Regulatory challenges: coal exports, housing and Washington’s “light touch”

Previously we wrote of the state Department of Ecology’s denial of a key permit to Millennium Bulk Terminals. OPB reports on the issue, providing additional comments from business and labor leaders.

Ecology’s broad scope angered project supporters. Washington’s business community took aim at the decision, with several groups issuing statements calling the process a charade and questioning the grounds for the denial, saying the agency appeared to be looking for any reason to reject the project because it involved coal…

Kris Johnson, president of the Association of Washington Business, said the decision turns away an investment in good jobs in a part of Washington that truly needs them. The project promises 300 full-time jobs, with an additional 2,650 for construction. Cowlitz County’s unemployment rate is currently around 6 percent, and historically runs higher than the national average.

“From the beginning, it has faced unprecedented regulatory hurdles that send the wrong message to employers about Washington’s openness to investment,” Johnson said of the project.

The department, unsurprisingly, defends its decision. The timing may undercut somewhat a pro-business message the state wants to send.

Gov. Jay Inslee recently appeared before a national gathering of site selection consultants to promote the state’s pro-business regulatory and tax climate. According to the Seattle Times,

Gov. Jay Inslee kicked off the proceedings Tuesday with his pitch to the audience of corporate gatekeepers to consider Washington. His staff figures about 60 businesses with ongoing site searches may land in the state.

Washington, Inslee said, was the best state for businesses, citing a “light touch regulatory system” and pro-business tax regime.

We imagine the pro-business tax regime argument stems from this Tax Foundation report, which ranks Washington as having the nation’s 17th best state business tax climate. There are, however, other ways to evaluate the tax system’s impact on business.

As we’ve written, Washington often presents a challenging regulatory climate.

Over the decades, Washington has added new regulatory systems intended to protect the natural and built environment. That said, the Pacific Research Institute ranks Washington No. 42 in regulatory burden on a scale that has No. 1 as least burdensome. This is reflective of regulatory regimes that oftendo not fit well together, multiple layers of regulation, and requirements that contradict one another in intent and practice…

Regulatory compliance raises the cost of developing facilities and operations. Sometimes this impact is indirect, as when development regulations drive up the cost of leasing commercial and industrial space. Other times it is more direct, as seen with the very aggressive environmental approach being taken with the evaluation of proposed energy export terminals at Cherry Point and Longview.

Ecology’s permit rejection may be many things, but as AWB’s Johnson suggests, it’s not reflective of a light regulatory touch. Our recent foundation report also pointed to the impacts of regulation on housing costs.

Excessive regulation also restricts the supply of housing and raises its cost. For example, in the San Francisco Bay area, growth has slowed due to high housing costs and lack of housing supply. 

We can avoid the outrageous housing prices of the Bay area by paying close attention to the impact of our state’s land use regulation.

The Seattle Times reports today that Seattle’s home price growth is nearly double that of any other U.S. city. 

Seattle’s real-estate surge has been driven by a combination of a historic shortage of homes for sale, and strong job and population growth ratcheting up demand, leaving homebuyers to fight it out through bidding wars.

There are, of course, many reasons for the price growth. But we should not overlook the role of regulation. The Lens reports small builders may become an endangered species.

Even as building industry leaders in the Seattle metro area are highlighting the need for land-use reform to reduce housing costs, many small builders say regulations and extended permitting may drive them out of the city if those issues aren’t addressed.

“There is a calamity coming to the city of Seattle,” said Erich Armbruster, a licensed civil engineer and owner of Ashworth Homes, speaking about the red tape and project delays many small builders encounter.

The city, Lens reports, is working on expediting the permit process, but the city’s regulatory climate clearly drives up costs, ultimately driving out investors.

The Washington Research Council also comments on the price growth.

Again from our foundation report:

Even in the economically strong metro areas, policymakers cannot take continued prosperity for granted. Economies are always evolving and growth must be nurtured…

The history of the GMA and other environmental protections confirms our earlier recommendation that regulatory policies should be regularly reviewed to see that benefits justify the costs of compliance. As circumstances and priorities change over time, it will be important to be certain that the policies already in place continue to work for the future.

With respect to housing affordability and the Millennium project, to take just the two most recent example, there’s reason to question whether the policies in place are working now.