The Houston Post-Continental Merger

[GovernorAggie]

This post by ricco67 just fed into my thinking over the last few days:

On 5/1/2010 at 10:05 PM, ricco67 said:

Ok.

This is what I've found out:

*IF* the merger goes through, a slowdown/moving will start by this summer.

2800+ jobs will head to Chicago.

The main reason for this is that United already owns several buildings outright, except for what they have at the Sears tower, whereas Co only lease space, with the exception of the jefferson st property.

No fed intereference will stand in the way of the merger, so only CO can call it off.

First of all, I never thought an issue like land ownership is would seal a deal of this magnitude.

And 2800 (I'll just use 3000) jobs going is a lot, but not as much as I thought.

Either way, I stand by the fact that Houston will in the long run be better than fine after CO moves. Is it likely that another airline moves into CO's building? No. But who knew that Chevron would swoop in and bring life to Enron's two carcasses when that happened?

Unless someone knows otherwise, I don't know of too many efforts by COH to bring (lure) companies here or keep them here. I know the State uses the Enterprise Fund for a similar type of thing (Wal-Mart Distribution Center) and I know the mayor mentioned using them during her campaign. So I think that Houston (whether just COH or a combination of entites) should have an on-going full court press of not just advertising Houston's great qualities and why it make financial sense to be here, but have some carrots to pull out as well. I think that incentives combined with locational advantage (climate, air and sea transportation routes), cost of entry and cost of doing business here would be almost unfair to any competing cities. Personally, I would like to see them go after national and regional company HQ's and factories as well as being the American/North American HQ's of international companies.

Regardless, I'm personally done with talking about Continental/er, United. Worrying about them at this point is like wondering about if your girlfriend will come back to you after you've seen her cheating with someone else. The best thing for Houston to do is to tell Smisek (who I'm still amazed reportedly didn't return the mayor's nor the governor's phone calls!) and the gang to enjoy the grass on the other side of this shotgun wedding. He'll see the weeds soon enough. If Houston came back from the Oil Bust and Enron, this one will be a footnote in the city's history.

[ricco67]

Long term, I don't think it's going to matter one way or another, but short term it is going to take a big hit on small businesses.

I think Niche' might have better/accurate numbers, but basically for every job that leaves, 3 or more small businesses will be affected, particularly if they're from the same part of town/subdivision.

In the immediate hit will be the Homes and apartments that will be dumped on the market. This is good news if you wanna buy something from a desperate seller.

[TheNiche]

Is it likely that another airline moves into CO's building? No. But who knew that Chevron would swoop in and bring life to Enron's two carcasses when that happened?

Chevron would've taken other office space (or had new buildings custom-built) if it hadn't taken Enron's empty buildings, so there's just as much opportunity cost in that example. It's always bad when a company leaves town.

Unless someone knows otherwise, I don't know of too many efforts by COH to bring (lure) companies here or keep them here. I know the State uses the Enterprise Fund for a similar type of thing (Wal-Mart Distribution Center) and I know the mayor mentioned using them during her campaign. So I think that Houston (whether just COH or a combination of entites) should have an on-going full court press of not just advertising Houston's great qualities and why it make financial sense to be here, but have some carrots to pull out as well. I think that incentives combined with locational advantage (climate, air and sea transportation routes), cost of entry and cost of doing business here would be almost unfair to any competing cities. Personally, I would like to see them go after national and regional company HQ's and factories as well as being the American/North American HQ's of international companies.

Although many municipalities have implemented a 4A or 4B economic development sales tax, state law caps sales taxes at 8.75%, so Houston is already maxed out and does not have the option. This is one reason that Houston is less active where economic development is concerned than is Dallas. Whereas Dallas is smaller and hemmed in by municipalities with 4A/4B economic development sales taxes and has to fend them off, the ginormous City of Houston has relatively few local competitors...mostly just Conroe, Sugar Land, Pearland, and League City, and we hold our own against them pretty well. Even when those places lure away a company, we usually end up benefiting from the secondary effects of that company's presence in our region.

In relatively uncommon cases, The City of Houston or Harris County will also authorize tax abatements as an economic development mechanism. The savings can be passed through to a tenant in certain types of leases, but that all has to be negotiated out and is kind of clumsy.

What Houston does have going for it is the Greater Houston Partnership and it's Opportunity Houston fund, which is comprised of donations from local companies. Incidentally, Continental Airlines is listed as an "Other Investor" to the fund. Mostly, however, this organization serves as a mouthpiece for our region.

[TheNiche]

I think Niche' might have better/accurate numbers, but basically for every job that leaves, 3 or more small businesses will be affected, particularly if they're from the same part of town/subdivision.

In the immediate hit will be the Homes and apartments that will be dumped on the market. This is good news if you wanna buy something from a desperate seller.

A better way of thinking about it is that for every dollar of income that is generated by a core employer, about another two dollars of income are generated elsewhere in the regional economy. This is due to the velocity of money. In areas that become economically distressed, however, there is not only less income to go around, but the velocity of money diminishes as households become more financially conservative; so what's left has less of a secondary impact.

If you look at the effect that Enron's collapse had on our region, a disproportionate impact was indeed felt in central Houston, particularly among up-market apartments and retailers. That was a bit larger of a problem, but you should expect to see the same kind of pattern.

[GovernorAggie]

Chevron would've taken other office space (or had new buildings custom-built) if it hadn't taken Enron's empty buildings, so there's just as much opportunity cost in that example. It's always bad when a company leaves town.

Although many municipalities have implemented a 4A or 4B economic development sales tax, state law caps sales taxes at 8.75%, so Houston is already maxed out and does not have the option. This is one reason that Houston is less active where economic development is concerned than is Dallas. Whereas Dallas is smaller and hemmed in by municipalities with 4A/4B economic development sales taxes and has to fend them off, the ginormous City of Houston has relatively few local competitors...mostly just Conroe, Sugar Land, Pearland, and League City, and we hold our own against them pretty well. Even when those places lure away a company, we usually end up benefiting from the secondary effects of that company's presence in our region.

In relatively uncommon cases, The City of Houston or Harris County will also authorize tax abatements as an economic development mechanism. The savings can be passed through to a tenant in certain types of leases, but that all has to be negotiated out and is kind of clumsy.

What Houston does have going for it is the Greater Houston Partnership and it's Opportunity Houston fund, which is comprised of donations from local companies. Incidentally, Continental Airlines is listed as an "Other Investor" to the fund. Mostly, however, this organization serves as a mouthpiece for our region.

Thanks Niche, I knew I could count on your insight for more exact information.

While I'm not one to favor tax increases, I do have to wonder now if the transportation tax legislation that failed the last time around (led by NCTCOG and the Dallas region, ironically) would ever come back around to lift the cap for transportation spending. Without stopping to do enough research at the moment, if that were ever able to pass, in theory that could release maybe a portion of that penny we now spend on transit.

But I agree that losing a headquarters is never a good thing overall.

[BryanS]

But I agree that losing a headquarters is never a good thing overall.

Like it's the end of the world.

Remember... CO moved its HQ from El Paso...

To Denver...

Then to Houston... (1978)

two bankrupticies...

...and now life goes on in Chicago.

How quickly people forget the past.

[KinkaidAlum]

Continental has been a good corporate citizen. Hopefully United will be as well, but I doubt it. As with Enron, some of the biggest hits will come in the non-profit/arts/educational communities which Continental supported quite well.

[VicMan]

Continental has been a good corporate citizen. Hopefully United will be as well, but I doubt it. As with Enron, some of the biggest hits will come in the non-profit/arts/educational communities which Continental supported quite well.

Even though the new airline will no longer have its HQ here, I don't see how it would not continue to support Houston institutions. The airline will have Houston as a major hub.

The arts got hurt by Enron's withdrawal because Enron full-out collapsed.

I think a good way for United to make up for this is to get naming rights for the Dynamo Stadium.

[LTAWACS]

We should all just pack up and go home now that CO left.

[VicMan]

Or we can say "Hey United, we have a nice new (Dynamo) stadium under development. Could you please get the naming rights to it as a little make-up present for us? Thank you!"

We should all just pack up and go home now that CO left.

[LTAWACS]

Or we can say "Hey United, we have a nice new (Dynamo) stadium under development. Could you please get the naming rights to it as a little make-up present for us? Thank you!"

Interesting. What would it be called? Estadio Unido? Unido Stadium?

[rgr]

Even though the new airline will no longer have its HQ here, I don't see how it would not continue to support Houston institutions. The airline will have Houston as a major hub.

The arts got hurt by Enron's withdrawal because Enron full-out collapsed.

I think a good way for United to make up for this is to get naming rights for the Dynamo Stadium.

my guess is that they will. they've supported various institutions in the new york city area (home to their second biggest hub). as for the dynamo stadium, they did have their name on the stadium in east rutherford for a while. actually, it would be a nice gesture.

[Trae]

This post by ricco67 just fed into my thinking over the last few days:

First of all, I never thought an issue like land ownership is would seal a deal of this magnitude.

And 2800 (I'll just use 3000) jobs going is a lot, but not as much as I thought.

Either way, I stand by the fact that Houston will in the long run be better than fine after CO moves. Is it likely that another airline moves into CO's building? No. But who knew that Chevron would swoop in and bring life to Enron's two carcasses when that happened?

Unless someone knows otherwise, I don't know of too many efforts by COH to bring (lure) companies here or keep them here. I know the State uses the Enterprise Fund for a similar type of thing (Wal-Mart Distribution Center) and I know the mayor mentioned using them during her campaign. So I think that Houston (whether just COH or a combination of entites) should have an on-going full court press of not just advertising Houston's great qualities and why it make financial sense to be here, but have some carrots to pull out as well. I think that incentives combined with locational advantage (climate, air and sea transportation routes), cost of entry and cost of doing business here would be almost unfair to any competing cities. Personally, I would like to see them go after national and regional company HQ's and factories as well as being the American/North American HQ's of international companies.

Regardless, I'm personally done with talking about Continental/er, United. Worrying about them at this point is like wondering about if your girlfriend will come back to you after you've seen her cheating with someone else. The best thing for Houston to do is to tell Smisek (who I'm still amazed reportedly didn't return the mayor's nor the governor's phone calls!) and the gang to enjoy the grass on the other side of this shotgun wedding. He'll see the weeds soon enough. If Houston came back from the Oil Bust and Enron, this one will be a footnote in the city's history.

That's one thing Dallas/North Texas does better than the Houston area. Their leaders go out and pursue many different companies for corporate headquarters, from all types of industries. I don't see Houston leaders doing much of the same, but I could be wrong.

[citizen4rmptown]

I doubt it, earlier this year Continental Airlines signed up to be the official sponsor of New York Red Bull and their new stadium.

I don't think they paid for naming rights, but still, I imagine United Airlines will have to pick this up.

http://online.wsj.co...409-904987.html

Also United Airlines already has the naming rights to United Center in Chicago, and NBA/NHL stadium there.

Doubt they'll pick Dynamo Stadium. Ugh, I wish Continental would have bought the naming rights for this stadium. Continental Stadium/Center/Field/Park sounds cool.

[LTAWACS]

That's one thing Dallas/North Texas does better than the Houston area. Their leaders go out and pursue many different companies for corporate headquarters, from all types of industries. I don't see Houston leaders doing much of the same, but I could be wrong.

No you're right. They dont do much of anything... look around you.

[VicMan]

American Airlines has naming rights to multiple stadiums (one in Dallas, one in Miami) - So United could easily do the same.

I doubt it, earlier this year Continental Airlines signed up to be the official sponsor of New York Red Bull and their new stadium.

I don't think they paid for naming rights, but still, I imagine United Airlines will have to pick this up.

http://online.wsj.co...409-904987.html

Also United Airlines already has the naming rights to United Center in Chicago, and NBA/NHL stadium there.

Doubt they'll pick Dynamo Stadium. Ugh, I wish Continental would have bought the naming rights for this stadium. Continental Stadium/Center/Field/Park sounds cool.

[skwatra]

United is a sponsor of five of six of Chicago's major professional sports teams—the Bears, Blackhawks, Bulls, Cubs and White Sox - only the Fire are unaffiliated. The Blackhawks and Bulls play their games in the United Center, which the airline holds the naming rights to until 2014. The Cubs use a United 757 as their charter jet for transport between games, and the White Sox, similarly, use an Airbus 320 as their charter operating under flight number UAL9904.

Man if they picked up the Dynamo that would piss the Fire off! Though they already have Best Buy as a sponsor and Toyota for the park.