Reviving Galveston's Economy

[arche_757]

Galveston isn't DEAD by any means. Unfortunately, it's not exactly booming, as its tourism industry has been battered by both a hurricane and a recession. Heck, right now, I'm not even talking pre-WWII levels or pre-1900 levels, I'm talking pre-2008 levels.

 

Have you been recently?

 

Galveston hasn't been pre-1900 level of booming since 1899!  That's a fact.

I'd say we've they've caught up to pre-2008.  The big difference now is there are about 10,000 fewer people living full time on the island.

 

But it does need some additional retail growth + some additional white collar jobs.

 

I still think the issuance of a TIRZ for the Strand areas and the doubling up of convention center space coupled with bay to gulf transit (eg: trolleys) would be good.  Add in a business incubator that focuses on global shipping/freight and transoceanic issues and things might start to move faster.  The problem is MOVING forward from just concept.  Who will do those things?  The Moody's?  The Mitchells (probably not with the father passing away), the Sealy's?  They're already so heavily invested in the UTMB complex.

 

Perhaps UTBM can jump on the post-Ebola (post-USA ...so far) scare and get some additional dollars for more Biocontainment Level-4 stuff on the isle?  Why not?

 

[IronTiger]

Have you been recently?

Disclaimer: I was last in Galveston March 2012, for a wedding, so over two and a half years ago.

So, 10,000 people are no longer living on the island? Besides the Pointe apartments, some cheap garden-style apartments demolished after Ike and a few other casualties, how many abandoned houses are there on the island?

[arche_757]

I wouldn't say that many abandoned homes.  Galveston lost nearly 100% of the government subsidized housing - which is being rebuilt...maybe in the near future.  Some homes were swept away on the far west end.  Other than that, I guess perhaps there are simply fewer people living in some homes?  You know Galveston - great on one street, complete dump on another - its possible that homes that previously had 2+ families living in them now have only 1 in a few areas?

 

Overall though I'd say that Downtown is doing well in terms of residential.  Galveston has a healthy proportion of mixed-use building on and near the Strand, most have residential in some capacity or scale in them.  Most of the buildings downtown are also pretty nice - high rents for the most part.

[strickn]

The 2014 report Economic Impact of Tourism on Galveston Island says that "A total of 10,205 jobs were sustained by visitors to Galveston Island in 2013. This included 7,879 direct and 2,326 indirect and induced jobs.   Approximately 33.6% (1 in 3) of all jobs on the Island were sustained by tourism."

 

10,205 / .336 =

30,372 jobs, 2013.

 

Using the Census Bureau's LEHD online interface, we can find the total jobs for other years.   

30,408 primary jobs, 2011

29,531 primary jobs, 2010

26,807 primary jobs, 2009

30,889 primary jobs, 2008

30,853 primary jobs, 2007

33,413 primary jobs, 2006

32,170 primary jobs, 2005

32,250 primary jobs, 2004

33,588 primary jobs, 2003

The database extends back to 2002, when there were said to be 33,889 primary jobs.  Of those, 55% were held by people who lived onshore, and 45% by Galvestonians.  

 

In 2011, not only had employment shrunk by ten percent within the decade, but, of that smaller number, only 32% lived on the island.

 

Shrub Kempner told the Chronicle in 2012 that Galveston needed to recapture the residencies of the people who worked there already and THEN worry about econ. development.  But with increasingly obsolete housing stock, relatively high unemployment even after thousands of poor left for greener pastures, a dwindling of quality market retailers for non-tourists, high insurance premiums, relatively high costs to develop infill, and the generational track record of New Orleans-style genteel stagnation, why should homeowners, much less business owners, want to invest themselves there?

 

I believe in Galveston.  I also like old houses.  But like an old house, it's a money pit.  We keep suggesting that the Texans who live in functioning city regions keep it alive on the dole as a kind of crowdsourced plaything, but at what point must we recognize that the money and even the tax incentives would go farther in a city with a functioning, import-replacing economy?

 

Charisma is a poor guide to character.  We've learned that over and over again.  But confident charm is so deep in our natures that we go back to it again and again, like dogs to dog-vomit.  Or if you prefer, a temperature adjustment does mush more work on shifting a glacier than jackhammers will.  Thinking of economic development in terms of little well-placed jackhammers won't help Galveston adjust for the 21st century.  To actually change the climate, we'd probably have to tinker with the basis of the pricing signals that govern life on the island.  This could be the subject of significant innovation.  Happy to detail real proposals if needed.

[plumber2]

Jeepers Strickn! you lost me somewhere after dog vomit.

[cloud713]

Jeepers Strickn! you lost me somewhere after dog vomit.

Yeah.. Dude was posting pessimistic gloom and doom all night:

[IronTiger]

The housing stock is up for replacement partially because of primarily wood construction (or at least that's been my conception), and the decline of houses is accelerated because of the humidity. It doesn't have to be replaced with super-dense townhomes or chintzy cookie cutter houses, but it does need to be dealt with over time.

Nor does the city have to be "reinvented" in some dramatic way that loses its character. Take Waco, for instance--it had stagnated for years (generations, natch--at one time, it was a major competitor with places like Dallas for skyscrapers and whatnot...Dallas!) but now seems to be finally getting out of it with a relatively new hospital and restaurants around it, investment around downtown, and development up and down the Interstate, along with new subdivisions (and trust me, subdivision growth in Waco has been very slow compared to the rest of Texas). And that new stadium too. It's not going to be even like Austin anytime soon, but it's changing.

Because of the island, it is difficult to add new subdivisions like any other cities--so maybe some urban renewal is necessary!

[heightsicehouse]

I purchased a condo in Galveston about 3 years ago and have absolutely no regrets.  Sure, it's not Florida but it's only an hour from my full time home in Houston.  If you adventure off of the seawall and the Strand, you will find great restaurants bars that are frequented by the locals.  The locals are very friendly once they know you live there.

 

Galveston is not a rich town and it lives off of the ups and downs of the Houston economy.  One you accept it for what it is you will enjoy it. 

[k5jri radio]

According to a recent article in the Daily News, the Galveston City Council voted to enact a form of income tax on the various owners of rental properties (landlords) whose properties are located within the city limits of Galveston, TX. Rental property owners will have to pay a percentage of the rental income they collect from their tenants (renters). Not sure if this tax will [1] apply to student housing within the city limits of Galveston owned by UTMB or Texas A&M, or [2] if the tax rate will be progressive (similar to federal income tax), neutral, or regressive.

[phillip_white]

2 hours ago, k5jri radio said:

According to a recent article in the Daily News, the Galveston City Council voted to enact a form of income tax on the various owners of rental properties (landlords) whose properties are located within the city limits of Galveston, TX. Rental property owners will have to pay a percentage of the rental income they collect from their tenants (renters). Not sure if this tax will [1] apply to student housing within the city limits of Galveston owned by UTMB or Texas A&M, or [2] if the tax rate will be progressive (similar to federal income tax), neutral, or regressive.

This article mentions taxing fully furnished rental properties at the market value of the land, improvements, and contents (this is already a rule for commercial properties). But it doesn't exactly fit the tax structure you described. With Texas not having a state income tax, I find it hard to believe that Galveston (city or county) could target specific industries with a tax on income.

[hbg.50]

12 minutes ago, phillip_white said:

This article mentions taxing fully furnished rental properties at the market value of the land, improvements, and contents (this is already a rule for commercial properties). But it doesn't exactly fit the tax structure you described. With Texas not having a state income tax, I find it hard to believe that Galveston (city or county) could target specific industries with a tax on income.

I have property in Galveston and I haven’t heard anything about a rental income tax.  I would think the real estate agents would be buzzing about this if it were imminent.

[phillip_white]

Forgot to link the article I was referring to:

https://www.galvnews.com/news/galveston-central-appraisal-district-begins-treating-vacation-rentals-as-businesses/article_b3d7e8d6-4b9e-59c2-8844-909172092456.html

[k5jri radio]

I am aware the State of Texas is one of the nine states that do not have a state income tax. It follows that Texas and other states without a state income tax would be unlikely to allow their subordinate jurisdictions (counties, cities, etc.) to levy income tax. To be clear, I did not state the City of Galveston tax on rental property income (from rental or leasing properties located within its city limits) was an income tax, only that it had some aspects similar to an income tax. However, if the tax due is based on the actual rent billed by landlords to their respective tenant(s), regardless of whether or not the tax is collected at time of rent payment, it is more similar to an ordinary sales tax.

 

[Houston19514]

2 hours ago, k5jri radio said:

I am aware the State of Texas is one of the nine states that do not have a state income tax. It follows that Texas and other states without a state income tax would be unlikely to allow their subordinate jurisdictions (counties, cities, etc.) to levy income tax. To be clear, I did not state the City of Galveston tax on rental property income (from rental or leasing properties located within its city limits) was an income tax, only that it had some aspects similar to an income tax. However, if the tax due is based on the actual rent billed by landlords to their respective tenant(s), regardless of whether or not the tax is collected at time of rent payment, it is more similar to an ordinary sales tax.

 

But there are no aspects similar to an income tax, the tax due is not based on the actual rent billed by landlords and it is not similar to a sales tax. It is property tax on property used in a business.  Pure and simple.  Such property has always been taxable (or at least for as long as we've been taxing property in Texas).

[k5jri radio]

Are you a public official of the State of Texas, or its components responsible for taxation, or are you using the term "we" in the colloquial context?

I understand that property I own but do not reside at, (rental property for example) is not eligible for homestead exemption and will be taxed at the full rate based on its assessed value. The presumption being that if the owner does not reside on the property, he or she is using it for a business purpose intended to enrich the property owner. Property tax is normally collected by the county government based on assessed value determined by the county's assessment personnel.

The situation I refer to is the City of Galveston collecting additional money based on the actual amount of rent paid to the landlords by their respective tenants.  If a landlord collects no rent on a property he or she owns, nothing would be payable to the City of Galveston. This is a tax imposed by a government entity based on the amount of money (income) the landlord receives from the rental of property. This sure looks like a sales tax, but it will be interesting to see what happens when and if this is challenged in the Texas courts. As you are probably aware, Texas is one of the 49 states with its laws based on English Common Law. The remaining state, Louisiana, has laws based on the Napoleonic Code (French Codified Law).  

[Houston19514]

19 minutes ago, k5jri radio said:

Are you a public official of the State of Texas, or its components responsible for taxation, or are you using the term "we" in the colloquial context?

I understand that property I own but do not reside at, (rental property for example) is not eligible for homestead exemption and will be taxed at the full rate based on its assessed value. The presumption being that if the owner does not reside on the property, he or she is using it for a business purpose intended to enrich the property owner. Property tax is normally collected by the county government based on assessed value determined by the county's assessment personnel.

The situation I refer to is the City of Galveston collecting additional money based on the actual amount of rent paid to the landlords by their respective tenants.  If a landlord collects no rent on a property he or she owns, nothing would be payable to the City of Galveston. This is a tax imposed by a government entity based on the amount of money (income) the landlord receives from the rental of property. This sure looks like a sales tax, but it will be interesting to see what happens when and if this is challenged in the Texas courts. As you are probably aware, Texas is one of the 49 states with its laws based on English Common Law. The remaining state, Louisiana, has laws based on the Napoleonic Code (French Codified Law).  

Where are you coming up with the idea that Galveston (and it's the county, not the city) has proposed to collect taxes based on the amount of money (income) received from rentals?  That is not the case. It is a tax on property used in a business and it is based on the property's value. Not based on income (not an income tax). Not based on sales (not a sales tax). It is based entirely on the property's value (property tax). 

I presume you have gotten confused by the mention of the "income approach to valuation".  The income approach is just one appraisal method for establishing a  property's value. The tax is still on the value that is established using the valuation approach; the tax is not on the income. Other standard valuation  method's include: Sales Comparison Approach; Cost Approach.

Edited June 18 by Houston19514

[hbg.50]

31 minutes ago, k5jri radio said:

Are you a public official of the State of Texas, or its components responsible for taxation, or are you using the term "we" in the colloquial context?

I understand that property I own but do not reside at, (rental property for example) is not eligible for homestead exemption and will be taxed at the full rate based on its assessed value. The presumption being that if the owner does not reside on the property, he or she is using it for a business purpose intended to enrich the property owner. Property tax is normally collected by the county government based on assessed value determined by the county's assessment personnel.

The situation I refer to is the City of Galveston collecting additional money based on the actual amount of rent paid to the landlords by their respective tenants.  If a landlord collects no rent on a property he or she owns, nothing would be payable to the City of Galveston. This is a tax imposed by a government entity based on the amount of money (income) the landlord receives from the rental of property. This sure looks like a sales tax, but it will be interesting to see what happens when and if this is challenged in the Texas courts. As you are probably aware, Texas is one of the 49 states with its laws based on English Common Law. The remaining state, Louisiana, has laws based on the Napoleonic Code (French Codified Law).  

You need to cite your source.  The article provided by @phillip_white refers to a property tax, not an income tax.  You brought up a proposed income tax but you did not cite your source.

[k5jri radio]

Source was part of an online excerpt from an article published in the Galveston Daily News online edition. My misreading of the article excerpt prompted my erroneous assumption that the City of Galveston was planning to act independently of the County of Galveston and directly tax the rental income of properties within the City of Galveston. As you opined, I misinterpreted the term, Income Approach, to mean a taxation method based on income (income tax), rather than a business valuation method.

Wikipedia gives a fairly concise and understandable explanation and comparison of the three valuation methods you mentioned: Cost Approach, Income Approach, & Sales Comparison Approach  

[phillip_white]

@k5jri radio I was just trying to make sure we're all on the same page with regard to the GDN article. Is that the same one you were talking about? As a Galveston property owner, I've already been bent over the barrel enough the past few years that I would consider selling if they stuck out their hands for more.

[k5jri radio]

My listings in this thread are with regard to the Galveston Daily News article. My understanding is the Galveston County taxing authorities are considering an income approach methodology to determine (with better accuracy) the monetary value of commercial (business) properties located in Galveston County. Commercial (business) properties would continue to be taxed based on their monetary value, not their income.

 

 

      

[k5jri radio]

Obvious error in my previous posting 4 hours earlier at or about 12:15 pm CST on 6/19/2024. The last sentence in the posting should read: Non-commercial (residential) properties occupied by the owner would continue to be taxed on their assessed monetary value.

[Naviguessor]

Short Term Rental booking are subject to a 15% Hotel Occupancy Tax (9% from the state and 6% from the city).  Sometimes this is levied and paid by the booking platform (Like AirBnB), but booking on most platforms it is not, in which case the property owner must pay the tax from their portion of the payout.  It seriously adds up.  Now a Appraisal Tax?? Sheesh!

BTW - My realtor sent me the same article a week ago.      

[Houston19514]

To be clear, all property, both real and personal will continue to be taxed based on its monetary value.

Galveston County (and other counties in Texas) sometimes value some businesses such as hotels using the income method. If the income method is used, it covers both real and personal property, and both are taxed on one "account", with the tax based on the assessed monetary value, as established by the income method (basically deriving the propety's value by discounting the income generated by the property).

If the income method of valuation is not used, then the real property and personal property are taxed in separate accounts, both being based on their monetary value, as established by whatever method is used.