Austin Letter

Trusted Insights and Perspectives Since 1979

February 23, 2018

Volume 39, Number 45

As you might imagine, there has been quite a todo after the Austin City Council voted to make Austin the first city in Texas to mandate/require that private businesses provide their employees paid sick leave.  It wasnt even close.  After much debate, the vote was 92 to implement the policy.  Now what?  Lets examine what is likely to happen now.

First of all, start with the fact the Councils controversial action is not slated to go into effect until October 1, 2018.  Private businesses with five or fewer employees were not exempted from the ordinance, but they won’t be required to provide paid sick leave until October, 2020.

How much paid sick leave is required?  A worker can accrue up to 64 hours, or eight days, of paid sick leave per year.  Small businesses, with 15 or fewer employees, get a slight break.  Workers at small businesses can accrue up to 48 hours, or six work days, of paid sick leave per year.

When we mentioned there has been a “to-do” since the controversial decision, criticism came from several quarters.  Check our Archives for the 2.2.18 edition where we detailed the opposition position from the Austin Chamber of Commerce.  Additionally it asked the vote be delayed 90 days – didn’t happen.

A TV station from Houston jumped on this story.  It interviewed Austin business owner, Peter Morales, who told KHOU “I have several friends in the construction industry, several companies, that are “specifically saying they are going to move outside the city limits.”  A conservative policy group weighed in saying the City of Austin “should ease regulations that prevent businesses from locating here, staying here and expanding here.  Instead, they add new ones.”

The most significant opposition came from a local State Senator (Donna Campbell) and a local State Representative (Paul Workman).  They can do more than simply wring their hands and express dissatisfaction – they can get it overturned in the State Legislature.  And, they indicated they will do just that, having already lined up support to overturn Austin’s action.

While the Legislature has regularly overturned what it terms “Austin overreach,” the problem is the Legislature doesnt meet until January 2019, three months after Austin’s paid sick leave ordinance goes into effect.  No one has yet publicly stated what might happen during this interim.  Dont be surprised, though, to see some sort of legal delaying action take place.  Stay tuned. Read more →

February 16, 2018

Volume 39, Number 44

Okay, new Austin City Manager Spencer Cronk, sure hope you packed your running shoes when you moved to Austin to take the citys CEO job.  Surely, youve done your research and know that its been almost a yearandahalf since this city had a permanent city manager.  And, surely youre aware in that timeframe, Austin has incurred vacancies in almost 20 of the citys top executive positions.  Talk about hitting the ground running.  This is your first week on the job.  Youve got a lot to do in a short time.

Yeah, yeah, we know interim appointments by an interim city manager have been made in most of those positions.  But, you know the drill.  Those who have interim as part of their job title are seldom invested with a sense of permanence to make longrange decisions.  And, what about those just below the “interim” level?  Think about how they function when they believe their jobs may be in limbo.

How serious is this situation?  About onefourth of the highest executive positions in city government have become vacant over the past yearincluding a couple of Assistant City Managers, the Police Chief, the #1 and #2 positions in the citys Economic Development department, etc.  Think about this.  These are key positions.

After Cronk finds his way around City Hall (“tell me again, where’s the men’s room?”), he must meet and assess those now in interim positions.  Any new CEO wants to put his team in place.  Will he bring in trusted friends and associates from outside Austin who must also learn their way around?  Or, more broadly, will he re-organize city departments?

A kind of malaise has been reported in the city bureaucracy, with many leadership positions vacant or occupied by interim appointees.  Now, comes the uncertainty of “what next?” that can easily filter down several bureaucratic levels.

Just who is this guy, Cronk?  What is his managerial style and his personality?  City employees want answers to those questions.  And then, there are Cronk’s bosses – the ten members of the Austin City Council with their own district fiefdoms, as well as the mayor.  How will they be involved in the dynamics of running the city?  City Manager Cronk is facing a big job.  He may need a 2nd pair of running shoes to keep up with the complex urgency. Read more →

February 9, 2018

Volume 39, Number 43

Did you know that almost 3 million acres in Texas is foreignowned?  When Texas joined the US, it maintained private ownership of all its lands unlike some states, mostly in the western US, where much of their land fell under federal ownership when they joined the union.  Now, foreigners are buying up much of the bigacreage land in primarilyrural Texas.  This is in addition to foreign interests investing in suburban commercial properties.

This type of development is not normally the focus of this newsletter, but it struck us this is a phenomenon in which you might have an interest, if only as someone who is aware of the larger picture of what is going on around us.  Change is an important discussion about what is happening in Texas and this is another facet of change.

Which foreign entities are buying huge chunks of Texas?  Where are they from?  Which parts of Texas are they targeting?  What is the usage for the land?

East Texas is one of the acquisition targets.  Canadian-owned entities are buying increasing amounts of land in the pine timber region of East Texas.  Tyler County, Newton County and Polk County have the largest acreage concentrations of foreign ownership along with the country of origin for the largest owners.  Also land is being gobbled up in Panola, Nacogdoches and Cherokee counties in East Texas.

The largest acreage holdings, in addition to East Texas, are in South and West TexasHidalgo County in the Rio Grande Valley of South Texas is right up there with East Texas timber counties having the largest concentration of foreign ownership.  Willacy County, to a lesser extent, is on the list from the Valley.  Cropland is the primary usage of the South Texas land.

West Texas?  Briscoe, Culberson, Jeff Davis, Zavala, Nolan, Sterling, Presidio and Reeves counties show up on the list where foreign land owners are concentrated.

Besides Canadians, which countries have the largest Texas holdings?  Germany, The Netherlands, the United Kingdom top the list.  By the way, this is the most current tally, but it is only up-to-date as of 2014.  It should expand when the next report is released. Read more →

February 2, 2018

Volume 39, Number 42

Downtown Austins skyline is an intriguing thing to behold.  Its continually changing, with office, hotel and residential skyscrapers replacing tall construction cranes on a regular basis.  Infrequent visitors to downtown Austin express amazement over the visual transformation.  Well, it wont be long before two more office towers will emerge closer to the State Capitol.  Yep, the State of Texas will soon join the building spree.  Lets check out the latest.

Consolidating state offices and state employees has long been discussed.  After all, in a state that has been one of the fastest-growing in the nation for years, it is not surprising the size of state government has been expanding as wellAs this expansion takes place, many state agencies have been paying rent to provide space for state workers.  And, many of those employees are spread around town.  So, what’s the plan?

The Capitol Complex Master Plan is composed of three phases that will consolidate several state agencies in buildings near the State Capitol.  It’s big.  The current cost is estimated at $581 million.  And, this is planned to deliver about one-million square-feet of office space in two new office buildings.

One building is a 14story office tower.  It is planned to contain about 600,000 square feet of office space.  The other state office building is a 12story tower.  The plans call for it to contain about 400,000 square feet.

Yeah, but what about parking in this area that is adjacent to the downtown area, where City of Austin policies have severely restricted auto access and parking?  Part of the plan includes a fivelevel underground parking garage.

 To the credit of most state building plans, a lot of effort is focused on cosmetics.  Right now, a grassy openair mall, with a lot of trees, on Congress Avenue is part of the Master Plan.  After all, this is public space that hosts visitors.  It will run from the Capitol’s north steps for several blocks up to MLKJr Blvd.

When viewed as part of the overall downtown Austin skyline, 14story and 12story office buildings will not compete visually with the highrises shooting skyward a couple of blocks away.  But the investment is planned to save state money in the long run and theoretically make state government more efficient by this consolidation.  And it will “fill-in” a changing skyline. Read more →

January 26, 2018

Volume 39, Number 41

Traffic issues abound in major US cities and, in fact, worldwide.  New traffic solutions, some quite controversial, are being tested or actually installed.  Austin is facing some of the same congestion/traffic problems that have triggered actions elsewhere.  But, so far, Austin has not officially adopted any of them.  However, it is important to track these trends just in case.

What are the trends?  How about congestion pricing?  This is where cities are so concerned about traffic in their downtown areas, they charge a premium if you drive downtown.  One US city is getting ready to levy a paypermile gasoline charge versus a per-gallon gas tax.  And, of course, the long-discussed increase in gasoline taxes.  Here’s what’s happening now.

CONGESTION PRICING.  Just this month, a proposal to charge motorists $12 to drive into the busiest parts of Manhattan started gaining steamLondon, Stockholm and Singapore already have congestion charges.  Trucks, Uber and Lyft would also be hit by differing amounts with Manhattan’s congestion tax.

PAY-PER-MILE GASOLINE CHARGE.  Seattle, in a coupla weeks, will start a one-year pilot program to charge 2,000 individual drivers a paypermile gas tax, instead of a pergallon gas tax.  “Oregon, California and other states have proved that it can be done, at least on a small scale,” according to Governing.com.

INCREASE GASOLINE TAXES.  This has been cussed and discussed for years.  But this month the powerful business lobby, the US Chamber of Commerce, said it will push Washington to increase the federal portion of the gasoline tax by 25cents per gallon.  (Texas state officials have shown zero appetite for increasing the state’s portion of the gasoline tax.)

The argument used to implement these money-raising options is the revenue will be spent on infrastructure improvements.  This is in face of declining gasoline tax revenues due to better gasoline mileage, hybrid or electric vehicles, lower gas prices, etc.  So the pitch to get additional revenue in addition to, hopefully, decreasing congestion is getting traction.

As we said at the top, no serious effort has emerged in Austin or at the state level to install any of these options.  And there are huge logistical problems to implement some of them.  But its our job to keep you abreast of trends elsewhere just in case they pop up here. Read more →

January 19, 2018

Volume 39, Number 40

Apple will likely be the worlds first trillion dollar company maybe as early as this year.  It already has its largest presence in Austin other than at its California headquarters.  Apple employs more than 6,500 people in Austin, most housed in a 38acre complex in northwest Austin.  Only its home in Cupertino is bigger.  Now Apple, just this week, announced it plans to spend as much as $30 billion on a second corporate headquarters and for expansion of other work sites in the US.  Chickens should not be counted before they are hatched, but no matter what, this is great economic news for Austin.

Austin has been a part of Apple’s phenomenal growth.  The world’s largest consumer electronics company opened its doors in Austin with about 100 people in 1992.  Apples CEO Tim Cook just a few months ago described to the American-Statesman what Apple workers do in Austin:

“They include customer support, online sales, retail sales, we have our Maps team here, and finance and a huge engineering team that’s growing fast.  Literally,” Cook emphasized, “many, many pieces of our company are here.”  Its 1.1 million sf Americas Operations Center in Austin runs many of its corporate functions throughout the northern hemisphere, according to the Statesman.

For these reasons (and, obviously, others) Austin stands to be maybe the biggest economic gainer of any city in the nation as a result of Apples newlyannounced plans.

Some may think this “will really put Austin on the map” if Apple pumps a healthy chunk of its $30 billion planned investment into the Austin economy.  That thinking is so out-of-date.  Austin IS on the map.  Otherwise it wouldnt be in the position it is visàvis AppleAnd visàvis Amazon, Facebook and Google, all also with large Austin investments.  These three make up the other parts of the Big Four companies pushing hard to be the world’s first trillion dollar company based on valuation (check our story last week).

Oh yeah, Amazon’s 2nd headquarters.  Austin just made the long short list for Amazon HQ2.  This is a big deal.  Now it moves to the next step.  Check out the next item. Read more →

January 12, 2018

Volume 39, Number 39

The formal announcement this week that former City Councilmember Laura Morrison will run against Mayor Steve Adler should trigger spirited discussion about Austins governing policies up until the November election day.  Many of their positions differ dramatically, but the mayor only has one vote out of eleven in Austins CouncilManager form of government.  It could be a good time to explore the possibility of changing to a Strong Mayor form of government called a MayorCouncil.

In the Mayor-Council form of government, under which most big US cities currently operate, the Mayor is paid a full-time salary and takes over most of the functions allocated to a City Manager.  The mayor is the citys CEO and directs daytoday affairs of city departments.  The mayor does the hiring and firing.  And of course, the mayor answers to the voters, unlike the city manager who is hired by the Council.

Based on the 2010 USCensus figures and according to the National League of Cities, Austin is one of only nine of the nations 30 most populous cities operating under a CouncilManager form of government.  The five biggest cities, including Houston, are all governed by a Mayor-Council.

Austin is listed as the 14th most populous city on this list.  And, frankly, it is one of a very few cities that manages and sets policies for three very complicated enterprises an airport, an electric utility and a water utility.  Most cities utilize independent entities to manage one or several of these enterprises, negotiating contracts, etc.  As a result, running Austin is a formidable management task.

The arguments pro and con for the two forms of government have valid points.  The City Manager has too much power.  It’s better for the city to be managed by one who answers to voters, rather than a bureaucrat.  Or the flip side, you need to remove politics from these decisions.  You get the picture.

If a change is made, it would be a laborious process that would need to be put on the ballot by the Austin City Council and approved by the voters – much in the same way the City of Austin expanded to a ten-member council elected by districts and a mayor elected citywide, in 2014.  Frankly, it’s a long shot to happen.  But as the campaign for mayor and other council seats unfold, it will be a good thing to keep in mind for the future direction for a growing city. Read more →

January 5, 2018

Volume 39, Number 38

The final official 2017 tally wont be released for a few more weeks, but after 11 months it is clear the 2016 record number of travelers through AustinBergstrom International Airport (ABIA) will be shattered.  In fact, the 2017 number will easily exceed 13 million passengers in the airport that was designed to handle 11 million.  If the 10+% annual increase continues, its time to examine the status of expansion plans at ABIA.

ABIA officials reported this week that, through November 2017, “the annual passenger mark stands at 12.6 million passengers flying Austin.”  The total in November was 1,229,791 – up 15% compared to the same month the year before.  And the 11-month cumulative was up 11%, to 12,698,792.  All signs point to a continuation of significant increased traffic through 2018.

Recent ABIA users have noticed quite a bit of construction activity during the past year.  But, will the planned increased capacity be complete in time to handle the growing demand?  Start with the fact that the pace is behind the curve as we speak –there are already 2 million more passengers than originally anticipated.  So the answer is “yes” for certain areas of expansion, and “no” for other areas.

Additional parking capacity in the form of a new 6,000space parking garage is on schedule to be completed this year.  This will be a big help.  You can track the availability of parking at www.abiaparking.com.

The biggie though will be the completion of nine more gates at the east end of the current Barbara Jordan Terminal, at a total cost of almost $400 million.  This will increase the number of gates with boarding bridges from 24 to 33, but they wont be completed until 2019.

Yeah, but.  Will this just be a “catch-up?”  What about future growth?  ABIA officials say “the expansion project will increase the airports capacity to 15 million passengers annually.”  Okay, this is all well and good.  But, when do the airport folks anticipate that level of passenger traffic will be reached?  “At least 2025,” is their projection – seven years from now.  We’ll see.

There’s more work underway.  The expansion includes the replacement of three existing gates.  All gates will be able to accommodate domestic airline operations.  Four gates will accommodate international flights.  You get the picture.  It’s a scramble to handle demand. Read more →

December 15, 2017

Volume 39, Number 37

As we wind down 2017 and look ahead to 2018, it helps to know where the local economy standsespecially when it comes to residential real estate.  After all, not only is real estate an important underpinning of the Austin area economy, but the fact you either own or rent, means you are personally affected.  Real estate is an Austin economic barometer, but it also affects your financial bottom line.  So, lets analyze this alwayschanging market.

When we say “always-changing,” consider what an Austin real estate expert, who has been a long-time observer of the real estate market in Austin and Texas, has to say:  “Austin real estate has been traveling at light speed with over 60% appreciation on residential real estate in the last ten years,” reports Independence Title’s Mark Sprague.  Let this sink in for what it means for the homeowner who has owned the same home for the past ten years.

After the wild swings of the real estate recession years, Austin and DallasFort Worth have led the nation with steady appreciation for the last ten years.  In fact, since 1990 Sprague reports “Austin has had an average (annual) residential real estate appreciation of 5.4%, Houston 4.9%, San Antonio 4.7% and DFW 4%.”

Regular readers of this newsletter know that in many real estate segments, sales have slowed this year.  “Not much, but a little,” Sprague points out.  Okay then, Mark, what does this mean?  He emphasizes an important distinction when he says “residential appreciation has slowed, but not declined.”

The differences in housing price movement are stark when you look at the luxury home price points, compared to homes of lesser value.

If you are shopping for a house with a budget above $2 million, I have good news,” Sprague said.  “You have more than a six month supply of homes to choose from, as opposed to a couple months’ supply of homes in many of the lower prices.”  Repeat after me:  it is now a buyer’s market in the luxury market.

Not so in the lower price points.  “Below $700,000, we are still seeing multiple bids,” he said. But, still, the market is slowing.  Its not really slow or crashingIt is simply slowing.  And this is the watchword as we look ahead to the New Year.  It bears watching closely. Read more →

December 8, 2017

Volume 39, Number 36

In a national presentation closed to the news media, Austin mayor Steve Adler outlined Austins actions preserving the environment as it relates to the citys transportation policy.  As he put it:  “Preserving our environment is a big priority in Austin.  Its huge.  But most Austinites, stuck in rush hour traffic every day, will tell you traffic is the most immediate, inyourface challenge.”  Lets look at some quotes he made available.

First of all, the mayor said “we’re going to need to reduce our transportation carbon footprint if we’re going to make a big difference fighting climate change.”  He ticked off a number of steps already taken, including passing “the biggest bond in city history.  It was bigger in fact than all the mobility bonds in the previous 20 years.  And it passed with 60% of the vote.”

He continued:  “We’re making better use of our existing roads, making them more efficient and safer.  Were putting scores of millions of dollars into active transportation; bikes, trails and sidewalks.  We’re managing demand by accurately recognizing the cost of parking and dynamically pricing toll lanes, paid for by automobiles and free for transit.”

“The lessons we’re learning are clear,” he told the C40 Climate Summit.  “Where we offer multiple, diverse transportation options, Austinites get out of their cars and ride bikes, take buses, and even walk.”

Where we dont offer those choices where we dont have protected bike lanes, frequent bus service, even sidewalks people stay in their cars, Adler said.  So, mayor, what is in Austin’s mobility future?  “Our challenge is to expand choices.”

For a picture of what he’s talking about, you need to look no further than the proposal announced Tuesday for the area known as The Drag, adjacent to UTAustin.  It will reduce car travel to one lane in each direction, while adding busonly and bike lanes with expanded sidewalks, eliminating parking along one-mile of Guadalupe St.  At a cost of $33.7 million.  To be sure, this is a unique area with tens of thousands of students within walking distance of UTAustin and shuttle buses bringing in others from greater distances.  But it is an example of the move to allocate city tax dollars to implement the overall plan to curtail car traffic. Read more →