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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

September 21, 2018

Volume 40, Number 25

Face it.  Whether you like it or not, advances in robotics and artificial intelligence will be used in battle by someone an enemy or an ally.  And Austin will be on the cutting edge of the effort to ensure US soldiers will have the best technologies available.  This was securely set in stone when the first new 4-star command in 45 years the Army Futures Command (AFC) – was established, not in a remote military base, but in downtown Austin.

While this is a development of yet-to-be-fully-understood, long-term-significance to the Austin area, it is a continuation of Austins quiet involvement for more than a half-century in private and public war-related activities.  Two quick examples:  1) UTAustins Defense Research Lab was active in World War II in North Austin, where the Pickle Research Lab now sits, and where Sam, the first monkey to launch into space, was trained and 2) Tracor, the first home-grown NYSE-listed company, was founded in 1955 to work on US defense electronics.

What we know about the AFC’s economic impact in Austin is that, once fully operational, it will employ about 500 employees, including 400 civilians.  Not Dell-huge in terms of numbers, but important in high-level positions.  This is where university graduates and private sector workers come in.

“By tapping into private-sector and academic know-how, the Army can better develop solutions to future problems,” observed longtime Texas economist Ray Perryman.  “With Austins large number of professionals in science and technology industries and thousands of graduates each year in science, technology, engineering, and mathematics career fields, the area is well equipped to work with the Army to modernize.”

The Army hasn’t said so yet, but you can anticipate that millions and millions of government dollars will start flowing, as if from a fire hose, into UTAustin, established tech and computer companies, start-up tech innovators, leading-edge researchers, etc.  This is how the Army can maximize the advantages of all that Austin offers.  Make no mistake, this will provide a significant infusion of funds into the area. Want a phrase from an expert that puts the Army Futures Command Austin/Texas location into perspective? Try this from Perryman:  “In one of the most important arenas imaginable, Texas has shown itself to be an innovation juggernaut of global significance.” Read More

August 31, 2018

Volume 40, Number 22

Dear ,

The National Science Foundation announced this week that UTAustin will receive a $60 million grant to build one of the most powerful supercomputers in the world.  And, it will be the fastest of any university in the nation.  This moves UTAustin to the very top in the field.  And while vastly important for academic disciplines at UTAustin, the recognition also reinforces Austins overall tech economySo, how did UTAustin reach this pinnacle?  It got a rocket boost 35 years ago when it did something it had never done before, nor since.

First a little background:  In 1983, Microelectronics and Computer Technology Company (MCC) was a brand-new consortium composed of 15 of the US’s top tech companies (it later grew to 21).  MCC’s task was to counter Japanese dominance in the tech field, which was supported/funded by its government.  In other words, Japanese companies were beating the butts off US companies that didn’t have that level of R&D financial backing.

With a wink and a nod to US anti-trust rules (later validated by Congress), these companies ponied up big bucks and committed to offering their best and brightest minds to work together for far-sighted tech research.  Then the companies took the research results and competed in their own way in the world marketplace.  MCC’s site location was a prize sought by 57 cities in 27 states.

Bear with us.  We’re getting to UTAustin’s unprecedented role.  But, first you need to know Austin, Dallas and San Antonio were all part of the initial 57 cities.  Following a presentation led by Texas Governor Mark White and UTAustin Engineering Dean Ben Streetman, Austin became one of the four finalists along with San Diego, Atlanta, and Raleigh-Durham.

Governor White tapped his chief of staff, Pike Powers, to corral the full force of state and Austin resources to successfully lure MCC to Austin.  The governor said “Don’t leave anything to chance, Pike.”  So, a team of mostly volunteers collaborated to prepare a precedent-breaking proposal that involved UTAustin.

Keep in mind, at the time, the university already enjoyed a solid reputation in computer science and electrical engineering.  But, in 1983 it decided to make a quantum leap, and invest heavily and uniquely (with the help of benefactors) to support the bid to attract MCC to Austin.  UTAustins commitment raised Austins proposal above all others.  Check the next item for how UTAustin helped itself, while it helped the city and the state. Read More

August 10, 2018

Volume 40, Number 19

If you look at the calendar with eyes that have some economic development expertise, you can logically assume Amazon will soon publicly announce the next big step in the selection of a city that will be its choice for its second headquarters, Amazon HQ2.  In January, 20 cities including Austin were told they made the cut from 238 original submissions.  Since that time, Amazon has made no public utterance.  But, its self-imposed deadline is nearing.

Don’t expect Amazon’s next announcement to be the city.  Amazon initially said it will decide the HQ2 city in 2018.  But, if Amazon follows standard site selection procedure, a handful of finalist cities will be revealed a Final Four,” or some small manageable number.  Winnowing down the smaller number to the “winner” will probably include further site visitations, negotiations and a comparative analysis.  This could take a few months.  And by this time, Amazon’s own deadline will be upon them.  For these reasons, you can expect the final cut of cities should be announced sooner rather than later.

Amazon earlier confirmed site selection teams visited all 20 cities.  The visits were very private.  Even some city officials didn’t know they were in town.  And those who met with the site selectors were asked to sign confidentiality agreements.  Even the HQ2 team members didn’t reveal their full names.

This, by the way, is the norm for most economic development visits, though usually it is to make sure the company’s competitors are not aware of their plans.  However, in this case there are no competitors.  Amazon announced it would invest about $5 billion in the chosen city, and HQ2 would grow to about 50,000 new high-paying jobs over the years.  Amazon HQ2 has no peer.

The Austin and Dallas regions were the only two Texas sites among the 20 that made the first cut.  And, an Amazon team not only visited these sites, they also met with the Texas governors office to gauge the states role.  So, make no bones about it, Texas’ no-income-tax, low-regulations, business-friendly-leaders add tremendous clout to local presentations.

A final note about Austin’s chances:  from Day One, Austin Chamber of Commerce officials who guided the Austin effort, have used the phrase Austin Region” – not City of Austin.  So, if Austin makes the “Final Four” – and it is considered one of the favorites – dont be surprised if the physical location is outside Austins city limits. 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

June 8, 2018

Volume 40, Number 10

You hear a lot about the Austin area being inundated by newcomers from California, New York, Boston, etc.  And its happening.  But you dont hear much about your fellow Texans leaving their hometowns to settle down in the Austin area. The common denominator is job-seeking. This is an important, often overlooked, part of the growth in the Austin metro.  And, in some cases the people-moving event is a two-way street.

According to a new study by a career-analysis website, Glassdoor, the biggest supplier of jobs for newcomers to Austin is ta-dahh, wait for it the Dallas-Fort Worth (DFW) metroplexHouston and San Antonio are next.  New York City and Los Angeles follow in the pecking order.

Glassdoor measures job applicants.  The availability of well-paying jobs in Austin is the lure, which we’ve chronicled for you for years.  And, of course, it’s easier to uproot and move down the road to attractive Austin, rather than make a cross-country move.  So, in that sense, it makes sense for ambitious Texans, seeking a better situation, to consider a move to the nearby Austin metro.

Not all Austinites stay here (I know, I know, it’s hard to believe).  And you must (grudgingly) admit, the much larger D-FW metro is also a pretty good area.  While Glassdoor reports D-FW attracts the most job applicants from Houston and New York City, Austin comes in at #3, just ahead of Chicago and Los Angeles.  Aside from Austin, there’s a pattern here:  big city attracts residents from other big cities.  (Maybe, for some Austinites, it’s trying to “move-up” to the big city life.)

Another point that needs to be made:  weve always mentioned Austin area.  This population influx is not limited to the Austin city limits.  As we have regularly referenced, the nearby communities within the Austin metro offer more affordable accommodations and civic amenities such as nearby schools, quality neighborhoods and access to all Austin offers in terms of quality of life.  It’s part of the big picture. Speaking of smaller Texas cities, didja know the most prosperous city in America is a small town in Texas?  And, a nearby city is also in the Top TenOdessa as #1 and Midland as #10 are stories unto themselves.  But, these boomtown oil patch Texas success stories bring with them a number of trade-offs.  Check out the next item. Read More

April 20, 2018

April 20, 2018:  Volume 40, Number 3

Dear ,

What if the Russians (or other enemy entity”) hacked into your power supply, Austin Energy?  How about the nuclear power plant that supplies a portion of Austins electricity?  Or the source of your water supply, the Lower Colorado River Authority (LCRA)?  In other words, what if your access to water and/or electricity is cut off?  This was the subject of a recent FBI/Homeland Security report on Russian hacking.

The Department of Energy has begun the task of creating an office of cybersecurity and emergency response.  “But at the local level, it will be up to officials to take whatever steps are needed to prevent hacking attacks,” says Mary Scott Nabers, CEO of Austin-based Strategic Partnerships.  “The possibility of future impacts is enormous.”

“Our power plants, nuclear generators and water infrastructure are all outdated and vulnerable,” Nabors noted.  “It would not be that difficult for unsophisticated hackers to shut down our electric grids or our water plants.  It’s even plausible to think that hackers could reroute our airline flights.”

It’s not just foreign powers that pose direct hacking problems.  “To gain access to something significant like a power plant, hackers usually first attack smaller, less secure networks like firms that make parts for generators or sell software to power plants,” observed Nabors.  “Virus and malicious code usually enters a network via a third party breach.”

Nabors acknowledged local entities are already investing in safeguards.  But, she said “that will escalate significantly in the near future.”  It is estimated that US utilities will spend more than $7 billion on grid cybersecurity by 2020.

The reason for this increased effort:  “between 2010 and 2014, hackers infiltrated the US Department of Energy’s networks 150 times.”  And, 68% of oil and gas companies have experienced at least one compromise over the past 12 months. Nabors points out federal funding sources are available for local cyber security:  “The threats are significant and funding and assistance are available.  It seems important for state and local officials to avail themselves of all assistance possible.”  She also admitted it will be difficult, as the federal government is large, complicated and bureaucratic. Read More

August 11, 2017

Volume 39, Number 19

Is something wrong with Austin home prices?  For that matter, the same question can be asked about home prices in other major Texas cities.  This sobering question is prompted by recent national reports that area home prices are among the most overvalued in the US.  Those reports have pointed to the recent rapidly-rising home prices in the Austin area as examples that the local residential housing market is overvalued.  However, this week, a longtime, respected Texas economic research outfit took issue with this designation.

While not overtly stated, these national reports saying Austin housing is over-valued imply a housing bubble may be on Austins horizon.  And, a housing bubble further implies a bursting of the bubble could have bad economic consequences.  Therefore, their reports should not be taken lightly. You may remember two weeks ago (see the 7/28/17 newsletter in our Archives section) we told you the TexasA&M Real Estate Center was looking into these “overvalued” reports.  Well, the Center released preliminary results of its research this week.  Saying such comparisons are “not easy,” it did conclude that “Texas shows no current signals of overheating” – a reference to a possible housing bubble like the one that led to a recession many years ago.

TexasA&M research economist Dr. Luis Torres refers to the discrepancy in calculation as a “misalignment” that suggests “recent price changes cannot be explained by supply and demand fundamentals alone.”  He points to 2014 as the year when the “misalignment” started in Austin, Houston and DFW.  And 2015 when it started in San Antonio.

Torres says “there is no sure way of knowing what prices should be,’ even when considering supply and demand determinants, since they change over time.  Even more difficult is determining with certainty the formation of housing bubbles.”

But, the real estate researcher looked back at conditions present during the last bubble, and concluded they “seem not to be present currently in the Texas housing market or in the major Texas MSAswhich includes Austin.  However, he did caution about the lack of housing inventory, and said the TexasA&M Real Estate Center “will continue to monitor and analyze” this significant supply restraint.  We’ll also watch it for you. Read More

March 24, 2017

Volume 38, Number 50

Austin software engineers are well-paid and in high demand.  Tech jobs have exploded worldwide in recent years.  So, where does Austin as a widely-recognized major tech center stand when competing with other world tech centers especially as you examine salaries and cost of living?  Quite well, thank you.  Lets do a quick analytic comparison.

To set the stage, we turn to Hired, a company that facilitates the job search process for clients, ranging from interview request all the way to the final job offer.  As a result of its recent worldwide expansion, Hired has access to salary information in 16 of the worlds biggest tech markets including, obviously, Austin.  And their analysis reveals why Austin is attracting so many tech workers from elsewhere, punching the area’s population ever higher. For decades, Silicon Valley has been the epicenter of the tech industry, but the rise of new technology and innovation hubs across the US and the world are challenging the Bay Area’s reign.  “In fact,” noted Hired, “after adjusting for cost of living in San Francisco, cities like Austin, Melbourne, Seattle and Toronto are increasingly attractive stops for tech workers to grow their careers.”

Hired reported the following in its 2nd edition of Global State of Tech Salaries:  “In Austin, the average salary for a software engineer on Hired is $110K.  But this is equivalent to making $198K in San Francisco when you consider the cost of living difference between the two cities.  Quite a competitive edge for Austin.

And, Austin tech enterprises are aggressively taking advantage of this discrepancy.  “Notably, Austin-based companies are especially willing to relocate the right talent, with more than 60% of job offers going to candidates living outside the Lone Star State, Hired observed.  “In comparison, only 30% of offers from SF Bay Area companies are given to non-local candidates.”

Austin is not alone in this competitive advantage.  It’s especially true outside the US, such as European, Canadian and Asian markets.  “Our analysis shows its a great time for tech workers to consider a role outside Silicon Valley,” the company concluded.  “This year’s data reveals that higher salaries await candidates who are willing to move to a new city.”  Another factor to consider on the flip side is that, in many cases, these higher salaries for relocating non-local candidates are more than those offered to local candidates. Read More

December 2, 2016

Volume 38, Number 36  

When the Texas Senate Select Committee on Property Tax Reform and Relief released its report this week designed to hold down your city property taxes, it immediately unleashed a firestorm of opposition, primarily from many cities, including Austin.  Right now, its just a recommendation that will be considered by the Texas Legislature when its members descend upon Austin next month.  But if the negative reaction is any indication, it will be a hot topic.

The proposal is a 4% revenue cap on property taxes levied by Texas cities.  It recommends the cap could be exceeded only by asking local voters if they approve such a move.  If this had been the law over the past decade, the cities of Austin, San Antonio, San Marcos and New Braunfels would have lost at least $770 million, according to a joint statement from the cities.

While holding down the increase in property taxes may seem on the surface a good move, it appears to be targeting the wrong culprit, say the cities.  According to the Texas Municipal League (TML) “cities are not the cause of high property taxes in Texas.  Cities only get 16% of the property taxes paid by Texans (in Austin, it’s 20%), while 55% is levied by school districts.”

Legislators dont want to deal with the real cause of high property taxes the school finance system because the legislature depends on rising school property taxes to balance the state budget,” charges the TML.  (Check the Archives for the 2nd item in our 10/28/16 edition to get more detail on the school/city property tax imbalance.)

Under the Robin Hood funding scheme, 230 school districts are forced to send part of their property taxes to the state treasury this year,” the TML noted.  Locally the large Austin and Eanes school districts, for example, send millions of their property tax dollars to the state to be re-distributed.

Austin Mayor Steve Adler weighed in by claiming “if the legislature really wants to help local taxpayers, it should better fund education because thats most of the Austin property tax bill.”  Adler picked up on the argument many cities make – especially the fastest-growing cities -- when he raised the specter of what less revenue would do for the Austin city budget.  “We should not risk police, firefighting, EMS, parks, safety nets and transportation projects all to save Austin homeowners only $2.60 a month.  Its risky and not real tax relief.” Read More