We want to recognize the generous support of the Dragas Family Foundation and Helen Dragas, CEO of the Dragas Companies.

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Dwayne Washington
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2 We want to recognize the generous support of the Dragas Family Foundation and Helen Dragas, CEO of the Dragas Companies. The Dragas Center for Economic Analysis and Policy now bears the name of the Dragas family in recognition of its support of our mission to contribute to the rational discourse on making Hampton Roads an even better place to live.

3 In Memoriam We honor the memory of Anne Shumadine, a tireless advocate for children and the people of Hampton Roads She was a consummate professional who sought out to improve the public good Anne B. Shumadine 3

4 The Strome College of Business and Old Dominion University continue to provide important support for the State of the Region report. However, the report would not appear without the vital backing of these donors, who believe in the power of rational discourse to improve our circumstances. Richard F. Barry III The Aimee and Frank Batten Jr. Foundation Ramon W. Breeden Jr. Chartway Federal Credit Union George Dragas Jr. David and Susan Goode Thomas Lyons Anne B. Shumadine (in memoriam) Jane Batten R. Bruce Bradley Arthur A. Diamonstein Dragas Family Foundation Helen Dragas Edward L. Hamm Jr. Patricia and J. Douglas Perry Dr. Jitendra Swarup 4

5 We acknowledge the efforts of LEAD Hampton Roads in making today s presentation possible. Over the course of the last 30 years, LEAD Hampton Roads has sought to make our region a better place to live by educating and supporting regional leaders.

6 The presentation materials and commentary do not constitute an official viewpoint of Old Dominion University, its President, John R. Broderick, the Board of Visitors, the Strome College of Business, or the generous donors who support the activities of the Dragas Center for Economic Analysis and Policy.

7 Is it Morning Again?

8 Millions of Dollars $110,000 $100,000 Nominal and Real Gross Domestic Product (GDP) Hampton Roads, * $99,313 $90,000 $80,000 $70,000 $60,000 $50,000 $69,410 $57,558 $83,621 $40,000 Nominal GDP Real GDP Sources: Bureau of Economic Analysis and Dragas Center for Economic Analysis and Policy. Data on GDP incorporates latest BEA revisions in September Data for 2017 for Hampton Roads is the advance estimate. *Data for 2018 represents our forecast. Real GDP in 2009 Chained Dollars. 8

9 Annual Real GDP Growth 6% 5% 4.3% Growth in Real Gross Domestic Product Hampton Roads, * 4% 3% 1.6% 2% 1% 0% -1% -2% -3% -0.1% Sources: Bureau of Economic Analysis and Dragas Center for Economic Analysis and Policy. Data on GDP incorporates latest BEA revisions in September Data for 2017 for Hampton Roads is the advance estimate. *Data for 2018 represents our forecast. CAGR GDP growth in horizontal bars. 9

10 Index of Real GDP (2006 = 100) Index of Real GDP, * Hampton Roads, Virginia, and the United States Hampton Roads Virginia United States Sources: Bureau of Economic Analysis and Dragas Center for Economic Analysis and Policy. Data on GDP incorporates latest BEA revisions in September Data for 2017 for Hampton Roads is the advance estimate. Index is equal to 100 in *Data for 2018 represents our US, Virginia, and Hampton Roads forecast. 10

11 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Individuals 870, , , , , , , , ,000 Civilian Labor Force Hampton Roads, January 2007 August , ,204 Persons 852, , Sources: Bureau of Labor Statistics and Old Dominion University Economic Forecasting Project. Seasonally adjusted data. Data for July 2018 are preliminary. Trough was October Next update: November 6, 2018

12 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Individuals 840, , , , , , ,000 Employment of Individuals Hampton Roads, January 2007 August , ,740 Persons 825, , Source: Bureau of Labor Statistics and Old Dominion University Economic Forecasting Project. Seasonally adjusted data. Data for July 2018 are preliminary. Trough was November Next update: November 6, 2018

13 Unemployment Rate 12% 10% Headline Unemployment Rate (U3) Hampton Roads and the United States, January 2007 August % 8% 6% 4% 4.6% 7.9% 3.9% 2% 3.1% 3.2% 0% Hampton Roads United States Sources: Bureau of Labor Statistics and Dragas Center for Economic Analysis. Seasonally adjusted monthly data. Next update: November 6,

14 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jobs 800, , , , , , , , , , ,000 Total Nonfarm Employment (Jobs) Hampton Roads, January 2007 August , ,300 Jobs 786,100 Sources: Bureau of Labor Statistics and Old Dominion University Economic Forecasting Project. Seasonally adjusted data. Trough was February Next update: November 6,

15 Change in Annual Covered Employment (Jobs) by Selected Industry Hampton Roads 2007 to 2017 Education and Health Services 19,291 Federal Government (Civilian) 10,513 Leisure and Hospitality 6,128 Professional and Business Services 1,885 Information Local Government Manufacturing Financial Activities -4,684-4,728-5,533-5,631 Trade, Transport, Utilities -9,850-15,000-10,000-5, ,000 10,000 15,000 20,000 25,000 Sources: Bureau of Labor Statistics and Dragas Center for Economic Analysis and Policy. Annual data from Quarterly Census of Employment and Wages data are preliminary. 15

16 Percentage of Respondents 60% 50% 40% 34.6% Personal and Family Financial Situation in Hampton Roads Life in Hampton Roads Survey, % 56.2% 50.3% 30% 20% 10% 8.1% 4.3% 2.9% 1.1% 0% Better off Same Worse off DK/Refused Personal Finance Today Personal Finance Next Year Source: Life in Hampton Roads Survey, Social Science Research Center, Old Dominion University. Advance estimates from the 2018 LIHR Survey. 16

17 Percentage of Respondents 60% 50% 40% 39.5% Business Conditions in Hampton Roads Life in Hampton Roads Survey, % 45.4% 30% 28.7% 20% 10% 15.5% 11.3% 4.1% 3.8% 0% Better off Same Worse off DK/Refused Business Conditions Today Business Conditions Next Year Source: Life in Hampton Roads Survey, Social Science Research Center, Old Dominion University. Advance estimates from the 2018 LIHR Survey. 17

18 Defense Spending in Hampton Roads

19 Billions of Nominal Dollars $800 $700 $600 $500 $400 $300 $200 $100 $691 $687 Department of Defense Discretionary Budget Authority, FY 2010 FY 2023 $645 $577 $581 $560 $580 $605 $655 $686 $701 $714 $727 $742 $0 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 DoD Base Budget Overseas Contingency Operations Sources: U.S. Department of Defense and the Dragas Center for Economic Analysis and Policy. FY 2019 DoD Budget Materials. Nominal dollars. 19

20 Days from End of Last Fiscal Year 250 Delays in Department of Defense Appropriations, FY 1970 FY Average Delay = 68 days FY70 FY74 FY78 FY82 FY86 FY90 FY94 FY98 FY02 FY06 FY10 FY14 FY18 Fiscal Year Sources: Center for Strategic and International Studies, Todd Harrison, and Dragas Center for Economic Analysis and Policy 20

21 Billions of Dollars $23 $21 $19 $17 $15 Estimated Direct Department of Defense Spending Hampton Roads, 2000 to 2018* $19.8 $20.0 $21.5 $13 $11 $10.0 $9 $7 $5 Sources: U.S. Department of Defense and Dragas Center for Economic Analysis and Policy. Includes Federal Civilian and Military Personnel and Procurement. *Data for 2017 are estimates while 2018 is our forecast. 21

22 Employees in Thousands Military and Federal Civilian Employment Hampton Roads, Sources: U.S. Bureau of Economic Analysis and Dragas Center for Economic Analysis and Policy. Military Federal Civilian 22

23 Good news as defense spending increases in FY 19 Increases in ship building and maintenance are included in the FY 2019 appropriations bill Federal deficits will exceed $1 trillion in FY 19 (and beyond) Interest on the debt may exceed $800 billion annually by FY 26 Position Hampton Roads now to win in the coming BRAC round 23

24 The Port of Virginia

25 Millions of Tons General Cargo Tonnage Port of Virginia, 2007 to 2018* Sources: Virginia Port Authority and Old Dominion University Economic Forecasting Project. *2018 represents our forecast. 25

26 Millions of TEUs 3.50 Twenty-Foot Container Equivalents (TEUs) Port of Virginia, 2007 to 2018* Sources: Virginia Port Authority and Old Dominion University Economic Forecasting Project represents our forecast. 26

27 Increases in defense spending will raise economic growth An immediate challenge: Finding the right labor at the right time for employers The long-term challenge: Labor force participation rates have not recovered, difficulty moving disaffected back into workforce The opportunity: Improving collaborative efforts among cities to retain/attract businesses while defense spending is increasing 27

28 The Hotel Industry

29 Thousands of Rooms Average Available and Occupied Hotel Rooms Hampton Roads, Available Occupied Sources: STR Trend Report January 2018 and the Dragas Center for Economic Analysis and Policy, Economic Forecasting Project. 29

30 Millions of Dollars $900 $800 $700 $600 Nominal and Real (Inflation-Adjusted) Hotel Revenue Hampton Roads, $708 $711 $842 $500 $400 $342 $335 $343 $300 $200 $100 $ Revenue Real Revenue Sources: STR Trend Report January 2018, Bureau of Labor Statistics, and the Dragas Center for Economic Analysis and Policy, Economic Forecasting Project. 30

31 50% 45% 40% 45% Growth in Hotel Revenue and Revenue Per Available Room 2007 to % 30% 25% 20% 19% 31% 27% 23% 19% 19% 15% 10% 5% 0% 1% Chesapeake Suffolk 9% 11% 6% 6% 6% Hampton Newport News Norfolk Portsmouth Virginia Beach 3% Williamsburg Hampton Roads Revenue Source: STR Trend Report January 2018 and the Dragas Center for Economic Analysis and Policy at Old Dominion University. RevPAR 31

32 Percent of Hotel Revenue 7% 6% Airbnb Revenue as Percentage of Total Hotel Revenue Hampton Roads, October 2014 to July % 5% 4.7% 4% 3% 2% 1.8% 1% 0% 0.4% Sources: STR Trend Reports and AirDNA data received in September 2018 excluding shared rooms. Selected data points are July of each year. July 2018 = $7.3mil. 32

33 Millions $8 $7 $6 $5 $4 $3 $2 $1 $0 Monthly Revenue of All Airbnb Properties Hampton Roads, January 2015 to July 2018 $7.3 $2.2 $5.9 $0.4 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: AirDNA data received in September 2018, excluding shared rooms

34 Single Family Housing in Hampton Roads

35 Median Sale Price of Existing Residential Homes for Selected Cities Hampton Roads, 2007 and 2017 City Percent Change Chesapeake $250,100 $245, % Norfolk $195,000 $183, % Portsmouth $165,500 $140, % Suffolk** $257,500 $240, % Virginia Beach $245,000 $247, % Hampton $180,000 $155, % Newport News $199,250 $170, % Williamsburg* $284,450 $283, % Hampton Roads $223,000 $219, % Source: Real Estate Information Network and Dragas Center Economic Forecasting Project. Information deemed reliable but not guaranteed. * Williamsburg represents Williamsburg, James City County, York County and Gloucester County. ** Median price in Suffolk peaked in 2006 at $263,950 35

36 Median Sale Price of Existing Residential Homes for Selected Cities Hampton Roads, YTD August 2017 and YTD August 2018 City Percent Change Chesapeake $245,000 $255, % Norfolk $182,000 $193, % Portsmouth $137,000 $150, % Suffolk $240,750 $245, % Virginia Beach $249,900 $254, % Hampton $151,564 $166, % Newport News $167,950 $179, % Williamsburg* $280,000 $294, % Hampton Roads $218,000 $225, % Source: Real Estate Information Network and Dragas Center Economic Forecasting Project. Information deemed reliable but not guaranteed. * Williamsburg represents Williamsburg, James City County, York County and Gloucester County. ** Median price in Suffolk peaked in 2006 at $263,950 36

37 Months Supply Estimated Months of Supply of Existing Homes Hampton Roads, January 1996 August Average = 5.56 months Source: Real Estate Information Network and Dragas Center Economic Forecasting Project. Information deemed reliable but not guaranteed. 37

38 Active Listings 3,500 Number of Active Listings of Distressed Homes Hampton Roads, June 2008 to August ,224 3,000 2,500 2,000 1,500 1, Source: Real Estate Information Network and Dragas Center Economic Forecasting Project. Information deemed reliable but not guaranteed. Distressed properties are short-sales or bank-owned. 38

39 Multifamily Housing

40 Homeownership Rate 70% 69% 68% 67% 66% 65% 64% 63% 62% 61% 60% Homeownership Rates in the United States 1st Quarter 1965 to 1st Quarter % 69.2% 64.2% 59% Homeownership Rate Average Rate ( ) Source: Dragas Center for Economic Analysis and Policy and U.S. Census Homeownership Survey (2018). 40

41 Homeownership Rate 75% Homeownership Rates in Hampton Roads and Virginia 1st Quarter 2005 to 1st Quarter % 65% 60% 55% 50% 2005 Q Q Q Q Q Q Q Q Q Q Q Q Q Q1 Hampton Roads Virginia Source: Dragas Center for Economic Analysis and Policy and U.S. Census Homeownership Survey (2018). 41

42 Marriage and a birth of the first child, which are often considered the indicators of the transition from rental housing to single-family residential housing, are increasingly delayed Homeownership by age cohort is falling, younger generations are less likely to own a home 52 percent of those born between 1956 and 1960 owned a home by the time they were 30 to 34 years old 46 percent of those born between 1981 and 1985 owned a home by the time they were 30 to 34 years old Student debt, stagnant real wages, and changing preferences for residential housing appear to play a role 42

43 Number of Units 120, , , , ,000 95,000 90,000 85,000 Multifamily Units Available and Occupied Hampton Roads, , , ,941 80, Units Available Units Occupied Source: Co-Star and Dragas Center for Economic Analysis and Policy. Values for 2018 to 2022 represent Co-Star s forecast. 43

44 Vacancy Rate 9.0% 8.5% 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% Multifamily Vacancies Hampton Roads and the United States, * 8.70% 6.75% 6.30% Hampton Roads United States Source: Co-Star and Dragas Center for Economic Analysis and Policy. *Values for 2018 to 2022 represent Co-Star s forecast. 44

45 Craft Brewing in Hampton Roads

46 Equivalent Gallons of Ethanol 3 Apparent Alcohol Consumption Per Capita Ages 14 and Older, United States and Virginia, Beer Wine Distilled Spirits All Beverages Virginia United States Source: National Institute on Alcohol Abuse and Alcoholism (2018), based on population ages 14 and older. Alcohol consumption measured in per capita ethanol terms. 46

47 Beer Production in Millions of Barrels Share of Craft Brewing Production Total Beer Production and the Share of Craft Brewing Production United States, % 16% 14% 12% % 190 8% % % 4% 2% Total Beer Production Share of Craft Brewing in Total Beer Production Source: Brewers Association (2018) and U.S. Department of the Treasury, Alcohol and Tobacco Tax and Trade Bureau (2018). 47 0%

48 Craft brewers are small, independent, and traditional Small: 6 million barrels or less brewed annually Independent: The craft brewer has majority ownership or control in the company Traditional: The craft brewer uses ingredients that follow the Reinheitsgebot of 1516 or is using unique flavors in innovative ways (Garlic beer, anyone?) Craft beer drinkers tend to be: Higher income - 66% earn $75k or more Younger - Over 80% are Gen Xers or Millennials Male - 75% are men White - 60% are White, 10% are African American, and 21% are Hispanic Craft beer s untapped market: 51% of the population are women Only 25% of surveyed women reported drinking craft beer weekly Source: Dragas Center for Economic Analysis and Policy and Brewers Association of America. 10,000 people nationally surveyed in

Virtuous cycle of development Craft breweries can create a culture that attracts tourists, who spend money elsewhere in the economy Breweries displace consumption that would have occurred in

49 Virtuous cycle of development Craft breweries can create a culture that attracts tourists, who spend money elsewhere in the economy Breweries displace consumption that would have occurred in restaurants and bars Rapid growth has also meant volatility, example of Green Flash being replaced by New Realm Source: Dragas Center for Economic Analysis and Policy. Photo credit Big Ugly Brewing, Chesapeake, Virginia. 49

50 Hampton City Schools: The Next Generation of Learning

Hampton City Schools has partnered with Ford Next Generation Learning The objective is to create Academies in each high school The Academies allow students to select a

51 Hampton City Schools has partnered with Ford Next Generation Learning The objective is to create Academies in each high school The Academies allow students to select a career path rather than one size fits all In 2018, all students are enrolled in an Academy Sources: Hampton City Schools and Dragas Center for Economic Analysis and Policy 51

52 Hampton City Schools First Cohort Results Academic Year Total Students Percent African American Percent White Percent Other Race Percent Eligible for Free or Reduced- Price Meals Virginia On-Time Graduation Rate Dropout Rate Academy Students Non-academy students % 27% 14% 29.4% 100% 0.0% % 25% 12% 53.6% 89.8% 2.8% Sources: Hampton City Schools and Dragas Center for Economic Analysis and Policy 52

53 Students in the pilot Academies outperformed non-academy students Academies are aligned to workforce projections and industry input If successful, Academies will produce students who are collegeready and/or employable in the workforce Steep learning curve awaits The challenge: maintain and replicate the Academies model 53

54 Medicaid Expansion in Hampton Roads

55 Medicaid in Virginia currently does not allow childless adults to enroll, but this changes on January 1 st, 2019 Medicaid eligibility is complicated Eligibility is on a case-by-case basis Income eligibility is determined relative to the Federal Poverty Limits (FPL) Aged, blind, and disabled are a class of individuals who may be eligible Pregnant women are another class of eligible individuals The parents of families with children may also be eligible Income eligibility limits in Virginia are relatively strict In 2018, the parents of a family of three in Hampton must earn less than $10,536 annually to even be considered for Medicaid If the family moved to Newport News with the same income, the parents would no longer be income eligible as the income limit is $7,968 55

56 Percentage Reporting Health Care Coverage Types for All Individuals United States, Virginia, and Hampton Roads, % 59% 54% 52% 50% 40% 30% 27% 20% 10% 5% 12% 17% 16% 15% 21% 12% 14% 12% 15% 13% 9% 9% 8% 0% Employer Based Military - VA Medicare Medicaid Direct Purchase Uninsured United States Virginia Hampton Roads Source: U.S. Census, 2016 ACS microdata and Dragas Center for Economic Analysis and Policy. Percentages may not sum to 100 percent as individuals may have more than one type of health insurance. 56

57 Percent Uninsured 16% 14% 12% 10% 8% Uninsured as a Percentage of Total Population Cities in Hampton Roads, % 9.1% 9.4% 10.7% 12.4% 12.5% 14.6% 6% 5.2% 4% 2% 0% Williamsburg Chesapeake Suffolk Virginia Beach Hampton Newport News Sources: U.S. Census, ACS 5-Year Estimates and Dragas Center for Economic Analysis and Policy. Total population is the civilian noninstitutionalized population. Portsmouth Norfolk 57

58 Estimated Insured and Uninsured in Hampton Roads, % 8.2% Insured Sources: Dragas Center for Economic Analysis and Policy American Community 1-Year Survey Microdata. Uninsured 58

59 Insured and Uninsured Hampton Roads, 2016 Eligible and Ineligible Adults Hampton Roads, % 8.2% 2.9% 5.3% Insured Uninsured Income Eligible Income Ineligible Sources: Dragas Center for Economic Analysis and Policy American Community 1-Year Survey Microdata. Adults must earn less than 139 percent of FPL to be income eligible. 59

60 New Adult Enrollees 25,000 Estimated Impact of Medicaid Expansion on Adults in Hampton Roads, ,000 17,184 19,505 15,000 13,276 10,000 6,509 6,758 7,671 5,000 0 Under 100 Percent of FPL 100 to 138 Percent of FPL Low Estimate Medium Estimate High Estimate Sources: Dragas Center for Economic Analysis and Policy ACS Microdata. Estimates represent adults ages who are without health insurance and who are projected to enroll in Medicaid expansion. 60

61 20,000 to 27,000 newly eligible adults in Hampton Roads will enroll 100,000 working age adults will remain uninsured after expansion Positive impacts Health outcomes will improve for new enrollees Work effort will increase for current and new enrollees Uncompensated care costs have decreased in Medicaid expansion states Expansion will likely have positive impact on the state budget (in the short-term) Risks Enrollment and administration costs could be higher than expected Work requirements may deter or reduce enrollment If the federal government reduces the reimbursement rate (or block grants Medicaid), costs to Virginia could increase significantly 61

62 If you would like to receive economic updates from the Dragas Center for Economic Analysis and Policy and to have immediate access to our reports, please leave your card with us. You may also text CEAPODU to to join our list. Follow CEAPODU on Facebook, LinkedIn, and Twitter for up-to-date information to help you understand new economic developments. You ll receive absolutely up-to-date economic information the same day it is released by the Bureau of Labor Statistics, the Bureau of Economic Analysis and other major data providers. And, we will put it in context so that you can better understand the numbers. 62

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Old Dominion University 2017 Regional Economic Forecast. Strome College of Business

Old Dominion University 2017 Regional Economic Forecast January 25, 2017 Professor Vinod Agarwal Director, Economic Forecasting Project Strome College of Business www.odu.edu/forecasting The views expressed