OKC's Rebirth; Take Two

[Hondo1]

While driving just about anywhere around town, it's fascinating to observe all of the out-of-state tags on cars that presumably indicate new residents who have moved to OKC. I'm reminded of a period during the oil boom in the early 80s when similar dynamics were present. I caught a broadcast on the CBS evening news back then that included a story about OKC's resurgence. The narrative was that a city (state) people once fled in droves during the dust bowl was experiencing a huge rebirth. Film rolled showing buildings rising, homes being built and a lot cars with out-of-state tags. And some "prestigious" magazine called "W" said OKC was "the new [in] city." This was around 1982. Well we all know how that turned out. Our current "rebirth" gives me hope that this time it will take, provided our local economy holds out. I would be curious to know your views of what makes our current "boom" different from the "oil boom years" and do you think it will last?

[dmoor82]

Rondo1,I have noticed a BIG influx of out of state tags also more than ever,what gives?Maybe a population BOOM is on The horizon!

[Steve]

Hondo, I'm not sure how old you are, but I was in high school and then college when this transition took place. And indeed I was asking up until 2008 "gee, it feels like 1982 - but is 1983 right around the corner?"
So let's break this down. Why did I stop saying it felt like 1982 after the crash of 2008? And why did I quit asking if 1983 was next at the same time?
Looking back at 1982, the activity we saw then was irrational. Banks were being reckless. People were spending money on crazy things, not being sensible. It was, to be blunt, "false growth."
False growth - that's apparently what we saw the past decade throughout the country. When we had this false growth in Oklahoma, it brought down our banks. Lessons were learned. When many peers left the state in the late 1980s, I stayed around. I remember the bumper stickers back then -something like "Dear Lord, one more boom. I promise not to f-ck it up."
Those promises, overall, have been kept. We're seeing a lot of banks failing nationwide due to another era of "false growth." Oklahoma's banks have fared well (though there are a couple hurting for getting involved in craziness in other states). Our economy is continuing to do relatively well despite the national undercurrents. At the risk of sounding like a chamber guy, by most appearances there is real growth going on in Oklahoma City with much of it due to MAPS and self investment. Will it last? I don't know.

[okclee]

Steve, that is a great post and I agree 100%.

The people of Oklahoma learned a lesson that other parts of the country knew nothing about until now.

[OSUMom]

Our banks are doing much better then banks other places because we already lost all the banks doing crazy unsafe stuff. And no one came to bail us out. We learned a hard lesson and are now much better for it. IMHO.

[adaniel]

I wasn't even alive in the early 1980's but working in the energy industry I have heard a LOT of stories from old timers. It seems that it like the real estate boom of the previous decade it was more a banking bubble than an energy bubble. People would just walk into a bank, say they have an interest in an oil well, and BOOM you have a $1 million loan. A lot of this madness centered around Juniors off NW Expy. I knew an oil and gas lawyer who used to take clients there and shower them with Don Perrion and give out a Maserati yearly to one of his clients. I also think he had a nastly little cocaine habit. But today he is much more humble person. I would love to hear more stories from that time period. It seemed like a fun and wild time, although the hangover from these things is always pretty harsh. I'm glad OKC has moved on from it.

Here's a question: if banks hadn't got slapped so hard with souring oil and gas loans from the 1980's do you think they would have been less reluctant to participate in the crazy real estate boom?

[Steve]

Yes, the lessons of the 1980s were harsh and memorable.
Adaniel, a lot of what you've been told is correct.
Here's just a bit of color I observed back then:
- Signature loans totaling in the millions for oil rigs with people who had no business being in oil & gas
- Extravagant company parties where 10-speed bikes were given to each employee's kid, followed by a private jet trip to Dallas for desert and drinks
- Way too many expensive watches, way too many sports cars, way too much speculative real estate investment

To learn more about the early 1980s and the failure of Penn Square Bank, I strongly recommend "Funny Money," a great book that should have been turned into a movie.

[Chicken In The Rough]

I remember reading an article somewhere back then that reported OKC's Rolls Royce dealership (Bob Moore, I think) was the top selling dealership in the world in terms of number of units sold.

[Bunty]

At the risk of sounding like a chamber guy, by most appearances there is real growth going on in Oklahoma City with much of it due to MAPS and self investment. Will it last? I don't know.

And many Republicans will want credit given to the small cuts to the state income tax that have been going in most recent years. If Fallin wins, then they will be demanding that the state income tax be eliminated entirely, in order to help economic growth.

[Hondo1]

A funny aside. During the "bust" around '85 - '86, I saw bumper stickers that said "pray for $15 dollars a barrel for oil."

[bluedogok]

To learn more about the early 1980s and the failure of Penn Square Bank, I strongly recommend "Funny Money," a great book that should have been turned into a movie.

"Funny Money" is a pretty quick read, "Belly Up" goes into a bit more detail about the Penn Square Bank failure. I graduated high school in 1982 so I saw it all happening right when I was starting to enter "the real world".

I remember reading an article somewhere back then that reported OKC's Rolls Royce dealership (Bob Moore, I think) was the top selling dealership in the world in terms of number of units sold.

Jackie Cooper at May & Britton was the Rolls/Bentley dealer and got Ferrari after Bolen dropped it, Bolen might have had Rolls/Bentley before Jackie Cooper.

Fretwells across from Northwest Classen High School was the Jaguar/Volvo dealer and had the British Leyland lines (MG/Triumph/Rover) until they folded in the mid-80's. I did some part time work for the Lotus dealer (John Hoke) in the mid-80's at 8th & Broadway.

[ljbab728]

[QUOTE=adaniel;369365] I knew an oil and gas lawyer who used to take clients there and shower them with Don Perrion and give out a Maserati yearly to one of his clients. I also think he had a nastly little cocaine habit./QUOTE]

adaniel, I think they probably bought more Dom Perignon than Don Perrion. I know that's not a signficant fact but I just couldn't resist. Sorry, LOL.

[poe]

I used to make my parents drive by Jackie Cooper just to see the Rolls-Royces on the lot. I remember in '88 or '89, one sales guy told us the first red Bentley in North America was sent to OKC.

Also, during the 80s oil boom, Midland, Texas, had a Rolls-Royce dealership with a high sales volume, much like Jackie Cooper. The building now houses a tortilla factory.

[flintysooner]

There are still a lot of us who lived through that time in Oklahoma and take to heart the lessons learned. On the other hand I do seem to notice an awful lot of folks saying and doing things that are way too reminiscent of the excesses of that period fir my comfort.

[Platemaker]

OR - you have a situation where all these Californians (and others) move here and start buying the most expensive properties in OKC because the think "how affordable" !

that's what happened to Reno, Nevada.... lots of nice winter homes for Tahoe bought up at prices closer to California standards and then forced all the locals to live in flea bag motels.

[progressiveboy]

There are still a lot of us who lived through that time in Oklahoma and take to heart the lessons learned. On the other hand I do seem to notice an awful lot of folks saying and doing things that are way too reminiscent of the excesses of that period fir my comfort.

Well like the saying goes, "History "repeats" itself.......time and time again. It could very well happen again in Oklahoma, and OKC for that matter. What would happen if CHK and Devon had massive layoffs due to oil and gas prices plummeting severely? Back in the 80's oil companies spent and spent like there was no tommorrow and look what happened to Oklahoma. This incident nearly bankrupted the State. With General Motors gone, Firestone gone, Lucent Technologies gone there has not been any if few companies that have taken their place. I hope I am wrong about this, but people in OKC better think long and hard because I could see it happening all over again.

[Steve]

progressiveboy, you bring up some good questions - is OKC more or less diversified in employment than it was 30 years ago?

[ljbab728]

OR - you have a situation where all these Californians (and others) move here and start buying the most expensive properties in OKC because the think "how affordable" !

that's what happened to Reno, Nevada.... lots of nice winter homes for Tahoe bought up at prices closer to California standards and then forced all the locals to live in flea bag motels.

There very well may be people moving in from out of state who can afford some of our more expensive housing. If so, I have seen absolutely no indication that's it's causing our housing market prices to become inflated or having any affect on the market for locals.

[Spartan]

It comes down to this: OKC is NOT diversified.

[progressiveboy]

It comes down to this: OKC is NOT diversified.

Spartan, what is your opinion as to why OKC is not a diversified city? Do you feel like it is the citizens fault? The city founders lack of visionary thinking? I do believe that MAPS has helped shape OKC into a better city in terms of "quality of life", however, I feel that OKC has not done a very diligent effort in attracting Fortune 500 and 1000 companies. Do you feel alot has to do with the State leaders? How about the Chamber of Commerce? I would be interested in your two cents as to"why" OKC has not become a "truly" diversified city? What are some of the compelling facts that seems to hold OKC back and make a significant rebirth?

[flintysooner]

Actually I think the metro economy is more diversified than it was in 1982 and prior. Didn't research it at all but that's my sense. Really don't think the number of "big" companies is much changed and they still attract most of the interest and attention.

[bluedogok]

Having been at the age of entering the workforce in the previous bust I agree with flintysooner, the economy in OKC is more diversified now than it was 30 years ago when almost everything was tied to energy in some way. I know that it is not as diversified as most would like but it still has more diversity than in the past. I know here in Austin they always talk about diversifying the economic base, they thought they did when they went heavy into the tech industry but then it had its own bust in the late 90's, Denver had the telecom bust hit them at the same time, diversification is much easier said than done.

As far as getting the large companies to relocate, I think that is a failed strategy for a market like OKC because all you attract are the corporate whores looking for a payday and will move onto the next location offering a better pay day, I think it is better to incubate local companies and maybe attract a few in similar industries to create dynamic growth. I know one of the companies that we deal with (Boxx Technologies) relocated about 12 years ago to Austin from the Phoenix area mainly because of the established supplier network that Dell had created here, not because of large state/local incentives. Now Boxx designs and build everything in Austin where Dell only builds servers here having closed many plants in Austin, Nashville and North Carolina in moving almost all production to places like Singapore and China. The larger the companies seem to get the less actual local presence they have because everyone will offer them more to move significant portions of their business elsewhere. The semiconductor industry is a fraction of what it once was as most of it has moved overseas, Samsung is the only new one built in the last ten years while there are a bunch of former Motorola, AMD, IBM and other plants sitting vacant.

Austin has found that out recently with some of the tech companies that relocated here under incentives when they were in incubation periods and have since relocated due to larger incentives from other states. Sematech has a very small fraction of the employees they once had here since the State of New York has thrown tons of money at them to relocate to Albany. Using incentives for relocations is always a huge gamble.

[semisimple]

The semiconductor industry is a fraction of what it once was as most of it has moved overseas, Samsung is the only new one built in the last ten years while there are a bunch of former Motorola, AMD, IBM and other plants sitting vacant.

That's a very misleading statement--the semiconductor manufacturing industry is a fraction of what it once was in the U.S., but engineering and design has ramped up. Large tech companies like Intel do a lot of their R&D domestically while concentrating manufacturing operations overseas in fabs that are now heavily automated.

Over the last ten years there have been cuts in manufacturing but overall Austin has gained jobs in the industry due to growth in engineering, with much of the growth coming from smaller companies. Of course some plants sit empty due to the changing nature of the work, but conversely the industry probably occupies much more office space in town than it used to.

[bluedogok]

That's a very misleading statement--the semiconductor manufacturing industry is a fraction of what it once was in the U.S., but engineering and design has ramped up. Large tech companies like Intel do a lot of their R&D domestically while concentrating manufacturing operations overseas in fabs that are now heavily automated.

Over the last ten years there have been cuts in manufacturing but overall Austin has gained jobs in the industry due to growth in engineering, with much of the growth coming from smaller companies. Of course some plants sit empty due to the changing nature of the work, but conversely the industry probably occupies much more office space in town than it used to.

Sematech has a small engineering office left here, the bulk of their operations are now in Albany. Just because some engineering happens here doesn't mean the employment or total income levels come anywhere close to what those levels were in the days of manufacturing, if you believe they employ more people than the engineering manufacturing combined in days past then you are kidding yourself. As far as the office space issue, that is my business, we design office space for tech companies all the time. When you consider most of the semiconductor companies had their operations combined in the plants their office space was "off the record" on the public reporting. Engineering departments are now renting space since their manufacturing plants are shut down and for sale those show up on the office space reports. So while according to office space rolls that may technically be true it is far from reality.

All over town there are semiconductor plants sitting vacant that were mostly built with government incentives, that was my main point. Just because you lure someone from outside doesn't mean they have any loyalty to any particular location. The partially finished Intel building in downtown that was imploded a couple of years ago was a prime example of that.

More of the engineering has also been going offshore when in the past almost all of the engineering was done in the US, my wife and I have the unemployed friends in both sectors to prove it.

[flintysooner]

As far as getting the large companies to relocate, I think that is a failed strategy for a market like OKC because all you attract are the corporate whores looking for a payday and will move onto the next location offering a better pay day, I think it is better to incubate local companies and maybe attract a few in similar industries to create dynamic growth.

I think that is very true. I would like to see more done for local companies although I do understand how difficult it is to actually implement.