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November 30, 2018

Volume 40, Number 35

Dear ,

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 fast-growing 5-county 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 23, 2018

Volume 40, Number 34

While enjoying leftovers from the Thanksgiving holiday weekend, its time to look ahead at a special Austin City Council runoff election that will likely be largely overlooked.  Even though Council positions are theoretically non-partisan candidates are not listed by political affiliation Council District 8 has taken on an aggressively partisan Dem vs Repub tone.

It’s a special runoff election December 11, 2018 for three seats on the Austin City Council.  No candidate got 50+% of the vote November 6, 2018.  So the top two vote-getters for District 1, District 3 and District 8 must face voters once again.  Here’s how it breaks down.

District 1 features newcomers Natasha Harper-Madison against Mariana Salazar.  District 3 is a re-match of a family affair:  incumbent Pio Renteria is in the runoff with his sister, Susana Almanza.  Neither of these contests has partisan overtones.  No matter who is elected, these districts will continue to be represented by another left-leaning Council member.

The change in tone is for the District 8 Council seat.  You’ll recall this is the Council district currently represented by Ellen Troxclair.  An avowed conservative, Troxclair – who was frequently on the short end of 10-1 votes – decided not to seek re-election.

The runoff for this seat pits Paige Ellis against Frank Ward.  Why do we say this is a highly-partisan contest?  The Travis County Democratic Party endorsed Ellis.  And described the contest this way:  “Her opponent Frank Ward is a Trump-Republican and former staffer for the Republican National Committee endorsed by outgoing conservative Council Member Ellen Troxclair.”

The Dem Chair says of Ellis:  “Paige is an advocate for Planned Parenthood and believes that Austin can be a leader in gun safety reform … and is running to ensure environmental responsibility.”  The Democratic Party is raising money for Ellis and is block-walking Sunday, November 25th to get out the vote for her.

If Ellis wins, there will be no conservative voice, much less a lone vote, on the Austin City Council.  And, as the Austin American-Statesman noted previously, in the very diverse 11-member City Council, there will be no white, heterosexual, Christian male serving on the law-making body.  Early voting runs from November 29th to December 7th. Read More

November 16, 2018

Volume 40, Number 33

Dear ,

What would a race for President of the United States be that didnt include a Texan or two in the mix?  Remember last time around, the Republican primary featured Ted Cruz and Rick Perry.  It also included Jeb Bush, who was born in Texas and is a family member of the famed two-Bush-presidents-from-Texas.  Now its the Democrats turn.  Lets start with two Texas Democrats in the very early speculation Julian Castro and Beto ORourke.

Castro is the Texan frontrunner as we speak.  The former San Antonio mayor and former Housing and Urban Development Secretary is making the most overt moves to get the Democratic Party’s nomination for president, even saying he is “likely” to run.

What do we mean by “overt” moves?  Just last week Castro had a private meeting in the Alamo City with roughly 20 possible donors to fatten his presidential campaign war chest, as first reported by PoliticoHes also building a paid staff in the early nominating state of Iowa.  And, he’s talked to lawyers about “the mechanics of a possible 2020 presidential campaign.”

Just as important, he crisscrossed the country during the recently-concluded midterm elections campaigning for Democratic candidates.  This was a significant effort to build support, as his Opportunity First PAC endorsed (meaning, gave money) to 89 Democrats.  He’s visited early primary states like New Hampshire, South Carolina and Nevada, as well as Arizona and Florida.  He was an early (2017) endorser of Andrew Gillum’s Florida campaign for governor.

And, right now, he is the only Hispanic to privately make major presidential moves.  Not coincidentally, Castro is raising money and speaking in Hispanic-heavy California late this week.

Ironically, O’Rourke while not making anywhere near the national moves as Castro, is more top-of-the-mind with his fellow Democrats.  He is a media darling, as well as an inspiration for liberal Democrats – with many speculating about a presidential run for him. The El Paso Congressmans term ends in January.  So he has a national platform – if he decides to use it – as Dem leaders urge him to seek the presidency. His mega-financed race against Cruz raised his profile.  Check the next item for stats about O’Rourke’s campaign. Read More

October 26, 2018

Volume 40, Number 30

Historic flooding up-and-down 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 porta-potties?  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 19, 2018

Volume 40, Number 29

UTAustin is without doubt one of the Austin areas most important economic engines.  (Years ago we made a speech titled If you want to stop growth in Austinmove the university to Amarillo!”)  So,how is UTAustin doing?  Especially, how does it compare with other peer institutions?  In the world?  How about this UTAustin rose ten points to be ranked #39 worldwide by one of the most respected global rankers of universities.  Impressive.

The editors of Times Higher Education World University Rankings (THEWUR) singled out Yale University and UTAustin for making major advances this year.  It attributed UTAustin’s leap to “significant increases in its institutional income and research volume.”  The ranking relies on a combination of reputation surveys and quantitative metrics in five areas:  teaching, research, research citations, international outlook and industry income.

It’s difficult to get detailed information on the specifics underlying THEWUR’s ranking but, according to UTAustin, it “correlates with recent expansions in research funding, research reputation and academic reputation.”

UTAustin ExecVP/Provost Maurie McInnis said investments in faculty compensation and interdisciplinary research, combined with the addition of the new Dell Medical School, are enhancing UTAustins research impact.  (If memory serves us correctly, UTAustin’s rankings have suffered in the past because most peer institutions boasted medical schools.)

And UTAustin’s future appears even brighter.  McInnis said “by placing greater emphasis on doctoral programs and strategic hiring, the university aims to become even stronger in years to come.”

Other Texas universities placing in the ranking include Rice University (#86), TexasA&M (#159) and UTDallas(lumped into a range of #201-#250).  UTAustin has done well in several other global rankings:  Center for World University Rankings, #31 … USNews&World Report’s latest ranking of Best Global Universities (#32) and Nature Index’s ranking of #23 in the world for scientific research. As its stature grows nationally and worldwide (and this growth is expected to continue surging), UTAustin enhances much of what makes Austin, Austin. Read More

September 14, 2018

Volume 40, Number 24

The Texas economy especially as it impacts the Austin area is so strong it has triggered an action not taken in 30 years.  State government, so important in Austin, is benefitting significantly from what is happening throughout the state not to mention the impact of the red-hot Austin economy.  All this is due to better-than-expected economic and revenue growth around Texas.

We’ve long maintained the Austin area is uniquely positioned economically.  Steady government paychecks provide a solid underpinning for the area.  In general, these jobs are not subject to ups-and-downs or twists-and-turns of the private sector.  So, add to this, the Silicon Hills of Austin is right now riding the crest of tech-driven private sector job growth, that is the envy of the rest of the nation.

Consider this:  the sky-rocketing Austin private sector tech economy is set to get a rocket-boost from normally-staid state government.  What?  How’s this?  The Texas Legislature that sets budget parameters for the many state agencies in Austin doesn’t even meet for almost four months.

Texas Comptroller Glenn Hegar, by law, is the state official who decides money guidelines the legislature must follow.  He says to legislators “this is how much money you will have to spend during the next two years of the biennium and you cant spend any more than that.”  Last October, he issued his forecast for fiscal year 2019.

For the first time other than a legislative session in 30 years, the State Comptroller has increased his certified revenue estimate he made last October.  And it was a big increase.  Remember, the Texas Legislature meets only once every two years for 140 days.  So its a big deal for setting a two-year budget.

His reason for saying state agencies will have more money to spend starting in 2019 than earlier predicted are several fold:  sales tax revenue is up 10.5% over FY 2017 … oil/gas natural gas production tax revenue is up 56.1% … general revenue-related revenue, up 9.3%, etc.

The legislature will have more money to dole out.  If state agencies get bigger bucks, it will mean bigger paychecks circulating through the Austin economy.  A nice future boost. Read More

August 3, 2018

Volume 40, Number 18

Are there Chinese and Russian spies in Austin?  Preying on Austin tech interests.  According to one report, the FBIs Austin office may think so.  It is believed Austin may be the target for cybersecurity espionage due to its concentration of tech companies that could harbor important data worth stealing.  Further, there is concern that some Austin tech operations are unprepared to deal with this espionage.

Buried in the next-to-last paragraph of a very lengthy and starkly detailed July 27, 2018 report in Politico magazine is the reference that grabbed our attention.  After recounting what was called “a full-on epidemic of espionage on the West Coast by China and Russia, aimed at science and technology companies, the report said mid-sized cities with thriving tech industries will likely see an uptick in counterintelligence cases.  Then, came this quote:

One former intelligence official noted that the FBIs office in Austin, Texas, has built up its counterintelligence capacities.”  There you have it.  Of course, the FBI is not talking for obvious security reasons.  But it makes sense.  And it’s not because of the logical big targets in Austin like Dell, Apple, Google, etc., but also tech start-ups that are especially vulnerable.

“Russian and Chinese operatives have an easier time infiltrating organizations without any security systems or hierarchies in place,” noted the report.  “These services like penetrating young companies and start-ups because its always better to get in on the ground floor when seeking to pilfer valuable information or technology.”

The espionage efforts by the Chinese and Russians are diverse and complicated.  For example, here in Austin there is a treasure trove of data at UTAustin where research is conducted on vital topics, such as energy and computer technologynot to mention defense contracts.  UTAustin probably has massive precautions in place. Now with the all-important Army Futures Command establishing its headquarters in Austin, its entirely possible Russian and Chinese espionage efforts will ramp up in Austin exponentially.  The Army, too, will have extensive safeguards.  But remember:  spies don’t just concentrate on hacking, etc., spies also compromise individuals who may have access to what they want.  Get ready:  espionage will expand in Austin. Read More

July 27, 2018

Volume 40, Number 17

Dear ,

As the state of Texas goes, so goes Austin.  Some think the vice versa is more true.  But since Austin is the home of the massive state government that must keep up with the impressive growth of Texas, its important to examine the economic health of the Lone Star State.  Especially as the Texas Legislature will meet in Austin in less than six months for its every-two-years decision-making sessionAnd, legislators will have a lot of money to spread around.

When you think about it, it’s really impressive how the amazing Texas economy is churning out enormous amounts of money to run the government.  And, unlike the vast majority of other states, Texas is doing this without a state income tax.  The single largest source of revenue for Texas is the General Sales Tax instituted in 1961.  And, get this, the state sales tax rate of 6% has not increased since 1990.

The booming state economy has caused the sales tax source of revenue to zoom almost 10% since last year at this time.  As a result, State Comptroller Glenn Hegar now predicts legislators will have more than $110 billion (with a b”) to spend during the next biennium -- $2.8 billion more to spend than originally anticipated.

Now then, enough about mind-numbing big bucks.  Let’s talk about another economic factor.  Separate from the sales tax, Texas has “benefitted from rising oil prices and production,” Hegar pointed out.  This translates simply into a 2019 balance in the states savings account – the Rainy Day Fund” – growing to almost $12 billion, the largest ending balance in the states history.  Talk about economic stability.

Not only that.  After voters approved a constitutional amendment in 2015 to increase funding for highways, the adopted formula means $2.5 billion will be allocated to highways from collections this 2018 fiscal year.  This is huge.  And it is occurring because of the increased sales tax receipts.

At least one group is urging legislators to “buy down some existing taxes” with additional funds. (Explanation:  Back in 1992, the legislature allowed municipalities and special districts, such as transit authorities, to levy local sales taxes.  The maximum municipal rate is 2%.  This is why some sales taxes are as high as 8.25%, depending upon the locale.) 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 up-to-speed on critical issues.  One question:  what should the Board of Regents pay to attract a world-class 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 one-third 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 6, 2018

Volume 40, Number 14

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

It didn’t take long after the Texas Supreme Court ruled local bag bans ran afoul of state law for the state attorney general to take action.  (Austin has had a bag ban since 2013.)  This week, Attorney General Ken Paxton officially notified Austin and other Texas cities their local ordinances were illegal and therefore unenforceable. To make sure the word got out, Paxton directly notified the City of Austin, Mayor Steve Adler and the 10-member Austin City Council, then he issued a press release to the media.  Now what?  The ruling that banning plastic bags is illegal as of this moment should stand until some counter action – if at all – is taken.    

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

The testing by Capital Metro and the City of Austin Transportation Department could begin later this month and take up to 60 days.  During the second phase, proposals will be evaluated to lease six vehicles, carrying up to 15 passengers, to run in the pilot program for 12 months. CapMetro thinks the fleet of vehicles will be in operation on downtown streets in late fall.  Not to worryCapMetro says operators will be on board while the autonomous electric vans are being evaluated and running in service.    

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

Read More