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.
CNET visits the JSC
Reply
Category Archives: News – Houston Local
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!
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?
Bill King’s Story
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.
The best city for a job
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.
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!
Dragged into the mud
The collateral damage of Roger Clemens’ questionable approach to disputing his use of steroids or other 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.
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.
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!