Whatís Reshaping Arizona, New York City And Texas?Jan 21, 2022
Unknown: The cost of living in San Francisco is three times that of Arizona. So we had a lot of people locating here and working virtually from our state. Now that they want to stay here, we're going to need all hands on deck because the gravity of this crisis is very, very real. And there's no guarantee that New York City will return the way we wanted it to. There is a strong culture that needs to be respected in Texas, because that is why Texas is the way it is. Katie Schoolov: The Arizona land of snowbirds and Grand Canyon retirees and ATVs is quickly gaining a reputation for an entirely different story.
It is becoming an epicenter for electric vehicle and self-driving technology, as well as a new surge in semiconductor manufacturing as the US tries to address a global chip shortage. Unknown: I would say Arizona is the semiconductor capital of the world. This is going to be the center. Intel's $20 billion investment in Arizona, building two new factories and a semi-truck in Taiwan, is something I don't think has gotten the attention it deserves. Katie Schoolov: Taiwan Semiconductor or TSMC is building a $12 billion chip manufacturing plant in Phoenix. Tesla rival Lucid Motors built a new electric vehicle factory in the state along with Nikola and Electra Meccanica.
And Wei Mo's fully autonomous rides are now available to the public in Arizona only. Unknown: So the cost of living. It's the great atmosphere. The people love it. People love being in Arizona and I think that also helped us attract talent from all over. Katie Schoolov: In 2020, Phoenix attracted more residents than any other US
cityfor the fourth year in a row. 634 businesses relocated or expanded in Arizona between 2015-20, creating 13,000 manufacturing jobs alone. We headed out into the desert to ask the governor big business and those living in the midst of the boom How is the state changing and why Arizona, the sixth largest state by area?
Arizona first became famous when a great mind opened there in 1854. And copper mining remained its main industry for nearly a century. Slow to grow. It became the 48th state in 1912 and did not experience a population boom until after World War II, when air conditioning became widely available. Phoenix has been growing ever since. Now surrounded by a large expanse of suburbs and agriculture. Unknown: Everyone knows the five C's of Arizona copper cattle, cotton weather and citrus. I think you could add two, maybe three additional C's, you've got chips, you've got electric cars, and you've always had construction as well.
Katie Schoolov: During WWII, GM began using about 4,000 acres outside of Phoenix to test parts it supplied to US Army tanks, Toyota, Ford, Chrysler and others soon tested their cars in Arizona tracks for aerospace manufacturing has also been huge. Raytheon has made missiles in Tucson since the 1950s and recently expanded there. Boeing has built its Apache helicopters in Mesa since the 1980s. In 1969, Motorola started another statewide trend when it began manufacturing semiconductor wafers at a factory in Mesa. But during the Great Recession, 300,000 Arizonans lost their jobs and home values ‚Äč‚Äčdropped $100,000. So, in 2011, the Arizona Commerce Authority was formed to attract new high-paying jobs.
One of the first big wins came in 2015, when Apple invested $2 billion to build a data center outside Phoenix in the years since the list of companies moving to or expanding in Arizona skyrocketed. Caterpillar, Infosys Reference Electronics, Blue Vision, Zoom, Knowledge and many more. Businesses that grew in the state in the last decade promised to generate nearly $34 billion and 191,000 new jobs in exchange for big incentives. Unknown: We have a Foreign Trade Zone program. We also have some tax credits for quality work. So as a company creates jobs and makes capital investments, those programs become available to all companies.
Katie Schoolov: Filling all these new jobs are many highly skilled workers flocking from California to lower cost of living states as the pandemic allowed them to work from home. Unknown: If I can work in Arizona, I can have twice the house a newer house with a pool. The cost of living is cheaper, my taxes are cheaper, and I can find out at work. Why wouldn't I live here? Katie Schoolov: Real Estate Agent and Single Father Chris Barker grew up in Arizona. After 16 years in Maryland. He moved back to Phoenix with his two teenage children during the pandemic last year, but it wasn't the same.
Unknown: Many of the beautiful things that Arizona used to enjoy have gone to waste. Slide rock in Sedona snowbowl all these great places Arizona had to offer one now there is such an influx of people it is almost miserable. I can see that the contamination is thicker. There has obviously been a lot more traffic. Katie Schoolov: But for many, the cost of living is still a big plus. Unknown: The cost of living in San Francisco is three times that of Arizona. So we had a lot of people locating here and working virtually from our state. Now they want to stay here.
Katie Schoolov: The business-friendly regulatory environment and lower taxes are also a downfall. The Tax Foundation ranks Arizona 24th in business tax climate, while California ranks 49th. Unknown: In Arizona, we've removed book-clearing regulations 2751 since 2015. That's the equivalent of a $150 tax cut million, and that's the direction Arizona will continue to go. Katie Schoolov: This, along with Arizona's long history of manufacturing, has helped the state attract a whole new industry of electric car companies. Although Arizona lost a bid for Tesla's first Gigafactory to Nevada in 2014, the state's big leap into electric vehicles came in 2016 when Lucid Motors announced it would build its $700 million electric car factory in Casa Grande.
Unknown: We had a large survey of about 65 sites in the US against the full range of criteria. And we made a very good decision here to come to Arizona. Katie Schoolov: And then there's Arizona's proximity to Mexico, where companies make components for GM electric vehicles and for Lucid. Unknown: It was our third interview with Lucid, the final question was, how is your relationship with Mexico and is Mexico the number one trading partner for Arizona? It's not even close. Katie Schoolov: Evie's businesses in Arizona have easy access to supplies from nearby California and beyond via a major rail system and I serve a major trucking route.
Unknown: That was the most attractive thing about Arizona that we have, being close to the supply chain being close to our headquarters having enough room to grow, that's
whatwe found here. Katie Schoolov: Loose it broke ground on its 590-acre factory in 2019. After some delays, it says its Air Dream edition is now in production there with customer deliveries coming later this year. Unknown: The Job Role of the Workforce for One Author 4000 People Su Katie Schoolov: The maker of electric semi-trucks Nicola, which made headlines for some big blunders last year, is based in Phoenix. She's building a new factory in Coolidge, Arizona, scheduled to start producing her niccola tray in 2022.
Unknown: Coolidge's phase one is mostly done outside. So now it's all the inside work at this point. It's on time. We should be aiming to have that first phase up and running this year, and we are on track to do so. Katie Schoolov: Another electric vehicle being made in Arizona is the three-wheeled single-seater. Electromechanics says its new factory in Mesa, which just started, will create 500 jobs and eventually produce 20,000 solos per year starting in early 2023. It is also creating pools of shared solos, similar to short-term bike rentals. electric and scooters. close to our target market on the west coast and the willingness of these five municipalities to test that participation solo.
That was probably the turning point for us that really helped us decide on Arizona. Katie Schoolov: Rivera says access to the Eevee supply chain, much of it now being made in-state, was a huge factor in choosing Arizona, Unknown: Secondary supply chain, Tier 1 suppliers who will be supporting us in addition to those who are already here, supporting lucid and Nikola, for example, Katie Schoolov: UAC J Whitehall, a leading supplier of aluminum components for electric vehicles has just announced the opening of a new plant in Flagstaff. Lithium-ion batteries are also a crucial part of the Eevee supply chain and the Battery Recycler Lifecycle is now building a new recycling facility in Gilbert, Arizona.
And now, Atlas Motor Vehicles, known for its x t electric pickup truck, recently announced that it is building a production line for battery packs and selling them at its headquarters outside Phoenix. Unknown: Several of our employees who came from California love it for the price of an apartment with three roommates. They can have a house and be alone and that is very attractive, but they still have the benefits that they had in California. Katie Schoolov: In addition to a growing supply chain and robust manufacturing, Arizona is known for its ideal vehicle testing conditions. Six major proving grounds, or proving grounds, are scattered across the remote deserts of Arizona, where major auto companies can discreetly test drive their new cars.
GM Ford, Toyota, VW, Chrysler, and Nissan all test their cars at these tracks. low rainfall and winds allowed testing almost every day of the year. The extreme heat of the desert is also a draw. Unknown: Here, in the summer, it is the hottest anywhere. Which is not cool. Well, you're in the middle, but it's great for testing vehicles in hot weather. Katie Schoolov: Arizona is now one of the first testing grounds for self-driving cars that have become commonplace in some cities around Phoenix, which have wide streets ideal for testing laid out on a grid. Unknown: I think there's some truth to the fact that the infrastructure here is fantastic, right?
But I think the biggest, most compelling draw is the dynamic, progressive government here and the fact that you bring companies like Uber and Waymo, and cruise ships, the willingness to let those kinds of companies try out Katie Schoolov: In 2015, Governor Ducey signed an executive order that allows testing autonomous vehicles on public roads. Since then, Waymo, Uber, Chevy, Ford and Cruise have tested their autonomous vehicles in Arizona. Although Uber sold its self-driving division last year, five years after trials began in Chandler, Arizona, Google's Waymo now offers driverless rides to the public. Now, Walmart is testing self-propelled deliveries by GM-owned cruise cars in Scottsdale and the two-simple self-driving semi-truck company announced a major expansion in Tucson in January before going public in April.
Unknown: We are the first and only publicly traded autonomous driving company. It's really a validation of our shareholders' trust in us and our technology. Katie Schoolov: Semiconductors that have a long history of manufacturing in Arizona are another crucial part of autonomous driving technology and the electric vehicle supply chain. Intel started making chips there in 1980 and now has plans to expand rapidly in the state as demand increases. Chips are in short supply after the pandemic disrupted supply chains and caused consumers to buy more electronics. Intel, which says its technology powers almost all autonomous vehicles, has four factories in Arizona with two more on the way.
Unknown: Today Intel announces a new $20 billion investment, the largest private sector investment in Arizona history. These facilities will add 3,000 high-wage, high-tech jobs to the state of Arizona. Katie Schoolov: Amid global shortages, the US share of global chip manufacturing fell from 37% in 1990 to just 12.5% ‚Äč‚Äčin 2019. The Unknown World: Intel is Counting on More Than Ever to offer innovative products. Katie Schoolov: Intel's two new factories in Arizona are scheduled to come online in 2023 and will make Arizona their largest manufacturing site in the world. And he is far from alone. TSMC, the world's largest contract chipmaker with clients including Apple and Qualcomm, aims to make20,000 chips per month and its new Phoenix factory by 2020.
To be the first such factory in the US, Unknown: Arizona is considered one of the top four states in the country for concentration of semiconductor talent. This will continue to elevate Arizona's position to a superior status in the country. Katie Schoolov: Chips are vital to powering our modern life. But making French fries requires an incredible amount of water, anywhere from two to 4 million gallons of water per day for a typical factory. And water isn't exactly plentiful in the desert. Arizona's largest water source is groundwater, which is accessed through the Wells. But deepening wells on large farms are consuming groundwater faster than it is naturally replenished.
So some manufacturers have added on-site water recycling in their factories, Unknown: generally. Lyon's part of our water is recovered. In order, I'd say more than
whatyou know is 80-90% recovered. So that's very, very significant. And we use billions of gallons, you know, per year for the company as a whole. Katie Schoolov: Intel says it treats 9 million gallons of water a day, adding much of it to the local supply for things like irrigation. Arizona has a history of reusing nearly all of its gray water to cool power plants and irrigate fields, store water banks in underground aquifers, and restrict irrigation in urban areas.
Unknown: We are using less water today than in 1957. With six times the population. No one is better in the country than Arizona with water. Israel is probably the best in the world in water with Arizona right behind them taking advantage of generational projects like the central Arizona project and then the drought contingency law that we passed in this administration. And before that we had the groundwater management law, so we continue to focus on water, Katie Schoolov: Major tributaries and 336 miles of man-made canals allow 36% of the state's water to come from the Colorado River. River. Unknown: Growth has not been limited by water at this point.
The water this year is very well used. The Colorado River sometimes doesn't even reach the ocean because it is used to the last drop. Katie Schoolov: Lucid also recycles the water she uses to make Air. Unknown: So we have a water treatment system in our plan, so we treat the water twice and put it back into the system. Katie Schoolov: Car and chip manufacturing requires a lot of energy for US News and World Report ranks Arizona as the second most reliable power grade in the country, and its power costs about half California's industrial rates. Unknown: But I would say the good thing about Arizona is just the overall infrastructure when it comes to power.
When it comes to stability what we need to run this world class operation. Katie Schoolov: 14% of Arizona's electri
citycomes from renewable sources, thanks in large part to its ranking as the sunniest state, it generates the fourth most solar power of any state, and ranks second in solar power potential . But all that constant sun also means intense heat. Averaging 99.1 degrees, Phoenix had its hottest month on record last August, and last year was the state's driest on record. Although Arizona does not suffer from the myriad of natural disasters that California and Texas face. The state has significant dust storms, flash floods, and fires.
Unknown: I think there are a lot of people moving here who haven't moved here over the summer. So I'm like, I don't know if they know what they're getting into. Katie Schoolov: But in recent years, the heat certainly hasn't kept people away. Arizona's population has been on a steady increase over the past decade, rising 13.9% between 2010 and 2019. The upside for incoming Evie companies and chipmakers is the availability of skilled workers. Unknown: We are graduating 9,000 students a year from our three universities in the semiconductor industry. Katie Schoolov: And CNBC is mostly the most recent states for business rankings, Arizona ranked 20th.
But we're looking specifically at the Arizona workforce which ranked second. And many of those workers come from California. Uhaul, which is based in Phoenix and makes much of its equipment in Arizona, found that California was the state with the most people moving to Arizona out of more than 10,000 one-way rental truck customers from California to Arizona in 2020. Converting Arizona in fifth place on their annual list of growth states is up 15 points from 2019. There's no denying that all these people, especially California's wealthy, are changing the fabric of Arizona starting with the real estate market. While Arizona sits right in the middle of the cost of living index.
The typical value of a home in Arizona is about $329,000 About half the typical value of a home in California, at least for now. Unknown: My mortgage is three times less than our rent was in Seattle. Katie Schoolov: During last year's pandemic, Arizona native Brooke Sanders Silverman and her family moved into a 1,000-square-foot home she bought in Tucson in 2010. Unknown: When you have a four-year-old running around, it's like if the space much smaller, faster. Katie Schoolov: They intended to quickly upgrade to a bigger house. Unknown: Probably three or four days a week, either by mail or by phone, I get an offer to buy my house for cash.
Katie Schoolov: But she turns down these offers because her own housing search has been unsuccessful. She submitted an offer of $10,000 above the asking price for her dream home in September and another offer a couple of months ago. Unknown: We made a full offer and I think it was over 100. I'm just baffled by these cash on sight offers, they don't want to be inspected. The cost of living has gone up so much that I don't think many retirees can afford the current real estate market in general. We are seeing a 30-40% increase from July to now in home values.
And that's crazy. Katie Schoolov: Walk over here. Sanders Silverman's daughter will start kindergarten next year. And CNBC ranked Arizona schools 47th. Her parents were both teachers in Tucson. Unknown: What our teachers do here is offensive. I mean, there's no way they can stay here if our cost of living continues to rise the way it has for the past few months. So if we continue to lose our teachers and our good teachers because they can do so much more in another state and I think our education will continue to decline. Katie Schoolov: Apart from existing resident prices.
Population and manufacturing booms have also led to worsening pollution. The American Lung Association found that nearly all Arizonans breathe unhealthy air, and Phoenix and Tucson both worsened in every category last year. The population boom is changing Arizona politics to when Biden carried Arizona in November. It was the first time Arizona went blue since 1996. You'll see a lot of unfamiliar things: from communist Fornia flags you know you can visit but leave your politics at home California chasing people punishing people and producers with lack of quality of life with burdensome taxes and regulations. Arizona will remain Arizona Katie Schoolov: As more young professionals move out of states like California, and the Asian and Latino population grows as well, it's no surprise that demographics and politics are changing.
The state also had large voter turnout from members of its 22 Native American tribes. Unknown: As more and more people move here from Washington state from California, there are a lot of people who are upset about it and they hate it, you know, because they're not just making this place unaffordable for the people who consider themselves natives or have lived here for a long time. But they are also changing politics. Katie Schoolov: Regardless of politics, Arizona is certainly changing as new people and new AV and chip companies solidify its reputation as a center of advanced manufacturing. Unknown: It really has become a center of excellence here that will only get bigger and more important as we go along.
Is there enough momentum now? I think it's unavoidable. MacKenzie Follow Them: New York City, possibly the epicenter of the world, a famous song says if you can get there, you can make it anywhere. And it's true. Those who do make it really great. It is the richest city in the world with a total wealth of $2.7 trillion, 113 billionaires and 25,000 super high net worth people, but the coronavirus pandemic has rocked the city. At one point, the death rate was around 10% in more than 30% of those hospitalized. In April, nearly one in three New Yorkers was out of work and overall consumer spending fell by more than 40%.
The tourism industry, which supported nearly 400,000 jobs and generated nearly $70 billion in 2019, came to a screeching halt. shootings and murders skyrocketed. Unknown: We're talking economic recovery, the rich don't need a recovery. In reality, they are now richer than before. The best argument in favor of New York is to invest in the fund. MacKenzie Follow them: The consequences are a potential budget shortfall of at least $30 billion in the next few years, while the area will soon receive almost $24 billion in federal aid. State and local officials say that's not enough. Good morning, all the tax hikes on the rich is a part of Governor Cuomo's proposal if Unknown: on high income taxes, top rate, which is currently MacKenzie Follow 'em: would make New York the income tax area the highest state and local rent in the Nation.
Unknown: The most successful New Yorkers are doing very well and asking them to pay more is very appropriate. But I think there's a balance that one has to maintain if you need that iceberg to melt faster and faster. And the next thing you know, a large part of the tax base has come off and floated away. In general, migration goes down with income, you know, if the rich really just want to find a low-tax place to live, they've had generations to figure out how to make it work, then you have to cut drastically. MacKenzie Follow them: Another part of this proposal is to cut Medicaid and school spending.
Unknown: Cutting public services is a very dangerous thing from an economic, political and moral point of view. That really drives people to leave the city. not so much considering that the total population of New York City is 8.3 million. But those who left brought with them $34 billion in personal income. Unknown: Is this the collapse of New York City or any other city? No, it's not. There is so much that New York has to offer. But is it a serious challenge for policymakers to grapple with right now? Yes it is. MacKenzie Follow Them: Watching the city go through this crisis has been really difficult.
I was born here and spent half of my career here. We spoke to experts to find out what some of the challenges are and the potential path to recovery. Economists often refer to post-recession recoveries with a letter L U V. or A W. A V is the ideal meaning that the economy fell sharply but then will also rise sharply. The coronavirus pandemic has introduced something we haven't seen before the K, which means a part of the economy picks up like the Wii, and in this case, those who worked from home were able to save and benefit from a sharp increase in the asset value.
Some corporations did very well for others, the pandemic has been the opposite. In 2020, 662,000 jobs were lost and bankruptcies increased by 40%, leading industries like hotel entertainment, food service or travel shut down completely. Unemployment in the city is 13.1% and even higher for those below the poverty line. Unknown: What New York City on New York St needs to do is spend money right now and they could really spend money like building affordable housing, rebuilding the roads, rebuilding the bridges and all those things that will put people back to work taking shortcuts. it is guaranteed to backfire. First, I'm advocating for a billion dollars in cash aid for the extremely poor, then I'm proposing to try to bring high-speed internet to the 29% of New York City residents who don't have it.
And I proposed a People's Bank to help reduce the proportion of New Yorkers who are unbanked or underbanked. MacKenzie Follow them: On the fiscal side, the city initially projected a budget deficit of $8.33 billion for fiscal year 2021. But in betweenfrom its review in February 2021, it showed that a better-than-projected income from corporate income and taxes is looking to generate a surplus of nearly $3.4 billion. In the medium term, the prospects are not so good. The study projects a shortfall of $15.6 billion dollars for the 2022-24 fiscal year, primarily due to a decline in property tax collections for the state. Governor Cuomo estimates a deficit of $15 billion for fiscal year 2022 alone.
Unknown: Policymakers should not overreact to the revenue shortfall they are running right now. It's not very significant for all the concerns about our declining income in New York. tax collection was reduced by 1%. Last year, that's well within the state's coverage capacity. Now state spending continues to rise. Therefore, fixed income continues to be a challenge for the state because those expenses continue to rise. But nonetheless, this is manageable. MacKenzie Follow them: Regardless, city and state officials are feeling the pinch. There are a number of proposals for the way forward. President Biden's US bailout plan signed on March 12 includes nearly $24 billion at various levels of government in New York, that $6 billion will go to the city, Unknown: When you look at the richest people in the city ‚Äč‚Äčand the richest people in the state.
His wealth increased by $88 billion, right. So the deficit is not something arbitrary. The deficit is a failure of city and state policy to tax the rich who get more out of the economy and reinvest it in the rest of the economy so they can see some gains too. We don't really have data, we have a lot of anecdotal evidence right now that the rich are leaving high-tech cities and states during Covid. If they leave, there is a big fiscal crisis. How do you pay for all these services? And that affects everyone, the people who stay or have a higher tax burden or will receive less government services.
So there's a real question that policymakers need to address right now. How do you keep these people here? How do you make sure that after the pandemic they want to come back? We are moving towards a virtual world where people have choices. The city has to realize that these people are not the enemy. MacKenzie Follow them: In 2018, the top 1% accounted for 42.5% of the total income tax collected by the city. According to the independent budget office, that was $5 billion in revenue for the city. In January, Cuomo proposed an increase in the top tax rate of up to two percentage points.
Unknown: New York is probably the best place on the entire planet, potentially, to become very, very rich, and taxes aren't even a priority. Studies have shown that we could probably increase our taxes by 60-70%. And at the end of the day, the million dollar flight that would occur would be dwarfed by all the money entitlement that the state would still show, the city would still show a net positive in revenue. MacKenzie Follow Them: Plus New York State's top tax rate of 8.82%. The city collects its own income tax, which can be as high as 3.876%. According to the Tax Foundation's calculations, New York is the third most expensive state in which to live and do business.
CNBC does a similar ranking, but looks at the state's attractiveness to businesses on that list. The state is ranked 27th. Unknown: New York City has a very high municipal income tax. And if people don't physically work there, New York City doesn't get that revenue. Just as those Midtown Manhattan offices empty, so the city coffers, we can ask the fundamental questions about what kind of society we want, what kind of tax treatment we want. We also have to deal with the economic realities, which is that there is a tipping point where people will leave MacKenzie Follow them: income taxes are only part of the story.
New York City is even more dependent on property taxes. According to a report from the New York Real Estate Board, residential property sales and investments fell 46% in 2020. That meant a loss of $1.6 billion in revenue for the city and state combined. But there are some signs of recovery January 2021 was a great month where sales were $6 billion, almost 40% more than January 2020 Unknown: as taxes fall because values ‚Äč‚Äčare low, the city in Instead of making tough decisions about its own budget, it will simply look to raise rates or target higher taxes on the remaining value of the remaining land.
God willing the remaining businesses and high income earners in the city make up for the loss and create a kind of vicious cycle where they push people and businesses away and lose more. MacKenzie Follow Them: The fear that high-income earners will leave cities or states because of high taxes is common among lawmakers and pundits alike. Unknown: It's very intuitive. If what we know about millionaires in general is that they are not known for evading taxes. And just so you know, there's sort of an income defense industry of accountants and lawyers and wealth managers helping them reduce their tax burden.
And so this fits in with the idea of ‚Äč‚Äčthe millionaire tax flight MacKenzie Follow them: Young says that, well, there are anecdotes, the data does not support it. He has been analyzing the tax returns of the wealthy for more than a decade. Unknown: 2.4% of millionaires a year change their state of residence, one in eight of those moves pursuing lower taxes. So we have a small fraction of a small fraction. This equates to about 0.3% of the millionaire population moving for tax reasons, MacKenzie Follow them: A street tax increase for the rich isn't the only option. Others, like the city's independent budget office, have proposed a combination that would lower costs and increase revenue.
Unknown: The reason you don't see anything approaching an exit after this is that the value proposition, as they say, of New York hasn't been completely destroyed needlessly. I think many very high-income people would probably prefer to live in New York and would prefer the New York lifestyle, if they could be sure it would return. MacKenzie Follow Them: This isn't the first time New York City has experienced a major recession. In fact, the city has a long history of them from the 1918 flu pandemic and the Great Depression, to 911 and the eight o'clock recession. Each time the critics have proclaimed the end of the city and each time they have been wrong.
The Unknown Mayor: The one who guided New York City through its greatest crisis is Fiorello LaGuardia. He was the city's mayor during the Great Depression and World War II. He worked at a time when the federal government was willing and ready to invest a lot of money in its cities. But in the decades after World War II, over time, the idea of ‚Äč‚Äčthe federal government supporting New York City fell out of fashion. MacKenzie Follow Them: In the 1960s. The working poor prospered in New York City, there was a system of free public hospitals, free college tuition at City University of New York schools, a great public housing system , cheap and reasonable subway service and generous wages for public service workers.
But the services were not cheap. And by 1975, the city was facing a fiscal crisis. It was a time of rising conservatism, and the city became a symbol of what was wrong with big government. Unknown: By providing a federal guarantee, we would be reducing rather than increasing the prospects that the city's budget will ever come into balance. MacKenzie Follow them: President for denying federal aid and banks forced city officials into an austerity program that cuts social services. Now, the city has avoided bankruptcy. But historian Phillips Fine argues that austerity measures transformed the city's politics, character and demographics Unknown: forever.
And, in a way, the development of the city became much more oriented towards the idea that you have to develop a city policy with an eye to retaining and attracting wealthy residents, businesses and doing everything possible to make sure that stay here To say that in the '90s, if you were going to be a top tier employee at a top tier firm, you had to work in New York. So it's what I would call the network effect. And today I would say that that proposition has changed drastically. MacKenzie Follow Them: From 1977 to 1997, the top tax rate on earned income more than halved, the state's gross domestic product skyrocketed, and the rich became substantially richer while the poor got poorer.
Unknown: That's a development that played out during the '80s, '90s, and the last 20 years of the 2000s. A lot of the crises we've seen in the city have affected people very differently depending on where they are. in the economic structure. MacKenzie Follow Them: And after the Great Recession, New York City experienced its biggest expansion in decades. This time, however, the economy is in shambles. The state and city fiscal situation is looking better than in previous recessions and not as bad as initially predicted. And the fact that Americans overall have more savings than ever bodes well for the recovery.
Unknown: If all these people felt some assurance that the city would move quickly again and that the city and state were not going to crush thriving and profitable businesses with even higher taxes. I think it would be there, the outlook would be more positive and optimistic. But right now, I think it's just that we're in an atmosphere of great uncertainty. Public services must be protected and expanded to deal with crises, such as the pandemic. Actually, I think they are much more important in driving people out of New York or could be more important than the MacKenzie tax increases Follow them: manageable by historical standards.
What sets this pandemic apart is the unprecedented near-term uncertainty, that is, the speed with which the vaccine will become widely available and the arrival of federal aid. In the long term, it will depend on whether the city can maintain its agglomeration economy, which could be at risk if work-from-home policies are maintained. Unknown: You know, we've heard this story for thousands of years and the cities always come in, we've had plagues before and the cities came back. New York has proven to be resilient, it will continue to be, but that doesn't mean everything will be normal. We're going to need all hands on deck because the severity of this crisis is very, very real.
And there's no guarantee that New York City will return the way we wanted it to. Katie Schoolov: They say that New York still hasn't convinced me to leave. I've been trying to stop bleeding, bleeding. I wish we never had. Texas, in many ways, stands alone. It's huge. It's iconic. Your people are proud. And lately, a growing number of corporations and billionaires have decided they'd rather be part of the Lone Star State than California. Unknown: This has turned into an absolute tidal wave. They are looking for a state that gives them the independence, autonomy and freedom to chart their own course.
Texas is big, wide open spaces, there's room to grow. And it has a very business-friendly environment that makes companies willing to move here to Katie Schoolov: Austin is where Tesla is building its new giant gig factory. Oracle moved its headquarters and the Apple Building to its second largest campus. Governor Abbott spoke to CBR E about a possible US headquarters there, and Charles Schwab relocated his headquarters from California to the Dallas area in recent months. And Hewlett Packard Enterprise is heading to Houston, that pandemic Unknown -- in particular it's had a really interesting effect, hasn't it? If you can work from anywhere, you can still have a job and you know, San Francisco but living in North Texas our real estate costs are a third of what you get in, you know, the Bay Area.
Of course, it all depends on having electricity to keep the web going, you know, especially if you're going to telecommute, Katie Schoolov: But long before its power grid was decimated by February's historic winter storm, Texas was experiencing a bill important. The state economic development agency says there has been a tremendous increase in corporate relocations since the pandemic hit with nearly 200 projects in the pipeline at the end of 2020. Unknown: I think a lot of companies look at that and say, you know what? Running my business without this massive government interference that I get running my business in places like California or New York, Katie Schoolov: Texas and California are the two most populous states with a combined one-fifth of the country's population.
As the largest Democratic state and the largest Republican state. rivalryamong them is no surprise, while California's population and job growth slowed to a trickle, Texas added more residents than any other state in 2020. With no income taxes, Texas has attracted wealthy people like Joe Rogan, Elon Musk, Drew Houston and Joe Lonsdale to take the plunge. Unknown: One of the reasons I moved here is that it somehow feels like an extra-American. You know, it's like getting up on your own. Katie Schoolov: As the ninth largest economy in the world, Texas has always been a major hub for business on CNBC, their ranking of best states for business Texas came in second.
Dallas has long been the financial capital of the giant state. Unknown: Incredible numbers of people are moving to Dallas right now. We picked Toyota StateFarm we can't even name all the companies. Katie Schoolov: Manufacturing is huge in central Texas. Houston is home to major oil and energy companies, where big names like Exxon and Shell have been since the early 20th century. Thanks in large part to oil and natural gas, Texas has been the nation's leading exporter for 18 consecutive years. The state economic development corporation says Texas is home to 50 Fortune 500 headquarters, more than 1,600 foreign-owned businesses and 2.7 million small businesses.
Its civilian workforce of 14 million is second only to California's 18.7 million. Unknown: Texas has world-class educational institutions, the University of Texas system, UT Austin, Texas A&M system, Houston, Dallas, and that's part of what attracts so many of the companies that come here. And as Katie Schoolov: The pandemic created a work-anywhere mentality, data from the US Postal Service shows that Texas was the second most popular destination for people leaving the Bay Area. Unknown: The cost of living here is normal. It is not artificially inflated. So you can come here and live decently without spending $4,000 a month living in a den with rats.
Katie Schoolov: And while California is tops when it comes to big tech, Texas has a rich history of tech businesses. Texas Instruments pioneered the development of silicon transistors in Dallas in the 1950s. In the 1980s, three Texas Instruments engineers broke away to form compacts and developed the first laptop-sized portable computers in Houston. Dell was founded by a University of Texas at Austin freshman in 1984. IBM has had a major presence in Austin since the 1960s, while Microsoft is a major employer in the Dallas area. Unknown: You think of California, it's the 40 niner, right, the 1840 niner, who came to California to get rich and go to the gold rush and the birth of Levi jeans and all that.
So in the northern part of California, there are technology companies, so it went from gold to silicon, while Texas is a different story. Texas is Texas, right? It is the word Caddo, and it means traveler or friend. And in Texas, we celebrate Six Flags of Texas. And I think the idea of ‚Äč‚ÄčTexas is very different. It's about uniting. It's about bringing different things into the conversation, adding your stuff to the mix, and seeing what emerges from Katie Schoolov: it. With a huge new presence from Apple, Tesla and Oracle, some wonder if Austin will be the next Silicon Valley.
Unknown: We want to learn from Silicon Valley. We want to take, you know, copy some of the best Silicon Valley stuff. We love great people moving here from Silicon Valley, but we don't want to be in Silicon Valley. People really love being in Austin, which has forced big tech companies to set up offices here. Katie Schoolov: Austin is also home to South by Southwest, which Goswami has been involved with since its inception as a tech festival. He graduated from Stanford and moved to Austin in 1995. To work for the technology company Trilogy, he also moved from Silicon Valley.
Unknown: We want people to become part of Austin, we want them to come and leave some of the California baggage in California. Katie Schoolov: Some say that a big difference for companies starting in Texas instead of California is in the financing models. Unknown: What's going on in Austin is a lot of boot. And then, oh, you've got something, let's add some backgrounds to it. But you have something that is showing itself, right? Whereas in California, they'll go fund something just on that idea. We have some VC here. We have some funds here. Are you competing with Silicon Valley?
No, not even close. But California Katie Schoolov: Had $65.6 billion in VC investment in 2019. By far the highest of any state, Texas came in fifth at $3.7 billion. Unknown: While there are some investors who would only invest in Silicon Valley, there were just more and more investors willing to do so. Other places. Katie Schoolov: Investors like Josh Bear say that funding a startup in Austin has gotten a lot easier. Unknown: I've been here over 20+ years. It's the best that there's been this huge influx of all these people, capital ideas, and that's making everything happen faster and easier. And I think COVID-19 really pushed everyone over the edge.
I set up a deck on Friday, and by Tuesday, we had the $5 million round done, and that was it in Texas. That would not have been possible. Seven years ago. Katie Schoolov: Last year, Lloyd Armbrust launched a PPE manufacturing company in an Austin suburb called Pflugerville. Produces up to 1.2 million masks a day, Unknown: he wouldn't have done it in California. There is simply no way for the regulations to border on the ridiculous. Katie Schoolov: The Pflugerville Economic Development Group offered her over $1,000 for every job she brought to the area. Austin is offering similar incentives, such as big property tax rebates on Samsung's proposed new chip factory.
Armbrust first moved to Austin in 2011, relocating a previous company he founded to the Bay Area. Unknown: Hiring was the number one reason we came here in 2011. There was only access to really smart people. And there wasn't that competition, you get on Facebook, but then Uber comes up to you and says, "Oh, I'll give you $100,000 more and shares." And it's very, very difficult to compete with that. Katie Schoolov: More than 200 companies have moved to Austin since 2017. And more than 70 of them are from California. SpaceX is expanding into South Texas, where it already has a launch site, but Elon Musk is increasing his presence in Austin as well.
Relocating his personal home from Los Angeles to Austin, the Tesla cybertruck will be built at Giga's new Austin factory. And the boring company is opening a large space next to the armrest. Unknown: Probably the funniest reason that I don't think a lot of people realize is because across the street is the private airport when you know someone is looking at Texas and says how do I get around? And I think having access to that private airport is really a great Katie Schoolov: deal. Getting around the vast sprawl of Texas, especially as more people move, means traffic is an issue.
Unknown: So you know a horrible I 35 is like a dumpster fire. A Katie Schoolov Toll Road ‚Äď With the highest speed limit in the country at five miles per hour, it offers an alternative to Austin's infamous i 35 traffic. And there's a $20 billion high-speed rail project in the final planning stages, it would amount to over 200 miles from Dallas to Houston in 90 minutes, Unknown: you can drive for 12 hours and you're still in Texas, like it's a great steak. Katie Schoolov: At 1.6 times the size of California, Texas is the second largest state after Alaska. And all that land is a huge draw for manufacturing sites.
Unknown: There's a lot of space like there's just farmer's fields waiting to be developed everywhere around me. Of course, that translates to cheaper rents and cheaper rates, we couldn't be successful in California with this business unit, the economics would be meaningless. Katie Schoolov: And all of this space leaves room for a lot of cultural variety beyond the Texas cowboy stereotype. Unknown: It's not like hey, come to Texas and you have to wear cowboy boots, and you have to have a cowboy hat and be super Texan, that's not the case. My neighbor was white. My other neighbor was a Vietnamese neighbor who was Indian, another neighbor if that was black and Spanish, and so on, and so on.
So here's a diversity that I think is hard to talk about in a way that a lot of people don't really think Texas is Katie Schoolov: colio noir grew up in Houston and now lives in Dallas, worked for the NRA from 2013 to 2019 But he didn't touch a gun until he was in his late twenties. In Texas, Unknown: I am left to enjoy my ability to exercise my right without unnecessary restrictions in a way that I cannot say in many other states. A good 75-80% of the weapons I own. Now, in Texas, you couldn't in California, Katie Schoolov: Whether it's individual rights or business-friendly regulations, the Texas government has a reputation for hands-off.
Unknown: For me, that was one of the biggest differences between Texas and California. It's the fact that we understand that we attach great importance to freedom and independence, Katie Schoolov: California handled the pandemic much more strictly than Texas. Just one example of the state's differences in addressing regulation. The Unknown Government: It is so oppressive that they shut down a massive manufacturing plant. During covid. Katie Schoolov: Elon Musk cited freedom from regulations as a reason for moving to Texas. Last May, Musk openly defied state lockdown orders by reopening his plant in Fremont, California. When the county pushed it to close again.
He threatened to leave California altogether. Nobody has been waiting for a long time. And I think they're taking it for granted that slightly less Covid-related regulations in Texas allowed businesses to stay open, but Texas has a higher fatality rate than California. Despite warnings from Biden officials. Governor Abbott lifted statewide mask requirements and business capacity limits on March 10. Austin did not immediately follow suit. As of today Unknown: Masks come off in Texas. The city says it will keep the masks in place for now. But then last night the State Ag threatened to sue the city if the city and county did not comply with the state's mandated lips.
Katie Schoolov: Texas your political climate also comes with lower taxes. Unknown: This is a California personal income tax form. I never want to see one of these in the great state of Texas Katie Schoolov: at 13.3%. California has the highest marginal income tax rate in the country. Texas is one of a handful of states with no income tax, Unknown: It doesn't matter which way you measure it. It is much cheaper to live your life and run your business in Texas than it is in California. Your taxes your cost of doing business. Your Overhead, Your Job, Tax Katie Schoolov: Foundation ranked Texas the 11th best state for business and its 2021 State Business Fiscal Climate Index.
California ranked 49th. Texas' cost of living is also a lot lower. Unknown: I'm out of California and people would consider me pretty wealthy. I'm sure I can't go to California and move my family there. It's just that I couldn't afford it. After living in San Diego for about seven years. We were hoping to have a bigger family and move to a bigger house, which in California is very difficult, if you want a place with good schools, Katie Schoolov: Red Alder moved to Austin from San Diego in 2015. While taxes a Property taxes are some of the highest in the nation, Alder still preferred the tax system in Texas.
Unknown: We went from 1.25% property tax to 1.7% and then got rid of income tax. So for us on the tax side, it was definitely a net gain moving to Texas, if you move to Texas, they charge the same property tax for everyone. But in California, there can be this huge disparity that I think is kind of a downer and, in my opinion, an inconceivable burden on young people and newcomers. Katie Schoolov: That alter was shocked by the high cost of utilities in Texas. , for instance. Unknown: So it was like $12,000 just for the connection fee. And on top of that I think our overall bill was like two I can't remember 20250 And that was just for the interior of our house.
Katie Schoolov: Alder moved his family to California in 2016. Unknown: He was ready to say goodbye to Texas. Katie Schoolov: But now they are preparing to move to Nevada. Unknown: My dream is to be able to see California from my front porch, but not necessarily, you know, to pay the high taxes or the high housing costs. Katie Schoolov: Although housing is still much cheaper in Texas than in California, the housing boompopulation is taking the Texas real estate market with it. Austin home sales in January, for example, were up nearly 24% and inventory was at an all-time low. Frisco, Texas, topped the Census Bureau's list as the nation's fastest-growing large city, with Texas cities occupying six of the top 15 spots.
While Irvine was the only California city to make the list. Over 43% of Frisco homeowners have lived in the same home for less than 10 years. Unknown: The market right now is crazy. I mean, I'm looking for places and they're going to sell them in two weeks. They are coming in and they are pushing people who have lived there for generations. In fact, it could happen at a higher rate. Because of the way the property tax system works, it almost has gentrification built into it. Katie Schoolov: Property taxes and taxes increase with home value. So the demand for homes increases taxes for current homeowners.
Unknown: Is it something like automatic gentrification that is built into the Texas real estate model? That is something good? I think ultimately yes. And the reason is that it generates wealth for everyone. The businesses that come here are paying much more than the minimum wage. And I think that's going to cheer everyone up. And they all keep talking. Austin is like Southern California. No, it's not. It's still Texas. It's nasty. It gets hot. It gets slimy, it's muggy. Katie Schoolov: We can't talk about Texas without mentioning the heat and humidity. Unknown: It's hot for three months straight.
And there is no expected reprieve. Katie Schoolov: The heat in Texas has caused terrible droughts and wildfires in the state, as well as in California. And while California has earthquakes, Texas has hurricanes. The deadliest natural disaster in United States history was a sudden hurricane in 1900 that struck Galveston, killing more than 8,000 people. In 2017, Hurricane Harvey claimed at least 68 lives and flooded more than 300,000 structures causing $125 billion in damage. And in February, a record-breaking winter storm killed at least 80 people and left 4.4 million residents without power and more than 7 million without clean water for days. The unknown Republicans - they've been in charge for a long time here.
They believe in small government, they believe in less regulation. And all is well until the entire state is left in the dark and you get $50 billion worth of property lost in business insurance losses. Katie Schoolov: While the rest of the country gets power from two national grids. Texas is the only state that is largely offline to avoid federal regulation. Some blame this independence for the failure. Unknown: We are stranded in terms of our overall network operation. The reason the network failed is because we have huge and peaking demand, thanks in part not only to the storm, but also because our population has increased so much.
And really, our infrastructure hasn't kept up. Katie Schoolov: In early March, big energy companies started filing for bankruptcy after Texas has a free market electric grid system that brought in billions. Unknown: When a company is looking at their critical infrastructure checklist to consider a move, Texas will definitely fall on that metric. And I think it will have an impact on a lot of decisions here going forward. Katie Schoolov: As the fallout from the February storm continues, some Democrats say it could be the catalyst that turns Texas blue. Unknown: I think it's not a question of if it's a question of when in Texas, all of our big cities are liberal, they vote Democrat.
Katie Schoolov: A catchphrase has even emerged from those who would rather not see political and cultural change in Texas. Unknown: So no California, my Texas, essentially saying, if you're going to come to Texas, come to Texas, we're not coming with just one product. Welcome everyone. However, you are leaving California for a reason. Yes. So you can come here because you would like to lower your income tax or lack thereof. But at the same time, if you continue to vote for the people who were like the people in California, who were instituting these high income taxes, you'll follow suit next year.
I think it will feel like the last 10 years compressed into one by the announcements of new people moving here and companies coming here and new things launching. Katie Schoolov: Well, the trend is an outright debate as to whether it will actually change Texas in the long run. Unknown: Everything Elon Musk is today is because of California. Like the first and second third star of him was PayPal all that was in California but instead of saying hello let's make California better and make California a really great place. It's like I'm leaving. So bring a transactional mindset. He doesn't bring a long-term mindset to Texas.
Right? It's just the place for him for now. There is a strong culture that needs to be respected in Texas because that is why Texas is the way it is. And why is it such a sought after place to live now? So don't try to uproot it just for spice. What brings a little of the culture that you brought from California. Just sprinkle it on there a bit and then leave Texas as is and enjoy it. Try to appreciate what Texas is all about and prepare for freedom
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