Recession-Proof

Recession-Proof
We are officially Macondo.

A recent report published by Forbes, concluded that San Antonio is in effect, the second most recession-proof city in the United States, right behind the gangbuster bastion of enterprise and compelling travel destination that is Oklahoma City. On the one hand it is good to know that we are close to the top of the list in something other than obesity rates, yet on the other hand we lag behind in the Lame category, not even lame enough to be the lamest in the country.

Of course, everyone is making a big to-do about the stability, viability, strength, diversity and predictability of San Antonio’s economy, playing up the proof-positive side of the coin. But what every economist knows (regardless of PR spin), and what history tells us, is that without volatility, without ups and downs, without cycles of boom and bust, there are no train-wrecks, no dust-ups, no real growth, no competition, and more tellingly, no dynamic.

Eons ago, in the rental car business competition between Hertz and Avis, Avis tacitly acknowledged being number two in the field, and because of that they advertised: We Try Harder. Aware of their not-quite-top-dog status, they did their best to be better, if not bigger, than Hertz.

On the other hand, the pride that many of our local Jefes feel about Forbes’ statistical proof of passivity –the recession-proof numbers that put us at a remove from Oklahoma City– is reflective of a character trait that underlines the fact that We Try Less, Harder.

For the last twenty years –at least, city leaders have been intent on elevating the economic profile of San Antonio, in hopes of making us less of a passive ecomony; less dependent on government subsidized sustainability (the military), traveler subsidized income (tourism), agricultural enterprise (land and cattle), and oil royalties (lots of oil trust funds in our city).

All of these are prime examples of a passive economic environment, which appear, in most cases, only one or two at a time in other cities’ economic activity rosters. In San Antonio, until fairly recently, that’s all we got.

Problematic about this is that a passive economic environment will always engender a passive cultural environment (which is the subject of many of my writs). What two decades of civic leadership has failed to articulate in a quest for economic viability is precisely the importance of addressing our passive economic and cultural environment, which has begat among other things, an endemic lack of enterprise and accountability, a mien for quick and easy solutions that address short-term issues (my shift ends at midnight, after that it’s not my problem…), and more insidiously, a missplaced sense of pride and identity that derives its legitimacy from being part of something as opposed to being someone.

So even though the economic development intentions have been sound, the actions have proven less than effective. The ideas are good, the execution is faulty. This is still a substantial problem and it has a direct correlation to taking pride in our culture of passivity.

To its credit, San Antonio plays a huge, underappreciated, financial role in the region, with long-established banks (Cullen-Frost for example) holding sizable amounts of capital from wealthy Mexicans seeking secure, discreet banking arrangements close to the border (but not too close, as in Laredo), to protect their net worth from the vagaries of Mexican politics. Frost Bank, sells itself, understandably so, on the premise of being a dependable banker for over a century. Good and fine. But all the bank is doing is keeping someone else’s money in the vault.

In my early days in San Antonio, when looking at banking options, I did in fact settle for Frost Bank, because many of my friends had accounts there as well. I eventually became familiar with banking and finance and saw the value of a traditional, no-risk banking operation. At the same time, I realized that the folks I was dealing with at the bank, even though for the most part nice and serviceable, were decidedly sub-par when it came to understanding the basic intricacies of anything other than an interest-bearing checking account.

So yes, if all you need is a safe haven for your money, our local bank will suffice. But if you are indeed looking for more complex financial arrangements to foster enterprise or trade (that do not involve flashy default-inducing derivatives or murky international deals), the door is shut. Unless you already have a ton or two of the green stuff.

Biomedical and other forms of scientific and industrial research have also played an important role in shaping our city’s priorities (Southwest Research Institute, UTHSC), but unfortunately, most of these efforts are conducted under non-profit tenets, which never, ever beget real enterprise. Only recently was the notion of Development & Marketing added into the mix, with a corollary of patents and profits included in the plans for future efforts at capitalizing on the substantial research conducted in San Antonio.

The elephant in the room is the military, whose intense economic impact on our city has truly defined, more than anything else, our cultural identity. But once again, for decades the impact was passive, generating jobs and payrolls, giving our folks a sense of entitlement to a lifetime of pensions, benefits, and care unlike anything outside of the military. Now, with a national reduction and consolidation of military bases that greatly benefitted Fort Sam Houston (in the heart of San Antonio), the spin machine promises to put us squarely in the forefront of state of the art medical research, and treatment for war wounds, which –aside from housing an important unit of Army South- will be the ostensible raison-d’etre for Fort Sam. It would be very interesting and productive if this time around there were a more sizable, industrious, spill-over economic effect, other than the run-down Mexican and Asian shops and restaurants around the base, and the acres of cheap apartment and condo developments slated to house the thousands of personnel and their families relocating to San Antonio.

The pervasive presence of the military in San Antonio has, from what one hears, spawned a relevant offshoot: a slew of business specializing in internet and communications security, headed by former com-int folks trying their hand at private enterprise, even if the bulk of their business still comes from the military. It is a laudable effort to ween themselves off the government teet, the results of which are yet to be tallied.

And then there’s tourism.

For many, long, painful years, our city, egged on by the hacks at the Convention & Vistors Bureau –always operating in Easy mode– was engaged in selling itself as a theme park destination. Many tax abatements later, our theme parks (which are still tenuous business propositions) attract mostly low- to middle-income tourists, residing within a day’s drive of San Antonio, and whose search for family diversion is severly limited by their budgets and their diminished cultural appetites. Their gastrointestinal appetites however, are provenly undiminished, which could be a boon for the food industry, if there were more of a food industry and less of a fast food assembly line.

For almost two decades, those of us involved in the arts preached the cultural tourism gospel to our CVB friends, to no avail. There was no effort made to listen or to understand the arguments put forward. The powers that be, theme park owners, advertising agencies, etc., would have nothing of this.

It is only recently, within the last five years, under the leadership of Felix Padron at the City of San Antonio Office of Cultural Affairs, that the city changed course in the way it brands and markets itself, trying to tap into a growing stream of cultural travelers who might want to visit us on the strength of our arts and cultural offerings.

First, came the Fall Art Festivals initiative, a promotional package for a series of established festivals which take place in the Fall. Fall Art Festivals is marketed nationally through ads, promotional brochures and its proprietary web site, www.fallartfestivals.com, which in itself is a milestone because it marks the first time that the City allowed for a public initiative to have a web site domain other than a .gov (you try getting something like this through the City’s legal and IT departments). Second, was an Economic Impact study commissioned by the Office Of Cultural Affairs in conjunction with the City’s Economic Development Department –a good example of how enlightened city agencies can actually work together– the results of which (close to 1.5 billion in annual economic impact) gave San Antonio’s creative industries a leg up in economic/political stature, and more importantly, put us in the forefront of the minds of our city leaders. The third and most recent effort, the wholesale branding and packaging of arts and culture events and entities in San Antonio, anchored by the www.sahearts.com web site (also an initiative of the Office Of Cultural Affairs); is built on the precedent set by the Fall Art Festivals, and is getting the added benefit of a full-fledged, City and CVB-backed advertising and marketing campaign for arts and culture in San Antonio. Another fortunate example of collaboration between city agencies.

So, for the first time ever, San Antonio is now officially promoting the arts as a big part of the City’s appeal as a tourist destination. This is the good news. The bad news is that people are buying into this for the wrong reasons. Among other things, artists and art organizations are behind the effort because they see a potential for more non-profit sources of income. Everyone and their mother is starting a cultural non-profit, with grant application as a business model. This is just like digging a deeper entitlement hole.

Additionally, in this climate, decidedly benign for the arts and all manner of civic enhancements, our fearless city leaders have seen fit to propose for election a set of municipal bond initiatives (to be voted on today, May 10th) floated for the creation of infrastructure for parks, sports, the arts, and the Spurs (Go Spurs!). This is way too long of a subject matter to discuss here, but suffice it to say that once again, it’s a prime example of wanting to do something only if someone else appears to be paying for it; the old passive approach to economic development.

Here’s the catch: When muni bonds are floated a city effectually goes into debt, which in turn means that taxpayers will be funding that debt. Our city leaders have offered the notion that since most of the debt service will come from the hotel-motel tax (of which San Antonio has one of the highest rates in the country), the tourists –not us– will be paying for all these perceived improvements. Somewhat true. But not entirely. The bond solvency is based on PROJECTED income, taking statistical data from the last five years which show San Antonio to be in the best of times. We are in fact in the best of times, and the PR value of the Forbes survey indicates, if one is inclined to read it as such, that since there are no wild swings in recession-proof San Antonio, the best of times are here to stay. I beg to differ, since as I have said before, the issue here is not recession, it is inflation. Anyone been to the grocery store in the last six months?

Anyway, regarding the bond issues:

1) Infrastructure does not beget enterprise, it’s the other way around. You can build as much as you want, and some will in fact come. But typically someone has to be there in the first place. 2) This whole thing will benefit: Contractors with good relationships in the city and the county. 3) If done correctly to begin with (a big if), the next tier of beneficiaries will be the administrators of the projects and facilities covered by the bonds. 4) That’s it. No one else stands to benefit. No programs, and no operating and maintenance costs will be covered.

(Update on the bond offerings: In a city of almost 1.5 million, about 7% of eligible voters (less than sixty thousand) went to the polls, and about sixty six percent of them voted in favor of the bonds. In spite of the negligible turnout, city leaders are smugly interpreting the results as a majority mandate. The spin is that with the bond approvals, citizens are investing in the future of our city. The fact is: Voters approved the bonds only because tourists will be investing in our city. Not us. Not yet at least.).

Why is this such a big deal? At fifteen percent, San Antonio already has one of the highest percentages of the HOT tax going to the arts (second only, I believe, to Houston). This does not include cities whose arts funding comes from general fund monies, only HOT tax monies. San Antonio already hands out more money, on a case-by-case basis, to individual arts organizations than any other city (Houston has more money but their grants are much smaller and more spread out). Currently, since even turtles and sea lions have their own non-profit, everyone wants a larger slice of the pie (the politics behind all this is ugly and petty). If and when the proposed cultural infrastructure is in place, and when the administrators suddenly realize that they need a regular flow of cash for programs, operations and maintenence, the logical step would be for them to try to get grant funding from the HOT monies allocated by the Office of Cultural Affairs. Overnight, the number of grant seekers will increase while the relative size of the pot will decrease, reducing allocations across the board, resulting in a major non-profit brawl.

All because we feel entitled. It’s the DNA of our economic culture.

In his novel, 100 Years Of Solitude, Gabriel Garcia Marquez, underscoring the cultural makeup of the town of Macondo, quickly makes the point that all the unnerving realities of the stark, dreary life led by the town’s inhabitants, could easily be construed -and are, as a means of hope and survival- as magical events, there to be witnessed as such by those who buy into the notion that magicality is more pervasive in far-flung rural settings such as theirs, than in any other part of the world. The rich interpretive strains of all things magical provide a balm for the brutal deficiencies proffered by the realities of life. The traveling merchant, with his shiny trinkets, is a more reliable source of information and news than the town’s elite, whose only goal is to maintain, at all costs, the status quo. Macondo will never change. There is not enough going on inside Macondo, or in the minds of the townfolk, for anything to change. It is good for those in charge that nothing changes. It is also their spin on the benefits of maintaining the status quo that allows them to stay in power. Without the competition that comes with change, there is no need to share power with anyone.

For many folks in San Antonio, the Forbes report spells success; it’s good for them that things don’t change, and it’s also good for them that their passive-wealth incomes derive from the lack of competitiveness that goes hand-in-hand with perennial stasis.

The equivalent medical term for this condition is known as Flatlining.

The way I see it, all this praise for a misplaced appreciation of economic flatlines is just one more indication of why we still are a We Try Less, Harder kind of town.

We are very much Macondo.

It is what it is.

Michael Mehl

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