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Growth & Development

March 29, 2019

Volume 40, Number 50

Well, this is it.  The final edition of The Neal Spelce Austin Letter.  It was precisely 40 years ago today that we began a weekly examination of the Austin area.  This is edition number 2,000.  Forty years, publishing 50 weeks a year beginning April 1, 1979 (we took a 2week break each year).  And those 2,000 issues totaled around 3 million words written about this remarkable city.  For us, it seems to be a good time to move on to other exciting ventures, which well detail further in the newsletter.  But for now, if youll allow us, its time for a bit of reflection.

In 1979, most major private newsletters, such as The Kiplinger Washington Letter, were fourpages of printed information snailmailed to subscribers.  So we followed suit.  We converted to Internet distribution in 2000.  However, many subscribers preferred a hard copy, and still do, so we designed the Internet version to print each edition in a 4page format.  It remained the same Austincentric 4page letter, but with the delivery system arriving at subscriber inboxes each Friday morning, instead of depending upon postal service delivery that usually didnt arrive until the following Monday or Tuesday or whenever.

Long-time subscribers will recall the content has changed somewhat since the early days.  Back then, there were very few sources of information that focused on Austin business and public affairs.  There was no Austin Business Journal and the business pages of the Austin AmericanStatesman were thin indeed.  So we focused on timely – even breaking – news developments.  Eventually, the Statesman expanded its business-oriented coverage, and the Internet blossomed, creating a wealth of information for those who wanted to seek it out.

So we carefully moved to providing insight, analysis and perspective about what was happening, predicting trends and offering inside information.  It turned out to be spot-on because, after all, we started covering news in Austin as a broadcast journalist in 1956, providing extensive experience and context that added unique depth to our weekly reports.

Ever wonder why our weekly notifications to subscribers listed each topic?  It didn’t just say, hey, click here to go to our website for this week’s issue.  Period.  It was a nod to the change in attention spans and demanding personal schedules.  Even if the subscriber didnt have ten minutes at that moment to read the newsletter, the topics were laid out at a glance.  Our newsletter adapted as the Austin area began its amazing transformation.  Check out a perspective on this in the next item. Read more →

March 22, 2019

Volume 40, Number 49

Its almost here.  One more edition of this weekly newsletter is all that remainsAfter exactly 40 years — we are ceasing publication.  It is triggering a bit of personal nostalgia.  But, put that aside.  Lets dive into this weeks look at the Austin area.

Speaking of looking,” if you want to know about a major overhaul of downtown Austin, you can get an elaborate look at the future plansIt will be more than just a dog and pony show, it will be dogs and ponies with bells and whistles.  The Downtown Austin Alliance (DAA) and the City of Austin call it The Downtown You Will Always Love.”  They call the presentation a celebration.”  And it will take place at the Austin Public Library downtown.

Plans are still evolving for the event April 30 (weeks after this newsletter ceases publication).  But, based on preliminary announcements of what is currently in place, they are going allout to convince you the redo of downtown will be spectacular (my word, not their’s).  Some examples:

Be the first to hear findings from our new State of Downtown report while enjoying some of the citys best food, drinks, and live entertainment,” said DAA in a promotional piece.  Okay, this is all well and good.  But, what about the bells and whistles?

“Take a step into the future with our unique VR experience,” DAA said.  “As the goggles go on, guests will be transported into a virtual world representing the future of Austin mobility.”

Or to put it another way:  “Guests will learn about the community’s vision for the future of downtown – and how we are going to get there – through compelling speakers and hands-on activations featuring local artists and the latest technology.”

Okay, let’s read between the lines.  When DAA says “the future of downtown will certainly feature welcoming, engaging places for all to enjoy” the translation is likely to include less auto access, less parking, wider sidewalks and more emphasis on bicycles and scooters.  Also, you need to raise some questions:  what will be the total cost, the impact on businesses and, importantly, will such a costly project with drastic changes be submitted for voter approval?  Participants at the 4:30 pm to 7 pm will be charged at least $55 to be dazzled. 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 22, 2019

Volume 40, Number 45

Televised presidential primary debates played a huge role in helping newcomer Donald Trump beat a crowded field to win the nomination of the Republican Party last time around.  Now its the Democrats turn.  And it wont be long before the Dems line up maybe as many as 20 wannabe presidents on TV appealing for votes.  The first debate hold on is right around the calendar corner in June.  So how will the Dems decide who gets to debate?

Somehow it seems appropriate to review this topic in a week that started with the President’s Day holiday, and this issue is now being published on George Washington’s birthday.  Anyway, be that as it may, let’s get to the nitty gritty.  First of all, the Democratic National Committee (DNC) is running the show – setting the rules, negotiating with the TV networks and deciding which candidates “qualify” to participate in the debates.  And, the DNC is planning 12 – count them, 12 debates during the course of the 2020 campaign cycle.

The DNC has selected NBC News, MSNBC and Telemundo to carry/host the first debate on back-to-back weeknights in June 2019.  The second debate will be carried/hosted on CNN on back-to-back weeknights in July 2019.  The DNC says both agreements are unprecedented.  No debate has ever aired in prime time on back-to-back nights before.  Location, venue, moderators, date and time, format and logistics for both debates will be announced at a later date.

Which candidates will be selected out of what looks like a very crowded field?  Just because a person declares I am a candidate for president is not enough.  The DNC said candidates may qualify by meeting one of the two following sets of criteria:

A candidate must register 1% or more support in three different preselected polls conducted by different organizations and released between January 1, 2019 and 14 days prior to the debate.

The second criterion is the candidate must demonstrate the campaign has received donations from at least (1) 65,000 unique donors and (2) a minimum of 200 unique donors per state in at least 20 US states.

The Repubs haven’t announced any plans.  Trump is running for reelection and no one has yet officially announced a run against him.  Don’t worry.  Things will heat up in due time. 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 →

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 fullon 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 startups 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 allimportant 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 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 →

June 29, 2018

Volume 40, Number 13

As Texas grows, so grows state government.  Right?  Uhhhh, not necessarily.  Government payrolls are a significant part of the Austin economy.  Always have been, always will be.  But, as the rest of the Austin area economy expands at one of the fastest rates in the nation to what extent is government keeping pace?  Bottom line:  private sector jobs are quickly growing in the Austin area.  And the jobs in the government sector are not in step.

This is not to downplay the role in Austin of steady government paychecks.  Far from it.  In fact government sector jobs are more than 17% of all jobs in the Austin area.  (These stats are lifted from a June report by the Austin Chamber’s VP/Research, Beverly Kerr.)  Other cities would die for such a solid job base.  Instead, the current economic situation is a testimony to the private sector that it is outshining the government jobs in the metro.

Without relying on the 17% government jobs (because government job growth was essentially unchanged) the Austin area added 33,900 net new jobs in the 12 months ending in May.  Let this sink in.  This growth of 3.3% made Austin the third fastest growing major metro in the US.  And it was basically in the private sector.  For the nation, private sector growth was 1.9% for the same period.

A half-century ago, we were quoted in TIME magazine as saying “Austin is a state government, state university town.”  True, then.  Not so much, now.  And it has occurred in less than one lifetime.

By most measures, the Austin area boasts of one of the most vibrant economies around.  And private sector jobs have been the defining difference compared to the area’s historical past.  This is a major economic sea change that has taken place in front of your very eyes.

Oh, by the way, all this is underscored when you understand that almost as soon as new jobs are created in the private sector, they are filled.  In May, Austins outstanding unemployment was at an eyepopping 2.8%.  Economists will tell you this is full employment – anyone who wants a job can get a job.  Other major metros in Texas are also doing well.  Their unemployment percentages are solid – ranging from 3.2% in San Antonio to 4.2% in HoustonDallas and Fort Worth were at 3.4% in May.  These are all better than the unemployment rates seen a year ago. Read more →

June 22, 2018

Volume 40, Number 12

Too often the debate about energy sources becomes an usversusthem discussion – “fossil-fuelsversusalternativefuels.”  Energy is vital to Austin and the rest of Texas.  Texas is a world leader in fossil fuels with enormous oil and gas availability.  Not as well-known, is the fact that Texas is fast becoming a leader in capacity to generate electricity from an alternative fuel source — wind power.  Its an enviable position.  With such a wealth of resources, how about peaceful coexistence in Texas as an energy policy?

The City of Austin has committed big bucks far into the future to use wind power to generate electricity, while currently relying on other sources such as natural gas, coal-fired power, nuclear power and solar (which will be discussed at a later date).  Wind is an important and growing part of the Austin economy.  So, just how big is wind in Texas?

According to Texas economist Ray Perryman, Texas capacity of 22,799 megawatts is larger than most countries around the world.  And in the US, Texas capacity is triple that of secondplace Oklahoma.  The Lone Star State also tops the list for capacity currently under development.

Just as with fossil fuels, geography is key.  Texas has abundant land with the right wind speedsAdditionally, there have been billions of dollars of investments in transmission lines that are needed to get wind power from the often rural areas, where it is generated, to Austin and other growing population centers where it is needed.

It’s not been widely discussed, but development of wind power has been an economic boon.  The American Wind Energy Association estimates more than $42 billion has been invested in Texas wind farms, creating jobs during construction, and to a lesser extent, on an ongoing basis through operations and maintenance, Perryman reports.

In addition to the economic benefits of the industry itself, wind generation capacity works to reduce electric power prices,” Perryman continued.  And wind gives electric power customers more choices.  There are also more benefits.

How many states would love to have Texas oil/gas/wind energy resources?  This situation will inure to the economic benefit for Austin and the rest of the state for generations. Read more →