Tuesday, May 31, 2005

Twin Cities: Houston and Atlanta

The Wall Street Journal had this short profile of Atlanta last week, and from what I can tell, just about everything in it matches very closely with what's going on in Houston. It even has a couple Houston-specific stats of interest.

Downtown Atlanta Hopes For Change of Pace

Atlanta's sprawling metro area is seeing a surge of housing development in urban neighborhoods, and residents, who have suffered with the nation's highest commuting costs, are lining up for these new apartment and condominium units.

Developers are moving forward with thousands of units in established neighborhoods, such as Buckhead, and some new ones. Sandwiched between Buckhead and the central business district, Midtown is undergoing a renaissance with the redevelopment of the 138-acre site of an old steel mill. Developed by Atlanta's Jacoby Development Inc. and New York-based AIG Global Real Estate Investment Corp., the $2 billion Atlantic Station is adding 7.5 million square feet of retail, office and entertainment space, with hotels and as many as 5,000 residential units.

"People want to get off the highways," says Joel Brockmann, development director at Lane Co., which is building more than 500 apartments and nearly 1,000 condos at Atlantic Station.

More entertainment and shopping are coming to the city. Downtown Atlanta will soon boast a new aquarium, along with the new World of Coca-Cola museum. Developer Sembler Co., based in St. Petersburg, Fla., will wrap up four urban mixed-use developments by 2006 with a total of 1.6 million square feet of storefront space and 1,200 residential units. And office buildings are going up throughout the urban core, despite a lofty 22.4% vacancy rate in 2004.

Real-estate markets in the nation's ninth-largest metro area have been slow to recover, as job growth notched up a scant 0.8% year-over-year in March. However, a relatively low cost of living is attracting corporations to the city. One example is rolled-aluminum manufacturer Novelis Inc., which was spun off from Alcan Inc. this year and chose the city for its executive offices. According to Property & Portfolio Research, the Atlanta metro boasts four of the nation's 10 fastest-growing counties.

That may explain commutes that average 60 miles a day and cost a chart-topping $4,573 per year for a family with two workers driving separate cars, according to Sperling's BestPlaces. Despite a public transit system with a subway system, rush-hour traffic is heavy. Springtime marks the start of the "smog season" in Atlanta. With few constraints to new development, the Horizon City and its suburbs now extend over 8,376 square miles -- giving it the third-largest land area of any metro in the country, after Dallas and Houston.

Atlantic Station is preparing for a grand opening in late October. Once complete, the redevelopment is to include 12 million square feet of shops, restaurants, hotels, urban dwellings and office space plus 11 acres of public parks.

Atlanta's sprawl has made building easy, so it's not surprising that apartment vacancies stood at 11.5% at the end of 2004, the third highest in the U.S., trailing Houston and Denver. But vacancies near the city center were lower -- 9.8% in Midtown and 9.7% in Buckhead. In the next two years, at least 28% of new apartments will be built in urban markets.

Demographics are in the city's favor. Population growth is expected to outpace the nation in the next five years, and the area has more than its share of young adults, who are likely to rent apartments, even with a median housing price of just $155,562.

Real-estate executives say apartment vacancy rates are expected to drop quickly and there is evidence that the market is starting to tighten. "Concessions are starting to burn off. We're seeing an increase in effective rents," said John M. Leonard, a vice president and regional manager of Marcus & Millichap Real Estate Investment Brokerage Co.

Despite all the activity downtown, the pace of new construction has slowed in all property types. But developers here are known for their zeal, and once again they are pursuing permits. In the retail market, for example, the three million square feet delivered this year will mark a 13-year low, according to PPR. However, the amount of space in the planning and bidding stages would boost the area's inventory by 16%, giving Atlanta the most ambitious retail development program of any market in the U.S.

Did a lot of that sound familiar?

Their "3rd largest land area" claim doesn't match what I found in a Google search:
(New Census MSA Boundaries)
In square miles, 2003
    1. Phoenix - 14,573
    2. Salt Lake City - 9,539
    3. Dallas - 8,990
    4. Houston - 8,928
    5. St. Louis - 8,649
    6. Denver - 8,385
    7. Atlanta - 8,376
    8. Kansas City - 7,858
    9. San Antonio - 7,341
    10. Chicago - 7,212
    11. New York - 6,726
Also came across these cool maps (pages 3 and 4) of urban land areas as defined by the Census Bureau. Not sure what's up with those gigantic Phoenix and Salt Lake City MSA definitions, which each look large enough to cover downtown Houston and Austin in one metro if they were overlayed on Texas. I think it has to do with the very large county sizes in the west, and MSAs are defined by counties - so if even a small sliver of a metro area overflows into a large mostly-empty county, that county gets included in the MSA.

How property tax assessment limits drive away new homeowners

Yet another interesting post from Otis White's Urban Notebook at Governing.com. This one talks about how property tax assessment caps can keep out the new homeowners a city so desperately needs.

Welcome to Detroit - City to Homeowners: Keep Out!

The Detroit News recently published an article with this arresting lead sentence: “From a purely financial standpoint, buying a home in Detroit is a no-brainer: Don’t do it.” As the article explained, not only do homeowners in the city have to put up with the usual hassles of city life (lousy schools, spotty public services, a scarcity of groceries and drug stores, dicey neighborhoods and crime), but they also get socked with property taxes that are often double what they’d pay in the suburbs. The article focused on one man who had moved from Chicago and was ready to buy a house in the same neighborhood as the mayor’s residence, with a nice view of the Detroit River — until he learned the taxes on his $290,000 house would be $9,700 a year. “There was no way I could afford that,” he said, opting instead for a more expensive home in the suburbs with lower taxes. For a city as desperate as Detroit to bring back middle-class families, crushing taxes (and higher property insurance rates) work like a giant keep-out sign, the News said. “Young professional couples can afford a $250,000 home and they can choose to buy anywhere, but when they look at Detroit and run the math, it puts Detroit at a competitive disadvantage,” one lawyer who lives in the city said. Making things worse, Michigan has a harebrain tax-limitation law that artificially restricts assessments on homes until they are sold. Obvious result: The tax burden is shifted to recent homebuyers, punishing the very people the city most needs to attract. Hence, the staggering tax bill for young middle-class families.

Footnote: So if simple-minded tax limitations aren’t the way to help homeowners, what is? Two things: Much greater commercial development, which strengthens the tax base and eases the burden on homeowners, and drastic downsizing of Detroit’s bloated city government. As leaders there often point out, Detroit has a government designed for city of 2 million supported by an impoverished population of 900,000.

Lessons for Houston? The obvious one: adjust overall tax rates rather than assessments. As far as his recommendation to strengthen commercial development to boost the tax base, I believe that is directly related to one of my pet topics: mobility. Businesses need easy access to customers and employees. If they don't have it, they'll move. Sure, transit can be a small piece of that, but the real foundation of most mobility is the car (at least in Houston and most newer sunbelt cities), meaning investments in freeways, tollways, and fast arterials.

Sunday, May 29, 2005

Texas home prices

The Houston Business Journal online edition had an article last week stating that the number of million dollar plus homes in Texas doubled from 2000 to 2003 to almost 18,000. It also had a series of other interesting stats:

Texas ranked 41st in 2003 for median home price, $94,515.

In 2003, California led the country with the highest median home value, $316,600, followed by Hawaii at $302,300, the Census Bureau says. The national median home value in 2003 was $139,759, according to the Census Bureau.

Among the 88 largest U.S. cities, Austin ranked 39th for median home price, $156,515. San Francisco was the top city at $607,065.

Among other major Texas cities, the median home price in Dallas was $113,880; Houston, $99,152; Fort Worth, $91,075; and San Antonio, $76,282.

Now, the stats I've seen in the Chronicle list the average house in Houston at $177K and the median at $136K. I'm not sure how to reconcile that with the U.S. Census Bureau's $99K. Maybe one is based on sales and the other based on assessed property values? Pretty big discrepancy.

Fortune had a recent cover story on the real estate boom, including a specific profile of Austin, which people in the article seem to think will be one of the next boom cities (the "moving east from California" theory). I'm not as sure. Arizona and Nevada are easy to explain: people escaping the high cost of California, esp. retirees wanting to cash out of their expensive CA house. And Florida is easy to explain too: retirement and second homes for northeastern baby boomers. But I don't see any massive movement to Texas by wealthy retirees. Sure, baby boomers in Texas will probably also retire here to places like the hill country, Padre, Galveston, and various lakesides - and I think all those properties will do well - but I don't see an explosion in urban real estate values. Austin is certainly nice, but its economy only has a limited amount of wealth available to drive up home prices (tech - somewhat; state government, universities/students, musicians - not so much). Those real estate speculators in Austin may be in for an unpleasant surprise...

Friday, May 27, 2005

Escape from San Francisco

I'm not sure exactly why I'm writing about families fleeing San Francisco in a blog called "Houston Strategies", but it's a topic that sort of fascinates me. It seems completely obvious to me that insane housing costs would drive out families, but I'm not sure San Francisco can really do any thing about it at this point, other than maybe some sort of rent-controlled affordable housing that only allows families - and that would have to be done on a massive scale to have any real impact (I don't think any affordable housing program in the country affects even 1% of a city's housing stock). I'm sure the mayor's task force will try a lot of small programs on the margins, but I doubt it will have any real impact - the simple economics are just too overwhelming.

Houston has always been a pretty family-friendly city, especially when it comes to affordable housing, and I think that will be a very helpful strength long-term. It not only increases diversity and makes the city more interesting, but those kids, once they're grown-up and educated, will have a natural affinity to either stay in Houston or come back here after college, adding to our skilled work force and economy. I guess it comes down to being another argument for keeping housing affordable, and its close corollary, investing in good mobility to keep that affordable housing accessible within a reasonable commute.

Child Population Dwindles in San Francisco
Anne Bakstad and Ed Cohen are starting to feel as if their family of four is an endangered species in San Francisco. Since the couple bought a house five years ago, more than a dozen families in their social circle have left the city for cheaper housing, better schools or both...

San Francisco has the smallest share of small-fry of any major U.S. city. Just 14.5 percent of the city's population is 18 and under.

It is no mystery why U.S. cities are losing children. The promise of safer streets, better schools and more space has drawn young families away from cities for as long as America has had suburbs...

Another reason San Francisco's children are disappearing: Family housing in the city is especially scarce and expensive. A two-bedroom, 1,000-square-foot starter home is considered a bargain at $760,000.
A recent survey by the city controller found 40 percent of parents said they were considering pulling up stakes within the next year.

Determined to change things, Mayor Gavin Newsom has put the kid crisis near the top of his agenda, appointing a 27-member policy council to develop plans for keeping families in the city.
"It goes to the heart and soul of what I think a city is about - it's about generations, it's about renewal and it's about aspirations," said Newsom, 37. "To me, that's what children represent and that's what families represent and we just can't sit back idly and let it go away."...

Other cities are trying similar strategies. Seattle has created a children's fund, like the one in San Francisco. Leaders in Portland, Ore., are pushing developers to build affordable housing for families, a move Newsom has also tried.

For families choosing to stay in San Francisco, life remains a series of trade-offs. They can enjoy world-class museums, natural beauty and an energy they say they cannot find in the suburbs.

But most families need two or more incomes to keep their homes, and their children spend most of their days being cared for by others. "We have so many friends who are moving out and say how much easier life has been for them," Bakstad said. "If we can make it work in the city, we would love to stay. In a way, the jury is out."

Wednesday, May 25, 2005

Could Metro face a bus rider revolt?

So Metro's Jan-April 2005 stats came out recently, and the rail ridership is pretty healthy, but overall system ridership is down 3% and several bus routes are being cut. This drop is common in cities where previously continuous bus routes are forced to transfer to new rail lines - the extra delays incent people to find alternative transportation if possible. I came across this blurb in an email newsletter I get, and I could definitely see this happening to Metro in the future if these trends continue.


Low-income residents of Oakland are suing the Metropolitan Transportation Commission, charging discrimination because the commission gives most available funds to rail transit to affluent white neighborhoods while bus transit in poor minority neighborhoods are starved for funds. The Metropolitan Transportation Commission (MTC) is the regional organization that distributes federal transportation funds to Bay Area transit and highway agencies.The suit points out that MTC's regional transportation plan failed to provide $700,000 for bus transit improvements in a black neighborhood, but it did fund $1.5 billion for commuter trains and $4 billion for a BART extension to San Jose. MTC's own analysis said that the unfunded bus service would have added new passengers at a cost of just 75 cents a ride, while the commuter trains would cost $26 per new ride and the BART extension would cost up to $100 per new ride. This suit resembles a suit brought by the NAACP against the Los Angeles transit agency in the 1990s. That suit forced the agency to slow or halt its rail transit plans in order to restore bus service to minority neighborhoods. More information about this suit is available at http://tinyurl.com/8otrw

For an interesting history of the Los Angeles Bus Riders' Union suit by one of the organization's leaders, see http://la.indymedia.org/news/2005/05/126280.php

(Anne also has a good post on this topic over at blogHouston)

Tuesday, May 24, 2005

Houston Strategies milestone: 5,000 hits

Today we crossed the milestone of 5,000 hits (!) since Houston Strategies started in March. Word-of-mouth recommendations from our readers is what makes this kind of traffic growth possible.

Thanks for your support,

Urban Legends: Cities Aren't Doing As Well As You Think

Joel Kotkin has a new essay on how many cities are focusing on glitz - stadiums, convention centers, hip downtowns - and getting good publicity for it, rather than the basics of good city management: infrastructure and education. He addresses 3 urban myths:
  1. Myth: Cities are gaining people
  2. Myth: Cities are where the successful people are
  3. Myth: Cool cities attract the best jobs; uncool cities don't
(It's important to understand that when he uses the word "city", he's referring to the urban core of a metro area, not including its suburbs and exurbs.)

I do want to disagree with one of his points:
"The idea that Cleveland and Oklahoma City, much less Detroit and Kalamazoo, can out-compete New York, San Francisco, London, or Paris on a hipness scale is simply bizarre. These cities will never win the battle for the dollars or affections of the young, the nomadic rich, and tourists."

I think you could probably include Houston in that list of cities, but I think he misses the point. We're not trying to match cities like New York and San Francisco, just "close the gap" enough to hold on to residents, especially younger ones, as well as make local corporate recruiting easier. As an example, Houston's theater and museum scenes certainly don't match New York, but they're "good enough" for all but the most sophisticated tastes. If we didn't have them, we would certainly lose more young people and have a harder time recruiting employees to local companies, but we've built them up enough to meet the vast majority of people's needs.

His conclusion:

"Cities must return to a progressive focus on fixing their real problems--that is, the problems of the majority of the people who live there--not serving the interests of artists, hipsters, and their wealthy patrons. Right now school reform is often hostage to the power of teachers' unions. City budgets, which could be applied to improving economic infrastructure, are frequently bloated by, among other things, excessive public sector employment and overgenerous pensions. In the contest for the remaining public funds, the knitted interests of downtown property holders, arts foundations, sports promoters, and nightclub owners often overwhelm those of more conventional small businesses and family-oriented neighborhoods that could serve as havens for the middle class.

Ultimately, a new urban progressivism must challenge this power axis. It would force local governments to focus on the most important historical work of cities: the transformation of newcomers to America into successful, middle-class citizens. This has underlain the emergence of all great modern cities, from fifteenth-century Venice to seventeenth-century Amsterdam to twentieth-century New York. The American metropolis can be more than a way station for the wealthy young and part-time destination for the nomadic rich. It can be a place where average people live, thrive, and build communities across lines of race and class. Now that would be a cool city."

To be honest, I actually think Houston is doing many of the right things he's talking about. Yeah, we have gotten caught up in some of the glitz: stadiums, convention centers, a hip downtown - but we've also been pretty diligent on improving infrastructure and education. It's important we don't get the "grass is greener" envy problem and forget those real priorities that we're handling pretty well right now. It's easy to neglect your strengths until one day you wake up... and they're gone.

Monday, May 23, 2005

Dealing with "problem" property owners

Interesting post on Otis White's Urban Notebook at Governing.com. The Minnesota law sounds like a good idea for Houston too, but I'm not an expert in this area. I do understand that some homeowners associations have gotten out of control, and the state is looking to reign them in - but do cities like Houston have the opposite problem: no ability to effectively go after property owners that are an obvious big problem? I'd love to hear readers' thoughts in the comments section.

Oscar Madison on Steroids

Nightmare Properties

Remember Oscar Madison, the lovable slob in “The Odd Couple”? Well, there are some real Oscar Madisons out there, and most aren’t lovable; some, in fact, are like Oscar Madison on steroids. Their homes are falling in, their yards are overgrown and they toss trash everywhere. Worse, they’ve been threatened with fines and liens so often, they just ignore them. What does a city do then? City officials in Vadnais Heights, Minn., a suburb of St. Paul, have wrestled with just such a “problem property” for three years. The owner keeps an illegal mobile home on the property and has received numerous citations for filling wetlands, cutting trees and what the St. Paul Pioneer Press primly calls “nocturnal activities.” The city has cleaned up the property twice and sent the owner the bills. She won’t pay. She also ignores court injunctions and citations. Finally, the city negotiated a five-page legal agreement with her spelling out exactly what she can and can’t do on her property. (Even so, there’s doubt it will do any good. The agreement forbids her son from visiting, but she told the Pioneer Press she won’t abide by that part. “He provides too much help here,” she said, “and I can’t control another human being.”) So what can cities do when faced with such obdurate scofflaws? St. Paul and Minneapolis have formed special teams of building inspectors, police officers and lawyers that can swoop in when neighbors report problems. These teams monitor nuisance properties and, when they find real problems, haul in the owners. Most of the time the coordinated approach works, but for the truly recalcitrant, the teams use a state law that allows them to remove renters and even owners for up to a year without first going through condemnation proceedings. (To move back in, an owner has to put up a $50,000 bond and agree to stop all nuisances.) The St. Paul team has threatened to use the law more than a dozen times, one city official said, and in every case but one the owners quickly settled. (St. Paul is preparing its first property-expulsion case now.) It’s a harsh but necessary law, the official said, adding, “It makes the difference between a livable neighborhood and one where everybody is putting up for-sale signs.” This isn’t a problem just in Minnesota, of course. There are nightmare properties in every city, including one in suburban Tampa where the owner has piled trash and auto parts in his yard and parked junk cars and an illegal mobile home. Fines don’t sway him. In the past 10 years, courts have assessed $210,000 in penalties, or about three times the property’s value. But since it’s a homestead, the county can’t foreclose under state law. As a result, the county is considering a new strategy: garnisheeing scofflaws’ wages and bank accounts. “This is only going to be used in the worst of the worst cases,” one county official promises.
Posted May 20, 2005

Sunday, May 22, 2005

A win-win-win strategy for Big Oil, Houston, and developing countries

The McKinsey Quarterly had a recent article titled "What's Next for Big Oil?" (subscription required) which talks about how the big oil companies are having trouble replacing their reserves as fast as they are using them up. This is primarily because most governments of countries with the reserves are hesitant to let them in. Here is the abstract:

The petroleum industry's prosperity masks a growing uncertainty about the long-term ability of big international oil companies to replenish their energy reserves. They have limited access to the Middle East, which holds half of the world’s known oil and natural-gas reserves, and potential new sources—such as those located in extremely deep water or the Arctic—are difficult and expensive to extract. Big Oil has let its technological leadership lapse over the past decade or so, and it faces increased competition from national oil companies and increasingly global midsize players.

The take-away
To be more attractive as partners to the national governments controlling oil and natural-gas reserves, major international oil companies need to build capabilities that give them a clear advantage over their rivals.

and one of its major recommendations:

Make a positive economic impact
Paradoxically, petroleum-rich countries often suffer as a result of their energy wealth. In many cases, the influx of foreign funds raises the value of the local currency. As a result, the country's other exports can't compete on the world market, so that whole sectors of the economy are decimated. Indeed, such problems prompted Juan Pablo Perez Alfonso, a founder of the Organization of Petroleum Exporting Countries (OPEC), to describe oil as "the devil's excrement." Nigeria is often cited as an example of what can go wrong: it remains one of the world's poorest countries, despite having earned some $300 billion from oil exports since the late 1950s.

International oil companies can capture an important competitive advantage and improve their chances of gaining access to important new reserves by demonstrating the broad positive economic impact their presence can have. At best, the record of oil companies in this respect is mixed, and clearly there are limits to what they can achieve...

The oil majors could also do far more to enhance the positive economic and social impact of their investments. Too often, energy projects create pockets of wealth for a privileged few but fail to lift the economy... Similarly, oil companies can partner with governments and international organizations to improve standards of governance, thus reducing the risk that oil revenues will be wasted by public bodies. Anticorruption efforts—for example, the Extractive Industries Transparency Initiative—offer companies other ways to engage with governments.

In practice, none of these propositions is easy to act upon. Moreover, companies cannot single-handedly solve the deep-rooted problems of poverty and underdevelopment. During the course of a 30- to 50-year relationship between an oil company and a country, however, even partial successes can have a significant impact. Companies that are astute enough to navigate these complex and politically sensitive issues are likely to have an edge over their rivals.

So here's an idea: could the local oil & gas industry in Houston sponsor a non-profit institute to provide "best practices" advice and direct support to countries developing their governance and infrastructure, drawing on expertise in Houston and Texas? Essentially, when an oil major is proposing to work with a country, part of its proposal would be to pay this institute to help with infrastructure development in that country. As this institute developed a track record of achievements, its inclusion in bids would be more and more attractive to countries desperate for effective development.

Not to say that Venezuela is a model way to do this, but this Chronicle article gives examples of positive ways the oil money can be spent.

Everybody wins. The countries get better development, Houston city and county governments get extra funds to develop and share best practices through the institute, and local oil companies get better access to more reserves, which helps them grow in Houston and create more jobs here. It also could go a long way in improving Houston's international profile.

I'm thinking the right groups to look at possibly setting something like this up would be the Greater Houston Partnership and the Mayor's Office of International Affairs and Development (good newsletters worth a browse at the bottom of the page). Not an easy project by any means, but one that could pay very nice dividends down the road for the city, industry, and developing world.

Wednesday, May 18, 2005

Wal-Mart elevates Houston's status as a logistics hub

The Houston Business Journal has an eye-opening feature this week about Wal-Mart's new distribution center in Baytown. There's also a second article with the story of how they were attracted here. Some random excerpts from the first one:

A massive Wal-Mart Stores Inc. distribution complex opening this month in Baytown will give a gigantic jolt to the Houston economy and could even dictate future trade patterns throughout the United States. With a total of 4 million square feet, the largest Wal-Mart complex of its kind in the country has nearly 92 acres indoors. That is big enough to hold 30 downtown city blocks or 70 football fields.

The president of IMS Worldwide, a Houston-based logistics and imports consultant, sees the coming of Wal-Mart as a local milestone of historic significance. "Wal-Mart's decision to come to Houston is as big of an event as us deciding to build Bush Intercontinental Airport," says Spencer.

But the potential ripple effect extends far beyond Houston, notes the federal appointee to the Advisory Committee on Commercial Operations of the U. S. Customs Service. "The decision that Wal-Mart made to bring between 20 percent and 28 percent of its container capacity through Houston will forever change the dynamics of international trade lanes coming into the United States," Spencer says.

Delivery of Wal-Mart goods will make Houston a greater port of call for steamship traffic. And shipping activity will continue to mushroom as the globe's biggest retailer attracts copy-cat projects.

"Houston is finally on the logistics map," sums up Spencer.

"The log jams and delays in California are propelling more companies to look for alternative ports of entry, and Houston is a great one," says Gray Gilbert of CB Richard Ellis.

All of these factors combined contributed to making Houston Wal-Mart's fifth -- and largest -- gateway market. Spencer says the local complex is scheduled to receive more than 20 percent of Wal-Mart's total annual imports, much of it coming from Asia.

Products previously shipped to the West Coast and sent cross-country by rail will now go by sea all the way to Baytown via the Panama Canal. The all-water route is 11 days longer than the water/rail route, but Spencer says the total trip time is about the same when delays at California's ports are taken into account.

While officials gear up for an influx of container business driven by Wal-Mart at the sixth-largest port in the world, real estate players are also mapping plans.

OK, I'm not really buying the comparison to building IAH, but nonetheless, this is a pretty big deal for Houston. It's an important part of Houston's economic diversification to offer quality blue-collar jobs outside of the oil industry. One of the things I've always liked about Houston is our mixed white/blue-collar economic base, which I think makes for a more diverse and interesting city.

So what's next for Wal-Mart? I'm thinking they might one-up pallet-based Costco by opening container-based retail on open asphalt at their new distribution hub: just walk among the open shipping containers and load up your own personal forklift of bargains... ;-)

(side note: I'm headed to Austin Thursday afternoon through Friday evening, so there will probably not be a post tomorrow. See ya next week.)

Tuesday, May 17, 2005

Recapturing gambling dollars from Louisiana

The Sunday Business section in the Chronicle had a feature article on a new casino opening in Lake Charles, Louisiana. The casino is focused, as you might expect, on getting Texans, and specifically Houstonians, to cross the border to gamble (although, given some of the hard feelings from the last couple of years, the choice of a French name - L'Auberge du Lac - may not be the wisest branding move in this part of the country). Inserted in the middle of the article is a little commentary on Texas' hypothetical loss of gambling dollars to other states:

Heading out of Texas

Although certain kinds of gambling are legal in Texas, such as wagering at horse and dog tracks, the amount of entertainment dollars heading out of state worries some, including the Houston-based Sam Houston Race Park.

"This is just another example of Texas dollars flowing across the border to Louisiana," said Robert Bork, president and general manager of the race park. "We want the gaming revenue to stay in Texas and support education and tax revenues here instead of moving to our neighboring states."

A bill was filed earlier in the Texas legislative session that would allow video slot machines at horse and dog tracks, Indian reservations and at one location in each of nine areas around Texas. Bork said representatives from racetracks and breeding organizations are in Austin seeking support for legalizing video lottery terminals. Several other gambling bills have been filed.

Jordy Tollett, head of the Greater Houston Convention and Visitors Bureau, noted that Houston is a city of millions, many of whom make a good living, so it's no surprise Louisiana gambling operators try to attract them. "We already know it is in the hundreds of millions that goes over there," Tollett said. "It is inevitable that someday we have to take a serious look. Is that something we should invest in later? I don't know."

What this simplistic thinking ignores is: How many dollars are currently spent in Texas on wonderful products, services, and amenities that would otherwise be sucked into the gaping black hole of the gaming industry if it were legal here? Right now, Texans have to be pretty hard core to gamble beyond the lottery or race tracks: essentially fly to Vegas or drive to Louisiana. That helps limit the amount disposable (and not-so-disposable) income in this state that is lost to gambling. If more extensive gambling were legalized here, that portion would almost certainly grow, meaning less disposable income available for other businesses and charities in Houston and Texas. The losses would be subtle and not easy to see, but they would most certainly be there.

If people insist on trying to recapture dollars lost to Louisiana, here's a simple least-harm solution: allow a few casinos in Orange, Texas. Almost the same inconvenience as going to Lake Charles - which minimizes lost disposable income - but people will stop and gamble before crossing the border, keeping the spending - and taxes - here.

Monday, May 16, 2005

Airport passenger growth in Houston vs. Dallas

Interesting opinion column in the Ft. Worth Star-Telegram attacking American Airlines' new "independent" study showing that repealing the Wright Amendment (previous post) would be a disaster for the city. He rightly points out that the study talks about loss of service (which is nuts, because lower fares increase demand and therefore service), but completely ignores the benefits of lower fares. His interesting stats:

Since 1994, air passenger traffic has grown almost 33 percent across the nation, according to the Transportation Department's statistics on originating traffic. But D/FW is up just 8 percent by that measure, and that's before Delta pulled 200 flights this year. Love Field passengers declined 13.5 percent over the same period, as flight restrictions prompted Southwest to shrink in its hometown and expand elsewhere.

Combined, this measure of passenger traffic in the Metroplex rose just 5.4 percent from 1994 to 2004. That stinks. But that's what happens when you miss the discount revolution, when long-haul fares are almost 40 percent higher than the national average.

Miami did worse than D/FW, but at least Fort Lauderdale doubled. Together, 40 percent more people flew out of South Florida in 2004 than in 1994. Houston's two airports were up a combined 44 percent; Chicago's two airports were up 26 percent. Atlanta was up 53 percent and Phoenix, 50 percent.

In short, the Metroplex aviation market isn't growing like the rest of the country's. Not even close. The best explanation is that we've put a regulatory fence around Southwest at Love Field, and American's dominance at D/FW is so lucrative that it vanquishes any challenger. With limited competition, there's been limited growth.

5% growth for Dallas vs. 44% growth for Houston - that is a huge difference. Both metros are about the same size and have grown at about the same pace, so the difference has to be the higher fares in Dallas from the lack of real Southwest competition. You gotta think they'll eventually come to their senses and repeal this thing...

Saturday, May 14, 2005

Welcome new readers!

If you're coming here for the first time because of the Houston Chronicle editorial, Welcome! Come on in and take a look around. Hopefully you'll find a few items that catch your interest.

My post on the Chronicle editorial is directly below this one. Houston Strategies is less than 3 months old, so there aren't too many older posts if you'd like to skim through them. All the May posts are on this page, and links to the March and April archives can be found at the bottom of the right-side column, or here's a post with March and April highlights. There's also an introductory post to the blog and my profile.

Thanks for your interest, and I hope you'll visit us again on a regular basis. I try to post at least 5 times a week, Sunday through Thursday nights, and all constructive comments are welcome.

-Tory Gattis

Keys to unlock our gridlock

It's probably a bit unseemly to toot your own horn in your blog, but if journalist and author Virginia Postrel can tout her NY Times articles in hers, I should be able to tout my Houston Chronicle opeds in mine - especially when they're the lead in the Sunday Outlook section. The editorial (permanent link) is built around the 3-part mobility solution posts I did a couple weeks ago. When the new 2005 Texas Transportation Institute numbers came out, I figured the timing was right to submit an editorial.

One line did get accidentally cut out in the transition from page E1 to E5 (online version is ok). Here's how the sentence should've read, with the missing piece in italics:
"These private transit companies will offer more nonstop services from more neighborhoods to more job centers with more convenient schedules, increasing commuter transit usage and reducing solo drivers on the freeways."
And, in yet another coincidence, there is a very well written cover story in Governing magazine this month on using congestion pricing to break gridlock. A few interesting excerpts:

One version of that future will be unveiled this month in Minnesota. Starting May 16, congestion pricing is coming to Interstate 394, west of Minneapolis. The highway’s carpool lanes will open up to solo drivers, who may buy their way into the lanes using a transponder attached to their windshield. Sensors in the pavement will monitor traffic volume, feeding data into a central computer every 30 seconds. The price will fluctuate as often as every three minutes, depending on how heavy the traffic is, and will be determined based on an algorithm intended to keep traffic moving in the toll lanes at 55 mph. During rush hour, the total price for an 11-mile trip could rise as high as $8. Late at night, when fewer drivers are on the road, it will cost a flat 50 cents to use the toll lanes (the price will be posted on electronic highway signs). Carpoolers and buses can still use the lanes for free. ...

Minnesota’s HOT project also proves that the politics of road pricing have changed. The early experiments with congestion charging in California were continually dogged by a social-justice critique that said only rich people could afford to buy into toll lanes. Critics called these projects “Lexus lanes,” invoking an image of luxury cars breezing past lower-income drivers, stuck in their Chevys and Hondas amid the red glow of brake lights. Today, however, the Lexus lane argument seems to be fading. For one thing, California’s experience is proving it wrong. It isn’t just rich people using the fast lane. But there also is a new consensus on road pricing, between many on the political right and the left, that didn’t exist just a few years ago.

Historically, it was free-market conservatives who gravitated to the idea of using tolls to manage congestion. Economists have been talking about it since the 1950s; Friedman himself once co-authored an essay on the topic. Through the 1990s, the conservative Reason Foundation made congestion pricing one of its most celebrated causes, promoting it as a market-oriented tool for dealing with traffic. Lately, however, the idea is catching on with the political left — not just in the United Kingdom but in the United States, too. Environmentalists have come to see congestion pricing as a way to improve air quality by keeping traffic moving. Transit supporters see toll revenues as a source of funding for public transit systems. And advocates of “smart growth” see any movement to put a price tag on driving as a good thing — hopefully inspiring more people to use transit or to buy homes located closer to where they work. “Road pricing 15 years ago was a bit of a gleam in an economist’s eye,” says Michael Replogle, a transportation specialist with Environmental Defense. “Today, we see that it works, it’s efficient and it can produce a lot of winners.” ...

The [Minnesota] plan passed with broad bipartisan support. “There is now a much clearer recognition that the pricing tool is the most powerful way to manage congestion,” Johnson says. “We’d be absolutely silly not to give this a try.”

Public opinion seems to have shifted, too. In March, the University of Minnesota released a survey of 1,000 people who drive I-394 frequently. Sixty-four percent thought the toll plan was a good idea. Most tellingly, support is just as strong among people whose household incomes fall below $50,000 as it is among those above $150,000. Minnesota’s data tracks with surveys from San Diego, where focus groups show that lower-income drivers use the HOT lanes, too, especially when they’re in a pinch. “Even for the less well-off, it’s affordable, and probably smart, to use the lanes on days when their value of time is higher,” says Ken Buckeye, the program manager for MnDOT. If the choice is between paying $1-per-minute late fees at the day care center or a $4 toll, for example, people of all income levels are likely to pay the toll.

Part of the political support for congestion pricing in Minnesota came from transit advocates. One reason is because some of the toll revenues — half of whatever is left after paying to administer the system — will support expanded bus service along the corridor. A second factor is that transit advocates like the idea of sending drivers another price signal, in addition to the cost of a gallon of gasoline, which might induce them to consider alternative modes of transportation. Ann Rest, a Democrat and transit supporter, sponsored the HOT lane bill in the Senate. “I hope that when people begin to see the actual price of driving their single-occupant car, that they will realize the savings they could get from carpooling, vanpooling or taking the bus,” Rest says.

Evidence from San Diego suggests that those price signals make a big difference. After I-15 switched over to variable tolling, the number of carpoolers on the road doubled. This is very exciting stuff for transportation planners, because it means that the existing highway capacity is being used more efficiently. “When you’ve got a finite resource like highway lanes, you’ve got to manage it in a way that provides you with the greatest return on your investment,” Buckeye says. “The variable fee is just a very logical step to manage demand.”

Thursday, May 12, 2005

Houston gets an A+

Came across a random press release on an A+ bond rating for Houston's airport system, and it had a few interesting facts in it:

Intercontinental serves as the primary commercial airport for the metropolitan area. Houston-based Continental operates its largest hub at the airport and, along with its Continental Express regional affiliate, accounted for 83.2% of enplanements at Intercontinental during fiscal 2004. Reflecting the strength of the economy and Continental's increased operations at the airport, enplanements at Intercontinental increased at a 5.4% average annual rate since 1992. In calendar year 2004, Intercontinental ranked as the nation's 10th busiest airport.

Hobby, located seven miles southeast of downtown, serves as the market's secondary commercial airport and features mostly low-cost carriers providing point-to-point domestic service. Southwest, which considers Houston as one of its 'focus cities,' accounted for 85.6% of enplanements at the airport during fiscal 2004. Reflecting the capacity constraints of Hobby's older terminal facilities, enplanements at the airport increased at a 0.5% average annual rate since 1992, to 4.0 million passengers in fiscal 2004 when the airport ranked as the nation's 43rd busiest facility. The city's third airport, Ellington Field, serves general and military aviation. ...

The city is in the midst of a $3.31 billion capital program, of which $2.56 billion (77.2%) has been appropriated through March 31, 2005, with most of the related work at or near completion. The program includes extensive terminal renovations and expansions at both Intercontinental and Hobby, as well as the addition of a north parallel runway at Intercontinental. Of the remaining $750 million in projects, the airport anticipates financing approximately $250 million through external borrowing.

The system's primary market area consists of the eight-county Houston-Galveston-Brazoria consolidated metropolitan area (CMSA). The metropolitan area recorded a 2.2% annual gain in population since 1990 to an estimated 5.2 million residents as of 2003. The regional economy recorded a 6.6% annual growth rate over the past decade as measured by total personal income, outpacing the 5.1% rate for the nation. Per capita income in the metropolitan area equals 118% and 109% of the state and national averages, respectively.

Take those last stats and combine it with the lowest cost of living of any big city in America, and you have a pretty sweet deal. That spread between income and basic cost of living is money that's available for better housing (including renovating older housing), restaurants, charities, arts organizations, theater, museums, festivals, entertainment, vacations, higher education, and entrepreneurship. In other words, it's the raw fuel that drives our vibrancy, and we have more of it per capita and in total than any other major city in America. Kind of puts a different spin on "Energy Capital of the World" doesn't it?...

Wednesday, May 11, 2005

Houston #13 on Forbes Best Cities for Business

Forbes 2005 Best Cities for Business list is out, and Houston placed a very respectable #13 out of 150. Texas as a whole made a strong showing with 4 in the top 20: Austin (3), Houston (13), Dallas (19), and Fort Worth (20). #1 was Boise and #2 was Raleigh-Durham - although I found it very strange that they had a sidebar on Raleigh-Durham titled "Deadville" (mega-sprawl, weak downtowns, thin culture and nightlife, etc.). Not sure how the Raleigh-Durham chamber of commerce is dealing with that one ("Um, there's a page missing in these complimentary copies you're handing out...")

The rankings were partially based on the cost of doing business, job growth, and educational attainment. Somebody will have to explain to me how Dallas ranked 23rd for cost of doing business, but we were 41st. Everything I've heard says our costs are almost exactly the same - and Dallas' housing costs are actually a little higher (a study a few years back attributed that to zoning).

Only a few big cities did better than Houston: DC (4), Atlanta (9), and Phoenix (12). Most of the really big boys ranked pretty badly: New York (120), LA (106), Chicago (87), and San Francisco (81). Florida also did amazingly badly, with all 13 of its cities ranked between 58 (Melbourne) and 138 (Miami). California also did pretty badly, and Rich Karlgaard has a column in that issue advising Californians to evacuate and recommending where they should go in "the interior":
"One-third of Los Angeles residents now tell pollsters they are sick of their city. The percentage of L.A. malcontents has doubled in only two years, according to polls cited by Anne Taylor Fleming, a local essayist. Of course, one learns to take any poll analysis with a grain of salt. But my gut tells me this one has it right. The radio talk shows in L.A. these days yap constantly about the prices of houses, car commutes that never end and the breakdown of public services."
Who's ranked at the bottom, you ask? Modesto in the central valley of California at #150, where I'm sure the people and businesses are fleeing in-mass to their neighbor city, Stockton, ranked a much more respectable 149...

Tuesday, May 10, 2005

Houston housing: steady as she goes

On Sunday, the Chronicle had some great color-coded maps of the local real estate market in the Business section (right side chart links). Bottom line: even though we were flat last year, on a longer-term basis we're appreciating at a very reasonable, sustainable pace. Like that bear-porridge story I can't remember: not too hot, not too cold.

We're not ultra-hot like the east or west coasts, where home building is more restricted, but they're heading for a crash and already feeling the hit to economic and population growth (Boston, in particular, has been lamenting their inability to keep the grads from their wonderful universities because of outrageous housing costs). A hot real estate market is like a one-time-shot bargain with the devil: you get a short-term boost as everybody feels wealthy, but ultimately the higher housing costs stunt economic growth and drive away the middle class, who cash out of their house and retire to cheaper digs, usually in another state - thus denying the local city much of whatever wealth benefits do accrue from high real estate appreciation (right now, Nevada, Arizona, and Florida are the big beneficiaries of the cash-out and move phenomena). That generation of home-owners make out like bandits at the cost of future generations of home-owners. Companies quickly realize they can't afford to pay new employees enough to afford a decent house, so they start sending operations elsewhere, even offshore. Economic stagnation sets in.

A few observations from the articles and maps:
  • Houston continues to be the most affordable big city in America, with average housing costs almost $50K below the national average ($136K vs. $184K)
  • Las Vegas suddenly hit a wall on available land to build (surrounded by protected federal land), and housing values shot up almost 50% in one year as rampant demand from evacuating Californians ran ahead of abruptly slowing supply. If this keeps up, I'm not sure where the blackjack dealers and showgirls are going to be able to afford to live. Casinos will have to start building their own employee apartment complexes.
  • Waterfront in Galveston and Brazoria counties is hot and getting hotter. I think you'll see it as a major retirement destination for Texas baby boomers, especially with the benefit of UTMB health care.
  • The core is very healthy, with good appreciation in most zip codes, including many of the least expensive neighborhoods. Central Houston is getting more and more attractive as a place to live, with a growing list of amenities.
  • Evidently the hottest of the hot areas are inside the loop near Memorial Park and in Bellaire. I live in Meyerland and can attest to the Bellaire tear-down-and-build-a-McMansion phenomena, which continues to amaze me with their ability to cram ever more house on ever smaller lots (or, in some cases, spread across two lots). I kid you not, somebody even built something strongly resembling a medieval castle across from Bellaire High School (I can almost picture arrows being poured from the ramparts onto hordes of attacking teenagers... a la Lord of the Rings).
  • Good value but not much appreciation in the outer burbs, which you should expect if you buy a house there. The tradeoff is that you get a great new house in a nice new subdivision, but the house depreciates as fast if not faster than the land appreciates, so you generally stay just about even, mainly because even newer houses are available not far from where you live.
Wondering what the number one thing is the city can do to improve home value appreciation? Improve education. School districts have a big impact on values. If HISD makes good progress, home values will have nice gains for years to come.

(Addendum on businesses fleeing high housing costs: from Orange County, where the average home is now over $600K: "Fluor is the third Fortune 500 company in a week to say it is breaking some Orange County connections (HQ moving to DFW). Last week, Boeing Corp.said it was moving key rocket jobs to Colorado and Pacific Life said it was moving its head office to Omaha, Neb., to save an estimated $10 million a year.")

Monday, May 09, 2005

How Houston's traffic congestion stacks up (so to speak)

In a pretty random coincidence, the week after I write about a mobility solution for Houston, the new Texas Transportation Institute 2005 Urban Mobility Report has come out. The Chronicle has pretty good coverage of the Houston specifics. The most important thing to note is that everything is based on 2003 data, so nothing the Mayor has done in the last year and a half is in there: light timing, Safe Clear, etc. Safe Clear seems especially promising, as one stat indicates that 49% of delays are from incidents. It would be nice to see it expanded beyond the city limits to the county or even the metro area.

A few other random observations:
  • If you think Houston's bad, browse through some of the stats to see the pure hell known as the City of Angels. (Fortunately, angels have wings, and they certainly need them there.)
  • We look pretty good on the 1982 to 2003 stats (p.20), with only a minor worsening (ranked 38th in the country). The explanation is pretty simple: horrible congestion during the peak of the oil boom in 1982, a big crash afterward, and substantial road building since then. In other words, we started off a lot worse than other cities when the data collection began.
  • Transit usage really dropped after 2001 in Houston. This was not due to forced light rail transfers (which didn't happen until 2004), but because of huge financial incentives by automakers to keep up demand after 9/11, which made new cars a whole lot cheaper, which, in turn, reduced used car values. Everybody on the margin could suddenly afford a car and stopped riding the bus.
  • Dallas has a slight edge on Houston, which I'm willing to bet is because more employers have abandoned Dallas for the suburbs, reducing commutes. Houston has a more balanced and centralized geography and demographics that tends to keep employers here. (for example, moving your company to The Woodlands is really going to upset your Sugar Land and Clear Lake employees)
  • A lot of the other big cities that have less congestion than us tend to either have weak economies and/or growth, or they have radically decentralized so employers are spread more evenly over the metro (which can actually make it harder to switch employers without moving).
  • p.22 shows that we stack up pretty well relative to other very large cities.
  • If you want to see some stats on some scary roads, check out this p.5 on HOV lanes. HOV lanes are helpful to Houston, but nowhere near as critical here as they are in LA, DC, Seattle, and Dallas where the mainlanes can take twice as long or more at rush hour (and almost three times as long on I-10 in LA!).
  • To put 63 hours per person of annual delay in perspective: that's about seven and a half minutes each way each day.

My prediction? Houston's making pretty impressive efforts on mobility (here's one), especially relative to a lot of other cities. While I'm not sure we'll reduce congestion, or even stay put (although it's possible), I think we'll get worse a whole lot slower than a lot of other cities, so our rankings should continue to drop/improve.

Sunday, May 08, 2005

Who was the real loser this weekend?

Yup, the Rockets were whupped by the Dallas Mavericks by 40 points in game 7. I'm sure they're having quite the celebration up there. But in a lesser noticed story, Dallas voters also rejected adopting a strong-mayor form of city government similar to Houston's. From the Chronicle article:

Meanwhile, voters in Dallas, which is struggling with high crime and racial tensions, shot down a proposition to strengthen the mayor's governing power Saturday. With nearly all Dallas precincts counted, about 62 percent, or 65,885 voters, said no to a major overhaul of the city charter that would shift the balance of power at City Hall to the mayor and away from the 14 council members.

Mayor Laura Miller and other supporters of a strong-mayor government had said it would free the mayor to address the city's woes: job losses, an empty downtown and the highest big-city crime rate in the country.

Opponents, including former Mayor Ron Kirk and all 14 council members, said the proposal would give the mayor too much power and fail to ensure adequate checks and balances.

Despite the proposal's failure, Miller said she believes Dallas residents want change. "I think that the opposition did a good job in repeating over and over again this was scary and too radical. In reality, it was a lot weaker than what other strong-mayor cities have," she said in Saturday's online edition of The Dallas Morning News.

A quote from the Dallas Morning News article:
"The City Council has proven over the last 20 to 30 years that they are incapable of moving forward, and they're partly responsible for businesses leaving the city," Mr. Burnett said.
I'm no expert on the intricacies of strong vs. weak mayor systems or the specifics of the Dallas proposal, but what I have read is that the trend is away from city managers and toward strong mayors because of accountability to voters and the ability to get things done. There also seems to be a steady beat of bad news coming from Dallas and good news coming from Houston. It has to make you wonder: who lost more this weekend? Houston and our hopes for another NBA championship? or Dallas and their chance at a real turnaround?...

(update: Chronicle editorial)

Thursday, May 05, 2005

The mobility solution for Houston - Part 3 of 3: Cash-out parking at work

OK, so now we have our high-speed network of MaX lanes (part 1) and a robust set of transit options on that network (part 2). The final piece of the puzzle is giving people the real financial incentive to switch from their car to these new transit options. The third LA Times article (abstract) provides that final piece: letting employees cash-out of their subsidized free parking space at work.

"Once you buy a car, insure it and have a parking permit, why not drive to work? That's what most of us do, and it's a choice made much easier because 95% of automobile commuters in Southern California park free at work. Employer-paid parking is the most common fringe benefit offered to workers, and the cost of all this free parking amounts to about 1% of national income. Almost everyone who can park free drives to work, but taking away any fringe benefit is difficult.

There is an ingenious way out of this dilemma: Employers can offer commuters the option to "cash out" the value of their free parking. Commuters can continue to park free, but the cash-out option encourages them to consider alternatives to driving to work alone. Would you walk, bike, carpool or ride the bus to work if someone paid you to do it?

If employers with more than 50 employees rent parking spaces for drivers, California law requires them to offer their workers cash equal to the parking subsidy. The money the employer saves on parking goes to the commuters who stop driving, so the program costs the employers almost nothing.

Few people have heard of the law, and the state has not enforced it. Even so, some companies voluntarily offer their workers cash to not park, and the results are promising. In one study, the share of Southern California commuters who drove to work alone fell from 76% before a cash offer to 63% afterward. The number of cars driven to work fell 11%. Three times more solo drivers switched to carpools than to transit, which shows that offering cash instead of parking can work where public transit is not available. By encouraging carpools, the offer of cash exploits the vacant seats in cars already on the road to work.

Employers praised "cash for parking" for its simplicity and fairness, and said it also helped them recruit workers. The cash-out plan reduces traffic congestion, conserves gasoline and improves air quality without increasing employers' costs."

I've heard of other cases where 25% or more of employees switch to some form of carpooling or transit when given the cash-out option. I believe downtown has a 30+% transit ridership rate because parking there is usually not free. Can you imagine the congestion reduction if we could remove 1 in 4 cars at rush hour? It would be huge. Even a 10% reduction would be very noticeable.

So there you have it, the complete 3-part mobility solution for Houston that is not only inexpensive but could be implemented very quickly:
  1. A comprehensive network of managed express lanes (MaX Lanes)
  2. A wide range of point-to-point private transit express services to use them
  3. Cash-out parking at work: a no-cost financial incentive to stop hauling 2 tons of steel to work with you every day

The mobility solution for Houston - Part 2 of 3: Private Transit

OK, so we have our express lane network, but now we need good options on it. The second LA Times article (abstract) talks about the need for private transit options in addition to, or even as a replacement for, public transit.

"As matters now stand, public transit agencies are franchises: They have an exclusive right to provide service in their communities. It is illegal for private providers to enter the market for transit services and compete against a franchise operator. In truth, though, transportation is just another service. A public franchise for bus or rail service is no more necessary or natural than a public franchise for selling shampoo.

Public transit agencies have two conflicting objectives. First, public transit is intended to transfer wealth. Government agencies use public resources to provide mobility to people who could not otherwise easily travel about an area.

Second, public transit is intended to clean the air and decongest roads by competing with the automobile. But the only way to lure people who don't really need public transportation — people who drive where they're going — is to make them want to use alternatives.

Unable to pursue both objectives simultaneously, most public transit agencies resolve the conflict by failing at both.


If we want transportation services — jitneys, private buses, cabs — that can compete effectively with automobiles, we are going to have to bring transportation entrepreneurs out of the shadows, inspect their vehicles and license their operations. If we are committed to making sure that poor people, the old and the disabled have ways to get around, we should stop subsidizing transit agencies. Instead, we should fund transportation voucher programs, give subsidies to the people we want to help and unshackle the supply of ways to get around. There are plenty of people who would eagerly try to make a buck by cooking up new ways of getting folks from point A to point B. But at the moment, it's a crime to do so.

I'm not sure we want to get rid of Metro entirely. They do provide a pretty solid network covering the basic street grid. Where private transit makes a lot of sense though is point-to-point express commuter services.

Once we have the comprehensive network of MaX lanes, I'd like to believe Metro would omnisciently provide the perfect schedule of express services from the various neighborhoods to multiple job centers. But realistically, this is where private providers can be much more effective.

Provide a straight passenger-mile subsidy, and let private operators figure out who wants to go where at what times during morning and evening rush hours. Metro could continue to provide park-and-ride lots, but let people go there and find a whole range of private-operator vehicles to major and minor job centers across the metro area. Some might even offer some interesting service options, like onboard wireless Internet access. But the main reason for private express transit is simple: the odds will be much higher that people will find service where they want to go when they want to go there - which means they will actually use the transit options instead of their cars.

Tomorrow, the final part 3: getting paid not to park at work.

Cinco de Cinco de Cinco

A totally random observation: today is not only the Cinco de Mayo holiday, but it's May 5th, 2005 - or 05/05/05 - or, in my hacked attempt at Spanish:

Cinco de Cinco de Cinco

(It'll probably sound better if you're singing it after a couple margaritas... ;-)

Tuesday, May 03, 2005

The mobility solution for Houston - Part 1 of 3: Express Lane Network

In my kickoff post, I promised a solution to our traffic congestion woes. In an amazing coincidence, three articles recently in the LA Times have laid out the key elements. The first article (abstract) explains that:

And the neat part is that this doesn't have to be a multi-decade project. A few left-lane and HOV conversions could create a relatively comprehensive network very rapidly, although interchanges will be tricky and may take some extra time and money. And, as I mentioned before, I think a great name for this network would be "MaX Lanes" - Managed eXpress lanes that move the maximum number of vehicles at maximum speed.

So that gives us the relatively inexpensive high-speed network. Tomorrow, part 2: creating convenient options on that network with private transit.

Monday, May 02, 2005

Why pricey gas doesn't really cut driving or increase transit usage

Great editorial in Forbes on the economics of driving. His provocative title: "$3 Gas? We'll Shrug It Off."

"If your car ran on unrefined $42-a-barrel crude and got 20 miles per gallon, fuel would cost you a nickel a mile. But add in the cost of turning crude into gasoline and gasoline into miles--i.e., the amortized cost of refinery and car, plus taxes (which pay for the highway, among other things) and insurance--and the mile runs you 30 cents to 50 cents. The IRS lets you expense 37.5 cents per mile for business travel in your own car. The American Automobile Association estimates that it cost an average of 56 cents per mile to drive a new car in 2004. Or to put it another way, driving would be only 15% cheaper, at most, if crude oil were free, or if your car engine delivered 1,000 miles per gallon. Grumble though we may at the pump, drivers buy miles, not barrels. And when the price of crude doubles--rising from, say, $28 a barrel to $56--the price of the average mile rises only 10% to 15%. That just isn't enough to impel most of us to change our behavior very much."


"The length of your daily commute is the other key factor that strongly affects how much gas you burn. But if living 10 miles farther from your workplace saves you $5,000 a year in property taxes and other carrying costs on the house you want, that translates into a dollar a mile in savings. If it takes an oversize gas-guzzler to make those extra miles bearable, or even pleasant, you'll buy it."

That stat really hit me between the eyes: free gas only cuts driving costs 15%, which means doubling the price of gas only increases driving costs 15%. This is yet another nail in the coffin for James Howard Knustler's arguments that our civilization is about collapse from higher oil prices. It also means that higher gas prices aren't going to do much in the way of getting more people on transit or living closer to their jobs.

April highlights

Near the first of every month, I'll be adding a post highlighting key posts from the previous month(s), with a particular focus on significant ideas I'd like to see kept alive for discussion and action. The main page will only show about a month's worth of entries, and I know most new readers won't go back into the monthly archives linked at the bottom of the right-side column. If you're just interested in the highlights, here they are:

From April:

And from March:

Thanks for your interest in Houston Strategies.