Month: July 2021

The Return of the Company Town

The Return of the Company Town?

  • Company towns were popular in the late 1800s and early 1900s. But because of problems associated with them, they fell out of favor.
  • As a way to help with affordable housing, some Silicon Valley companies are planning to build housing for their employees.
  • While this could be a great benefit, they likely want to avoid the mistakes of company towns in the past.

Two weeks ago, I wrote briefly about Tesla planning to build a subdivision in conjunction with a local developer that will largely be powered through Tesla solar panels. It was an interesting, exciting idea and I used it to talk about solar power and whether it makes sense for property owners.

But as I was reading the article, another thought popped into my head. And I want to come back to that thought this week. The neighborhood that Tesla is planning to build is near the new Tesla plant. It does not appear to be exclusively for Tesla employees but because it is so close to the plant, it reminded me of the old company towns that used to exist. And that reminded me that a couple of years ago, some of the big Silicon Valley companies were looking into building company towns as a way to provide affordable housing for their employees.

So that’s what we are going to talk about this week – the company town. Is it a way to provide affordable housing? Is it a good idea? Would Bukowski Law Firm employees want to live in one? Lets see.

The History of the Company Town

If you are not familiar with company towns, they were popular in the late 1800s and early 1900s. There were companies that had a lot of employees – sometimes out in the middle of nowhere, not near any other housing. And often these were very low paid employees. So, for example, Pullman, Illinois was built around the Pullman Palace Car Co. or Hershey, Pennsylvania had candy factories where they employed a lot of people.

As a way to solve their housing problems, the companies built towns where the employees could live. Generally all of the buildings and shops were owned by the company and employees could lease a house to live in. They had shops, schools, etc.

These fell out of favor, however, when they became problematic. With nowhere else to go, the employees were forced to rent from the company and shop at the stores. And sometimes the rent and shop prices became exorbitant. As a result, the employees could go into great debt to the company for whom they worked. So not only would an employee have to live in the town if they wanted to work at the company, they often would run up a debt to the company that would have to be paid off before they could leave. It created a sort of indentured servant status for many employees and, as a result, fell out of favor.

Recent Examples

A couple of years ago, Facebook, Google, and Amazon were facing terrible housing issues in Silicon Valley. Their employees were having a difficult time finding reasonably affordable housing to live in near the work campuses.

As a way to potentially solve this problem, each of the companies announced they were going to build some (relatively) affordable housing for their employees.

Facebook is still in the planning stages of building 1700 units near its Menlo Park, California headquarters. Google, meanwhile, through its parent company Alphabet, was planning to build 300 prefab houses for its employees. Those plans expanded in 2019 when it invested $1 billion to build 15,000 modular homes in the next 10 years. Amazon, meanwhile, has pledged $2 billion to build affordable housing in three different cities where it has a large number of employees.

We have talked a lot in this blog about the nationwide affordable housing crisis. So I think these companies should be applauded for trying to find creative solutions to the problem for their employees. These do not appear to be traditional company towns – they appear to just be the housing component.

And yet, its hard not to be a little leery of company sponsored/owned/built housing. The devil is always in the details, but will these be leases for employees? Or will they be owned? And if they leave Facebook/Google/Amazon, will they have to leave their homes? That is potentially a very big problem and could tie the employees to their jobs beyond when they would normally want to stay.

Obviously this is not a reason for these companies to stop building this housing. Its just we need to be aware of some of the problems that arose with company towns in the past and design these to avoid those issues.

And if anyone has a good site for the Bukowski Law Firm Company Condos, please let me know.

The True Cost of a Microchip

The True Cost of a Microchip

  • Austin and Williamson County are two of four national finalists for a large chipmaking plant that Samsung is going to build.
  • Samsung has asked for significant tax abatements from the locales to build in their area.
  • At some point, are the size of the abatements so big that the deal does not make sense for the local area?

Samsung is back in the news this week. The Travis County Commissioners are soon to discuss the application for tax abatement from Samsung. And a neighboring county is competing with Travis to house the chipmaker’s new factory. While we have talked about this before, I figured it would be a good time to revisit the issue.

So what’s the big deal that we need TWO articles about Samsung? Well first, another company is considering building another factory in Central Texas. That’s great news. And just to be clear again – it is fantastic news. We want them to build here and bring jobs. So many good things happen when companies build factories and bring jobs to an area.

But, like all companies do now, Samsung has picked a few areas where it may build and is making those areas compete with each other for Samsung’s plant. It wants tax breaks. And the area that gives it the biggest tax breaks may just win the factory.

So the question I keep wondering is – at some point are those tax breaks not worth it anymore? Is it too much for an area to give? If you’ve read this blog at all, I bet you know my answer already (hint: I’m a lawyer).

What is Samsung Building

In case you missed the first article or do not remember, Samsung is building a $17 billion chipmaking plant … somewhere. With the plant will come up to 1800 new jobs. As of right now, it appears that the four finalists for the plant are:

· Austin

· Taylor (Williamson County)

· Phoenix

· Upstate New York

We knew that Austin was going to be one of the finalists (that’s what I wrote about a few months ago) but Taylor is a new addition. That information was just made public this week.

Obviously this new plant would be a boon to whoever gets it. And, with the chip shortage throughout the world, it is much needed. There’s little doubt this would be a fantastic addition to any area’s workforce.

The Cost of the Jobs

As I wrote above, Samsung is demanding tax breaks to build the plant in a town. My last article went in detail how Samsung wants tax breaks that may total over $1 billion to build in Travis County. On July 20, the Travis County Commissioners are going to discuss whether to move forward with a tax abatement proposal to lure Samsung to the County.

It now appears that the Taylor school district is considering a proposal that would grant Samsung $314 million in tax breaks over 10 years. And undoubtedly Williamson County will have to chip in for more incentives.

Samsung is actively negotiating with all the proposed sites to determine who will get the plant. So while its unclear what Phoenix and New York are offering, suffice it to say they are coming up with significant packages themselves.

Is the Cost Worth It?

If Samsung chooses one of the Central Texas sites, that will be great for our local economy. We want these companies to come to Texas. Jobs are good. And its difficult to impossible right now to get these companies without competing. But the question I keep coming back to, though, is – is it worth it? Is this a good idea for cities to compete like this?

A number of studies have been done to show that these are not good deals for cities. Look at Samsung and Travis County, for example. If the numbers are correct, Samsung will get $555,555 in tax breaks for every job it eventually brings to the County. That is a lot of money that the County will not have to build infrastructure for the new people that move here because of Samsung.

Does that mean that Travis County definitely should not do it? Of course not. It may be worth it. For example, there may be more than just the 1800 jobs that Samsung brings. There are second level jobs that may come also. But it just seems to me like we automatically accept that giving tax incentives to get a big Samsung plant (for example) is a great idea. And I just want to know more about the financial impacts for the City and County.

So what’s the answer? Should Texas cities and counties continue to give large tax breaks to companies to build plants and factories and offices here?

Maybe.

(You know that was coming, right?)

Should We Harness the Power of the Sun

Should We Harness the Power of the Sun?

  • The cost of renewable energies – including solar – have decreased dramatically over the past decade.
  • For property owners, the decision whether to add solar panels is a balancing of costs and savings.
  • Part of the savings includes government subsidies – which happen at the local, state, and federal level.

Its hot all over the country right now. While we are used to it here in Texas, other parts of the country are experiencing a heat wave they are not used to at all. These hot days made me think more about solar power and whether these changes made it more viable and affordable.

While I was having these thoughts, I read about Tesla’s desire to build a totally sustainable neighborhood here in Central Texas. Tesla is partnering with some local folks to build the first Tesla Solar neighborhood and the nation’s most sustainable residential community, according to a news release. The goal is to create an energy-neutral, sustainable community and a model for the design and construction of sustainable large-scale housing projects around the world.

This sounds really cool and I’m excited to see companies working to develop sustainable buildings. But there are so many questions I have that I am just ignorant about – especially when it comes to solar. What is the state of solar power? Does it work? Is it affordable? Those are the questions I wanted to ask in this week’s blog entry.

The Current Status of Solar Power

I want to start this off by admitting that I am completely uneducated on solar power. My impressions of it are that a) its clean but b) it is expensive and often unaffordable without government incentives. So those are the biases I came with as I began to examine this issue.

This article from Popular Science pretty quickly challenged belief b) above. According to the article, the cost of renewable energy has plummeted in the last decade. Solar energy specifically has gone from the most expensive option for building a new energy development to the least expensive. This is largely thanks to investment in technology that both the government and private companies have made.

Cost for Individual Consumers

But while the cost of solar has apparently plummeted, what does that mean for the individual consumer? If you own a house or a commercial building, does it make sense to install solar panels?

Turns out the answer to that is maybe. (They must have a good lawyer). To get solar panels installed on a typical house usually costs between $15,000-$20,000. And once you get the solar panels installed, you can connect to your electricity grid and get a credit from your local utility provider. So the question you have to make is – how much offset do you need to recoup the cost of the installation in a reasonable time?

Electricity rates vary greatly depending on where you are. The national average appears to be about 13 cents per kilowatt-hour. So as a property owner, you have to determine how much energy you use, how much you will get from the solar panels you install, and how much savings that will provide based on your local energy cost. That will tell you how long your payback period is – and if the installation is worth it.

Incentives are Available

But there is one more variable you also have to consider – government incentives. Depending on where you live, your local or state government may provide incentives to install solar panels on your property.

In addition to that, there are federal government incentives that may be available. Currently, if you install a solar power system by December 2023 you may be eligible for up to a 26% tax rebate. This is a dollar for dollar tax credit up to 26% of the cost of the installation. So that is another factor that can go into your financial analysis on whether it makes sense to install solar panels.

So after all of this research – what’s the answer? Is solar power the future? Should a property owner install panels? Well … maybe.

A (Very) Brief History of American Real Estate Law

A (Very) Brief History of American Real Estate Law

  • Americans have always had a desire to own real property as a gateway to increased wealth.
  • The British enacted a debt recovery act in the colonies that formed the basis of creditor rights acts still in existence today.
  • Those two interests have formed the backbone of state property law throughout the US.

Happy Fourth of July. I hope everyone had a great long weekend with friends and family. And that you were able to celebrate the great fortune of being able to live in this wonderful country. We most certainly have our faults here in the US, but even with those, it is still a great place.

The Fourth of July is my favorite holiday. I love the warm weather and the friends and the burgers and fireworks and everything associated with it – though my dog may disagree. So with that in mind, I decided to celebrate the Fourth in the most boring way possible – by researching and writing about the history of American property law. So that’s what this week’s entry is all about.

How Real Property Law Developed

It should come as no surprise, but United States property law developed directly from the British property law. As a result, owning land was seen as a god given right for some people in the new area. But the British also wanted to be able to recover on debts in the new land. As a result, in the mid 1700s, Parliament enacted a debt recovery act that shielded little of the colonists land from the debtors. This was a very significant act and lead to the creation of a lot of real property law in the US.

But unlike in Britain, land was very plentiful in the US. And despite the debt recover act, many of the founders saw pushing westward as a great benefit for the US. As a result, Americans saw land ownership as route to prosperity. Indeed, in 1774, Thomas Jefferson wrote –

“It is time for us to lay this matter before his majesty, and to declare that he has no right to grant lands of himself. From the nature and purpose of civil institutions, all the lands within the limits which any particular society has circumscribed around itself are assumed by that society, and subject to their allotment only. This may be done by themselves assembled collectively, or by their legislature, to whom they have delegated sovereign authority; and if they are allotted in either of these ways, each individual may appropriate to himself such lands as he finds vacant, and occupancy will give him a title.”

Post-Revolution Real Property Ownership

Once the revolution happened and the USA became its own independent country, property rights were generally left to the states to figure out. But there was still this core belief among residents that property ownership was a god given right and a way to prosperity. In addition, at the time, all states but one required property ownership to be able to vote. As a result, many early Americans owned real property.

States, though, also knew they wanted to attract creditors to invest in their area. For those investors to feel comfortable investing in these new states, they wanted to know that their investment would be protected. As a result, most states enacted some sort of debt recovery act based on the British form that was enacted in the colonies. These acts were pretty strict back then – not much real property could be protected from the creditors.

This is really the basis of how property law has developed in the US. These two competing interests – the desire for property ownership and creditor protection – has driven much of the real property law development in the states.

And it continues to this day. Americans still want to own real property. Its still seen as a path to wealth. And creditors still want to be protected. So while property owners are now usually able to exempt a homestead, for example, from the creditors grasp, creditors can go after other types of property. These two interests – property ownership and creditors rights – have been the backbone of real property law development throughout the country.