July 21, 2008
Update on the Judge Kent investigation
It looks as if the heat is being turned up again on embattled U.S. District Judge Sam Kent. Here is the latest by Chron reporter Lise Olsen:
Justice Department broadening investigation of Kent
Sale of home and gift reporting being examinedA Justice Department investigation into the sexual conduct of U.S. District Judge Samuel Kent has expanded to include allegations that he accepted but failed to report gifts and also sold his home in a deal arranged by a lawyer with dozens of cases in his court, Kent's own attorney and other lawyers have confirmed.
The ongoing investigation was launched last year after Kent's former case manager complained that the judge sexually molested her. Since then, several prominent attorneys have been subpoenaed by federal prosecutors to appear before a Houston grand jury involving other allegations of judicial misconduct, according to documents and interviews obtained by the Chronicle.
Months ago, investigators began asking about parties, a 2001 trip to London and meals attorneys had bought for Kent at Galveston restaurants — often on days they did business in his court, lawyers and former co-workers said.
According to Kent's attorney, Dick DeGuerin, they also requested records about a real estate deal in which one of those attorneys, Kurt Arnold, helped persuade his mother to buy Kent's home in the city of Galveston.
[. . .]
The 2006 sale price was $339,500 for the 64-year-old house in the Denver Court neighborhood a few blocks inland from the seawall. The property is valued at $224,090 by the Galveston County Appraisal District. However, appraisals obtained by the buyer and seller were closer to the sale price, . . .
Arnold is a former law clerk of Judge Kent who had cases pending in Judge Kent's court, so the implication of the article is that Arnold arranged for his mother to make a favorable purchase of Judge Kent's house. Nevertheless, it appears that the sale was for fair market value, although Judge Kent was able to negotiate a reduced commission on the deal because Arnold's mother didn't use a realtor. The article suggests that the reduced commission was an effective gift to Judge Kent from Arnold, which is a stretch.
The grand jury is also investigating possible gifts that Judge Kent received from attorneys practicing in his court, including a 2001 trip to London and lunches at various Galveston restaurants. The Chron reports that "at least" 10 attorneys have been subpoenaed to testify before the grand jury, although several have given sworn statements in lieu of testifying. Judge Kent has already given a statement to the FBI and has offered to cooperate with prosecutors, but has not yet been requested to do so, according to his defense counsel, Dick DeGuerin.
It's still too early to say what all this means for Judge Kent, but the extent of the grand jury investigation is not good news for him. Stay tuned.
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July 17, 2008
Beijing = "People's Republic of Houston"?
"Beijing is flat and sprawling and smoggy and jammed with traffic and nearly all new, which is why an American friend who’s been working there for the last couple of years calls it 'the People’s Republic of Houston.'"
That's the opening of From Mao to Wow! by Kurt Anderson of Vanity Fair. He goes on to say that a more accurate comparison is Beijing now with New York City of a century ago.
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July 13, 2008
Dr. Michael DeBakey, R.I.P.
Dr. Michael DeBakey (previous posts here) died late Friday at the age of 99. One of the most influential men in Houston's history, Dr. DeBakey was the world-famous cardiovascular surgeon who researched, developed and initially implemented not only a variety of devices that help heart patients, but also such now-common surgical procedures as heart-bypass surgery. Two of the Chronicle's finest reporters -- Science reporter Eric Berger and Texas Medical Center reporter Todd Ackerman -- provide this outstanding article on Dr. DeBakey's remarkable life, and Eric provides an audio file of his 2005 interview of Dr. DeBakey here. The New York Times' article on Dr. DeBakey's death is here.
As with my late father, Dr. DeBakey was one of the leaders of a talented generation of post-World War II doctors who embraced the optimistic view of therapeutic intervention in the practice of medicine, which was a fundamental change from the sense of therapeutic powerlessness that was widely taught to doctors by their pre-WWII professors. As noted earlier here and here, that seismic shift in medicine has changed the course of human history.
But the tremendous impact that Dr. DeBakey had on medicine is exceeded by the massive effect that he had on Houston. When Dr. DeBakey accepted the president's position at Baylor College of Medicine a few years after the end of World War II, the Texas Medical Center was a sleepy regional medical center. Over the next two decades, Dr. DeBakey was one of the key leaders who transformed the Medical Center into one of the largest and best medical centers in the world. Dr. DeBakey was the catalyst who established the culture within the Texas Medical Center of cutting-edge research, productive competition but also widespread collaboration, quality care for patients and good, old-fashioned hard work that attracted the best and brightest physicians, teachers and students from around the world to the Medical Center.
This massive importation of intellectual capital over the last 60 years of Dr. DeBakey's life generated enormous wealth and benefits for Houston. Today, the medical facilities of the Texas Medical Center are the largest aggregate provider of jobs in the Houston area, even greater than the local jobs provided by the energy industry.
That's quite a legacy in my book.
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July 10, 2008
Which Starbucks stores are closing?
When Starbucks announced last week that it is closing 600 stores and laying off 12,000 employees, the company did not disclose which stores would be shuttered (got to get those lease buyouts finalized). However, that hasn't stopped word from filtering out into the Web on the location of the shuttered stores. The Seattle Times has already generated this Google map containing a large number of the anticipated store closings.
View Larger Map
However, the question that is on most Houstonians' minds has not been answered. Will Lewis Black's "End of the Universe" cease to exist after Starbucks is finished closing stores?
This clip includes video of the two stores as Black comments on the end of the universe on The Daily Show (H/T Life is a Thrill):
Update: Here is the full list of the stores that will be closing.
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July 5, 2008
CNET visits the JSC
CNET's Road Trip 2008 blog visits the Johnson Space Center in the Clear Lake area of Houston (photos here). The article and accompanying photos are a good primer for the always interesting visit to the JSC.
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June 30, 2008
Continuing to suspend reality on financing the soccer stadium
This earlier post addressed the economic absurdity of having financially-strapped Texas Southern University make an investment in the long-proposed Houston Dynamo downtown soccer stadium.
However, why is it that common sense seems to evaporate into thin air whenever either TSU or the soccer stadium is mentioned? Buried in this Chronicle article about TSU's failure to prepare its students adequately to pass state licensing examinations is the following gem of analysis on TSU's proposed investment in the Dynamo stadium:
TSU President John Rudley and athletic director Charles McClelland also gave an early report on negotiations to share a new stadium with the Dynamo, Houston's professional soccer team.
McClelland said the proposed $105 million stadium would seat 21,000. In exchange for a $2.5 million investment, TSU would get a 20-year lease, a locker room, 50 percent of concession sales and 100 percent of the profit on TSU merchandise sold there, he said.
The deal is preliminary, and regents won't vote for a while. The stadium won't be completed until 2010 or 2011, he said.
McClelland, on the job just a few months, said the deal would be a good investment for the university, whose football team plays mostly at the University of Houston's Robertson Stadium, at a cost of $40,000 a game.
The Tigers occasionally rent Reliant Stadium, which costs $115,000 a game, he said.
Investing in a new stadium would be cheaper in the long term, he said.
TSU has a stadium, but it seats only 4,500 — too small for the competitive football program McClelland has promised to build — and lacks the amenities people expect.
Let's see now. In return for pre-paid rent of $2.5 million (which TSU really doesn't have to throw around right now), TSU gets a 20-year lease, 50% of concession sales (on only its games or on all events of any type?), a locker room, 100% of TSU merchandise sales and a pink slip at the end of the 20-year lease term. I hope that locker room is really nice.
Meanwhile, without paying a dime up front, TSU can continue to lease Robertson Stadium on the University of Houston campus for about $200,000 per year (5 home games x $40,000) or $4 million over a 20-year term. While playing at Robertson, TSU could invest the $2.5 million that it wouldn't have to pay the Dynamo and easily generate at least another $2.5 million off that investment over the 20-year lease term. At the end of 20 years of playing at Robertson, TSU would have a net surplus of at least $1 million to play with.
So, in view of the foregoing, my question is this: How could any reasonably responsible TSU leader even consider using the scant existing financial resources of that institution to invest in the Dynamo soccer stadium?
Perhaps the answer is revealed in the last paragraph of the Chron article:
Regents cautioned Rudley and McClelland to make sure TSU has good representation in the negotiations. "They're sharks," Javier Loya said of the Dynamo's leadership.
Update: Some folks actually think this is a good deal for TSU!
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June 25, 2008
The Future of Law Firm Advertising?
Clear Lake-area plaintiff's lawyers Ron and Scott Krist use the YouTube video below to explain why helicopter crash victims should hire their firm. Not exactly To Kill A Mockingbird, but pretty darn effective nonetheless. By the way, I wonder who the defense attorney was that Scott got fired?
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June 16, 2008
Bill King's story
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As Republican presidential nominee John McCain is doing his best to stoke public prejudice against job-creators and wealth builders, longtime Houston lawyer and businessman Bill King is promoting his new book, Saving Face (Somerset 2008), which is King's personal history of the savings & loan crisis of the late 1980's and early 1990's. Ironically, McCain knows quite a bit about the back story to King's book. McCain was one of the Keating Five, the Congressional supporters of former Lincoln Savings & Loan chairman and CEO Charles Keating, who was convicted of various corporate fraud crimes and served four years in prison as a result of highly-stoked but substantively-thin prosecutions that were ultimately overturned on appeal. Keating eventually pled guilty to a single count of bankruptcy fraud to limit further prison time and insulate a family member from prosecution. For a thorough review of the mendacity of the Keating prosecutions, pick up a copy of Dan Fischel's book, Payback: The Conspiracy to Destroy Michael Milken and his Financial Revolution (HarperCollins 1995).
King's story is the Houston version of Keating's and a precursor of the prosecutorial abuse that the post-Enron criminal prosecutions in Houston generated a decade later. Not only does King do an excellent job of explaining the financial, economic, regulatory and political underpinnings of the S&L crisis, he explores how the government wielded its prosecutorial power indiscriminately to serve up scapegoats to a salivating mainstream media and an ill-informed public. King is thinking about running for Houston mayor in 2009 and, based on the depth and perspective that he exhibits in Saving Face, King would probably be a fine mayor. The following is King's overview of Saving Face, which I recommend highly:
These days I find myself cringing when I hear media accounts that fraudulent and greedy mortgage brokers are responsible for all of the woes of the current housing bubble and the sub-prime defaults. I do so because the recriminations are an all too familiar echo of an earlier debacle. One to which I had a ring-side seat.
Many of you who have known me for some years know that shortly after law school I made the somewhat less-than-fortuitous career decision of joining a law firm that specialized in representing savings and loans. At the time it did not seem like a bad decision. The Houston real estate market was enjoying an unprecedented boom and the savings and loan industry had just been deregulated. Investors were clamoring to get into the business.
Within a few years of joining the law firm, I began investing in savings and loans and related businesses. By 1986, notwithstanding that I had started with barely two nickels to rub together after working my way through law school, I had built a small, but respectable, business empire consisting of savings and loan holdings, title companies, and real estate investments. However, within a couple of years, everything I had built evaporated into thin air.
The Houston market collapsed when the price of oil fell from over $34 per barrel in 1984 to $9 the next year. It did not recover to above $20 until 2002. Manufacturing jobs in the region fell by nearly 50% and for the first time in history Texans' personal income declined.
Bankruptcies in Houston tripled between 1983 and 1987. All but one of Texas' major banking holding companies failed. Harris County's population actually declined from 1985 to 1989. It was the first and only time in Houston's history that it has lost population. If you did not live through these times, the magnitude of melt down is hard to imagine.
It is certainly difficult to lose everything that you have worked for, but the environment that existed in the late 1980s and early 1990s had an even more ominous aspect. As the public became increasingly aware that the savings and loan crisis was going to take a major taxpayer bailout, there were ever more strident cries to hold someone responsible.
The complexity of confluence of interest rates, regulatory policy, oil prices, the Tax Reform Act of 1986, and the collapse of large portions of the real estate market that actually explained the collapse was too great to be reduced to sound bites. Politicians and bureaucrats began pointing the finger at those in the industry, and soon, the "S&L crook" was born. And there were enough egregious cases for the politicians and bureaucrats to hold up as "proof" of their argument that the "S&L crooks" caused the crisis.
The proposition that fraud and insider abuse had sunk the savings and loan industry was eventually discredited. In 1993, a National Commission concluded that fraud had caused less than 15% of the total problem. But in the heat of the moment, there was little interest in cool, scholarly reflection on the problems of the industry.
As the 1980s came to a close I watched as many friends, associates and former clients in the S&L industry were swept up in a maelstrom of civil and criminal litigation. Naively, it never occurred to me that I might be caught up in such a dispute as well. But I was.
Eventually, I prevailed in my battle with the regulators, but as you might imagine, it was an experience that left an indelible mark and from which it took me many years to recover. For some time I have been jotting down notes for a book about these experiences. For a couple of reasons, I recently decided to finalize such a book.
First, as many of you know, I am considering a candidacy for mayor of Houston in 2009. We all know too well that "negative campaigning" has become the standard today. Certainly going bankrupt in the savings and loan business will provide potential opponents ready ammunition. So first and foremost, I want to put the issue squarely on the table. If I decide to become a candidate, there will undoubtedly be some voters who will be troubled by these experiences. Some will believe difficult times such as the ones I went through are a crucible that better prepares a person for leadership. Most, I expect, will simply want to be advised of the facts so that they can be weighed with other issues bearing on their decision.
But beyond the potential political implications, the troubling similarities between what I saw in the S&L collapse of the 1980s and the sub-prime crisis playing out before us now demands some consideration. It is a well worn adage, but nonetheless true, that if we do not learn from our history, we are doomed to repeat our mistakes. Perhaps relating what I saw during the saving and loan industry collapse will provide some perspective on the current financial crises.
So for these reasons I have written Saving Face: An Alternative and Personal Account of the Savings and Loan Debacle. I have attempted in the book to tell the story of what I experienced during these times, but at the same time, to place my experiences in a larger, national context. I believe my story has some relevance to anyone experiencing trying times generally, and certainly to those in the Houston real estate industry, many of whom lived through these times as I did.
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June 14, 2008
The best city for a job
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June 2, 2008
Ron Paul, we hardly knew ye
This post from last June noted Houston-area Congressman Ron Paul's deft media touch on Comedy Central's Daily Show. Now, a year later, Jim Henley sums up the utter failure that Paul's presidential campaign became:
This fellow can’t spell "candidate," but by being willing to come out and say that Ron Paul Lost, he’s closer to wisdom than the entire staff of Takimag. The full measure of Paul’s failure isn’t even that he’s not going to be the Republican nominee. It’s that, even since everyone else dropped out of the race but Paul and McCain, he’s still been losing to Mike Huckabee in every state where the Huckster was on the ballot except Pennsyvlania (Paul was born in Pennsylvania.) Idaho is the only other primary state where he broke 10%. (He hit low double-digits in a few caucus states.) He has 35 delegates by CNN’s reckoning. Huckabee has 275 and Romney 255. With his $30 million in donations, he’s barely breaking the million-bucks-a-delegate mark. That’s ten times the much-ridiculed rate of Mitt Romney.
Paul failed to win any states, to move the GOP debate in his direction, to accrue significant delegates or to leverage his fund-raising into a third-party run. And word is he’s staying quiet about endorsing an independent because he doesn’t want the Congressional GOP leadership to strip him of committee assignments come the fall. Paul accomplished the one thing he’s always been good at: using political appeals to get people to send money. I don’t feel freer.
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May 27, 2008
Checking out Houston on the tour bus
Randal O'Toole went on a bus tours of different parts of Houston while he was in town for the Preserving the American Dream Conference a couple of weeks ago and he chronicles his impressions with observations here (neighborhoods between downtown and the Galleria area) and here (one of the Houston area's several master-planned communities, Sienna Plantation). Upon finishing the tour of Sienna, O'Toole commented on the trip back to his downtown hotel:
After finishing up our tour of Sienna, we took the Fort Bend Parkway, one of the region’s many toll roads, back to Houston. This 6.2-mile, four-lane highway required just over a year to build and opened in 2004 at a cost of $60 million. That’s less than $2.5 million per lane mile, including on- and off-ramps, over- and underpasses, and toll facilities. By comparison, $60 million would barely get you one mile of light rail and less than a mile of heavy rail. The toll for the 6.2 miles was $2, even for our full-sized buses.
And compare that to this!
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May 26, 2008
Dragged into the mud
The collateral damage of Roger Clemens' questionable approach to disputing his use of performance-enhancing drugs is already extensive. It now appears that the best player in Stros history may get pulled into the public fray. As this post from a couple of years ago noted, the rumors about Bags and other Stros using PED's have been around for years.
Regardless of the foregoing, I can sure think of more productive things to do in regard to understanding the perverse Major League Baseball PED culture than dragging decent men such as Jeff Bagwell through the mud.
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May 22, 2008
Houston's solid housing market
One of the under-appreciated benefits of living in the Houston metropolitan area is its varied and reasonably priced housing market, which is the subject of this Federal Reserve Bank of Dallas report. The report notes that Houston's housing market has resisted the boom-and-bust syndrome that has been experienced in many other U.S. housing markets recently:
Given that Houstonians had access to the same new types of mortgages as the rest of the country and that Houston has had greater population growth than other large metros, we might expect price appreciation to be stronger in Houston than elsewhere. However, the opposite has been true.
Houston’s large supply of land means that demand growth primarily results in more construction, not higher prices. Construction levels are limited by the availability of two kinds of developable land: the previously undeveloped, generally found on a metro’s outskirts, and the redeveloping, usually in a city’s interior. In both cases, Houston’s policies are relatively permissive, making the metro friendly toward development.
The most fundamental difference between Houston and other cities lies in how they provide (or in Houston’s case, do not provide) water, sewer and drainage to developments on the urban fringe. In Houston, developers can create a municipal utility district, or MUD, to provide these services on their properties and can finance these with tax-free bonds. Houston requires developers to build MUDs in such a way that they eventually could be connected to the city’s corresponding infrastructure, but they begin as self-sufficient enterprises.
In other cities, developments must be connected to the city’s water and sewer lines, confining new projects to nearby or adjacent land since the cost of building lengthy lines is prohibitive. In metro Houston, by contrast, virtually any large parcel of land can become a new suburb, especially given the metro’s expansive highway system. Experience bears out this conceptual framework, with significant Houston suburbs like Katy and Spring developing and prospering before many closer-in areas.
But Houston does not just have a larger supply of available land on its outskirts. Unlike all other large U.S. cities, Houston lacks zoning laws restricting industrial, commercial and residential construction to specific neighborhoods. Many inner-city Houston neighborhoods protect property values through deed restrictions diligently enforced by private neighborhood associations, and the large, planned suburban communities operate similarly. But much of the land in metro Houston is not assigned a specific use.
So much land is available in Houston that the cost of each incremental unit rises slowly and keeps the average cost below that of more restrictive metros. Even in the face of significant population growth, this large supply keeps land prices in Houston stable, which over time contributes to lower home prices. . . .
Indeed, Houston and other metros such as Dallas and Atlanta that have relatively more permissive development policies have lower housing prices than more restrictive places do.
At $155,800, Houston’s median house price is the third lowest among the 12 largest U.S. metropolitan areas and is less than half the average for these cities. Houston’s median price is lower than even the national average, which includes inexpensive rural areas.
By comparison, the median house price in metropolitan San Francisco, where zoning laws and building codes are very strict, is $825,400.
This result—more zoning bringing higher prices—is a robust one. Economists Edward Glaeser and Joseph Gyourko find that house prices across the country are positively related to the degree of zoning and regulation. Even in Houston, there is evidence that houses in deed-restricted neighborhoods or in zoned cities within the metro area are more expensive than comparable ones outside these areas. But with plenty of unzoned neighborhoods remaining, Houston house prices, on the whole, are restrained near construction costs.
In summary, Houston’s low-and-slow home prices have made real estate a relatively accessible and safe investment for the area’s residents even as other cities’ markets have become expensive and volatile. The early phases of the current housing downturn—the boom and bust in prices—were barely felt in Houston.
The article goes on to point out that the crisis in the sub-prime mortgage markets has reduced the pool of available homeowners in the Houston market, which is contributing to a downturn in the local housing market. However, the report also notes that that Houston's housing policies and local economy place it in a strong position to weather the downturn.
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May 16, 2008
Friday Musings
So, did you know that Taxi Driver is the greatest wealth-creating movie of all-time?
Speaking of movies, actor Mickey Rourke has been down on his luck for the past several years, but he sure had a good run of movies in the 1980's.
Finally, singer-songwriter Hayes Carll, fresh off the release of his new CD, returns home to The Woodlands for a Friday night show at Dosey-Doe. I'll be there, so come by and say hello!
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May 15, 2008
Houston's best 19th hole
Although Jack Burke's venerable Champions Cypress Creek Golf Course may arguably be a bit overrated, this Ron Kapriske/Golf Digest article rates the Champions Men's Locker Room Bar as one of the 50 best 19th holes in the country:
Sit back and listen to Jackie Burke tell stories, especially the one about Jimmy Demaret at the bar in his birthday suit; the bar inside the locker room is three-sided to allow for "cross-counter shouting matches"; wood paneling is a "throwback to the country-club days of the 1960s."
I can attest that having the opportunity to listen to a couple of Burke stories is certainly worth a trip to the Champions Men's Locker Room. A close second to the Champions Men's Locker Room Bar among the best of Houston's 19th holes -- Lochinvar Golf Club's Clubhouse.
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May 14, 2008
The Chron's continuing soccer stadium drumbeat
In this post from last week on the proposed downtown soccer stadium, I observed that the Chronicle should simply declare that it supports the public financing of the stadium and quit attempting to rationalize that such financing makes economic sense.
Well, based on this Glenn Davis/Chronicle column, it looks as if the Chronicle took me up on my suggestion.
Actually, Davis' column is about as good a rationalization for the public financing of the soccer stadium as you will come across. He eschews the economic-benefit ruse and instead contends that it's worth spending public money on the Dynamo because the club represents the city well internationally, particularly in Mexico and Central America. On the other hand, Davis stretches by suggesting that "the team deserves its own stadium [because it] would elevate the sport and city even more in the eyes of the world."
Just to be clear -- there is nothing inherently wrong with public financing of sports stadiums. Davis might even have a valid point that it's worth using public funds to invest in the Dynamo to bolster Houston's image internationally, although it would seem that at least some consideration should be given to alternative investments before coming to the conclusion that financing a soccer stadium is the best way to achieve that goal. But let's at least have truth in advertising during the remaining public discussion on this issue -- the marginal economic benefit of a soccer stadium to the community is simply not a good reason to finance it publicly.
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May 9, 2008
Suspending reality on financing the soccer stadium
Look, I realize that the reasoning in support of public financing for the proposed Houston Dynamo soccer stadium has not been particularly rational. But this Chronicle article takes the cake in terms of suspending reality. Chron reporters Bernando Fallas and Bill Murphy breathlessly suggest that financially-troubled Texas Southern University -- which is currently seeking $40 million in emergency legislative funding simply to keep the lights on -- is a serious player to make up at least a portion of the gap between the private and public financing on the deal:
Forget soccer-specific. The Dynamo would be thrilled to call their proposed stadium football-specific or even fútbol-specific.
Either way would be accurate — soccer is known as football almost everywhere else in the world — if the Dynamo can get Texas Southern University to join negotiations with the city of Houston toward the construction of a $105 million facility just east of downtown that would be home to the two-time defending MLS champions and TSU athletics, primarily the Tigers' football team.
By the looks of things, TSU is prepared to do just that.
Two weeks after he first expressed interest in the project and a couple of meetings and phone conversations later, newly appointed TSU athletic director Charles McClelland said the school is willing to invest in the construction of the 22,000-capacity stadium in exchange for the rights to use it. [. . .]
Of course, the article is utterly devoid of details, such as how TSU is going to find any money to throw at this deal, much less make a multi-million dollar investment in it. Heck, the TSU athletic director and the Dynamo's president haven't even met yet, so it doesn't even appear that Dynamo management takes TSU's involvement seriously. Why don't the Chronicle editors just come out and say that they really want the city to finance the downtown soccer stadium and spare us such vapid articles as this one? Gosh, it's gotten so bad that even normally common sense bloggers are giving in to this silliness.
Meanwhile, J.R. Taylor over at PoliSci@UST runs circles around the Chronicle's reporting on the soccer stadium financing with this well-reasoned post that actually addresses facts regarding public financing of stadiums. Yet another example of how the blogosphere is trumping the mainstream media in terms of providing coherent analysis of important issues.
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May 5, 2008
Chron: Sacrifice the local economy for the polar bears
Given the editorial slant of the Houston Chronicle over the past several years, it's not particularly surprising that the editors ran this editorial calling for polar bears to be declared an endangered species under the federal Endangered Species Act.
Unfortunately, it's also not surprising that the Chron editorial failed to mention that the oil and gas business -- a key source of jobs and wealth for Houston and the nation -- is likely to suffer considerable financial damage as a result of the polar bear listing push, which Hugh Hewitt notes "is not only an abuse of the ESA's original intent but also unsupported by the facts concerning the ice and the polar bears."
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April 30, 2008
Examining stadium subsidies
As if on cue for the soccer stadium financing issues currently being discussed on the local scene, Dennis Coates provides this excellent op-ed in The American on the dubious nature of municipal stadium subsidies:
Clearly, stadiums built with public funds have evolved over time. No longer are they built to honor the sacrifices of American soldiers. No longer are they built to be flexible venues capable of hosting a great variety of events. And no longer does the public sector determine the appropriate price to charge private enterprise for use of this publicly supplied resource. Today, sports stadiums are largely the private domain of for-profit businesses that the public sector subsidizes, often with special taxes. [. . .]
Over time, both the purpose and the real cost of public support for stadiums and arenas have changed. It may be that the subsidies state and local governments provide for stadium and arena construction and operation are justified by the community benefits those facilities provide. But the evidence says otherwise. [. . .]
My own research, conducted with economist Brad Humphreys . . . finds that the professional sports environment—which includes the presence of franchises in multiple sports, the arrival or departure of teams, and stadium construction—may actually reduce local incomes. For example, we found that the overall sports environment reduced per capita personal income, a finding that was new in the economic literature at the time we published it (1999). We also found that, in many local economies, wages and employment in the retail and services sectors have dropped because of professional sports. [. . .]
Of course, even if the benefits of stadiums and arenas cover the subsidies, the subsidies still may not be sound policy. First, there may be enormous variation in the distribution of the consumption and public-good benefits. It is clear that not all citizens in a community benefit equally from the presence of professional sports franchises in their city. Indeed, because the tax revenues used for the subsidies are often generated from lotteries and sales taxes whose burden falls disproportionately on the poor, while the consumption benefits go mostly to relatively wealthy sports fans, the net benefits are distributed regressively. Second, we should consider the net benefits to the community of alternative uses of the funds spent subsidizing sports facilities. Good policy means using the money where the net benefit is greatest, not simply where the net benefit is positive. That’s something state and local governments should keep in mind before pledging millions of dollars to fund the next new stadium project. And it’s something Congress should remember when evaluating the future of U.S. tax policy.
Are you listening, Mayor White?
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April 26, 2008
Conited Airlines, finally?
The NY Times is reporting that the on-again, off-again merger negotiations between Houston-based Continental Airlines and Chicago-based United Airlines are coming to a conclusion and that a definitive merger deal is likely to be announced by the end of next week.
Continental, the nation's fourth-largest carrier based on traffic, has long been the natural merger partner for United, which is the No. 2 airline. If they strike a deal, the merger would produce the world's largest airline, bigger even than the combined Delta-Northwest and significantly outdistancing American, which is currently No. 1.
Speaking of the Delta-Northwest deal, those partners this week reported an astounding, combined first quarter loss of $10.5 billion, reflecting that the two airlines are now worth far less than when they emerged from bankruptcy a year ago.
Two drunks holding each other up is rarely a good idea. ;^)
Update: The Chron is reporting that Continental's board has decided to reject any merger proposals "at least for now." The NY Times reports that Continental backed off because of United's worse-than-expected first quarter losses.
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April 24, 2008
UH Law Center gets it right
Ray Nimmer is truly one of Houston's treasures. The Leonard Childs Professor of Law at the University of Houston Law Center, Ray is one of the nation's leading authorities on business and bankruptcy law, computer information licensing, e-commerce, and related intellectual property issues, all of which he has addressed in the 20 or so books and numerous articles that he has written over his superlative 30+ year teaching career.
However, even more importantly, Ray is a gifted teacher who has taught a remarkably broad variety of courses at the UH Law Center over the past 30 years, including Contracts, Contract Drafting, Evidence, Bankruptcy, Corporate Reorganization Law, Internet Law, Electronic Commerce, Secured Financing Law, Negotiable Instruments, Copyright Law, Information Law, Sales, and Licensing Law. Somehow, Ray has even found the time to maintain a blog.
For the past couple of years, Ray has been serving as the Interim Dean at the law school, where he has done an excellent job of patching things up after the divisive resignation of the previous dean, Nancy Rapaport. As noted in this post from when Ray was appointed Interim Dean, I couldn't think of a better choice for the new permanent dean than Ray. Thus, I was happy to see this UH press release Wednesday confirming Ray's appointment to that position (Mary Flood's Chron article on the announcement is here). Ray released the following statement to friends, alumni and students:
As many of you know, in 2006 I agreed to serve as interim dean of the Law Center while a nationwide search for a permanent dean was conducted. That search has now been completed – and today I have accepted the position of Law Center Dean offered to me by Dr. Donald Foss, the provost of the University of Houston, subject to the approval of the UH Board of Regents.
In many ways, it remains business as usual at our school. Two years ago, this is what I told my team when I stepped in as interim dean:
Here’s what you can expect from me. I am pragmatic, oriented to understanding and explicating the role of law and lawyers in society, and I am committed to leading a team that will distinguish our Law Center as being among the best in academia and a major factor in the practical practice of law. I believe in action and achievement. I applaud people who target goals—and invest the necessary work to achieve them. And I am determined to give our highly skilled faculty, administrators and students the support they need to maneuver and achieve.
That’s been my approach over the past two years as we energized the Law Center and continued the “pursuit of excellence” in everything we do. Our momentum is reflected in our 15-point improvement in national rankings, two “Top 10” specialty programs, and record-high LSAT scores for our newest class.
I took the job of interim dean for a simple reason: because I believed the Law Center was on the cusp of great achievement, and I wanted to help my school reach that goal. Today, I am accepting the position of permanent dean for the same reason, and I am 100% committed to pushing us higher into the top echelon of Tier 1 law schools.
It is an honor following the seven men and women who previously served as permanent dean and contributed to the greatness of our school. With help from the entire Law Center community, there is no limit to what we can accomplish.
Congratulations to Ray for the much-deserved appointment and to the UH administration for making the right decision.
Posted by Tom at 12:01 AM | Comments (1) | TrackBack (0)
April 22, 2008
Mayor White's management
Help me out here. I'm really trying to understand the basis of the perception among a large number of Houstonians that Mayor Bill White is an effective manager.
For example, this earlier post summarized Mayor White's dubious decision-making in regard to having the city buy expensive and not particularly well-located downtown land for the new Houston Dynamo soccer stadium. Not only did the city already own nearby property that is a better location for the stadium, Mayor White pushed through the land acquisition despite not having a binding commitment from the soccer club owners on the amount of their contribution to the cost of the stadium's construction.
Given the foregoing, who except Mayor White was surprised last week when Major League Soccer (which is really just a minor soccer league) sent a letter to the Dynamo owners that was (again, surprise!) passed along to Mayor White that threatens to relocate the Dynamo if a satisfactory stadium deal isn't reached? For good measure, MLS and Dynamo officials informed the city that the estimated price of the stadium has increased from $90 million to $105 million and that some MLS cities have contributed as much as 90% of the cost of similar stadiums.
So, what was Mayor White's reaction? Tell these minor leaguers to take a hike to Corpus Christi or Beaumont? Apologize to the citizens for having the city lay out $15-20 million for property that it doesn't need? Promise that he won't get taken to the cleaners again in negotiations with minor league sports club owners? No, Mayor White did his best tough guy imitation:
"I've gotten a little bit of a reputation, probably deserved, that I don't respond well to threats," he said. "I smiled."
If Mayor White is smiling, then imagine what the MLS and Dynamo officials are doing after the way in which those minor leaguers have had their way with Mayor Bill in these negotiations?
The only good news about all this is that the $50-75 million that the city will probably end up dropping over this soccer stadium boondoggle represents only about a couple of months of losses of this much larger boondoggle, which -- you guessed it -- Mayor White strongly supports. And those aren't the only questionable management decisions that the Mayor has made during his tenure (for example, see here, here, here and here).
How much longer can Houston afford Bill White?
Posted by Tom at 12:01 AM | Comments (2) | TrackBack (0)
April 16, 2008
Ripples of the Delta-Northwest deal
The merger agreement between Delta Air Lines and Northwest Airlines (they were meant for each other) announced yesterday not only would create the world’s largest carrier if approved, but it has renewed talk (see this W$J article, too) in Houston over the fate of one of the city's largest employers, Continental Airlines.
Continental's future has been the subject of conjecture over the years. This post from a couple of months ago summed up the current situation in anticipation of the Delta-Northwest merger. Unfortunately, Continental's most likely merger candidates -- United Airlines and American Airlines -- are not particularly attractive partners at this point. As airline consultant Adam Pilarski noted in this Scott McCartney/W$J column, "There's no history of anything good that happens in [airline] mergers. Two drunks holding each other up is not a good idea." The W$J's Holman Jenkins speculates as to why this is the case in the chronically-profitless airline industry, which Richard Anderson and Doug Steenland, CEOs of Delta and Northwest, argue the contrary position.
The proposed Delta-Northwest merger would create a behemoth company with more than $35 billion in annual revenues, a mainline fleet of almost 800 planes and a combined workforce of 75,000 people. Interestingly, the most successful US airline is the polar opposite of that structure.
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April 9, 2008
Good Travis Street Eats
Look at what street is number two in Good Magazine's seven Tastiest American Streets for good restaurants.
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April 4, 2008
The NY Times discovers that Houston
is a pretty darn diverse place.
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March 30, 2008
Icahn on settling Pennzoil-Texaco with Jamail
This blog is mostly about business and law, so Carl Icahn's activities have been a frequent topic. Likewise, this blog also centers on Houston, where the Pennzoil v. Texaco case from the mid-1980's is a part of the city's storied legal lore. Consequently, the video below of Icahn doing his equivalent of a standup comedy routine describing how he settled the Pennzoil-Texaco case with famed Houston plaintiff's lawyer Joe Jamail is an absolute classic for this blog. A very big hat tip to John Carney at Dealbreaker for the link to the Icahn video.
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March 29, 2008
Thoughts about basketball at Reliant
My friend John Stevenson graciously hosted a couple of friends and me at last night's NCAA South Regional semi-final basketball games at Reliant Stadium. Although the company and conversation was a solid A+, my grade for Reliant Stadium's performance in hosting its first big-time basketball tournament is a rather pedestrian C- (the Chronicle's David Barron has a more favorable review here). Here are my observations:
1. First, the good. The configuration of the stadium into a 43,000 seat basketball arena is not bad, at least for a football stadium hosting basketball games. We sat in the first row of the club section and the sight lines were fine, although we all used our opera binoculars from time to time. I do think that it would be possible to arrange more seats closer to the floor, particularly on the ends, without giving up much from the nose-bleed seats.
2. But now for the bad. As has been the tradition at Reliant Park since the opening of the Astrodome over 50 years ago, parking was Byzantine. Although Reliant Park is blessed with plenty of on-site parking, the facility's parking areas were originally designed with narrow entry points that funnel autos to relatively few parking ticket agents that take a parking fee from the driver of each auto entering the facility. This has always been a horrible idea and it's incomprehensible that Reliant Park officials have not changed it after decades of fan frustration. With tens of thousands of autos descending upon the facility within an hour or so of a big game, traffic around the facility slows to a crawl as autos line up for miles at the most popular entry points waiting for drivers to stop, pay the parking charge and then move on to park. To make matters worse, the narrow entry points are converted to too-narrow exit points after the game, so traffic also stacks up in the parking lots after the game.
What should be done is simple. All of the entry points should be widened to facilitate traffic flow and, at least for big events, there should be no parking charge taken at the facility (the parking charge should be included in the price of the ticket -- with tickets already priced at $156 for the South Regional, charging an additional $20 to park at Reliant is outrageous). With widened entry points and no stoppage for payment of a parking fee, parking lot attendants could then concentrate on moving drivers quickly into the parking areas. Traffic backups would be greatly reduced.
Being old-timers in attending events at Reliant Park, our group avoided the traffic bottleneck by entering Reliant Park off of little-used Stadium Drive on the north end. However, when we entered an hour before game time, automobiles were already backed up for miles on Kirby and the other west-side entry points. That bottleneck caused many fans to miss a good part of the first half of the opening game between Texas and Stanford.
3. How on earth could Reliant Stadium not have sufficient concession workers and supplies available for an event as prestigious as an NCAA Regional? In the club section, there were so few concession areas available that the lines required a half hour wait throughout and after the Texas-Stanford game. There were no individual concession vendors. By the time that the lines had dwindled midway through the second game between Memphis and Michigan State, many of the concession areas had run out of bottled water. Finally, although it's not a big deal with me, isn't it a bit odd that a fan can't buy a beer while attending a basketball event that lasts over five hours?
4. The Reliant Park overhead video screens were nice, but provided sophomoric information about the players and showed too few replays of exciting and controversial plays. The folks at Reliant Park need to check out how the Toyota Center operates its overhead video screens, which provide much better information and more replays.
5. Pricing of the tickets is definitely an issue. It's my understanding that Reliant Park and the NCAA priced the tickets for the three South Regional games at a total of $156 on the thought that the basketball configuration would be limited to about 25,000 seats. When hometown favorite Texas was given the second seed in the South Regional and then won a spot in the South Regional semi-finals, Reliant Park and the NCAA modified the configuration to its present 43,000 seat configuration to accommodate the increased demand for tickets from Texas fans (they also sold tickets at $78 for only the two Friday night semi-final games). Although almost 33,000 attended last night's games, my sense is that even more would have done so if the nose-bleed tickets had been priced at more reasonable levels.
By the way, I've got Memphis in my bracket winning the South Regional final tomorrow against Texas. Although the Horns are solid, nothing that I saw in the two Friday night games has changed my opinion that Memphis will prevail.
Posted by Tom at 9:04 AM | Comments (2) | TrackBack (0)
March 25, 2008
Reliant Stadium, South Regional-style
Check out the Chronicle's nifty rendering of the new basketball configuration that will be used this weekend at Houston's Reliant Stadium for the NCAA Basketball Tournament South Regional. The Reliant Park ticket seating chart for the basketball configuration is here.
This particular configuration provides about 40,000 seats for the South Regional. A different configuration that will seat 72,000 will be used when Reliant Stadium hosts the NCAA Final Four in 2011.
Posted by Tom at 6:17 PM | Comments (0) | TrackBack (0)
March 20, 2008
The ignorance of costs
I don't particularly like the distraction of talking on a cell phone while driving, so I avoid it as much as possible. It's also not enjoyable avoiding other drivers who are not paying full attention while chatting on the cell phone.
However, I also recognize that cell phone usage while driving has facilitated beneficial communication exponentially. Thus, whenever I see creeping paternalism such as this, it gets my attention:
West U. eyes ban on calls while driving
Cell phones in school zone lead to 'near misses'Houston-area officials are watching West University Place as elected officials there consider banning cell phones in the school zone near the community's lone elementary campus.
The move would put the affluent suburb on the map as the first Houston-area municipality to take a stand against drivers talking on their phones as children travel to and from school. The community is following in the footsteps of Dallas and several North Texas suburbs that have recently approved bans. [. . .]
West University proposed the ban earlier this month after conducting a study to determine how often drivers were spotted chatting on their cell phones in active school zones. Over three weeks in February, police counted 297 drivers on their phones.
Six of the drivers violated traffic laws by creeping into intersections while children and crossing guards were present, West University police Lt. Thad Olive said.
Although neither Olive nor HISD police officials could recount an incident when a child was seriously injured in a school zone because of a driver on a cell phone, they said this type of ordinance could prevent tragedy.
"There's been a lot of near misses," Olive said. "It definitely has distracting effects. If I can take one element of risk away from the children in that school zone, then it's a good thing." [. . .]
Kenneth Jones, who oversees HISD's crossing guard department, said he'd love to see the ban enacted citywide.
"If you've got that phone in your hand, I don't think you have your mind 100 percent on driving," he said.
Kelli Durham, an assistant superintendent in the Cypress-Fairbanks school district, was one of several educators to suggest widening the ban to include all drivers, regardless of whether they're in school zones.
"If cell phones shouldn't be used for safety reasons in school zones, should they be used anytime on our streets and highways?" Durham asked. . . .
So, if "one element of risk" can be taken away from children in a school zone, then that's sufficient justification for regulation of a hugely beneficial communication device? Does this mean that the next initiative will be to ban conversation between a driver of a car and a passenger while in a school zone? That's also distracting, perhaps even more distracting than talking on a cell phone. Should we also ban distracting billboards, signs, automobiles and lights while we're at it?
What is most disturbing about all this is the utter ignorance of the bureaucrats proposing these regulations of the cost of the regulation relative to the benefit. Wouldn't it be prudent at least to perform a meaningful cost-benefit analysis of the probable impact of outlawing a valuable improvement in communications before foisting yet another regulation on the public?
Posted by Tom at 7:44 PM | Comments (2) | TrackBack (0)
March 19, 2008
T-Mac for MVP?
The incongruity of Chronicle sportswriter Richard Justice writing about sports has been a frequent topic on this blog, so I don't much bother anymore keeping up with his often baseless observations about the local sporting scene. However, on the heels of the Houston Rockets' recent 22-game winning streak, I did a double-take when Justice jumped on the bandwagon and started promoting the Rockets' Tracy McGrady for the NBA's Most Valuable Player Award this season.
As noted in this earlier post, as of December 30, McGrady was barely better than a league-average NBA player. There were dozens of players in the Western Conference alone who were having demonstrably better seasons than McGrady. So, at least as of that date, there was simply no objective basis for McGrady being considered the MVP of the NBA this season.
But perhaps McGrady elevated his performance tremendously during the Rockets' subsequent 22-game winning streak? Maybe that improved performance justifies Justice's advocacy of an MVP award for McGrady?
Sorry. As this Dave Berri post points out, McGrady’s production in the second half of the season is essentially the same as it was in the first half. Thus, McGrady is not the reason the Rockets went on their 22-game winning streak. Rather, the primary reason for the Rockets' transformation was the improved play of Carl Landry, Rafer Alston, Shane Battier, Luther Head, Luis Scola and Dikembe Mutumbo, not McGrady.
Berri backs up his position with objective statistical analysis. Justice backs his up with subjective blather. Is that what the Chronicle prefers?
Posted by Tom at 8:55 PM | Comments (1) | TrackBack (0)
March 17, 2008
"America’s booming opportunity city"
Each time local politicians in Houston engage in bad policy initiatives such as the ones noted here, my wish is that they would be required to read this fine Joel Kotkin/The American op-ed entitled Lone Star Rising -- How a combination of ambition, entrepreneurship, trade, and tolerance made Houston America’s booming opportunity city. Kotkin has been studying Hous