Saturday, July 29, 2006

All The News

We have had a news feed on for quite a while now. I have found the news feed to be less useful than I had hoped. Today I changed the news feed to use the feed from If you haven't looked at that site, you need to.

You can find our new news feed @


Thursday, July 20, 2006

If You Build It

There has been a lot in the news lately about maintenance problems. We have has a number of water main breaks and the water department estimates there are $85,000,000 in repairs needed to completely fix the system as of today. The school board was shocked by how much money was needed for repairs of its buildings, not counting the cost to build new ones. At the last council meeting we heard that around $5,000,000 would be needed to renovate the basement of city hall and rearrange and consolidate offices in the buildings at city hall plaza. The convention center is loosing business because of the age of its audio-visual equipment. These stories have much in common.

Our local governing bodies need to get rid of the habit of build it for the lowest price and then forget it. They are starting to ask for big picture, long term estimates on the cost of fixing existing problems. This is good, as it gives a better picture of where money is likely to go and helps set goals and priorities. The old practice of ignoring maintenance until it's a crisis and then managing the crisis for the photo op just doesn't work. We need to go beyond this. We need to ask as part of the planning process "What is the likely life expectancy of project, and what are the on going maintenance and operating expenses likely to be."

Here is a real life example. One of my customers does a lot of laser printing. He goes through at least a ream of paper a day. The printer he was using was one that was recommended to work with his software, was competitive in toner cost, and for the most part worked well. The problem was, he was replacing the drum almost once a week. At $200 per drum, that added up pretty fast. We checked the specifications and with the manufacturer and found the printer was working as designed. The drum wasn't designed for that much printing. We started shopping for a new printer. We found sites that actually estimated the cost per page based on costs of consumables (toner, drums, paper, etc.) and the expected use life of the printer. He eventually bought a new printer at about twice the price of the printer he was using. His cost per page dropped from about 10 cents per page to just over 2 cents per page. The printer paid for itself in a little over 3 months. He learned that initial purchase price is only one of the questions that needs to be asked, and in his case it was not the most important one.

Similar questions need to be asked on all projects, especially the big expensive ones. Questions like how much electricity will be needed to heat, cool, and light a building? How long will a roof last? How long before you have to dig up buried pipes? What can be done to lower operating costs and make components last longer? What types of preventive maintenance will get the best use and life for new facilities and infrastructure and what is the cost? These questions need to be answered when we are looking at the up front, procurement costs. It needs to be part of the design and planning process.

In the end, if you build it you have to maintain it.

Employment Directions

Members of the Convention and Visitors Bureau and the Chamber of Commerce gave a report at the last council meeting. Pat Malloy, who is the chief salesman of the city, gave his report and showed updates to sales materials they are using to sell the city to businesses. This years approach is a pleasant change.

This years sales program really emphasizes the success of technology companies, especially information technology. They created an insert titled San Angelo Texas Making Connections. It is full of technology companies using our excellent telecommunications infrastructure to grow and run thriving businesses. Eight companies and organizations are profiled and the benefits of doing business here are well presented.

The chamber is still learning how to sell San Angelo to technology companies. I talked to Pat during a break and he said that unless we get lucky, we have probably seen our last heavy industry move here. The companies that are moving labor intensive manufacturing are going straight to the cheap foreign countries. He also noticed that remote backup and business continuity type operations are already here and it is such a natural fit that he is trying to attract more. It is obvious that there is a lot of work to be done, but the shift is promising.

Couple this shift in marketing with some other initiatives, and San Angelo could become a technology oasis out here on the edge of the desert.

Tuesday, July 11, 2006

A positive Business Climate

In my last post I referenced a quote that businesses looking to relocate cared more about reasonable taxes and a positive business climate, than bells and whistles, or even short term bribery. Again, I come to points made during the sales tax debate, but which have probably wandered off the radar screen since.

Of particular interest in the current instance, I recall speaking in favor of a proposed convention center put forth by one Jamie Crowe, the original developer of Quicksand Golf course. Funding would have been through bond sales under an IRS provision called “63-20”, which would have given the city more protection than the county would have received for its prison proposal. The city was asked for two things: a formal statement of approval; and extending Concho St. out to the Loop.

I thought the Concho St. extension, done as a continuation of the existing street, winding along the river in scenic style, would have given tourists in four wheelers direct, attractive access to the historic downtown we spent so much effort and money on, while still encouraging heavier commercial and through traffic to take the Houston-Harte fourlane. Cost to the city at that time was estimated at $1.5 million, with the total $14 million cost of the center being borne by Mr. Crowe and his partners. The city dithered, as best I recall the final objection was the possibility traffic noise would disrupt the contemplative atmosphere of a religious retreat across the river, and Mr. Crowe and his money went away.

We had another petitioner to spend money when Mr. Baker of Oklahoma approached, wanting to rebuild and reopen the old Neff's Amusement Park, of which I have many fond childhood memories. He also approached with his own money, needing only a lease on the city-owned property in time to refurbish over the winter and be ready for a spring opening. This time it seems we were in the midst of a parks “master plan”, far from completion of course. I recall the comment being made that the site would be just lovely for a “Children's Art Museum” to complement the new saddle across the river. Predictably, Mr. Baker took his money and left in disgust and equally predictably, we now have neither a museum or an amusement park on the land.

These examples don't touch on what local businessmen go through. I have seen two businesses on Bell St. shot down by Planning, both vacant lots now. One that recently passed muster had to jump through hoops including, but not limited to, being on City Council Agenda as two separate items at one meeting. Some time ago, I went to get the forms for a relative to build a fence. The paperwork emphasized that all neighbors had to be notified and invited to comment on the minor zoning change, but even if there were no negative comments, or even positive comments from them, approval was not to be taken for granted.

Now excuse my radically libertarian view of property rights, but in my never humble opinion, if that which a property owner and taxpayer wants to do will in no way depredate on his neighbors, the city's job should at least be to stay out of the way, if not actively expedite the approval process.

In fact, I have been so radical as to suggest that so long as a business proposal has no identifiable downside, the city ought to designate one individual in Planning to be THE contact number for a prospective business, and act as ombudsman to help this potential investor jump through the hoops and create the tax paying, employment providing business become a reality. In some venues, this is called a “positive business climate.” We might give it a try, what we are doing now ain't setting any records.

Un "Conventional" Flexibility

It is useful to remember this space originated to make the argument against the twenty year extension of the sales tax. We lost that issue, and I have stated I have no intention of revisiting the issue in the sense of going after repeal. Unlike the first round, which was bullied through under threat of another tax, this last was approved by the voters after a good airing of the issues.

This is not to say a lot of the points we made were not valid. Taylor Publishing took the money and ran. Nice people, I worked for them as a temp, it's just that our bit of freebie could not overcome the underlying economics that eventually forced the company to move. One of our latest grants was to Lone Star Beef, essentially giving them money to do something they were almost certainly going to do anyway.

Now we have a Convention Center proposal that is nothing short of ludicrous. The location suggested ties that proposal to the spending on sports facilities. San Angelo has under-utilized meeting space all over town. If some of it is less than state of the art, say on Wi-Fi or latest Audio Visual presentation equipment, we can upgrade a whole lot of servers and overhead projectors for the price tag on this white elephant.

Mr. Turner provides links to articles well worth the trouble, the Sports Journal piece is a good short one, the Chapin article on “Real Costs and Benefits of Sports Facilities”, is a definitive serious study. Let me cut to the chase as I did during the original debate. The measures of economic impact of visitors, be they for a rodeo or a computer skills seminar are generally suspect.

It doesn't take a great exercise of common sense to know those dollars, however many, will primarily target service industry jobs. A visitor will need a room, food, probably some gas, and will likely shop at some local stores. The jobs creation side of the sales tax repeatedly used the term “high-tech, high pay jobs with a future.” Tourism, be it for business or pleasure results in dollars trickling down to hotel staff, cafe waitstaff, and retail clerks. Some places will at least be locally owned, but other businesses will have economic “leakage”, in that a national hotel or car rental agency sends a fair part of that to corporate headquarters.

Three major leaks in a few days on water mains, and we are already hearing $150 million as a price tag on that little upgrade. At least this time they might remember to put in a valve here and there to let us isolate problem areas during repairs. I mention this latter because state law gives us rather greater latitude in using 4B tax money if such use is approved by the voters.

An example we used during the tax debate was that of Tyler, Texas. Tyler uses the biggest part of its revenue on pay-as-you-go infrastructure improvements. They have improved their airport, built city parks, done flood control, even paved streets with their 4B money. In the course of this plan, they have been able to reduce their property tax rate from 54 cents to a state low of 24 cents.

Going to the Chapin article I mentioned, he addresses the idea that Sports facilities, by bringing out of towners in, shows off a city, encouraging businesses to relocate there. I hold the conclusion as valid for any sort of visitor, not just sports related. “Studies of business and household relocation have found sports facilities to be largely irrelevant, as businesses are usually more interested in factors such as low taxes and a positive business environment...” Imagine that, business actually concerning itself with a major cost of doing business.

I believe we have sufficient evidence that the bribing jobs into town model is not working as advertised. The sales tax can still be used to create a better, primarily lower tax environment that will bring business here. San Angelo has a lot to offer. What we call “rush hour” is light traffic in a lot of cities.

It will require voter approval to change our current use of 4B money, but with that approval we can do things of far greater benefit than what we are doing now. I am not talking about cutting the locally directed sports money, but allowing greater latitude for money we are already collecting. We ask for comment and will be proposing concrete ideas for a reforming referendum on this tax. I really feel a bit guilty here. By effectively opposing the last extension, we may have moved the supporters of the tax to write more restrictive ballot language than was desirable over a twenty year term. I know I can't set a household budget twenty years out, nobody's crystal ball is that good. We really do have some very good people working in government now, we need to give them a little room to work.

Friday, July 07, 2006

Convention(al) Wisdom

I have been reviewing my notes on the proposed conference hotel at Foster Field. This issue is really two issues. First, should the city be a partner with the conference hotel and help fund it with our tax dollars. Next, are there other options for supporting this project without using tax dollars.

Before we go further, lets get some background information. We have a lot of people working in the leisure and recreation areas: 10% according to the latest MSA information we have. That is the fourth largest segment of our economy and it is also one of the lowest paid (see the figures from the BLS). The mean (average) wage for desk clerks is $6.48, maids and house keeping $6.77, food service $7.12. First line supervisors do better but still only make in the $10.00 to $12.00 with management possibly making around $20, but the bulk of the jobs will likely be in $6.50 to $7.50 range. This is about half of our mean salary of $14.04. It is well below the target wage that COSADC uses when it offers assistance to a business.

Looking further, there are about 1800 hotel rooms in the city. Our occupancy rate is in the 53% range. Average room rental was just over $50, with the top rate was in the $80 to $89 range. The conference hotel wants an occupancy rate of 65%, with a minimum break even point of 45% and a room rate in the range of $100. It would also add over 200 rooms that would be competing directly with the rest of the hotels and motels in town.

The hotel occupancy rate is also an indicator of problems we have attracting conventions here. There are problems with our current convention center. The multimedia support is old. There are few break out or separate meeting rooms. The closest hotels are struggling (one of them is currently closed) so it is hard to attract conventions to our convention center. There a number of other facilities in town. Some of them are small, like Spring Creek Marina which can hold 50 people. The coliseum, on the other hand, can seat 6500 people (with expansion possible into the Wells Fargo Pavilion and Spur Arena), and the Junnell Center can seat 5000 with another 1000 close by at the CJ Davidson Center. The La Quinta Inn has 4 meeting rooms, the largest of which has a 400 seat capacity. According to the local hotel representatives, they are having a very hard time keeping these smaller venues filled and feel the convention and visitors bureau needs to get the existing facilities filled before asking for new ones.

After looking at all the information so far, here are my conclusions. The city should not invest tax money of any type into this venture. The city council has time and again stated that their goals are high paying jobs with a future. COSADC won't consider a grant for a job that pays less then 75% of the average wage. Why should the city be partners in a business whose average wage will be about 50% of the city's average? Even if you take various multiplier impacts into consideration, the effect is more entry level, low wage jobs. There are also significant opportunity costs here. Any tax money used to build this facility can't be used for other projects. We have been told that it could be funded out of the hotel/motel occupancy tax, which is probably true. That tax is already used to fund the Chamber of Commerce, prize money and other incentives for various events we have, and lots of other cultural and tourism related projects. We already are at the statutory max of 7% for the tax rate, so there is no more money to be had there. Who do we take tax dollars from for this project?

There is another problem with the city partnering in a venture like this. It's a simple matter of fairness. The city needs to treat all the businesses equally. It needs to avoid even the appearance of favoritism or preferential treatment. How can it truly do that when it is in the business?

Looking at this project, there do appear to be some options where the city can help this project move forward. When the Quicksand Golf course looked at a convention center project there seemed to be some ways that the city could help such as tax abatements, road improvements, and possible help in getting tax free bonds for financing, although that was not commonly done. There did seem to be a possible problem with impact on bond rating, which should be looked at very carefully, but the bond advisor stated there would be no tax liability.

At the end of my quick analysis, I can't see a good case for the city to partner in building this conference hotel complex, especially if tax dollars are involved. There are still ways the city can encourage and assist this project.

Economic Impact Basics

We hear about economic impact and benefits frequently. Any time a business or project is mentioned we start hearing terms such as direct effects, indirect effects, induced effects, multiplier effects, opportunity costs, etc..

Before we can really examine the impacts we need to know what these terms and phrases actually mean. We need to know where the numbers come from and what they actually tell us about a businesses prospects. We also need to know the accuracy of these studies in predicting the future.

A good place to start is information from the MRSC of Washington. There are differences between Texas and Washington, but the basics are the same. Their information on this page has good background material on how to analyze the total impact of a project. This particular study on sports impact from the Lincoln Institute is a good starting point because it also details the non-economic impacts of sports facilities and similar businesses.

Once you get the basics down look at reports and articles such as this one, this one, and this one.

I will be presenting my analysis of projects such as the proposed conference hotel in the near future. These are some of the references I will be using.

Sunday, July 02, 2006

July Fourth

Before I return to my normal job of beefing about this or that, I want to weigh in with my thoughts on Independence Day. We really should pause and consider the miracle which brought about our country. We started with a British heritage, which against the tide of that time, recognised individual rights. Then in a wonderful coincidence, Adam Smith published the still definitive text of capitalism, "The Wealth of Nations", almost to the day of our Declaration of Independence.

The men who came together in the stifling heat of a Philadelphia summer to craft our Constitution were another miracle. The lesser lights of that body would probably be university chancellors today, while the guiding minds, Jefferson, Franklin, Madison, Washington, Adams and even Hamilton, were barely short of gods come to visit. Perfection they did not give us.

We fought one of the bloodiest wars in human history to atone for the original sin of slavery. On that, I only ask that you remember, had they forced the Question in Philadelphia, there would have been no Union for Lincoln to preserve.

We have moved incrementally, but steadily, to a level of freedom unmatched in the modern world. We are not without fault, no government operated by imperfect people ever could be. I want to point out that all these shortcomings notwithstanding, we are the envy of the world, and so long as common people work to improve what is, so we shall remain.

Pay no mind to the detractors in the world at large. It is only natural that the slings and arrows of world opinion are aimed mostly at the largest target. Here I apply my "Fences" theory. Look at any country with fences on its borders. Are they built to keep people in, or to keep people out?

The fact that one of our largest debates today involves how to limit with some degree of compassion, the flood of people wanting in, whether from political oppression, or pure economic greed, convinces me, all else aside, that we are truly perceived by the world as the best place on the planet to live.

Do we sit and bask in self-congratulatory glory? Only if we are fools. What has been given us is an excellent starter kit. "All that is necessary for evil to triumph is for good men to do nothing". That truism is not specific to any passing Administration or Congress, freedom requires constant care and maintainence.

That's us folks, you and me. City just said something you don't like? Call your Councilman and beef about it. Find out what it will take to change it, then do it. We are fortunate beyond belief that we can do these things without risking our "Lives, our Fortunes, and our Sacred Honors." Not to sound too highblown, but the American Revolution was founded on thousands of heated conversations in taverns, churchyards and over dinners, by people who then went out and did their part, large or small. We owe those who risked it all to give us our freedom the small efforts to maintain it.

Saturday, July 01, 2006


Two hundred and thirty years ago a committee of 5 people were busily revising Thomas Jefferson's rough draft of the Declaration of Independence for the Continental Congress to adopt and sign. Before we go watch the POPs and fireworks it is appropriate to review this incredible document.

An astute observation from the Declaration is "that mankind are more disposed to suffer, while evils are sufferable," the evils of governing bodies.

As part of the celebration it might be fun to see how well we have done at keeping the evils from the list from recurring. There are some such as "He has erected a multitude of new offices, and sent hither swarms of officers to harass our people, and eat out their substance." that we still seem to have problems with.

After the Declaration was signed, it took until 1789 to develop the foundation of our country and our freedoms that we often take for granted today. We must remember that the revolution of 230 years ago was just part of the process of securing everyone's right to life, liberty and the pursuit of happiness.