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Ed Wulfe

Sales tax revenues take a dip

Don’t freak out just yet, but do be a little worried.

Houston’s 53-month consecutive span of year-over-year sales tax revenue gains has come to an end, five months into an energy slump analysts said could dent the city’s economic numbers for the rest of the year.

The city’s $50.1 million sales tax revenues for April, received this month as its allocation from the state, represented a 2.3 percent decline from a year ago, according to the Texas Comptroller’s Office.

One month’s spending activity doesn’t represent a trend, and revenues from various sectors of Houston’s economy were all over the map. Among the top-grossing sub-sectors providing tax revenue in Houston, reported collections were down roughly 2 percent at discount department stores and family clothing stores that month compared with 2014, and off 2.6 percent at supermarkets and grocery stores. Full- and limited-service restaurant collections, on the other hand, rose 4.7 percent and 10.1 percent, respectively, figures show.

But as Houston’s sales tax revenues declined 2.3 percent, the state’s $2.6 billion in sales tax revenue represented a 5.2 percent increased over April 2014, suggesting that a sharp downturn in the oil and gas industry so crucial to Texas has affected Houston more significantly than the rest of the state.

[…]

In Houston, sales taxes account for 30 percent of the city budget’s general fund revenue. As the city prepares its next budget, whether the monthly dip is a blip or a more sustained rattle is being monitored, city Controller Ronald Green said.

“I think now’s the time not to panic but for us to kind of determine if there’s going to be a trend in this,” Green said, adding he needs two more months of data to determine whether’s April’s revenues were a trend or an anomaly.

Compared to the doom-and-gloom predictions of late last year, steadying crude prices for the last several weeks are a sign industry is making adjustments, said Ed Wulfe, chairman and CEO of Wulfe and Co., a commercial retail real estate brokerage firm. “I think it has corrected itself already,” he said of the energy downturn. “By and large, we’re starting to get back on the normal speed and level already.”

Crude oil prices began dipping last summer after reaching a peak above $100 per barrel and have hovered around $60 since April.

The effects of that sharp price decline began arriving at the beginning of April, said Jesse Thompson, business economist with the Houston branch of the Federal Reserve Bank of Dallas.

“At this point, the only thing that’s hitting us is what’s happening in the energy market,” Thompson said.

I basically agree with Ronald Green. A one month dip like this can be brushed off as an aberration. Three months of it is a serious problem. If it’s about what’s happening in the energy industry, there’s not much to be done about it except adjust behavior and expectations accordingly. Check back in August and we’ll see where we are.

The case against Metro advertising

Ed Wulfe isn’t happy with talk about Metro putting ads on buses and trains.

In the late 1970s, Houston voters overwhelmingly defeated a local referendum to allow ads on bus shelters. Soon after, Houston City Council banned all new billboards within the city limits, then extended the prohibition to the limits of the city’s extraterritorial jurisdiction. In the years since, Houston and Harris County have also created Scenic Districts with signage constraints and ongoing landscaping enhancement efforts.

As a result of these measures, the number of billboards in greater Houston has been reduced an astounding 84 percent over the past 30 years, from more than 10,000 to less than 1,500 – and the number continues to decrease. This dramatic reduction in visual clutter has been accompanied by infrastructure investments that further enhance Houstonians’ quality of life. For example, our city’s parks continue to grow and will become even better and more accessible in the years ahead, thanks to the overwhelming support of Houston voters in the most recent bond elections.

Given this extraordinary progress, it is very troubling that Houston Metro is now considering selling ad space on its taxpayer-funded bus and train fleet. The desire for new sources of revenue is understandable, but this should not occur at the expense of Houston’s visual environment. Paid advertising on the sides of buses would not only be unsightly; it would also create additional distractions for drivers, not to mention opening up our city to a variety of challenges relating to deciding who can advertise and what types of ads would be permitted.

For all of these reasons and more, advertising on the exterior of Metro’s vehicles is unacceptable and should not be allowed. Instead, Houston Metro should explore other revenue-generating opportunities that have fewer negative consequences. Options such as providing naming rights on park and ride facilities and selling advertising on the interior of buses should be considered, for example. I am also confident that Metro’s administrative and board leadership can find ways to reduce their operational expenses a minimal amount to offset any potential revenue sources from damaging advertising on the sides of buses.

See here for the background. I don’t share the concerns about ads on buses and trains, though I do concede that the occasional controversy about what does or does not get advertised is inevitable and unpleasant. But this isn’t a hill I want to die on. If there’s no objection to selling station naming rights, or to ads on the inside of buses and trains, then I’m fine with that. Giving up that small piece of revenue is worth it to avoid a fight and maintain goodwill. Let’s move forward with those things.

Your one-minute real estate update

I just have one mostly tangential thing to say about this.

Houston will see a modest and steady growth in retail activity in 2013, according to Ed Wulfe’s annual retail forecast.

And the following year should be much better, said Wulfe, who is chairman and CEO of Wulfe & Co., a retail development, brokerage and property management firm.

The amount of new shopping center space to be built and opened in 2013 will be slightly greater than this year’s, while 2014 should be “very strong based on what’s underway,” Wulfe said.

I note that story mostly because it seems like as good an excuse as any to wonder once again about the status of all those long-dormant projects whose empty lots serve as a daily reminder of their lack of activity. I speak of course of the Stables and the Robinson Warehouse, now celebrating its sixth anniversary of vacantness. At last report the Sonoma site was being redeveloped; I can’t personally confirm this, as I generally avoid the area. Regent Square was supposed to have commenced construction in October, but I haven’t seen anything on the Allen Parkway part of the property. And one property that I generally forget about but was in the news recently, the old Astroworld site, also continues to lay fallow. I know this story is about retail development, and most of the sites I’m talking about were intended to be residential or mixed-use, but I feel like the Houston real estate market won’t truly be healthy again until something is happening with all of them.

Park ambitions

Dream big.

Two of Houston’s heaviest-hitting business groups — the Greater Houston Partnership and the Quality of Life Coalition — are promoting an ambitious master plan to develop land along 10 of Harris County’s major bayous, creating an enormous system of “linear parks.”

With a potential half-billion-dollar price tag, the Houston Bayou Greenway Initiative would include almost 250 miles of new or upgraded hike-and-bike trails, not to mention canoe trails and more than 50 new parks that would do double duty as flood-retention basins or wetlands that improve the quality of the city’s groundwater.

“Two hundred and fifty miles!” exults developer Ed Wulfe, who represents both the Partnership and the Quality of Life Coalition. “That’s the distance from here to Dallas!”

The Bayou Greenway would be the biggest parks initiative in Houston’s history, says Tom Bacon, president of the Houston Parks Board, and would add desperately needed greenspace to neighborhoods widely spread across Harris County.

How much would it all cost? Roksan Okan-Vick, executive director of the Houston Parks Board, offers a rough estimate in “big round numbers:” $255 million to acquire land for the trails, build them and landscape them with native trees and plants, plus $240 million to add the 50 parks.

The Greenway would be a patchwork of projects carried out by hundreds of parties: city, county, state and federal agencies; nonprofits; municipal utility districts; Tax-Increment Reinvestment Zones; neighborhood groups; private developers; and private philanthropists.

I love the sound of this, I’m just not clear on what it means. The main question, of course, is “How will this be paid for?” For that,we go to the Houston Parks Board:

The Greater Houston Partnership will take the Bayou Greenway Initiative to our elected representatives in the coming months to secure support, and hopefully obtain funding commitments over the next two to three budget cycles. As that process moves forward, HPB will continue to work with the community, increase its partnerships with other bayou organizations, continue on-going communication with its public partners, and pursue private funding opportunities.

In other words, this is still more wish list than anything else. Not that there’s anything wrong with that – I love the vision, and I hope to see it come about. There’s still a lot that needs to fall into place for it, and no guarantees that any of it will happen. Click that last link to see a map of the proposed new trails, and to find an email address for Roksan Okan-Vick if you want to get involved.

The case for conformity

Max Watson and Ed Wulfe of the Houston Quality of Life Coalition make the case in the Chron for Houston to be more like some other cities.

Last week’s new sign ordinance addressed roof, wall and window signs throughout the city as well as some reductions in height and size for on-premise signage installed after the effective date of the new ordinance and some limits on electronic changeable message signs. As newly constructed signs are built, business must comply with the new sign ordinance. With the exception of changeable message signs, all existing structures may add new sign faces without complying with current code standards because of the city’s grandfathering allowance.

There are reportedly more than 60,000 grandfathered on-premise signs in the city of Houston, including 22,000 pole signs that were constructed years ago. These signs will continue to be in their current locations for years to come without a law that requires grandfathered signs to conform to the current sign laws at some time in the future. The result of this lack of strong sign regulations citywide has left a majority of the city — particularly freeways and thoroughfares — cluttered with on-premise signs and visual congestion of signage that is difficult to read and unhelpful as a way-finding tool for the businesses they are meant to serve.

The Quality of Life Coalition comprises more than 85 endorsing organizations dedicated to a significant reduction in signage blight through reviewing current ordinances, researching signage comparisons with competitive cities and exploring incentives to reduce existing grandfathered signs. Most of Houston’s major competitor cities have some type of conformity provision that requires grandfathered signs to ultimately be brought into compliance with current sign regulations: Austin, Atlanta, Boston, Charlotte, Denver, El Paso, Fort Worth, Irving, Sugar Land, Los Angeles, Raleigh/Durham, San Antonio and San Jose are some examples. Smart cities across the country are adopting comprehensive but simple sign regulations that are relatively easy to enforce and provide businesses with an even playing field, stronger economic development opportunities, increased property values and safety/aesthetic improvements — all at the same time.

The main takeaway from this is that these folks, along with the Chron editorial board, believe that Houston’s difference from these other cities is a competitive disadvantage. The Michael Berry position is just the reverse, that Houston’s difference in this matter is something that draws people – or at least businesses – to it. I’m still not seeing any objective data to support or refute either of those arguments, but at least now I feel like they’ve been defined.

Chron makes the case for beautification

The Chron editorializes in favor of the new sign ordinance passed by Council this week. The tone is off-putting, and as has been the case all along is long on assertion and short on empirical evidence, but it’s a pretty good capsule version of the pro-beautification side. Here’s the key bit:

There’s no virtue in looking awful, and when Houston competes with other cities, our tackiness puts us at a disadvantage. Nobody dreams of living in the Ugly Betty of cities.

Yes, of course every business wants the biggest, tallest, most attention-grabbing sign that it can possibly have. But that kind of competition is like an arms race: When every business has an enormous gaudy sign, no one gains a competitive advantage. Nobody wins, and the street looks wretched.

Real estate magnate Ed Wulfe — a deal-loving, free-enterprise kind of guy — has worked for years with Scenic Houston on quality-of-life issues like sign ordinances. He notes that his own shopping centers — successful places like Meyerland Plaza and Highland Village — already impose stricter rules on signage than the city does. Controlling all the signs’ size and materials makes the mall as a whole classier and more attractive to customers. Each tenant, of course, would prefer that its own sign be bigger and more attention-grabbing. But smaller, more coordinated signs for everyone lead to higher profits for all the stores.

As I’ve said, I hear people say Houston is ugly all the time, and I have to believe that has an effect on our fortunes in the greater marketplace. Who wants to live someplace ugly? A city that can’t draw people in isn’t going to be successful in the long run. Against that are questions of fairness to new businesses, and whether or not a new set of regulations would discourage businesses from locating here. I still don’t feel like I have enough information to evaluate the competing claims.

As far as the unfair-to-new-businesses business goes, the Chron has a plan for that:

That’s why, next time we update our sign ordinance (which is very much on the agenda of Scenic Houston), we need to provide a reasonable way to address signs that already exist. Right now, the new rules apply only to new signs, and even if every tenant of a shopping center changes, the entirely revised sign won’t count as “new” as long it stands on the same old pole. Small properties, anxious to preserve an individual competitive advantage even at a cost to the larger area, are likely to cling to those too-big, too-ugly poles for decades.

Well, that addresses one point while making the other a bigger deal. Which has to make me wonder about the possibility of a lawsuit over whatever might come next. Just another factor to consider.

Finally, on a related note, I have been informed that Council Member Anne Clutterbuck was out of town this week, so there’s no mystery as to why she did not vote against the new sign ordinance. I had expressed some curiosity about that in my earlier post.