Austin Letter

Trusted Insights and Perspectives Since 1979

July 20, 2018

Volume 40, Number 16

The UTSystem should be nearing the end of its search to replace retired Chancellor Bill McRaven.  There is no stated deadline and former UTAustin President Larry Faulkner is a very capable interim replacement.  But, the Texas Legislature convenes in Austin in less than six months and a new Chancellor needs time to get uptospeed on critical issues.  One question:  what should the Board of Regents pay to attract a worldclass caliber candidate?  Do the Texas Aggies hold the key to that answer?

No doubt about it, the job of UTSystem Chancellor is a tough one, overseeing as CEO 8 academic institutions (including UTAustin) and 6 health institutions that include 6 medical schools, 2 dental schools and 8 nursing schools, among other professional programs.  Consider this:  The UTSystem confers more than onethird of the states undergraduate degrees and educates over half of the states healthcare professionals.  This is a major responsibility.  And, ancillary to this, the newly-named Chancellor will become an influential citizen of Austin.

So, what should the Regent’s search committee pay to get someone of that caliber?  Start off thinking of an amount north of a million dollars a year.  The Chronicle of Higher Education released a 2016-2917 national salary survey this week.  TexasA&MSystem Chancellor John Sharps salary was among the nations highest at $1.29 million for acting as CEO of 11 institutions.

Even the president of the single campus TexasA&MUniversity in College Station, Michael Young, pulls down a $1 million annual salary.  By the way, UTAustin president Greg Fenves turned down a million dollar salary offer when he was hired in 2015 and now makes $762,220.

The precedent has already been set.  When he retired as UTSystem Chancellor earlier this year, McRaven earned just more than $1.5 million in combined base pay, bonuses and other financial perks during the 2017 fiscal year.

The Board of Regents will hire the new Chancellor at whatever salary it takes to attract its chosen candidate.  The search committee is headed by current Regents Chair and Vice Chair Sara Martinez Tucker and Jeffrey Hildebrand.  They are joined by two former chairs, Don Evans and James Huffines and a former vice chair, Paul Foster. Read more →

July 13, 2018

Volume 40, Number 15

Its difficult to keep tabs on the many organizations, boards and commissions that are actively working, one way or another, to determine what Austin is and will be in the future.  But two relatively new groups, composed of some of this citys most notable heavyweights, deserve your attention.  They could have a huge impact on one of the Austin areas most promising future economic underpinnings healthcare research and startups.

It’s understandable they are not all that well-known yet.  Let’s look at the first one, created last year.  And it is growing as we speak.  Its a non-profit organization Capital City Innovation (CCI).  Its purpose is to help coordinate the creation of a healthcare innovation district associated with UTAustin’s Dell Medical School (DellMed).  The makeup of CCIs Board of Trustees is what gives CCI its weight and significance.  Consider these influential board members:

Clay Johnston, dean of DellMed … Greg Hartman, president/Academic and External Affairs, Seton Healthcare Network/Ascension Texas … Kerry Hall, Austin Region president of Texas Capital Bank and former chair of the Austin Chamber’s economic development entity, Opportunity Austin … Stephanie McDonald, chief of staff at Central Health … Dewitt Peart, president/CEO, Downtown Austin Alliance.  Ex officio members are Austin mayor Steve Adler and Travis County judge Sarah Eckhardt.

The second organization is also a non-profit, created this year to speed-up revenue generation for expansion of ambitious healthcare development plans related to DellMed.  Commercial real estate powerhouse Sandy Gottesman formed 2033 LP, a limited partnership that will generate millions of dollars for Central Health, the local public agency that connects Travis County low income residents to quality health care.

Gottesmans 2033 LP will serve as UTAustins development partner in the redevelopment of the multi-acre campus area to support DellMed’s clinical and research operations.  (Gottesman, by the way, after graduation from UTAustin, cut his civic/business teeth as young aide to Austin civic titan Lowell Lebermann, before becoming super successful in Austin’s commercial real estate scene.)

Check the next item for a discussion of the problems that led to this unusual move this week. Read more →

July 6, 2018

Volume 40, Number 14

In this holidayshortened week, it seems appropriate that a number of short items should dominate this edition of the newsletter.  Not that they are any less significantIts just they can be covered with a few sentences or paragraphsTake the now-defunct ban on single-use plastic bags as our first example.

It didn’t take long after the Texas Supreme Court ruled local bag bans ran afoul of state law for the state attorney general to take action.  (Austin has had a bag ban since 2013.)  This week, Attorney General Ken Paxton officially notified Austin and other Texas cities their local ordinances were illegal and therefore unenforceable.

To make sure the word got out, Paxton directly notified the City of Austin, Mayor Steve Adler and the 10member Austin City Council, then he issued a press release to the media.  Now what?  The ruling that banning plastic bags is illegal as of this moment should stand until some counter action – if at all – is taken.

 

 

It may not be long now before you see electricpowered, autonomous transit vehicles circulating in Downtown Austin.  It will be a pilot program instituted in two phases technology testing and actual service runs.

The testing by Capital Metro and the City of Austin Transportation Department could begin later this month and take up to 60 days.  During the second phase, proposals will be evaluated to lease six vehicles, carrying up to 15 passengers, to run in the pilot program for 12 months.

CapMetro thinks the fleet of vehicles will be in operation on downtown streets in late fall.  Not to worryCapMetro says operators will be on board while the autonomous electric vans are being evaluated and running in service.

 

 

For Austin airport travelers, and those picking up arriving passengers, the renovated cell phone lot is offering this month a Texaco fuel station, 120 parking spaces, a convenience store (serving tacos, BBQ, etc.) and electric vehicle charging stations.

Read more →

June 29, 2018

Volume 40, Number 13

As Texas grows, so grows state government.  Right?  Uhhhh, not necessarily.  Government payrolls are a significant part of the Austin economy.  Always have been, always will be.  But, as the rest of the Austin area economy expands at one of the fastest rates in the nation to what extent is government keeping pace?  Bottom line:  private sector jobs are quickly growing in the Austin area.  And the jobs in the government sector are not in step.

This is not to downplay the role in Austin of steady government paychecks.  Far from it.  In fact government sector jobs are more than 17% of all jobs in the Austin area.  (These stats are lifted from a June report by the Austin Chamber’s VP/Research, Beverly Kerr.)  Other cities would die for such a solid job base.  Instead, the current economic situation is a testimony to the private sector that it is outshining the government jobs in the metro.

Without relying on the 17% government jobs (because government job growth was essentially unchanged) the Austin area added 33,900 net new jobs in the 12 months ending in May.  Let this sink in.  This growth of 3.3% made Austin the third fastest growing major metro in the US.  And it was basically in the private sector.  For the nation, private sector growth was 1.9% for the same period.

A half-century ago, we were quoted in TIME magazine as saying “Austin is a state government, state university town.”  True, then.  Not so much, now.  And it has occurred in less than one lifetime.

By most measures, the Austin area boasts of one of the most vibrant economies around.  And private sector jobs have been the defining difference compared to the area’s historical past.  This is a major economic sea change that has taken place in front of your very eyes.

Oh, by the way, all this is underscored when you understand that almost as soon as new jobs are created in the private sector, they are filled.  In May, Austins outstanding unemployment was at an eyepopping 2.8%.  Economists will tell you this is full employment – anyone who wants a job can get a job.  Other major metros in Texas are also doing well.  Their unemployment percentages are solid – ranging from 3.2% in San Antonio to 4.2% in HoustonDallas and Fort Worth were at 3.4% in May.  These are all better than the unemployment rates seen a year ago. Read more →

June 22, 2018

Volume 40, Number 12

Too often the debate about energy sources becomes an usversusthem discussion – “fossil-fuelsversusalternativefuels.”  Energy is vital to Austin and the rest of Texas.  Texas is a world leader in fossil fuels with enormous oil and gas availability.  Not as well-known, is the fact that Texas is fast becoming a leader in capacity to generate electricity from an alternative fuel source — wind power.  Its an enviable position.  With such a wealth of resources, how about peaceful coexistence in Texas as an energy policy?

The City of Austin has committed big bucks far into the future to use wind power to generate electricity, while currently relying on other sources such as natural gas, coal-fired power, nuclear power and solar (which will be discussed at a later date).  Wind is an important and growing part of the Austin economy.  So, just how big is wind in Texas?

According to Texas economist Ray Perryman, Texas capacity of 22,799 megawatts is larger than most countries around the world.  And in the US, Texas capacity is triple that of secondplace Oklahoma.  The Lone Star State also tops the list for capacity currently under development.

Just as with fossil fuels, geography is key.  Texas has abundant land with the right wind speedsAdditionally, there have been billions of dollars of investments in transmission lines that are needed to get wind power from the often rural areas, where it is generated, to Austin and other growing population centers where it is needed.

It’s not been widely discussed, but development of wind power has been an economic boon.  The American Wind Energy Association estimates more than $42 billion has been invested in Texas wind farms, creating jobs during construction, and to a lesser extent, on an ongoing basis through operations and maintenance, Perryman reports.

In addition to the economic benefits of the industry itself, wind generation capacity works to reduce electric power prices,” Perryman continued.  And wind gives electric power customers more choices.  There are also more benefits.

How many states would love to have Texas oil/gas/wind energy resources?  This situation will inure to the economic benefit for Austin and the rest of the state for generations. Read more →

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 →