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March 8, 2019

Volume 40, Number 47

First an important announcementIn four weeks, this newsletter will reach its 40th anniversaryFor four decades, we have chronicled events about the remarkable Austin areaForty years, with a deadline every weekThis represents approximately 3 million words in 2,000 newsletter editionsAnd now, the time has come for us to change our career emphasis.

 The March 29, 2019 issue will be the final edition of The Neal Spelce Austin Letter, that we first published April 1, 1979.

 Were not going awayWe are just stepping aside from this timeconsuming enterprise, as we step forward in different directions.

Our efforts are now being turned toward an exciting new ventureAfter years of encouragement from numerous associates, friends and family, yours truly has undertaken the humbling task of a memoir book projectTo modify a line from a Farmers Insurance TV commercial, “Its about a thing or two, because weve seen a thing or two.”

The book project includes an indepth look at Austin how the metro has evolved to a globallyimportant city.  Humbly, we have come to recognize no else has during the past 40 years written each week (or, importantly, been involved in) how Austin has emerged in ways that many could never imagineThe book also includes some entertaining (we hope) accounts of a long and varied career.

We still plan to contribute our insights, perspectives and analyses to LinkedIn similar to what weve done in this newsletter, only it will be free to those who follow us on LinkedInSo, if you are interested, simply join our LinkedIn familyAlso, we are continuing ongoing consulting work, putting our decades of wideranging experience and knowledge to good use.

Well share more about all this with you over the next few weeks, before we reach the 40year milestone at the end of the month.  Well be working with our computer gurus to wind down.  Subscriptions will receive prorated refunds as appropriateAnd, we will be glad to answer any questions you may haveJust shoot us an email.

We want you to know how very much we have appreciated our loyal subscribersNow, lets get on to this weeks edition. Read more →

March 1, 2019

Volume 40, Number 46

Dear [MM_Member_Data name=’firstName’],

So, whats Michael Dell up to these days?  You know, Austins most famous billionaire who made so many Austinites millionaires the moniker Dellionaires took hold.  That was back in the day soon after the computer whiz kid came up with an industrychanging computer manufacturing concept in his UTAustin freshman dorm room.  Hes changed, his company has changed a lot.  Lets check in on how the now 54yearold is doing.

First of all, he and his wife Susan have poured immense amounts of their personal fortune into making Austin a better place.  Providing enough funds so the new UTAustin medical school bears the Dell name is just one example and no small deed.  But, as Michael Dell has grown older, his company has gone through a number of iterations.  The official company name change illustrates Dell’s new focus.  No longer is it Dell, Inc. it is now Dell Technologies.  Make no mistake, though:  Michael Dell is still very much in charge.

As the tech scene has changed since the 1980s, so has Dell.  It would take too much space to detail the move from the dorm room concept of a transformative way to build and sell computers, to going public, going private, then going public again.  The marketplace has changed and Michael Dell has continued to change with it.

A big part of the change was the acquisition of EMC, a company almost twice as large as Dell.  It cost Dell $67 billion — the largest tech deal at the time — reinforcing Dell as a powerful company specializing in selling technologies to businesses and running it for them.  Transformative!  You bet!

Wait a minute, what about the personal computers business?  As Darrell Royal used to say in a different context, you “dance with the one who brung you.”  Dell is still peddling PCs.  And, yes, you can still buy Dell personal computers.  But it is a smaller part of Dell Technologies business.

Dell is betting on the hybrid cloud, the latest iteration of cloud computing,” reported Texas Monthly (TM) in its March 2019 issue.  “Thanks to the EMC acquisition, Dell can manage … those tasks,” noted TM.  The mag also states:  “The new Dell will profit from being one of the largest, most comprehensive, most integrated product and service companies on the market.”  Check the March 2019 Texas Monthly article by Loren Steffy for more detail. Read more →

February 1, 2019

Volume 40, Number 42

It was a big publicity deal seven years ago when the mayor of Georgetown led the effort to make the Central Texas citys energy supply 100% reliable on renewable sources such as wind and solar.  Now, heres the big deal:  Georgetown residents paid more than $1,000 per household in higher electricity charges over the last four years.

“That’s right — $1,219 per household in higher electricity costs for the 71,000 residents of Georgetown, all thanks to the decision of its Republican mayor, Dale Ross, to launch a bold plan to shift the city’s municipal utility to 100% renewable power in 2012,” notes Chuck DeVore, a VP with Austin’s conservative think tank, the Texas Public Policy Foundation.

“His decision to bet on renewables resulted in the city budget getting dinged by a total of $29.8 million in the four years from 2015 to 2018,” said DeVore.  “Georgetowns electric costs were $3.5 million over budget in 2015, ballooning to $6.3 million in 2016, the same year the mayor locked his municipal utility into 20- and 25-year wind and solar energy contracts to make good on his 100% renewable pledge.”

DeVore said city leaders had to lock in a large excess of wind and solar power to be able to lend credibility to their 100% renewable claim, since wind and solar power can’t be relied on to keep the lights on 24/7/365.  “And, even with that surplus, there are times when Georgetown draws traditional fossil fuel power from the Texas grid, making the citys 100% renewable claim nothing more than spurious sloganeering,” he added.

Georgetown is now trying to renegotiate its costly longterm wind and solar energy contracts.  And, effective today, February 1st, Georgetown customers will see an average $13/month increase in their electricity bills – not due, say city officials, to wind/solar contracts, but because they leaned on forecasts back in 2012 and 2013 that predicted a shortage of power and a significant rise in energy prices.

Long ago, city-owned utilities (such as Georgetown’s) were exempted from competition, like you have in other Texas cities, where residents have a choice of electricity providers.  Keep an eye on the Texas Legislature.  A proposal is under consideration by lawmakers that would allow such monopolies to be changed, giving customers the ability to shop around. Read more →

December 14, 2018

Volume 40, Number 37

As 2018 winds down, its time to look ahead to what can be expected in 2019 (especially since this is our final 2018 issue, as we take our traditional yearend 2week hiatus).  In no particular order, lets hit as many issues as we can cram into this weeks newsletter.  First, as you plan your 2019 travel, heres what you can expect at Austins airport.

Frequent flyers know record-breaking passenger traffic has crowded the corridors, security lines and parking at Austin-Bergstrom International Airport (ABIA) this year.  It is averaging a huge 15.1% increase over last year, with no additional airport capacity.  Hang on.  Help is on the way.  And sooner, rather than later.

Nine new gates are nearing completion.  They should be quite impressive.  They will open in phases in the next year.  The north facing gates are on track to open in the spring of 2019.  This is none too soon.  But final construction will continue on new restaurant space, concessions and for an area ABIA calls the patio.  All this and the south facing gates are set to open by fall of 2019.

Important, but not as sexy, the remodeling and modernization of 13 vestibules is entering into the final construction phase.  Vestibules are the automatic sliding glass entrances and exits.  They will be enlarged to allow more space to enter and exit the terminal with luggage, while controlling drafts and the loss of cooled air.

In 2019, look for a continued major increase in passenger traffic.  But, by the end of the year, the new construction should alleviate some of the hassle as you travel through ABIA. Read more →

November 30, 2018

Volume 40, Number 35

Dear [MM_Member_Data name=’firstName’],

As we move into December its time to look ahead to 2019.  This is especially true when you single out real estate an essential portion of the Austin economy.  It also affects personally so many residents of the fastgrowing 5county Austin metro area.  So, what can you expect to happen next year?

The Urban Land Institute and PWC’s Emerging Trends in Real Estate:  2019 gives high marks to the Austin area and to Texas’ major metros.  In fact, Austin ranked #6 in the study, but it took a back seat to #1 Dallas/Fort Worth.  San Antonio ranked #20, while Houston ranked #37 in the review of the nation’s major markets.  These strong Texas cities have a significantly higher percentage of a younger population than the rest of the US.  This means there should be strong labor force growth and productivity.

As a result, demand for housing in these Texas markets is expected to remain strong through 2019,” Dillon Cook, founding partner and COO with Range Realty Advisors (RRA), told GlobeSt.com.  “Also Millennial demand for housing in these Texas markets is expected to continue for many years as a growing share get married, attain higher income levels and have children.”

There’s more to this positive real estate outlook than just demographics.  “Housing demand continues to be fueled by relatively low interest rates, low unemployment and continued economic growth,” Cook pointed out.  And Austin is among the nation’s leaders in these categories.

Yeah, but, what goes up must come down, right?  This may be true, but it’s all relative.  Range Realty Advisors points out “the ups and downs of economic cycles can vary substantially globally, regionally and by state.”  Cook says it is entirely possible the next nationwide economic downturn will look and feel very different in Texas compared to other states.

In previous economic downturns, there have been several causal factors – rampant speculative development for oneIn Austin most speculative real estate development is leased/sold as soon as its finished.  There are other national and international factors that are not currently apparent.  Conclusion:  “Add to this strong economic and job growth, high level of consumer confidence and business investment, and many believe Texas will continue to be a magnet for real estate investors and developers for years to come,” notes RRA. Read more →

November 9, 2018

Volume 40, Number 32

Austins reputation as a home for heavyweight companies of the future is wellrecognized and welldeserved.  After all, when you start calling the roll of Austin majors Dell, Google, Apple, Facebook, Indeed, 3M, etc., its hard to know where to stop.  The list is long and impressive.  But what about smaller enterprises that could be the biggies of the future?  Where does Austin stand as the site for startups?  New information late this week:  startups accounted for a larger share of businesses in Austin than in nearly all major US metros in 2016.

Young companies account for a larger share of businesses in Austin than in nearly all other major US metros.  So, it’s important to note that for the first time, the Survey of Business Owners compiled as part of USCensus Bureau data, included data regarding the number of years a firm has been in business.

Here’s how the numbers break out.  Take the newbies, those firms with less than 2 years in businessAustin with 4,444 companies, or 11.6% of all employer firms, ranks #3 in the nation, behind #1 Las Vegas and #2, Orlando.

Those Austin companies that have been in business a little longer, but less than four years, break out this way:  10,807 Austin businesses, or 28.1% of employer firms, place Austin at #2 in the nation, behind #1 Las Vegas.

And the oldies?  Austin firms in business less than six years15,077 Austin businesses, or 39.3% of firms, place Austin at #2 in the nation, behind #1 Las Vegas.

How did other major Texas metros fare in this review of the 50 largest metros in the US, in business less than 6 years?  The DallasFt. Worth metro was 5th in the nation, Houston was ranked #10 and the San Antonio metro was 13th in the US.

In the past, Austin has been noted as a good place to start a company.  After all, Dell started in a UTAustin dorm room.  But, this is the first report putting precise numbers to the entrepreneurial environment in this area.  This late report came to us from the Austin Chambers VP/Research Beverly Kerr.  Her analysis goes much deeper by the way.  For instance, she breaks it down by womenowned firms, minority and veteran entrepreneurs.  And she reports on Austin’s #4 US 2016 ranking for firms receiving significant funding from outside investors. Read more →

October 26, 2018

Volume 40, Number 30

Historic flooding upanddown the Central Texas Highland Lakes is affecting many more than those touched by the flood waters.  Lakes Buchanan, Inks, LBJ, Marble Falls and Travis have been closed by the Lower Colorado River Authority (LCRA) until further notice, as the surging waters move rapidly downstream, causing dangerous conditions on Lake Austin and Lady Bird Lake.  But the impact is broader than that.  A boil drinking water order was issued for 1.4 million users because of the massive amounts of silt, mud and debris1.4 million users!

One lakeside resident watching water surge into Lake Austin through the Mansfield Dam floodgates from the bottom of Lake Travis said the roaring water looked like chocolate milk because of all the silt, mud and debris.  This is the same water that is straining the facilities at Austin area water treatment plants.  These extreme levels of crud are 100 times the typical condition of the Highland Lakes.  And these levels have to be treated for your drinking water as well as for use by businesses, industries, agriculture interests, etc.

But here’s what is not being talked about in the lake water.  Think how many septic systems are being flushed by rising/flooding water.  Thats human wasteWhat about animal waste that is being washed from the nearby land into the lakeCan you say fecal coliform?  And what about flooded home propane tanks that are floating (leaking?)?  Construction portapotties?  And agricultural pesticides washed from the land into the water?  To purify your drinking water will take a massive effort beyond getting rid of silt, debris and mud.

As this is a weekly publication, it is not possible for us to provide up-to-minute info as you read this.  Buchanan is set to open to the public at noon Friday.  LCRA will assess the other lakes Tuesday.  But, when we are talking about such widespread impact, we can provide you with a sense of how we got here and, importantly, what you can expectbecause, frankly, millions of dollars are being spent right now to address the situation.

Just think what this unbelievable amount of water would be doing to the area if the LCRA weren’t controlling that water through its system of dam floodgates.  The biggest reservoir lake, Buchanan, was built way back in 1938.  It straddles Burnet and Llano counties.  Mansfield Dam created the other reservoir, Lake Travis.  It wasn’t completed in its present configuration until 1942.  It overlaps Travis and Burnet Counties.  Renovation work is underway on Mansfield now.  We’ll explore that and different solutions in the next item. Read more →

October 12, 2018

Volume 40, Number 28

Its a rare sight in Austin:  powerful activist environmental interests disagreeing among themselves.  Usually the environmental community leaders in Austin publicly march in lockstep fighting for or against the same issues.  Not now.  Distinct lines have been drawn over an issue that will be on Austin ballots November 6th.  Which side prevails may go a long way toward defining the shape of Austins growth.

The ballot item is Proposition J.  Huh?  What’s that?  Simply put, it would require any comprehensive change to Austins land use rules go to voters for approval.  Just getting on the ballot was controversial.  It took a grass-roots effort to bypass the Austin City Council to get Prop J on the ballot.  This grew out of the CodeNEXT development rules process that inflamed such strong opinions, it was ultimately abandoned.

So, how has this pitted Austin environmental leaders against each other?  We need to credit Mose Buchele, an award-winning reporter for KUT-FM, for bringing this to our attention through his writing in Austin MonitorIt boils down to differing environmental philosophies as they relate to growth and climate change.  How so?

If Proposition J passes, then the voters will have the right to check the Councils work if we resurrect CodeNEXT and we have a comprehensive rewrite of our Land Development Code,” longtime environmental activist Bill Bunch argues.  Arguing against passage of Prop J is the director of Austin-based Environment Texas, Luke Metzger.  Where do they differ?

Bunch opposes development being shoved into the Central city where you would “scrape our existing city neighborhoods and try to force it on top of existing communities.”  He doesnt like adding density in downtown Austin and wants growth moved away from the city core.

Metzger disagrees:  “Are we going to increase sprawl, increase traffic, or are we going to do it in a much more walkable, transitfriendly way and bring people into the city core?”

They both cite strong, passionate environmental reasons for their approach.  Itll be interesting to see which approach prevails in this environmentallycentric Austin community. Read more →

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 →