Sunday, April 29, 2007

Does land-use planning/zoning inhibit a great restaurant scene?

One of my posts last week inspired quite a debate in the comments on whether land-use planning or zoning has any impact on the restaurant scene in a city - interesting enough I thought the topic deserves its own post. The post noted that Houston was ranked as the sixth-best city in the country for restaurants by Forbes Traveler.

The debate started when I responded to a commentor that noted that Dallas doesn't seem to have nearly as interesting a restaurant scene as Houston - they are really much more chain-focused vs. our "home-grown" scene of great independents. That fits my limited experiences in Dallas, and I have heard it from a number of people over the years, especially those that moved to Dallas from Houston. But if you look at my eight reasons for why Houston has such a great restaurant scene, you'll see the Dallas shares pretty much all of them except for zoning and maybe a bit of diversity.

My comment:
I think zoning/permitting regs play a part in a bland restaurant scene. I've heard that cities are reluctant to permit/approve independent restaurants (or developments that will have them) because they have such a high failure rate, and they fear the image of empty retail. They feel chains are much safer and more stable.

In Houston, anybody who thinks they've got a better idea can find a hole-in-the-wall to start, and if they're successful, it's easy to expand from there, and if they're not, somebody else comes along to replace them pretty quickly. Really quite the Darwinian survival-of-the-fittest ecosystem that leads to some great winners over time.
Others pointed out that chains have more money to work through the permitting process, and some requirements for stand-alone restaurants driving up costs vs. strip centers, which also favors deep-pocketed chains. That led me to some additional thoughts:
I'm going to propose another potential cause: in my experience, cities tend under-zone commercial relative to demand (exception: places like CA with a local tax system heavily tilted towards commercial because of property tax caps). Sometimes it's from residential objections, but, more commonly it's from simple economic growth: people have more discretionary income over time (and want to buy more and eat out more), but planners zoned the "appropriate" amount of commercial space many years in the past. Given limited commercial space relative to demand, chains have more financial clout vs. independents, and win the competition.

Finally, to tilt the playing field even more against independents, property owners also prefer the stability of chains as leaseholders. This happens in Houston too, but because our commercial space can expand to meet demand, there's still plenty of affordable space willing to take independents.
There are other ways to develop a great restaurant scene, as shown by some of the other cities on the list. One is lots of tourism, like Las Vegas or New Orleans (which also has a unique cultural stew to help). But another way is in older cities like NYC, Chicago, SF, and Boston that may have plenty of regulation, but they also have high incomes and a lot of old, existing street-level retail that has to fill with something, and restaurants are a very common use.

But when it comes to the everyday, modern, car-based city, it looks like Houston's approach of no-zoning and light regulation creates the richest diversity of great independent restaurants (and affordable too!). Now, whether or not that's good for our waistlines - and health - is a whole 'nother story...

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Thursday, April 26, 2007

Randal O'Toole on Houston

Randal O'Toole of the Cato Institute and the Preserving the American Dream Coalition visited Houston last week from Oregon and spoke to a substantial crowd at a Houston Property Rights Association luncheon. He gave a compelling slideshow on overreaching urban planning and wasteful rail transit run amok in other cities around the country (he was quite the engaging speaker for an economist ;-). He posted his thoughts on his visit to his blog. Some highlights:
...I sense in Houston a dynamism that I haven’t found in any other American city except Las Vegas. Like Las Vegas, in Houston they tear things down, they build things up. They gentrify neighborhoods. They build skyscrapers all over the place.

And they are building freeways. Not “no new roads,” like Portland. Not “one new freeway,” like Denver. But freeways, all over the place. (Of course, when I say “freeways” I mean tollways, but to me a freeway is free of stop lights, not free of pricing.)


A month or so ago, the Houston Chronicle had an article about mixed-use developments. It seems that Houston developers are following the national trend of attracting “affluent young professionals and empty nesters tired of long commutes” with such developments.

Reporters managed to find nine such planned developments scattered throughout the Houston area. ...

...the lesson is: even without subsidies, developers will build mixed use for the market. The market may be limited and it certainly will not transform an entire region. But it will be there for those who want it.

Kathleen happened to drive us down one street that is in the process of being gentrified. We saw fancy new townhomes next to run-down grocery stores and used-car lots. This process can take place rather quickly, and without any urban renewal subsidies, in a city with no zoning.


The American Dream Coalition is going to hold its 2008 conference in Houston so everyone can come see how a city without zoning and with minimal planning works. I hope I can make another visit to the city before then so I can see one of the region’s master planned communities (but planned by private developers, not by government).

If you're interested in more, I've posted on some of his stuff before, like the costs of transit vs. cars and the risks of badly done rail transit.

Update: Rad Sallee's Chronicle interview.

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Tuesday, April 24, 2007

Local pride and Houston's identity

Hope you caught Lisa Falkenberg's column in the Chronicle today on GHCVB efforts to build local pride in our city, so, in turn, we'll promote it to others. I thought it made a lot of good points, especially coming from someone moving here from Austin.
..."Austin gets really small after a while. There's Prozac in the water, and people seem overly concerned with being weird. Houston, with all its imperfections, is real to me. I love this place."

But this is exactly the kind of anecdote that worries the folks at the Greater Houston Convention and Visitors Bureau.

They're concerned that Houstonians lack pride in their sprawling urban metropolis, that they're so caught up in the hustle and flow of daily life we can't see all that America's fourth-largest city has to offer.


All this would seem fine and good, except that I'm not convinced Houstonians need a remedial course in civic pride. The same folks who ask me if I miss Austin will, in the same breath, spout off for a half-hour about Houston's best barbecue joints, the iFest and the Art Car Museum.

Rice University sociology professor Stephen Klineberg is skeptical as well: "I don't know where they get this idea that Houstonians bad-mouth their city."

In fact, Klineberg says, given Houstonians' persistent concerns about traffic, crime and pollution, it's shocking how much they love the place. According to the most recent annual Houston Area Survey results, more than 80 percent think H-Town is better than other metropolitan areas. Less than 10 percent said it's worse.

For more scientific proof, look at the wildly successful "Houston. It's Worth it." campaign, still available on its Web site of the same name. A photo book is due out soon.

Once you get past the comedic references to flying cockroaches and the miraculous skin-preserving benefits of humidity, there are thousands of comments on the site that could have been written by the visitors bureau folks themselves.

Houstonians gush over the low cost of living, authentic local restaurants, diversity, world-class museums, endless opportunity and generosity of the people, as exhibited after Hurricane Katrina. ...

If there is a problem with Houstonians' perception of their city, it may be an inferiority complex inspired, as best I can tell, by the stereotypes of outsiders.


The quality of life surveys say Houston is fat, dirty and hard to navigate. They leave out the good stuff: Houston just completed a $4.5 billion downtown revitalization. It's planting a million trees and converting bayous from drainage ditches to parks. It's diversifying its economy from oil to every kind of tech: bio, nano, info, enviro.

"We're in the process of redefining this city," Klineberg says.

Meanwhile, there's one truth about this city I hope will never change: Houston is whatever you want it to be.

Celebrities have their opinions and I have mine. My Houston is a drive down Rice Boulevard's tunnel of oaks. It's banana pancakes at Buffalo Grill. It's Urban Cowboy flashbacks when I approach the skyline from I-45. It's the best classic country radio station this side of my iPod.

I'll do my part to spread the word.

Hear, Hear! It's a big part of why I've made so many efforts on this blog to brand Houston - not just for outsiders, but to build our own pride in the city - to understand the essence of what makes us special and forge an identity around that. My current favorite is Mayor White's "Open City of Opportunity" summing up our friendliness, hospitality, entrepreneurial energy, minimal regulations (including no zoning), open-mindedness, diversity, affordability, social mobility, optimism, and charity (especially after Katrina) - although I think there are others that are complimentary and could be used in certain contexts:
Would love to hear your perspectives on our identity in the comments.


Sunday, April 22, 2007

Curing everything, Metro analysis, #2 migration, #6 restaurants, #4 for blacks, see HT,CC!

Time again to hit some smaller miscellaneous items. But first a quick anecdote I think you'll enjoy. My wife and I were watching the very good (albeit a bit twisted) Spanish movie "Volver"on DVD the other night (the Pedro Almodóvar movie with Penélope Cruz). Set in Madrid, at one point a character with cancer says "They offered to take me to Houston. They cure everything there." Not a bad reputation to have in the international community. Pretty cool, in fact.

OK, on to the list:
  • If you're interested, Neal Meyer has put together a pretty comprehensive spreadsheet analysis of Metro's ridership stats from 1997-2007. The short overview: their ridership increased steadily until 2001, then started declining with the light rail construction, spiking up again temporarily after Katrina. The #2 Bellaire bus is their busiest bus route.
  • A company recently ranked Houston #2 for migration, behind Chicago and ahead of Austin, LA, and Atlanta. LA surprises me, since the Census shows them losing domestic population, but this company's data is based on a relatively small survey. Thanks to Houstonist for the link.
  • Houston was recently ranked as the 6th best restaurant city in the nation by Forbes Traveler, and the best in Texas. This is a topic I've covered before: Houston as dining out capital of America, and why we have such a great restaurant scene. Zagat says we eat out more times per week on average than any other major city in America, and at near the lowest average cost. Looking at their criteria, it looks like cost was mostly ignored while tourism was factored in, which is probably why we came in behind those other five cities. From the KHOU story:

"Only New York, Chicago, San Francsico, Los Angeles and New Orleans finished ahead of the Bayou City. Houston was followed by Washington, D.C., Atlanta, Boston and Las Vegas.

Here's what the Web site had to say about Houston restaurants: "San Antonio may have a far more manifest Mexican food culture, but Houston, which spirals forever outward, has far more breadth and depth — from one of the nation’s finest and most elegantly modern Italian ristorante, Tony’s ($110), to Robert Del Grande’s Café Annie ($110), where New Texas cuisine took hold, and Américas ($100), which pioneered Nuevo Latino food in this country. One of the best places to get the most important meal of the day is the funky Breakfast Klub, where the irresistible specialty is waffles and chicken wings."

  • Black Enterprise magazine recently ranked Houston the fourth-best city for African Americans, behind DC, Atlanta, and Raleigh-Durham (???). Thanks to Houstonist for the heads up, and they have some of their own thoughts.
Finally, if you haven't seen the wonderful one-hour Houston documentary "Hot Town, Cool City" yet, you'll have another couple chances this week at the River Oaks Theatre on Wednesday and Thursday, April 25th and 26th at 7pm and 8:15pm. Spread the word to all your friends and loved ones! Thanks.

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Thursday, April 19, 2007

2007 Fortune 500 HQ analysis for Houston and Texas

A couple years ago, I looked at how Houston and Texas scored with the Fortune 500 headquarters. Well, the new 2007 list is out, and I thought it might be interesting to take a look again at how we're doing.
  • We're still the #2 city behind NYC, with each of us gaining 2 more HQs. They moved from 43 to 45, and we moved from 20 to 22. Atlanta lost a couple from 14 to 12 (one of those was San Antonio-based SWB/AT&T buying Bell South), and Chicago picked up 1 from 10 to 11. They counted Halliburton in Houston this year, and they really should count it again in Houston next year, even if the CEO "offices" in Dubai.
  • They don't have stats for metros, and I didn't try to add them up (who can guess which metro has all those small cities in CA?), but I don't think we would fall much from #2: behind Chicago and possibly the SF Bay Area. We only pick up 1 to 23, with Anadarko in The Woodlands, but Chicago and SF pick up a lot in their smaller suburban cities.
OK, a little bad news. I just did the count, and the greater DFW metro has 24 F500 HQs, edging us out by 1. If it makes you feel any better, we have 4 in the mega-biggie F100, while they only have 1 (Exxon in Irving, and by far the majority of their employees are in Houston).
  • As a state, Texas has moved up in the world over the last two years (48->56), passing California (52->52) to become the #2 state just behind New York (54->57). It is quite possible we will pass New York in the near future, as we have 10 companies ranked between 500 and 600 ready to move up (including 4 between 501-520), while New York only has 6, and their highest one is 544.
Somehow a major editing error made it into their opening article, which included this sentence with some very wrong numbers:

"New York boasts the most Fortune 500 firms this year with 57 companies, while Texas and California took the No. 2 and 3 spots, with 45 and 22 headquarters respectively."

For some reason they knocked 11 off our count, but a whopping 30 off the CA count. I'm sure CA isn't happy. No idea how they let that slip through.
All in all, a great couple of years for Houston and Texas. We'll have to check the progress again in another couple of years...

Update: I thought of another interesting cut on how well Texas and Houston are doing. Texas has 11% of the F500 with only 8% of the US population (1.4x), the Houston metro has 4.6% of the F500 with only 1.8% of the US population (2.5x), and the city of Houston has 4.4% of the F500 with only 0.7% of the US population (quite the impressive 6.3x).

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Tuesday, April 17, 2007

Toll roads and commuter rail

I wanted to comment on a couple very interesting Chronicle mobility articles from Monday. The first is Rad Sallee's Move It! column on Texas House Bill 1892:
...would give the Harris County Toll Road Authority first shot at developing any new toll projects on state-owned right of way in the county.

If the county weren't interested, the Texas Department of Transportation could offer the job to a private developer or other applicant.

...Another boon for the county, Emmett said later, is that any payments generated by a toll project would be spent on road or clean-air projects in the same TxDOT district or an adjoining one.

The bill also says the fact that a county is earning revenue from a toll project cannot affect its share of state highway funding.

And if local officials and the regional planning agency (here, the Houston-Galveston Area Council) determine that a local toll project is needed, TxDOT must allow use of land for free.

All of these would be really great things for Houston by clearing the way for some much needed HCTRA projects. I have mixed feelings about the core of the bill - a two-year moratorium on private toll road projects. There are some really good features of these deals, which Len Gilroy of the Reason Foundation recently articulated to the Texas Senate here. But the noncompete clauses really worry me. We won't be able to expand I35? Or what about state and county roads that run parallel to the TTC? So much of the crux of these deals rests inside the arcane language of the encyclopedia-sized contracts, which few seem to be familiar with. Ultimately, it may be safer and simpler to just have TXDoT build the TTC (via contractors, of course) and toll it themselves (to pay off cheap tax-free bond financing).

Second, there were a lot of interesting nuggets in County Judge Ed Emmett's Q&A interview.

Q: What projects do you especially want to push through?

A: The completion of the Grand Parkway (outer freeway loop) has got to occur, and the northeast section of Beltway 8, and the Hardy Toll Road into downtown. Also, we need a toll road on U.S. 290, and if we don't talk about commuter rail there, we're making a big mistake. We need commuter rail to Fort Bend County too, and we have to relocate some of our freight rail.


Q: Metro's plan approved by voters calls for commuter rail to the northwest out U.S. 290 and to Fort Bend County along U.S. 90A. A line toward Galveston out Texas 3 has also been discussed. How do you rate those?

A: The U.S. 290 rail corridor is underutilized, and U.P. has said they're perfectly willing to have that one looked at for a commuter line. I don't think a line toward Galveston has high feasibility right now, partly because coming in from the east you get mixed up in heavy freight traffic pretty quick.

I'm mostly in agreement. My long-time readers know my negative feelings on commuter rail for Houston. I recently made an exception for rail to Galveston, but I have heard similar things from others: there's just too much freight traffic once you get into the city. Not sure if there's a reasonable-cost solution to that or not, especially with the rapid growth of Bayport.

I'm not a fan of the 90A Ft. Bend line, because essentially all it will serve is the medical center (the 30 min slog up the Main St. LRT to downtown is too long a connection to be realistic vs. the 59 HOV lane). Since 90A is being upgraded to near-freeway status, it seems unlikely the rail would get enough riders to justify the cost: it only realistically serves one job center, and driving to that job center from Ft. Bend isn't bad enough to push people to rail.

I'm moving towards a more neutral to slightly-positive stance on the potential 290 line. It's underutilized by freight, serves a gigantic chunk of northwestern Harris County that lacks adequate spoke freeways into the core, and could effectively serve several job centers with connections: Uptown (BRT connection), Greenway (BRT+LRT Uline), Downtown (intermodal center), and the med center (Main St. LRT). Lot of potential riders + lot of potential destinations + relatively low conversion cost = reasonable option. I still don't think it's as fast as HOV/HOT express buses, but the "bulk capacity" of rail may trump that in this case (i.e. it could replace a whole lot of buses and drivers, many of which might be redeployed for better service in other parts of town).

In the last two questions, he essentially supports transit-oriented development and rail on Richmond. I really like what I'm hearing from Mr. Emmett, and think he may end up being quite the fine successor to fill Eckels' big shoes.

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Sunday, April 15, 2007

Urban corridors initiative

So I attended the City of Houston Planning Department's event on the urban corridors initiative on Saturday at the GRB. I'd say about 100 or so people attended. The goal is to improve our development regulations around LRT/BRT transit stops to get the most value out of those transit lines, and that means mixed-use, high-density, pedestrian-friendly. They're going to be holding individual workshops for each line, which you should definitely check out if you live along any of the planned lines.

Their logic is pretty compelling:
  1. Millions of people are moving to the Houston metro over the next 2-3 decades, hundreds of thousands of them into the City of Houston itself
  2. That's a lot more cars on the road, straining our existing grid and freeways
  3. A significant number of those newcomers would consider living in high-density, mixed-use, pedestrian-oriented neighborhoods if they're available, and they would walk and take transit for more of their trips
  4. We can get a lot more value out of Metro's planned LRT/BRT network in the core if we encourage this type of development near the stops
I really like the scale/scope of their planning effort. I've written before on the problem of complexity overwhelming planning at larger scales, but this seems like the right fit. They're focused on a 1/4-mile radius around stops, about a 5 minute walk (studies have found this to be most peoples' limit for walking to/from transit). That would add up to a very manageable 15 square miles tops (1/2 mile width times about 29 miles of track), out of about 10,000 sq.miles in the metro, 1,778 in the county, 600 in the city, and 100 inside the 610 loop. That's about 2.5% of the land in the city, yet it has the potential to hold a significantly higher percentage of the city's population. Consider that Manhattan has only 20 square miles - not much larger.

All indications are that the end result will be a form-based development code targeted near the stops, with some mix of incentives. Existing single-family neighborhoods will be protected.

They asked for our input on what we would and would not like to see. I pushed for two elements I consider key:
  1. Sidewalk awnings/shade (including tree canopy), to protect from the sun and rain in our tropical climate.
  2. Diagonal street parking wherever possible (like Cotswold), backed up with extra garage or other parking in the rear, if they want the mixed-use ground floor retail to have any chance at all. I've heard the term "teaser parking" used - insufficient parking in front of a store that people think they will be able to get when they set out on a trip, but they're willing to drive to the more inconvenient parking in back or down the block if necessary when they get there. The pedestrians will not be enough to support the ground retail, and they will have to offer some convenient up-front parking if they want to compete with traditional strip malls to draw customers. Diagonal street parking is best way to do that and keep the urban feel, and it could be either in the public street right-of-way or on the private property (in place of the strip parking lot the developer would usually build). Let's face it, Houstonians are not trained to parallel park.
All in all, it seems like a well run project trying to do some good things in a very focused and developer-friendly way (where possible). I'm looking forward to the May 23rd meeting where they will discuss the results of the individual corridor workshops.

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Thursday, April 12, 2007

Speaker event, bullet trains, Chicago rail troubles, Toronto wants HouRail, Mercer QoL, Houston vs. Austin in software, zoning vs. kids, blogging stds

An announcement before clearing out the smaller, miscellaneous items: Randal O' Toole, economist and senior fellow at the Cato Institute, is visiting Houston from Portland and will be speaking at the Houston Property Rights Association luncheon next Friday the 20th on the topic "How a General Plan Would Harm Houston." I don't always agree with Randal, but he makes some strong, fact-based arguments on transit and planning that ruffle a lot of feathers, and it should be a very interesting presentation. For more details and to RSVP, email Barry Klein.

Speaking of Portland, it's one of our misc items tonight:
FHWA Blasts Portland's Idological Transport Planning
For years what has passed as transportation planning in the Portland, Oregon area has been based on little more than ideology and virtually no reality. Portland has engaged in building light rail lines with the intent of attracting people out of cars, but its highway market share remains unchanged. Portland planners naively thought that people would rush to switch to better transit, not realizing that few are prepared to spend longer traveling or to use transit to go places that it does not go. Portland's reward has been development of the worst traffic congestion of any primary urban area its size. Last year a report prepared for the planning agency indicated that firms were leaving and avoiding the Portland area due to its traffic congestion. Now, the Federal Highway Administration has leveled strong criticism at Portland's regional transportation plan (see: FHWA criticizes Portland planning ). The agency commented: "It is difficult to find the transportation focus in this opening chapter of (the) Regional Transportation Plan." Instead, the plan focuses on bike trails, light rail, and expensive skyline transport. FHWA further noted: "The plan should acknowledge that automobiles are the preferred mode of transport by the citizens of Portland. . . . They vote with their cars every day." This is a particularly unusual development, since government agencies are reluctant to criticize one another. This shows how desperate the situation has become.
On to the rest of our list. It should provide you with plenty of interesting reading material for the weekend.
  • In my recent post on the difficulties facing inter-city rail in Texas, one of my arguments was "let's see if California can pull it off first" - they have more people, more density, more congested airports and roads, and a nice linear urban zone from Sacramento to San Diego. Well, this op-ed came out in LA Times recently arguing that bullet trains won't work there either. It sparked this debate on Planetizen.
  • A NY Times article on the crumbling Chicago Elevated ("the El"), the staggering costs of repair and maintenance, and how the service is rapidly deteriorating to the breaking point.
  • Christof on why Toronto wants their rail transit to be like Houston's
  • Mercer recently release their global city rankings for quality of life, and Houston didn't do well, although they don't release enough details of their methodology for us to really understand why. The main problem, IMHO, is they look at statistical averages for everything, so their ideal city is an small, upper-class (mostly anglo) one with no industrial or construction jobs (limited or no growth). As soon as you add poorer or immigrant populations, or blue collar jobs, your QoL indicator averages will fall - even if there are plenty of parts of the city that have all the same characterstics of that ideal city I described before (good schools and "quality of life"). And, to top it off, of course, they're ignoring costs. The real proof of "quality of life" is people who vote with their feet, and Houston is one of the largest migrant-magnets in the country (I think I've seen a half-dozen Ohio license plates this week alone). We must be doing something right.

    I have to say, based on this, some very, very lucky expats will get a big $ boost because they're taking a position in "low scoring" Houston, and they will live like kings when they actually get here.
In any case, you can read more about the survey here, including an excellent defense of Houston in the comments by John Whiteside (and Richard Florida's confession that he likes Houston too).
  • A surprising ranking showing Houston has more software companies than Austin, although DFW is the king-of-the-hill in Texas.
  • Brian sent me this frightening story of cities using exclusionary zoning to keep "expensive" kids away from their school districts. An excerpt:
"The New Jersey Supreme Court ruled last month that towns could condemn land for open space under eminent domain laws to stop development that might result in "overcrowded schools.'' That put schoolchildren on a par with pollution and traffic congestion as valid reasons for seizing property." (zing!)
  • Finally, there's been some buzz lately in the blogging community about standards of conduct since one popular blogger started getting death threats in her comments. I'm lucky enough that the vast majority of my commentors are very reasonable - the flaming is usually kept down to mild sniping. Very rarely I have to delete a comment, most of the time because it's spam, but very, very occasionally because it's pure vitriol that adds no value to the debate. I would like to emphasize that I do not delete comments simply because they disagree with me - but I reserve the right to delete those that do not maintain a basic level of civility.
Have a great weekend. Hope to see you at the urban corridors meeting Saturday.

Tuesday, April 10, 2007

Will Houston also be the center of alternative energy?

The New York Times and Wall Street Journal have dueling perspectives on the geography of alternative energy. NYT is touting Silicon Valley. But the Wall Street Journal recently focused on what's happening in Houston (7-day open link, subscriber permalink).
While it's too soon to say which of these efforts will thrive and which will wither, energy-industry veterans are increasingly confident they know where at least some of tomorrow's leaders in alternative energy will be: Houston, the home of big oil.

In California, Gov. Arnold Schwarzenegger is pushing ahead with efforts to keep his state among the leaders in the development of green energy. The Midwest continues to explore new ways to exploit its competitive edge in ethanol. And Northeastern universities are pumping big money into energy research. But while Houston's economy still sits on a foundation of conventional petroleum, alternative energy is suddenly on the rise here, too.

Major oil companies have stationed key alternative-energy divisions here, newer ventures in wind energy and biofuels are emerging, and Texas universities are pushing hard to develop carbon-free energy.

Houston's emergence as an alternative-energy center is partly an outgrowth of the city's role as home to major players in the conventional-energy industry. "There's always been this sort of joke within biofuels, that when these technologies become real, the traditional oil companies will snap them up," says Nathanael Greene, a senior policy analyst with the Natural Resources Defense Council, a New York nonprofit environmental advocacy group.

As alternative energy moves "from the margins into the mainstream," the big, established energy companies will make more of a commitment to the market, and Houston "is going to play a role just because of its importance in the oil industry," Mr. Greene says.

But Houston also is playing host to newcomers in the energy business, thanks in part to a welcoming regulatory environment and efforts by the state government to encourage the production of alternative energies.

One advantage Houston offers alternative-energy companies is that the approval process for new facilities is far less onerous in Texas than in many other states.

"Texas creates a very positive environment to work in," says Jeff Trucksess, executive vice president of Green Earth Fuels LLC, a biodiesel company started a year ago that is based in Houston and is building a production facility along the Houston Ship Channel. "There are strict rules on what you have to do, but it's a very efficient process." The company's Houston site won permits last year and is expected to begin producing biodiesel in July.

"In Texas, things happen -- stuff gets built," says Michael Skelly, chief development officer for Houston-based Horizon Wind Energy, which will produce power from seven wind farms in six states, including Texas, by the end of this year.


"This was the natural place for this business," says Robert Lukefahr, president of BP Alternative Energy North America Inc., who emphasizes the city's wealth of knowledge of the energy business. "These are folks that know how to bend metal and put it in the ground and do it safely," he says.

The wind-energy business boomed in Texas after the 1999 passage of a state law that requires a certain amount of the electricity sold by utilities in the state to be generated from renewable sources.

More recently, the state has again taken the initiative by easing the construction of transmission lines for wind farms, a crucial step if entrepreneurs are to continue to build turbines in the windiest corners of the state. Mr. Skelly enthuses about the new rules, which have set Horizon and other wind companies on a land grab to claim the best spots for turbines.

Houston also is emerging as a home for both start-ups and established energy companies entering the biodiesel business. These producers like the city in part because of its access to the huge Texas consumer market and its location at the center of a nationwide fuel-distribution network, with extensive storage facilities, pipelines and rail and water connections. "Economically, it's always been our opinion that if you're in the heart of the distribution center...that's a great place to be," says Mr. Trucksess of Green Earth Fuels.


The city also offers easy access to people experienced in every aspect of the energy business. For instance, Green Earth's plants initially will produce fuel mostly from soybean oils, but as different feedstocks come into use the company expects to tap into Houston's expertise in commodity trading, Mr. Trucksess says.

"It's already in the DNA of Houston to be energy-oriented," says Rick Zalesky Jr., a vice president of biofuels and hydrogen at Chevron Technology Ventures, a Houston-based unit of Chevron Corp. Chevron is conducting biodiesel research at a couple of laboratories in Houston that have been used for decades in the conventional energy business. And it is a partner in Galveston Bay Biodiesel LP, a start-up that is building a facility in nearby Galveston, Texas.

Houston also is home to research on hydrogen, nanotechnology and other areas that could have a dramatic impact on the energy picture in the years ahead. Research on alternative fuels is being done not only by big energy companies like BP, Shell, Chevron and General Electric Co., but also by nonprofit institutions like the Houston Advanced Research Center and Rice University, which has convened a number of recent conferences on alternative energy.

It's good to see the city embracing alternative energy instead of resisting it. The best strategy is to have bets across the board, and run with the winners (a la the Silicon Valley model). I'm also hoping the oil companies will use their giant cash hoards to buy up promising, smaller alternative energy outfits and move their headquarters here (like from CA, or ethanol outfits in the Midwest).

I'm struggling to come up with historical examples of other cities heavily based on one industry and one technology that either succeeded or failed to adapt to technological change. Plenty of cities have seen their industries collapse, but they seem to be more from competitive shifts than from fundamental technology changes (Detroit's Big 3 automakers, Pittsburgh steel, defense companies in LA, etc.) Of course Silicon Valley has morphed with information technology's evolution, but that seems different somehow (or is it?). If you have thoughts or examples, I'd love to hear 'em in the comments. It would be nice to have some data points for "lessons learned"...

Sunday, April 08, 2007

Economics of transit vs. cars

I came across this pretty interesting analysis of the cost per passenger mile of using a car vs. transit. Cars turn out to be surprisingly efficient, on both a cost and pollution basis. Cars work out to about $0.22 per passenger mile, while buses are about $0.92, commuter rail is $0.65, and light rail is a hefty $2.03. Even the often demonized "highway subsidy" only adds 0.38 cents per passenger-mile, bringing it to $0.224. When all the transit modes are blended together:
"So transit costs 84 cents per passenger mile, nearly four times the cost of driving. Transit fares average 20.4 cents per passenger mile (interesting how the transit industry keeps fares close to the actual cost of driving), so the subsidies are nearly 64 cents per mile."
And after factoring in "social costs" like pollution...
"So transit costs are nearly three time auto costs, while transit subsidies are more than eight times auto costs."
His conclusion:
This doesn’t mean transit is evil. What this should suggest instead is that the transit industry needs to make itself more efficient. This could be done by introducing competition into the industry or, at the least, contracting out transit to private operators who spend about 60 percent as much, per passenger mile, as public agencies. It goes without saying that an efficient transit industry would not sink billions into rail capital improvements when buses can do everything rail can do at a far lower cost.
My thoughts? I do think it's good to debunk the common myths of transit cost-effectiveness and environmental benefits vs. cars. But there are caveats.

First, this is a blended average of transit costs. Even the bus number is mostly based on substantially-empty buses covering local routes. I'm sure nearly full express commuter buses are far more efficient than cars on a per-passenger-mile basis. They also use limited freeway capacity (HOV/HOT) more efficiently during peak hours. So I think that's still a very legitimate transit strategy, albeit one where his suggested privatization could bring improvements, not just in cost, but in schedules, service, and routes.

Transit's core mission to provide mobility to those without it, whether they can't drive or can't afford a car, is also still a perfectly legitimate social good, regardless of this analysis. Yes, it's not cheap (mainly because the buses aren't full enough at the required frequency and coverage), but we've still made a choice as a society to provide it as the transportation option of last resort with comprehensive coverage.

I think it makes a valid point on rail, especially commuter rail in modern, dispersed, auto-centric cities like Houston (remember, that "almost reasonable but still too high" $0.65 number above is for cities designed around commuter rail like NYC, Chicago, Boston, and DC - it would be far, far higher here). My thoughts on Houston's core LRT/BRT plan are more nuanced. The economics clearly don't justify it. So it's essentially a city amenity - like sports stadiums or parks or libraries - that the citizens/voters choose to provide because, well, they want it. For tourists. For the "urban lifestyle." To support a dense core of pedestrian-oriented neighborhoods. To enable errands, lunch, and outside meetings during the day for those who use commuter transit. Whatever the reasons, they voted for it, and the economics are only a piece of the equation, same as for other subsidized amenities like stadiums, parks, and libraries.

Thursday, April 05, 2007

WSJ on Houston's commercial real estate boom

Just a quick pass-along tonight. The Wall Street Journal profiled Houston's commercial real estate market yesterday (seven-day open link, subscriber permalink), and I thought I'd cover key excerpts:

Soaring oil and gas prices have sparked a robust economic rebound that is lifting the fortunes of Houston's commercial real-estate market.

The region's downtown office market has seen a dramatic recovery that has prompted some developers to jump-start plans for new projects...

The gleaming glass-clad icon [former Enron building leased by Chevron] is now a symbol of the Houston real-estate market's rising tide. "It was a catalyst for change. Now we're looking at the next development cycle," says Paul Layne, executive vice president and head of the Houston regionfor New York-based Brookfield Properties Corp., ... The lease helped central business-district office vacancies drop to the 12.4% in the fourth quarter from 18.8% last year, according to Property & Portfolio Research, a Boston real-estate research firm.

At the same time, the Bayou City's Texas-size pride was dinged last month when Houston's Halliburton Co. said it would open an additional corporate headquarters in Dubai. Asked how the decision will affect the company's Houston-area employees and real-estate needs, a spokeswoman for Halliburton writes in an email that Dave Lesar, the company's chief executive, is "the only employee who will move to Dubai to lead the company's efforts in growing Halliburton's business in the Eastern Hemisphere. ... No other employees are being relocated (or offices vacated) and no jobs will be lost as a result of opening the additional headquarters in Dubai."

Halliburton, which employs more than 5,000 people in the Houston area and has more than 3,000 employees in various locations throughout the Middle East, is still in the process of determining how many people will be located in Mr. Lesar's new offices.


But the potential for a loss in energy-related status may be offset by the area's increasingly diverse economy. The energy sector as well as health-care and education and construction sectors pushed job levels up 4.2% In January from the year-earlier, well above the national rate of 1.7%, according to the Bureau of Labor Statistics. The National Aeronautics and Space Administration is also a major employer in the region. The region's economy, which suffered two straight years of job declines with the unwinding of Enron and the consolidation of other companies, has been on the upswing since 2004.

The economy has raised nearly all sectors of the commercial real estate market. Office, retail and warehouse markets all saw vacancies fall and rents rise in the fourth quarter, though rents and building values are generally still below national averages. The area's retail is also expanding, driven partly by the rising number of consumers in the region as its population rose at more than double the national rate in 2006 from the year-earlier to 5.5 million, according to Moody's

As is often the case in sprawling regions, the real-estate recovery has been somewhat uneven. Apartment vacancies have risen as some refugees from Hurricane Katrina have left the Houston area. Meanwhile, office vacancies are as high as 21% in such areas as the northwestern Houston submarket and speculative office construction in the so-called energy corridor of West Houston is expected to push vacancies up to 14.2%, PPR says.

Houston's historically volatile economy and the relatively few constraints on new building construction make some experts cautious about real estate investments there. Kenneth T. Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley, gives the short-term prospects for office and apartment investments in Houston an A and a long-term grade of B minus. "In the long run it's not as good because of its boom-bust nature," Mr. Rosen says.

At first I thought he meant the nature of the energy industry, but I think what he's really saying is that, in a relatively unregulated market like Houston, there's lots of competition in real estate, and occasional boom-bust overbuilding cycles. That makes life a little riskier for real estate developers, but great for tenants, who can count on finding plenty of affordable space - obviously a good thing for the city and maintaining a vibrant economy.

Tuesday, April 03, 2007

Winter 1Q07 Highlights

Time for the quarterly highlights post. These posts have been chosen with a particular focus on significant ideas I'd like to see kept alive for discussion and action, and they're mainly targeted at new readers who want to get caught up with a quick overview of the Houston Strategies landscape (just finished celebrating our two-year anniversary). I also like to track what I think of as "reference posts" that sum up a particular topic or argument.

Don't forget we offer an email option for the thrice/week posts on Sunday, Tuesday, and Thursday nights - see the Google Groups subscription signup box in the right sidebar. An RSS feed link (Atom) is also available. As always, thanks for your readership.

And don't forget the highlights from the first two years. For what it's worth, I think the best ideas are found there, often in the first year (I had a lot "stored up" before I started blogging).

Sunday, April 01, 2007

Mayor expands historic preservation, air pollution initiatives

Mayor White recently announced that he wants to expand both his historic preservation and air pollution initatives, actually combining them in a new direction. In his own words:
"As most Houstonians know, we've lost a lot of our precious historical structures over the years to redevelopment. I've recently taken steps to try and strengthen our historic preservation incentives while still respecting property owners. I've also recently started an initiative to further cut toxic air pollution in Houston, particularly from industy in the eastside ship-channel area. But several constituents have pointed out to me, very validly, 'Isn't air pollution an integral part of Houston's history? Won't we lose some of our historical character if we clean up the air? What will happen to those awesome multi-color rainbow sunrises over refinery row?'

To answer such concerns, I've hammered out a joint agreement with the mayors of Baytown and Pasadena to designate a cross-municipality "industrial air preservation zone," where companies who prefer not to cut toxic emissions like benzene will be given the option instead to rollback their emissions to historic levels, and where current and future generations of Houstonians will be able to visit and say, 'Wow, so this is what east Houston used to smell like? My grandfather always told stories, but I didn't believe him!' "
Some other details from the announcement: the zone has also been perfectly aligned so 225 eastbound drivers should still see spectacular technicolor sunrises, truly one of Houston's greatest sights, exciting for the whole (sleepy) family. As a matter of fact, the visitor's bureau has agreed to add "Scenic 225" to its tourists maps, with tips on best viewing and smelling. In a related note, the Safe Clear program will be dramatically beefed-up along 225 to handle expected accident increases from tourists staring into the sun while driving.

A formal ribbon-cutting event is planned for the zone, as soon as John Travolta of Pasadena-filmed "Urban Cowboy" fame can be scheduled to attend and verify, after taking a deep, hacking breath, "Yep, that's the same air we breathed while filming in 1979-80!"

Hope you enjoyed this year's April Fools post, which has now become quite the high-pressure annual event for your friendly local blogger, but writers' block hasn't stopped me so far. You might also enjoy these from previous years:
Update: Christof's amusing "Alpacas on Richmond"