Austin has a particularly robust taco market that generates God knows how much sales tax revenue for city government. But is the city really providing enough support for Austin’s trademark cuisine?

Here’s a novel idea: Why don’t we exempt tacos from the sales tax and instead implement a special taco tax? The revenue from this special taco tax would not be allowed to be used for typical city services such as police, fire, parks, or social programs. Instead, all of the money would go into a special fund dedicated to promoting the growth of the taco industry.

For instance, we could use the money to establish the first ever national taco museum. Or if that’s already taken we could surely do the first ever breakfast taco museum. We could pay for signage that directs visitors and residents alike to various taco locations. The city could set up taco walking/biking/running tours and organize taco-eating competitions. We could pay to send various taco businesses to national and international culinary festivals and to appear on cooking shows.

At this point you may be wondering if I’m serious. Of course I’m not. The idea is ludicrous.

And yet replace “taco” with “hotel” and you’re looking at the situation in Austin and every other city in the Lone Star State. This is the scam the hotel industry has convinced the state of Texas and municipal governments to buy into. Hence the push to expand the Convention Center.

Are hotels a public good? 
The whole premise of the hotel occupancy tax is that a city’s hotel industry is a public good that deserves government protection. Whereas other businesses are subject to a sales tax that flows into the city’s general fund, hotels are subject to a different tax that (for the most part) can only be used, per state law, on things that benefit the convention and lodging industry. No, it’s not just about tourism. The law specifically calls for the great majority of the revenue to be committed to spending that will benefit hotels.

Businesses often claim they just want government off their backs, but in this case hotels would prefer to pay higher taxes as long as they can dictate how those taxes are spent. They know there are certain things they cannot accomplish individually. It’s much easier to give their money to the government and have it build them a Convention Center than to figure out a way to finance one on their own and deal with the risk.

So, is the hotel industry a public good that needs government support? No. It doesn’t require government support any more than the taco industry. That argument might be compelling for a small, economically-depressed town (but perhaps in a beautiful area) that believes it could jump-start its tourism economy if only there were a hotel or two within 50 miles. That’s obviously not the case in Austin. We have a booming tourism industry, most of which has nothing to do with the things we spend the hotel occupancy tax revenue on.

What about the economic benefits?  
So now we come to the Convention Center. The hotel industry desires –– and City Council has already delivered –– an increase in the hotel occupancy tax to fund a new Convention Center that will likely cost north of $1 billion.

The hotel industry and the dedicated city staff supported by HOT revenue (Visit Austin) argue this is a win-win-win situation for Austin. If we get a bigger, better Convention Center, we will attract bigger conventions to town and therefore more hotel bookings, more restaurant spending etc etc.

The problem is, even the city-commissioned study that endorsed the concept didn’t offer compelling data in support of the idea. It flatly stated that the tax revenue generated from the increased Convention Center business would never make up for the cost.

Below is the chart outlining what the study views as three plausible scenarios. The base case is sort of the middle of the road, and the upside and downside case are pretty self-explanatory.

I can’t vouch for the methodology used here, but I’ll say that even the upside case hardly looks like a home run. In that scenario, the more than $1 billion we spend on the Convention Center supports less than 1,000 full-time jobs, so that’s more than $1 million per job.

Yes, government investment usually produces economic benefits. I’m totally cool with Keynesian economics. But we could just as easily derive that benefit from investment in things that the general public uses: libraries, parks, museums, infrastructure, etc. We pay people to build them. We pay city employees to staff them. All of that money circulates back into the local economy, probably much more effectively than spending on international hotel chains.

Finally, the evidence that Convention Centers are a powerful driver of local economies is exceedingly thin. There’s no evidence that I’ve seen that they provide a more effective economic stimulus than a traditional government project. However, there have been decades of Convention Center expansions not living up to the expectations created by the hotel industry and convention consultants.

But what about the homeless? And the arts? 
Alas, we arrive at the only reason I can fathom supporting the Convention Center expansion.

You see, the downtown hotels have offered the city a deal. If the city goes ahead with the expansion, the downtown hotels will submit to a Tourism Public Improvement District where they will levy an additional 1-2% tax on hotel stays. They have agreed to dedicate a certain % of that to homelessness services, which, as you may have already noticed, we desperately need. Supposedly we’ll get $4 million for the homeless in the first year and eventually it will generate up to $10 million a year.

And then there’s the fact that state law allows cities to spend 15% of their hotel tax revenue on promoting the local arts and 15% on historic preservation (as long as the historic projects are near the Convention Center). So if we raise the hotel tax, we increase the revenue available for arts and historic preservation. Council last month voted to set up a live music fund that will begin getting about $3 million a year in hotel tax revenue.

So everything that I’ve mentioned in this section actually serves a public good. But it’s beyond perverse that in order to get them we have to spend over $1 billion on something that provides very little public value.

Many urbanists, including Convention Center skeptics, have come around to the idea because Council has made clear the new CC will not be as godawful as the current one. It will hopefully engage more with the street –– perhaps with ground-level retail –– integrate some public space and not break up the street grid. This is great, but again, it probably doesn’t justify the cost.

But it’s state law!
A common refrain at City Hall is that, while Convention Centers aren’t particularly useful, it’s not like we have a lot of options for spending hotel tax revenue. It’s state law, after all.

Yes, I get it. But laws can change. And frankly, I’m having a hard time taking seriously the recurring claim from City Hall folks that the hotels will never allow the law to change. For one, have they even tried to change it?

No, Austin can’t do this alone. It will require the collaboration of other Texas cities, all of whom are also desperate for new sources of revenue to support basic public services. But there are people on both sides of the aisle, from the libertarian right to the progressive left, who would be eager to subject hotels to the same rules as everybody else.

It may take a few years to get the law changed, but if we move forward on the Convention expansion now, we’re foreclosing on future opportunities to put our money to better use.

I thought it’d be useful to look back at how this whole camping debate started. No, not this past summer, when Council voted to decriminalize camping/sitting/lying. Let’s go back to when the camping ordinance was first implemented.

You could be forgiven for assuming the rules that Council scrapped had been on the books since the city was first incorporated. Based on the outrage their repeal has caused, you’d think a camping ordinance was a basic building block to any U.S. city.

Alas, City Council did not target homeless encampments until 1996. Let’s take a look at the Chronicle reporting on it at the time. How similar –– and yet how different –– the story is from the one we’ve been hearing the last few months:

On Thursday, January 25, the first day that the ordinance went into effect, making it a Class C misdemeanor for an individual to sleep, store personal belongings, cook, or build fires in public areas, about 200 people gathered on the steps of the Capitol building to protest its passage. 

APD vs. City Council
Back in ’96, the police also felt abandoned by City Council’s camping policies. But for very different reasons:

Michael Urubek says the city council is dreaming if it thinks the new encampment ordinance will succeed in solving the homeless problem. His view may not sound radical until you know who he is: Urubek is the Austin police lieutenant in charge of fielding questions about the city-wide camping ban. As spokesman for the municipal entity responsible for enforcing the new ordinance, Lt. Urubek knows he’s supposed to toe the party line about how the new law will aid police in cracking down on the homeless population. But the man just can’t seem to lie.

“What were the city council’s expectations after this [ordinance] was passed? The police department is not targeting the homeless. We don’t have the staff to round them up or the room to put them away,” Urubek huffs. “Maybe the council should have thought this through a little more.”

Urubek likens the council’s action to a political game. “[The councilmembers] said, `We’ll talk our game; we’ve done our job [by passing the ordinance]. And now we are not going to have homelessness anymore,'” he says. “But the only problem is, it’s not going to work in the long run… [Violators] will go in court one day and come out the next.”

Just like San Francisco! 
As is the case today, back in ’96 people responded to Council’s action by drawing comparisons with San Francisco.

Another city that, like Austin, has gained nationwide attention for defying its reputation as the liberal bastion of its state by cracking down on the homeless is San Francisco. City leaders there launched a campaign two years ago to ticket homeless people for some of the same offenses detailed in Austin’s new ordinance. According to an article in the Washinton Post on January 1, the move was widely criticized as having little impact other than wasting police resources and inconveniencing homeless people. Police issued more than 27,000 tickets with little effect. “Several million dollars have gone down the drain so this mayor’s office can give the business community the perception they’re addressing the problem, by having fewer homeless people visually present,” Paul Boden of the Coalition on Homelessness told the Post.

Ridesharing (Uber & Lyft) and dockless e-bikes and scooters are a tremendous resource for those seeking to free themselves of car ownership. Both tools make it much easier for my household to forgo a second car. I mostly rely on my bike and public transit, but because this city’s system bike/transit system has serious gaps, it helps that I can rely on a Lyft or a scooter when I’m in a pinch. If not for those options, it would be much more tempting to spend thousands a year to own a second vehicle. (AAA estimates it costs the average American $9,000 to own a car)

The problem is, none of the companies that provide me these options are profitable.

Uber & Lyft
Uber lost $5.2 billion just last quarter, while Lyft lost a comparatively modest $644 million.

It’s not as if Uber & Lyft are paying their drivers too much. In the Wall Street Journal last moth, Ken Wiles, a UT finance professor, recently joined Kep Sweeney, some private equity guy, argue convincingly that Uber/Lyft are fueled by financial illiteracy. When taking into account the full cost of ferrying strangers around –– gas, repairs, maintenance and, last but not least, the decline in the value of their vehicle –– drivers are barely making any money at all.

For drivers who depend on Uber to make a living, their cars’ loss in value is serious. If a driver carries passengers for 40,000 miles a year and incurs depreciation of 29 cents a mile—the average reported by the American Automobile Association in 2018—the annual expense is $11,600, or $967 a month, $223 a week, $5.58 an hour based on 40 hours a week.

This dynamic is exacerbated by the fact that Uber/Lyft won’t let you drive a 20-year-old beater that doesn’t have much value left to lose. You have to have a relatively new car.

Wiles and Sweeney suggest drivers may catch up to the ruse:

Once drivers understand that they are liquidating the value of their vehicles, in effect receiving payday loans with their cars as collateral, the effects may be significant. Companies like Uber, Lyft, Grubhub and DoorDash may find it more difficult to recruit and retain drivers unless they raise prices and pay drivers more.

If Uber & Lyft can’t come close to a profit even when they’re ripping drivers off, what will happen to them if they have to actually pay them decently? And how much of a price increase are customers willing to tolerate?

One theory is that Uber & Lyft have no plans to be profitable until they can take the driver out of the equation. Which is why both are investing heavily in autonomous vehicles. If that’s true, you gotta wonder how many years of losses they can sustain waiting for a driverless revolution. A driverless car is one thing, but the ability to deploy a whole fleet of driverless cars to pick up and drop off people … that’s a long way off.

Scooters
It’s tougher to find out numbers associated with the scooter operators, which are largely private companies, but leaked numbers show that Bird, one of the two top companies, lost $100 million in the first quarter of the year. Speculation abounds online about whether scooter economics can work.

In recent months the scooter companies have recently raised their prices –– significantly. Originally they all charged $1 to unlock the device plus 15¢ per minute. The $1 flat fee has remained the same, but Bird and Lime have raised their per-minute rate to 27¢ and Lyft has gone up to 30¢.

So far the price increases don’t appear to have dampened enthusiasm. User racked up over half-a-million miles on dockless devices in August, around the same level as previous months. Now that school is back in full swing use appears even higher, and September is on pace to set a record for non-SXSW months.

Let’s prepare for the worst
If all of these companies fail, then we’re just back to where we were six years ago. That’s not disastrous, but it is certainly suboptimal. However, the city can take steps to mitigate the negative effects:

Keep leaving taxis alone: There is a profitable way to give people rides, even if those rides aren’t as cheap as those offered by Uber & Lyft in recent years. The key is for the city NOT to do what it did in the pre-Uber days, when taxis were strictly limited through a franchise system and left people on 6th Street waiting for hours to get a cab at night. Council voted last year to deregulate the taxi industry –– they should stay the course.

Make regular biking attractive: Keep building out our All Ages & Abilities Bicycle Network via protected bike lanes and urban trails. For only a couple hundred million dollars, we could put in place a system ala Portland that dramatically increases bike ridership.

Invest in transit: In addition to the high-capacity routes created via Project Connect, the city must aggressively reallocate right-of-way on key corridors to transit. This will make transit much more attractive, whether or not you have a convenient last-mile scooter option.

Cap Metro’s July ridership was 8.9% greater than the previous July. The increases were seen across all bus services, including MetroRapid routes, Express routes to the burbs and the good ol’ local routes. The Red Line actually declined, no doubt due to the disruption of the downtown station due to renovations.

This builds upon the 5.5% ridership increase that Cap Metro experienced between July 2017 & July 2018. That first increase, along with most of the monthly increases Cap Metro has seen since implementing Cap ReMap in June 2018, could in some part be dismissed, since Cap Metro had essentially “bought” them by increasing service hours. Investing heavily in increased frequency and not achieving greater ridership would have been a catastrophe.

However, July 2019 is the first full month where we’re comparing year-over-year performance post-ReMap. So for whatever reason, presented with the same exact service, more people opted to take the bus this year than last. Hopefully that means that more people are giving transit a chance due to the increased frequency.

There’s one very obvious caveat: July 2019 had one more weekday than July 2018, which probably accounts for a couple percentage points of the higher total ridership. There may have been a couple weather differences too, although I’m sure both were miserably hot.

There are cheap ways to do even better

In a video promoting the increase, Cap Metro CEO Randy Clarke said, “Think about what could happen when we get dedicated lanes with something like Project Connect.”

Totz. I hope we do move forward on the ambitious plan for two high-capacity transit routes envisioned by Project Connect. But that likely won’t materialize until mid-way through the next decade, at the earliest. There’s a lot of work Cap Metro and, more importantly, the city, can do to further boost ridership on the existing system.

First, the city must aggressively seek opportunities for bus-only lanes on major corridors. Even small stretches of a road –– such as the new contraflow lane on Guad or the new transit/bike lane on W. 5th –– can substantially reduce the impact of traffic on bus service by helping buses avoid particularly nasty bottlenecks. Neither of the above projects cost much money or prompted armed rebellion, so there’s no need not to do a lot more of them.

And then there’s density. We need a lot more of it. Especially near transit stops.

City Council adjourned at 4:18 a.m. today, concluding what I believe is the longest meeting in the four-and-a-half year history of the 10-1 City Council. It’s tough to keep it short with an enormous zoning case, a fight over hotel taxes with the county and two citizen referendums.

Yesterday would not have had to be so grueling if Council had had at least one meeting in the past seven weeks. But City Council has a tradition of taking a break in July. That’s to give the city manager and staff time to craft the budget, which Council takes up in August and September, but it’s worth noting that the County Commissioners Court meets every week all year long and their staff doesn’t appear to have problems putting a budget together. Yes, the commissioners court has fewer members and (at least currently) the members tend to be less talkative, but still…

Council’s first meeting in August last year similarly went into the early morning hours. That was not the case in 2016 & 2017, but both of those years the second meeting following the break was very long, which I imagine still had something to do with the lack of work in July.

It’s not good for City Council to be making big decisions at 3 a.m. Even the sharpest wits on the dais are seriously impaired by that point.

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I’m not an expert on apartment maintenance, but my sense is that you’re not necessarily a bad landlord just because you picked up a couple code violations. But I also know that negligent and unfair landlords are not uncommon. Come to think of it, it’s not as if us tenants are always saints either.

I don’t know quite what to think when I look at the list of properties on the Code Department’s “repeat offenders” list. But then I look at a map of the properties and something is very clear: this isn’t really an issue in West Austin. Most of the central neighborhoods also show zero violations.

It’s a particularly big issue in the north and the southeast. Broken down by Council District, District 3 (Pio Renteria) leads the pack with 888, while Greg Casar’s North Austin District 4 is in a close second, at 864. In contrast, CentralAustin District 9 (Kathie Tovo) only had 6 violations. (Curiously, however, there was one major property in West Austin District 10 that racked up 169 violations)

In a real estate market as tight as Austin’s, however, advocates for tenants and low-income people find themselves balancing their desire to demand better from landlords with their desire to keep affordable housing available. A condemned property not only immediately disrupts the lives of the current tenants, but it takes affordable housing out of a market that is desperate for it.

If you have any insights or experience dealing with this issue, I’d love to hear your thoughts.

Scooters are far from perfect, but they are definitely here to stay.

Half a million trips a month … 
In July of 2018, the first full month when electric micro-mobility devices were legal in Austin, people here took about 119,000 trips totaling 142k miles. At the time, there were 1,959 devices in circulation. Almost all of that came from scooters –– there were only 247 bikes in circulation that generated 7k trips.

One year later, there were 450,000 trips totaling more than half a million miles. Undoubtedly the dramatic increase is partially driven by increased popularity and awareness, but it also has something to do with supply: there are now just under 17,000 devices in circulation.

While scooters still dominate, there is now a substantial number of e-bike trips: 29,000 last month.

If it’s not broke…
This is very good news for Austin mobility. Although city officials have been surprisingly supportive of the scooters from the get-go, there is always a threat of a political backlash (see: San Antonio). The more popular the devices are, however, the harder it will be for the city to clamp down on scooters (e.g. franchise system).

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The national conversation about housing is changing. Or rather, for the first time in years, a national conversation about housing is taking place.

On social media I’m seeing prominent liberal writers take a few minutes from Trump-bashing to bemoan exclusionary zoning and excoriate the (predominantly) Democratic elected officials who protect it in major cities across the country. The New York Times has twice editorialized in favor of eliminating single-family zoning and has run guest columns that have blamed NIMBYs for making San Francisco and other major cities increasingly unlivable for the poor and middle class. Elizabeth Warren, Cory Booker, Kamala Harris and Julián Castro have all proposed housing policies that aim to dismantle exclusionary zoning.

Here’s what Elizabeth Warren says about zoning in her housing plan:

But there’s another driver of expensive housing costs: some state and local zoning rules needlessly drive up the cost of construction. These aren’t necessary rules that protect the environment or ensure that homes meet safety codes. These are rules like minimum lot sizes or mandatory parking requirements. These kinds of rules raise the costs of building new housing and keep families from moving into areas with better career and school choices.

This is great news for local activists who for years have struggled to make the case that liberalizing zoning regulations is actually the progressive thing to do, whether or not it helps developers.

It’s easy for local politicians and activists to dismiss those who call for density as developer shills. It’s much harder, however, to tell loyal Democratic voters the same thing about Elizabeth Warren.

The old adage is that all politics is local, but today I believe the opposite is increasingly true: all politics is national. For a variety of reasons, including the decline of local media, people seem much more likely to keep up with national politics than local politics. People often view local politics through the national political lens, supporting candidates not so much based on their views on local issues as much as their affiliation with a national political tribe. 

Of the $250 million affordable housing bond that we approved in November, $94 million is used to fund income-restricted rental units. Any developer can apply for those funds. Some of the projects will be a mix of market-rate and affordable units (the city funds can only fund the latter). Other projects are done by developers that focus exclusively on affordable housing.

Staff from the Neighborhood Housing & Community Development department provided an update earlier this week on the applications they’ve received in the past quarter. There were 17 applications just in that three-month period, which is about twice as many as the city typically receives in a year.

Here’s a map of the projects applying, most of which probably won’t get picked.

Only one or two of these projects is located in what would traditionally be viewed as a “high-opportunity” area. That generally means an area with high(er) incomes that is close to jobs, amenities and good schools. But in light of changes in the real estate market, it’s worth rethinking those definitions.

Notably, a number of projects on the near-east side, for instance, are providing affordable housing in an area where market rates have exploded due to gentrification. They are also very close to transit and downtown.

There’s a big range of projects targeting different household sizes, different income levels. And of course, some projects are much bigger than others. Housing bond dollars can only be used for units for those at or below 50% area median family income ($30k/single, $34k/2 person, $43k/family of four). But some of the projects are drawing other funding sources (notably Low Income Housing Tax Credits) to provide income-restricted units at higher levels and some projects include some market-rate units, which help pay for the affordable ones.

For instance, on E. Oltorf, Saigebrook Development, a for-profit affordable housing builder, is planning a 190-unit project. Fifteen of those units will have no income restrictions, while 123 will be at 60% AMI (financed by tax credits, no bond funding) and 52 will be at 50% AMI. Among the income-restricted units, 43 will be 1BR, 81 will be 2BR and 51 will be 3BR.

Similarly, at Lakeline Station, Foundation Communities, the nonprofit developers, wants to build 13 units at 30% AMI and 56 units at 50% AMI. Of those 69 units, 21 will be 3-bedroom, 34 will be 2-bedroom and 14 will be 1-bedroom. Those units are part of a bigger development that includes another 51 units at 60% AMI.

Meanwhile, some projects almost exclusively target smaller households. Burnet Place Apartments, for example, is seeking funding for 55 studio apartments, 33 of which would be at 50% AMI, 11 at 40% AMI and 11 at 30% AMI, which amounts to $18k for a single person and $25.8k for a family of four. Similarly, of the 62 units Travis Flats is seeking bond funding for, only 11 will be 2BR and one will be 3BR. The rest will be studios or 1-BR.

Some projects are really, really small. Blackshear Community Development Corporation wants money to build two units –– one 2-bedroom & one 3-bedroom –– at 50% AMI on a single-family lot in the Rosewood neighborhood. At 6711 Porter, Guadalupe Neighborhood Development Corp wants money to build a single 1BR garage apartment at 30% AMI.

How does the city decide which projects are most worthy of its support? It’s a complicated scoring process that takes into account a number of city goals. The goal to build as much affordable housing as possible is balanced against our desire to facilitate economic integration by placing affordable units in affluent areas that are otherwise off-limits to the poor. Similarly, we want housing to be near transit or within walking distance of critical services, schools, grocery stores. Finally, we want housing that serves different types of households, including families with children.

After repeated postponements, the Planning Commission will finally take up what could be the biggest zoning case in a generation: Project Catalyst, or as it was recently humbly renamed, 4700 East Riverside.

It’s a 97 acre mixed-use development centered at E. Riverside and Pleasant Valley. The plan is about 4 million square feet of office and around 4,700 residential units. The developer, Presidium, says 8-12% (400-550) of the units will be income-restricted.

This project has gained prominence over the last year due to the opposition it has attracted from Defend Our Hoodz, a group of anti-gentrification activists. DoH was originally founded by a veteran east side activist in response to the demolition of the Jumpolin piñata store on E. Cesar Chavez, but it was eventually taken over by 20-something radicals. They’re not a particularly large group, but they show up at every meeting related to the project and disrupt it. They will almost certainly show up tomorrow.

Folks with more credibility than DoH will likely voice concerns about gentrification and displacement as well. While the income-restricted units are significant, the rest of the units will likely be very pricey. Much pricier than the Ballpark Apartments, a student-oriented complex that will be demolished to make way for the new development.

CM Greg Casar previewed his stance on the project when he opposed rezoning the nearby Mesh Apartments. Although the rezoning will allow greater density and a certain percentage of the new units will be income-restricted, Casar says he is opposed to upzoning existing multifamily properties that provide low-cost housing. He worries that upzonings will incentivize their redevelopment into luxury housing.

What was interesting in the Mesh debate, if we can even call it a debate, was the lack of opposition from the West Austin anti-growth crowd. There was not a peep from Tovo, Alter, Pool, the three who are most likely to claim that upzoning single-family properties will result in displacement. Will the same dynamic play out at 4,700 E. Riverside?

While opponents of the project will make it appear that Council has the choice to either preserve the Ballpark Apartments or bulldoze them to create luxury units, that fact is that the developer does not need permission to do that.

Council’s choice is this: It can do nothing and inevitably the developer will redevelop the properties with no affordable housing. Or Council can negotiate a major upzoning in return for certain community benefits, notably affordable housing.

Beyond the affordable housing, another major benefit of the new development will be density and mixed use. The existing multifamily properties on E. Riverside aren’t particularly dense due to the enormous amount of space they devote to surface parking. For instance, the Ballpark Apartments is about 13.5 units/acre, which is about the same density as the most common form of single-family zoning in town (SF-3).

Unlike the current properties, the new multifamily will hopefully be up on the street, rather than behind gated parking lots. Along with the office and commercial, this should create a more walkable, transit-oriented area. This nicely compliments the city’s plans for the E. Riverside corridor, the only one of the city’s major corridors that has been designated for the full treatment of urbanist improvements, including protected bike lanes, wide sidewalks, streetscaping, etc. And of course, Riverside will also be home to high-capacity transit –– dedicated right-of-way for bus-rapid transit or light rail –– if voters approve Project Connect in 2020.