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Women-owned businesses in Texas

This story was written by Claudia Grisales and appeared in the Austin American-Statesman on August 15, 2014.

Business leaders: Texas can do more to help women-owned businesses

More can be done to boost the number of women-owned businesses in Texas, female business leaders told U.S. Sen. John Cornyn and Texas Comptroller Susan Combs during a roundtable discussion in Austin on Thursday.

About 29 percent of businesses in Texas are owned by woman, but with additional intervention that number could be higher, business leaders said.

“These are great stories, some of which I will never forget,” Cornyn, R-Texas, said after hearing female business owners share stories on how they got their starts.

The discussion, held at Chez Zee restaurant in North Austin, started off with discussion of an American Express study that found the number of women-owned businesses in Texas grew by nearly 100 percent from 1997 to 2014. That ranked Texas was second in the nation behind Georgia, which posted a 118 percent growth rate, according to the study.

The study didn’t include specifics on whether that growth rate included women-owned businesses that failed. An American Express spokesperson could not immediately be reached Thursday.

Brian Kelsey, principal of Civic Analytics, an Austin-based economic development firm, said Texas doesn’t appear to stand out from other states in terms of the share of total businesses that are owned by women.

As of 2007, there were more than 600,000 women-owned businesses in Texas, which was about 28 percent of all businesses in Texas, Kelsey said, citing the latest available data from the U.S. Census Bureau. If you look at women-owned businesses as a share of all businesses, Texas ranked 18th, well behind places like Washington D.C., Maryland and New Mexico, he said.

“The important point is to ensure that we do everything we can to lower any barriers that may exist for women to start and grow businesses,” Kelsey said.

Still, Combs said, the growth figures are positive and point to a determined set of female business owners.

“It’s a really big deal,” Combs said, adding later, “we are feisty, we are not afraid to kick anybody in the shins and that’s why we are successful.”

Several area female business leaders, including the founder of Triton Ventures, Sugar Mamas Bakeshop and others, shared how they started their operations, lauded some of the resources that helped aid those starts and also laid out concerns that can hold back such entrepreneurship efforts.

For example, Sugar Mamas Bakeshop owner Olivia Guerra O’Neal, who said she had learned the ropes of starting a business from her father by the age of 10, said that while Austin has been welcoming she’s also faced challenges with her business location and working with the city’s health department.

“We do believe there could be more done to help women-owned business in Texas,” O’Neal said.

Laura Kilcrease, founder and managing director of Triton Ventures, said she has also seen the challenges facing female business owners.

Kilcrease said improving the size of state and federal contracts for small businesses, improving access to capital, boosting education could help grow the number of female-owned businesses in Texas.

“I think education through our universities in our is going to be key,” she said.

Economic Development Incentives

This is the second lengthy op-ed I’ve seen from the state’s top economist for hire defending Governor Perry’s Enterprise Fund and other economic development incentive programs. The legislature periodically reviews the rules governing incentives whenever there’s a public flap, but perhaps the combination of turnover in the governor’s office for the first time in 14 years, the lurching rightward of Republican politics, and the flogging inflicted by Louise Story in the New York Times, has opened the window wider than usual for critics.

So do incentives work? Like most policies, it depends what you mean by “work.” The literature is wide and deep on the efficacy, use, and theoretical foundations of subsidies for economic development purposes. I won’t go into the finer aspects of market failure here. That eye-glazing-over journey is reserved for my students. But for those of you interested in the academic arguments, read Tim Bartik’s Solving the Problems of Economic Development Incentives, and really anything else written by Bartik on economic development. The article is a bit dated now (2005), but it’s still one of the best and most accessible reads for non-academics. I’ll leave it up to you to decide if that’s a testament to Bartik’s command of the topic, or the lack of innovation in the field.

After 15 years of working in and studying the practice of economic development, and teaching it to graduate students during the last few years, here’s what I know:

1. No degree of appeal to scholarly treatise or “21st century” economic development will end the use of incentives. As long as we have politicians and separate tax bases, incentives will be in play.

I would even take that one step further and say that no amount of public shaming for bad deals will end the use of incentives, either, at least not permanently in most places. Instead of questioning the nature or rules of the game, or of course acknowledging their own role in applying pressure that can often lead to bad deals, communities usually let economic developers take the fall when things go poorly; new staff is hired, and business continues as usual.

2. Sometimes incentives make a difference and sometimes they don’t. You will never really know which is true, before or after a deal is signed.

Site selection is a lucrative business for consultants, whose compensation is often based on the amount of money they can wring out of states and communities through subsidies. But more important is the simple fact that businesses will take free money when it is offered to them. The amount of money saved from tax abatements and other incentives is small potatoes for the large and very profitable companies who make headlines when announcing a new location or significant expansion. But it’s still money. Free money. It’s armchair philosophy of the greatest magnitude to expect companies to forego free money out of some sense of obligation or interest in doing “what’s right” for a state or community.

Yes, critics of incentives are right to point out that most parents working for that company will send their kids to public schools depending on property taxes, use parks and other public amenities, drive on roads built and maintained by local governments, and expect the police, fire department, and EMS to show up when called—all things that suffer when states and communities give up tax revenue. Supporters counter that giving up a portion of new tax revenue is preferable to getting no new revenue at all.

Here’s how it works. Put yourself in an elected official’s shoes and decide what you’d do. You’ve run a campaign on creating jobs or at least ensuring that your community is business-friendly. There’s a site selection consultant in your office saying that your city is one of three under consideration for a project and the other two cities are offering incentives. You have no way of independently evaluating how your city stacks up against the other locations because the other locations are confidential—apparently naming the final three cities can tip off competitors about the company’s business model or growth strategy. So you have no way to assess your bargaining power, but at least the prospective company will sign a statement saying that this is a “competitive” process with other cities offering incentives, which provides a little cover for you. Information asymmetry, indeed. But, nonetheless, you are faced with a difficult choice: (a) refuse to offer incentives and gamble that the company will choose your city anyway; or (b) play it safe.

What would you do? When times are good, and times are really good in Austin right now where this debate is heating up, you may be more likely to gamble. I have no doubt that companies will continue to invest in Austin, with or without incentives. I also have no doubt that some companies would refuse to consider Austin for relocations or expansions if Austin stopped offering incentives.

Same goes for Texas and the debate going on right now about the state’s economic development programs. Supporters and critics are both right, and that makes for a compelling policy debate with staying power. But beware the expert predicting 100% downside if incentives are discontinued. Similarly, beware the critic predicting that most of these jobs will come here anyway.

3. If abstinence is unrealistic, then at least be smart.

Needlessly risky behavior, thankfully, is on a downward trend. Today, clawbacks are widely recognized as an industry standard. An increasing number of cities are using refund incentives, where tax payments are collected up front from a subsidized company and then refunded after the firm’s contractual commitments of jobs, capital investment, etc., are verified. This protects a community’s investment and avoids expensive legal action in the event the subsidized company goes bankrupt, moves away, or otherwise can’t or won’t provide evidence that its commitments under the incentive agreement have been met.

We’ve come a long way, but more improvement is needed. For example, too many states and local governments are still relying on basic economic impact analysis that focuses only on direct and spinoff jobs, wages, and sometimes tax revenue when calculating and communicating a deal’s return on investment. That’s only part of the story. What’s really needed is a fiscal impact study, or a cost-benefit analysis, of the proposed deal, with a full accounting of additional costs to local governments resulting from the new development–i.e. more students in schools, more traffic on roads, greater demand for housing, etc. There are inexpensive tools, such as LOCI, for conducting fiscal impact analysis without having to hire consultants.

For general guidance on best practices, check out Good Jobs First. When an anti-incentive advocacy organization says a city or state is doing a good job, then you can be fairly confident that the example is useful.

Finally, I was asked recently what my incentive policy would look like if I were an elected official. Here’s a broad outline:

  • A level playing field—if you’re going to use incentives, be equitable and inclusive. Make sure that companies of all sizes, new and existing, have the opportunity to participate. Whether you’re creating five jobs or 500 jobs, the policy should apply equally to entrepreneurs, small businesses, and large corporations. Consider a per job created subsidy, rather than using a minimum number of jobs created per project threshold for incentive eligibility. This lowers the barrier to participation for small businesses, which make up 95% of all businesses and about 50% of all jobs in metro areas like Austin.
  • A living wage requirement—decide on the hourly or annual wage a worker must earn to meet her family’s basic needs in your city and only subsidize jobs that pay at or above that line. This approach has several advantages over the more traditional method of using average wages. For example, a policy offering per job subsidies for net new living wage jobs may encourage business owners in lower-wage industries, who would not qualify for incentives based on average wages, to consider whether eligibility for the subsidy would be worth raising wages for new jobs created paying close to a living wage. This would not produce the sea change in paychecks that a minimum wage increase would, but it would be an interesting experiment.
  • Transparency–whether it’s cash or foregone tax revenue, incentives are taxpayer money. Taxpayers deserve to know what they are getting for their investment before a deal is signed. Findings from the cost-benefit analysis should be posted online with sufficient time for review. Taxpayers should have an opportunity to provide feedback on a proposed agreement during at least one public hearing. Reports on incentive payments and company commitments should also be available. The City of Austin incorporated these changes a few years ago, and contrary to doomsday predictions from some, the process has been working quite well.

At the regional level, I would also push for an anti-poaching agreement, like Metro Denver’s Code of Ethics.

So what should the Texas Legislature do about the state’s economic development programs? Would killing the Enterprise Fund and the Emerging Technology Fund hurt the state economy? Certainly, it would be more difficult for communities in Texas to compete with communities in other states without an active state partner. Now, does that mean we need a $500 million cash fund, or could we achieve the same results using different tools?

Let’s consider what else the state could offer. No state income tax takes that off the table as a policy lever. Perhaps sales tax rebates would provide enough encouragement in some cases, but clearly that’s not as compelling as what the Enterprise Fund offers. If we don’t mind offering cash, perhaps from the Rainy Day Fund, but want to use a different process, we could adopt a system common in other states where the legislature is called into special session to consider incentives on a case-by-case basis, but I have a feeling that may not work so well in Texas.

The bottom line is that the Enterprise Fund and the Emerging Technology Fund have been factors in corporate decisions to invest in Texas, but there is no way to know what would have happened without them. And killing the programs won’t settle the debate, either, because you’re not likely to know for sure which future investments could have located here but didn’t.

Taking an ideological stance on incentives is easy. Strangely, so is crowing about the virtues of the “free market” while doling out taxpayer money to companies, for some state leaders. Nonetheless, when designed and managed appropriately, incentives can be an effective tool for improving communities.

Here’s hoping the gamble pays off, whichever way it goes.

Economic Resilience

Buzzwords governing community and economic development policy in Washington DC tend to follow a certain lineage, a sort of genealogy fueled by the symbiotic relationship between think tanks and technocrats. A term or concept, often long-debated and sometimes even settled in academic circles, suddenly takes hold–a spark that starts consuming air in the bubble. Eventually, the bubble adapts, as federal programs integrate, or at least learn to live with, the new concept.

The exact lineage is difficult to map in some cases, because concepts can spark at the same time, like twins.

Innovation > Competitiveness > Clusters

Place-Based > Sustainability > Resilience

A slightly more cynical view would suggest that the latest cause célèbre follows (or perhaps dictates?) the availability of funding, like a dowry that facilitates buzzword offspring:

Clusters (regional) + Resilience (local) = Innovation Districts

Occasionally, this constant rebranding of “what works” does produce things of tangible value for practitioners outside the bubble. For instance, thanks to HUD’s Office of Sustainable Housing and Communities Economic Resilience, we now have examples of  how regional planning can be streamlined to more effectively align economic development, housing, and transportation, such as Region Five Development Commission’s Resilient Region plan in Minnesota and Centralina Council of Governments’ CONNECT Our Future initiative in the Charlotte area.

No buzzwords are necessary to understand why planning silos should be better connected, or broken down altogether. Completing and implementing separate plans for economic development, workforce development, transportation, and housing is expensive, inefficient, and counterproductive, especially for the business owners, community leaders, and residents you are asking to participate in these various planning processes. If resilience means better planning–thus freeing up staff time to do things rather than plan to do things–I’m all for it.

Federal agencies are also investing in research tools that can help practitioners work with stakeholders to determine what “resilience” means for their communities. The U.S. Economic Development Administration (EDA) is leading the way through support of a revamped U.S. Cluster Mapping Project, now with data for counties and the ability to build multi-county regions aligned with Economic Development District boundaries, and an enhanced StatsAmerica website (I’m on the advisory committee). These tools can be really helpful for exploring topics and identifying metrics for tracking resilience, such as the degree to which a region is dependent on a single cluster, or sources of income for residents.

In addition, the Appalachian Regional Commission recently completed an impressive effort with the University of Illinois at Urbana-Champaign and the Center for Regional Economic Competitiveness to measure several types of economic diversity. The work focused on the Appalachian region, but data is available for all U.S. counties, as well as Economic Development Districts (Spoiler: Portland-Vancouver Economic Development District and Southwestern Pennsylvania Commission, you do quite well):

Economic Diversity in Appalachia

Practitioners can explore resilience with more traditional data sources, as well, such as the Census Bureau’s Statistics of U.S. Businesses, looking at how dependent a community is on large or small businesses, for example. As of 2011, there were 17,671 firms in the U.S. with 500 or more employees. These large firms made up less than one percent of total firms in the U.S., but accounted for 52% of total employment and 58% of total payroll. Practitioners may want to compare their communities to the U.S. average as a way of further understanding potential vulnerabilities, such as layoffs or closures at branch plants of large corporations during recessions. For example, 76% of total employment in the Tuskegee, AL, area is in firms with 500+ employees. In Orlando, FL, it’s 63%, also well above the US average. Large firms account for 73% of total payroll in Bloomington-Normal, IL (home of State Farm), compared to only 33% in Santa Fe, NM.

What, if anything, can practitioners glean from these statistics to address economic resilience? The literature review completed for the Appalachia project, which you can find on the website, is a good starting point, and you can also learn more about this topic at the NADO annual training conference in Denver later this month.

For the 380+ EDA-funded Economic Development Districts, this “pivot” to resilience, as they say, will soon be part of the requirements for Comprehensive Economic Development Strategies (CEDS). I like the shift, despite the jargon gymnastics that come along with it. Resilience is a helpful framework for examining strengths, weaknesses, opportunities, and threats to a regional economy. It’s broad enough for tailoring to local circumstances, but specific enough to provide common themes for peer learning: natural disaster, industry diversification, BRAC.

Stay tuned for more on this when the new CEDS guidelines are published.

Workforce training deserves higher priority in Texas

This story was written by Dan Zehr and appeared in the Austin American-Statesman on July 23, 2014.

Comptroller: State needs to boost support for job-training programs

Texas has one of the country’s largest and fastest-growing youth populations, but the economic boost they could deliver when they enter the workforce won’t materialize unless the state supports the training programs they need to launch and sustain their careers, according to a new report released from the state comptroller’s office.

The working-age population in Texas is projected to grow about 37 percent over the next three decades, the report said, more than three times the national average. And those young workers could provide the state a key economic advantage, giving it a more vibrant workforce to fill existing jobs and attract new employers, it said.

“Texas has a huge potential source of workers to trim skills gaps and meet employer demands — if this youthful cohort receives the proper training and education,” the report said.

The expansion of the state’s up-and-coming workforce comes as workplace skills requirements are evolving at breakneck speeds. Without the necessary education, this rapid shift toward new and greater skill requirements could leave many of Texas’ young workers with limited access to good jobs.

The report encouraged state lawmakers to help expand an educational pipeline that prepares young workers for careers and then provides them opportunities to upgrade their skills throughout their careers.

In particular, the report recommended a stronger focus on career and technical education programs, the expansion of Early College High School programs, more adult-education options and a broader consideration of alternative training programs, such as apprenticeships and industry-based certificates.

“If you don’t increase that training as the world becomes more diverse, more varied and more complex, then these people are going to be left behind — and employers need all these people,” Comptroller Susan Combs said in an interview.

Exhibit A for the return on educational investments, Combs said, is the Jobs and Education Training (JET) program the Legislature approved in 2009. So far, JET has funded almost $27 million in equipment for training programs around the state, serving more than 69,000 students and generating an net salary increase of $22,000 per student.

“If you multiply that out, you get hundreds of millions of dollars of return,” she said. “This is not throwing money down a rat hole.”

Not every young Texan will want or need a four-year degree, but national earnings data suggest that more education means more earning power over the course of a career. Someone with an associate’s degree will earn an average of $1.7 million over the course of his or her degree, compared with just $973,000 for a high school diploma, the report said, citing a 2011 study by the Georgetown University Center on Education and the Workforce.

And increasingly, associate’s degrees and alternative credentials have become prerequisites for the middle-skill, middle-class jobs that used to require little more than a high-school diploma and a good work ethic. Texas has seen skills gaps appear for many of its technical, high-wage jobs, but the state’s widest gaps have opened up in the middle tier, the report said.

To close those gaps, the report said, Texas will have to expand and raise the profile on a range of technical education programs, including efforts to push more associate’s degree and credential programs into high schools.

While some local economic development and workforce experts agreed with the reports recommendations, they said the report means little if the Legislture doesn’t commit the financial resources needed for the programs.

“Most school districts don’t have the funding available to offer high-quality, comprehensive career and technical education programs,” said Brian Kelsey, principal of Civic Analytics, an Austin-based economic development firm. “Finding instructors can be difficult, especially in rural communities.

“A new report is great,” he said, “but nothing will change unless state leaders get serious about investing in our future workforce.”

The state’s comparatively low levels of per-capita education spending extend beyond K-12 education. In 2010, the report said, Texas funded adult education programs to the tune of just $4.83 per adult without a high school diploma — far less California (106.27), and New York ($30.70).

“Adult education especially has been a ‘backwater program,’ seen as a step child to public education and workforce development programs,” said Christopher King, director of the University of Texas’ Ray Marshall Center for the Study of Human Resources.

Currently, adult education providers in Texas get much of their funding regardless of performance levels, King said. So while the state needs to put more money into these training programs, it should also tie at least a portion of adult-education funding to performance. Combs agreed.

“When you can make case for educational rigor and measureability,” she said, “then you’ve provided enormous value to Texas.”

Is Austin’s black population really declining?

Much has been made recently about Austin’s shrinking black population:

African-Americans Are Austin’s Only Shrinking Ethnic Group. Here’s What Some Are Doing About That

As Austin Grows, Its Black Population Continues To Decline

What Nobody Says About Austin

Undoubtedly, the black population in the city of Austin is not keeping pace with the growth of other race/ethnicity groups. In 2010, Austin’s black population was 64,406, a decrease of 1,550 people compared to 2000 (-2%). The city’s Hispanic population, by contrast, increased by about 77,000 people (38%) and Asians surged 61%.

Austin is very much out of step with black population change compared to other cities in the region. Round Rock and Pflugerville, for example, ranked among the top twenty cities in Texas according to black population growth between 2000 and 2010, each adding more than 5,000 black residents (Fort Worth ranked first with a gain of nearly 32,000). In percentage terms, Pflugerville’s black population grew 371% and Round Rock’s black population doubled between 2000 and 2010. Both cities added more black residents than the city of Houston.

Austin’s declining black population combined with significant growth in places like Pflugerville and Round Rock has led many experts to speculate that black residents are moving out of Austin but staying in the region, for a variety of reasons including rising cost of living, lack of social and cultural opportunities, and a myriad of other factors you can read about in the articles linked above.

I have no doubt that is happening in some cases, but unfortunately we don’t have much data available for tracking it, and therefore no easy way to gauge progress on policies or strategies designed to address it. Limited data is available at the county level. Here’s what we know, according to the American Community Survey:

  • Travis County is losing black residents to nearby counties, -545 to Williamson County, -141 to Hays County, -115 to Llano County, and -54 to Caldwell County, according to census estimates for 2006-2010 (these figures are net changes–i.e. people moving in minus people moving out).
  • Travis County is also losing black residents (< 100) to places outside Texas, including Davidson County, Tennessee (Nashville), Broward County, Florida (Fort Lauderdale), Mecklenburg County, North Carolina (Charlotte), Marion County, Indiana (Indianapolis), East Baton Rouge Parish, Louisiana, Muscogee County, Georgia (Columbus), Kings County, New York (Brooklyn), Oklahoma County, Oklahoma (OKC), Clark County, Nevada (Las Vegas), and others.

Now, here’s where things get a bit more complicated.

You are allowed to check more than one box for race on your Census form:


Nine million people nationwide reported multiple races on 2010 Census forms and that population is growing quickly. Thus, in census parlance, black households in Austin could fall into two main categories: black alone or black in combination with one or more other races.

Accounting for people responding with black alone and black in combination with one or more other races, the total black population in the city of Austin increased by 1,187 people (2%) between 2000 and 2010. This slight gain was still far smaller than other race/ethnicity groups, but it does put the change in positive territory.

Further, according to the 2006-2010 census data, Travis County gained black (alone) residents from other places in Texas, such as Harris County (Houston), Smith County (Tyler), and Gregg County (Longview), as well as some places in other states, such as Delaware County, Pennsylvania (Philadelphia area), Maricopa County, Arizona (Phoenix), Cook County, Illinois (Chicago), Orleans Parish, Louisiana, and Los Angeles County and San Francisco County, California.

Neither point detracts in any way from the overall concern about equity for black residents of Austin. But, at the risk of ruining a powerful sound bite with nuance, knowing what all the available data can tell us about what’s going on is much better than looking at only one aspect of it. Why is Austin gaining black residents from some places and losing black residents to others? How will the growing number of people reporting more than one race shape our thinking about demographics and how we measure future progress on social equity in Austin?

And then there’s the important question of what we can really know for sure from currently available data. There are, clearly, many limitations in play when it comes to census data, such as:

  1. We are constrained to using counties for analyzing migration, when we really need city-level data for Austin.
  2. It’s difficult to account for college students in the migration data. The stealth dorm research suggested that approximately 50% of UT students change their permanent address to Austin and therefore may be included in the census migration data, but that estimate needs more work.
  3. We only get a snapshot of data for 2006-2010, which is not ideal for keeping pace with how quickly things are changing in Austin.
  4. We can’t (perhaps thankfully) track moves of individual households using only census data–i.e. knowing how long black households who move to Austin stay in Austin and where they go if they move would be helpful. This “two-step” migration, as some demographers refer to it, could reveal important insights.
  5. We don’t have crosstabs in the migration data for looking at race/ethnicity and other key factors, such as age, type of household (family/non-family), or income.

My point here is that neither data nor anecdote alone provides a solid enough foundation to draw conclusions for policy making. Census data can get us part of the way there, but a meaningful community dialogue on an issue as important as social equity warrants better information.

A few ideas:

  • Sponsor a research project to survey and interview black households in Austin and recent movers, perhaps in partnership with realtors, to collect better data than what is available from the Census Bureau.
  • Task city staff working on open data initiatives with identifying mechanisms for collecting and analyzing data on households moving to and from Austin, as well as what other cities have done on this topic, if anything.
  • Work with UT and other area schools to develop better estimates of student impact on population and migration data.

Welcome other suggestions in the comments.

Stealth Dorms Invade Fort Worth

This story was written by Caty Hirst and appeared in the Star-Telegram on June 20, 2014.

Residents hope overlay will preserve TCU-area neighborhoods

FORT WORTH — Tim Latta’s once quiet, family-oriented Frisco Heights neighborhood of circa 1920s to 1950s homes is all but disappearing, being swallowed up one home at a time to make room for parking lots and housing developments geared toward Texas Christian University students.

Latta, who lives in a Mad Men-reminiscent, 1950’s home — complete with a series of floor-to-ceiling windows and low-pitched roofs — is watching the development creep onto her block, which was listed on the Most Endangered Places of 2014 list by Historic Fort Worth because of the buildup.

Even though the 2700 block of Sandage Avenue is zoned single-family, developers are taking advantage of a city ordinance that allows up to five unrelated people to live in a home, creating what some call “stealth dormitories.”

The result is often historic, single-story homes being knocked down to make way for multi-storied homes, 5-bedroom houses that look out-of-place in the older neighborhoods.

“The man next door to us built two structures, and we call them dormitories. They are five bedroom, five bath houses, with a small living room and kitchen. That is not really a single-family house — that is a dormitory,” Latta said.

Further down Latta’s block, two similar, five-bedroom homes have replaced a sprawling, ranch-style 1950s house.

“I can’t believe the city allowed that,” she said.

But the city is taking steps to curb this trend, as it considers implementing an overlay for the TCU-area neighborhoods to limit the number of unrelated adults who can live in a single-family home to three.

Coupled with it is a citywide effort to control parking at single-family homes by requiring an additional parking space when there are more than three bedrooms. Currently only two parking spaces are required regardless how many bedrooms there may be.

It is not a problem that is unique to Fort Worth or other towns with a major university as a neighbor. Austin, for example, recently limited the number of unrelated people living under one roof from six to four in the central city.

Mayor Pro Tem W.B. “Zim” Zimmerman, who represents part of the TCU-area, said the issue is the influx of students into TCU-area residential neighborhoods, which creates tensions with parking, noise complaints and partying.

“The other thing is try and maintain the integrity of our single-family areas . … There is a whole lot of single-family areas that are now being built specifically as a target for students, taking over the area,” Zimmerman said.

“We have got to try and do something — whether we can do it or not would be a different problem. We have to try and see if there is a solution,” Zimmerman said.

The proposed changes

The proposed overlay would encompass neighborhoods surrounding TCU, including Frisco Heights, University Place, Paschal, Bluebonnet Place, Bluebonnet Hills, Westcliff, Westcliff Village, Colonial Hills, Tanglewood, University West, University Place, Park Hill, Park Hill Place and Berkley Place.

The city will hold several public sessions, including at neighborhood association meetings, to flush out potential problems and hear any suggestions, said Dana Burghdoff, assistant director for the planning and development department.

For example, she said, the city is considering whether to allow neighborhood associations to opt in to the restriction or apply it throughout the district and whether to grandfather properties with more than three bedrooms and a history of leases to more than three unrelated persons.

Burghdoff said she has had some push-back from developers, but several TCU-area developers who have actually built the mini-dorms did not return requests for interviews by the Star-Telegram.

Dak Hatfield, a developer in the near-southside, said he would expect developers in the area to protest the change or request to be grandfathered in.

“They are going to want to make sure their investment is protected,” Hatfield said, though he added he understands why the neighborhoods are pushing for the change.

“You are seeing student housing continuing to creep into a lot of these areas that have been there for a long time and historically have had families live there,” he said.

There have been 111 new single-family construction permits issued in the proposed overlay area since July 2001, according to city data.

Property values in the area are also increasing.

Latta’s home, valued at $397,000 for 2014, according to the Tarrant Appraisal District, has seen a 172 percent increase in land value alone since 2009, going from $66,000 in 2009 to $180,000 in 2014. One of the new homes next door is valued at $457,100, including $180,000 for the lot.

Though none of the developers were contacted, residents in the area say students are paying around $1,000 per bedroom in the houses. The total cost to live on campus is about $5,500 per semester.

Concerns about enforcement

Zimmerman said he is leaning toward supporting the overlay, but said the public input sessions will be vital in learning how to implement the overlay.

With many city ordinances, Zimmerman said, he is concerned about enforcement of the restriction, which would probably be incumbent on neighbors to report if they see violations.

Bethanne Chimbel, a resident of Frisco Heights, said she is also concerned about how the city would enforce the overlay, saying it is already hard for them to enforce the 5-unrelated persons rule.

“I think it has potential, but how are they going to regulate it? Are they going to go door to door and ask for birth certificates?” she asked.

“I think it is an interesting idea, but I also wonder if it is too little too late for a lot of the areas that I have seen.”

Chimbel lives in an area of Frisco Heights that is currently zoned to allow duplexes, but she and several other area residents are pushing to get several city blocks in Park Hill Place and Frisco Heights rezoned to single-family to keep dense developments out.

“We moved in the area knowing we would be surrounded by students, that is not really the issue, but the size and the scope of the density has changed so drastically and so quickly,” she said. “We are kind of on the end that hasn’t changed yet, and we are hoping to maintain that.”

A canary in the mine

Paula Deane Traynham, president of the Frisco Heights Neighborhood Association, wants Frisco Heights to be a canary in the mine for the other neighborhoods surrounding TCU.

Traynham has owned her 1939 cottage-style home for 30 years, but said only 60 homeowners are left in an area that has become a “magnet for development,” she said. The city has issued 66 residential demolition permits in Frisco Heights alone since May 2004.

“The closer that this development comes toward my house and the more my peaceful porch is encroached on, the more I think about it [selling],” Traynham said. “But I love my house, I love this neighborhood. I would love to live the rest of my days here, but at the same time, it is not the neighborhood I moved into and it never will be again.”

To her left, right and across the street, Traynham’s home is now surrounded by duplexes, which are allowed to fit up to five people in each unit, and come with a host of parking woes, noise complaints and plenty of red solo cups found in the streets and yards.

Traynham did say some areas of Frisco Heights needed some tender love and care, with some of the older homes falling into disrepair and neglect. But the recent development the neighborhood got was not what they were expecting.

“Don’t let this happen to your neighborhood. Y’all have these cute, classic little neighborhoods,” Traynham said she tells nearby neighborhood associations. “If you want to preserve them, now is the time to do it. Don’t let it sneak up on you, because that’s what it did to us.”

Brent Spear, president of the Bluebonnet Hills Neighborhood Association, said the warnings from Frisco Heights are something they take seriously, especially as Bluebonnet Hills attracts more and more student renters.

“Collectively, what I would say is most people are concerned about something going up that doesn’t fit the character of the neighborhood, and so I think it is a concern that we have and we have seen what is happened to Frisco Heights,” Spear said.

He said the neighborhood association will consider all the options, including pursuing historic designations if it is what the residents want, to protect Bluebonnett Hills, a 1920s-style neighborhood with little bungalows, open front porches and an old-time feel.

Jerre Tracy, executive director of Historic Fort Worth, said all of the neighborhoods surrounding TCU were included in the 2014 Most Endangered Places list because of the rapid development, and all of them could be eligible for a historic overlay or designation.

Still, Tracy said the occupancy overlay is a “step in the right direction.”

“The neighborhoods are changing overnight, and a lot of people don’t realize there is anything they can do,” Tracy said. “It is going to continue on unless the neighborhoods choose options that restrict the ability for those changes to happen.”

“Stealth” dorms popping up in other cities

Austin made an attempt at stopping what they called “stealth dorms” by limiting the number of unrelated persons who can live in a home from six to four in the central city.

The Austin City Council approved the temporary, two-year ordinance in March because of complaints from residents near the University of Texas, who claimed dorm-style homes brought an influx of students to single-family neighborhoods and irreversibly damaged the integrity of the neighborhoods.

Homes that already house more than four people are grandfathered in under the ordinance, as long as they don’t build large additions or make major renovations.

Research presented to the Austin City Council from Civic Analytics, an Austin-based firm, found about 1,800 properties in Austin house five or more unrelated people out of 331,000 households citywide.

Brian Kelsey, principal at Civic Analytics, however, also expressed concern in the study about how reducing the number of unrelated people living in a home in central Austin would affect affordability.

“Much more needs to be understood about why single-family zoned high-occupancy properties are more likely to be found in lower-income areas with increasing rents to avoid unintended consequences of reducing the limit from six to four unrelated people,” he said.

Arlington, Lubbock and San Marcos only allow two unrelated people to live together; College Station, Dallas, Denton and Waco all allow four unrelated people to live together; Byran allows four except in single-family zoning, which is restricted to two people living together and El Paso allows five.

TCU hopes for 100 percent residency on campus

So, if the student’s can’t move into housing near the campus, where would they go?

TCU’s eventual goal is to have 100 percent of undergraduate students live on campus for all four years, but that goal won’t be reached for several years, according to Lisa Albert, spokeswoman for TCU.

The projection with current building plans is to have 64 percent of the undergraduate students living on campus by 2021. Currently, they have 51 percent of undergraduate students living on campus. Albert did say they “will continue to build residence halls until the demand ceases.”

“It is not uncommon for cities to place overlays on neighborhoods surrounding universities to assist in maintaining the characteristics and living environments of established neighborhoods,” she said in an emailed statement.

“TCU regularly communicates its on-campus residential goals with the City and neighborhood associations located near TCU’s campus to help the community understand the University’s on-campus housing development plans.”

Latta and others in the area are also worried about what will happen if and when TCU meets its goal of 100 percent on-campus occupancy for students. They worry the five-bedroom, dorm-style cottages won’t appeal to family homebuyers, so could be left vacant and deteriorate.

“The city may have allowed this under the five unrelated persons rule, but it absolutely flies in the face of the spirit of the law,” said Latta, as she looked up at the two-story brick house neighboring her single-story home and the three-story apartment complexes looming over her backyard.

The modern houses next door and the apartments easily overlook the privacy fence into Latta’s yard, providing an open view of the home and master bedroom.

“It is just massive. It closes us in,” she said.

Analysts: Austin tech scene is back from recession

Brian Gaar, Austin American-Statesman, Analysts: Austin tech scene is back from recession

May 10, 2014

Back in 2009, in the middle of the nation’s economic downturn, Austin’s tech sector was taking a beating.

Worldwide PC sales were slowing. Companies were tightening their belts. Tech startups were failing. At the end of 2009, the area’s number of jobs in key tech industries had slumped to less than 82,000 — the lowest since the dot-com bust of the early 2000s.

“It was a grim place for tech in the worst of the recession as layoffs were being reported all over the city,” said tech analyst Patrick Moorhead of Moor Insights & Strategy. “It was ugly.”

But five years later, things are looking brighter for Austin’s technology sector.

Despite national fears of another tech bubble, local analysts and economists say they’re optimistic when it comes to the health of Austin’s tech sector.

Austin’s tech sector’s total employment has climbed back up to more than 100,000 jobs — a jump of about 19 percent since the end of the recession in 2009, according to Brian Kelsey, principal of Civic Analytics, an Austin-based economic consulting firm. Austin is on pace this year to exceed its 2001 tech employment, Kelsey said, “which would be a remarkable achievement given the depths of the recession experienced locally after the dot-com bust.”

Local high-tech companies supplied about 9 percent of the area’s jobs in 2012, according to data from Civic Analytics and the Austin Technology Council. If local tech jobs reach 101,000 this year, those numbers would rise to almost 12 percent of the metro area’s roughly 855,000 jobs.

As it bounces back, the area’s tech sector does, however, have a different look as it evolves away from hardware and PC sales. At the same time Dell Inc., long the anchor of the area’s tech scene, is now privately held and in transition. Apple Inc. is boosting its Austin presence with a new operations center. At Flextronics’ Austin site, they are building the first U.S.-made Apple computers in years. Advanced Micro Devices says it is poised to boom.

“The overall strength of Austin’s tech sector,” Kelsey said, “has created a much different experience during this recovery compared to the dot-com bust.”

Time of transition

Perhaps the biggest transition can be found at Dell Inc., which went private about six months ago in a $25 billion buyout headed by company CEO and founder Michael Dell. Since then, the company has downsized through a combination of layoffs and voluntary severances. The company hasn’t said how many employees have exited or been laid off.

That shrinkage comes as Dell Inc. — which made its name selling personal computers — continues to remake itself into a stronger supplier of advanced information technology hardware, software and services for business customers.

Dell Inc. needs to transition into more kinds of “infrastructure hardware” like data centers, which will require more expertise in networking and storage – things that Dell historically hasn’t been involved in as much, said Cody Acree, managing director and senior research analyst for Ascendiant Capital Markets.

Eventually, Dell will “look a bit more Cisco-like or IBM-like, for that matter, where there’s a lot of software and services that go along with the hardware,” he said.

Elsewhere, Advanced Micro Devices, which is struggling to regain lost sales in the lucrative market for server processors, unveiled a chip that’s aimed at reviving sales of chips that run servers, the powerful computers that store and dish out data for websites and corporations.

Lisa Su, a senior vice president at AMD, gave the first demonstration of the Seattle chip, which uses ARM Holdings technology, at a presentation in San Francisco last week.

AMD, the only other maker of processors using Intel’s x86 standard, is switching some of its designs to ARM, betting that the technology that dominates in phones and tablets will find a role in servers. The Sunnyvale, Calif.-based chipmaker is targeting machines used by companies such as Facebook Inc. and Google Inc. to perform simple functions, such as logging users into their accounts.

“For our customers, we’re trying to be here creating something you can’t get anywhere else,” Su said. “We are setting ourselves up for the future. It’ll take time.”

AMD, which has a significant presence in Austin, also said this month that it has obtained an ARM architecture license. That license will allow AMD to design its own ARM-based chips as opposed to just using the available ARM cores. The new chip could be huge for AMD, Moorhead said, because it could get AMD’s products into the tablet market, as well as Google-made laptops.

“This could be a game-changer,” Moorhead said.

Moorhead said Austin is tops in the country for chip design, with huge presences from such companies as AMD, as well as Intel, Apple, Samsung, ARM, Freescale and Qualcomm, all of which have design operations here.

The city is also strong in mobile technology, but not as much in devices, given lackluster offerings from companies like Dell, he said.

Moorhead pointed to venture capital as a soft spot locally, saying the level of investment has fallen off precipitously since the dot-com era of the late 1990s.

“Overall, the Austin tech scene is very healthy as there is a good deal (of) investments in mobile and the cloud,” he said. “We are a bit hardware heavy, and I’d like to see more world-class software and services activity, but we need more VC investment to make that happen.”

Austin is continuing to see an evolution from manufacturing to services, but job growth is evident in both lately, Kelsey said. Mobile is driving a lot of the growth in Austin — such industries as custom programming and systems design have grown by nearly 7,000 jobs since 2009. On the manufacturing side, Austin is back above 2009 employment levels in many industries, he said.

“In fact, comparing employment today to where we were coming out of the recession in 2009, a slight majority of tech manufacturing industries in Austin have added jobs,” he said.

According to data compiled by Economic Modeling Specialists International, there were more than 97,000 jobs in key tech industries in the Austin area last year – ranging from semiconductor manufacturing to software programmers.

That’s up from 2009, when there were less than 82,000 tech jobs. It’s also higher than 2007, when there were more than 91,000 such jobs.

The Dell factor

Of course, Austin’s tech sector health is always partially tied to Dell Inc.’s health, given that the company is the largest private employer in the area, with about 14,000 employees.

In a note to company employees this month commemorating the company’s 30th anniversary, Michael Dell said the company is building momentum.

“We’re leading the industry in enterprise flash deployments, and leading with our security and cloud integration solutions,” he wrote. “Our services business is rapidly acquiring new customers and huge deals in key verticals like healthcare and finance.”

If Dell Inc. is headed in the right way, that’s good news for the Austin area, Acree said.

“I think it’s continuing to grow and be very strong, but of course Dell’s position in the PC space drives a lot of that,” he said. “And with the PC market in decline – and that’s not likely to change – Dell has got to figure out … if it can be equally important to other sectors of tech.”

Other companies’ impact

Austin’s other major tech players are making important moves as well — among them tech giant Apple Inc.

The California-based computer maker is building on a 39-acre site adjacent to its present Austin operations, which employ more than 3,000 people in its Americas Operations Center. While the company didn’t respond to requests for comment from the American-Statesman, it has provided some details about its Austin project in return for the estimated $35 million in state and local tax incentives it will receive for the Austin expansion.

The company has said it plans to spend $282 million on new buildings and equipment in Austin over the next decade. That is expected to include seven new office buildings with a combined 1 million square feet or more of space. Those buildings will house an estimated 3,600 new workers needed to support Apple’s continued growth.

The jobs will run the gamut of skills required to run Apple’s business operations for the entire Western Hemisphere.

But Apple has also hired employees in chip design and development locally. Those jobs presumably are supporting the Intrinsity Inc. design team that Apple acquired in 2010. That design team, analysts say, has been heavily involved in developing the new systems chips that run Apple’s mobile products — both iPhones and iPads.

And late last year, Apple confirmed that its new Mac Pro computers would be built at the Flextronics Americas factory in Northwest Austin.

That further solidified Central Texas’ status as one of Apple’s primary hubs outside Silicon Valley. By locating Mac Pro production in Austin, Apple has established a direct or near-direct role in almost 5,000 current Central Texas jobs — and could expand that to as many as 8,700 over the next decade.

A Flextronics spokeswoman declined to discuss the company’s relationship with Apple.

Elsewhere in the Austin tech scene, IBM has shifted from a former manufacturing outpost to an engineering and technology development hub.

Last month, IBM introduced a new Power Systems server that was developed in Austin, with an open platform that gives programmers more flexibility to develop uses for the device.

Power8 is the name IBM has given to the new hardware, which includes a new microprocessor and a lineup of servers. The servers and processors were developed in Austin, which is a leading research and development site for IBM with an estimated 6,000 employees here.

Semiconductors are also one of Austin’s longtime areas of tech expertise. And perhaps no company has invested more heavily in Austin than South Korea-based Samsung Electronics Co.

Samsung has made a historically big manufacturing investment in Central Texas and created one of the biggest chip manufacturing complexes in North America, with at least $15 billion in new investment. The company employs about 2,600 people locally and produces, among other things, advanced low-power processors that are used in mobile devices such as phones and tablets.

“We make up a huge portion of Samsung’s overall capacity in that market,” Samsung spokeswoman Catherine Morse said. “And so what we do here is crucial.”

In another promising sign for local tech employers, Emerson Process Management earlier this year unveiled a $70 million facility in Round Rock designed to help its customers operate large-scale automation projects. And even smaller players like Active Power, which makes backup power systems, tout such big-name clients as Oracle, Yahoo and Hewlett-Packard.

Overall, analysts say, the future for Austin’s tech scene looks good, as Dell Inc., AMD and others move to diversify their businesses and become less reliant on PC sales.

“If companies can adjust to the new normal, which is really what has happened in the last two years,” Acree said, “then an economy like Austin’s reaches a degree of stability, where that diversity is offsetting the declines in the PC market.”

Additional information from Bloomberg News.

Austin jobs in key tech industries

2014: 101,000*

2013: 97,135

2012: 94,278

2011: 88,643

2010: 83,154

2009: 81,792

2008: 90,280

2007: 91,248

2006: 86,549

2005: 84,265

2004: 81,593

2003: 80,616

2002: 84,016

2001: 95,630


Source: Economic Modeling Specialists International

Major Austin tech employers

Dell Inc. (14,000 jobs) – PC maker and supplier of advanced IT hardware, software and services

IBM (6,000) – engineering and technology development

Freescale Semiconductor (5,000) — produces and designs embedded hardware

Apple Inc. (more than 3,000) – business operations, chip design

Samsung Electronics Co. (2,600) – chip manufacturing

Advanced Micro Devices (2,000) — develops computer processors and related technologies

Intel Corp. (more than 1,000) – chipmaker

Expert reporting

This story is part of the American-Statesman’s ongoing coverage of the Austin technology sector. Tech reporter Brian Gaar has tracked the area’s top technology-related stories, including Dell Inc.’s transition to a privately held company, Apple Inc.’s expansion in Central Texas and the growth of the area’s mobile technology sector.

Texas Economy: Miracle or Myth (Revisited)

Governor Perry’s signature economic development programs are under the microscope again this week. Perry, meanwhile, was in New York, talking up the “Texas Miracle” and challenging Governor Cuomo to a debate, who has also been very active in economic development the last few years, to the tune of $1.5 billion.

Given the flurry of activity, I thought it would be a good time to update my Texas: Miracle or Myth presentation from the TEDC conference last October. Here are the claims for your consideration:

1. Texas is leading the U.S. in job creation.

2. Texas has the fastest growing economy in the U.S.

3. People are fleeing California for Texas in droves.

4. Most new jobs in Texas are low-wage.

5. Economic growth in Texas is due entirely to oil and gas extraction.

Is each statement mostly miracle or mostly myth? Click on the image below to jump to the slides for my take.

Political theater is an easy target, but behind this “debate” is a serious challenge for local economic development efforts in Texas. The standard narrative of the Texas Miracle–low taxes (including no income tax), lax regulation, and business-friendly legal environment–serves as a distraction from recognizing the contributions of the nearly 700 combined Type A and Type B economic development corporations in the state. If economic prosperity can be guaranteed with sufficient commitment to the Miracle formula, then why should communities continue to support the investment of sales tax revenue into community and economic development projects? Why not eliminate the EDCs, lower the sales tax rate, and watch the private investment and jobs come rolling in?

That would be a mistake. While we need more EDCs to take a leadership role in championing things like career and technical education and workforce development, the program as a whole is one of the best vehicles you will find in the country for making community-driven economic development possible. EDC expenditures represent a small fraction of total state tax collections and provide important resources for communities in an environment of declining support from federal and state agencies.

A real miracle defies explanation. Local economic developers in Texas, along with their business, community, and education and workforce development partners, deserve better than that.

One-person firms on rise in Austin

Dan Zehr, Austin American-StatesmanOne-person firms on rise in Austin

April 24, 2014

The idea of leaving an established employer to launch a company often seems fraught with risk. James Higginbotham took that leap because it offered more security.

Higginbotham realized that his company’s rapid development of new technologies meant its need for his product-management work would dissipate with each new launch. By leaving one employer and taking on a variety of clients — each with varying launch cycles — he could actually create a more secure stream of work.

“Those kinds of skill sets tend to lend themselves to specific seasons in a company’s life cycle, so it made sense to be independent and to help several companies in that capacity,” he said.

Blue Jazz Consulting was born in 2006. By 2012, Higginbotham’s firm was one of almost 153,000 non-employer companies in the Austin metro area, making it part of one of the largest and fastest-growing communities of one-person businesses in the country, according to data released Thursday by the U.S. Census Bureau.

Roughly 3,700 new non-employer firms went into business in Travis County alone during 2012, and their receipts jumped 9.1 percent from the prior year — the largest increase of any county in the nation, the Census Bureau said.

Across the entire metro area, almost 6,500 new one-person firms came online during the year, and their receipts grew at an even faster rate, rising 9.6 percent to almost $7.8 billion, according to Census data.

That was enough to rank Austin 21st among all the metro areas in the country. But on a per-capita basis, Central Texas ranked fifth, with its non-employer firms pulling in $4.25 for every resident in the metro area. It trailed only Miami, San Francisco, Los Angeles and New York on that score.

“I’ve seen a trend with businesses being more open to reaching out to someone like myself to get the expert insight they need while they’re growing their teams,” Higginbotham said.

In fact, the high-tech and other white-collar industries in the professional, scientific and technical services sector produced more than 1,000 new single-person businesses in 2012, more than any other major economic sector. Combined with the real estate and construction sectors, the trio dominated the ranks of non-employer companies in Central Texas.

According to Census data for 2012, the one-person shops in those three sectors accounted for 42 percent of all the non-employer businesses in the metro area and generated 56 percent of the total receipts, almost $4.4 billion.

“Self-employment usually tracks broader industry trends in a regional economy,” said Brian Kelsey, principal of Civic Analytics, an Austin-based economic consulting firm. “The home building and real estate markets in Austin right now are firing on all cylinders, and a significant portion of self-employed firms are in those industries”

The entrepreneurial spirit that pervades Austin’s high-tech scene lends itself to startups and single-person shops. Programmers and developers can work from afar, and startups that are cost sensitive often prefer the idea of contracting out tasks rather than taking on the expense of a full-time employee.

“Austin’s tech sector is creating plenty of opportunities for independent contractors, developers, etc., to launch and grow new businesses, which often start out as self-employment,” Kelsey said.

A wide range of economic, local and personal factors can influence the creation of non-employer firms. Their ranks often swell during times of tepid economic growth, when companies looking to control costs cut full-time positions and rely more heavily on temporary and contract workers.

Laid-off or underemployed workers might use the opportunity to start their own companies, or do so as a necessity in a difficult labor market.

The decision to jump into self-employment could become even more palatable with the passage of the Affordable Care Act, said Jon Roberts, principal of TIP Strategies, an Austin economic development firm.

By lessening a worker’s dependence on an employer for health insurance, Roberts said, the program could give people greater flexibility to start their own business without the risk of prohibitively costly medical expenses hanging over them.

“A lot of external factors will continue to influence the logic someone brings to decisions of self-employment,” Robert said. “But it will be easier to be self-employed, and more desirable for corporations to adopt that model as well.”