Austin Letter

Trusted Insights and Perspectives Since 1979

June 15, 2018

Volume 40, Number 11

All you have to do is check the skyline to know that downtown Austin is undergoing amazing change.  But, theres more to this change than skyscrapers.  The Downtown Austin Alliance (DAA) points out that within the last few years investments have also been made in parks and green spaces, a new Central Library, a flood diversion tunnel, roadways and transit planning, and a stateoftheart teaching hospital.  But, what does DAA envision for the future?

DAA took a long-term view toward downtown’s future.  Long-term?  Yeah, they referenced 2039, when Austin will be 200 years old.  DAA went through an extensive process to arrive at a vision.  “We engaged 3,000 people in 75 ZIP codes, using surveys, focus groups, interviews and events to learn their aspirations for downtown,” said Mike Kennedy, Chair of the Downtown Austin Vision Steering Committee.

“The Downtown Austin Vision is the north star to guide the future of downtown toward the communitys values and aspirations for a thriving, welcoming, vibrant and connected downtown,” reads the vision report.  It also calls it “the downtown you will always love.”

Lofty words.  And its priorities seem to cover all the bases, under four headings:  Thriving CenterWelcoming PlacesGrowing Neighborhoods … and Leading Mobility.  All worthy subjects.  But referenced in general terms, with few specifics.

There is some precise language, without detail.  Such as:  “provide a variety of options for people to get to and from downtown, including a robust transit network in central Austin.”  See what we mean.  No mention of what this would look like.  Or “create extremely viable and walkable streets.”

Other phrases:  improve the experience and availability of parking in downtown while planning smartly for the future position downtown for a successful retail futurebroadly address the needs of people experiencing homelessness, and the associated impactsmake downtown a familyfriendly place to live and visit.

To be fair, this “vision” is not intended to be a blueprint for construction.  All bases seem to be touched.  But, the devil is in the details.  And the details will be debated ad nauseum.  Stay tuned. Read more →

June 8, 2018

Volume 40, Number 10

You hear a lot about the Austin area being inundated by newcomers from California, New York, Boston, etc.  And its happening.  But you dont hear much about your fellow Texans leaving their hometowns to settle down in the Austin area. The common denominator is jobseeking. This is an important, often overlooked, part of the growth in the Austin metro.  And, in some cases the peoplemoving event is a twoway street.

According to a new study by a career-analysis website, Glassdoor, the biggest supplier of jobs for newcomers to Austin is tadahh, wait for it the DallasFort Worth (DFW) metroplexHouston and San Antonio are next.  New York City and Los Angeles follow in the pecking order.

Glassdoor measures job applicants.  The availability of wellpaying jobs in Austin is the lure, which we’ve chronicled for you for years.  And, of course, it’s easier to uproot and move down the road to attractive Austin, rather than make a cross-country move.  So, in that sense, it makes sense for ambitious Texans, seeking a better situation, to consider a move to the nearby Austin metro.

Not all Austinites stay here (I know, I know, it’s hard to believe).  And you must (grudgingly) admit, the much larger D-FW metro is also a pretty good area.  While Glassdoor reports DFW attracts the most job applicants from Houston and New York City, Austin comes in at #3, just ahead of Chicago and Los Angeles.  Aside from Austin, there’s a pattern here:  big city attracts residents from other big cities.  (Maybe, for some Austinites, it’s trying to “move-up” to the big city life.)

Another point that needs to be made:  weve always mentioned Austin area.  This population influx is not limited to the Austin city limits.  As we have regularly referenced, the nearby communities within the Austin metro offer more affordable accommodations and civic amenities such as nearby schools, quality neighborhoods and access to all Austin offers in terms of quality of life.  It’s part of the big picture.

Speaking of smaller Texas cities, didja know the most prosperous city in America is a small town in Texas?  And, a nearby city is also in the Top TenOdessa as #1 and Midland as #10 are stories unto themselves.  But, these boomtown oil patch Texas success stories bring with them a number of trade-offs.  Check out the next item. Read more →

June 1, 2018

Volume 40, Number 9

The sometimesbitter, pushpull battle between public schools and charter schools is ongoing in Austin and around the state.  South of here, in the Lower Rio Grande Valley, a public school district is considering a plan that could give its campuses more flexibility and funding by adopting some charter schoollike policies.  This is one to watch.

Immediately after our deadline this week, the Pharr-San Juan-Alamo (PSJA) public school district teachers will vote on a plan that will create an Innovative Management Organization, or IMO.  If adopted, PSJA superintendent Daniel King says the IMO approach could result in additional funding for the school district.

Stay with me now.  The non-profit IMO will operate as an independent contractor to PSJA and will be responsible for delivering services to the district.  King calls this a way to merge the benefits of having charter status with the current public school system.  How will it work?

To achieve a middle ground, King proposes holding the IMO responsible not for fully running the campus, but for creating methods in which teachers and staff are more involved in the decisionmaking of their campuses, according to the McAllen Monitor.

The IMO will be overseen by its own governing board and operate as a separate entity from the district.  It will hire its own executive director.  If this plan is implemented district-wide, it would partner with 5-7 IMOs.

It gets complicated and maybe even a bit convoluted.  Space prevents us into delving too deeply into the pros and cons. But King estimates this plan would bring in about $906 additionally per child, per year, and if it is districtwide, it would mean $28 million annually.  This approach is made possible by Senate Bill 1882, passed by the Legislature.

Long a supporter of charter schools and frequent critic of public school operations, the Texas Public Policy Foundation praises this approach, saying not only would it result in more education dollars for the Valley, but it should also provide improved opportunities for teachers and better student outcomes.  It bears watching. Read more →

May 18, 2018

Volume 40, Number 7

Amazon, the powerhouse Seattlebased company, continues its quest for a second massive headquarters location dubbed Amazon HQ2.  It hopes to settle on a site this year.  The Austin area is one of 20 finalists that have made pitches for the economic development prize.  Debates have erupted about how such a gigantic, 50,000job enterprise can be absorbed into the local economy.  Consider some arguments against HQ2s ultimate location.

“Many residents fear that winning the prize would actually exacerbate all the things they hate about living in the region:  horrendous traffic, expensive housing, crowded schools and gentrification.  The area consistently ranks near the top in surveys of the nations worst traffic congestion.  It has failed to keep up with the demand for low and moderate priced housing, a challenge that also concerns Amazon.”  Betcha thought these quotes printed in a national newspaper were about Austin.  Nope.  They refer to another “favorite” for HQ2 – the Washington DC region.

Make no mistake.  The DC region is very much in the mix.  It would give Amazon an East Coast presence to balance Seattle’s West Coast location.  With Amazon gobbling up more and more enterprises, it will face more and more scrutiny by the US government, and a local presence would be helpful.

Also, don’t discount this:  Amazon’s CEO Jeff Bezos (generally considered the world’s richest man) owns the influential Washington Post newspaper – which incidentally carried the DC quotes listed above.  Oh, by-the-way, the DC area offered Amazon nine sites:  four each in Northern Virginia and the District, and one in Montgomery.  You see why some savvy analysts pick DC?

But, looking beyond DC and other highly competitive sites such as the Dallas area, we wanted to share this information with you to “point up a point” we like to make.  In almost any competition you can name, the winner is not perfect.”  It is the best of the rest.  And oft times, subjective factors (such as “I just simply like this one” when the competition is close) play into the decision.  This is where handicappers fall short in predicting winners.

So where does all this stand as of now?  Don’t know.  Amazon’s lips are zipped, as they have been all along.  But an interesting development took place just this week in Seattle that upset Amazon.  Check the next item that might swing an intangible toward a Texas location. Read more →

May 11, 2018

Volume 40, Number 6

Multiinch rainfall fell throughout much of the Austin area last week.  The benefit is obvious when you look at the trees, shrubs, grass, etc.  Vegetation is thriving nowBut, emergency crews will tell you the dog days of summer harbor the potential for disaster.  Were not talking about flooding, were talking about wildfires.  As the summer temps rise, dry vegetation provides fuel for fastmoving wildfires.

Specifically, we’re referencing the northwest quadrant of Austin, lavishly graced with massive amounts of trees – especially cedar/mountain juniper.  Fire casualty companies have rated Austin #3 in the nation for high wildfire risk, with more than 37,000 homes at risk.

Public Safety Commission member Mike Levy says the Austin City Council chooses to ignore the critical, immediate need for another fullystaffed fire station in the Loop360 corridor.  “If a wildland fire pushed by high winds from the northwest is not contained at 360, there goes Austin,” Levy warns.

Pointing to recent widespread fires in California and Colorado, Levy says the heavily-wooded area of Austin along the 360 corridor poses even greater risk.  “We have massive amounts of cedar and persimmon,” he said.  “Because of their oils, they dont ignite; they explode.”

He envisions a scary perfect storm scenario:  Thirty-to-thirty-five mile an hour winds that don’t “lay down” at night.  Low humidity.  Very dry vegetation in large quantities serving as hot fuel.  “One home on the urban interface ignites, most likely by a flying ember under the eaves rather than direct contact with flame, similar to how Bastrop homes, several miles from the actual flames, ignited,” said Levy.

“Then that fire igniting homes on either side and then on either side of those, with the same pattern across the street, with the fire jumping to the homes behind those … Well, you get the idea of the checkerboard pattern of rapidlyspreading house fires,” he continued.  “A monstrous inferno.  In less than 2-3 hours, thousands of homes will be lost along with lives of firefighters and civilians.”

Levy continues to press for expanded fire protection in Austin’s northwest quadrant, saying “Austin so far has dodged the bullet.” Read more →

May 4, 2018

Volume 40, Number 5

Yes, median pay at Facebook really is about $240,000 a year.  The median is the midpoint at which half of workers make more and half make less.  $240,000 a year!  Median employee pay at Alphabet (parent company of Google) is $192,274How do we know these eye-popping numbers?  Congress required this disclosure to be made to the Securities Exchange Commission (SEC) starting this year as part of the DoddFrank law.  The objective was to compare employee salaries to their CEOs compensation to name and shame bad CEO actors.

Since this was the first year for the requirement to take effect, enterprising reporter Kathleen Pender dug up these numbers and published them this past weekend in the San Francisco Chronicle.  The problem is that the law is a bit obscure as to what is included in the compensation.  So Pender reports it is not quite apples-to-apples when you compare companies, even though the companies stand behind their SEC filings for their individual entities.

The employee totals are the most interesting numbers for Austin.  The CEO’s don’t live here.  Employee payrolls are of the utmost interest in the Austin area as these two companies are expanding their local workforces regularly.

But, let’s quickly look at the CEO figures.  Pender reports, “Facebook founder and CEO Mark Zuckerberg made 32 times what the median Facebook worker earned.  But, Zuckerberg only took a $1 salary last year and got no new stock grants (on top of the $70 billion in Facebook stock he already owns).  So where did the compensation figure come from?  His $8.8 million in compensation last year was mainly for his personal security detail and private aircraft use.

What about Alphabet’s CEO’s compensation?  Pender further reports, “its CEO and cofounder Larry Page took home his usual $1, producing a pay ratio near zero.”  Other CEO’s (not just tech) pull down annual salaries ranging in the eight-digit millions.

For this report, weve selected just a couple of companies with a major, growing presence in Austin.  The law was designed to single out companies perceived to be bad actors.  But, there are other ramifications.  Some “CEOs got pay envy” and sought more bucks.  As for employees, backlashes occurred when disgruntled workers found they were earning less than the median and poaching of employees is starting to occur.  Stay tuned. Read more →

April 27, 2018

Volume 40, Number 4

Even as oil and gas production enjoys another resurgence in Texas, the state has issued a positive report on solar powers momentum as a separate energy source.  “The longterm prospects seem as bright as the Texas sun,” said Glenn Hegar, Texas Comptroller of Public Accounts.  And, the cities of Austin and Georgetown were cited as examples of early adopters of the technology.

Ten years ago, Texas’ solar industry was fairly small, but today some believe it’s ready to take on a much larger share of the states energy needs, according to a report by Patrick Graves and Bruce Wright, of the State Comptroller’s office.  How big is the Texas solar industry?

Nearly 8,900 Texans work in the solar industry, in manufacturing, installation, sales, distribution and more,” Hegar noted.  “Our state has 532 solar companies and nearly 100 solar manufacturers.”  Hegar did acknowledge the Texas solar industry is “a relatively small slice of the national industry,” but went on to say “its growing rapidly, driven by improved technology and falling prices.”

Research fellow with the Energy Institute at UTAustin Roger Duncan sayssolar is where wind was 10 years ago and he believes the economics of solar power are as good as wind energy, and maybe better.”

Austin was cited as being at the forefront of using these new energy sources:  “Between solar and its windpower resources, Austin expects to be able to meet more than half of its total needs with renewable energies by 2020,” the Comptroller’s report noted.

It also pointed out nearby Georgetown signed agreements recently that will allow “Georgetowns municipallyowned utility to rely entirely on wind and solar sources.  The city will sell excess power to ERCOT, the states power grid, which will also provide backup power for Georgetown in the event of any shortfall in its power resources.”

To be sure, “there are still unknowns that may rock the industry, including the fate of an important federal tax credit and a recent tariff on foreignmade solar panels,” said Hegar. Read more →

April 20, 2018

April 20, 2018:  Volume 40, Number 3

Dear ,

What if the Russians (or other enemy entity”) hacked into your power supply, Austin Energy?  How about the nuclear power plant that supplies a portion of Austins electricity?  Or the source of your water supply, the Lower Colorado River Authority (LCRA)?  In other words, what if your access to water and/or electricity is cut off?  This was the subject of a recent FBI/Homeland Security report on Russian hacking.

The Department of Energy has begun the task of creating an office of cybersecurity and emergency response.  “But at the local level, it will be up to officials to take whatever steps are needed to prevent hacking attacks,” says Mary Scott Nabers, CEO of Austin-based Strategic Partnerships.  “The possibility of future impacts is enormous.”

“Our power plants, nuclear generators and water infrastructure are all outdated and vulnerable,” Nabors noted.  “It would not be that difficult for unsophisticated hackers to shut down our electric grids or our water plants.  It’s even plausible to think that hackers could reroute our airline flights.”

It’s not just foreign powers that pose direct hacking problems.  “To gain access to something significant like a power plant, hackers usually first attack smaller, less secure networks like firms that make parts for generators or sell software to power plants,” observed Nabors.  “Virus and malicious code usually enters a network via a third party breach.”

Nabors acknowledged local entities are already investing in safeguards.  But, she said “that will escalate significantly in the near future.”  It is estimated that US utilities will spend more than $7 billion on grid cybersecurity by 2020.

The reason for this increased effort:  “between 2010 and 2014, hackers infiltrated the US Department of Energy’s networks 150 times.”  And, 68% of oil and gas companies have experienced at least one compromise over the past 12 months.

Nabors points out federal funding sources are available for local cyber security:  “The threats are significant and funding and assistance are available.  It seems important for state and local officials to avail themselves of all assistance possible.”  She also admitted it will be difficult, as the federal government is large, complicated and bureaucratic. Read more →

April 13, 2018

Volume 40, Number 2

Dont know if you noticed, but the #2 person in line to become US president spent a lot of time in Austin this past week while the USCongress was in recess.  House Speaker Paul Ryan also hit other cities to preach the administration gospel and raise money.  But, he also participated in a 3day Republican retreat in Austin, discussing politics and policyAll this was before Ryan announced Wednesday he was retiring at the end of his term in Congress.

According to the Texas Tribune (TT), Ryan has just concluded a swing through Texas that included a retreat in Austin with about 100 GOP donors.  Additionally he held fundraisers in Dallas, San Antonio and Corpus Christi.  Along the way, he was promoting new legislation like last year’s sweeping tax overhaul.

The Wisconsin Republican raised almost $4 million with these events – quite a haul.  Where did the money go?  It went to “Team Ryan” — a joint fundraising committee composed of Speaker Ryan and other Republicans running for Congress, reports TT.

Three Texas GOP Congressmen have been publicly targeted for defeat by the Democrats – Will Hurd from Helotes, John Culberson from Houston and Pete Sessions in Dallas.  Some of this money will go to help their re-election.

Make no mistake.  There were a lot of Republican heavyhitters here in Austin, both elected and powerbrokers.  The focus was on elections later this year.  It is somewhat interesting Austin was chosen for this politically-oriented retreat.  After all, Austin leans heavily democratic.  (Apparently, the attractions of our fair city appeal to a wide political spectrum.)

Ryans retreat and fundraisers were private affairs, but he did make a few public appearances, including stopping by the Austin Police Department to thank local officers for their response to the deadly bombings last month.  This rare, high-level GOP concentration in Austin – albeit briefly — brings to mind the enthusiasm powering local Democrats.  As we mentioned two weeks ago, there are three Democratic Party runoffs May 22nd that will determine which candidate will run against local GOP Congressmen Michael McCaul and Roger Williams, as well as, who will contend for the seat left vacant by Lamar Smith, who decided not to seek re-election. Read more →

April 6, 2018

Volume 40, Number 1

This week the Austin AmericanStatesman, an important, venerable Austin institution dating back to the late 1800s, is under new ownership.  Gatehouse Media, a national media giant, paid $47.5 million for the news operations (real estate was not included).  Will there be changes?  You betcha.  A lot of changes.  Not this week.  But soon.  What can you expect?

Assuming the price tag was a good deal for the buyer, you can further assume the buyer is convinced it can do a much better job with the Statesmans assets than the former owner.  Otherwise, why make the purchase?  In other words, they obviously feel they can make a lot more money — even at a time the revenue streams have been shrinking for years at the Statesman.  How will this manifest itself?

First of all there will be layoffs.  “That’s inevitable” the new owner was quoted as saying.  The Statesman is now part of a media behemoth.  So you can expect some consolidation of functions, and that could result in job increases in certain areas, as well as decreases.

Yeah, but what about reporters, writers, photographers, etc.?  Right now, only about 100 employees fall into that category.  This is about half of where it stood ten years ago.  So, the editorial staff is not likely to be hit with a meat axe approach.  But some attrition is likely.

You can look for Gatehouse to focus heavily on the digital side of the business.  Subscriptions to the Statesman’s digital offerings have grown, even as print subscriptions have dropped precipitously.  This includes new approaches to advertising revenue (the mother’s milk of publications).

Also, bear in mind other Statesmanowned news assets were part of the sale, such as community newspapers like the Bastrop Advertiser, Westlake Picayune, Lake Travis View, Pflugerville Pflag, Round Rock Leader and the Spanish language weekly, Ahora Si!.

And for what it’s worth, Gatehouse Media also has another major presence in the Austin area.  The Center for News & Design opened in 2014, where more than 240 employees provide editing and design work for publications nationwide.  Add it up.  It’s a New Day for news and reporting in the Austin area, playing out over the coming months.  Stay tuned. Read more →