The Economic Impact of Development in San Antonio: 2010

1. The Economic Impact of Development in San Antonio: 2010 Responsible Growth Alliance Presented by TXP | October 24, 2011

2. Economic Overview Tale of two economies: Global growth slows, as hot spots increase Corporate profits are record levels – overseas expansion, reduced costs (inputs, hiring), slow domestic investment = $1.9 trillion in cash Unemployment remains stubbornly high – no real sign that anything will change in the near term – weak consumer spending, no hiring, no wage growth Public sector also feeling severe heat – no economic growth, no tax increases = sharp cuts Conventional wisdom is that debt has to yield inflation over time – not for the foreseeable future, but logically down the road. Energy costs are pushing up current figures Debt deal kicks the can down the road. S&P downgrade impact mostly psychological in the near term – could raise borrowing costs over time U.S. appears to remain the “one-eyed man in the kingdom of the blind.” Wake-up call for the equity markets. Bottom line: sideways through the 2012 elections. Macro Situation

3. Economic Overview Global Situation Sources: IMF; TXP

4. Economic Overview GDP Growth (SAAR) Sources: Bureau of Economic Analysis; TXP

5. Economic Overview National Employment Growth (12-Month Change) 6.5 million jobs lost in last 4 years Sources: Bureau of Labor Statistics; TXP

6. Economic Overview Consumer Price Index (12-Month Change) Sources: Bureau of Labor Statistics; TXP

7. Economic Overview National Industrial Capacity Utilization Sources: Federal Reserve Bank; Calculated Risk blog

8. Economic Overview Small Business Optimism Index Sources: Federal Reserve Bank; Calculated Risk blog

9. Economic Overview National Housing Starts Sources: Federal Reserve Bank; Calculated Risk blog

10. Economic Overview Average Home Sales Price ($000s) Sources: National Association of Realtors; TXP

11. Macro Conclusions • GDP will continue be positive next year, but real “recovery” won’t happen until the following are resolved. • Solid job creation will follow demand growth that isn’t policy/debt driven – can’t happen without credit resolution • Current uptick in prices (energy and food showing signs of accelerating), but interest rates/monetary policy unlikely to change significantly until recovery is firmly in place. • Global economic trends and foreign conflicts will shape outlook – surprises likely to be negative • Longer-Term Outlook (Next Five Years) • Best Case – back to traditional model: global recovery leads to export-driven growth (lower dollar and new tech/products) that allows job creation and creates overseas markets for investment. Value of dollar is a plus. • Worst Case – some version of stagflation: debt yields inflation, causing interest rates to rise sharply and growth to be stifled.

12. San Antonio Economy Overview • Signs of life in the private sector. • 1,600 net new jobs in the manufacturing sector for the 12 months from Aug-10 through Aug-11; 10,200 more in education & healthcare and 4,100 in leisure & hospitality • Tourism remains a positive element - 2011 likely to be a record year for hotel revenue, as growing supply and occupancy offset static rates. • Consumer spending shows signs of improvement, but concerns about prices and income remain a constraint. • Multi-family looks to be first sector coming out of real estate recession. Overcapacity has been addressed on development side, but values have yet to recover, especially for commercial space • Population growth stronger than expected • Bodes well for housing markets and overall regional economies

13. San Antonio Indicators Total MSA Employment Growth 12-Month Change) Sources: Bureau of Labor Statistics; TXP

14. San Antonio Indicators City of San Antonio Sales Tax Growth Sources: Texas Comptroller; TXP

15. San Antonio Development Indicators Median Home Sales Price ($000s)

16. San Antonio Development Indicators Annual MSA Home Sales

17. San Antonio Development Indicators Annual MSA Single Family Building Permits

18. San Antonio Development Indicators Annual MSA Construction Sector Employment (000s)

19. San Antonio Development Indicators Annual MSA Months of Housing Inventory

20. San Antonio Development Impact Overview • Update based on annual data from 2010 for following sectors. • NAICS 236 – Construction of Buildings • NAICS 237 – Heavy & Civil Engineering Construction • NAICS 238 – Specialty Trade Contractors • NAICS 531 – Real Estate • Recession and construction slowdown shows up in the 2010 data • San Antonio still looks better than most of rest of nation • Impact well below previous analysis

21. San Antonio Development Indicators MSA 2010 Direct Footprint

22. San Antonio Development Indicators Direct Footprint by City Council District

23. San Antonio Development MSA 2010 Total Economic Impact

24. San Antonio Development MSA 2010 Total Local Tax Revenue Impact

25. San Antonio Development Impact Conclusions • Impact remains substantial. • Direct Development Jobs: 52,286 (2010) • Direct Manufacturing Jobs: 43,696 (2010) • Recession and real estate bust take their toll – total MSA economic activity drops $3.7 billion; total jobs fall from 142.6 thousand to 119.7 thousand. • Jobs continue to be well spread throughout the City – every Council district has an average of about 300 firms and 3,500 workers directly employed by development sector. • Tax revenues also drop, although City only off by about $10 million (all sources). • An improving economy should combine with attractive prices, low interest rates, and external sources of demand (Mexico) to help overcome tougher underwriting standards and consumer hesitation.