Monday, October 23, 2017

Why congestion after freeway expansion is a good thing, entrepreneurship hotspot, people want space, market urbanism, those savages in HTX, and more

Before getting to this week's items, a commentary on this silly article in the Chronicle, "Adding lanes doesn't reduce congestion. So what is TxDOT doing?"  What always gets lost in these kinds of stories about congestion growing back to previous levels after a freeway expansion is the additional number of people being moved every day, even if they're at the same speeds as before.  More cars and people are being moved, and that's a good investment. Do people honestly believe Houston would have been better off if we had frozen our freeway network 20 or 40 years ago?  Think of it this way: we want government to invest in infrastructure that gets a high utilization (as opposed to roads to nowhere). If they built a new airport runway and it filled up with flights, people would sing the praises of such a great investment, yet if we invest in additional freeway capacity and it fills up, it was wasted money? How does that make sense? It means the government built mobility infrastructure exactly where people needed it - where there was unmet demand - and isn't that exactly what we want them to do as taxpayers? (I made a similar comment on this story criticizing the widening of I10)

The more I think about it, the more the airport analogy really exposes the absurdity of the "induced demand" anti-freeway expansion argument.  Applying the same argument to airports would say every city only needs a single runway, because new runways just enable more flights and "induces demand" for more flying! So absurd!

Moving on to this week's items:
"Cities will sprawl—it’s pointless to try to stop the phenomenon. To the dismay of many environmentalists and urbanists, most people dislike tight quarters. They use rising incomes to buy themselves more space."
Some great stuff recently from The Market Urbanism Report:
"Note: I don’t mean to pick on Houston. In fact, I really like Houston, which is why I talk about it. Plus, they have great urbanists there who are working hard on these issues and might actually ease up on citywide parking requirements!"
"He begins with the obvious case study of Houston. While not completely unregulated, Houston has lighter regulations than other major U.S. metros, and builds much more housing than any of them. Although Houston receives many of the stereotypical scapegoats thought to increase housing prices ― millionaires, immigrants, corporate relocations, and luxury condos ― median home prices in Harris County remain $141,000."
  • Does adding expensive housing help the little guy? According to our analysis, it helps not only the little guy but every other income group.
  • Texas toll roads: a big step towards open markets for transportation
  • Housing and transportation costs have become a growing American burden. Clearly shows the rise of the car (and the plane) in the 20th century. And I think the author is downplaying the huge benefits of all that freedom of mobility. But what I don't think it shows is how much the car has become a luxury status symbol. I'm stunned how many high-end models there are now, and it's a bit of a misnomer to call that a "cost of transportation" when a used Honda Civic or Toyota Prius would get you the same places for a whole lot less money per mile (especially depreciation). To call all these luxury SUVs, trucks, sports cars, and sedans a "cost of transportation" is like calling a Brooks Brothers suit or Chanel dress a "cost of clothing".
Finally, leaving you with a bit of humor from Reason ;-D

Houston's Anarchic Zoning Laws are an Affront to Sim City

They just build whatever they want, wherever they want, like a bunch of savages.

That's us - savages! ;-D

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posted by Tory Gattis @ 6:18 PM 9 comments

Saturday, October 14, 2017

New strategies for post-Harvey Houston and MaX Lanes

A couple of big new items from me this week.  The first is the official release of my COU white paper (along with Wendell Cox) on Houston after Hurricane Harvey, cleverly titled "A Layman’s Guide To Houston After Harvey: Don’t Throw The Opportunity Baby Out With The Stormwater" as a follow-on to an earlier piece from Kotkin and Cox.  Our paper led to this interview with Atlantic City Lab.

Out of that work came some preliminary recommendations/ideas that aren't in the paper, but I'm interested in hearing feedback on in the comments. I'll be the first to admit that these are very high level, and that people far more qualified than I are looking into many of these at a much deeper level.
  1. FEMA should accelerate programs to buyout homes that flood repeatedly. 7,000 homes could be removed for roughly $2 billion.
  2. Jumpstart the Trump infrastructure plan with a FEMA infrastructure investment bank, since FEMA is best positioned to see the costs and benefits of flood mitigation infrastructure projects.
  3. Review detention regulations, especially the 10,000 sq.ft minimum rule.  Also consider increasing the detention standard so runoff is actually reduced by development vs. land left undeveloped.
  4. Instead of an outright ban on floodplain development - which risks government takings lawsuits or very high costs of buyouts – enforce high elevation and detention requirements on such developments.  Houston should be confident that every new outlying development is actually reducing the flow of water into downstream bayous.
  5. Review reservoirs for upgrades and improvements.  Evaluate the potential for additional new reservoirs and detention parks.
  6. Consider cross-connecting reservoirs and bayous using high-voltage power-line rights-of-way so areas at risk for overflowing can have alternate drainage channels. One possibility would be to connect the Addicks and Barker reservoirs to White Oak and Braes Bayous to reduce stress and flooding on Buffalo Bayou (see power-line RoW map here and note the dotted lines on the west side near the reservoirs connecting to both bayous).  If such channels had existed during Harvey, thousands of homes near the reservoirs would not have needed to flood during reservoir releases (as Dallas News exposed in this story about a never-implemented 1996 plan under I10).
  7. Use Harvey as a new modeling benchmark for flooding. Projects can be evaluated on a cost-benefit basis for property value that would have been removed from Harvey flooding.
  8. Reinstate ReBuild Houston, including a new ballot this fall if necessary. Popular support seems assured after Harvey.
  9. Consider relaxing minimum parking regulations in favor of additional stormwater retention.  Allow new developments or re-developments to tradeoff parking for additional stormwater retention.
  10. Consider special purpose/TIRZ districts in specific watersheds for mitigation projects in those watersheds.  These projects would be paid for by the tax-increment value increase of properties removed from the floodplains.
  11. When adding new taxes or fees for drainage funding, consider market-based incentives that give property owners credits to reduce their tax with water retention improvements like green roofs, cisterns, water barrels, permeable pavers, and detention ponds.
  12. Don’t let Harvey’s rainfall make us lose sight of Houston’s high storm-surge risk (especially in the industrial Ship Channel) and the continuing need for the Ike Dike or mid-bay solutions.  Evaluate potential financing of these projects with the savings from resulting flood insurance rate reductions.  Eric Berger also pointed out that we've grown complacent about the risks from very high winds, since nothing higher than a Cat 2 hurricane has hit us since the early 60s.  Construction standards should be revisited.
  13. Harvey exposed the need for elevated roads to help evacuations and first responders get around the city during flood events.  As Houston further develops its network of Managed eXpress (MaX) Lanes (see below), consider elevating them to provide this network.  This is the quote that made me think of it: "It seems like there would be a way to create an elevated road that helps people get out all the time [rather than rely solely on low-lying, water-conveying roads]."  -Wesley Highfield, professor of marine sciences at Texas A&M University at Galveston who specializes in flood resilience in an interview here.
  14. Businessweek just profiled the app that came out of Superstorm Sandy flooding in NYC, and now it’s being adapted for NOLA and Portland – maybe Houston should too? Flood Insurance Is Hard. This Hurricane Site Can Help – Bloomberg
One thing Houston is really good at is engineering, and this is really just a large cost-benefit engineering optimization problem that should be manageable: calculating what $X investment will yield in $Y benefits in terms of property protected from future flooding.  Figuring out the right answers should be complex but relatively straightforward. But I acknowledge the politics will be trickier. Fingers crossed our representatives are up to the challenge, even if it involves a few tax increases.

The second item is a video of my recent MaX Lanes presentation to the HGAC High Capacity Transit Task Force Workshop (complete report here). The first 11 minutes are my presentation followed by 10 minutes of Q-and-A.  The first question is from Carrin Patman, Chairman of METRO.  Later in the same video, Sam Lott from TSU has a great presentation on autonomous vehicles.

 

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posted by Tory Gattis @ 4:59 PM 2 comments

Monday, October 02, 2017

Assessing Houston’s Chances and Suitability for Amazon HQ2

This week we have a guest post from Oscar (Erik) Slotboom analyzing Houston's chances for Amazon HQ2.  Chris Tomlinson also weighed in at the Chronicle. And I'll weigh in with my own thoughts at the end, including a silver lining option I think we have a real chance with!

Assessing Houston’s Chances and Suitability for Amazon HQ2
Amazon’s request for proposals by October 19 for its planned second headquarters dubbed HQ2 has unleashed a frenzy of interest across the country. The New York Times has designated Denver as the city to beat, and a leading site candidate in the area is a large tract halfway between Denver and Boulder along highway 36, an office park which curiously was originally developed by Houston’s Phillips 66 to target alternative energy research. Denver’s front-runner status seems justified, since it has the Rocky Mountain high (in more sense than one!) and does not have any fatal flaws which could knock out other likely leading candidates, such as high housing costs and inability to build new housing (Boston, NYC, California), poor business climate and/or government finance (NYC and Chicago), inadequate infrastructure for a 50K workforce (Austin), lack of coolness (Dallas-Fort Worth, Atlanta), and lack of tech workforce in numerous cities, including Houston. There are plenty of rankings and lists of contenders on the web, and not a single one I’ve seen mentions Houston as a candidate (1, 2, 3, 4, 5, 6).

North Texas has been especially interested and eager, with daily press reports of sites that local interests are promoting, including a detailed proposal for Victory Park by Hillwood (Perot’s firm) and Hines, as well as numerous other sites including the planned Texas Central rail station , Reunion arena site, the Valley View mall redevelopment site in North Dallas, the State Fair site at Exposition Park, Plano, and many more. Local interests are submitting up to 50 sites, which are being filtered for one unified submission.

The Houston Business Journal reported that Houston will likely submit a bid. But in contrast to North Texas and other cities, there’s been negligible reporting of HQ2 activity in Houston. Which leads to the questions: how extensive is the local effort, does Houston have a chance, and would HQ2 even be a good fit for Houston?

Amazon’s Requirement
Amazon’s RFP spells out their wishful wish list, and there is no magical place which meets all their desires. So Amazon’s decision will be based on which criteria are most important, and perhaps only Jeff Bezos knows what will drive the decision. And Bezos may already have preferred location(s) in mind and is using this exercise to maximize the incentives to be offered by increasing the sense of competition.

Looking at the RFP, here is the number of lines dedicated to each criteria category:
Lines in RFP on the subject
Houston’s position
Site and Buildings
50
Probably average or below
Incentives
27
Likely to be less than other big cities
Workforce
17
Below tech hubs
Overall Logistics
14
Good
Sustainability and Environment (mainly site buildings)
12
Depends on the building site
Business Climate
10
Good
Education
8
Average
Quality of Life
8
Average or below
Highways
7
Good (congestion is a factor)
Culture
4
Average or below
Public transit, bikes and pedestrians
4
Below average
Housing
2
Very good

If Amazon’s decision criteria are in proportion to the RFQ space, then issues like public transit, culture, and quality of life may not be as important as numerous press reports have suggested, which would work in Houston’s favor. The facility site, incentives, workforce, and logistics appear to be most important. On the other hand, business climate and housing, Houston’s strengths, are not among top categories in the RFP. Most cities including Houston are going to struggle to meet the real estate requirement, either with downtown sites or ready-to-build suburban sites with around 100 acres. Cities with suitable sites under single ownership will have an advantage.

Houston’s Chances
First things first: will the risk of hurricane disasters and potential major disruption to business operations be a fatal flaw for Houston, especially with Harvey fresh on everyone’s minds? There’s a good chance the answer to that question is yes, especially since Seattle is at risk for a major earthquake, and a near 100% safe location for HQ2 makes sense from the business perspective. But the RFQ makes no mention of operational continuity, so let’s assume we’re still in the running.

Sites: Amazon is open to anything and everything, but ideally wants 500,000+ sf by 2019 with space to expand to 8,000,000 sf, which is equivalent to eight of Hines’ newly built 48 story 1,050,000 sf office tower at 609 Main.While there is plenty of vacant space in Houston, I can’t think of a location which is an ideal match for Amazon, especially given the 2019 deadline for phase 1 space of 500,000 to 1,000,000 sf.

This web post suggests three sites in Houston: 800 Bell (former ExxonMobil office), the 150-acre East River site , and the Astrodome.  While 800 Bell is empty and available, it was completed in 1963 and its exterior design screams early 1960s retro, which is probably a negative. Can it be renovated to meet modern standards, everything including LEED standards , trans-gender restrooms and ceiling heights? While the originally planned renovation would have redone the exterior, I’m inclined to think Amazon will want something newer than a 54-year-old building. On the plus side, there are plenty of vacant lots around 800 Bell, and it is downtown, if that’s what Amazon prefers.

I surveyed the East River site last week and I think it is a nonstarter. Approaching it from interstate 10 on Hirsch, you pass through a disadvantaged neighborhood with pre-WW2 housing and vacant lots – definitely not attractive. The east side of the site is bordered by warehouses, and going east along Clinton you’ll find more warehouses, industrial facilities, and a scrap yard. Buffalo Bayou along the site has a large cliff-like dropoff to the water, as well as bulkheads along the water, and is not much of asset in its current state. The north side of the property along Clinton is modern housing, which is not a vibrant urban scene Amazon may be seeking for a downtown location. In addition, there is no site work in progress yet, and the only office building is the old KBR building. I just can’t see Amazon wanting to bring potential recruits to this site, it won’t impress.

The Astrodome may have potential. Harris County has already slated $105 million towards its conversion to a parking garage and event center , and that money could be redirected to an office conversion. Once the Dome is reduced to a shell, you could build multiple levels of offices in a ring around the perimeter inside, potentially getting up to 1 million square feet of offices overlooking the field area, creating one of the most distinctive offices anywhere with myriad possibilities for the center field area and maybe catwalks up high. Somewhat like a smaller version of the Apple headquarters inside a dome. There’s plenty of parking, land for additional buildings is available probably for free since it is publicly owned, and it has good transportation access with the freeway and light rail. On negative side – potentially a show-stopper – is the need to coexist with the Houston Livestock Show and Rodeo, which may be possible for a smaller presence but not for a 50,000 person campus.

The former downtown post office site could be a potential candidate for downtown, but may not be large enough and the developer’s current plan would need to be totally redone. Of course there is plenty office space in the Energy Corridor, such as the 1.4 million sf campus Conoco has recently abandoned , but environmentally-oriented Amazon will probably not want to be anywhere near an oil and gas industry cluster. There could be suburban sites readily available in a suburban area like the Woodlands, but the challenge is to deliver 500,000+ sf by 2019 with sufficient space for massive expansion.

In summary, Houston does not appear to have ideal candidates for the site, so we don’t have any advantage in this crucial category.

Incentives: Houston will of course offer something, but most likely it will be much less than others will offer (and rightfully so, since there’s no compelling reason to give away the farm for Amazon, like Wisconsin did for Foxconn).  Incentives are unlikely to be an advantage for Houston.

Workforce and Education: We’re going to rank behind tech hubs in the important workforce category, and we’ll probably be in middle of the pack in terms of education. Conclusion: there is no advantage for Houston in these categories.

For education, I can’t help but lament the demise of the proposed University of Texas Data Science Center.  This new campus could have been a big plus in Houston’s bid, as well as being a tremendous asset to the region to prepare our workforce for the future. The University of Texas name would have brought prestige and resources that others can’t match. The cancellation due to narrow-minded political interests was a huge loss to Houston. (Disclosure: I’m a Texas Ex.)

Other Factors: For the remaining factors Houston will have advantages in business climate, logistics and housing, but lag behind others in public transit, culture and quality of life (or at least outside perceptions of those -Tory). Overall, no net advantage.

Which brings up a larger, more philosophical issue: are Amazon and Houston a good fit? If Amazon wants to duplicate its Seattle culture, image, and workforce dynamics, probably not. Being in the world’s leading oil and gas center may not be consistent with their values. The high-growth Seattle tech scene is a totally different workforce dynamic with abundant tech workers and high churn. Amazon is notorious for its high turnover rate. Houston’s lack of rival tech employers would provide a more staid, subdued employment scene.

Wildcards for Houston which could put us in play
Diversity: Page 5 of the RFQ calls for the “presence and support of a diverse population”. Houston would probably rank #1 among all contenders in this category, both domestically and in terms of immigrants. With the increased scrutiny of workforce diversity and inclusion in the tech industry, Houston would be a much better place to recruit black and Hispanic workers than Denver, Boston, and Austin, and certainly at least as good as any other place.

Sites and Building: Page 2 states that Amazon has a preference for “communities that think big and creatively when considering locations and real estate options”. As mentioned above, an office in the Astrodome would be highly unique and something that no other city can duplicate, and likely very attractive to millennials due to the coolness factor. But that’s only if the Astrodome is in play for Houston’s proposal.

Health Care: Does Amazon have any future aspirations of being in the health care industry beyond prescriptions?  If yes, the Texas Medical Center workforce and strong medical education system is among the best in the country.

The scuttled University of Texas data science center: Can this project be resurrected as part of Houston’s proposal? It seems unlikely in the short time before the Amazon deadline, but if it can be resurrected it would be very helpful in closing the education gap.

Jeff Bezos Houston connection: He attended elementary school in Houston at River Oaks Elementary from fourth through sixth grade. Does he have fond memories of Houston, or does he prefer to avoid Houston? 

Downtown Freeway plans: The $4 billion plan to rebuild and expand Houston’s downtown freeways to relieve congestion is expected to move forward in the 2020s. Most or all competing cities except Dallas have nothing in the works even remotely this ambitious for center-city highway infrastructure. Will Amazon view this as a plus?

Airports (Tory addition): fantastic nonstop air access to all of the Americas, if they want to drive an international expansion across Latin America.

Verdict
The chances of Houston being selected seem very unlikely due to our lack of strength in the key categories. And that’s not necessarily a bad thing, since Amazon is probably not a good fit for Houston.

Just about every city with at least 1 million in population will submit a bid. For most cities (including Houston), this isn’t about winning, but it is about showing what you have to offer, and also that partnerships with Amazon are desired and valued. Amazon will continue to need distribution sites and regional offices, and here’s a chance to show Amazon our strengths, so when they need that next logistics facility, they’ll know we’re a good place to do business. So, assuming that Houston will submit a bid, the Greater Houston Partnership should be sure to highlight our strengths in logistics and transportation.

Amazon’s RFP says the final site selection and announcement will be in 2018. And North Texas should calm down and not get overexcited. Most likely, they’ll also be on the losing end.

Tory Commentary
In general, I pretty much agree with Oscar. I also think there's a more fundamental issue, which is that Amazon doesn't want to compete with the high-paying energy industry for local talent (especially if there's another oil boom!), nor does the energy industry want Amazon poaching their hard-recruited talent, especially technical talent. I just don't think there's much appetite here for Amazon, and the feeling is probably mutual.  

Also, I think Amazon wants to be the "big fish in a small pond" (or maybe 'modest lake' for sufficient scale) wherever they go, with dominant influence (think Mercedes or Airbus in Alabama or BMW or Boeing in South Carolina), and that just wouldn't be the case in Houston with so many major Fortune 500 corporations here.  They certainly would be in Denver though, and I agree with the NYTimes it's the most likely winner if they put a competitive incentive package together.

The silver lining: The most interesting wild card from Oscar's analysis is the UT data science center: if somehow those became synergistic campuses (maybe using the Astrodome or old Astroworld land?), it would certainly be a major differentiator vs. other cities.  Even if we didn't win the HQ2, they may circle back for a major secondary office (data science + Americas intl HQ?)... a consolation prize worth shooting for?

UPDATE just added some new thoughts on the Astrodome option here.
UPDATE 2: Big Houston proposal at Generation Park.

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posted by Tory Gattis @ 6:14 PM 5 comments