Executive V.P. Report

January 2009

The Legislature Goes Back into Session.

This month the Texas legislature went back into session, as it does every two years, to hammer out its biennial budget.  Eight months ago then Speaker of the House Tom Craddick said that the State was sitting on a $15 billion budget surplus and everything was looking rosy.  Today we have a new Speaker, Joe Straus III a Republican from San Antonio and everyone is saying that the budget is going to be very, very tight.  State budgeters are saying that sales tax revenues are still up, but that the rate of increase has slowed considerably.  Hurricane Ike will cost the state about $2 billion for cleanup and reconstruction.  Apparently there is an issue with the state education endowment fund.  It is unable to make any payments if its rate of returns fall below a certain amount over a ten year period.  The market crash triggered that little problem and now the State is set to lose $1.5 billion it had expected to receive if  it does not find a solution or a loophole.  On top of all that the state’s new business tax has underperformed.  If you recall, part of that tax was the agreement that local school taxes were cut and the business tax was supposed to make up for the reduction.  The problem now is that the tax did not bring in enough revenue to cover the reductions that were made.  The difference some budgeters are estimating to be around $5 billion annually.  The state will start the budget process with a cash balance of about $2 billion.  There is another $6.6 billion in the rainy day fund but it does not appear that budgeters want to spend those funds because it is “one time” money and it will be slow to replenish especially in a depressed economy.  Keep an eye on this process, it will be interesting to see where legislators come up with the extra funds.  It will also mean that when the special interest groups start coming around, it will be easier or the representatives to say no than it was in prior years when the coffers were flush with gold.  For contractors that is not a good sign, especially with TxDOT under a sunset review and a less than glowing report on their performance on the legislator’s desks.

Kay Bailey Hutchison.

The ripple effect of Senator Hutchison’s probable decision to run for governor. (She hasn’t formally announced her intentions as of yet, but has formed an exploratory committee and begun raising money.)  U.S. Representative Michael McCaul, Republican from Austin has stated that he is considering running for the Texas Attorney General position in 2010, a position that is currently being held by Republican Greg Abbott.  Abbott is reported to be considering several different possibilities ranging from Lt. Governor to U.S. Senate.  The decision would depend upon what Lt. Governor David Dewhurst decides to do.  If Dewhurst runs for re-election, then Abbott would pursue the federal spot being vacated by Hutchison.  If Dewhurst goes for Hutchison’s seat then Abbott would run or the Lt. Governor position.  In either case, that would leave the attorney general seat open for McCaul to pursue. 

Speaking of Senator Hutchison and her fundraising, the Houston Chronicle reported that a flurry of letters were sent out to potential supporters poking at Governor Perry and asking for support for her exploratory committee.  Many of these potential supporters have been in both the Perry and Hutchison camps in the past and with a legislative session about to begin, puts them in a very difficult position.  Hutchison has however been able to enlist the support of several high profile names from around the state including Houston beer distributor John Nau III, actor Chuck Norris, Nolan Ryan, Ned Holmes, Rod Paige and Astros owner Drayton McClane.  This is promising to be a very contentious primary and should leave a lot of blood on the floor.  Let’s just hope that there is enough of the winning candidate left to go up against the Democratic challenger in November.

HCA Christmas Party

Just a quick note to say thank you to everyone who attended this year’s Christmas party at the Hilton North Houston.  I hope everyone had a good time, I know that I did.  I would especially like to thank our event sponsor, Mustang Cat for their generous support of this event.  I would also like to thank our Christmas drink sponsors who made the bar possible; Equipment Support Services (ESS), Roy Moffitt Customized Fueling, Rush Equipment Center, Cokinos, Bosien & Young, R & B Group, Slack & Co. Contracting Inc., Sprint Sand & Clay, Waukesha-Pearce Industries, Amtek Information Services, Cherry Crushed Concrete, Double Oak Construction, Kacal’s Auto & Truck Service and Total Site, Inc.  Finally both Antonette and I would like to recognize the incredible job done by this year’s Board and especially its president Mr. Peck Boswell.  Congratulations to the new Board on being elected and I look forward to working with you these next two years.

Join a HCA Committee Today!

Over the years I have heard many different opinions on what member’s think it takes to become part of an HCA committee.  Some think you must be elected to the position, some say it all depends on who you know.  I am here to set the record straight once and for all.  If you want to be part of any of HCA’s working committees all you have to do is ask.  HCA is now accepting members for committee positions, either associate members or contractors.  If you have ever wanted to serve on any of HCA’s committees but were not sure how to begin, then this is your chance.  Simply call the HCA offices at (713) 349-9434 and express your desire to contribute to the betterment of this association.  Sign up now and help make HCA the best association it can be.

November VP. Report

Election 2008 Wrap Up

Finally the race to see who would replace George W. Bush as President of the United States is over and as far as I am concerned, none too soon.  I am just thankful that Texas was not a battleground state and we were spared the onslaught of inescapable media advertizing and automated phone messages.  On the national scene Barack Obama beat John McCain by 192 electoral votes with Obama winning 53% of the popular vote to McCain’s 46%.  In Texas McCain fared much better garnering 55% of the vote compared to Obama’s 44%.  Sen. Obama won Harris County by 18,000 votes claiming 50.43% to Sen. McCain’s 48.84%.  Exit polling showed that there was heavy turnout in the African-American community but also that Hispanics turned out to vote for Obama by a margin of 60%.  Issues that were pivotal in Obama’s campaign were opposition to the war in Iraq, healthcare issues, the recent collapse of the banking and credit industries and Sen. McCain’s inability to distance himself in the minds of the voters from President Bush.  One of the issues that started off hot and died quickly was energy independence, which the Republican Party latched onto early and made some hay with when gas prices hit $4.00 a gallon.  However as election day approached, gas prices steadily dropped (they are now under $2.00 per gallon) and the issue quickly faded away.  On the positive side, during the height of the commotion Congress released its ban on offshore drilling freeing up locations for exploration and development that oil companies have wanted to tap into for decades.  Another topic that hard–core Republican’s made an issue during the primary, but never saw the light of day in the general election was immigration.  Despite all of the hand-wringing and chest thumping that took place during the Republican primary with members calling for more boarder fencing and a round-up of all illegal’s in the country, the issue never took off.  The most likely reason for immigration to be a non-starter during the general election was the fact that both candidates were known to have similar views on the issue.  Both candidates support some form of an expanded work visa program and increased boarder security. 

In the U.S. Senate the Republicans slipped further from control losing nine seats so far.  Before the election the Democrats had a lead in the Senate holding 51 seats to the Republican’s 49 seats.  After the election those numbers have changed to show the Democrats holding 57 seats, the Republicans have 51 with three seats that are still undetermined at this time.  In Texas, Incumbent Senator John Cornyn won re-election over his Democratic challenger, Rick Noriega by one million votes, taking the race 55% to 43% Cornyn led throughout his entire race and did not appear to be hurt by the surge of Democratic voters that turned out early across the country to vote for Sen. Obama.

In the U.S. House, Republicans lost 25 seats dropping from 199 Republican held seats prior to the election to 174 after.  There are also six seats that are still undecided.  The Democrats increased their hold over the House from 236 seats to 255.  In local U.S. House races Republican incumbent John Culberson beat challenger Michael Skelly 56% to 42% in a strongly Republican district to hold on to his seat in District 7.    In District 10, Michael McCaul won re-election over his Democratic challenger Larry Joe Doherty 54% to 43%.  In District 18 Democratic incumbent Sheila Jackson Lee easily won re-election against two challengers taking 77% of the votes.  In the seat recently vacated by Tom Delay, Republican challenger Pete Olson upset the Democratic incumbent Nick Lampson and reclaimed the office for the Republicans.  Olson won District 22, a notoriously strong Republican district, from Nick Lampson 56% to 42%.

In the state races there were no real surprises, all incumbents won re-election except one.  Rep. Jim Murphy, freshman Republican lost his re-election bid to the person he beat out for the seat originally.  Kristi Thibaut narrowly edged out the incumbent, winning the seat 50.58% to 49.42%.  Mrs. Thibaut won the race by 464 votes.  This Northwest Houston district has typically had a slight Republican lead in probable voters, however it is clear that Mrs. Thibaut gave Murphy a good run for his money in the first election and while the Obama coattails probably helped her out I would say it would be a mistake not to give her a large portion of the credit for her victory.  This may be setting up to be a classic election showdown and I would not be surprised to see Jim Murphy attempt to retake his old seat at the next election. 

The local County elections are the ones that felt the biggest impact from the Obama surge.  Two years ago the Texas Democrats were crowing over their sweep of the Dallas County elections especially in the judge’s races.  This year it was Harris County that took the hit, seeing all Republican judges on the ballot lose except for four.  Before election day there were 22 criminal court judges, all Republican and 25 civil court judges, again all Republican.  Now there are 14 Republican and eight Democrat criminal court judges and 12 Republican and 13 Democrat civil court judges.  Of the four Republicans that won re-election, the only common denominator in their victories was that their opponents had uncommon names that may have turned voters away.  A point of fact however, the Republican judges had to know that they were on the verge of losing their seats simply by looking at the last couple of election outcomes.  In 2006 there wasn’t one judge that won their race by more than two percentage points.  It took very little to push the balance of power away from the Republicans and over to the Democrats and that push came from the increase of straight ticket Democratic voters that showed up to support the Obama campaign.  According to the Harris County returns 52.94% of those voting Democrat hit the straight party button compared to 46.52% for the Republicans.  This is an increase for both parties which usually average 45% straight party votes.  The judges are also a victim, to some extent, of voter apathy.  Being that far down the ballot voters sometimes get bored with races that they may not be familiar with and in many cases will skip over the bottom part of the ballot. 

Other high profile County seats to fall to the Democrats were the County Attorney, the County Sherriff and the District Clerk.  Houston City Council Member Adrian Garcia will be vacating his District H Council seat a year early to become Harris County’s first Hispanic sheriff. He defeated thirteen year incumbent, Tommy Thomas by double digits 56% to Thomas’ 43%.  Thomas was plagued recently by several scandals including a high jail death rate, a high profile civil rights lawsuit and thousands of questionable deleted e-mails.  With Garcia’s victory comes the fact that now the City will have to hold a special election to fill his unexpired term and the next authorized date would be Saturday, May 9^th.

County Attorney Mike Stafford lost his bid for a third term to the democratic challenger, and ex City Council Member, Vince Ryan.  Ryan won the election 49% to 51% winning by 30,000 votes. In the District Clerk’s race Democrat Loren Jackson defeated Theresa Chang by the same margin as in the County Attorney’s race 49% to 51% with a 30,000 vote difference.

It’s the Economy…

This has not been a good year for anyone financially.  The banking industry is collapsing due to their policy of authorizing anyone that could fog a mirror to receive a home mortgage loan.  The credit card industry was already in collapse due to their high interest rates and the soaring numbers of defaults by their users as American’s slowly slid into bankruptcy. Then of course the market collapses, dropping more than 3140 points since September 12^th.  Like many people in the financial market, I was hopeful that after the election was over that the market would recover, or at least stabilize.  Historically whenever there is an open election for President, the market that year is unstable and only corrects after the next president has been selected.  This year however that has not happened.  Since the election of Barack Obama on November 4^th the market has continued to drop losing 1342.6 points, and market analysts are saying that bottom is nowhere in sight.  Hopefully after the inauguration, the market will stabilize, but that may just be wishful thinking on my part.  For the construction industry, all of this market turmoil has caused another problem.  With the credit industry tightening up their requirements for borrowers, no one is immune from a reduced credit limit and higher rate including municipalities.  The City of Houston announced at their last Council Committee on Budget and Fiscal Affairs that it would be stretching its normal five year capital improvement plan (CIP) out to a six year plan.  At that meeting City Controller Annise Parker stated that the department directors were being asked to scrub their budgets to free up money for the city.  The Controller stated that the City is paying significant penalties on treasury debt, and the major players that the City had typically dealt with in the past like Bear Stearns and Lehman Brothers are no longer in business.  Ms. Parker stated that the City has considerable funding reserves, but that we are heading into a recession and that we must be conservative with our money.  Director of Public Works, Mike Marcotte stated that they will be deferring CIP projects from this year into year three that will have a minimal effect upon City services.  He was also quick to note that none of the projects are being cancelled only deferred for 30 days up to two years.  There will be $185 million worth of deferrals and expenditure changes over the next two years stated Marcotte.  Director Marcotte did say that regulatory and joint funding projects were protected as well as any project already underway.  There would be no delays to any storm sewer projects in the first year nor would there be any delays to major thoroughfare projects.  Most of the deferred projects came in the form of neighborhood street projects and water and wastewater replacement projects.  The city was quick to point out that if the economy suddenly turned around in the next twelve months then the City would re-evaluate their actions and if possible adopt the old plan, but that does not appear to be likely.  As a gift for the engineers the City also announced that all engineering projects scheduled to begin in 2011 had been deferred indefinitely as well. 

Rumor Mill

The election night 2009 is still a year out but the race for mayor already has its candidates testing the winds for viability.  The most recent potential candidate to float up a trial balloon is ex-City Attorney Gene Locke.  Though in all honesty Mr. Locke hasn’t officially put his name into the hat yet, nor has he really done any wind testing personally that I am aware of.  What he does have apparently is the backing of his previous employer, Mayor Bob Lanier.  I have gotten at least three calls from ex-Lanier employees all buzzing about how great it is that Gene Locke is going to run for mayor.  We’ll see, we all remember the last black candidate that Lanier backed for mayor and how that turned out for the City.  In Mr. Locke’s defense however he is no Lee P. Brown.  In fact Gene Locke appears on the outside to be quite capable.  He is a partner with a major downtown law firm, Andrews Kurth LLP, he currently serves as general counsel to the Harris County - Houston Sports Authority and special counsel to the Port Commission of the Port of Houston and the Metropolitan Transit Authority.   As City Attorney his opinions always came across fair and thought out even if you didn’t agree with him.  Exciting he is not, but then again neither was Bill White when he ran for mayor.  Let’s see if he still wants the job after he gets a peek at the current City finances.

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Harris County Judge Ed Emmett Talks About Infrastructure & Hurricane Ike.

Harris County Judge Ed Emmett was the guest speaker for the October HCA luncheon.  This is a special luncheon in that it is the last of the year and the association uses it as an opportunity to recognize the contributions made by our own past presidents.

Judge Emmett started off his presentation by commenting upon where Harris County stands in these most precarious financial times.  Everyone is concerned about the impact of this economic crisis, stated Emmett.  The good news is that Harris County has a triple A bond rating.  That rating is there, according to the Judge, because of the very conservative approach that the County has taken with its finances over the years.  However, the County also uses commercial paper just like most other public entities to finance its projects.  Commercial paper basically works as a bridge loan that allows the County to borrow money before it goes out with the bonds.  That fact changes everything, the credit market is tightening up on everyone including the County, this tightening increases the basis points that the County has to pay to get money to finance the projects.  The good news for Harris County is that they have the Harris County Toll Road Authority.  The Judge stated that he believes that it is very important that the County comply with all aspects of SB 792 and that we get those projects started very quickly.  SB792 was passed during the last legislative session and basically put a two year moratorium on privately financed toll road projects, but it also allowed a handful of toll road projects, that were already underway or in the planning phase, to continue.  The Judge recognized that with the current market conditions, the release of jobs held by the Toll Road Authority might just keep some of our members in business.  Judge Emmett stated that they are moving quickly on Hardy and on North Beltway 8 and that they need to get moving on what is being called Fairmont Parkway.  Judge Emmett stated that the Fairmont Parkway project is an important project because it goes from the Port of Houston and is designed for the transport of containers vehicles.  Container traffic is going to continue to be a huge economic engine for our region.  Judge Emmett believes that the Port of Houston, in which he includes the ports of Galveston and Freeport, will become the dominant port in North America in the near future.  The Judge stated that he believes that due to increased regulations at union controlled, west coast ports, companies like Wal-Mart are starting to find ways to route their supply chains away from there and are sending more of their merchandise through the Panama Canal from China to Houston.  We need to have the infrastructure in place to serve that increase in container traffic, stated Emmett.

Another transportation artery that the County is looking closely at is the Hempstead toll road.  According to Judge Emmett, TxDOT has not decided where they stand on that toll way and it is his opinion that we need to push that decision.  “If TxDOT is not going to move forward quickly on Highway 290, then we need to move forward with the Hempstead toll way and get that project going.” said Emmett. 

Judge Emmett said that Hurricane Ike had one beneficial effect, and that was that members of congress are now openly stating that now is the time to start investing in public infrastructure.  This discussion was prompted not only by the need to rebuild after the hurricane but also due in part to the current financial woes faced by the nation.  Congress will meet one more time before the end of the year and Governor Perry has appointed two people to chair the Ike recovery effort.  The main goal of that effort is to make sure that Houston, Harris County, Galveston County and the entire region gets help especially in the form of public infrastructure.  The two people appointed to head the effort are the ex Chief of Staff for the Governor and ex Harris County Court Judge, Robert Eckels. 

Staying on national issues, Judge Emmett stated that the Federal Highway Administration has come out with a notice of proposed rule-making which says that all highway projects, where you are giving up the toll making authority to another party, either private or government must go through a market evaluation process.  According to Judge Emmett, this will be a disaster if it occurs.  Harris County has just finished going through such a process with the Grand Parkway and it creates a huge roadblock for the construction of the project.

Switching to politics, Judge Emmett said that the County is in a transitional state when it comes to voting, and Harris County will not be the same from this election going forward.  Up until 1994, if you put your name on the ballot as a Democrat you got elected, and after 1994 if you put your name down as a Republican you got elected.  According to Judge Emmett, those days are gone and are not likely to return anytime soon.  The Judge stated that he thinks this is a good thing because now politicians will have to pay attention to different groups and their issues.  Politicians will have to get out and campaign and actually talk to people about what is important.  Part of the problem now according to Judge Emmett, is that too many people vote a straight ticket.  According to the Judge, if you vote a straight ticket you get a lot of bad with the good.  It is important for people to pay attention to the races that they care about and make that choice.  Now there is a lot of confusion about the straight ticket vote concerning whether or not you can vote straight ticket and then go down ballot and make changes in specific races.  The short answer is yes you can.  Texas is one of only 17 states that allow the straight ticket vote on the ballot and according to the Judge there is always talk of changing the law to end the practice, but those talking about it are usually those who are not in power.  Once they are in power however, it seems their positions change and straight ticket voting isn’t so bad anymore.  Early voting has also changed with this election according to Judge Emmett.  Its biggest effect this election was to show Democrats up 2 to 1 in early voting totals.  Most candidates are not used to having a difficult general election and many are panicked by this number, however Judge Emmett stated that when he originally ran for office those numbers were closer to 10 to 1.  

Looking at the economy, Judge Emmett said that he hears people say all the time that we are in such a terrible economic time.  The Judge said that nationally that may be true, but locally that is not necessarily so.  The Judge stated that the region is a strong economic engine, but that we have to get TxDOT up and running and through this sunset process so that it can be the economic driver that it has been for so many industries including construction.

With Hurricane Ike, we were lucky stated Emmett and people don’t realize just how lucky we were.  According to the  Judge, if the storm had gone eleven miles to the west, then the damage that was seen on Bolivar is what you would have seen on the west end of Galveston, Kemah and Seabrook.  You would also have had eight to ten feet of water in Clear Lake.  Imagine trying to recover from a storm like that.  Judge Emmett stated that Hurricane Ike is going to be with us for years.  We need to all work to build the infrastructure that will help us recover from hurricane Ike and help turn this storm from a negative into a positive.  The Judge did highlight again the importance of contacting Washington and pushing our elected officials to allocate as much money as possible for the cleanup of Ike and the dedication of new infrastructure in the area.

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Hurricane Ike

Hurricane Ike rolled into town wreaking havoc and raining destruction down upon the Texas and Louisiana gulf coast communities. The Galveston area took the worst of the storm, suffering through a twelve foot tidal surge and over 100 mph winds as the storm came ashore. For the Houston area damage mainly was the result of falling trees and high winds that damaged homes and buildings and knocked down power lines. The hurricane managed to hold its eye together all the way up through Northern Arkansas and caused that largest power outage in the history of Tennessee. Most Houstonians had their power back on after two weeks, and the City had most of the traffic lights working shortly thereafter. One high point to keep in mind when we are talking to our friends and family about how we struggled through the storm, remember that the water and sewer never stopped working, if they had, things could have been a lot worse.  Officially, Hurricane Ike was the ninth named storm of the year.  At its peak it was a category four storm with winds hitting 145 mph and a pressure of 935 mbar making it the most intense storm of 2008.  Damages from Hurricane Ike are estimated at $27 billion making it the fourth costliest Atlantic hurricane of all time.  Closer to home, reports of damage to our members has been sporadic and lacking in detail.  I think it is safe to say that every company suffered some loss due to the storm even if it was only time down due to lack of power. 

I would like to recognize Ritchie Brothers Auctioneers for their efforts in helping to restore power to the City after hurricane Ike.  The day after the hurricane, Ritchie Brothers opened up their I-10 East location as a staging area to be used by several of the out of state repair crews that had come in to help Centerpoint energy restore power.  Soon after that they were approached by officials from Centerpoint and asked if they could use their yet to be opened Highway 59 North site.  This request occurred after Centerpoint was asked to move from their previous location at the Sam Houston Race Track.  According to Alan McVicker, Regional Sales Manager for Ritchie Brothers, the I-10 site housed approximately 750 trucks plus their support crews and the 59 North site held about 1500 trucks plus support crews.  At the height of the repairs there were approximately 7000 repair trucks in the Houston area, this number has been reduced down as more homes come on line, but according to Mr. McVicker trucks could be using his facilities until Christmas. 

To all the other members that have contributed to the Hurricane Ike recovery effort, I would like to say thank you.  I know that there are several of you out there that are first responders or are assisting with debris removal.  It is through all of your efforts that make this a great community and a great association that I am proud to serve.

It’s the Economy…

For the last several months all of us with a 401K have seen the value of the stock market slide steadily into the tank.  Then with the sudden failure and subsequent Federal bailout of the housing finance market, banking institutions and various investment organizations, we may finally be near the bottom of the worse financial drop since the great depression.  As of the writing of this article, the Dow Jones had dropped 3000 points and was down 36.29% compared to this time last year.  The S&P has dropped 38.76% and the NASDAQ has lost 37.81%.  Pile on top of that the reduction in housing construction and the TxDOT construction cut back and this has been a really bad year for contractors.  Now we may face the addition problem of a tightened credit market.  This problem is not only limited to private businesses either.  The City of Houston relies heavily upon debt as a financing mechanism.  A local article in the Houston Chronicle sited City Controller Annise Parker as saying that some public improvement projects may have to be postponed in the coming months, although it is too soon to tell.  Houston has a strong economy and a strong credit rating and should weather the financial storm fairly well, however with the increasing costs of construction and a CIP that hasn’t increased in at least five years, the thought of having to “postpone” any civil project is not good news.  The City of Houston will begin the process of electing a new mayor next year.  This is the time that we as a community need to press, and press hard for increasing the amount of work that the City puts out through its CIP.  I would suggest that you take every opportunity to press this issue with every incumbent City Councilperson, candidate for office or mayoral contender that you happen to run across during this campaign cycle, otherwise it may be another six years before we get any relief.

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