Finding ideas in the “CEO Cabinet”

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by Robert Burke

John Wood works almost as hard for Loudoun County as he does at his real job. Wood is CEO of Telos, an IT network security provider with close to 500 employees in Ashburn. He has been in Loudoun since the early 1990s, when he took over Telos and nursed it back from Chapter 11. Today it’s growing quickly, with $225 million in sales last year, up from $140 million in 2006.

Running Telos is demanding enough, but Wood is a believer in corporate citizenship, and he walks the walk. He is vice chairman of Loudoun’s Economic Development Commission and three years ago helped create the county’s “CEO Cabinet,” which includes two dozen local executives who give advice to county leaders. Today, with Telos looking to add 100 people to its 500-member work force, Wood says that enlightened self-interest is part of why he wants to see Loudoun thrive. “If I can make Loudoun County the best place to live and work in America, that means I can keep the people I have and bring new ones to Virginia,” he says.

He’s got his talking points ready. Asked how the county is faring in a slumping economy, Wood touts its core strengths, even with the hits the county budget and homeowners have taken in housing values. “Look at our regional economy,” he says. “We benefit by being so close to the federal government. The nation as a whole might be feeling the effects of recession, but the local economy is not doing so badly.”

He’s right. In terms of its underlying economic strength, Loudoun is lucky in ways that few other localities are. Buoyed by the federal spending that supports hundreds of government contracts in defense and other sectors, and by the thousands of government employees who call Loudoun home, its economy does comparatively well in good times and bad.

Among the county’s major employers are Orbital Sciences, a developer and maker of rocket systems, with about 3,000 workers, and, of course, AOL LLC, formerly America Online. The biggest blemish on Loudoun lately is the departure of AOL’s headquarters to New York City, a move announced last fall. Between the move and company layoffs, the AOL work force in Loudoun is shrinking, but it still employs close to 3,300 people.

Unemployment here was just 2.8 percent in March, a full percentage point lower than the state average. And while the county’s well-documented rapid growth — its population has tripled since 1990 — has produced crowded roads and a strained county budget, those new arrivals bring plenty of dollars. Forbes magazine this year ranked it the nation’s second-wealthiest county, with a median income of $99,371. First place went to neighboring Fairfax County, at $100,318.

The Fairfax factor
There’s no time for jealousy, though, because Fairfax is one of the reasons Loudoun does so well. Fairfax dwarfs Loudoun — it has more than 1 million residents, compared with Loudoun’s 280,000 people, who are mostly crowded in the eastern third of the county. According to a county survey done in November, about 40 percent of Loudoun residents relocated from Fairfax, and 35 percent of the county’s labor force commutes to jobs there. Plus, one of Loudoun’s largest and fastest- growing business categories — professional and technical services — owes much of its growth to Fairfax. Jobs in that sector grew 10 percent in the third quarter last year, the most recent quarter for which data is available, compared with the same period a year earlier. Growth in that sector “has been going on since around 2000, and a lot of it is spillover from Fairfax County,” says Tricia Simons, manager of research and operations for the county’s economic development office.

Other sectors haven’t done so well. Construction is the county’s biggest employment sector, with just over 16,000 jobs, but its growth has flattened out as residential building slowed. Job growth was just 1.8 percent in the third quarter of 2007, and building permits are down, say county officials. But again, Loudoun has something to lean on: the massive Washington Dulles International Airport, which straddles the boundary between Fairfax and Loudoun. It is in the midst of a $3 billion, five-year expansion and renovation, and that demand is pumping life into a flagging construction industry.

But there’s no escaping the nationwide crisis in subprime lending, and Loudoun is taking some big lumps. There were 1,259 foreclosures in the county last year, compared with 139 in 2006, according to county data. Housing prices and sales have plummeted. The average sale price peaked in 2006 at $547,000, according to the Dulles Association of Realtors. By March that average was down to $408,000.

Jeanette Newton, the association’s CEO, says members hope business will pick up once the foreclosed houses are sold and off the market. Yet tax increases might slow that recovery: in April the Board of Supervisors approved a $1.6 billion budget for 2009, which included no money for new county initiatives. The real property tax rate will be $1.14 per $100 in assessed value, up from 96 cents this year. The new rate takes effect July 1. Under the new rate, even with the drop in residential property assessments the annual property tax bill for the average homeowner will go up 6.5 percent, or $308.

That hurts a lot of people, especially those in the lower brackets, Newton says. “They should have cut spending, just like everybody else has to do. You’ve got to bite the bullet.” The county’s political leadership has lurched back and forth in recent elections, from a slow-growth board of supervisors to a pro-growth board dominated by Republicans, and most recently back to a slower-growth board. Yet Newton’s criticism points up one of Loudoun’s chronic problems: keeping up with the cost of rapid residential growth. The county opened four new schools last fall, and more are coming.

Andrea McGimsey, one of four new county supervisors elected in November, says the public school system projects building 30 to 40 new schools in the next decade to keep up with growth, not to mention fire stations and other public safety projects. This year’s budget work “was a hard deliberation, because we’ve got a lot of foreclosures in our area,” McGimsey says. “When you’ve got families losing their homes, it’s hard to raise taxes. But it’s also hard to cut vital services, so it was a true balancing act.”

Open to new ideas
With problems like this, the county is open to new ideas, which is where Wood’s CEO Cabinet comes in. He says the group is modeled after the New York City Partnership, formed in 1980 by banker David Rockefeller. Wood’s group includes CEOs and company presidents and it meets quarterly. There are few rules: “If you’re a jerk, you’re not allowed to stay,” says Wood. And no designees allowed. Plus, a version of the Las Vegas rules apply — what is said there, stays there. “Early on, the supervisors asked us to take a look at the issue of pay for supervisors … the most politically charged issue there is,” Wood says. The group recommended hiring support staff for the supervisors instead of raising their salary, and the county did so.

In this year’s budget debate, Wood’s group suggested the supervisors get the budget approve quickly and focus on the problems the county will face next year and beyond, from funding the county’s pension plan to dealing with special education costs and the continued drop in property values. The cabinet is asking if there is sufficient electric generation capacity to support new businesses and residents, as well as broadband access so people can telecommute. “It’s those kind of debates we throw on the table,” he says.

The county has two other similar cabinets: a science and technology group, which pushes the county and the region as a center for those fields, and the design cabinet, which organized an awards program for building projects and holds free collaborative brainstorming sessions, called charrettes, for public and private projects. “We have partnerships no one else has in the country,” says Larry Rosenstrauch, director of the county’s department of economic development.

It’s a safe bet that Loudoun can use the extra hands. In late April word came that federal transportation officials had dropped their objections to providing $900 million in funding for the $5 billion extension of Metrorail. The federal support comes with strings attached, of course, but it’s a good sign for supporters of the project. Opponents see the rail project as a developer’s boondoggle and a waste of precious tax dollars. The extension would run 23 miles from near Falls Church to Loudoun and have seven new stops, including three in Loudoun. If the rail project is built, it will drive development even more quickly across eastern Loudoun.

It also will help push the county’s population up 46 percent to nearly 410,000 by 2020. This means the demand for housing will continue despite the slump in prices. Many of those new residents will likely be refugees from Fairfax or other pricier localities in the Washington region. Even if Loudounites want to slow growth now, they really can’t. When the housing market heats up again, developers have plenty of projects waiting in the wings that are already approved by the county, McGimsey says. “We have a pipeline of 37,000 houses that have not been built.” 

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