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April 20, 2018

April 20, 2018:  Volume 40, Number 3

Dear [MM_Member_Data name=’firstName’],

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“Our power plants, nuclear generators and water infrastructure are all outdated and vulnerable,” Nabors noted.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

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 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 →

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 →

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 →