Wednesday, March 30, 2005

Wright Amendment follies

For those of you who might not be big followers of the aviation industry, a little background: Back in 1970s after DFW was built, a federal law was passed called the Wright Amendment that limited Dallas Love Field flights from going beyond Texas and roughly its adjacent states. This was done to force the airlines to use DFW, which is quite a bit farther out. Southwest stayed behind, and built a tidy little business shuttling people within Texas and those states. Now, DFW is the 3rd busiest airport in the country (IAH is 9th), and little Love Field is absolutely no threat to that. So Southwest would like to get these restrictions dropped, and DFW airport and American Airlines, who has a big hub there, are going ape trying to stop it. It basically gives both of them a near-monopoly on flights beyond those states, and American has a long history of expensive nonstop fares to prove it.

Here's a fun Wright Amendment visualization exercise:
  1. Go to Southwest's Interactive Route Map page
  2. Hold your mouse pointer over Dallas (Love Field)
  3. Hold your mouse pointer over Houston Hobby
Which service would you prefer?

I finally decided to post on this topic because the Dallas Morning News has a great head-to-head editorial on the pro and con arguments. It's worth reading simply to watch DFW and AA twist themselves silly trying to argue that less competition is actually good for Metroplex travelers. Sure, AA is all for low fare competition, as long as it's from DFW. It's like a crocodile that's all for duck swimming, as long as it's in their pond.

I have no idea why DFW is supporting the restrictions. I suppose on a superficial level, it looks like it gives them some sort of twisted "competitive advantage" against Love. But the reality is that more Southwest competition would drive down fares (since AA would match) and demand would skyrocket. To meet that demand, AA would add a whole slew of new flights, which means more landing and gate fees for DFW.

The Chronicle actually wrote an editorial supporting Southwest:
"The Wright Amendment now amounts to political protectionism of the most blatant kind that results in many travelers out of D-FW paying double what their counterparts in Houston pay. It is not healthy to have politicians propping up one airline at the expense of others during a time when the fallout from the 9-11 terrorist attacks has brought carriers such as Continental to the brink of bankruptcy. If Continental has to compete head-to-head with Southwest, why shouldn't American? Houston would benefit from repeal of the amendment because flights, passengers, jobs and airport fees at Hobby would increase."
Houston certainly benefits from open competition between IAH/Continental and Hobby/Southwest, with lower fares and more destinations to choose from than Dallas. But the Chronicle is actually wrong in that last sentence about the repeal benefiting Hobby. Southwest routes a lot of connecting traffic and flights through Hobby it would probably prefer to route through Love, since Dallas is more geographically central than Houston. It's actually possible Southwest would cut back flights at Hobby and route them through Love instead if the amendment were repealed. I doubt that would happen, though. More likely, Southwest would be relatively stagnant in Houston over the next several years while it grows in Dallas and elsewhere (esp. Chicago, Pittsburgh, and Philly). Either way, Hobby will lose flights or at least grow slower.

So, I end up with the economist and Texan in me supporting the repeal, but the competitive Houstonian in me says: let Dallas keep their absurd restrictions and high fares. We appreciate the favor.

Tuesday, March 29, 2005

This man is certifiably nuts: James Howard Kunstler

OK, I'm not generally one of those extremist bloggers. I prefer reasoned arguments and looking at all sides as objectively as possible. But every once in a while, I come across something so outrageous, it simply must be mocked.

The writings of James Howard Kunstler, author of "The Long Emergency", fall in that category. His Rolling Stone piece (partial abstract here) is so off the charts as to be comical (warning: don't read it where laughing out loud might draw unwanted attention from co-workers... ;-) In a nutshell, he believes energy costs will go so high it will drive us back to some sort of labor-intensive agrarian society with Mad Max/Road Warrior overtones as we duke it out for the last drops of oil.

Three very simple data points completely undermine his argument, but this hasn't stopped him from getting huge amounts of press. He bases everything on Peak Oil Theory, which has also gotten a lot of press lately, and argues that we're about to reach peak global oil production. Declines from there, matched with ever-growing demand (esp. from China and India), will lead to out-of-control energy costs. Even if Peak Oil Theory is correct - and there is a lot of argument on that point - there are three reasons his extrapolations are absurd:
  1. A huge number of oil alternatives get economically viable at $25-$50/barrel: tar sands, liquefied coal, biomass, and oil shale (Business Week graphic). This puts an effective long-term cap on oil prices right about where we are right now: $50-60/barrel (of course, there may be short-term spikes above that until alternative energy capital investment ramps up). A quote on just one of those alternatives, oil shale, from a recent Wall Street Journal article:
    "With an estimated two trillion barrels of shale oil under American soil -- roughly 60% of the world's known deposits -- successful development would, at least on paper, begin to change the international oil business. The U.S. would become the world's single biggest oil source, far surpassing Saudi Arabia's proven reserves of 261 billion barrels."
  2. The Europeans, because of high taxes, have gas costs almost four times ours, yet they are still suburbanizing - they're just doing it with tiny high-mileage cars instead of massive trucks and SUVs. Sure, we'll probably start moving to more fuel efficient vehicles, but the argument that the suburbs and global supply chains are doomed is just plain loony.
  3. If there are temporary shortages, they won't be here. Oil is a global free market (Well, mostly - OPEC is a powerful cartel in theory, but pretty weak in reality. None of their governments can afford to take much of their oil off the market for long, even if they wanted to for some twisted reason.) The US has the highest GDP per capita by far of any major country on the planet (we're not talking about Luxembourg, Norway, or Monaco here folks). No matter what the price of oil is, we can afford it more than anyone else, and that especially applies to China and India.

Yes, one day we will move beyond oil for our energy needs. But it will be because a better and cheaper technology comes along, not because oil runs out. As a recent Economist article quoted, “The Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil.”

My own prediction? I don't have a lot of faith in the technological and economic viability of hydrogen. In about a decade or so, I think we'll see next generation hybrids that plug-in at night and go 60+ miles on the battery charge the next day - only using the gas engine when they go beyond that range. This will eliminate the vast majority of gasoline usage. (This ties into my theme that Houston needs to invest aggressively in education, infrastructure, amenities, and economic diversification while the dominant energy-side of our economic base is doing well - or we'll end up like a Rust Belt city one day.)

I think the Rolling Stone piece reaches its wacked-out crescendo with this paragraph:

"The process of readjustment is apt to be disorderly and improvisational. Food production will necessarily be much more labor-intensive than it has been for decades. We can anticipate the re-formation of a native-born American farm-laboring class. It will be composed largely of the aforementioned economic losers who had to relinquish their grip on the American dream. These masses of disentitled people may enter into quasi-feudal social relations with those who own land in exchange for food and physical security. But their sense of grievance will remain fresh, and if mistreated they may simply seize that land."

Will someone please buy this man an isolated plot of remote farmland (ideally with no communications to the rest of the world), a feudal title (maybe "Grand Duke of Fantasyland"?), plus a horse and a plow - and ship him there? Please?

Monday, March 28, 2005

"Houston, we have a problem..."

So the Chronicle has an article this morning asking if the "Houston, we have a problem" phrase of Apollo 13 fame has become a cliché. This phrase has become such an ingrained part of American and even global culture, I've always wondered if Houston could somehow leverage it into a new identity for the city to move beyond "Space City" or "Bayou City".
  • Houston: Problem Solving City
  • Houston: City of Problem Solvers
  • Houston: Problem Solved

...or something like that. As you can see, none of them are too catchy. But the ad campaign would be a lot easier. Imagine a full page magazine ad:

  • Top of page: "Houston, we have a problem..."
  • Then: a person or company complaining about some issue in their current location (ex. "Housing costs a fortune where I live." or "My company needs better access to global markets.") along with some picture/visualization of the problem.
  • Mid page dividing line, then "Houston here. We have a solution..."
  • Then some relevant facts about Houston that address the problem along with another appropriate picture/visualization.
  • Some sort of closing tag line and/or logo at the bottom: "Houston, Texas - Problem Solved"
I think it could be a pretty memorable "brand building" campaign, especially in the business press. I'm not going to name names, but we've certainly run worse campaigns in the past.

If you have your own thoughts on the phrase and/or integrating it into an identity for the city, I'd love to hear 'em in the comments area.

(BTW, this is not the Houston identity mentioned in the kickoff post. That will be part of a multi-post series to come later.)

Sunday, March 27, 2005

Transit Corridors Planning in Houston

Last Wednesday I got to attend David Crossley's monthly Livable Houston meeting at the Houston-Galveston Area Council offices. David and I have our disagreements, but the topics, dialogues and debates are almost always engaging. The subject this month was Transit Corridors Planning, presented by Guy Hagstette, Mayor Bill White’s special assistant for urban design. He presented a document that recently went before the Planning Commission (no online link I can find, unfortunately). In his words
"...this concept focuses on new policies to encourage high-quality urban development near transit corridors, stabilization of nearby residential neighborhoods, and a planning process for central city areas experiencing rapid change."
The bottom line is that, for light rail transit investments to make any kind of sense, lots of high-density, pedestrian-oriented, mixed-use, urban-style development needs to take place near the transit stations in order to supply ridership. The rest of the world does this via zoning, which is an anathema to Houston.

This proposal seems to be a pretty innovative approach, with the right balance of guidelines, incentives and disincentives instead of rigid regulations and requirements. And they are very clear that it is not zoning (no land use designations) and that it will only apply near "high-capacity transit" - i.e. rail, not bus routes. Still, as they say, "the devil is in the details", and its success will definitely depend on the specifics of implementation.

Even if you are opposed to the light rail plan (and my own views are mixed on the extensions), if they're going to get built, we should all get behind making them as successful as possible. Nobody wins if they fail. Even if some people might feel vindicated in the short-term, it will hurt the city as a whole in the long-run. And high-density, high-value, high-tax-base real estate developments around the corridors are critical to that success.

Friday, March 25, 2005

An education strategy for Texas

The Feb 26 Economist has an interesting special report on higher education (alternate copy for nonsubscribers here). It talks about how globalization trends are bringing a new level of competition to higher education, especially to the government-run higher-ed systems in Europe. It got me wondering if there is some way Texas could turn education - K-12 as well as higher ed - into a global competitive advantage without busting budgets.

Texas has a rapidly growing young population that is straining education resources. It seems to me that one way to get more "bang for the buck" from teacher and professor time is to supplement them with great online education materials, especially multimedia. The Rice Connexions project is a good early example of this. If compelling online multimedia experiences (think Flash) can help students better learn concepts, that has to help us get more value out of limited and relatively expensive teacher time.

A collaborative effort at the state level among the Texas Education Agency, school districts, and public and private universities could generate this content into a comprehensive online library. In some cases, textbooks written by Texas faculty could be converted to online content. In other cases, students could help generate the modules (it has actually been shown that the most effective technique to learn material is to have to teach it).

The next step is where this really gets interesting: offer this content for free to countries around the world, especially developing ones (maybe with a focus on Latin America?). There would only be one requirement: since we're serving up this content from a central data center of web servers, we would be allowed to build a proprietary and confidential database of worldwide students who use the material (including online testing). We would mine that database to try and bring top-talent undergraduate and graduate students from around the world to study at Texas universities (although probably at full cost, unsubsidized by Texas taxpayers).

When they graduate, they may stay and directly benefit the Texas economy. But even if they go back to their home country, they will use their relationships in Texas, including their alumni networks, to build deeper economic and academic ties between their home countries and Texas. These global connections will be of immense competitive value to Texas in the 21st century.

In summary, everybody wins:
  • More Texas students get better educations with enhanced online multimedia content
  • Texas gets a better return on its education spending by increasing teacher and professor productivity
  • Developing countries get access to top-notch online educational materials they could not afford to develop themselves
  • Both Texas and those countries get better developed talent and deeper economic and academic ties
  • Texas builds a global brand name in education
  • Texas attracts the smartest student talent from around the world
  • Top-talent students help Texas attract and retain top-notch research faculty and enhance the value of Texas-granted degrees
  • Top research faculty generate technologies likely to be commercialized in Texas
There is definitely a first-mover advantage to this opportunity. Once countries establish these types of relationships, they don't have a lot of motivation to look at other partnerships, which could leave Texas out in the cold if California or the Ivy League or Japan or Britain or anybody else gets there first...

Thursday, March 24, 2005

Asian trade growth and the Port of Houston

The Wall Street Journal has an article today on how Vancouver's port and Canada's rail lines are trying to lure booming Asian container traffic, which is running into major congestion problems at West Coast ports, LA/Long Beach in particular. One paragraph with a couple statistics of interest:

"Inland ports are also jockeying for a share of the growing Asian trade. Houston, which handles 65% of containers entering the Gulf of Mexico, saw incoming containers from Asia increase by 28% in two years and will be further boosted by the opening of a Wal-Mart distribution center near the port later this year."

High housing costs driving out young families

The NY Times has an article today on one of the negative side-effects of out-of-control housing costs: the loss of young families. The article has a lot of good points, and as much as I tried to pare them down, the remaining excerpts are still extensive (sorry):

Portland is one of the nation's top draws for the kind of educated, self-starting urbanites that midsize cities are competing to attract. But as these cities are remodeled to match the tastes of people living well in neighborhoods that were nearly abandoned a generation ago, they are struggling to hold on to enough children to keep schools running and parks alive with young voices.

San Francisco, where the median house price is now about $700,000, had the lowest percentage of people under 18 of any large city in the nation, 14.5 percent, compared with 25.7 percent nationwide, the 2000 census reported. Seattle, where there are more dogs than children, was a close second. Boston, Honolulu, Portland, Miami, Denver, Minneapolis, Austin and Atlanta, all considered, healthy, vibrant urban areas, were not far behind. The problem is not just that American women are having fewer children, reflected in the lowest birth rate ever recorded in the country.

Officials say that the very things that attract people who revitalize a city - dense vertical housing, fashionable restaurants and shops and mass transit that makes a car unnecessary - are driving out children by making the neighborhoods too expensive for young families.

Other cities have tried and failed to curb family flight... "We can't let Portland become a retirement city or a city without neighborhood schools," [the mayor] said.
The problem is not that children are leaving for private schools, officials said. It is that new people attracted to the city tend to have higher incomes, having already raised a family; are retiring; or are single and unlikely to have children. After interviewing 300 parents who had left the city, researchers at Portland State found that high housing costs and a desire for space were the top reasons.
The pool of school-age children is shrinking so fast that Portland will have to close the equivalent of three or four elementary schools a year over the next decade, according to school district projections.

"I don't think we're going to become a nearly childless city like San Francisco, but the age structure is really changing," said Barry Edmonston, an urban studies professor at Portland State, who does demographic projections for the school district. "People are not turning over the houses like they used to. They're aging in place, at the same time that prices are really going up, making it hard for young families to move into the city."
Mr. Longman said a decline in children not only takes away "human capital" needed to sustain an aging population, but "having fewer children really diminishes the quality of life in a city."

Most city leaders seem to agree. Even in San Francisco, where officials are preparing for another round of school closings amid a projected decline of 4,000 students in the next five years, city officials are aggressively marketing the city and its schools to young families.

But what they cannot do, especially after the failure last year of a ballot measure sponsored by the Chamber of Commerce to encourage affordable housing, is bring housing prices down.

"It's a real challenge trying to raise a kid in San Francisco," said Jim Armstrong, a father of two who is active in Little League in the city and rents a home. "It takes a degree of fortitude for a parent to stay with the city."
But now the school will be shuttered, and improvements from Portland's beloved light rail line have contributed to rising real estate prices, defeating the broad goals of the mayor's effort to bring and keep young families in the city.

"Portland is a great city that attracts a lot of educated people," she said. "But the real estate is becoming outrageously expensive. And then you get wealthy singles and wealthy retirees. What's missing are kids. And that feels really sterile to me."

Virginia Postrel also has a few insightful comments here and here.

Lessons for Houston? Well, the lesson is not that we shouldn't develop these types of urban neighborhoods. People want them, and we should try to offer them as long as there is demand. One lesson is that trying to force an urban density/transit model on an entire region - using tools like urban boundaries - is a bad idea. Young families need an affordable, suburban periphery that grows with demand to keep prices affordable.

The next piece is high mobility investments into the core. Those young families have to be able to reasonably get to the central employers (i.e. within about a half hour, on average, whatever the mobility mode). Family-focused 30, 40, and 50-somethings are the core employee base of most companies. If they can't get into town, the employers will eventually move out to them.

Without aggressive freeway and other mobility investments into the core, it's easy to end up with a 3-ring city: residential urban core, middle ring of employers (usually along a beltway/loop freeway), and an outer ring of suburban families. It's almost impossible for transit to effectively serve those kinds of dispersed employer centers, which leaves the urban core people with reverse commutes by car, kind of making all the spiffy transit investments moot and hurting the attractiveness of those urban core neighborhoods.

The SF Bay Area, Seattle, LA, DC, Philly, Atlanta, and Dallas are all examples of cities struggling with this dispersed employer problem to some extent. In many cases, there has been underinvestment in freeways and overconfidence in commuter tolerance for long transit times (once all connections, waiting, and walking is taken into account). Studies have shown that, thoroughout history, regardless of mobility mode, a half-hour each way is the average commute tolerance - and people always try to get housing within that time-range of their employer. It's a bell curve, of course, so there are plenty of people who do 45 minute, 1 hour, or even higher one-way commutes. But if too many of their employees get put in that position, employers will generally move if they have the choice.

In general, I'm pretty optimistic about Houston on this score. Our housing costs are some of the lowest in the country (among big cities). We're developing the core transit and dense urban neighborhoods, but we're also making big-time freeway investments, including new toll roads, so suburban families can get in to the employers. And as long as we really take into account the half-hour commute rule, I think our transit investments will be reasonable.

Wednesday, March 23, 2005

Two steps forward, one step back

A little humor submittal by reader Chris Smith:
Quote of the Week
"I'm proud of our city today" -- Houston Mayor Bill White after the city's Tour de Houston bike ride to combat obesity wound down with free beer and tacos for all participants.

Houston dodges the zoning tax

The Economist has a recent article covering a Harvard study on the cost of housing and its relationship to government regulations, zoning in particular (if you're not a subscriber, an alternate copy of the article can be found here). Some key excerpts:

They studied the housing markets of more than 300 American cities since 1950 and have pieced together evidence of regulation-induced inflation in many places.
In a related paper, the authors look at Manhattan, where free land is so scarce that the cost of a new unit of housing is simply that of adding an extra floor to a building. Comparing this cost with the market price of housing, the authors estimate that the regulatory “tax” of Manhattan's planning laws has risen to more than 50% of the average price of an apartment.

Still, New York's zoning rules might be economically justified if they reflect the costs imposed by additional residents on those already living in Manhattan. The authors first estimated the value of views and sunlight lost when new flats are built. Then they examined the costs of extra congestion and of new public services, such as schools, sewers and so forth. By their calculation, all these costs taken together could not come close to explaining such a high regulatory burden. In other words, the zoning “tax” was much higher than the cost to existing residents of having new people in the neighbourhood.
Not in my backyard, or anywhere near
Since housing is by far the biggest expense for most people, any source of house-price inflation matters. Although zoning restrictions are often welcomed on the grounds of preserving the benefits of rural charm or urban character, their cost tends to fall disproportionately on poorer people, says Mr Glaeser. By raising property values, planning laws act as a windfall for existing owners and a burden on those who rent or seek to buy. Since renters typically have lower incomes and wealth, zoning is often a highly regressive form of taxation, he says.

One lesson for rich-country governments, says Mr Glaeser, lies in the way that they help people who cannot afford adequate shelter. Billions are spent every year on “affordable housing” schemes, either through grants or by requiring a certain portion of newly built units to be sold or rented at below-market prices. This latter requirement is, in effect, yet another a tax on new building. A more effective and cheaper way to make housing more affordable, he reckons, is to loosen restrictions on new construction. It is inconsistent, surely, for a government to offer help with one hand, while holding back the supply of housing with the other.

As you may or may not know, Houston is the largest US city without zoning, and has some of the lowest housing costs of any major American city. While much of the world has thought us crazy for avoiding it, now more and more of the negative side-effects of zoning are being recognized and "maybe those hicks in Houston are smarter than we thought?..." ;-)

Monday, March 21, 2005

Making Houston a global financial hub

An interesting Business Week article based on a Federal Reserve study claims that the rapidly growing US trade deficit may not be as bad a deal as we thought. Their basic argument is that there is a global glut of savings that is being invested in the US, which makes our trade deficit look a lot worse than it really is. Why are foreigners saving so much and why is it coming to the US? They mention the aging and anemic European and Japanese economies with few attractive investments as a primary reason. I would personally add a few others:
  • High consumption taxes abroad, like VAT and sales taxes, that encourage savings (vs. more focus on income taxes here).
  • Well-regulated and safe US securities markets, especially with the addition of new Sarbanes-Oxley regulations (which some believe go too far, but that's another story).
  • Globalization has made American companies into global companies, so investing here is really like investing in their home country, with the added benefits of diversification and the safe/mature securities markets.

This raises the interesting possibility of the US being the financial intermediary for the world. It's an extremely attractive "export" industry for the US, with financial companies accounting for almost a third of S&P500 profits (i.e. it's a very profitable industry, so dominating it globally is more lucrative than dominating something like basic manufacturing or call centers).

At this point you're probably wondering, "What the heck does this have to do with Houston?" Well, obviously it bodes very well for the future of New York City as the financial capital of the world, and financial industry jobs tend to pay very well and inject wonderful vitality into a local economy. Houston's opportunity? To be not just a local center for physical and financial energy trading, but a global one. Chicago managed to get the agricultural commodity trading markets away from New York, and we need to get focused on owning the energy trading markets. Sure, the Enron implosion was a blow, but New York and Chicago have certainly had plenty of financial scandals in their past and did not lose their financial-center status.

The Chronicle recently ran an article on the return of energy trading in Houston, but more needs to be done to nurture this industry cluster like we nurture the physical energy industry and the bio/nanotech industries. Just as a serious securities or investment banking professional knows they need to be in New York, we need to create an environment where any serious energy trader or investment banker knows they need to be in Houston to get a real, intuitive feel for the market. There's a real risk that, while some trading will happen in Houston, much of the market will be dispersed geographically and in cyberspace. It could be too easy to say, "I've got an Internet-connected trading terminal, why do I need to be in Houston?" Organizations like the Greater Houston Partnership and the Houston Technology Center need to build more of the personal networking and event infrastructure that can't be duplicated online: conferences, luncheons, speakers, and training to build a deep talent pool. It might even make sense to create a high-profile exchange with a live trading floor (a little archaic, but it looks good on CNBC...).

Taking this industry for granted is a dangerous approach. The opportunity needs to be aggressively seized before it slips away from neglect.

Sunday, March 20, 2005

Dallas does Houston

The Sunday Travel section of today's Dallas Morning News has a feature on exploring Houston via the light rail line, including a discussion of museum architecture and an incredibly cool print-and-fold pocket guide. A little friendly competition between Houston and Dallas is fine, but it's also nice to see Texas cities talking each other up instead of down for a change. Maybe the Chronicle will return the favor?

(Thanks to Erik Slotboom of Houston Freeways fame for the tip on the article.)

The risks of property tax appraisal caps

I'm not a tax expert, but I have heard some anecdotal evidence from California on the risks of property tax appraisal caps (something our state legislature is currently considering). There are a lot of risks, some of which are articulated here. My understanding is that California put an insanely low appraisal cap (1-2%/year) in quite a while back (Proposition 13), which has created a very warped real estate market. Appraisals are reset whenever a property is sold or major improvements are made, and they now have properties that, for instance, can be worth $800K but appraised on the books at only $300K. Those people can never sell or make improvements without generating a huge new annual tax bill, so houses go unimproved and unsold, leading to a state of renters rather than owners. It's a mess, and one that's just about impossible to undo without a voter revolt.

A better approach is to automatically reduce the property tax rate (rather than the appraisal). Or, even better, maybe increase a property tax exemption on the first $X of value, which makes it easier for the poor to become homeowners because of a lower tax burden on lower value housing, while still spreading the benefit across everybody.

Thursday, March 17, 2005

Houston officially a "world class city"

While browsing the Wikipedia entry on Houston, I came across this intriguing statement:
Houston is considered a "Gamma World City" by the GaWC.

Well, it turns out a UK university actually attempted to rank "world class cities", generating a map and a report (search on the word "Houston" for a quick browse). The good news is, we made it. We're now officially a world class city. Everybody can stop worrying about it now. Amazingly, this ranking report came out in 1999, well before we had light rail or three new stadiums.

The bad news is, we're only in their third tier of world cities, which they call Gamma. So now we can all worry about making it to Beta or even Alpha class world city (you know, as in "alpha male" - we get to dominate and push around the littler cities).

In my own biased and subjective judgment, San Francisco has dropped and we have moved up since '99, so I'd think we might make Beta if they did it today. And, if you look at the Wikipedia criteria, I think we're on a long-term trendline to match Chicago, which would put us in the Alpha tier. The one incredibly elitist and laughable criteria that I could see people using to trip us up is

A unique cultural air and sophistication produced by its inhabitants.

OK folks, to move up the rankings, we all need to try a little harder. Remember: please hold your noses up at slightly higher angles, be disdainful towards anybody not in your 'intellectual class', always order wine instead of beer, no eye contact on the street, and never, ever smile for strangers. Your cooperation is greatly appreciated.

Wednesday, March 16, 2005

Houston #1 in international flight growth

A USA Today article on the growth in international nonstop flights has a chart that ranks Houston Intercontinental #1 in international flight gains since 2000, with 38 new daily international departures taking us from 73 then to 111 now. Very cool. When it comes to global connectivity, we are one of a small handful of top-tier US cities, thanks mainly to our proximity to Mexico and Latin America, large population, international diversity, the global nature of the energy industry, and, of course, wonderful hometown hub airline Continental. We also just opened the largest international customs and immigration arrivals facility in the country. An excerpt on Houston from the USA Today article:

Bush Intercontinental has boosted its nonstop international flights to 111 a day on average, up by about 50% since 2000.

The biggest driver: Continental's push into Mexico with 50-seat jets, which lets passengers avoid connections in congested Mexico City. Continental launched new service to several cities in Mexico, including the business destinations of Toluca and Monclova.

The airport last year also landed its first Asian carrier — China Airlines —for service to Taipei. The route is popular with Houston's Southeast Asian community, many of whom then connect to airports in Vietnam. The carrier started with three flights a week, and daily service is possible by year's end, Peña says. Houston is lobbying Air India to become its Texas gateway.

As a sidebar, does anybody else think it would be cool to riff off the NASA and "Space City" themes to officially rename the airport "Bush Intergalactic"? I've heard it referred to that way informally for years, but why not go all the way and make it official? It could be a great image builder every time someone books a flight. And don't bother me with niggling details about not actually having intergalactic flights. There are a laughable number of airports in this country named "[insert tiny town name here] International Airport", yet have absolutely no international service.

Realistically repurposing the Astrodome

Well, in my kickoff post I promised something on realistically repurposing the Astrodome, and today's Chronicle article seems to be a good lead-in. The current focus is on trying to convert it to a "mammoth, luxury convention hotel", similar to the Gaylord Texan outside Dallas. And I'm ok with that if the economics truly work. But I suspect we're getting into dangerous "white elephant" territory. There have been articles lately talking about the grossly overbuilt convention space situation in this country (there was even a picture of the recently-expanded George R. Brown in a Newsweek article), as well as ones talking about the pain our downtown hotels are feeling since so much capacity has been added without matching demand (occupancy hovering around 50%). And, from what I've heard, the Gaylord Texan is great, but it's a true resort with a lake and golf courses. Do convention groups really want to hang out at Reliant Park with no lake, no golf, and no nearby street life? There seems to me a high risk of ramming through a very big mistake because of desperation to do something with the Astrodome.

During the original proposal-seeking phase in 2003, I teamed up with the Houston International Festival to propose converting it to a Festival Dome that could hold climate-protected weekend festivals year-round (don't worry, the main annual HIF would still stay downtown). Houston has a great festival scene, but they are packed into narrow spring and fall windows when the weather is (usually) just right (and even then there is substantial rain risk). The proposal listed up to 30 weekend festivals a year, many focused on international cultural themes to draw on Houston's broad global diversity.

This is the kind of use that is extremely inexpensive and low-risk, while still more than covering the maintenance costs of the Dome. Incremental improvements could be made over time as funds are raised (like maybe a freeze-proof tropical botanical garden if the the painted roof panels were cleared?). This use would be also be totally compatible with the concert venue concept mentioned in the Chronicle article, which would be a great compliment to the Woodlands Pavilion - not to mention a heck of a lot closer for most people.

It's also compatible with a concept we've been kicking around at the Education Foundation of Harris County: a large-scale Math and Science Summer Academy for jr.high and high school students. While festivals would use the Dome on weekends, summer weekdays could accommodate thousands of kids spread in small groups throughout the seating tiers doing fun science projects like building robots for competitions, solving Rube Goldberg challenges, understanding the physics of Astroworld rides, and taking light-rail field trips to museums, the zoo, Rice University, the Texas Medical Center, and even Minute Maid baseball games (after learning the physics of baseballs, of course).

Ultimately, our proposal was not picked as a first choice, which I perfectly understand. If the county can find workable proposals that draw $200-$400 million of private investment, they should certainly explore them. But if those proposals look increasingly shaky, have negative side-effects elsewhere (like downtown), or start asking for public money, then they should start looking at the less grandiose proposals that could still be a wonderful asset to our community.

Update: Alison Cook at the Chronicle suggests a food market inside the Astrodome modeled on the Reading Terminal Market in Philadelphia.


Time magazine does Houston light rail

Time magazine has a story in this week's issue on exploring Houston via the light rail line. An excerpt:

A rare and exotic species has found its way to Houston of late. Known in other cities as pedestrians, the carless creatures are suddenly appearing along a vibrant 7 1/2-mile stretch of the city, thanks in large part to Houston's new light-rail system. Any new visitor to the city would do well to see them in action--and join them for a ride on the new rails and a stroll around town. .... Of course, taking a walk in Houston means leaving the air conditioning behind. You've been warned.

(Thanks to Dr. Bob Sanborn of the Harris County Education Foundation for the tip on the article.)

The impact of a housing bubble

This LA Times article is an interesting followup on my last post about housing affordability. It discusses the short-term boost but long-term drag of a housing bubble, using California as a case study. Of particular note is how it drives critical external/exporting jobs out of the state (as businesses flee high costs) while replacing them temporarily with local jobs to service the newfound wealth of the property owners. When the market cools and that one-time wealth boost has been used up, those jobs will disappear, likely throwing the state economy into recession or long-term stagnation. Some excerpts:

Real Estate Reliance May Hurt California

Half of the private-sector jobs created in California in the last two years are connected in some way to real estate. Meanwhile, property values in the last four years have swelled $1.7 trillion, the equivalent of about 35% of the total personal income in the state since 2001.

This sharp increase in home equity has spurred consumer spending that, in turn, has fueled more economic growth.

"We have an economy that's rolling along on the basis of a false sense of wealth," said Christopher Thornberg, a senior economist with the Anderson Forecast team.
"We need some other sectors to carry the ball," said Ross DeVol, director of regional economics at the Milken Institute in Santa Monica. "Real estate simply cannot push the economy forward any longer."

UCLA's Thornberg said it would take strong growth in other sectors of the economy to take the place of a flagging real estate market. Since 2000, California has lost so-called external jobs that cater to the national or international economy - making computer chips or T-shirts, for example - as it gained jobs that cater to other Californians, in retail, nursing or real estate. Only if external jobs catch on fire, Thornberg said, can the state maintain the status quo, which is lackluster job growth far behind historical averages.

"The best-case scenario is mediocre," he said. "That's what this boils down to."

Monday, March 14, 2005

The benefits of housing affordability

A recent report ranking the highest-risk housing bubble markets has an interesting side-by-side comparison of San Diego and Houston. Both have a median income around $36K, but San Diego's median home price is $578K to Houston's $137K. This means the average household in Houston only has to spend about 22% of their income on their median-house mortgage, while in San Diego they would have to spend 90%! (if the banks would even grant such a loan) The percentage is 50% or more for many other cities in California and the Northeast.

This has got to be a huge drag on their longer-term prospects. Not only does it make labor extremely expensive for businesses, but all that income going for mortgages is not available for education, restaurants, arts, entertainment, charitable giving, or small business entrepreneurship. They may enjoy a short-term boost as people cash out their bubble homes (just like some lucky people bailed out on Internet stocks in '99), but the longer-term headwinds are stiff indeed.

What's Houston's secret to keeping housing costs reasonable? It's pretty simple really: allowing supply to grow to meet demand, including minimal regulatory interference so condo/apartment/loft/townhome densification can naturally occur where the market wants it. It also includes mobility investments (mainly freeway capacity) that keep the new housing supply within a reasonable commute of the employers.

As one professional residential real estate investor, looking for scarce housing to invest in, so colorfully noted in a recent Wall Street Journal article:
He also looks at supply, steering clear of Texas, for instance, because "they build houses like rabbits multiply."

Venture capital in Houston

The Houston Business Journal has a cover story this week on the local venture capital environment, which has been one of the biggest barriers to a more robust startup scene here. The largest funds tend to be on the coasts, and they like their investments to be nearby for easy monitoring. The article mentions several promising tech firms that have relocated away from Houston as a condition of financing.

The solution to building more local VC depth is relatively simple: local institutional investment funds need to demand it. Houston endowments and pension funds already specify that some small, single-digit percentage of their assets go into VC/private equity (mostly on the coasts). Why not specify that some portion of that stay local? If even 1% of these institutional assets stayed in local VC funds, it would vastly increase the capital available and attract new partner and management talent to the area.

Yes, I understand that these institutions are very sensitive to the risk of compromising their main mission - return-on-investment - for somewhat vague community improvement goals. But with a little diligence and scaling it up slowly over time, there's no reason they can't get the same returns here they get from the coastal VC firms, while also substantially boosting the local economy and community - something I'll bet is in most of their mission statements if they take a look. Universities in particular (and I mean you, Rice) should be able to see the benefits of targeting some of their endowment investments locally to stimulate the startup scene, thus making it easier for them to lure top faculty and students to Houston. It's called a virtuous cycle, and we need more of them in this town.

If you sit on an institutional investment board, do your community a favor and bring it up for discussion at the next meeting. As employee, ask your employer for a locally-focused "special situations" fund option in your 401K plan. If you're a voter, ask your elected representative why our public employee pension funds aren't doing this. This is definitely a case where a few small voices can make a big difference.

Sunday, March 13, 2005

Houston's diverse portfolio of neighborhoods

A Chronicle interview with the president and CEO of The Woodlands Development Co. gives an update on the present and future plans up there in the far northlands. The Woodlands, especially with its new Town Center development, is a real gem in what I like to call the "portfolio of Houston neighborhoods". There's a lot of debate in the urban planning world about the "One Right Way" to build the perfect neighborhood, but it seems to me the goal should be to offer as wide a diversity of communities as possible, so every newcomer can find someplace comfortable for them. Diversification is the mantra for financial portfolios, and the same should hold for Houston's neighborhood portfolio.

Like Austin? Check out The Heights. Urbanism? Downtown or Midtown. Waterfront? Bay Area Houston. Diversity trumps conformity.

And the best part about all those Woodlands improvements? Rather than being jealous, Houston has the option of annexing them after the moratorium expires in 2011...

Friday, March 11, 2005

When a city turns its back on the middle class

This essay by Joel Kotkin is the best I've seen summarizing the slow decline cities go into when they turn their back on the middle class, using LA as a case study.

"Across the country, major cities are continuing to lose middle-class residents as they flock either to the surrounding suburbs or to less congested, more affordable, and more business-friendly smaller cities, particularly in places like Nevada, Arizona, Texas, and Florida. The group that is leaving--upwardly mobile people in their thirties and forties--represents a particularly important part of the urban mix. Historically, when this strata has abandoned cities, urban society has shifted toward a more bifurcated makeup: the wealthy few residing among a growing underclass. This occurred in late imperial Rome, in seventeenth-century Venice, in eighteenth-century Amsterdam--and has become a common prelude to urban disaster in American cities during the past half-century.


Why is this a troubling trend? Because cities that are stratified between the very wealthy and the very poor cannot fully exercise their role as centers of American economic, social, and cultural life. For one thing, such cities offer little room to the upstarts who historically reshape urban centers--a highly bifurcated city is less likely to produce great entrepreneurs or innovators. The wealthy generally bypass public institutions--parks, libraries, public schools--because they can create their own; those institutions, used only by the poor, inevitably deteriorate, and a vicious cycle is born. This is particularly important with regard to the public schools, which were once the primary means of social uplift in cities (and should, at least in theory, provide the glue that holds a city together across ethnic and economic lines). "

Houston so far has avoided these mistakes, although constant vigilance is required. I'm sure each individual decision made by these cities made sense at the time, but after adding them up along a gentle sliding slope, they ended up somewhere they didn't really want to be.

Is Houston good for smart people?

The Dallas Morning News recently ran yea/middle/nay head-to-head editorials on the question "Is Dallas good for smart people?". One of my favorite bloggers, Virginia Postrel, was the middle author, and she makes some very insightful comments here and here. I think much of what they say about Dallas is also applicable to Houston, although I also think Rice University gives Houston a bit of an edge over Dallas in the "intellectual climate" department. Her quote most applicable to Houston:
The funniest thing about the discussion in Dallas is how everyone assumes that the city should be good for intellectuals. (It's fine for "smart people.") Dallas is a city for normal people--people who focus on the reality at hand, not its deeper meaning; people who like their women pretty, their men successful, their children near at hand, their work productive, their religion inspiring. Intellectuals are weird. The only way to be an intellectual haven is either to have a very large population--large enough so that even a small percentage can constitute a critical mass--or to be a pretty strange city.

Thursday, March 10, 2005

Trees coming to a freeway near you

A New York Times article on the transportation bill that just passed the House has a listing of sample pork projects, including "$35 million for landscaping around freeways in Houston". Having seen the very nice landscaping improvements in my neighborhood around the recently rebuilt West Loop at Beechnut, it should be a pleasant improvement for the city and make some progress on our less-than-aesthetic national image.

White on White: Governing magazine on Texas cities vs. the legislature

Otis White's Urban Notebook on Governing magazine's web site uses the story about Mayor White's Safe Clear program as a lead-in to discussing Texas as a "home-rule state" and how the state legislature reserves the right to overturn city ordinances (and often does). I have no particular comment, but just like to pass along national media coverage on Houston for those who are interested.

(Their Notebook blog does not have permanent links, so you may have to scroll and page through to find this March 10 story.)

Wednesday, March 09, 2005

Popular Science ranks Houston a top 10 tech metro

Houston Business Journal article. The good news is we beat Austin. The bad news is we were beat by Columbus, OH?! These things are so arbitrary, both in the choice of individual scoring categories and in the way they weight those scores to come out with an overall composite score. And they have my biggest survey pet peeve: measuring job opportunities (in this case tech) on a per capita basis instead of in total. If you want a tech job, do you want to move to a city with shear numbers, or just high per capita? Shear numbers means more opportunities for you individually - both to start and as you move up your career ladder. High per capita could mean a three-man town where two of them are professional spammers. If you wanted to build a long-term career in energy, would you move to bigger Houston or more-focused Midland-Odessa? I think the answer is obvious.

To show the absurdity of per capita numbers: if we carved off a new municipality narrowly drawn to include HP/Compaq, BMC, NASA, and parts of the med center, called it "Silicon Houston", and submitted it to the rankings, it would shoot to the top of their list. You'd want to move there and build a career, right? But as soon as we fold it back into our broader metro area, it stops being attractive? How much sense does that make?

And the final kicker: if Mayor White somehow shut down the Port of Houston and kicked out all the associated companies, jobs, and people, that would actually improve our score (by improving the ratio of tech to non-tech jobs) even though it would be an economic disaster for the region. Good rule of thumb for ranking measures: if you could actually improve your score by doing something incredibly stupid, it's probably not a great metric.

Relieving the north-south traffic bottleneck

Spend some time in Houston traffic, and you'll soon realize two of the biggest freeway headaches are the downtown tangle and the 610 West Loop by the Galleria. Look at a map, and you'll see these are major north-south chokepoints. Hopefully the West Loop construction will relieve some of that problem, but what to do about downtown?

If Spur 527 off 59 could be connected through Midtown all the way up to 45, it would take a huge load off the Pierce and 59 elevateds and the bottlenecks between them (area map). How to do this without destroying the recently revived Midtown neighborhood? Simple: build one-way, two-lane, cut-and-cover tunnels underneath Bagby and Brazos connected into the nice, broad, already-in-existence entrance and exit ramps to/from 45. Sure, tunnels aren't cheap, but we're only talking about 3/4 of a mile here, and cutting and covering a trench is certainly cheaper than boring a tunnel. It would probably actually improve the neighborhood by taking short-cutters like me off Bagby and Brazos.

This Word document has more details, including maps.

(BTW, if you were wondering, this is not the traffic congestion solution referred to in the kickoff post.)

Update 12/9/10
An email from Peter one one reasonably affordable approach:

I talked to a guy named Curtis from OldCastle in North Carolina who said that he could lay 200 feet of tunnel a day using a combination of both precast split box culverts and a precast bridge--40 feet wide by 16 feet tall.   That is two full 12 foot lanes with 8 foot shoulders on each side.
Basically he would lay a 40 foot wide precast split culvert bottom half and put a 40 foot wide precast bridge on top of it.  That would accommodate full truck heights.
The cost is roughly 40 million a mile. Two 3/4 mile sections under Bagby and Brazos streets would cost 60-80 million.


Sprawl in perspective

Just an interesting factoid: at our current average density of about 3,500 people per square mile (city limits), Houston's greater metro population of around 5 million would fit in a circle with a radius of 22 miles. Forecasts indicate we may add another 3 million people over the next 20-25 years, for a total of 8 million(!). Wanna take a quick guess what the radius of that circle would be?

A mere 27 miles. Just 5 extra miles. That's a single, solitary mile every 4-5 years. Not as many or as fast as you thought, huh? It's the power of the r-squared in the area=pi*r^2 equation. Of course, cities don't actually grow in a nice, uniform density - there are plenty of gaps and areas where the population stretches farther out (usually along freeways), plus the natural densification of the core. But the math shows how cities can seem to have galloping growth early on, as each mile of additional radius just holds a small number of people, yet that radial growth must inevitably slow as the additional miles can accommodate ever more people.

One implication: the Grand Parkway is likely to be the last loop we ever need.

Tuesday, March 08, 2005

A new UH - Institute of Technology campus?

OK, so everybody knows that top-tier science/engineering universities can give a big boost to the local technology-startup community in a city: Stanford and UC-Berkeley in Silicon Valley, MIT in Boston, and, of course, UT in Austin being just a few examples. Rice has made great strides in that arena for Houston with the Rice Alliance for Technology and Entrepreneurship run by the indefatigable Dr. Steven Currall (written up in a recent Chronicle interview), and the University of Houston is pushing on the legistature to fund it as a "Tier 1 Research University" - the same as UT and A&M (not sure how that campaign is going, but I imagine it's a tough slog with tight state budgets and just about every other "Tier 2" university in the state clamoring for the same thing).

Now, Rice may rescind my alum status for saying this, but it is a little small to play the local role of Stanford, and we could really use a complimentary UC-Berkeley-equivalent to take us to the next level. The University of Houston is a system with several campuses, including Downtown, Clear Lake, and Victoria in addition to the main campus. What if it added a new campus to the system, adjacent to the main campus, and called it the "University of Houston - Institute of Technology" (or maybe "Houston Institute of Technology" for simplicity? - gotta build off that great MIT brand) with the goal of being the top public tech university in the nation. It could share plenty of classes, professors, staff, sports, and facilities with the main campus, but be a distinct entity with separate admissions and a top-tier national profile. We get the best of both worlds: the main campus gets to maintain its mission of broad access, while the tech campus draws top students, faculty, and research grants from around the nation and the world. It would be a huge boon to the city. There's even a nice piece of land adjacent to the campus, the bayou, and MacGregor Park that could work out perfectly.

This idea also fits what will be a recurring theme on this blog: Houston is currently poised to ride an oil and gas boom for quite a number of years, but, eventually, some new technology will come along and replace it. When that happens, we'd better have made some great civic investments from the good years or we'll end up like a whole lot of rust belt cities in the Midwest. Endowing UH-IT would be a great way to invest those flush corporate and personal profits for the future of the city.

Houston Strategies kickoff

This is my second attempt at a blog, after the launch of The Social Systems Architect last year. Since it can handle attachments and extra-long posts very well, I will still post "heavy" content there and put a link here. It's also the place to go to browse some of my previous Houston-related writings, including a Next American City magazine article and several published Houston Chronicle editorials (which, for some strange reason, are not kept in their online archives). If you don't have the time - no worries - I'm sure most of that content will trickle through here over the coming months.

This blog was inspired by the highly-encouraging feedback I've gotten on several "broadcast" emails (you know who you are... thanks). I decided it's time to join the 21st century and do a high-frequency blog while cutting down on the clutter I add to peoples' inboxes. This blog will be regularly updated with short, crisp postings that (hopefully) will spark some interesting dialogue and debate in the comments. If you care about the future of Houston and can't find something interesting here at least once a week, then I'm not doing my job - and I'd much rather you let me know that than just taking me out of your daily/weekly/monthly site-review rotation.

To throw in a little teaser marketing, in the months ahead we'll explore topics such as

Stay tuned.