Austin Letter

Trusted Insights and Perspectives Since 1979

August 18, 2017

Volume 39, Number 20

Do you want to pay a tax to drive into downtown Austin?  A tax, not a toll.  Congestioncharging zones (CCZ) are already in place in some important cities, and being planned in others, as a way to reduce roadway crowding in central cities.  CCZs are just one solution being bandied about, that also have the added advantage of generating revenue.  They all have one thing in common changing the way you pay for driving a vehicle.

While congestion is one of the driving forces, dwindling sources of revenue are also a big contributing factor.  The standard taxes you pay at the pump for gasoline are becoming less and less adequate to handle the increasing number of vehicles, according to The Economist.  And, face it, local and Washington legislators have shown no appetite for raising gasoline taxes.

CCZ’s have their champions.  There has been no serious public discussion about a CCZ for downtown Austin.  However, even as we speak, New York’s Gov Andrew Cuomo is pushing a CCZ tax for access to Manhattan.  But, the outcome is far from certain.

Why?  Take a look at London.  A CCZ was put in place there in 2003, but the city is now seeing congestion rising again.  Seems market forces are at play in London.  Uber drivers, taxis and vans figured out they could pay one tax for entry and spend hours driving around picking up riders, increasing congestion.  So the CCZ may go down as a failed experiment.

Still, fuel tax revenues are drying up even as more vehicles crowd roadways.  The problem of reducing revenue is multi-faceted:  better gas mileage (fuel efficiency has roughly doubled in the past 25 years) … more electric/hybrid cars, that are subsidized to increase production, etc.  So, some form of payby-mile is gaining steam.

A variety of ways to charge you for driving a vehicle are in the experimental stage – all bolstered by scary, unbelievable leaps in technological capabilities.  In less than three years, Singapore will use a GPSbased system to vary the amount it charges drivers based on distance, time, location and vehicle.  At the same time, drivers will receive real-time info about the cost and “busyness” of roads, encouraging them to consider other routes.  Closer to home, California and Colorado have received federal grants for trials of various pay-to-drive schemes.  We’ll detail what Oregon is doing with 1,500 drivers in the next item. Read more →

August 11, 2017

Volume 39, Number 19

Is something wrong with Austin home prices?  For that matter, the same question can be asked about home prices in other major Texas cities.  This sobering question is prompted by recent national reports that area home prices are among the most overvalued in the US.  Those reports have pointed to the recent rapidlyrising home prices in the Austin area as examples that the local residential housing market is overvalued.  However, this week, a longtime, respected Texas economic research outfit took issue with this designation.

While not overtly stated, these national reports saying Austin housing is over-valued imply a housing bubble may be on Austins horizon.  And, a housing bubble further implies a bursting of the bubble could have bad economic consequences.  Therefore, their reports should not be taken lightly.

You may remember two weeks ago (see the 7/28/17 newsletter in our Archives section) we told you the TexasA&M Real Estate Center was looking into these “overvalued” reports.  Well, the Center released preliminary results of its research this week.  Saying such comparisons are “not easy,” it did conclude that “Texas shows no current signals of overheating” – a reference to a possible housing bubble like the one that led to a recession many years ago.

TexasA&M research economist Dr. Luis Torres refers to the discrepancy in calculation as a “misalignment” that suggests “recent price changes cannot be explained by supply and demand fundamentals alone.”  He points to 2014 as the year when the “misalignment” started in Austin, Houston and DFW.  And 2015 when it started in San Antonio.

Torres says “there is no sure way of knowing what prices should be,’ even when considering supply and demand determinants, since they change over time.  Even more difficult is determining with certainty the formation of housing bubbles.”

But, the real estate researcher looked back at conditions present during the last bubble, and concluded they “seem not to be present currently in the Texas housing market or in the major Texas MSAswhich includes Austin.  However, he did caution about the lack of housing inventory, and said the TexasA&M Real Estate Center “will continue to monitor and analyze” this significant supply restraint.  We’ll also watch it for you. Read more →

August 4, 2017

Volume 39, Number 18

For the first time in 2017, a travel warning has been issued for a favorite destination of Austinites, Mexico.  No, it doesnt have anything to do with drug cartel violence.  This warning cautions those vacationing in popular resorts about possible tainted or low quality alcohol.  What?  Yep, seems several dozen imbibing Americans have been stricken after as little as one or two drinks.  In fact, one US citizen died.

The USState Department singled out vacation resorts near Cancun and Playa del Carmen.  Those who have been affected by the booze claimed to have a drugginglike sensation, memory loss, becoming ill, and/or blacking out.



For a further update on what is happening in Mexico, who better to turn to than a former US Ambassador to Mexico with deep ties to Austin former Texas Secretary of State and president of the Texas Exes, Tony Garza.

Garza says “over the past few weeks, there has been some great news coming out of Mexico’s energy sector.”  He specifically mentioned a “consortium of international energy companies had discovered enormous shallow water oil reserves,” and said he met with USEnergy Secretary Rick Perry about “our strong and vitally important crossborder energy integration.”

But, his brutally-honest assessment also includes some bad news.  “The countrys murder rate has skyrocketed this year, with 11,155 people killed from January through May alone (a 32% increase from last year).”  He further said:  Governmental “corruption allegations have also shown no signs of abating.”

Additionally, he cites uncertainty surrounding NAFTA trade renegotiations.  Austin and Texas are heavily involved in NAFTA trade deals.  But, this entire subject is caught up in the push-pull of international and national politics.  So, who knows where negotiations will end up.

Garza importantly raises a “timing” red flag.  Discussions are scheduled to begin in early fall.  “But the negotiators will have to move fast,” Garza warns.  “Theyll be under intense pressure to wrap up discussions by early 2018, before Mexicos presidential campaign picks up steam.”  Check out the next items for related Austin energy developments. Read more →

July 28, 2017

Volume 39, Number 17

During Rick Perrys 14year tenure as the states governor, he regularly touted the Texas Miracle” – his term for the economic dynamism of the Lone Star State.  He was an aggressive advocate for the oil and gas industry, while presiding over Texas leadership in the production of wind and solar power.  Now, with Texas in his rear view mirror, Perry is pushing policies that will greatly enhance his home states energy future.

As the current US Energy Secretary, Perry is making major moves to ensure US dominance in the global energy market.  And just about every action he is taking will have a profoundly positive impact on Texas energy leadership.  He is helped by the fact his energy policies are closely aligned with the man who appointed him to the post, President Donald Trump.

Just as Perry can’t claim total credit for what happened in Texas (credit Houston oilman/developer George Mitchell for the gamechanging fracking approach to the expansion of oil and gas production), he must also nod in Trump’s direction for what is happening to US energy development.  But, Perry is front and center on the advocacy and implementation of those policies.

A major driver of this effort is the push to export Liquefied Natural Gas (LNG).  Fracking in Texas has unleashed massive amounts of natural gas – so much that “overabundance” has been used to describe it.  Well, converting gas into liquid makes it easier to ship to markets around the world.

New and expanding LNG plants along the Texas Gulf Coast are the key to this effort.  So is expansion of the Ports of Houston, Beaumont, Corpus Christi, Texas City and Port Arthur.  And yeah, pipelines to get the gas to the Texas coast.  No longer are there roadblocks in the way of exporting this fossil fuel.  As Perry told the National Press Club:  “If you meet the rules, heres your permit.”

Of course, environmentalists are still battling the reliance upon fossil fuels – urging a move to alternative, sustainable fuel sources such as those derived from wind and solar.  (The City of Austin is one of the nation’s leaders in this direction).  As governor though, Perry was an all-inclusive energy advocate.  The massive wind farms and solar power installations that erupted in Texas during his tenure are testimony to that approach.  Perrys history indicates the US Energy Department may follow his all of the above approach.  If so, Texas will benefit. Read more →

July 21, 2017

Volume 39, Number 16

For years, Austin Neighborhood Organizations have been a powerful force at City Hall, many times taking a NIMBY (Not In My Back Yard) position against various development proposals, including building new housing/apartment units.  Now, because some NIMBY efforts have led to rising housing costs creating even fewer available living units a new countermovement is emerging nationwide to combat resultant rising housing costs.  Its called YIMBY (Yes In My Back Yard).  Can Austin be far behind?

YIMBY groups are springing up to battle long-established neighborhood groups and local elected officials.  They are demanding an end to strict zoning and planning regulations.  They want to prevent housing construction proposals from being delayed or even derailed.  YIMBY’s view is that rising costs are forcing residents to move further away to find less expensive housing, thereby damaging the environment as people get pushed into longer commutes.  Right now, YIMBY’s efforts are expanding in Colorado and California.

Take California.  The New York Times reported this week “a full-fledged housing crisis has gripped California, marked by a severe lack of affordable homes and apartments for middle-class families.  The median cost of a home (in California) is now a staggering $500,000, twice the national cost.  Homelessness is surging across the state.”

YIMBY groups have organized in many California communities, with full-time staff.  As a testament to their growing influence, the California legislature, controlled by Democrats, is now considering measures that will override local zoning laws, much to the chagrin of neighborhood groups.

Take Colorado.  YIMBY’s first gathering was organized by a group that included Boulder’s former mayor Will Toor who said “… tackling the lack of housing in thriving urban areas, caused largely by local zoning restrictions, is key.”  YIMBY conferences (called “Yimbytowns”) attract several hundred attendees.

We know of no YIMBY group in this area, though Austin is beset with many of the same concerns (high cost of housing, lack of available living units, homelessness, sprawl, local development restrictions, etc.) that have given rise to action in other cities.  But Austin has its own controversial process tackling these issues.  See the next item about CodeNEXT. Read more →

July 14, 2017

Volume 39, Number 15

One of the reasons people are moving to the Austin area at such a rapid clip is they are hearing from current residents who have income increasing at one of the fastest rates in the nation.  Yes, available jobs are important to population growth, as is cost of living and quality of life.  But after newcomers arrive, their income apparently keeps going up over the years.

Recent research shows Austin’s growth in real total personal income in 2015 was the seventh best among the 50 largest US metros, according to Chamber VP/Research Beverly Kerr.  She further reported this week that real per capita personal income growth over the last five years is 17.0%, and only five large metros have seen faster growth.  For comparison purposes, Kerr noted that Dallas-Fort Worth ranked 4th, and Houston and San Antonio (15th and 18th respectively) also saw better growth than the national gain.

Realizing eyes tend to glaze over when reviewing economic statistics (as ours did several times), we were intrigued by Kerr’s analysis of a recent trend to take into account regional price differences and personal consumption expenditures combined with income growth.  This data is not simply inflation-adjusted.  We’ll try to boil down her findings, without downplaying her good work.

She calls it price parity.  With all the local debate criticizing rising costs in the area, she found Austins average prices are still 0.5% lower than the US average.  This puts Austin way below “competitor metros” such as San Jose, San Diego, Boston, Seattle, Denver and Portland, as well as many other big metros.

And, importantly, Austin is still lower but not by much than Houston and DallasFort Worth.  In other words, a dollar earned in the Austin metro is worth more than similar income in more than 20 other big cities.

An important distinction:  inflation rates differ by regions.  When you see common national inflation rates, they are not nearly as relevant as regional inflation rates.  This is why the unique measure used here is significant.

Not only has the areas personal income been increasing at a comparatively fast rate, the lower regional inflation rate has given it enlarged spending capacity.  Caution:  Austin’s regional rate of inflation is creeping higher, compared to the national standard.  Be aware. Read more →

July 7, 2017

Volume 39, Number 14

The President of the Austin Chamber of Commerce Mike Rollins published an article titled Heres how your city can become the next Austin, Texas in a major Washingtonbased publication.  What gives?  Is he giving away secrets?”  Nope.  It was a clever ploy to do a little bragging and to lobby for additional resources for Austin.

An Austin area delegation of business and civic leaders descended upon Washington DC, shortly after titans of Silicon Valley met at the White House.  Rollins said they wanted to “share a fivepoint agenda we believe will create and strengthen more regions like ours.”  And, as a Chamber exec should do, he extolled Austin’s successes: “We have added more new jobs 350,000 in 12 years as a percentage of our labor market than any major US metro.”

But he did more, much more, than that.  He suggested ways Austin’s success can be enhanced, and replicated, with actions needed in Washington, such as investments in research, technology and innovation.

Congress and the White House must shoulder the lions share of Americas basic and translational research investment:  energy, the National Institute of Health, the National Science Foundation, advanced research projects and education sciences all need funding increases,” he argued.

We can’t cover all he recommended here.  But he did emphasize an Austin hot-button issue – physical infrastructure on a “scale of investment contemplated by the president’s $1 trillion vision.”  Rollins said “we need Congress to pass a plan which recognizes fastgrowing regions by using uptodate census data and includes states like Texas that lack new publicprivate highway partnerships.”

Pointing out “regions like Austin need more and better-prepared talent.  Austin maintains a low unemployment rate, despite 110 net new people moving here each day. We applaud the president and Congress for focusing on apprenticeships and $1 billion net workforce investment,” Rollins reinforced.

He supported international trade agreements that benefit American workers and grow jobs here at home.”  But, he devoted some of his strongest comments toward taxes, in combination with another pitch about the Austin area’s successes.  See the next item. Read more →

June 30, 2017

Volume 39, Number 13

One of the big economic stories in the Austin metro is what is happening to the three major hospital systems serving the area.  Were talking hospitals.  They are thriving and expanding, and when taken together, tell a story largely overlooked in the overall growing healthcare industry.  The UTAustin Dell Medical School has generated the lions share of notoriety.  And, while it is certainly significant, it doesnt tell the whole story.

A relative hospital newcomer appears to be going all-in to carve out a niche in the Austin metro.  Baylor Scott & White is the newly-merged entity joining the ranks of St. Davids HealthCare and the Seton Healthcare Family, to make up a powerful triumvirate of hospitals.

Scott & White built a national reputation north of Austin in Temple.  Baylor has had a long tradition of operating hospitals in the Houston area.  Following their recent merger, the new Baylor Scott & White entity is taking aggressive expansion steps in the Austin area.

As examples, it acquired a large troubled hospital operation in Lakeway, broke ground for a new facility in Pflugerville and is planning a new hospital in Southwest Austin.

St. David’s has continued building upon its impressive presence in Austin with a surgical bed hospital north and a new facility in Leander not to mention expansion of its major South Austin Medical Center, to name just a few.

And, of course, the one with the most recent notoriety:  the teaching hospital Seton Medical Center at UTAustins DellMed.  It replaced the venerable Brackenridge Hospital.

This is not a complete list – just a sampling, showing some of the hundreds of millions of dollars in major investments underway by the Big Three Austin area hospital systems.

This is occurring in an open marketplace where hospitals are competing with each other to provide the latest equipment and best personnel in facilities serving our growing area.  Not long ago, hospitals were tightly regulated.  They had to justify the granting of a Certificate of Need.  No more.  Now the Austin area is the beneficiary of a competitive marketplace. Read more →

June 23, 2017

Volume 39, Number 12

If you ever had any doubt the City of Austin is doing all it can to restrict cars in downtown Austin, just pick up the Street Design Guide released this week by the citys Transportation Department.  There it is in blackandwhite.  It reads:  “the modal hierarchy is pedestrian first, then bicycle and transit, then vehicles.”  But there were even more examples this week.

Civic activist and former publisher/founder of Texas Monthly Mike Levy (we used to call him a gadfly) criticized details of the Guide.  He also e-mailed “they have told folks along Sixth (street) that they are already committed to taking away lanes on each side for twoway bike lanes on each side of the street, and making Sixth two-way, and removing even more parking spots from the downtown area.”

Levy added:  “Two big retailers have recently left downtown:  Brooks Brothers on the southwest corner of 6th and Congress; and Keepers on the southeast corner of 6th and Congress.  The reason they have given:  No parking for customers.”

“Step on a bus in afternoon rush hour that’s stopped in a dedicated bus lane on Guadalupe or Lavaca, take a quick look, and get off.  Most only have a few passengers, at best,” he continued.  “But the gridlock on these two streets is unnecessarily compounded by the usage of a vehicular lane for empty buses.  Gridlock in the downtown area is also compounded by Brazos and soon Colorado streets converted to two-way from one-way and a loss of a lane on each street.”

Attorney Brian Greig, who offices downtown, emailed his concern about the Guide that gives private vehicles the lowest priority:  “Until there is a viable transit system this will keep many from downtown, especially older and disabled folks, and anyone not wanting to walk or peddle to town when its 90 degrees.”

Oh yeah, Mayor Pro Tem Kathie Tovo is floating an idea to ban all cars from Congress Avenue a distance of about two miles for one day, from the State Capitol south, across Lady Bird Lake, all the way to West Mary Street.  She wants to do this to spread the word about bicycle transportation, calling it Ciclovia.”  She may not pull this off until sometime next year.  In the meantime, she is getting city staff to explore the possibility, including what costs would be associated.  Question:  Is this just one more thing — or part of a trend? Read more →

June 16, 2017

Volume 39, Number 11

You probably havent heard much if anything about this.  But a former Texas Agriculture Commissioner and Austinite, Democrat Jim Hightower, is deeply involved in a nascent effort to push his political party more to the left.  They are calling it a revolution.”  They are organizing to take control from the current Democratic Party machine.  Nationally it is called Our Revolution.”  Locally it is called Our Revolution Texas.”

The Democrats have been loudly challenging GOP President Donald Trump.  And that daily drumbeat has drowned out a quiet battle going on inside their party, with Texas at the forefront.  “Our Revolution Texas is in the process of creating the infrastructure to challenge the established state party,” notes Theo Anderson, in the far-left publication In These Times.

How do these Bernie Sanders backers plan to do that?  Our Revolution Texas has divided the state into 11 regions, and the regional chapters will recruit and train candidates to run in local, state and congressional elections next year.  It is encouraging progressives to become Democratic precinct chairs, saying the party is so hollowed out in Texas that taking it over is mainly a matter of showing up.

As Hightower puts it:  “In probably half of the precincts in Texas, theres no precinct chair.  So were going to fill as many of those as we can.”  The precinct chairs elect the county chairs, who in turn choose the state party chair.  He claims corporations have too much control of the Texas Democratic Party.  “If you’re taking that corporate check,” says Hightower, “youre not pushing a $15 minimum wage; youre not pushing Medicare for all; youre not pushing for free higher education.  You’re going along with the corporate agenda.”

Its being called the most serious fissure in the Dem Party since the Vietnam War in 1968.  Various left-leaning groups are becoming part of Our Revolution.  In January, Texas became the national organizations first state affiliate.  The group now claims Dem Party chairs in Colorado, Nebraska, Washington and Wyoming.  It says it is now targeting at least 15 more, including Texas, to organize progressives to fill county/state party offices.

In the 2014 congressional election, Texas had the 3rd lowest voter turnout – just 28%.  Hightower says “Its not that Democrats turned rightwing.  They quit voting.  If they hear candidates and political organizations talking about the things they care about, they’ll respond.” Read more →