BG Reads | News You Need to Know (February 17, 2021)
[BINGHAM GROUP]
NEW // BG Podcast EP. 129: Discussing Austin's Tech Community with Jason Fernandez, Managing Partner & COO, Quake Capital
Continuing a series of conversations the firm is having around the recent and continued media hype of tech flight to Austin (and Miami), Bingham Group CEO A.J. spoke with his friend Jason Fernandez, Managing Partner & COO, Quake Capital.
Jason is a Miami native who moved and established Austin roots in 2010. He maintains business and personal ties to Miami. The two dig into his impressions on moving to Austin, the tech community here, and also the appeal of his hometown.
You can listen to this episode and previous ones on Spotify, Apple Podcasts, and SoundCloud. Please like, link, comment and subscribe!
CITY OF AUSTIN
The city of Austin has announced the cancellation of meetings and operations today, except for essential public safety services, including those related to winter weather response.
All Travis County offices and facilities will be closed today with the exception of essential emergency staff. The Commissioners Court meeting will be rescheduled for a later date when weather allows, according to a news release from the county.
The Austin City Council’s February 18th meeting is still posted to meet as of this email. Austin City Council Regular Meeting Agenda.
THE 87TH TEXAS LEGISLATURE
LINK TO FILED HOUSE BILLS (2,178)
[AUSTIN METRO]
Power could get cut to circuits that include hospitals as a ‘last resort,’ Austin Energy warns (KUT)
Austin Energy could decide to shut off electricity to circuits that include critical infrastructures – such as fire stations, hospitals and 911 operations – to prevent the state's power grid from collapsing, the municipal utility warned Tuesday.
"Only as an absolute last resort. I cannot guarantee that we will not get to that stage,” Austin Energy General Manager Jackie Sargent said during a news conference. “I am hoping that won’t happen, but I don’t want to create a false sense of security.”
As of Tuesday evening, about 173,000 Austin Energy customers – roughly one-third of the utility’s consumers – were without power. And it could be out into Wednesday, Austin Energy said, with no clear answer from the state grid regulator on when power can be restored.
“It makes it difficult to give you a certain answer,” Bill Magness, ERCOT’s president and CEO said during a virtual news conference Tuesday. “We’re relying on the ability to get that supply and demand in balance.”
A spokesperson for Austin Energy confirmed that the utility was able to restore power to some households Tuesday, but the number was very small compared to total outages.
“Until this weather event clears and more generating units across the state are able to come online, there will not be enough capacity to meet all energy customers’ demands,” Sargent said.
She said the utility has asked its largest customers to take additional steps to conserve power, and has cut electricity to those that have backup generators.
Should demand bypass the state’s current electric capacity, the entire system could break down.
“If the grid were to collapse, if the demand would continue to go up, the generating capacity or supply continue to come down, there would be a point when the whole system would go black,” Sargent said. “That would take not just days to restore power, but weeks and even longer for some customers throughout the ERCOT footprint.”… (LINK TO STORY)
With more freezing rain coming to Austin, road conditions not expected to improve any time soon (Community Impact)
As more than 170,000 Austin Energy customers remain without power, a difficult choice has been presented to many Austin residents: Stay at home and stay as warm as possible in homes with no electricity and consistently falling temperatures, or brave icy and unsafe roads to get to a friend or family member's house or to one of the city's warming centers.
Unfortunately, the dangerous condition of the roads is not likely to get any better for at least a few days. According to the National Weather Service, freezing rain and sleet will drop a tenth to a quarter of an inch of ice from the night of Feb. 16 into the morning of Feb. 17, which will make travel conditions even more dangerous.
Austin City Manager Spencer Cronk said crews from the city and other organizations have been working nonstop to get roads into the best shape possible, but the situation is going to get worse before it gets better.
"We won’t likely see this snow melt until the weekend. For the next several days, the road conditions are going to be very challenging," Cronk said.
If individuals do have to make emergency trips on the roads, officials are strongly pushing for them to do so during daylight hours, before temperatures drop and conditions worsen at night… (LINK TO STORY)
Report: Austin-area hotels lost nearly $1B in revenue in 2020 (Austin Business Journal)
The Austin metro recorded the steepest relative decline in hotel revenue in 2020 of any Texas metropolitan area — another indication of how local tourism has been decimated by the Covid-19 pandemic.
Austin's booming tourism industry took a massive blow last year as conventions were canceled and major revenue-generating events like South by Southwest were called off. Hotel revenue dropped 55% last year to $784 million, compared to $1.74 billion in 2019, according to a Feb. 12 report from Source Strategies Inc., a San Antonio-based hotel research firm.
Room supply also fell nearly 6% as some hotels closed and short-term rentals went unused. In Austin, the city has been leasing and purchasing hotels for community services such as housing people experiencing homelessness and housing those who may have been exposed to Covid-19. Those who have entered into agreements with the city have said the deals were financial moves to offset crushing occupancy rates and low revenues.
Statewide, lodging revenue dropped by more than $5 billion, or roughly 41%, according to the report. Occupancy in Texas hotels also dropped to 46%, the lowest level in more than 30 years.
Dallas hotels lost the most revenue — more than $1.1 billion — which equated to a decline of 48% year-over-year, according to the report. Houston came in at a 40.5% drop, San Antonio declined by 49% and Fort Worth-Arlington clocked in at 44.5% lower than 2019.
“The lodging sector, particularly in Texas’ large urban centers, remains severely distressed,” Todd Walker, president of Source Strategies, said in a statement. “With conventions and large events severely limited or cancelled through 2021, cities are losing billions of dollars, with ripple effects into all areas of the service sector.
"The loss of hotel occupancy tax revenues will be a major challenge as cities try to recover in the years ahead.”
The steep drop in hotel stays is a concern for City Hall. Hotel occupancy tax revenue in the city of Austin had been on the rise from 2010 to 2019, nearly tripling from $40.6 million to $111.7 million. In the 2019-20 fiscal year, the collections were expected to only reach $90.3 million, according to the fiscal 2020-21 budget. Actual numbers are not yet available.
And this current fiscal year, city officials said hotel occupancy tax revenue could fall to levels not seen since 2010. The loss of HOT revenue is worrying because of the many things those funds are used for, from running the Austin Convention Center to restoring historic buildings. Read more about the pandemic's impact on Austin city finances here… (LINK TO STORY)
[TEXAS]
ERCOT officials say they have no idea when Texas’ power outages will end (Dallas Morning News)
Texas’ power grid operators can’t predict when outages might be over, Electric Reliability Council of Texas officials said in a call with media outlets Tuesday. More than 4 million Texans, many of them in North Texas, are fighting extended power outages. The agency that oversees the state’s power grid is trying to avoid a total blackout by instructing utility companies, like Oncor, to cut power to customers. “We needed to step in and make sure that we were not going to end up with Texas in a blackout, which could keep without folks without power -- not just some people without power but everyone in our region without power -- for much, much longer than we believe this event is going to last, as long and as difficult as this event is right now,” ERCOT CEO Bill Magness said.
But when pressed by reporters for a timeline, Magness and Senior Director of System Operations Dan Woodfin could not say how much longer the outages would last. An uncontrolled blackout could leave Texans without power for “an indeterminate amount of time,” maybe a month, Magness said. They also described the challenge of keeping restored power throughout peak demand hours like morning and nighttime. Throughout the day, ERCOT and Gov. Greg Abbott announced that power was being restored to hundreds of thousands of customers. But it doesn’t always maintain. “At the same time we’ve been adding supply to the grid from certain generators, we’ve also been losing other generators,” Woodfin said.
“So we haven’t been able to add as much back during the course of the day that we would like and what we have added back, we’re hoping to keep online but if additional generation doesn’t become available as the day goes on, we may actually have to take some of it back offline to maintain that power and supply balance.” Controlled outages should have been rotated throughout areas for 15-45 minutes, but have been drastically extended for thousands of people, while others haven’t experienced any outages… (LINK TO STORY)
Gov. Abbott makes ERCOT reform emergency legislative item amid blackouts (Austin American-Statesman)
As statewide blackouts left more than 4.3 million Texans without power on Tuesday, Gov. Greg Abbott declared a new emergency item for lawmakers to tackle during this year's legislative session: reforming the state's main electric grid operator. The Electric Reliability Council of Texas, or ERCOT, begin requiring electric utilities to reduce usage through rolling power outages on Monday, as freezing temperatures and snow increased demand for power.
"The Electric Reliability Council of Texas has been anything but reliable over the past 48 hours,” Abbott said in a statement. “Far too many Texans are without power and heat for their homes as our state faces freezing temperatures and severe winter weather. This is unacceptable."
Abbott previously declared five emergency items for state lawmakers to tackle this year: expanding access to broadband internet, preventing local governments from cutting funding to police departments, reforming the bail system, preserving election integrity and offering civil liability protections to businesses that operated during the pandemic. Now Abbott is calling for state lawmakers to investigate ERCOT and "ensure Texans never again experience power outages on the scale they have seen over the past several days."
"Reviewing the preparations and decisions by ERCOT is an emergency item so we can get a full picture of what caused this problem and find long-term solutions," Abbott said in a statement. "I thank my partners in the House and Senate for acting quickly on this challenge, and I will work with them to enhance Texas’ electric grid and ensure that our state never experiences power outages like this again.”… (LINK TO STORY)
A glimpse of the future in Texas: Climate change means trouble for power grids (New York Times)
Huge winter storms have plunged large parts of the central and southern United States into an energy crisis this week as frigid blasts of Arctic weather crippled electric grids and left millions of Americans without power amid dangerously cold temperatures. The grid failures were most severe in Texas, where more than 4 million people woke up Tuesday facing power failures.
Analysts have begun to identify a few key factors behind the grid failures in Texas. Record-breaking cold weather spurred residents to crank up their electric heaters and pushed demand for electricity beyond the worst-case scenarios that grid operators had planned for. At the same time, many of the state’s gas-fired power plants were knocked offline amid icy conditions, and some plants appeared to suffer fuel shortages as natural gas demand spiked nationwide. Many of Texas’ wind turbines also froze and stopped working, although this was a smaller part of the problem.
The resulting electricity shortfalls forced grid operators in Texas to impose rotating blackouts on homes and businesses, starting Monday, to avert a broader collapse of the system. Separate regional grids in the Southwest and Midwest are also coming under serious strain this week. The crisis highlighted a deeper warning for power systems throughout the country. Electric grids can be engineered to handle a wide range of severe conditions — as long as grid operators can reliably predict the dangers ahead. But as climate change accelerates, many electric grids will face novel and extreme weather events that go beyond the historical conditions those grids were designed for, putting the systems at risk of catastrophic failure… (LINK TO STORY)
Texas House Speaker Dade Phelan calls for review of what led millions to lose their power (Houston Chronicle)
As millions of Texans remained without power Tuesday morning, Texas House Speaker Dade Phelan called on two key committees to meet next week to “review the factors” that led to the situation. “I’m asking these two vital committees to convene a joint hearing on February 25th for the express purpose of helping Texans understand what went wrong and how we can prevent these conditions from happening again,” Phelan said.
“We must cut through the finger-pointing and hear directly from stakeholders about the factors that contributed to generation staying down at a time when families needed it most, what our state can do to correct these issues, and what steps regulators and grid operators are taking to safeguard our electric grid.” The announcement came after several lawmakers had called for an investigation by the Legislature as the outages stretched on for hours Monday.
House State Affairs Committee Chair Chris Paddie, R-Marshall, said the blackouts across the state “raise questions about the reliability of our electric grid and its ability to withstand extreme weather events in the future.”
“I thank Speaker Phelan for his leadership on this issue, support his call for a joint hearing, and look forward to a thorough and exhaustive review of this critical matter,” Paddie said. House Energy Resources Committee Chairman Craig Goldman, R-Fort Worth, also expressed urgent concern and a desire for answers. “More than 2 million Texans have been left without power - some for many hours, some even days - and this is unacceptable,” Goldman said.
“This joint hearing will provide an opportunity for all Texans to hear from industry officials, regulators, and grid operators to get an explanation and understanding of what went wrong and steps they are all taking to make certain this never happens again. I look forward to working with my House colleagues and committee members to get to the bottom of this critical issue for all Texans.”… (LINK TO STORY)
Dallas vs. Austin: Competition for tech companies, talent heats up amid coastal exodus (Dallas Business Journal)
Amid all the talk about Texas gaining relocations from California, Austin has bolstered its resume in recent months as Dallas played a quieter role in technology.
Last year, Oracle, the Fortune 100 database and software company, said it was relocating from Silicon Valley to Austin. That came just days after Tesla CEO Elon Musk — arguably the biggest name in tech, if not corporate America right now — announced his move to the state’s capital. This year, there has been word of others shifting their headquarters, including data-center company Digital Realty.
Austin’s tech strength is bolstering at a particularly crucial time as companies look to find new places to put down roots, including making significant investments. The state’s capital, which has a long tradition with innovative companies, has attracted widespread hiring from places such as Apple and Facebook in addition to relocations.
That’s not to say that the Dallas region isn’t getting its share of corporate relocations, including from California. Charles Schwab, CBRE and McKesson are large companies that many metros in the country would scramble to have. And Dallas has attracted some names in tech, even if some aren’t as well known — and large offices without the headquarters themselves.
The Dallas Regional Chamber has been in conversations with companies tied to technology on the West Coast, said Mike Rosa, senior vice president of economic development at the DRC. The area is well-suited for many businesses as they look for corporate relocations or expansions, he said.
Discussing HQ relocations and office expansions, Rosa said the chamber is "aware of California companies and California tech companies that are looking pretty hard at Dallas-Fort Worth, and Dallas-Fort Worth makes sense for them."
"We’re in a great position," he added.
He said the companies are in Los Angeles and the Bay Area and others in the country, noting technology doesn't have to be narrowly defined.
Mark Cuban, Dallas’ most recognizable technology-minded son, said the region could land its share of tech companies. After the announcement about Oracle, he took to Twitter to make a case for his local area, talking up its advantages over the rest of the state for companies considering a move.
“We get the Fortune 500 companies to move here, and the entrepreneurs that create business to fit their ecosystems move here quietly and grow into major corporations,” Cuban said in an emailed response to questions. “Smaller tech companies will find it far cheaper with a much more target-rich environment of customers.”
The Dallas region should benefit as a mature region, according to John Boyd, a site selection expert. The area has a “diverse market,” which will help it in some key sectors.
It should be "another exciting year for Texas," Boyd said. "You're seeing this unprecedented migration of people out of expensive high tax markets like California, New York. ... Companies are really focused on traditional business climate factors like never before.”… (LINK TO STORY)