Arlington’s Federal Agenda
by Frank Shafroth
Federal Legislative Affairs for Arlington County, Virginia
A significant issue for Arlington is the health of its current and future economy; the health of Arlington’s economy is inextricably connected to its business component. Like a joint strand of DNA, there is considerable mutual interdependence between the county and business community.
Similarly, federal actions can have major impacts on Arlington’s economy in a myriad of ways. That is especially true with the rapid changes in the U.S. economy, not to mention the very significant federal presence in Arlington. Thus, whether through a federal court decision, a newly issued federal regulation, a decision to lease property or provide a service contract or grant, or the passage of federal legislation, federal actions affect Arlington’s economy every day and can affect Arlington’s future directions.
As a consequence, Arlington provides for a federal liaison through the County Manager’s Office with a responsibility to track federal issues that might benefit or harm the county’s economy, to serve as an advocate for the community, and to represent its interests. Part of the responsibility of that office is to help set priorities for Arlington vis-à-vis the federal government. Part of it is to help provide for a strategic focus on the future.
Setting Priorities
In 2004, Arlington determined that protecting its diverse and vibrant economic base was among its most important messages to send to its Congressional delegation:
“Preservation of an integral partnership with the federal government is vital to a vibrant economic base. That will require innovative partnership efforts to revitalize and adapt to post-9/11 security needs as much as a third of the county’s aging office base, nearly 60 percent of which is occupied by federal agencies and contractors.”
Similarly, the Board supports reauthorization of the nation’s expired surface transportation programs in a manner that recognizes sharply increased demands. In a meeting with the entire Virginia Congressional delegation and Virginia’s business leaders, Arlington represented the interests of all the Commonwealth’s municipalities in coordination with the Governor and business interests. It sought federal legislation that would insure local involvement in the planning process and allocation of funds, provide for robust funding for transit projects and systems, as well as support for maintenance of a healthy environment and for the proposed Safe Routes to Schools program. Arlington has pressed hard and successfully with its Senate delegation to ensure a fairer return of federal gas taxes back to the community. The Senate version would pump nearly $1 billion in additional transportation and highway funds into Virginia through increasing the share of every gas tax dollar returned to the state from its current 90 cents to 95 cents, phased in over the next six years.
Issue-based Advocacy
Based upon its experiences and leadership in managing and coordinating the response and recovery to the terrorist attack on the Pentagon, Arlington is working with the federal government to ensure a meaningful role for the level of government most affected by terrorist threats and has been successful in achieving enactment of federal legislation to shift to a threat-based formula that more appropriately recognizes greater responsibilities for those local governments that will be first responders. Now Arlington is working to coordinate the world class leadership of some of the County’s security specialists in the private sector and its own experienced staff to provide for comprehensive security standards for buildings in major metropolitan areas.
Board Chairman Barbara Favola has written to U.S. Senate Armed Services Committee Chairman John Warner to request his assistance in providing guidance to the Department of Defense (DoD) and other federal agencies to work with Arlington and other local governments throughout Virginia in the development of performance-based, rather than prescriptive standards for critical infrastructure and key asset protection and to consider chairing a conference in Arlington to help bring together the appropriate private and public leaders who bear the greatest responsibilities for the provision of security in our community.
Arlington County will have to comply with several new federal guidelines, standards, recommendations, and rules for Critical Infrastructure and Key Asset Protection. As yet, however, there are few final federal standards, and it is unclear whether any final federal standards will be either complimentary or will permit lease or ownership opportunities—especially for defense-related facilities—in urban areas.
The federal requirements are in their relative infancy, and are continually evolving, yet with mandatory implementation time frames, overlapping in both scope and jurisdiction. Moreover, Defense Secretary Rumsfeld has indicated his preference for pulling defense-related federal agencies out of all leased space and dispersing DoD facilities outside of Washington. The conjunction of new federal security standards and federal reconsideration of defense space allocations as part of the pending federal base closing and realignment process Congress might act on next year could have significant economic implications for Arlington.
Issue Tracking
As an example of pending federal legislation which could affect both Arlington business interests, as well as the County, the liaison office has followed Senate passage of federal legislation, the “Jumpstart Our Business Strength Act,” to address current World Trade Organization sanctions imposing steadily increasing tariffs on U.S. exports. The Senate-passed version of the legislation provide more than $175 billion in new federal tax breaks, but offsets those new breaks with an equal amount of changes to raise exactly the same amount of new or increased federal taxes, including $42 billion in additional federal revenue collections through retroactively changing the treatment of depreciation on government leases and service contracts—affecting both local governments and the private sector providing such space or services.
The liaison office has also tracked a U.S. Treasury proposed issued last December for the removal of an exemption for tax-exempt bond opinions from a proposed tax shelter rule, claiming it applied too broadly to municipal bonds and would mean that a bond deal could never be considered a tax shelter. The proposal would make changes to Circular 230, which applies to any bond attorney who practices before the Internal Revenue Service. State and local tax-exempt bond opinions have been exempt from the rule since it was created in 1984. These new requirements would add legal costs to state and local taxpayers for the tax-exempt bond issuing process. They would, in turn, add costs by adding to the already mind-boggling Treasury and SEC requirements analysts and brokers need to review in assessing such bonds. These additional administrative costs would likely result in higher interest rates reflected through a decrease in the purchase price of the bonds.
Strategic Focus
Over the last decade, the U.S. economic trends have accelerated away from manufacturing towards service, and are now shifting towards knowledge management. W. Michael Cox, chief economist and Richard Alm, economics writer, both at the Federal Reserve Bank of Dallas, describe this shift as follows: “Over the past decade the biggest employment gains came in occupations that rely on people skills and emotional intelligence — like nurses and lawyers — and among jobs that require imagination and creativity: designers, architects and photographers. But not all of the new jobs required advanced degrees or exceptional artistic talent; note the rise of employment for hair stylists and cosmetologists.” (W. Michael Cox and Richard Alm, “Where the Jobs Are,” The New York Times, October 13, 2004)
This new wave of innovation and change could pass Arlington by because leaders in other regions provide a better habitat for companies’ bio-, info- and nanotechnologies to flourish. Arlington’s economy could decline as innovative firms move out and other firms struggle to remain viable in established technologies and markets. Our talented and entrepreneurial employee base could opt to migrate to regions that are leading the wave and providing better economic opportunity and quality of life.
The Silicon Valley Joint Venture Project, a joint effort initiated by Hewlett-Packard and the Mayor of San Jose, has identified the Greater Washington D.C. region as “aggressively trying to become a leader in bioinformatics. In 2001, the Howard Hughes Medical Institute, the largest private biomedical research organization in the U.S., announced that it would invest $500 million to form a bioinformatics center in
northern Virginia. Regional leaders have formed the Greater Washington Bioinformatics Coalition to build on the area’s strengths—in particular, Virginia’s information technology concentration and Maryland’s bioscience concentration—to position the region as a leader in the converging technologies. The Coalition involves over 30 organizations, including educational institutions (George Mason University and George Washington University); economic development interests (Fairfax County Economic Development Authority and Virginia's Center for Innovative Technology); and private companies (Viaken Systems, the Adrenaline Group and Inova Health Systems).” The project identified this region and just a few others around the globe as a strategic competitor.
As with the high-tech boom, the next wave of innovation could happen in this region, but that will require preparing our people and institutions to participate. The wave of new technologies developed commercially from the early 1990s triggered hope that a different kind of economy was emerging, one that offered the prospect of improved productivity, a rising standard of living, and full employment. While our region has clearly emerged as a world class competitor, we have learned the demands, speed, and volatility of the new economy created real challenges for people, companies, and civic institutions.
The Silicon Valley Joint Venture Project defines its economic health to “depend on its underlying social health, including the quality of its education, the affordability of its housing, the efficiency of its infrastructure in getting people to and from work, and the upward mobility of its people. At its core, the high productivity of the region is based on both core assets—including its talent, technology, infrastructure, and capital base—and the ability to reduce “transactions cost” through its networks and relationships. Anything that harms those assets or networks, in turn, hurts the Valley.”
It is hard to imagine a more appropriate challenge for Arlington.
This challenge reinforces the importance of creating a dynamic relationship with the federal government, which, more than in almost any other local government in the nation, is inextricably tied to Arlington’s economic future. Whether from the federal workforce that resides in, works for, or subcontracts to the federal government; understanding and strategically envisioning that interrelationship must be an integral part of success for the future. That is especially true with the rapid evolution of the U.S. economy.
The next wave of innovation (and the resulting new business vitality) offers an opportunity for new corporate leadership and involvement in the community. Working together with emerging businesses and their leaders, Arlington can help integrate businesses into the fabric of civic affairs and help coordinate long-term commitment to the region.
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