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Two UT projects hint at a future for Austin’s development

This story was written by Dan Zehr and appeared in the Austin American-Statesman on 04/04/15.

Two UT projects hint at a future for Austin’s development

The University of Texas School of Architecture celebrates many of its faculty-student projects with posters along the fourth-floor hallway of the West Campus Building.

The posters for the Solar Decathlon 2015 and the Sustainable Places Project hang side-by-side, just across from Allan Shearer’s office.

Their placement is almost certainly random; the two projects don’t have much to do with each other. Yet these two initiatives could help reshape the way Austin contemplates development in the years to come.

At face value, both seek practical solutions to some of the region’s most intractable development issues – environment, density, transportation, affordability.

On a more fundamental level, though, the projects address those challenges in ways that align individual and neighborhood-centric interests with broader city-wide and regional development goals.

“You can’t scare people into action,” said Shearer, co-director of the school’s Center for Sustainable Development. “You can scare them, but you have to also show them something better.”

Last month, Shearer helped lead a South by Southwest Interactive panel that featured UT projects designed to help Austin-area residents visualize better solutions to the area’s development problems. That included Digital Austin, an effort to create a 3D map of the city that details everything from natural topography, to infrastructure, to neighborhood air pollution.

The effort stems in part from work led by Bob Paterson, a UT professor who focuses on land use and planning issues. As part of the Sustainable Places Project, Paterson and his team employed a new 3D mapping program called City Engine to model and simulate the development that would arise along a proposed rail corridor in Austin.

While Austin voters rejected the rail proposal last year, the work done by Paterson and his colleagues hints at how City Engine could allow residents and officials to visualize new developments and how they might affect anything from traffic congestion, to utility usage, to local noise levels.

“It shows not just what is made,” he said, “but how it works.”

Paterson would like to see the program become more seamless with 2D maps and data feeds. And like any software rendering 3D graphics, more detail and data requires more computing power. But talk to him and Nathan Brigmon, who worked together on the Project Connect urban rail modeling, and some interesting possibilities emerge.

Imagine, for example, a City Hall debate about the impact of a new high-rise. A 3D simulation of the development is up on the screen, and as council members or the public ask “What if?” questions, the staff could plug the factors into the program and show the most likely results in real time. Add virtual reality with an Oculus Rift headset, and you could take people into the simulation itself.

“People are afraid of the unknown,” said Brigmon, now an analyst at Civic Analytics, a local economic development firm. “This is making it known.”

Of Austin, for Austin

A few floors up from poster-lined hallway in the West Campus building, a group of professors and students discuss canopy materials and pore over structural elements for a radical new home design. A building away, some of their teammates dig into construction, landscaping and logistical details.

This is the latest generation of the NexusHaus team, a multiyear initiative that has involved more than 120 students and professors from UT and Technische Universität Münchenwork in Germany.

Over the past few years, the team has designed and, as of last week, started to construct a small, modular, solar-powered home that will serve as a prototype house for the Alley Flat Initiative in Austin. The design could eventually morph into easily producible, secondary housing units for properties in and around Austin’s urban core.

If all goes to plan, the homes would consume zero-net energy, capture and recycle water supplies, promote sustainable food production and help accommodate Austin’s rapid population growth.

In essence, the NexusHaus team is trying to design density in a way that doesn’t tax existing infrastructure or alter neighborhood character.

“The competition has evolved from being who can make a solar-powered house to who can produce the most holistic, sustainable, net-zero energy house that’s also affordable and environmentally friendly,” said Charlie Upshaw, a team captain and doctoral candidate at UT’s Cockrell School of Engineering.

The finished prototype will compete this October in the U.S. Department of Energy’s Solar Decathlon contest, where judges will award points based on energy production and efficiency, but also on affordability, design and consumer appeal.

NexusHaus set out to bring all of that together in a way that fits onto Austin’s own flavor of development debates.

“In Austin, they say we’re against two things – one of them is density, the other is sprawl,” said Michael Garrison, an architecture professor at UT.

The NexusHaus designs give the house a zero net-energy profile, and an elaborate water capture and processing system would require very little water and wastewater capacity. As such, Garrison said, it can be dropped in inner-city neighborhoods “without having to go back and completely redo the infrastructure.”

In its current design, two small modular housing units are tied together with a patio, an aquaculture garden to process water and produce food, and a greenhouse section that can double as a movie theater.

As is, the 850-square-foot prototype home would run somewhere around $300,000, Garrison said, but that could drop by as much as $50,000 with volume production and by removing some of the amenities.

Previous Alley Flat studies have identified 7,000 potential lots in East Austin, and 42,000 approved lots around the city.

“I think we can all agree Austin sort of wants to preserve its identity, to preserve the character of the neighborhoods,” said Ryan McKeeman, a NexusHaus project manager in the graduate architecture program.

The Alley Flat zoning ordinance would open space for NexusHaus and similar designs, McKeeman said, and do so without radically altering the infrastructure or neighborhood feel.

“We saw that as a really nice opportunity for this to be ‘of Austin,’” he said. “We’re here to make it a little more dense, but without you feeling it too much.”

Dallas Fed lowers Texas job growth forecast

This article was written by Dan Zehr and appeared in the Austin American-Statesman on 03/19/15.

Dallas Fed lowers Texas job growth forecast

The Federal Reserve Bank of Dallas scaled back its forecast for Texas job growth this year, saying that continued weakness in the energy sector, a tighter labor market and slowing exports would result in fewer new jobs than initially expected.

The Dallas Fed said it now expects Texas employers to expand payrolls by 1 percent to 2 percent in 2015, according to a report in its latest edition of “Southwest Economy.” That would result in about 117,000 to 235,000 new jobs statewide.

In January, the bank’s economists had projected state job growth of 2 percent to 2.5 percent.

“Last year, job growth nationally was 2.3 percent,” the report said. “If the national figure remains constant or picks up slightly in 2015, there is a good chance that Texas will trail the nation in job growth for the first time in 12 years.”

In January, Dallas Fed senior economist Keith Phillips said sharply lower oil and gas prices would slow job growth in the state, but not send Texas into contraction. At that point, he said, the state could add as many as 295,000 jobs in 2015.

Phillips had based his projection on oil prices of about $50 a barrel. On Wednesday, West Texas Intermediate Crude was trading just below $45 a barrel.

The low price alone didn’t prompt the revision. Rather, the report noted, the energy sector’s ripple effects on the Texas economy has been exacerbated by a tighter labor market and weakening exports.

To a point, lower energy prices deliver a boost to the national economy. But the current depth of prices and the state’s widespread exposure to the industry offsets the benefit Texas consumers get at the gas pump and Texas industry gets from lower energy costs.

“Even a 5 percent loss in oil and gas extraction jobs moves us down into the 2 percent employment growth range overall for 2015, and I think most analysts would say 5 percent is probably conservative,” said Austin economist Brian Kelsey, principal of Civic Analytics. “Growth in other sectors, especially the anticipated 6 percent growth in health care employment, will soften the blow, but a lot hinges on how lower earnings in the energy sector will translate to layoffs.”

For many manufacturers, the stronger U.S. dollar has had a bigger impact, slowing their exports as products become more expensive abroad.

The break-even point for most oil drilling in Texas is below $80 a barrel, the bank’s report said, so last year’s initial price declines helped spark an increase in consumer spending.

“The further decline to between $45 and $50 (a barrel) is likely to more greatly affect the oil and gas sector,” Phillips and Dallas Fed economic analyst Christopher Slijk said in their report. “The rig count is off 41 percent, from a high of 906 in late November to 538 at the beginning of March. Further reductions are expected.”

In January, Phillips said the chilling effect from lower oil prices would show up in the oil fields and in Houston during the first quarter of this year, with the effects rippling throughout the state later in the year.

The Dallas Fed’s Beige Book report released earlier this month provided evidence of that. Some staffing firms said they had seen demand shift away from Houston, the report said, while some energy companies there said they were scaling back and looking to sublet office space.

As for the potential impact on Austin, Kelsey said that while job growth in Austin would likely slow a bit, “I’d be surprised if we didn’t outpace Texas as a whole.”

“As of now, we’re still on track to reach 1 million jobs in the Austin region by the end of 2015, including self-employment. But we will still feel the downturn in the energy industry in Austin, even though we don’t rely on it much for jobs,” Kelsey said. “Lower earnings for Austin residents with oil and gas holdings means lower discretionary spending, and that could drag down Austin’s growth rate.”

Comprehensive focus is needed for an economically inclusive Austin

This article was written by the Austin American-Statesman Editorial Board and appeared on 03/10/15.

Comprehensive focus is needed for an economically inclusive Austin

A study released last month reported what many in the city have claimed for years: Economic segregation in Austin runs deep. The report, in fact, names Austin as the most economically segregated city in the country. The divide, as many Austinites have theorized, is due in part to the area’s ever-growing creative class, which includes the tech industry.

The tech industry, however, is not the only culprit. Educational disparities, stagnant wages and a lack of affordable housing also contribute to the existing economic gap and its consequences.

While the report by the Martin Prosperity Institute, an economic think tank based at the University of Toronto, is the latest study to show that Austin’s battles with economic and racial segregation remain ongoing, local leaders should read it as an opportunity to help shift Austin’s path in a more inclusive direction.

The issue of inequality affects us all, regardless of which side of the economic divide we sit. Austin stands to lose much if the issues remain unaddressed in a comprehensive manner. What’s at stake? The city’s economic security, increased traffic congestion, diminished public schools and continued suburban sprawl. Cities need a spectrum of income to survive, and right now, access to employment, good health and educational opportunities are all disproportionately determined by socio-economic status.

Austin’s economic segregation didn’t start with the recent arrival of the creative class. Its roots stretch back to the notorious city “Master Plan” of 1928 that divided the city into its present day geography. The plan created the “negro district” for the city’s black schools, black parks and other facilities just east of today’s central downtown business district. Over time, black communities to the west vanished as families moved to be near needed services. Years later, a booming Latino population would similarly occupy “designated” areas in East Austin. The area is now home to some of the last large pockets of affordable housing in the city, and even that is disappearing now that proximity to downtown continues to be increasingly desirable.

The Martin Prosperity Institute’s study suggests that a large creative class also tends to exacerbate these divides in all economically segregated cities. It most certainly has been the case in Austin.

The jobs in the tech industry require high levels of education and don’t have the same quantity of mid-tier jobs that other industries provide. Higher wealth gives families the ability to opt out of public schools, leaving neighborhoods with higher proportions of economically challenged students.

Poor public school performance in low-income neighborhoods, limited employment prospects and high cost of living are the prominent reasons why more and more working class families, especially African-Americans, are choosing to leave Austin.

This trend, which has played out all across the country, is one reason why there is currently an intense focus on economic segregation research. Studies like these show that where a person lives or grows up can have significant influence on their life prospects. An impoverished neighborhood “almost reproduces disadvantage,” said Richard Florida, author of the report, while the benefits of an affluent neighborhood tend to compound the advantages of those born there.

If past research is an accurate indicator, Austin’s working class will all but disappear if our local leaders don’t act soon.

In an email conversation, Brian Kelsey, founder of the research firm Civic Analytics and who teaches sustainable urban economic development at the University of Texas, said the city must own up to its share of the problem.

“The primary drivers of economic segregation in Austin are: (1) our collective unwillingness to invest in human capital development sufficiently,” Kelsey says. Second is “our failure to address rapidly increasing housing costs and inadequate transit that are fueling concentrated poverty and unsustainable land use patterns.”

It’s not impossible to change directions. Solutions do exist.

Experts agree, in order to move toward being more inclusive, all members of the sharing economy — entrepreneurs, policymakers and community leaders — have an essential role to play in making it happen. If our newly elected council is serious about making policy changes that benefit all Austinites, this is the time to do it.

For example, creating ample affordable housing across the city should be a priority, not just protecting what remains. As should be the adequate funding of education and workforce training programs that help lead people to living-wage jobs. And any conversation about incentives should include provisions regarding wages and types of industries to address job gaps, not simply numerical job increases.

Programs like Capital IDEA that help working low-income adults transition into living-wage careers, as well as the city’s investment in early education programs, are steps in the right direction. Still, more is needed.

These are issues and ideas this board has repeatedly called on local leaders to grow and improve, but a sustained and focused plan and investment have not followed. Yes, these solutions will not come cheaply, but they’re worth the investment and are desperately needed in order to make Austin an economically inclusive city.

Austin joblessness up in January; ′14 job growth stronger than thought

This article was written by Dan Zehr and appeared in the Austin American-Statesman on 03/07/15.

Austin joblessness up in January; ′14 job growth stronger than thought

January brought its usual chill to the Austin-area labor market, but the annual revisions made to past workforce data delivered yet another measure of the Central Texas economy’s growth.

As typical for the start of a new year, a broad range of Central Texas employers scaled back their payrolls in January, according to preliminary data released Friday by the Texas Workforce Commission.

As companies scaled back after the holiday rush and reset their staff for 2015, local payrolls fell by 11,900 jobs during the month, a drop of 1.3 percent, the commission said.

Those declines helped contribute to a higher unemployment rate in January, up to 3.7 percent from 3.4 percent the prior month, the commission said.

The commission doesn’t immediately adjust its data for seasonal workforce trends. Seasonal adjustments calculated by the Federal Reserve Bank of Dallas and typically published on the same day as the commission’s report weren’t available Friday.

Statewide, the seasonally adjusted unemployment rate dropped to 4.4 percent from 4.6 percent in December, the commission reported. The national rate edged up to 5.7 percent in January from 5.6 percent in December, according to a previous release by the Bureau of Labor Statistics. On Friday, the bureau said the U.S. jobless rate for February fell to 5.5 percent.

In Austin, the cooling January labor market fell generally in line with historical overages for the month, according to commission data.

However, the annual adjustments made to refine last year’s workforce data suggested a stronger 2014 than initially reported. At the turn of each year, the commission recalibrates the benchmarks it uses to calculate workforce tallies, adjusting the formulas to better account for emerging labor trends and data anomalies.

Locally, some of the biggest upward revisions came in goods-producing industries, which traditionally provide needed middle-wage jobs. The commission’s benchmark adjustments added more jobs in both the manufacturing and the mining, logging and construction sectors.

All told, local employers added about 27,700 jobs last year, according to the revised data, a gain of 3.1 percent. The commission’s preliminary data had suggested a 2.9 percent increase.

The 3 percent threshold “is the magic ‘healthy economy’ number,” said Brian Kelsey, principal of Civic Analytics, an Austin development-consulting firm.

In his forecast for 2015, Kelsey said the Austin-area economy would moderate after two years of rapid job growth. But, he noted, moderation in Central Texas might look like excess to many areas of the country.

While last year’s overall job growth fell far short of the gains Central Texas posted in 2013 — when employers added almost 38,000 new jobs, a 4.5 percent growth rate — it still suggested a strong economy that was adding enough jobs to keep pace with the area’s rapid population gains.

January’s data won’t dispel notions of a strong regional economy. While employers cut payrolls and the unemployment rate increased, both changes fell in line or were slightly better than usual seasonal performances.

Public sector payrolls were essentially flat, but almost all of Austin’s private-sector industries pared jobs. Even professional, scientific and technical services firms — which include many of the area’s high-tech jobs — made a few small trims during the month. No other industry set expanded payrolls faster over the past year, with 9.1 percent growth, according to commission data.

Perhaps more notable in a month of seasonal declines was one of the few industry sets to add jobs in Austin: the mining, logging and construction firms. They added 300 jobs, a 0.6 percent gain, in January and have now added 3,800 jobs in the past 12 months, a jump of 8.1 percent, the commission said.

In the Austin region, the vast majority of those jobs are in construction. Yet, to the extent that category includes energy production jobs in the area, it appeared that the oil and gas layoffs around the state had little direct effect on Austin.

They likely won’t in the future, either, Kelsey said.

“Most of the hit is going to come in lost earnings derived from oil and gas holdings, not job losses,” he said.

The sharp drop in oil prices sparked a rise in layoff announcements in recent months, as producers cut back on drilling activity and oilfield services providers saw less demand for their support. In a report earlier this week, the Federal Reserve Bank of Dallas said layoffs in the energy sector had hit the Permian Basin and the Eagle Ford Shale regions especially hard.

Yet the same Fed Beige Book report also noted that some of the indirect fallout of depressed commodity prices was rippling through Houston, the state’s and the country’s primary hub for the energy industry. Some firms were looking to sublet office space, the report said, while several companies said they or their clients were postponing new construction and development projects.

Given its place in Texas, Austin will feel some of the chill from the energy sector. But with less direct exposure to the oil industry, it likely won’t have too dramatic an effect on the local economy.

“That reduction in earnings will impact consumer spending, real estate and other types of discretionary spending industries,” Kelsey said. “But at 3 percent growth, Austin businesses likely won’t feel it that much, if it materializes at all.”

Austin tech scene braces for impact of Freescale’s sale

This article was written by Brian Gaar and appeared in the Austin American-Statesman on 03/03/15.

Austin tech scene braces for impact of Freescale’s sale

As the dust starts to settle from the announcement that Austin’s Freescale Semiconductor will be sold to a Dutch chipmaker, analysts say the city’s tech scene should be able to absorb any layoffs that might come with the loss of a corporate headquarters.

The news broke Sunday evening that Freescale is being acquired by NXP Semiconductors NV in a cash and stock merger worth more than $11 billion.

That could be a potentially big hit to Austin, as Freescale is one of the city’s biggest and most important technology companies. It employs about 5,000 in Central Texas and is a leading supplier of chips for the automotive and digital network industries. The company employs about 18,000 worldwide, with operations in more than 20 countries. Freescale’s stock surged on Monday following news of the planned deal, ending the day up 11.8 percent, or $4.25, to close at $40.36.

Freescale officials seemed to acknowledge that some layoffs could be forthcoming in a document filed with the U.S. Securities and Exchange Commission.

In a document titled “Freescale Employee Q&A,” the company wrote: “In any strategic combination, there will be synergies that result in some reductions. That will be the case here. While we are very early in the process, we expect the vast majority of Freescale’s team will have the opportunity to be integrated into the new company and have new opportunities for advancement and growth.”

However, economists and analysts interviewed by the American-Statesman agreed that, should layoffs happen, Austin’s tech scene is robust enough to absorb the hit.

“Losing the headquarters of a major technology company is unfortunate, but I don’t think it (will) negatively impact the Austin tech scene,” said analyst Patrick Moorhead of Moor Insights & Strategy.

Moorhead said he expects layoffs “based on the makeup of the acquisition,” but said the local job market will absorb them.

There are “always risks in losing a corporate headquarters,” said economist Brian Kelsey, principal of Austin-based Civic Analytics. “For example, most companies keep research and development activities close to home.

“Such investments in innovation can have important spillover effects for local economies,” he said. “So, if less R&D happens in Austin as a result of Freescale’s sale, then that is a potential downside.”

Estimates show that a net loss of one job in the semiconductor manufacturing industry in Austin takes another two jobs with it, Kelsey said, citing data from researcher EMSI.

“So, if there are significant layoffs at Freescale, and those workers can’t fill job openings in the industry elsewhere, then the local economy would feel it,” Kelsey said.

Austin’s semiconductor industry has shrunk in recent decades. It currently accounts for 10,000 to 15,000 jobs in Central Texas, down from about 30,000 two decades ago, according to Austin economist Angelos Angelou.

There’s also the question of Austin’s larger reputation as a tech hub. Freescale’s sale raises the question: Is losing the headquarters of a smaller semiconductor company offset by having a piece of a larger one? The new company will be the fourth-largest semiconductor company in the world, according to Freescale officials.

The presence of NXP in Austin could signal new opportunity, said Jon Roberts, principal of Austin economic development firm TIP Strategies.

“I tend towards an optimistic view,” Roberts said. “Whatever we lose in the short term is a function of necessary re-orientation in the industry. With the right positioning, NXP can be a real boon to Austin.”

Kelsey argued that Austin’s reputation as a tech sector— Dell Inc. notwithstanding — has never been based on the number of corporate headquarters located here.

The presence of corporate headquarters helps stimulate activity in the tech sector overall, he said, as many of Austin’s smaller firms were started by people who perhaps moved to Austin for jobs at larger companies like Dell or Freescale and then eventually decided to become entrepreneurs.

But ultimately, “Austin’s reputation is built more on our entrepreneurial economy, not large Fortune 500 companies,” Kelsey said.

GeoDesign: The Next Step in Data-Driven Decision-Making for Community Planning

This post was written by Nathan Brigmon, GIS Analyst at Civic Analytics.

In January, I attended the 2015 GeoDesign Summit in sunny Redlands, CA to give a “lightning talk” on the application of GeoDesign in urban planning. My topic was using interactive 3D models and scenario planning to measure the impact of urban rail in Austin, TX. I received a lot of great feedback, met really smart people, and learned a lot about GeoDesign and why we’ll be seeing more of it in the future. This post introduces GeoDesign, provides examples of how GeoDesign is being applied in planning, and offers a few lessons I learned from using GeoDesign in the planning process for urban rail in Austin.

GeoDesign is the intersection of people, geographic science, design, and information technologies. It represents a new way of thinking about how we should respond to today’s planning and design challenges. But like most bold, new ideas, GeoDesign is going through a bit of an existential crisis in terms of how we define the practice. Here is a commonly used framework, shown at the Summit, to help visualize where exactly GeoDesign can be found:

geodesign_1

Here are a few of my key takeaways from the GeoDesign Summit:

1. Statistics are critical. Noel Cressie, a rocket scientist from the University of Wollongong, Australia, stressed the need for GeoDesign practitioners to make more room for statistics, the science of uncertainty. Working with clients, our goal at Civic Analytics is to help people get from (a) uncertainty to (b) data to (c) information to (d) decision-making. In a world of uncertainty, we need statistics. Cressie was spot on.

2. Data collection can be fun. Ulf Mansson, a sustainable engineering and design specialist, showed us how GIS data is being used in Minecraft to explore how we think about our world. His team created a virtual Stockholm called “Blockholm” with real GIS data, which allowed kids and adults to plan, build, and change the infrastructure. This led to interesting conflicts and forced discussions about tradeoffs among the participants, illustrating how the gaming industry has great potential for exchanging ideas involving the real world.

3. Confront people with data. Joe Minicozzi, an architect with a mind for taxation economics, showed us incredible data on how Walmart stores usually return less value per acre than downtown structures, despite having 20 times more acreage. He pointed out how some U.S. cities are actually “going broke by design.” The key to fully understanding these issues and reaching consensus with stakeholders about how and why communities want to grow is to be able to visualize these facts, making it easier for most participants in a planning process to interpret data and reach their own conclusions. GeoDesign solves this problem.

4. Crowd source whenever possible. The finale of the Summit was a roundtable discussion with ESRI CEO Jack Dangermond on the purpose, reach, and ambitions of GeoDesign. Using web-based GIS, he wants to recruit users (in an openstreetmaps.org type effort) to map biometric imagery across the country and eventually the world, which in turn would be used to inform and strengthen National Park policy. The resulting dataset would then be available for any country interested in environmental policy.

The GeoDesign Summit revealed great promise for those hoping to inform decision-makers with good data, however, it was clear the field still has growing pains to get through. Which brings me back to Austin and urban rail.

geodesign_2

Working as a member of a University of Texas at Austin research team, I helped create an interactive 3D model of the proposed urban rail line, allowing anyone to view, comment, and explore the impacts of build and no-build scenarios.

GeoDesign allowed us to validate data in a third dimension–it gave us the ability to examine height, density, and form impacts resulting from land use decisions–which was a significant improvement over 2D maps.

geodesign_3

Because GeoDesign technology was not very well known at the time, we did not use or discuss it as much as we could have with internal and external stakeholders until the end of the project. One of GeoDesign’s most powerful features is helping people consume or interpret data in a way that appeals to planners and non-planners alike–it facilitates decision-making during a planning process, allowing for more informed and, hopefully, participatory debate about planning alternatives.

If I could do this process over again, I would encourage our planning team to better integrate 3D modeling earlier in the process. 3D models are more intuitive to non-planners and therefore promote transparency in a public decision-making process. That is why GeoDesign is so promising. The combination of modeling capability, interactivity, and feedback provides a platform for more collaborative, transparent, and data-driven decision-making. It’s a common language for designers, planners, programmers, city officials, and citizens.

As planners, we are challenged to make sense of ever larger and more unwieldy data sets–and derive meaning from them for technical and non-technical audiences. GeoDesign is an exciting advancement that holds a lot of potential for transforming how we design and conduct planning processes.

For more on how we’re using GeoDesign at Civic Analytics, please watch this short video.

Austin most economically segregated major metro area in U.S.

This article was written by Dan Zehr and appeared in the Austin American-Statesman on 02/24/15.

Report: Austin most economically segregated major metro area in U.S.

No large metro area in the country is more economically segregated than Austin, according to a new report that underscores growing concerns about the divides in Central Texas and the impact they could have on the region’s economic prosperity.

Previous research found high levels of income and education segregation in the Austin area, but a new study released Monday by the Martin Prosperity Institute found that the region also suffers from a distinct separation between workers in knowledge, service and working-class occupations.

The metro area’s elevated levels of income, education and occupational segregation combined make Austin the most economically segregated large metro and the third-most segregated among metros of all sizes, the study said.

“It is not just that the economic divide in America has grown wider,” the report said. “It’s that the rich and poor effectively occupy different worlds, even when they live in the same cities and metros.”

Denser and more populous metro areas tended to post higher rates of economic segregation, the authors said. Yet a series of studies by the Martin Prosperity Institute, an economic think tank based at the University of Toronto, suggest that a large creative class also tends to exacerbate those divides.

Other metro areas in Texas didn’t fare much better than Austin did: San Antonio ranked third, Houston fourth and Dallas seventh among the 10 most economically segregated large metros in the country, according to the report.

Among metro areas of all sizes, college towns tended to show greater levels of economic segregation. Tallahassee, Fla., home to Florida State University, ranked as the most economically segregated of all metro areas, regardless of size.

The results reinforced a growing body of research that has found high levels of income and educational segregation in Austin and other Texas metros – as well as the impact these separations could have on economic opportunity in these cities.

“These advantages are being compounded by where we live,” said Richard Florida, a director at the institute and co-author of the report.

Economic segregation has gained such an intense research focus in part because studies indicate that where someone lives or grows up can have significant influence on their life prospects. An impoverished neighborhood “almost reproduces disadvantage,” Florida said, while the benefits of an affluent neighborhood tend to compound the advantages of those born there.

A 2013 study by the Equality of Opportunity project found that metro areas with lower levels of racial and income segregation tend to see their young residents climb higher up the income ladder than less-integrated cities.

By one of that study’s key measures, Austin’s upward mobility rate trailed only three other Texas metro areas — Dallas, Killeen and Waco — and it lagged well behind the tech-savvy hubs in Silicon Valley, Seattle and Portland, Ore.

A separate study found that Austin posted the ninth-highest rate of income segregation among the country’s 100 largest metro areas — with divides between Austin’s low-income and affluent residents jumping during the 1990s, when the region’s tech economy and population boomed.

Yet this new study by the Martin Prosperity Institute found that Austin is now equally divided – and perhaps in some cases, even more divided – when viewed in terms of occupational class and educational attainment.

Residents in knowledge-based jobs, service-oriented jobs and working-class jobs — such as manufacturing — tend to live separately, the study found. Austin ranked among the 10 most-segregated metro areas by each of those three measures. Meanwhile, workers without a high school degree were more separated in Austin than in any other large metro area, according to the report.

Those divides have sparked a rising level of anxiety in low-income neighborhoods, Florida said. However, he said, because many of the most economically segregated metros have also posted some of the country’s most rapid economic growth rates in recent years, they have the resources to address the issues — if they choose to deploy them.

“The more I look at this, the more I’m coming to conclude that economic segregation and persistent poverty … are bigger problems than gentrification and housing affordability,” Florida said.

Inequality isn’t new to Austin or anywhere else, but questions of housing affordability in a booming city have made the issues more acute here, said economist Brian Kelsey, principal at Austin-based Civic Analytics.

“The gap hasn’t grown much wider in Austin in the last 15 years, as even the most highly educated have faced stagnant wages,” Kelsey said. “But the effect is cumulative in an environment of rising housing costs.”

Rising home prices and rents have created conditions where only well-educated and skilled workers can keep up, he said, especially in neighborhoods closest to the downtown core.

“While this isn’t unique to Austin, economic segregation is magnified here along race (and) ethnicity lines,” Kelsey said. “Our severe disparities in educational attainment according to race (and) ethnicity give our economic segregation in Austin a particularly pernicious quality.”


 

Apple’s Expansion in Austin

This article was written by Brian Gaar and appeared in the Austin American-Statesman on 02/22/15.

Apple’s Austin expansion moving swiftly, documents show

While Apple Inc. has been tight-lipped about its local presence, city and county documents obtained by the American-Statesman paint a picture of a company that’s moving full speed ahead with its expansion plans in Austin.

The technology giant has already created more than 900 full-time jobs in its Austin operation as of the end of 2013, the most recent year for which data is available, according to a report the company filed with Travis County. That’s on top of 3,100 local positions the company agreed to retain. As of the end of 2013, Apple reported 4,091 full-time employees in Austin.

What’s more, in a report last month to the city of Austin, Apple said it is about 67 percent completed with its Americas Operations Center, which it has valued at more than $348 million.

Taken in total, the documents suggest that Apple is outpacing its agreed-upon performance metrics, for which it is scheduled to receive millions in incentive payments from the city, county and state.

“All in all, I think the Apple deal has been good for Austin, especially since Apple is delivering ahead of schedule,” said tech industry analyst Patrick Moorhead of Moor Insights & Strategy.

In 2012, the Austin City Council approved $8.6 million in tax breaks for Apple in exchange for the Cupertino, Calif.-based company establishing its Americas Operations Center here. Apple also is in line for $21 million in state incentives for the project, along with between $5 million and $6 million from Travis County.

Apple, in turn, agreed to create more than 3,600 new full-time jobs in Austin while retaining at least 3,100 existing full-time jobs. The company also agreed to spend $282 million on new buildings and equipment in Austin over the next decade.

In its agreement with the city, Apple agreed to create 300 new full-time jobs in the first “employment year” of the contract. That year will be the first full calendar year after the issuance of the final certificate of occupancy for phase one of its Americas Operation Center. That hasn’t been issued yet, officials said.

From the city’s perspective, Apple is not required to submit a progress report until 2016, said Rodney Gonzales, deputy director of the city’s economic development department. The company would not receive city payments in the form of property tax rebates until after 2016, he said. Apple has so far received a $5.25 million incentives payment from the Texas Enterprise Fund, state records show.

For Apple as a whole, these are good times. Last month, the company reported another strong quarter thanks to its new plus-size iPhones, which helped the company smash sales records for the holiday season.

Apple said that it sold 74.5 million iPhones during the three months that ended Dec. 31, beating analysts’ expectations for the latest models of Apple’s most popular gadget, introduced in September. The surge in iPhone sales drove the company’s total revenue to $74.6 billion, up 30 percent from a year earlier.

Apple’s local project is planned to be built in two phases in Northwest Austin, near its current customer support center.

While the company agreed to spend $282 million on new buildings and equipment in Austin over the next decade, the total value of the project is estimated at more than $348 million, according to documents it provided to the city.

The company’s local investment is expected to include seven new office buildings with a combined 1 million or more square feet of space. Those buildings will house an estimated 3,600 new workers needed to support Apple’s continued growth. The average wage for those new jobs will be $54,000 a year in the first year of the expansion and will expand to $73,500 in the 10th year, according to the incentives agreement.

Apple’s local incentive deals were controversial, as critics argued that the technology giant didn’t need additional millions in incentives from taxpayer dollars.

However, Apple’s presence in Austin benefits the regional economy, said Brian Kelsey, principal of Civic Analytics, an Austin-based economic development firm.

“Given the company’s performance over the last few years, Apple shouldn’t have any trouble meeting their obligations under the tax incentive agreement with the city, so, from that perspective, it’s probably a ‘good’ deal,” he said. “Assuming the city’s cost-benefit analysis is reasonably accurate, Austin’s tax base is better off today with Apple’s larger presence here than it otherwise would have been.”

Incentives, he said, are the price cities pay for economic development projects on the scale of Apple. Kelsey called them a “calculated gamble.”

“Of course, you’re never likely to know what would have happened if the city of Austin refused to offer tax incentives,” Kelsey said. “Personally, I think economic development would be much improved if we didn’t have to give up revenue in the form of tax abatement that would go to fund schools, and especially perhaps career and technical education that would go a long way toward training future workers for tech firms.”

Others said that Apple’s presence will help further bolster Austin’s credentials as a tech hub.

“The Apple brand has the ability to attract other companies to Austin as well, because they trust that Apple has done their due diligence and chose Austin,” Moorhead said.

Jon Roberts, principal of Austin economic development firm TIP Strategies, said Apple’s presence helps create an ecosystem of innovative tech companies, which helps retain talent.

“We shouldn’t be playing this game,” said Roberts, referring to incentives. “But, given the fact that we are, are we using them in right way? And I’d say we’re using them as well as anyone is using them.”

Additional material from the Associated Press.

 

America Needs The Texas Economy To Keep On Rolling

This article was written by Joel Kotkin and appeared on Forbes.com on 02/11/15.

America Needs The Texas Economy To Keep On Rolling

In the last decade, Texas emerged as America’s new land of opportunity — if you will, America’s America. Since the start of the recession, the Lone Star State has been responsible for the majority of employment growth in the country. Between November  2007 and November 2014, the United States gained  a net 2.1 million jobs, with 1.2 million alone in Texas.

Yet with the recent steep drop in oil prices, the Texas economy faces extreme headwinds that could even spark something of a downturn. A repeat of the 1980s oil bust isn’t likely, says Comerica Bank economist Robert Dye, but he expects much slower growth, particularly for formerly red-hot Houston, an easing of home prices and, likely, a slowdown of in-migration.

Some blue state commentators might view Texas’ prospective decline as good news. Some, like Paul Krugman, have spent years arguing that the state’s success has little to do with its much-touted business-friendly climate of light regulation and low taxes, but rather, simply mass in-migration by people seeking cheaper housing. Schadenfreude is palpable in the writings of progressive journalists like the Los Angeles Times’ Michael Hiltzik, whorecently crowed that falling energy prices may finally “snuff out” the detested “Texas miracle.”

Such attitudes are short-sighted. It is unlikely that the American economy can sustain a healthy rate of growth without the kind of production-based strength that has powered Texas, as well as Ohio, North Dakota and Louisiana. De-industrializing states like California or New York may enjoy asset bubbles that benefit the wealthy and generate “knowledge workers” jobs for the well-educated (nationwide, professional and business services employment rose by 196,000 from October 2007 through October 2014), but they cannot do much to provide opportunities for the majority of the population.

By their nature, industries like manufacturing, energy, and housing have been primary creators of opportunities for the middle and working classes. Up until now, energy  has been a consistent job-gainer since the recession, adding  199,000 positions from October 2007 through October 2014, says Dan Hamilton, an economist at California Lutheran University. Manufacturing has not recovered all the jobs lost in the recession, but last year it added 170,000 new positions through October. Construction, another sector that was hard-hit in the recession, grew by 213,000 jobs last year through October. The recovery of these industries has been critical to reducing unemployment and bringing the first glimmer of hope to many, particularly in the long suffering Great Lakes.

Reducing the price of gas will not change the structure of the long-stagnant economies of the coastal states; job growth rates in these places have been meager for decades. Lower oil prices may help many families pay their bills in the short run. But there’s also pain in low prices for a country that was rapidly becoming an energy superpower, largely due to the efforts of Texans.

Already the decline in the energy economy, which supports almost 1.3 million manufacturing jobs, is hurting manufacturers of steel, construction materials and drilling equipment, such as Caterpillar. Separately, the strengthening of the dollar promises harder times ahead for exporters  in the industrial sector, and greater price competition from abroad, amid weakening overseas demand. Factory activity is slowing, though key indicators like the ISM PMI are still signaling that output is expanding.

Right now in Texas, of course, the pain is mounting in the energy sector. Growth seems certain to slow in places such as Houston, which Comerica’s Dye says is “ground zero in the down-draft.” Also vulnerable will be San Antonio, the major beneficiary of the nearby Eagle Ford shale. The impacts may be worst in West Texas oil patch towns like Midland, where energy is essentially the economy.

Yet there remain reasons for optimism. Cheaper energy prices will be a boon for the petrochemical and refining industries, which are thick on the ground around Houston and other parts of the Gulf Coast. The Houston area is not seeing anything like the madcap office and housing construction that occurred during the oil boom of the 1980s. Between 1982 and 1986 the metro area added 71 million square feet of office space; including what is now being built, the area has added just 28 million square feet since 2010. Compared to the 1980s, the residential market is also relatively tight, with relatively little speculative building.

The local and state economies have also become far more diversified. Houston is now the nation’s largest export hub. The city also is home to the Texas Medical Center, often described as the world’s largest. Dallas has become a major corporate hub and Austin is developing into a serious rival to Northern California’s tech sector.

Texas needs to increase this diversification given that oil prices could remain low for quite a while, and even drop further after their recent recovery.

This is not to deny that the state is facing hard times. Energy accounts for411,372 jobs in Texas, about 3.2% of the statewide total, according to figures from Austin economist Brian Kelsey quoted in the Austin American-Statesman. If oil and gas industry earnings in Texas fall 20%, Kelsey estimates the state could lose half of those jobs and $13.5 billion in total earnings.

Low prices also could also devastate the state budget, which is heavily reliant on energy industry revenues. A reduction in state spending could havedamaging consequences in a place that has tended to prefer low taxes to investing in critical infrastructure, and is already struggling to accommodate break-neck growth. The only good news here is that slower population growth might mitigate some of the turndown in spending, if it indeed occurs.

But in my mind, the biggest asset of Texas is Texans. Having spent a great deal a time there, the contrasts with my adopted home state of California are remarkable. No businessperson I spoke to in Houston or Dallas is even remotely contemplating a move elsewhere; Houstonians often brag about how they survived the ‘80s bust, wearing those hard times as a badge of honor.

To be sure, Texans can be obnoxiously arrogant about their state, and have a peculiar talent for a kind of braggadocio that drives other Americans a bit crazy. But they are also our greatest regional asset, the one big state where America remains America, if only more so.