Austin Letter

Trusted Insights and Perspectives Since 1979

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“Our power plants, nuclear generators and water infrastructure are all outdated and vulnerable,” Nabors noted.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 →

March 30, 2018

Volume 39, Number 50

It hasnt come close to peaking yet, but a coupla races for Congress in Central Texas will soon start coming into focus in the public eye.  Its only a handful because the next election is a runoff.  It will be held May 22ndThis will determine the Dem vs GOP contests to ultimately select the final winner in the General Election contest in November.

The most wide-open runoff race will be for the District 21 Congressional seat that extends from parts of Austin to parts of San Antonio.  Lamar Smith decided not to run for reelection.  One reason was, under House rules, he is term-limited and would not be able to keep his powerful committee chairmanship even if he were reelected. So what does the race to replace him look like now that the Dems and GOPers both have runoffs to select their party nominee?

First the Democrats.  Two candidates will be on the May 22nd ballot – Joseph Kopser and Mary Street Wilson.  They emerged from a crowded field, but neither, obviously, got 50+% of the vote to avoid a runoff.

The same is true for the Republicans. Matt McCall and Chip Roy will be going head-to-head for the GOP nomination.  The primary contest was notable in that USenator Ted Cruz went all-in for Roy, his former chief of staff.

Two Democrats will be scrambling for the opportunity to challenge District 10 Congressman Michael McCaul, who is the high profile chair of the USHouse Homeland Security Committee.  They are Mike Siegel and Tawana WalterCadien.  This district includes all of Austin, and runs east through several conservative counties to the edge of Houston.

Another congressional district race, that encompasses a portion of Austin and runs all the way north to the edge of Fort Worth, has two Democrats vying for the chance to challenge incumbent Roger WilliamsJulie Oliver and Chris Perri emerged from a crowded field of Dems to make the runoff.

These are the only Congressional runoffs in Central Texas.  But, there are others in Texas that bear watching if you’re interested in the balance between Democrats and Republicans in the USHouse, that is now heavily Republican.  Of particular note is District 23, which the Dems have targeted nationally.  They want to oust GOP Will Hurd, an African American in heavily Hispanic West Texas, where Gina Ortiz Jones is facing Rick Trevino in a runoff.  Stay tuned. Read more →

March 23, 2018

Volume 39, Number 49

Jobs data for the Austin area can sometimes be confusing and contradictory.  One reason is the gatherer/keeper of such stats, the Bureau of Labor Statistics, regularly revises its numbers.  The March 2018 revision changed the Austin areas employment stats from great to even greater.  How about that!  And even before revisions, Austins job growth is the 2nd best performing among the nations 50 largest metros.

The latest figs:  Austin added 36,900 net new jobs in the 12 months ending in January, making Austin the second best performing metro area among the nation’s 50 largest.  Its very strong 3.7% growth is, by far, tops in TexasDallas (up 2.6%), Houston (up 2.2%), Fort Worth (up 2.1%) and San Antonio (up 2.0%) ranking 12th, 17th, 18th and 21st respectively, according to Beverly Kerr, the Austin Chamber’s VP/Research.  This data is not seasonally adjusted.

But look what happens when you adjust the mind-numbing numbers seasonally, taking in a number of factors, including taking into account state and federal unemployment insurance.  In the Austin metros case, the adjusted numbers usually reflect a better economy.

For instance, “preliminary 2017 estimates for jobs in Austin have been revised upward,” noted KerrThe job growth percentages got better – going from previously estimated 2.7% to 3.2% — a significant increase.

When you dive a bit deeper in the numbers, some interesting tidbits emerge.  As an example, Austins sizable government sector lost 2,800 jobs over the past 12 months.  When we say “sizable,” the government sector includes more than 17% of the jobs in the area.  Yet, the job picture grew despite this loss.  Impressive.

So, which portions of the Austin private sector grew?  Darn near all of them.  Professional and business jobs grew by 12,500 over the past 12 months at a rate of 7.4%.  But, manufacturing jobs grew the fastest, at 9.2%, when adding 4,600 jobs.  Only retail lost jobs in the past year – just 200, for a rate of -0.2%.

One aspect of positive economic growth is just now showing signs for even better growth in the very near future.  Get ready for it.  The next oil/gas surge is starting to happen in Texas and this will help state government as well as the overall economy.  Check the next item. Read more →

March 16, 2018

Volume 39, Number 48

Despite much of Texas being hammered by Hurricane Harvey, 2017 was a recordbreaking year for residential real estate sales (the third year in a row, by the way).  And, sales activity across the state should be even more robust in 2018, according to the chief economist for the TexasA&M Real Estate Center and a longtime chronicler of residential real estate, Jim Gaines.  He has specific reasons for such a positive prediction.

“One of the big drivers will be from firsttime homebuyers finding opportunities in the market with more builders focusing on the entrylevel price point and lenders relaxing the requirements for first-time homebuyers,” Gaines predicted.  “Additionally the likelihood of more volatile interest rates in 2018 will influence homebuyers to buy now rather than later.”

This look-ahead is interesting.  But what about now?  How are sales holding up during the early part of the year?  Right here in the Austin metro?  For a change, we’re going to give you the stats on a city-by-city basis so you can see where the activity is taking place. These numbers reinforce Gaines’ prediction for the future.  This is a one-month snapshot, February 2018.  These are official Austin Board of Realtors single family home sales numbers.

The big kahuna is Austin, due to sheer size.  Units sold in Austin in February 2018 totaled 604, with a median price of $366,710.  But, metro areas also posted impressive numbers:

#2 Round Rock sold 165, with a median sales price of $272,000

#3 Georgetown sold 129, with a median sales price of $300,000

#4 Leander sold 103, with a median price of $245,000

#5 Pflugerville sold 82, with a median price of $252,500

#6 Cedar Park sold 64 units, with a median price of $288,950.

The southern part of the metro also showed strength.

48 units sold in Kyle, with a median price of $209,500

41 units sold in Buda, with a median sales price of $250,000

44 units sold in Hutto, with a median sales price of $224,500.

Notice the trend?  Most units sold were in the $200,000 range.  Sales of pricier homes were limited.  Example:  West Lake Hills tallied only 3 sales (median price $1,100,000), 4 sales in Horseshoe Bay (median price $996,250), and 5 sales in Driftwood (median price $970,700). Read more →

March 9, 2018

Volume 39, Number 47

Longtime residents know to stay clear of downtown Austin when Spring Break and South by Southwest (SXSW) coincide during the same week as they will next week (in fact, the 10day SXSW congestion starts today).  Once the nightmarish crowds begin to flock to the downtown area, many residents just leave town.  But this year, theres good news for those leaving via the Austin airport, as numerous projects to reduce airport congestion are nearing completion.

There’s no way to avoid the fact that this annual influx of crowds to Austin impacts the Austin-Bergstrom International Airport (ABIA).  To give you an idea of the scope, consider this:  Scandinavian Airlines (SAS) for the first time is operating two nonstop, roundtrip flights between Stockholm, Sweden and ABIA just for SXSW.  This marks the first flights for SAS at ABIA, and the first nonstop flights ever between Austin and Stockholm.

Add to this, total passenger traffic at ABIA for January 2018 was UP 13.2% compared to the same month in 2017 (a year that smashed passenger total records).  And, January is traditionally the month with the fewest passengers.  So, construction at ABIA can’t be completed soon enough.

What are some of the new changes at ABIA?  A new retail component outside airport security is nearly 85% complete at the same location as the previous free cell phone lot.  In addition to 50 new cell phone parking spaces for those waiting to pick up arriving passengers, the retail complex will include ten covered Texaco gas pumps, a convenience store, a drive-thru Austin Java coffee store, a Subway sandwich and a taco shop.  And, for all the local hybrid cars owners, there will also be electric car charging stations available.

These improvements were undertaken to help ease longtime congestion at ABIA due to passenger pickups from (sometimes-delayed) incoming flights.  And, to further keep cars from “cruising” around ABIA waiting on arriving passengers, the new retail complex will also have picnic tables, restrooms and an aviation-themed playground for kids.

(By the way, the air carrier dominance at ABIA shows no sign of changing.  In January, Southwest Airlines passenger total was 396,931 … #2 American Airlines’ total was 200,256 … #3 United Airlines passenger numbers were 148,312 and #4 Delta Air Lines carried 131,494 passengers.  Each of the remaining air carrier totals serving ABIA dipped to five digits, not six). Read more →

March 2, 2018

Volume 39, Number 46

So far, nearly 1,300 City of Austin employees during a six month period have earned paid time off from work because they have agreed to cut down on solo driving.  They are paid with your tax dollars while they are taking the earned time off.  In other words, the City is offering strong incentives to employees if they log a commute using a bicycle, or walk, participate in a carpool or vanpool, take transit, or telework.  The goal:  get more cars off Austin roadways.

Implementation of the program is structured in a way that a bureaucrat can love.  First of all, for a city employee to participate in the commuter incentives program each employee is given a demonstration video explaining how to participate in the program.  Here is a brief summary of how it is set up so you can see why a video is needed to bring the city employee up to speed (so to speak).

Participating employees accrue points when they log a commute using an approved, sustainable alternative to solo driving” – bicycle, walk, carpool, vanpool, transit, telework.  There is a two point per day maximum.

Then, when employees reach a specified point threshold, they are rewarded with four hours of paid time off.  But it doesn’t stop there.

Participants are permitted to continue accruing points beyond the minimum threshold.  This means they can earn even longer periods of paid leave in fourhour increments.  Yeah, but, how does the City keep track of all this?

Well, hiring an outside contractor to trace each employee’s activity, of course.  The firm called RideAmigos is running a special administrative leave commuter program that provides automatic tracking for participants on what it calls a “transportation demand management platform.”  Claiming “success,” it looks as if this program will continue.

While on the topic of non-auto travel on city streets, the city is now starting to spend about $20 million on bicycle improvements approved by voters in 2016.  One element under consideration by the Austin Transportation Department is the installation of buttons on city streets to delineate bike lanes.  Also called “tortoise shells,” they are white-cake-pan-shaped and will be attached by adhesives.  They cost about $2 to $4 per foot.  This is obviously a lower cost than precast concrete barriers.  But there is still opposition to their usage. Read more →

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 →