In the latest installment of our occasional conversations with newsmakers, economist Ray Perryman discusses the next session of the state legislature, the energy industry and home prices.
Business editor Bob Francis spoke with Perryman, president and CEO of The Perryman Group, on Thursday, Dec. 1, after the economist prepared to speak at the 30the annual city of North Richland Hills Business Appreciation Luncheon held at the NRH City Centre Grand Hall.
This conversation has been edited for length and clarity. For a longer version, please listen to the audio file attached to this article.
Bob Francis: Can you talk a bit about what you see happening in the Texas Legislature next year.
Perryman: I think there are a number of things that are important in the Legislature this year. No. 1, they have a lot of resources. I was with the comptroller a couple of days ago, we were talking about it. And they already have amassed $27 billion in funds, but it’s going to be a bigger number than that. This is unprecedented. So it’s a real opportunity to make the investment we need to make in education, in infrastructure, in broadband in particular, the kinds of things that will support long-term growth.
There’s a program called Chapter 313. It’s a program where basically it allows the school districts to participate in tax abatements for large businesses. And when you have something like a chip plant that’s costing $30 billion or something like that, the property tax on that is big enough, that can make the difference in it locating in Texas or somewhere else. Because we can show them the differences. That’s the one big disadvantage we have in economic development. And one of the advantages is our property taxes are very high. I was involved in passing Chapter 313 many years ago. The state’s economy just took off after that bill was passed. We need to do something similar to that, it can be a different structure, but we need to do something to help Texas remain competitive in that area.
Francis: You also mentioned interest rates. That’s had a big impact on the residential real estate business. How do you see that working out?
Perryman: It’s an unusual situation in that normally the interest rates are going up that’s obviously pushing some people out of the housing market, making some people buy smaller homes. That goes without saying, that’s the very nature of it.
But we still haven’t caught up on having the inventory of houses closer to the supply because of, again primarily in this area, because of all the people moving in. But what we’re seeing in this area right now is, where you’re seeing home prices drop a lot … in other places you’re just seeing them not increase quite as much in this area. We’ll go through a little correction here, what I call a garden variety not anything severe, as we work through this interest rate situation. But the bottom line is when you have a population that’s growing rapidly, as this population is growing you’re adding 150,000 people a year to an area, you’re going to need housing. And so I think long term the housing market will be quite good here.
Francis: You also mentioned energy. A lot of the drilling is taking place in West Texas. But a lot of the companies are based here locally, so it does have a big impact. Do you see that being sustainable, or do you think if things change between Russia and the Ukraine that might change things again?
Perryman: I think short term there’s a lot of things going on. There’s some policy things going on in Washington, there’s a lot of other things going on.
But basically if you look at our projections, the Energy Department’s projections, it doesn’t matter, anybody’s projections you look at, you’re going to have to have these petroleum markets in the future.
If it has to do with a climate issue, you’re going to have to capture the carbon matter, from getting it to wellhead all the way up to the end of it. We’re going to have to do a lot better job of not letting carbon into the atmosphere, but there’s going to be a huge demand and we’re going to have to amp it up going forward. And all of that is going to be supported by oil and gas.
The Permian Basin is the biggest to us, and maybe the biggest in the world but the Eagle Ford shale, the Appalachian, the Bakken, then the Barnett shale here in this area are going to be back active again. And we’re going to need to produce and develop all of these resources responsibly going forward.
Francis: You mentioned property tax. That seems to be a big focus of the lieutenant governor. What do you see happening there?
Perryman: With this much money in the latest venture I’m sure they’re going to do some things to help reduce property taxes. But what he’s talking about right now is a bigger homestead extension, there’s other ways you can do it. But property taxes are going to be a major topic of conversation with the legislature.
Bob Francis is business editor for the Fort Worth Report. Contact him at bob.francis@fortworthreport.org. At the Fort Worth Report, news decisions are made independently of our board members and financial supporters. Read more about our editorial independence policy here.
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