The metros at night - are big and bright

The metros at night - are big and bright,
Deep in the heart of Texas
The downtown cores - skyward sore
Deep in the heart of Texas

The glowing towns - shine like crowns
Deep in the heart of Texas
Reminds of - the stars above
Deep in the heart of Texas

Urban cowboys roam - their ranch-style homes
Deep in the heart of Texas
Commuters rush - to avoid traffic's crush
Deep in the heart of Texas

The economy booms - when oil price zooms
Deep in the heart of Texas
Roughnecks bawl when prices fall - and bawl and bawl
Deep in the heart of Texas

(adapted by Mark Druskoff)



Image Description: One of the Expedition 36 crew members aboard the International Space Station, some 240 miles above Earth, used a 50mm lens to record this oblique nighttime image of a large part of the nation's second largest state in area, including the four largest metropolitan areas in population. The extent of the metropolitan areas is easily visible at night due to city and highway lights. The largest metro area, Dallas-Fort Worth, often referred to informally as the Metroplex, is the heavily cloud-covered area at the top center of the photo. Neighboring Oklahoma, on the north side of the Red River, less than 100 miles to the north of the Metroplex, appears to be experiencing thunderstorms. The Houston metropolitan area, including the coastal city of Galveston, is at lower right. To the east near the Texas border with Louisiana, the metropolitan area of Beaumont-Port Arthur appears as a smaller blotch of light, also hugging the coast of the Texas Gulf. Moving inland to the left side of the picture one can delineate the San Antonio metro area. The capital city of Austin can be seen to the northeast of San Antonio. This and hundreds of thousands of other Earth photos taken by astronauts and cosmonauts over the past 50 years are available on http://eol.jsc.nasa.gov

The downside to industry clustering

During boom times, industry clusters can provide a rising tide that lifts all boats. But when the good times end, there are equal and opposite consequences. 

Today, Fitch released an analysis of the impact of the oil and gas downturn on the finances of local US governments, highlighting the impact on Houston.

Below is a copy of the text: 

Fitch: Oil Price Effect on US Locals Will Vary 

The recent decline in oil prices has raised the pressure on certain cities, counties and single-purpose districts in oil-producing states, Fitch Ratings says. In our view, some will be able to raise taxes (and other revenue sources), cut spending and use reserves. Others have sufficient size and economic diversity to weather the economic stresses. All will be affected to varying degrees by the decline. West Texas Intermediate (WTI) crude oil fell below $40 per barrel in trading yesterday for the first time since 2009.

“How Will Local Oil Patch Governments Fare?”

Our recent review of historical financial and economic data from selected Fitch-rated local governments since the early 1980s shows a high correlation between energy prices and financial data. We considered total tax revenue, GDP, unemployment and home prices. For example, sales tax collections in Texas fell by 1.4% in June 2015 from the previous June due largely to a weaker energy industry, ending a more than five-year streak of monthly gains.

We believe cities like Houston are facing some risk due to the decline in oil. Most major regional and multinational energy companies have offices in the Houston area, exposing it to employment pressures. Houston has limited ability to raise property taxes to compensate for revenue losses, as Proposition 1 limits tax revenue increases to the lesser of 4.5% or the combined percentage increases in population and consumer inflation. However, Houston's job diversity may mitigate some of this risk. Roughly 30,000 workers there are employed by hundreds of refining plants in the area, which benefit from lower oil prices.

Terrebonne Parish, LA also serves as headquarters for some offshore oil and gas companies and faces economic-related risks. The recent decline in oil prices will likely affect local employment, sales tax collections and home prices. Any related state funding decline could compound the impact, as cities and parishes in Louisiana receive a portion of state severance taxes and royalties. For Terrebonne Parish, these two sources total $5.9 million in the fiscal 2015 budget, or roughly 25% of general fund revenues. And, at nearly $41 million, sales taxes represented more than 35% of budgeted parish governmental revenues in fiscal 2015. Property tax millage rates can be increased to counter tax base losses, but any hike in a local sales tax rate must be approved by voters.

In our view, two Fitch-rated local issuers are at the highest risk: Culberson County Hospital District and Zapata County, TX, which are in remote locations with limited economies. To read more about these issuers and our review of historical financial and economic data for other issuers, see Fitch's Aug. 17 special report on "How Will Local Oil Patch Governments Fare?"(www.fitchratings.com)