Signs of economic recovery

2012 sales tax revenue up, real estate sales improve

When Texas Comptroller Susan Combs announced July 11 that state sales tax revenue in June was $1.98 billion, up 15.2 percent compared to June 2011, it was good news for a state economy that continues to show signs of strength.

“Sales tax revenue has increased for 27 consecutive months in Texas,” said Combs. “Strong business spending in industries such as manufacturing and oil and natural gas boosted the latest sales tax collections. Revenue from consumer spending in the retail trade and restaurant sectors also did well.”
In Southeast Texas, reported sales tax revenues also rose, in some cases dramatically, as forecasters sifted the fiscal tealeaves to detect trends that might suggest an even more robust economic recovery. But the June numbers were cause for at least cautious celebration.

In Beaumont, the nearly $2.8 million sales tax payment for June represented a 16 percent increase over the same month a year ago. Nederland recorded an even more impressive 51 percent increase, with Groves registering a solid 24 percent improvement. Port Arthur was off the charts with the nearly $1.6 million sales tax payment representing a 78 percent increase, although that figure should be viewed with caution as the increase could be the result of an auditing recalculation. The Comptroller’s Office does not separate sales tax revenues by business sector, making definitive analysis difficult.
Overall, total sales tax revenue for Jefferson County in June was up 33 percent over the same month last year. For 2012 to date, collections are up 14.8 percent over 2011 – a solid upward trend that suggests the June increase is not an aberration.

Next door in Orange County, there was more good news. Bridge City enjoyed a 29 percent sales tax increase over June 2011, with the city of Orange posting a welcome 24 percent surge. Vidor continued the upward trend with a 19 percent increase while Rose City enjoyed a 71 percent jump, although revenues totaled only $18,320, with the smaller totals making the numbers more volatile. Total sales tax revenue for Orange County in June was up nearly 20 percent over the same month last year. For 2012 to date, collections are up 2.46 percent over 2011, but the trend is positive.

In Hardin County, the gains were generally more modest but continued the upward trend seen in adjacent counties. One exception was Kountze, which showed a nearly 41 percent gain on revenues of $30,799; another was Sour Lake with a 36 percent increase on revenues of $57,982. Lumberton was steady with a 3.26 percent increase as was Silsbee with 4.99 percent. Overall, Hardin County recorded a 8.87 increase in June, with the 2012 number increasing 5.74 percent over 2011.

Putting these numbers in perspective requires some insight from area practitioners and analysts. Ann Galassi is economic development manager for the Sabine River Authority. As a board member of the Southeast Texas Economic Development Foundation, she was asked if she believes these positive signs are indicative of an overall economic recovery in Southeast Texas.

“My gut feeling is yes, but I don’t think we’re out of it yet,” said Galassi. “I’m very cautious about saying these are good signs — they are positive signs, but if you look nationally we’re showing a lot more positive signs than elsewhere because our job growth is larger than in other places.”

Despite the caution displayed by many in her profession, Galassi does see some cause for optimism.
“I think it helps, but I think the hard numbers, the reality – there are a lot of businesses that have struggled through all this and have done really well and there are those that haven’t,” she said. “It helps that industry – the manufacturers and the petrochemicals and refineries – have put investments in this area and believe this is where they need to be doing business.”

Dr. M. Ray Perryman, president and CEO of The Perryman Group, is an economist whose column appears each month in the Business Journal. He sees the surge in sales tax revenue as a positive harbinger for the economy.

“The gains have all the appearances of some staying power, and we are seeing them in many parts of the state,” said Perryman. “One thing a lot of people don’t realize is that sales tax also includes a lot of business-to-business transactions, which has really picked up in all of the areas that have anything to do with drilling, refining and petrochemicals.”

Real estate recovery

 

Other hopeful signs of economic recovery can be found in the real estate sector. Dr. Mark Dotzour, chief economist of the Real Estate Center at Texas A&M University, recently cited evidence of housing market strength, asserting the residential real estate market in Texas has appeared to have formed a bottom and is beginning to recover. Total sales of nearly $40 billion were reported to the Real Estate Center in 2011, very similar to 2004 before sales spurted in 2005-07 because of greatly relaxed underwriting standards. Dotzour said, “It appears to me that sales volume has stabilized around $40 billion for the past three years. Early results indicate that 2012 will show a substantial increase.”

The inventory of homes for sale is another indication of stabilization in the residential market. If there is an excessive amount of homes for sale, the risk of price declines is higher. When inventory gets lower, prices start to rise.

Dotzour cautions that comparing current home sales to peak-year figures sparked by what turned out to be disastrous lending policies are not really valid as an indicator of housing market reality.
“In 1999, we thought 184,054 units sold was so hot it was off the charts; in 2011, we thought 203,637 units sold was a difficult market,” he said. “Don’t compare your business activity with what happened in 2006 and 2007. Those years were an aberration. That kind of sales volume should have never happened. We have learned our lesson, and from now on you actually have to have a job and some income to buy a house. That’s called ‘a normal market.’”

In March, the Beaumont market saw a decline year-over-year in new home sales, a decline following a rise in February 2012. A total of 202 new homes were sold during the 12 months that ended in March, down from 205 for the year that ended in February. New home sales represented 2.9 percent of overall housing sales, less than the 4.2 percent of sales a year earlier. For new and existing homes, sales gained year-over-year in March after also increasing in February year-over-year.

For existing homes, the sales numbers were more robust. In the first five months of 2012, total home sales in Beaumont increased each month, rising from 110 homes sold in January to 197 sold in May, the last month for which statistics were available at press time. In May, the average price of those homes was $153,100 with a median price of $134,100.

Dr. Perryman has also seen the Real Estate Center at Texas A&M’s forecast “substantial” gains in real estate sales for 2012 over 2011 and shares their optimism.

“The increase in home sales is generally being seen in multiple listing data around the state. The situation is still a bit cautious due to the lending environment but should be sustainable,” he said.
As this apparent economic recovery takes additional tentative steps forward, both sales tax revenues and real estate sales will be valuable barometers to gauge how extensive the resurgence will be.

Location, location, location

Boomtown BBQ working to overcome obscure hideaway

The real estate agents’ mantra about location might be a cliché, but it expresses an underlying truth – an identical house or property can increase or decrease in value due to its location.

That truism has come home with some force for Chris and Emily Swanson, who moved their Boomtown BBQ restaurant less than two miles down Calder from their original location and dropped off the radar of many customers who had patronized their first location in the rustic building that once housed Fat Mac’s, another barbecue joint.

That building was on a stretch of Calder just past where it crosses Phelan. That part of Calder is not as heavily traveled as other parts of that avenue, but it is Times Square compared to the intersection of Calder and Junker where they remodeled a spot in a strip center that also houses Honey-B Ham and Tizzy’s salon. Sitting at the end of the strip center, Boomtown is almost invisible from Calder, as if they were hiding in plain sight.

Opening in the old Fat Mac’s in March 2011, Swanson said it was a larger restaurant than they originally had in mind but it came equipped with tables, chairs and equipment.

“That made it appealing because we didn’t have a whole lot of money,” he said. “The not-so-appealing part was that it cost a whole lot of money to rent that place.”

Swanson staggered under the $5,100-a-month rent, which when utilities were added meant the first $200 they took in each day went to the building – before food, employees, insurance and everything else was calculated. That sent them searching for a new location; they got out of their lease after 11 months. That building is currently being prepped for an August opening as Tibideaux’s New Orleans Kitchen.
By April 2012, the Swansons had moved into their new digs – formerly Gino’s Pizza & Pasta – but some of their customers have had a hard time finding them.

A better life

Chris and Emily Swanson are a hard-working couple with four kids who were living from paycheck to paycheck and looking for a better life. Chris was an auto insurance adjuster; Emily was a kindergarten teacher in a BISD elementary school. Together they took the plunge.
“We’ve put everything we have into this,” he said. “We both took out our retirements, we put all our eggs in one basket and said we’re going to make this work.”

Getting into the notoriously tough restaurant business was not as daunting a challenge as it might be to others. Chris’ father, Cook Swanson, had thrived in the industry off and on over the years. He built Christopher’s – a restaurant named after his son – in the building on 11 Street that later housed Hoffbrau Steaks and currently is home to Starvin’ Marvin’s.

Chris recounted how his father was living in Austin when he took his truck and trailer and moved to Durango, Colo.

“He parked his trailer at an old gas station and started selling Serious Texas Barbecue, as he called it. He later converted the gas station into a restaurant, then a couple of years later started a second Serious Texas Barbecue at the other end of town,” he said.

That success convinced Chris to attempt to emulate Cook’s success. The resulting cuisine might not be your father’s Texas barbecue – but it is his. Colorado may have something to do with that. The population boom in that beautiful state in recent decades has been fueled by transplants, coming in large part from the East Coast, the West Coast and Texas, each bringing their own ideas about barbecue.

For example, east of the Mississippi, when you order barbecue you’re talking about pork. Pulled pork tops Boomtown’s menu of smoked meat. Next is the more traditional Texas barbecued beef brisket, chicken, sausage links and ribs. They also have a nice smoked turkey breast. The barbecue sauce at Boomtown is something of a hybrid – a vinegar-based sauce typical of Carolina barbecue with flavors of Texas barbecue sauce added. Swanson said their regular customers swear by it, but Boomtown might benefit by offering a more conventional sauce for Texas barbecue purists.

Further down the bill of fare is where Boomtown BBQ really stands out with what Swanson calls his “Twisted Menu.”

“The G-7 is a sandwich I made up because we didn’t have a sandwich of our own; I wanted a sandwich that was a little bit different than anybody else around here,” said Swanson. It comes on a bun piled high with pulled pork, queso blanco, beef brisket and barbecue sauce.
The queso blanco is more typical of something you’d find in a quality Mexican restaurant, made with white cheese, diced green chilies, cilantro, onions and jalapeños.

The closest thing Boomtown has to a signature dish might be the Taco Bomb, a spicy combination of pulled pork and cheesy potatoes on a flour tortilla with onions, jalapeños and barbecues sauce. BBQ Nachos feature pulled pork and queso blanco on tortilla chips with onions and jalapeños. They also offer a nice cobbler for desert.

Chris and Emily Swanson have energy and passion to burn and it is reflected in the food that comes out of the kitchen. Their first year in the restaurant business has been a tough one, but they are not going anywhere. If you ever patronized their first place and wondered where they went, take the time to seek them out. New customers are welcome, too – and that Taco Bomb is, well … the bomb.

‘Business Journal, you have a problem’

In a recent article that appeared in both the Business Journal and The Examiner, we tested a notion that had been offered almost as an article of faith – whenever local doctors got sick, they traveled 90 miles west to Houston for treatment. A billboard erected earlier this year near the intersection of Dowlen Road and Highway 69 proclaims, “Houston … you have a problem,” then touts “World Class Surgery. Personal Attention. Right here in Beaumont.”

The focus of the article was new specialty health care facilities including Previty Clinic at Baptist Hospital and the recently announced Victory Medical Center. We often solicit opinions from people with inside knowledge of a particular industry. On rare occasions, we agree not to identify them by name to encourage them to speak openly about institutions they might encounter in their business. That was the case with ‘Boutique Medicine”. Here is a comment that appeared in that story:

“There’s no question we have quality health care in Southeast Texas because both hospitals have been recognized nationally – Christus and Baptist,” said one observer who closely tracks the local medical scene, and enumerates the points that are important to many patients. “You have a board-certified physician – you definitely want to know that, and there’s nothing wrong with asking doctors their clinical outcomes; you can go online and see that now. So you have everything that’s necessary here to provide the service in the right atmosphere with the right clinical outcomes.”

So far, so good. But the next comment from this unnamed observer proved problematic, as you will see – although it seemed like a minor point at the time:
“Insurance companies are all about saving dollars,” said the observer. “If you need an MRI, they may send you over to the MRI place that used to be a movie theater that has a rejuvenated MRI machine that is probably 15 years old and you can get your MRI for half the price. Never mind they can’t see a tumor that’s in your liver – it’s half the price!”

To be fair, this unnamed observer is not directly involved in promoting any particular diagnostic center so the comment did not immediately create concern in our editorial process. But it definitely caught the attention of Dr. L.E. Richey, owner of US Imaging, which has been serving patients and physicians in Texas since 1989. The company owns and operate nine outpatient medical imaging centers in Houston, Sugar Land, Pearland, Beaumont, Bay City and San Antonio.
As it happens, their facility here – Beaumont MRI – is located in an old movie theater on College Street near Gateway Shopping Center. Richey takes sharp exception to the idea that any of his facilities offer substandard care.

“We specialize in taking care of hundreds of thousands of people every year, and we’re not in it just to make a buck,” said Richey. “The quality of what we do is every bit as competitive in the marketplace. It’s like I can have a nice home for $250,000 or you can have another home that costs a million dollars, but in the long run all you do is live in it – and that’s what we’re doing. We’re practicing very effective medicine and taking good care of people, and when somebody says we’re not doing quality work, that is very, very offensive – and just plain wrong,”

Richey said you don’t have to just take his word for it, and cited this statement from Dr. L. Paul Gerson, a board-certified radiologist in private practice in Houston who spent 30 years as chief of neuroradiology at St. Luke’s and Texas Children’s Hospitals.

Gerson said he “was surprised at the negative description of Beaumont MRI.


I don’t know who their ‘local medical observer’ is, but I can tell you that his opinion is wrong” and then offered a blunt assessment: “I think that as a ‘medical observer’ I can judge the quality of MRI studies and I can say that the images produced by Beaumont MRI are perfectly diagnostic. … I can see no justification for their uncalled for and negative portrayal of Beaumont MRI.”

On a recent afternoon, Richey drove over from Houston to give the Business Journal a tour of his facility here. The former movie theater has been tastefully converted into a medical imaging center with no traces of the space where audiences once thrilled to the exploits of Luke Skywalker and Indiana Jones.

Beaumont MRI offers a service menu that includes digital X-ray, magnetic resonance imaging (MRI), MRA, CT scan and ultrasound in a spotless modern facility. During our visit, we observed center administrator Rhonda Rhodes and her staff offering warm, personal service to patients undoubtedly under stress from the health issues that required the diagnostic procedures in the first place. There was nothing “cut-rate” about any aspect of Beaumont MRI and despite the unflattering reference in our previous story, we would be perfectly comfortable with recommending Beaumont MRI to friends and family members.
That is a good thing, because subsequent investigation revealed that a preferred provider for the health insurance policy covering employees and family members at Examiner Corp – parent company of the Business Journal – is Beaumont MRI.


Business Journal editor James Shannon offers a weekly column of business news for readers of The Examiner. For more details, see the editions of the Business journal published monthly in Beaumont, Port Arthur and Greater Orange. Check out the blog at setxbiz.blogspot.com or e-mail james@beaumontbusinessjournal.com.