Virginia’s Contract-Fat Fairfax Digs In for Leaner Years, Bloomberg, April 8, 2013

By Lorraine Woellert - Apr 8, 2013 4:39 PM ET

When Mobil Corp. quit midtown Manhattan for 130 green acres in Fairfax County, Virginia, its new neighbors included country stores, dairy farms and a highway that ringed the nation’s capital. Mobil brought hope that the suburb could break free of its Washington ties to build its own world-class economy.

More than 26 years later, the largest U.S. oil company -- now Exxon Mobil Corp. (XOM) -- is leaving Fairfax and the county is more dependent upon the U.S. government than ever. Even as prize employers including Volkswagen AG (VOW) and Hilton Worldwide Inc. opened shop, federal spending as a share of the county’s economy has almost doubled since 2002, to 14.4 percent. Last year, the U.S. funneled more procurement dollars to Fairfax than anywhere else, almost $28 billion.

The county’s fortunes are so aligned with the government’s that Moody’s Investors Service has said Fairfax’s AAA bond rating could be hurt if U.S. debt is downgraded.

Photographer: Karen Bleier/AFP via Getty Images

Now, the county of 1.1 million people, whose $194 billion economy is bigger than Hungary’s, is bracing for its share of federal spending cuts, known as sequestration, that began last month. . . .

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Sequester’s Impact in Fairfax County? TBD, Reston Connection, March 21, 2013

Local leaders say “uncertainty” biggest fallout of sequester so far.

By Victoria Ross

Fairfax County businesses have been feeling the chilling effect of the $87 billion across-the-board spending cuts triggered March 1st for several months.

In anticipation of the original “fiscal cliff” deadline at the end of 2012, apprehensive business owners had begun taking preemptive measures, such as tightening budgets, and implementing hiring and pay freezes.

“Small and large companies are taking more conservative approaches to hiring, and government contractors, a large segment of the Fairfax County economy, could see their contracts reduced or terminated,” said Sharon Bulova (D-at-large), chairman of the Board of Supervisors.

But what has rattled Fairfax County businesses is not specific cuts in the sequester, but the uncertainty of what the cuts will be and when they will take effect. . .

. . . “The Washington Area economy has grown tremendously thanks to Federal Government spending. In 2010, total federal spending accounted for nearly 40 percent of the region’s GDP,” said economist Stephen S. Fuller of George Mason University’s Center for Regional Analysis.

The region’s strength is also its “Achilles heel,” Fuller said and warned the area “faces a sea change” as federal spending decreases.

According to economic forecasters, the outlook is grim and grimmer. Most of the fiscal apocalypse, they say, is related to government-worker furloughs, which could begin as early as next week. In addition to eroding consumer confidence, the furloughs could trigger a domino effect that impacts everyone.

“If the feds are furloughed two days a week, no more housing purchases, no more dinners out, everyone hunkers downs, consumer housing starts to slow down and things come to a grinding halt and everyone is affected,” (Fairfax County Economic Development Authority President Jerry) Gordon said. . . . .

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County Executive Ed Long on Sequestration: 'Prepare for the Worst', Burke Patch, March 25, 2013

What will it mean for the local economy?

• By James Cullum

. . . The unknowns surrounding sequestration make budgeting difficult, said Long.

"It's impossible to deal with in many ways, but you have to make certain assumptions," he said. "We set aside $8 million at year end to deal with some of the sequestration cuts, so we're in the process now of setting up a structure to tell the board that we will review all these cuts that come down and tell them what they are.". . .

Just how bad could things get? 

Long: "If we were to go back into a recession it would be serious, and certainly there would not be the will to increase the tax rate necessary to keep programs at the level that they are.

"We would then be at a situation where we would be eliminating programs. . ."

Click here for the rest of this article.  At the end of the article is a series of links to other Patch articles on the potential effects of sequestration on Fairfax County.  

Sequester punctures area economy’s government-dependent bubble, Washington Post, March 8, 2013

In the most complete article yet on the likely impact of the sequester, reporter Jim Tankersley examines its scope  and its effects in the metro area in this Washington Post article.  It begins:

Recent American history is strewn with examples of regional economies that grew dangerously dependent on a single industry: Los Angeles with aerospace in the early 1990s, Northern California with tech at the turn of the millennium, Detroit with auto manufacturing and Las Vegas with home building in the mid-2000s. When shocks rattled those industries, those regions bled jobs, and their economies sputtered.

None of those areas relied as much on a single source for jobs and growth as the Washington region does on federal government spending today.

This is the economic vulnerability exposed by the budget cuts brought on by sequestration. A decade of expanding federal largess has shielded the metro area from the worst effects of the financial crisis and the slow recovery. It also left the region, in investment terms, with a precariously unbalanced portfolio — heavily concentrated in a single stock, which is now falling.

“This is our spending bubble,” said Stephen Fuller, director of the Center for Regional Analysis at George Mason University. “It’s really distorted our economy.” . . .

Click here to read the rest of this comprehensive article.

Virginia’s Feast on U.S. Funds Nears an End, New York Times, March 2, 2013

The Gray Lady takes a look at the impact of sequestration in our neighborhood.

By TRIP GABRIEL

ARLINGTON, Va. — To listen to the human side of sequestration, wait in line here for the 595 bus to Reston, Va., a journey across a suburbia grown fat and happy on a federal spending boom in the past decade, primarily military. . .

The Washington metropolitan area, especially Northern Virginia, is in line to experience the largest economic hit of any region from the $85 billion in spending cuts that President Obama made official late Friday. . .

“No more movies, no more out-to-dinners, no more fun,” Robin Roberts, a civilian budget employee in the Defense Department, said as she waited for the 595 outside the Pentagon for the ride home. She and her husband, who is retired, have canceled their summer vacation. They switched to a cheaper phone plan. “It’s just pay the mortgage, pay the utilities, no more frills.”. . .

Read the rest of this article.

Some Local News Articles Look at Potential Effects of Sequestration Here

In the run up to the implementation of sequestration as a result of Congress' failure to pass a rational budget, we have heard both parties' public relations campaigns to bolster their position on the budget.  Now, with sequestration here, we actually have some news reports that look at the potential effects of sequestration here in northern Virginia, an area all agree will be hard hit by the sweeping budget cuts. 

In this first article, "Sequestration is Coming. How Will it Impact Fairfax County?," Fairfax Station Patch report James Cullum takes a look at the impacts on our county budget, the local business environment, and real estate, among other topics. 

Tighter budgets, diminished real estate values and more...

Sequestration threatens to destabilize the Northern Virginia economy, and some say the effects of the across-the-board cuts to federal programs and contracts will be felt across Fairfax County. 

"Businesses are in business because they know how to plan for problems and deal with them. But not knowing what to plan for is devastating to them," said Dr. Gerald Gordon, president and CEO of the Fairfax County Economic Development Authority to Patch. . .

Long asked the County Board of Supervisors in his budget to approve a 2 cent increase in the real estate tax rate, while contending with $20.52 million in agency reductions, including the elimination of 91 merit positions. Additionally, there would be no merit increases for County employees in 2014. 

One result of the economic uncertainty is that prospective commercial tenants have put on the brakes on moving to Fairfax County, said Mount Vernon District Supervisor Gerry Hyland to Patch.

For the rest of this good overview, click on the article's title above.

In this second article, "Gauging The Possible Effects Of Sequestration On Alexandria Workers And City Finances," in the Alexandria News, Bruce Johnson, a senior Alexandria government executive, takes an indepth look at the effects of sequestration there and in the surrounding northern Virginia areas.

 Because we live in a regional economy, the impact of the budget cuts caused by the “sequestration” of funds beginning on March 1, has to be evaluated not only by looking at the effects on Alexandria residents, who largely work outside of the City, but also on those who work in Alexandria, who mostly commute from outside of Alexandria. The Alexandria workforce can be seen from these two angles – those who work in Alexandria and those who live in Alexandria.  No matter which angle is chosen the impact is likely to be significant if sequestration occurs and it is not modified in some significant fashion over the coming months. . .

To understand the impact of sequestration on Alexandrians, one must look at the impact of sequestration on Federal employees and Federal contractors located not only in Alexandria, but also in the surrounding jurisdictions . . . In Fairfax County only 3.3% of employees are Federal workers and Federal wages constitute 4.4% of total wages.

The lower Federal government employee share of the Fairfax County labor market leads to the next important question, how much of the local labor markets are dominated by Federal contractors.   In Fairfax County, a list of the 50 largest employers[3] includes (in addition to 4 Federal government organizations and 2 Federally sponsored government enterprises - Fannie Mae and Freddie Mac), (and) 17 primarily Federal government contractors . . .

The article, available through the link above, goes on to discuss in greater depth the impact on Alexandria's government revenues.

The most systematic published work on the effects of the sequestration appears to have been done by GMU's Center for Regional Analysis.  In a presentation to the Fairfax County Economic Development Authority last October, Dr. Stephen Fuller walked through the effects of sequestration starting at the national level and drilling down to Fairfax County.  Here is the final viewgraph from that presentation showing the prospective impacts on Fairfax County in 2013: