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February 15, 2019

Volume 40, Number 44

Its more than a coincidence.  Its a bigtime trend unfolding before your eyes.  The companies of the future are betting on a future in Austin.  When you look at the size of the deals, its not bet-hedging or dipping-a-corporate-toe in the water.  Youre seeing full-blown commitments the likes of which are seldom seen in cities around the US.  The big office towers downtown and in North Austins Domain are visual indicators of this trend.

It’s usually risky business for a developer to put up a speculative office building.  Not now in Austin.  Before buildings are even completed, they are substantially leased by substantial companies.  Those pre-leases have the financial backers patting themselves on the back about how “smart” they were to support such normally-risky ventures.  Consider a few examples of what is happening in Austin in recent weeks.

The biggest and most obvious example is a visually-strikingly 35-story office building on the north shore of Lady Bird Lake downtown.  It soars to the sky, with setbacks that taper toward the top to resemble a sail on a giant sailboat.  According to news reports, all 723,000 sf have been leased by Google.  Let this sink in.  Then consider another example.

It was reported this week Amazon is leasing 145,000 sf (four floors) of a Tower under construction in The Domain that is set to be completed in the 2nd quarter of next year.  Amazon already occupies about 250,000 sf in two other office towers in The Domain.

One more example.  Facebook is said to have leased an entire 17-story tower to be completed later this year in The Domain.  We’re talking about 320,000 sf.  Remember Facebook already employs about 700 people downtown, has pre-leased another 250,000 sf in a downtown skyscraper under construction and also has a fetch of employees in The Domain.

These are just a few examples and it’s certainly not a complete list.  (We haven’t even discussed the expansion of Oracles huge campus along the south side of Lady Bird Lake.)  But, let’s go back to our original thesis:  these successful mega companies are sitting on top of stacks of cash and they are pouring resources into the Austin area as they expand to become mega-mega entities.  Quite an endorsement of our economy, lifestyle and workforce. Read More

February 1, 2019

Volume 40, Number 42

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

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

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

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

Georgetown is now trying to renegotiate its costly long-term wind and solar energy contracts.  And, effective today, February 1st, Georgetown customers will see an average $13/month increase in their electricity bills – not due, say city officials, to wind/solar contracts, but because they leaned on forecasts back in 2012 and 2013 that predicted a shortage of power and a significant rise in energy prices. Long ago, city-owned utilities (such as Georgetown’s) were exempted from competition, like you have in other Texas cities, where residents have a choice of electricity providers.  Keep an eye on the Texas Legislature.  A proposal is under consideration by lawmakers that would allow such monopolies to be changed, giving customers the ability to shop around. Read More

January 25, 2019

Volume 40, Number 41

The City of Austin has invested heavily in contracts for wind energy to produce electricity.  It indicated it may continue to do so in the future.  Austins commitments have helped Texas emerge as the nations leader in wind energy. This is taking place in a state where oil is king, with no signs of relinquishing its crown.  So, what is the future for wind as a power source?

Let’s get this out of the way up front:  wind power can exist alongside Texas abundance of oil and gas.  Its not an either/or situation.  In fact, visual evidence exists in West Texas where both giant spinning wind turbines and oil/gas wells dot the same wide-open landscape.  It’s a below-ground industry working beside an above-ground dynamic.

Back to the original question, what is the future for wind power?  Wind energy is an expanding business.  And it is not just for generating electricity.  For instance, there are nearly 13,000 wind turbines operating in Texas for electricity.  Yet, there are still another 80,000 wind turbines spinning in the state that are used for pumping water and other purposes.  (Think windmills pumping water in the days of the Old West.)

We focus on Austin’s energy needs, rightly so.  But considering the future of wind energy it’s important to note “wind power has become an invaluable tool in the rural economic development space,” reports Powering Texas.  It is providing opportunities for landowners and local school districts, as well as creating jobs,

The national wind energy association reports Texas is home to nearly four-dozen manufacturing facilities and numerous component suppliers.  This is a growing support group for the expanding wind energy industry.  Not only this, but eight of the worlds ten largest wind farms are in the US and five of those are in Texas.

The US Department of Energy’s Energy Information Administration this month released bullish 2019 projections.  Some of its strong forecast is based on these facts:  1) there is already installed wind capacity in Texas amounting to 23,421 megawatts, 2) Texas wind capacity under construction is 6,148 megawatts, and 3) the wind capacity in advanced development is 1,804 megawatts.  Do the math.  In the pipeline (so to speak) is a capacity that will increase wind power in Texas by more than one-third.  This is a hefty increase, signifying a solid future. Read More

January 19, 2019

Volume 40, Number 40

To rent or to buy in the Austin area?  And where?  These are not only important decisions facing newcomersEven longtime residents have to weigh this decision during various stages of life.  A new report analyzed this question for several metropolitan areas in the USAnd, according to the national 2019 Rental Affordability Report, it is more affordable to rent than to buy in Travis, Williamson and Hays CountiesThis is true even as rents are rising, as well home prices.

The report calculated rental affordability as a percentage of wages to rent.  For housing affordability, it was calculated as a percentage of wages and the monthly cost of owning a 3-bedroom, median-priced home, based on a 3% down payment plus mortgage cost, property taxes, homeowner’s insurance and private mortgage insurance.  

In a separate study, rents in Austin ranked highest in the state.  In 2018, rent grew an average of $57 a month, or 4.4%, to yield an average monthly rent of $1,361, according to RentCafe.  So, even though rents are rising at a fast rate in the Austin area, it continues to be more affordable to rent than buy.

The flip side of the equation – home prices – is a major factor.  Even though Travis County home sales are declining, the median home price continues to rise.  In Williamson and Hays County, prices and sales are both rising (as many opt to leave Travis County.)

Rising interest rates, regulatory barriers, higher building material costs and labor shortages all contribute to the increasing cost of housing.  Not to mention, demand.

As long as the Austin area continues to be a magnet for newcomers (many from higher cost areas such as California), the demand for new homes will increase.  And some newbies opt to pay rent until they have time to become established in the area, before deciding where and when to buy a home.

Of course, as home prices rise, many potential homebuyers will be priced out of the market, making them renters.  Its a cycle that keeps repeating itself.  And, it looks like there is no immediate end in sight. Read More

December 14, 2018

Volume 40, Number 37

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

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

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

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

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

December 7, 2018

Volume 40, Number 35

Its common these days for glowing national articles to be written about Austin.  So when an opinion piece in a respected national publication criticizes actions by Austin, you need to be aware of what is being said.  Within the past week, The Wall Street Journal (WSJ) wrote the City of Austin risks becoming the San Francisco of the South an expensive playground for wealthy progressives.”  And it cited examples.

 “It would be hard to find a better example of left-wing naiveite in municipal affairs than what transpired here in November,” wrote the WSJ in its opening sentence.  “Voters in the Lone Star State’s progressive bastion overwhelmingly approved a $925 billion bond package, but rejected a simple ballot initiative for an independent audit of city spending.” “The defeat of the audit wouldn’t be so galling if the new bonds didn’t so obviously demonstrate the need for an independent review of Austin’s books.  Spending in the Texas capital is more like what one would expect in some profligate California city,” observed with WSJ.  “With this new bond package, Austin has been reduced to using debt to fund parks, public safety and sidewalk repair instead of paying for them out of its $4.1 billion annual budget.”

It cited other examples saying Austin “spends too much of its steadily growing budget on dubious social programs and utopian schemes, financed by a steadily growing tax burden.”  It ticked off actions such as mandatory paid sick leave “with an exemption, of course, for union shops.”  A solar-ready requirement for all new homes and commercial buildings was another example, as was “exorbitantly high development fees that get passed on to consumers.”

The priority of the citys ultraprogressive political establishment is to serve the interests of the wealthy, ultraprogressive white people who fund and elect Austins insular political class,” claims the WSJ opinion piece.  “As living here gets more expensive and as the city’s elite dig in to protect their left-wing haven from disruption and change,” it becomes more like San Francisco.  Tough talk.

Let’s put this in perspective.  Readers of the WSJ can agree or disagree with this assessment.  This is not the point.  The pointthis review of the City of Austins governing policies is now out there for all to see.  In a respected publication. Read More

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

November 9, 2018

Volume 40, Number 32

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

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

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

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

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

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

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