Greetings, and welcome back to ZacCast, your official podcast for local government nerdery. It's 2025, and boy, do we have a humdinger of a show for you, Patrick. Are you excited about this one?

We have so many topics. I'm excited. Uh, I'm surprised that you're wearing your Texas shirt after, you know, just a horrible loss. I mean, what a way to lose on the, you know, fumble six, taking it back to the house.

You know what?

You know.

Horns always go up. And here's what I'll do-

Unless you're in Oklahoma, when they go down.

They never go down. I will take, I will take a somewhat devastating loss in the semifinals for the second year in a row over another eight and five season and a loss on the SRS Distribution Bowl any day.

It, it was a rough loss-

But-

... in the SRS Distribution Bowl.

Let's, let's not derail, because I know everyone comes here for our, like, end-of-season CFP recap commentary. Maybe we can have a special episode for that, where we just, like, harass each other, you know, for 30 minutes, but we have so much stuff today, Patrick, I'm imploring you.

We have to-

We gotta get started

... we have to hurry.

We gotta.

I, I agree. A couple, couple of things we gotta talk about on politics here. Um, one, uh, thank you, Ted Cruz, for making sure that Texas lost, and also, Chad, you're kind of like Ted Cruz. Every game you went to this year-

Every game I went to this year, we lost. And I was telling uh-

You lost.

Was I telling you? The, uh, the, the worst part about it is that the two games that we went to were trophy games. So as I'm leaving the stadium, I have to listen to the other team and their trophy ceremony. It w- it was, it was not fun.

Yeah.

But-

It's tough

... you know, you play the sport to be in big games, like the SEC Championship game, Cotton Bowl semifinal game. Like, that's why-

Mm-hmm

... you play it, and sometimes you're gonna lose. The way- with the playoff now, like, only one team is really gonna be happy at the end of the season.

Yes.

Right? Before you could, you know, you could play your bowl game, and you win it, and, like, that's good. It gets you some momentum, and you could be happy about that. But now, like, only one team is really gonna be happy at the end of the season, and so that's just, like, the new world that we live in.

True. So gotta move on and stop talking about that school from Austin.

All right. Let's real quick-

Uh-

... let's hit, let's, uh, let's do a table of contents, shall we?

Yeah, yeah. We have four items to discuss today. One of them will be very quick towards the end. Uh, we are gonna talk about the Texas Public Policy Foundation's property tax proposals that were just released. They put out a list of 15 ways to improve the property tax in Texas, and are they doozies? Yes, they are.

Yeah, buckle up.

We're gonna go one by one through them. Buckle up.

We're gonna go through all 15? Okay.

We're gonna do all 15.

Here we go.

It's gonna be quick.

Lightning round.

It's gonna be quick, but we're gonna hit it up. We're gonna talk about congestion pricing in New York. You and I for once agree on something, and then we're gonna jump into something we clearly don't agree on, which is home sharing- ... and another Texas Pol- Public Policy Foundation, which, by the way, um, if, if you don't know, the legislature is sheep, and whatever the Texas Public Policy Foundation puts out, we listen to, and we have to start thinking about. So also very interesting, and then we're finally gonna hit, um, the Attorney General of the State of Texas doing some good things. We're gonna talk about Ken Paxton suing Allstate Insurance, and, uh, wow, the shady business practices of the insurance industry in Texas, one thing we gotta jump on there. Crazy enough, we're not even gonna talk about the speaker's race. New speaker, our friend Dustin Burrows from Lubbock, Texas, uh-

Who was involved in the Bannon tapes, correct?

It, it is the rising-

Yes

... of the phoenix of Texas politics, Chad. That's the only thing we're gonna talk about, which is, how do you, as a legislator in Texas, get put in the doghouse because you talk openly on a tape about getting rid of moderate Republicans to then be supported by moderate Republicans and Democrats to become the Speaker of the House? Only in Texas politics is it that exciting. All of my friends in the political science department at the Bush School of Government at A&M are just super happy about what's happening in the legislative session, I'm sure. So let's get started, man.

Okay.

Let's start with the Texas-

Item number one-

I'm gonna let you intro this piece

... item number uno. Um, the Texas Public Policy Foundation, as Patrick mentioned, they've got the ear of the legislature, so when they make a proposal for, uh, something especially as important as property tax... Interestingly enough, there's, like, a bunch of, a bunch of, uh, news articles have come out over the past, like, six months about how the Texas Public Policy Foundation is maybe playing a little bit fast and loose on their own property tax bills, but we're gonna ignore that for now- ... and dive right into the, I guess, all 15 proposals-

Yep

... for property tax reform in 2025. They have broken these down, we'll post a link in the show notes, into three categories: communication, calculation and mechanics of the rate itself, and then, uh, rate reform and adjustments. Okay, do you just wanna go, like, 1 through 15?

We're gonna go 1 through 15, and we're gonna go through them pretty quick. Some of these are pretty goofy.

Okay, how about, how about-

Yeah

... like, we go through them, and then we, like, do thumbs up or thumbs down?

Okay.

You wanna, like, maybe, like, like, a, like, out of five stars, what we think?

Yeah, let's, let's roll.

All right, let's go. Number one.

Item number one-

Okay, so-

... property tax terminology is confusing. Thumbs down.

Okay, so-

We have, we have now changed the terminology in the last three legislative sessions for property tax. We have made it incredibly confusing because the Texas Public Policy Foundation felt like we needed to change the terminology for the last three rounds. This is like, "I just need to seem busy, and so I'm gonna change things in terminology." Specifically, they wanna change the voter approval tax rate election to a tax increase election.

... Mm-hmm, which, which is not loaded at all.

It's not loaded at all. Yeah, absolutely. The enrichment tax rate to the excess tax rate, and the no-new-revenue tax calculation-

This is my favorite one

... to the taxpayer timeout rate.

The hell? No-new-revenue sounds a lot more interesting than taxpayer timeout. I'm just, I mean... Or i- i- understandable.

It's, it's so paternal, like paternalistic.

It's just-

Like, you're gonna put the taxpayer in a timeout? Yes.

It reminds me of the, in college football, we added the two-minute warning, right? But they don't call it- ... a two-minute warning, they call it a two-minute timeout.

Two-

And it just feels like, like, oh, I'm a three-year-old child again, and they're, they're putting me in timeout. "You can't watch the game for two minutes. You better wait a minute."

Correct.

It actually is like two and a half minutes, 'cause it's always a media timeout, too.

So-

Yeah, so, uh-

Number t- number two. You ready?

Yeah, so thumbs down on this one.

Thumbs down on that one.

Number two.

Number two: The voter-approved tax rate election propositions are written in legalese. So they want to amend Section 2607 of the Texas Tax Code to include one to two simple sentences above the ballot language that describes the measure's general purpose and cost. The sentences should be written at an eighth-grade reading level.

So I don't think that it's the legalese that's the problem, I think it's the complexity of the system that's the problem.

Yes.

And, and it's the fact that the, the statute is trying to, um, uh, in almost every scenario, state that taxes are increasing, right? And so, like, the, the, the le- lexical gymnastics that have to take place, depending on, like, whatever the scenario is, is what makes it confusing. But anyway, go ahead.

And, and I'm just gonna say, by the time we get to 15, and the fact that 16 is not in here, which is the one that actually really matters, right? But by the time we get to f- 15, I'm gonna be full rage monster, Dude Perfect style. If you know that, you have kids, and you're in this, I, I'm there with you, but I'm telling you right now, it's gonna get crazy. But yes, uh, another thumbs down on number two. It's not really gonna do anything. They're, they're trying to simplify a very complex system that's overly complex, yes, but trying to simplify it in a way that actually is gonna make it more complex. And then they're gonna argue about ballot language, and we're gonna have lawsuits on ballot language constantly, because they don't, like, specify what it's gonna be, just write it at an eighth-grade level. Okay, crazy. Item number three: uh, voter-approved tax rate elections propositions lack sufficient information to alert voters to the possibility of higher taxes. W- what-

Can I just say that-

... voter-approval tax rate elections, the voter is approving the tax rate.

And if you also, like, read the ballot, it will tell you what the new tax rate is gonna be. It literally takes five seconds to figure out, is this a tax rate increase? What, what is my prop- I've already gotten my, my property value notifications. Like, if you can't do that math, I understand that it's complex and there's lots of different moving parts, but, like, if you can't do simple multiplication, probably shouldn't be voting.

Well, not, not only that, the ballot language already has in there, when you go through this, the amount of taxes being increased, the number being increased on the average home. You're telling somebody, "If your home is worth the average amount, whatever that may be, $200,000, your taxes are gonna go up $10 a year." They need to know that this is a property tax increase? Maybe we should be putting more money in public education if we can't understand that, folks.

Oh, wow!

That's all I gotta say. Wow! Whoa. All right, item number four.

Patrick bringing the heat today. Okay, go ahead, number four.

Voter-approved tax rate elections propositions lack any detail regarding the anticipated tax impact on the average homeowner. Instruct political subdivisions to include a tax impact estimate on voter-approved tax rate election propositions that discloses the average annual tax bill change that can be expect... It's already there. It's a-

Do we have a-

I, I can't... What-

Do we have a, like, uh, an agreed-upon pronunciation for the VATRE, VATER?

VATER. W- we're gonna start calling it-

I'm calling it VATRE

... VATRE from here on out. VATRE, VATRE.

VATRE sounds like-

Yeah

... fancy.

True.

Sounds less threatening. VATER almost-

Right

... kinda sounds like Vader, which is like Darth Vader. W- you know, that's bad, so...

Correct.

Okay.

We're not even gonna-

By the way, now we're moving on to the calculation mechanics

... We're not gonna talk about that one. And, and, and by the way, the requirement of truth in taxation now, for there to be a website for you to go look at your tax bill impact based on proposed tax rates, allows anybody with an internet access to go look at their tax bill and see exactly what the impact is gonna be. Just gonna say that out loud. So go do your job as a resident and as a voter, and educate yourself. All right, moving on. Calculation, item number five: The 3.5%...

VATER

... VATER limit.

This one-

Allow-

This one-

Yes, allows for an additional revenue growth beyond what the restriction implies. True up the VATER threshold by including the value of new property growth in development in its calculation.

Guys-

Wow

... this is the one. This is the one right here.

Yes. This is the sneakiest one of all of them.

Earmark this one, because we're gonna have to be arguing against this-

Yes

... and having, like, a legitimate discussion with our legislators, 'cause this is going to be a problem.

So I, I will say this, um, our Senate friend from Houston, I'd be shocked if he allowed this one. I, I, I would be shocked, because I, I just don't see the mathematician people in the Senate saying, "We're gonna add $100 million of infrastructure to a city, and maybe it's a billion-dollar development or whatnot, and we're not gonna account for the new revenue from that. We're gonna squeeze the entire tax base of a community, and give them-

Yeah, there's no, there's no value then-

Right

... from new development.

None.

And we have 1,000 people coming here every single day-

... Yeah, which we're, we're gonna-

And cities are gonna be adding all of this new stuff, all this new infrastructure, all these new obligations, and will literally get no new revenue from it.

But by the way, item three of today's topic, right, is we're gonna talk about zoning issues and things that Texas Public Policy Foundation won't stick away there. So, so we're gonna limit the ability of city to make revenue on new development, but then we're gonna force cities to have new... We're just gonna bankrupt cities, folks. Like, there's, there's no way to have both.

Yeah.

And, and the world of Texas Public, they do not talk from one office to the other. They also don't pay their taxes. So anyways, we're gonna jump into the next one here.

And they had Chuck Morron on a panel-

Yeah

... explaining all of this stuff.

Yes.

Just listen to him.

Good job, Chuck. So-

All right, number six.

Item six.

Guys, I'm serious. Earmark number five, 'cause it, that's, to me, the biggest one.

Number five matters, and it's the worst one on the list, right? Besides the one they a- they actually forget to put on the list. So number six: "The 3.5% VATRE limit excludes certain property tax-supported debt from its calculation, thereby for creating an incentive to borrow." This is a known thing. We've talked about this on the podcast before. Uh, it encourages... The way that the structure is, it encourages cities to move as much debt as possible, including fleet debt and things that we've cash financed for, for years, um, and, and stop cash financing pretty much everything, because you can move all of your financing instruments to your I&S rate, which is not, uh, in that 3.5% calculation. This was a danger that we knew was coming. We've informed lots of our city clients along the way that they needed to be careful with this, but the reality is, is that's the world they live in. Once again, I'm gonna say the same thing. If you look at California, guys, we're maybe 10 years behind at this point. Um, but if you do this, there's just gonna be a new method. It's Whac-A-Mole, right? Gotta pay police and fire departments, folks. It's just that simple, and if we don't, you have major issues that happen. Does anybody wanna look at the fires in LA, and the most underfunded fire department in the nation fighting a fire and doing what is happening there? It just is what it is. This is what happens when you do these types of things. So super big thumbs down on this, not because they're incorrect-

Not because it's a good idea

You're correct

... to, to move stuff over to debt that you should be paying cash for.

Yes.

But yeah.

It's, it's a thumbs down just because this, this is what you get when you take the power out of the voters' hands, right, and you try to legislate from Austin, from a, from a financial standpoint. Just have some type of greater voter involvement to make decisions in our local communities. That will fix a lot of this. Moving on. Item number seven: "Texas property tax revenue limits differently to cities, counties, and special districts versus school districts versus hospital districts and community colleges. Apply one universal VATRE limit to all political subdivisions, irrespective of the category."

Yeah. You know what this means is that we're all going to 2.5%.

I- that's exactly what this means.

Yeah. Okay.

Uh, and you're not gonna have... There are some other things that we're gonna hit here, too, but you're not gonna have the, um, the de minimis calculation-

Yeah, but that's later so I'm trying to-

... where you can go get a half a million dollars that's coming in, too.

Yeah.

But they're hitting that twice in here. Um, and then also, hospital districts, and s- I believe it's community college districts, I, I know it's hospital districts, they don't have the cap, right? So that's the other thing that they're talking about here. Um, you know, I don't know. I guess we should, we should all burn together. Thumbs up on that one? Chad's got a thumbs down. All right, number-

What is the, the phrase? "We'll either, uh, we'll hang together or we'll hang separately" from the Revolution?

Yes.

We're all gonna hang together-

Yes

... on this one.

Number eight-

Although that's technically-

"Texas property tax revenue"

... I'm misusing the, the phrase, but whatever. Go ahead.

Yes. You... That was more of a Patrick move right there than it was a Chad move, by the way.

Yeah, 'cause, like, the hanging together-

Right

... meant, like-

Management

... we're gonna stick together.

Yeah.

Or we're gonna hang separately, which means that we're gonna be hanged. So yeah-

Yes

... I, I kind of flipped it. I inverted it, but that's okay. I pulled a Maverick and Goose on that one.

There you go. There you go.

I was inverted.

Number eight: "Texas property tax revenue limit, uh, exempts smaller taxing entities, i.e., some communities under 30,000 in population. Apply one universal VATRE limit to all political subdivisions, irrespective of population size." Uh, this is r- it... You can't have a broad brush across local governments in the state of Texas. There are different needs. There are different things that happen. It's just... It's like I wanna walk into these offices of the Texas Public Policy Foundation and say, "Has anybody here worked in a government? Has anybody... " N- nobody, nobody's worked there.

No.

Nobody there actually understands how to do a budget. Like, "Hey, why don't you come hang with us for a little while, and let us teach you how budgeting actually goes?"

We'll give you a crash course, guys.

Okay.

Open invitation.

Correct. Let's go l- let's go look at the legislature's decision, a, a, a good decision on my, on, in my opinion, of putting police officers in schools, and how that has escalated the cost of police officers throughout the state. And then you're gonna go, "Oh, by the way, city, the cost of police officers is going up 9 to 10% a year, because now there's just more demand for police officers," but you can only raise 3.5%-

And it's only 40% of your budget

... more revenue. Yes. It- come on. Stop being ridiculous. Broad brushes, folks. All right.

Number eight?

Number nine.

Number eight.

The-

No, you're right, number nine. Sorry.

Yeah, number nine: "The 3.5% VATRE limit may be discarded if the taxing unit is located in an area declared by disaster by the governor, and the 8% revenue limit utilized instead. This type of exemption invites abuse." Wow, okay.

So literally, the governor declaring an emergency allows cities to abuse the system by increasing their taxes more than 3.5%?

I, I just-

In an emergency

... I don't.

Like, a governor-declared-

I don't

... emergency. Okay.

I don't understand it. They are smarter in the offices of-... the Texas Public Policy Foundation than the governor. Just gonna throw it out there. Okay, here we go. Number 10.

Well, you know, the governor only makes, like, a hundred and, what, $80,000 a year? So they also think that no one should make more than that in, in state government. Like, in, in the Texas government, no one should make more than that.

No one should in state government.

We're gonna have, yeah, we're gonna have a bunch of exodus out to... City managers leaving to go work at Buc-ee's. Can you imagine, like, how much easier your life would be? Like, I am not saying that managing a Buc-ee's is easy-

It's a whole lot easier than managing a city

... with the amount of crap that a city manager has to deal with.

Yeah. You don't have a city council meeting.

Just gotta cook the tacos, like-

You just have to talk to Buck every once in a while. So-

Gotta keep those beers flowing-

There we go

... and keep those bathrooms clean.

And, you know-

Okay, number nine. Now, so we're now into the rate, reform, and adjustments category. Number 10.

Number 10: The unused increment rate enables taxing units, other than special taxing units, to levy higher taxes than otherwise would be allowed under the VATRE. So to give a quick explanation to this, you have, like, a rolling three-year unused increment within the existing law that almost encourages cities to not go grab the 3.5% every single year, okay? Unless they need it. So if they do this, I'm telling you-

Everyone's gonna raise their tax rate

... for 100% certainty, everybody's gonna go grab 3.5%. If they implement number 10, this is a big thumbs down, guys. If they implement number 10, taxes will go up more than they ever did without 10 implemented. It, i- it is, it is easy to see the writing on the wall on this one. They'll have no choice, and, and city managers, and city councils, and mayors will have to say to their residents, "If we don't go get it now, we'll never be able to go get it. We'll never be able to recover that. So if I wanted to give you a break, I can't give you a break." And in the system that we have today, and the three-year rolling, we can give you a break if we think the sales tax economy is gonna be better, something like that. At this point, we're gonna have to have a risk avoidance policy if they implement item 10 here, and we're just gonna have to go get 3.49% every single year. Just, you know, spoken from the people who actually did this. Number 11: Taxing units are shifting M&O-related expenses to I&S side of the ledger instead of using M&O, we've already talked about this, they've already hit on this, uh, to pay for building maintenance needs like roof repair, HVAC. Government entities are instead financing these projects through the I&S. Uh, they were always kind of financing some of these projects anyways, but they were paying for it out of the M&O rate. Now, cities are making sure that everything that has a term of longer than one year is moved to the I&S rate. Not every city is doing this, but most cities are. Um, once again, same thing as before, I have a big thumbs down on this one because you created this terrible system that we have, and you are trying to fix the avoidance schemes that are going to be caused when you overcomplicate taxation systems.

Yeah.

Tax administration 101.

Let's make it less complex, guys.

Yeah, let's just make it easier. Um, and by the way, the one item that's not on here that we'll get to in item 16, if we just fix that issue, you'd fix most of your property tax issues. Just gonna say it out loud. Number 12: If voters reject a VATRE, a taxing unit may still adopt a tax rate up to the VATRE to produce a substantial revenue increase.

Okay, so you, for example, propose-

Yeah

... 5% increase, which is above the 3.5%. If that gets voted down, you can still go up to the 3.5%?

Correct.

'Cause that wouldn't require the tax, the v- the, the election.

That is right. And now they wanna say, "If you lose that election, we're gonna penalize you and make you go to the previous year's revenue number," the no new tax r- uh, rate, uh, the no new revenue rate. So I mean, okay.

Like, literally just-

Hot

... penalizing you for doing well. What is... Like, for following the law.

Asking the voters.

Asking the voters-

Yeah

... and they say, "No, that's too much."

Correct.

Okay, well, now you don't get anything.

Yeah.

Well, we- we're children.

Yeah. "Ensure that local government officials have skin in the game," that's their explanation for that one. Skin in the game. Okay, wow.

The-

Number 13

... on average, the average rate will increase more than it is now under these proposals-

Correct

... is my guess.

If a VATRE-

This is 13. What are, what are you doing?

Yes.

Okay, number 13.

If the voters reject a VATRE election, a taxing unit may soon thereafter propose another VATRE to be considered in the following year. They want to increase the threshold to approve a VATRE or TRE from a simple majority to 60% or higher in the following year.

Is that in the following year? I know they mention that later.

They, they kind of mention it later. I, I don't really know what they're getting at here. It seems like they want it to be a 60% threshold to begin with.

Yeah, but it... Like, at first, when I read it, I was like: "Oh, so the, the following year, it would be 60%," because obviously that's far less complex. It's like adjusting the, the approval threshold on an annual basis. But reading it again, it looks like they just wanna make it 60% for, like, every election.

So they wanna give the minority the power. I just wanna point that out because they're arguing in the speaker's race that the majority should have the power.

Mm-hmm.

Just calling it out like I see it, folks. It just is-

We should make everything 60%.

Everything should be 60%, apparently.

Okay.

We're gonna be-

You should have to get 60%-

... gonna be killing ourselves a little

... to win your election, too.

You know, if we did that, that may-

They're also gerrymandered, but it doesn't matter, but yeah.

They're so gerrymandered- ... but that may actually fix some of the gerrymandering issues. It would make some stuff pretty competitive, right? Uh, yeah. Anyways, number 14: A taxing unit may seek a VATRE or TRE in the following year, immediately after a failed election. Um, amend it to institute a cooling-off period after a failed VATRE period. I expect this probably to get passed.... uh, just because it would follow a lot of the bond rules that are already in place for general obligation bonds and school bonds, right? Uh, you can't take those within the cooling-off period that they have, and so that would kind of put that in there, and, you know, frankly, I don't know, I could see that being a carrot that gets passed. I'm not giving it a thumbs up, I'm not really giving it a thumbs down. I'm just kinda giving it a... I'm gonna keep my keel level there. Number 15: A taxing unit other than a school district may propose a VATER or TRE without first submitting to a third-party efficiency audit and disclosing its findings to the public. Require cities and counties seeking to hold a VATER or TRE to undergo a third-party efficiency audit of their budget and operations and disclose the findings at a public meeting prior to the election. Okay, I'm giving this a huge thumbs down before I talk about this. A- an enormous thumbs down, okay? But I'm also gonna say, with a huge asterix-

Asterisk

... that- asterix?

Asterisk.

Okay, sure. Um, is that the pronunciation properly?

That is the spelling and the pronunciation.

Man, I learn something new from you every day.

Asterisk.

I'm just always amazed by it. This is a terrible idea, right? Because the private consulting industry, it would make a ton of money on this. Um-

I wonder if we could do this work?

I'm saying that out loud. This is why I'm giving it two solid thumbs down because, yes, there are very few entities in the state of Texas that would be qualified to provide these audit services. These two guys you're talking to right here and, uh, our staff of 10 people these days would be the team that would do it. So, um, we have former city managers, finance directors, auditors on staff, and planners.

Here's the thing, are there inefficiencies in every large organization? Of course.

Of course. Of course.

But what is ineff- like, I don't... What is an efficiency audit going to do? First of all, you're not gonna get it done between the two months or so between when you, like, actually propose and adopt the rate and have the election. Like, that's not possible.

I just wanna know-

So it's more just to keep it rolling

... who was in the ear? Yeah, who was in the ear of the Texas Public Policy Foundation to get them to include this as their last item? That's, that's what I wanna know. Like, what was it?

PWC or

PWC, Deloitte-

Ernst

... My- our boys over at Ryan. Like, who, who was, who was in the ear here, folks? It was not us. They don't call us, they don't talk to us. We clearly are not big fans of, uh, people who choose not to pay their taxes and also choose to regulate taxes. But the reality is, is that, yes, this is a, um, wow, wow moment. So Chad, do you wanna guess what number 16 is that's not on this list that would actually significantly help residential taxpayers?

Split tax rate.

Split tax rate.

There we go.

There we go.

I can't believe, man, that you've-

The difference in appraisal methods-

... come around.

Nothing impacts residential property taxes in the state of Texas more than the fact that we have different appraisal methods between residential and commercial properties, folks. You can talk this... I'm not cussing, I- I'm just... You can talk this crap-

To death

... until your eyes go red, until your face gets blue, but at the reality, you can put every Band-Aid on this hemorrhage that you wanna put on it, but the real bleed is the appraisal methods. And the only way you're gonna fix that issue is to split the different tax rates between the different property types, so that you can fairly recruit money. 'Cause we have been shifting the burden of property taxes in the state of Texas for a very long time, and yes, residential taxpayers, you are the one fighting it. At some point, you're gonna have to wake up. This is another can kick. 15 items of can kick, and they don't even talk about the one that actually matters. Monster-

I'm not sure they've ever talked about a split tax rate, though.

I don't think they have. Maybe they should have us on the next panel.

Sure.

Yeah.

Let's go.

Maybe, maybe we should-

Again, open invitation.

With our Senate friend from Houston. I would love to have a conversation about his business model and how that works with writing legislation.

Yeah, I think, uh, honestly, I think that... I think that it would benefit him.

Oh, it'd be a hu- yeah, yeah, yeah. From a, from a... From his personal business, it would benefit him. Yes.

Because think about a scenario where, where your, your, your commercial properties, the valuations aren't really changing all that much, but because the residential properties are growing, that the actual tax rate is coming down.

Yep.

So your tax bill is actually coming down if your valuations are holding constant. If you split those rates out and you get your two and a half, three and a half percent from each rate, then those tax bills are starting to go up, which gives him even more incentive to fight the, the appraisal valuations. So I think that actually could be like a symbiotic relationship here. We can help him out in his, you know, day job, and also kind of start to fix some of the problems with the, the system.

It's still a conflict of interest, so let's not, let's not beat around that bush. He-

Oh, come on, the whole thing-

You're the guy who writes-

... is a conflict of interest. It's ridiculous.

You write tax code, and you also happen to fight taxes on behalf of private entities. So next item. We've gotta move on because we, uh-

Yes.

God, such a long show.

That went long. I was surprised that we went on all 15, but okay. All right, moving on. Do you wanna stick with TPPF and just do the home sharing?

Yeah, let's go ahead and do the home sharing-

All right, let's just stick to TPPF

... 'cause we're gonna disagree on this, and we're gonna have to agree to disagree and just move on.

Okay.

So keep going.

TPPF has a, an article here, uh, about, "Defending home sharing is about protecting basic freedoms." I love the rebranding-

Mm-hmm

... with the home sharing. Um, obviously talking about Airbnbs and VRBOs and whatever. Um, but the idea here is that-

You know how much money the Texas Public Policy Foundation has gotten from VRBO and Airbnb?... No, just curious. This, this seemed like the legislative affairs person for home sharing wrote this entire article and put the Texas Public Policy Foundation letterhead on top, and then just sent it out. It's, it's the way it's written, by the way.

So they go into the whole history, though-

Mm-hmm. Yep

... dating back to the 1800s about how people used to share their homes, right? They had, like, boarding houses, and you could-

Mm

... share an individual, uh, you know, room with a, a traveler or, or whatever. Um, which, you know, is all true. Um, but obviously, with, you know, the rise of Airbnb, it's a little bit different because y- you're not housing someone as much as you are ... It's like a hotel.

Yep.

Right? Now, I don't know, where do you even want to start with this? 'Cause obviously-

I mean, I'll just ask questions. Uh-

Okay, you ask questions

... clear- clearly, clearly, you, you believe that this is a zoning issue, and it's one of the reasons why we should just eliminate zoning altogether, right? I agree that zoning should be rehabbed. I don't think we can eliminate zoning altogether.

So here's wh- the thing I liked about this article is that-

Mm-hmm

... they are starting to talk more and more about how zoning is an actual limitation on freedom.

Yes.

Which it obviously is.

You're feeling- you're feeling like a shepherd, and the sheep are coming. Yes, I, I, I get where you're going.

What, what I don't expect to actually happen, though, is for a, like, broad-based zoning reform that actually creates broader, broader freedoms, you know, across the board, right?

Okay.

This is something that they have a bugaboo about, so they want reform on, like, occupancy of houses among non-related people, right? Where they call out College Station and San Marcos, like college towns.

Yep.

Right? M- I love the fact that College Station has one of the strictest non-related parties laws because the whole city is built around that school, but the people who live there-

Yep

... don't like the students at all . It's just so funny.

It's not that they don't like the students.

It's so ironic.

I- I mean, they have- they had young city council members. I mean, there was a student city council member while I was there. But it's not that they don't like the students, it's that people were building eight-bedroom houses, and you had eight different vehicles outside, and you didn't have any off-street parking available, and so-

Okay, well, maybe we should build cities that don't require vehicles. Like, let's solve the actual problem. What are you- what are you gonna do?

Man, you're so utopian in that idea. Like, I, I get that, right? But, like, your utopian idea is Houston, and Houston's an utter mess.

No, that's not true. Houston does not at all have, uh-

They, they have no zoning

... it's, it's very, very car-centric.

It- 100%, but they have no zoning, and guess what? Your, the ... It's still, like, the largest sprawl of single-family development with no zoning, and which is, which is my argument. It's, it's not that you're just gonna get this great density from the development community.

No, you won't. We've talked about financing is a major reason why you won't.

Correct, but you're gonna get all of this single-family housing that's gonna develop, and then you're gonna have all of these off-street parking issues and code enforcement issues that are gonna come up, and there's not gonna be any zoning to enforce any of the problems that you have, right? You can't just pack people in and then expect willy-nilly that the city is gonna function the way it's supposed to function.

Right. Okay, okay. We'll, we'll put that, 'cause we only have so much time, put that to the side-

Okay

... for now because this is actually talking about Airbnbs.

I- exactly.

It's not talking about, like, student housing.

Yes.

Okay.

I do not believe that somebody should be able to buy a house directly adjacent to me, next door, and turn it into an Airbnb, right? Where I'm gonna be dealing with people who are coming in and out at all times, partying and doing all the other types of stuff when I'm in a single-family neighborhood, right? Like, if a city wants to go and have a community discussion about i- an area transitioning to that ability, or you have an older downtown area where you specifically have items where people want to stay in Airbnbs, so forth and so on, it makes some sense, right? Um, if you wanna have rules where you can have at least one additional residential unit on a lot, I'm okay with that. But ultimately, I feel like there has to be some individualized control of the property that's there, or it's gonna get out of control. And you can go look at market after market after market where it's deregulated, where it's out of control. I mean, you have an entire populist movement right now in Spain because of this issue, because they basically deregulated everything, and then now they're gonna go in there, and they're gonna start charging non-um, non-Spaniards 100% tax on the purchase price because they can't get people to be able to buy housing in their own communities in Spain. That's what happens. So by just allowing this willy-nilly, like the Texas Public Policy Foundation is looking at-

Are, are you arguing, though, that Airbnbs are a primary cause of housing inflation?

I'm saying that if you look at, uh, if you look at specific touristy markets-

Mm-hmm

... they have been a significant increase in the cost of housing in those areas. Significant. Because the, the money that can be made on an Airbnb is so much more than a standard rental rate would be if you were just gonna own something and rent it. And, and so-

Have you looked at, um-

... that's where the market is driving.

Have you looked at Airbnb rentals over the past, like, year and a half?

I haven't, no.

Yeah. It's not-

I did read an article-

Not great

... last week, though, on specifically to this, to Spain.

I mean, if you wanna talk about, like, Mallorca, you know, or, like-

What? First off, I think Airbnb and VRBO have hurt themselves.

The Amalfi Coast.

Yeah.

Yeah.

First off, I think... Well, it's Madrid is the one that's the one that's real bad, but I, I think if you look at-... the business model of VR, uh, VRBOs and Airbnbs, what you're gonna see is, is that people have gotten very tired of the fees. You know, "Hey, it's gonna be $250 a night. For three nights, that should be about 750 bucks," and then it's like, "How is that $1,500?" By the time you get cleaning fees-

Yeah, it's like Ticketmaster

... and everything else, yeah, it's, it's gotten ridiculous. Um, because-

I think, I think the market-

How are they funded?

... will work overtime, though, in terms of s- it, it kinda just depends on what you want out of your vacation location.

Mm-hmm.

Right? Like, if you have a big family or a big group, sometimes the, the Airbnb house is a, is a more comfortable, better deal, right? Maybe, like, you don't care about the housekeeping, and, uh, you like to cook your own food or whatever. Well, you know, that, that may be different. But there's also still a market for an actual, like, hotel with good service, and restaurants, and, and things to do-

Mm

... in, in a, in a more, like, commercial area. So I think, I mean, I, I think the market can take care of a lot of, of a lot of this. And also, I, I do think, though, that the, the fees, especially the cleaning fees, are influencing people's decisions on whether they're gonna stay at an Airbnb or a hotel, and I think that's fine. Like, that's a good thing.

Yeah, no, I, I get that. I just- I step back, too, and I ask myself, "Show me..." or I ask people, "Show me the pudding. Show me somewhere, anywhere, that has deregulated this, and it's worked out nicely." Nobody can find it for me. I haven't seen it. So, I mean, maybe in California, where they've allowed the additional residential units on lots to go in, so that they could lower the cost of housing. Still haven't seen numbers on that, whether that's actually occurred or not. Um, I just... You know? I mean, it, and I, I, I would, I would love to be just, like, a free market capitalist, "This is gonna work. Everything's gonna go well." There's just too many things in the system since the 1940s and '50s, that have been put into the system, that is- that are not free market-based, and so you can't just take one piece and say, "Well, we're gonna go do free market with this one piece, and that's gonna work out."

No, that's, that's a fair point.

Can you hear that in the background?

No. The reason that I sent this to you, I'm, uh... This is not kind of the direction that I was expecting it to go.

Mm-hmm.

The reason that I sent it to you is because I just really appreciated... Like, there's this line here towards the end, "Under the guise of, quote, protecting neighborhood character, unquote, municipalities impose these regulations and others, such as density and lot size, forgetting that people have character, not houses." That's just a really interesting thing to come from the Texas Public Policy Foundation, and I wish-

It didn't come from them!

And-

They didn't write it.

Well, they published it. It's written by... Does it have-

Sure, yeah.

Yeah. John Banura and Ben Crockett. I'm gonna look up in a little bit and see-

Go... Yeah, go, go look them up on LinkedIn real quick and see where they've worked.

Um, the thing that fascinates me is how that gets applied, in this case, to short-term rentals, but not, like, broadly across the board in terms of zoning reform.

I can't agree with you on that.

You can't?

I, I, s- yeah, I, I can agree, but-

Oh, you can. Okay.

100%, Chad. This is-

John Banura is a policy analyst for the TPPF. Ben Crockett, studies at the Bush School of Government. All right, let's move on to congestion pricing, um, 'cause we're sitting at 40-ish minutes here, and I... Honestly, you just sent me this article about Allstate two minutes before we started recording, so I haven't read it yet.

I- to be fair, it just got published this morning, right? So I just, I just read it this morning. I was like, "We gotta hit this one," and it's gonna be super quick. But, um, you wanna intro the congestion pricing for New York?

Yes. Okay, so after years and years of struggle, including, uh, just a few months ago, the congestion pricing scheme being completely shelved by Governor Hochul of New York, it finally went into effect, I think, on the fifth or sixth of this month.

Yeah.

So we've had, like, a week at this point of congestion pricing. For those not familiar, the congestion pricing is, uh, it's, it's basically a toll for coming into Midtown and, uh, Downtown Manhattan. Okay, so if you wanna drive into that part of the city, you pay $9, which is actually cheaper than many people sp- spend to take the subway, right? So it's, it's not a huge amount of money in the grand scheme of things. Um, but the impacts have been quite astonishing just in the first week. So-

Yep

... uh, they, I don't know if this is measured in me- uh, the MTA posted some data on, on their bridges and tunnels. In 2024, the Holland Tunnel, it took an average of 11 and a half minutes to cross it. Between January 6th and 9th, four point... Uh, I'm sorry, four, four and a quarter. Four minutes, 16 seconds. That's 63% less time to cross that bridge. It's crazy. And you look in, uh, parts of, uh, like, v- you know, videos and, and pictures that people are posting on social media inside Lower Manhattan, the number of cars that are no longer there is staggering.

Yeah.

Now, it's funny because you see, you'll have people usually post them, and they'll be like, "The city is dead now." Like, "This is gonna kill Canal Street 'cause there's no cars." Folks, those people driving down, like, through Canal Street and in Lower Manhattan, those weren't shoppers. Those weren't people that were, like, trying to go shop at the little, you know-... bodegas on Canal Street. Those were just people driving through.

Yeah.

Like, this conflation that we have, and we do it especially here, even though we are more car-centric, but we still do it here, this conflation of cars on the road equaling liveliness and vitality, you know, in a, in an urban area is, is, is interesting to me. And it's, right now it's playing out in a, in an interesting way in New York, uh, where we're actually seeing street life kind of r- regenerate, um, in terms of pedestrian traffic, a- and actually having the ability to feel safe as a pedestrian. Uh, y- like, i- imagine in New York, which is the most pedestrianized place in this country-

Yeah

... like, certainly as a big city, people finally are now feeling safe.

My favorite system in New York.

They're finally now-

Yeah

... feeling safe to walk on the streets and cross the streets.

Yeah. The, the coolest part about New York City to me is the Citi Bike system. It is, it is awesome. Readily available everywhere. You know, has, like, its own bike lane system created throughout the city as well.

Yeah, but now you don't even need it.

Um, yeah, well, if you're walking-

Now we can actually use, use the roads-

Correct

... for all types of transportation. I mean, w-

Yeah, but if you're going from, like, World Trade to, like, um, Central Park, you're gonna use a Citi Bike. You're not gonna walk that.

No. Well, no, why not?

That's a long walk.

Yeah, that's like 60 blocks.

Yeah.

But yeah.

Yeah.

Um, but that's fine-

Long blocks, by the way

... because now you can, now you can safely do it on the road.

You gotta know the difference between long blocks and short blocks in New York, just for reference-

Yes, you do

... if you've never been before.

The avenues-

There's a big difference

... and the streets. Um-

North versus south and east versus west are very different lengths of blocks.

Yes, that is true. Uh-

Yeah

... last time we were there, and I was trying to direct us, uh, me and my wife, to different places, and I, I, I tell her, "It's only three blocks." And she'd be like, "Yeah, but, uh, are those long or short blocks?" I'm like, "Uh, I think they're short blocks." They weren't.

Yeah, I actually, uh-

I gotta lie to her about h- how long it takes to get, get around. But yeah, like, when we took the, the scooters in Long Beach at the Cal Cities Conference-

Yeah

... that was a lot of fun, but it was terrifying.

Yeah, yeah, yeah.

It's terrifying.

There's no protection for the scooter, yeah. Not like a Citi Bike. There's no prote- i- in the Citi Bike system in, in New York, there's a lot of, like, dedicated Citi Bike lane systems that are off-road, right? Um, like, almost like park trails, but there's, like, a Citi Bike lane on the trail.

But what I'm saying is now you don't even need that, right?

Agreed.

We can actually repurpose the same infrastructure. Um-

Yes.

And well-

But it y- this has been done in other areas

... potentially increasing the size of the sidewalks and allowing it, allowing even more pedestrian, um, you know, friendly amenities.

Correct. Like, like, in Rome, there's areas where vehicles are just not allowed, right? In London, they-

Well, also, a lot of people use little Vespas-

Correct

... which take up far less space.

Yes. In, in London, they've had congestion pricing for some time now, and like-

And I'll tell you what, it's amazing

... it's super popular.

It's amazing, because-

Yeah

... not only are the streets far less congested with cars, but they've had so much more money to invest in the Underground. Like, literally, they have two or three-minute headways on most of their major routes.

I just wish we-

So you go down there, and you miss a, you miss a train, it's like, "Okay, no big deal. I'll wait two minutes."

Yeah. Correct.

When we went to the SEC Championship game, we took MARTA everywhere.

Uh-huh.

It was perfectly fine for what it was. Um, I didn't have to rent a car, which was nice.

It's a, it's above ground, right, MARTA is?

Uh, it's b- it's a little bit of both.

Okay.

Um, but I mean, you could have 15, 20-minute headways. It's like, if you miss a train, you're gonna sit your butt there for a while. Uh-

Because of ridership problems? Is that why?

If you look at the actual map of the MARTA system, I mean, it's basically... It's more for commuting to downtown, right? You go from the airport to, like, really far north, and then there's an east and west line, and they meet up downtown. So it's... I mean, it's not like an everyday, uh, get around everywhere type of thing. Atlanta's very suburban and low density, so you know, it doesn't really have the, the setup to have a subway system like New York does.

That's, that's my complaint about some of the, some of the stuff in Fort Worth, Dallas, is there's not enough ridership to keep that stuff-

Right

... going, like, every five, 10 minutes.

Right. Now, with all of that car traffic being shifted to, or a lot of it being shifted to the subway, ridership is up, fares are up, and you're gonna have, for the leftover vehicles, that $9 toll going back into the, to upgrading the MTA, which is sorely needed.

Are you saying that Mattie Parker, Mayor Parker, should do this in Fort Worth and eliminate cars altogether? I mean, they already took away valet parking from downtown Fort Worth. Why not just get rid of the car altogether?

I mean, I don't really think Fort Worth is set up to handle something like that. I think, uh, however, like, in principle, I am a fan of charging for whatever externalities, uh, you know, a decision that you make causes, right? So, um, I don't think that free parking downtown is a good idea. I think free parking induces more car trips than would otherwise be needed, right? Wouldn't it be better to carpool, uh, because parking costs $5, than it would be to take three cars because it's free, who cares? But going back to Manhattan, there's an actual cost to society for having that many vehicles come in to that part of the city, and especially when you consider that a lot of the time, it's actually... a lot of the traffic in that area was actually just people circling the block trying to find parking. Um, but i- if it's not the driver bearing the cost, then everyone else is gonna bear the, be bearing the cost. Because by subsidizing those tra- those car trips, you're encouraging more than the market would otherwise, uh, desire if they were paying the cost.

So are you pro managed lanes?

I, I am pro toll, yes.

Okay. Okay.

I, I, I, I almost exclusively use them. Like, I'm happy-

I don't like them everywhere-

... I'm happy to pay $3 in traffic

... but I do, I do like them-... I do like them in clearly through-fare situations, right? So if we're talking Fort Worth here, 820 that takes you to the airport, to 121 to 183, right? Makes a lot of sense to me that we have managed lanes in that area, because there's so much traffic that's non-localized coming through there, right? So that makes a lot of sense to me. Uh, I'm not a huge fan of charging everybody who lives in Keller a toll to get to Keller. You know, I, I, I feel like we kinda did that one to ourselves. I'm not sure we should charge them a toll lane for it.

Uh, uh, in what scenario would, would that happen?

Well, if you're, if you're driving from Beach Street-

Mm-hmm

... and you wanna get to Golden Triangle-

So you're say- okay, you're talking about literally a congestion pricing in, in, on surface streets in a city like Keller?

Correct.

No, I think that's-

Yes

... not workable.

Yes. So I, I just wanted to be- I just wanna be clear-

Yeah

... about, like, the difference between, like, a localized conversation and a non. Like, you can jump on 820 or you can jump on 35 to go where you wanna go, or instead of being on 820, you could just take 26, right?

Yeah.

Where you could take-

I, I, I think it's all context dependent.

You know, other- like, there's some options there.

The reason that it works in London and New York is not because on principle, like, it's the only solution. It's because in those settings, it is a good solution. Chicago, San Francisco, like, these types of places, it could work.

Right.

Keller, Texas, it's not gonna work.

Agree.

Okay.

Okay. I think these numbers out of New York are fascinating, though. The 63% change, the Lincoln Tunnel was a 46% change. I mean, really, honestly fascinating.

When you price things... And I think that the pricing is actually too low. It should probably be, like, 15, 20 bucks. But when you actually price things, it allows people to make more informed decisions. Like, literally, the fundamental th- reason that prices exist is to send signals to the market about how much something is valued at. When people want more, price goes up. When people want less, price goes down. Um, or on the other side, if we're not charging enough, people will want more, and if we're charging too much, people will want less, right? So it's this counterbalance, this sort of, um, equilibriating force. There's so much knowledge encoded in prices that I think we really take for granted.

Right.

And if you're basically getting subsidized in that decision, then you're going to use more of that resource, or you buy more of that thing. This is why I'm perfectly fine with, quote-unquote, "price gouging." I feel like if there is a hurricane coming, and you know there's gonna be a run on gasoline with people trying to es- to, to leave, they're all gonna fill up their car to leave, and you don't raise the price, people will overuse, and there will be less gas for everyone, right? This is a unique scenario where pretty much everyone needs to buy gas at the exact same time, as opposed to the normal course of business, where people can kinda fill up as they need to. Everyone's trying to escape. Everyone needs gas. Raise the price, let people buy enough gas to get out, and then they can buy more after they're, you know, safe.

Don't worry.

As opposed to everyone filling up today, and then there's not enough gas for everyone to, to actually be able to escape.

Don't worry, friends. Chad will one day have a hard time in life, eventually come outside of his body, look at his life, and figure out that he didn't treat people as nicely as he should have.

Do you think that it is nicer-

Your whole conversation right there-

No, do you think that it is-

... was like Scrooge.

No, do you think that it is nicer for people who get to the gas station earlier to use all of the gas in an emergency and have none left for the other half of the population, or for everyone to get a little bit and pay a little bit more to ration it?

I just think sometimes you can't-

I understand that that means that the gas station makes more money, and that may seem-

Uh-huh

... unfair, but to me, it's more fair for the price to be adequately set and for everyone to be able to use some of the resource that's needed, versus only some people to be able to use all of it.

I would agree. Uh-

It's not a typical market scenario in a situation like that. If they had raised the price of toilet paper in March of 2020-

Uh-huh

... like, doubled it, we wouldn't have had shortages. Because what it does is two things. It signals both to the consumer and also the producer. It signals to the consumer that this item is more valuable right now, and so I have to make a decision about whether I want to spend more to consume as much as I'd like or spend the same and consume less than I'd like. And then it signals to the producers that, "Hey, this is in demand. Let's generate more to the extent that we can."

And, folks, that was your microeconomics conversation for the day-

I'm just saying, if-

... from Professor Chad.

If toilet paper had doubled in price, we wouldn't have had this, the kind of hoarding that we had, and people would have been able to get toilet paper. Thankfully, I have a bidet, so I don't need toilet paper.

No, don't need toilet paper, you-

Not to that extent.

Yeah.

You still have to use the bidet.

You found what we call in economics a market alternative.

Yes.

Yes.

Okay.

So-

All right, so last-

Congested pricing

... All right, hit me with this one. You're gonna have to do the, all of the explaining, because I ha- uh, I'm coming into this blind.

Okay, so pretty simple here. Um, the state of Texas, through the attorney general, has filed a lawsuit against Allstate Insurance and a couple of other companies that were involved in a scheme to collect driver data in order to raise rates. So Allsta- Allstate used a third-party firm that-... paid app developers to install a software development kit called Arity SDK, which is embedded in a number of apps, including Life360 and routinely GasBuddy and Fuel Rewards. And it would send information to a company that Allstate created, that would then track the driving and information of those specific unique users, and then Allstate would sell that information as a driving record to themselves and other insurance providers in the state of Texas, to then be used in your rates.

Okay, so you install GasBuddy, which many people do, try to find the cheapest gas.

Many people do, yep.

GasBuddy has a secret relationship with some other company that has a software development kit.

Which is owned by Allstate.

The software development kit tracks metrics on their driving.

Correct.

Then that data gets sold back to Allstate, which is the same company-

Correct

... right? Same, basically the same thing. And then Allstate uses that for their own purposes to set rates, and also sells it to other agencies to sell it to... Now, are they doing this on a, on an individual basis, or is this more aggregated?

No.

Like, are they able to say-

They're doing it on, uh-

They're able to say, "Oh, that's Chad-

Yes

... from GasBuddy, and that's the same Chad that has Allstate.

Yes.

And I know now exactly how you're driving."

Yes.

Okay.

They're connecting the private individual of the user, which is, which is the complaint also of the Attorney General's office. This is what they write: "If a person was a passenger in a bus, a taxi, or a friend's car, and that vehicle's driver sped, hard-braked, or made a sharp turn, defendants would conclude that the passenger, not the actual driver, engaged in the bad driving behavior." Right? So they had no idea who was driving.

Mm-hmm.

They knew where the phone was that had the app on it, and they knew who that was assigned to. And so anywhere that device was, they assumed that everything that was occurring was happening on that device. Not in the aggregate, but in the individualized data collection of the individual, which I know a lot of folks don't talk about. You and I talk about stuff like this quite a bit. Um, but, you know, this is kind of an issue. Users unwittingly granted A- Allstate access to their data by agreeing to share their location, um, which is required to access the majority of their features, according to the suit. Allstate's data collection violated the Texas Data Privacy and Security Act, the Data Broker Law, and the Texas Insurance Code's prohibition on unfair and deceptive business practices, according to the suit. Now, I'm gonna say this again, 'cause I've said it a couple of times on our podcast, this is another example. I'm proud of the Attorney General's office on this one. Give them some claps, some back, back slaps, good boy. But the reality is, is the insurance industry in the state of Texas is absolutely, absolutely fleecing people, and we know it, and the Texas Department of Insurance has been so handicapped by the legislature that they're doing very little about it. And this is one of those areas where we are allowing the insurance industry to rate people based on an application, and what's in there, and the, um, information that they gather, and it may have no impact on them whatsoever, right? Um, I mean, I'll use an example. When we were, like, a really small company... Um, interesting fact about myself, folks, never used an illegal drug in my life, okay? I know that may not be for everybody, and no judgment there, but never done it. But when we became a company and I rolled out of Hudson Oaks, I went to go get health insurance, and when I went to go get health insurance, the health insurance company said at some point in my life, there was some record of me possibly being a cannabis user, right? And they would not insure me because of that. Wrote me a letter and everything. Never used cannabis in my entire life, but they would not provide me any of the information to show where they got that from, so I have no idea how that happened.

Probably Facebook. They probably found a picture of you back, back in college.

But I mean, back in college. I'd, I'd never done it. I've, I've never done it. But this is the world we live in now, right? Where it's like they don't actually need, like, proof beyond a reasonable doubt here, they just need some inclination to cancel you, right?

So how do you, how do you, um, balance... Obviously, this scheme here is unethical and problematic in terms of applying data that they have potentially erroneously to specific individuals, right? If you don't know that I'm actually driving the car, then it's kind of bullcrap to assume that I was driving the car, if you're going to now increase my insurance by 10%.

Correct.

Um, especially if I've never had an accident or a claim.

Right.

That's kind of crappy. I get that. But how do you balance the stuff that you're talking about versus, like, in California, where their insurance market is totally screwed up because the legislature doesn't even allow them to, like, raise their premiums? And so their only option is to just kind of sit there for a while and then be like, "Uh, I'm out." Right? I mean, the number, like... They're dealing with terrible fires right now.

Mm-hmm.

And six months ago, the insurance industry said, "We have to raise premiums because of this fire risk, and if we can't do it, we're gonna back out of the market."

So that same-

Right, so how do you, how do you sort of balance?

The same insurance industry, but that same industry in Texas has raised rates 25 to 30%, which we later found out was because they took profits in their reinsurance companies and passed those profits through-... in addition, as expenses to the insurance companies in Texas, and then raise rates, and then applied later for the rate increase to TDI. So I, I'm gonna be honest, I think the indus- I, I think the insurance industry right now is as dirty as it can be. I, I think it is a, a basically a money-laundering machine out there. Um, so, you know, I-

So you're saying we're in the wrong business?

Uh, we're for sure in the wrong business, yeah. There's, there's no doubt, and I'm saying that the insurance industry at this point is bought and paid for. Um, you know, they're taking losses in other states, and they're moving those losses into Texas. Now, overregulation in the California market, I think is a little different, but my thing is, is, like, it's- insurance is kind of a utility, so regulate it like a utility. And to be fair to California is, you know, and look, we're not always fair to California, right? But to be fair to California, they have to justify those rate increases to, like, a PUC-style board, right? If they can't justify it, then why would they get the increase? I mean, I, I just... It's, there's no other game in town. It's a regulated industry, right? And so they need to be able to justify the increase that's there. They need to be able to justify their losses, and, and yeah, I, I do believe it's there, but they're playing games. They're- they've, they've got multiple layers of companies now that are all taking margins, feeding into a parent company, and then they're using those multiple layers to get rate increases at individual state levels. Um, and, and the insurance industry is just broken. It's, it's just broken. Um, homeowners insurance is basically turning into the same market as, as medical insurance. So could you- can you justify with our eight to 10 employees, what we pay in medical compared to what we actually cost on a margin?

Um-

I mean, the answer to that question is no, our loss-

No

... ratios are-

To the... Well, uh, except for the fact that because we only have so many, the risk is higher that there could be, like, one catastrophic event significantly turns our, you know, our balance upside down.

Right.

Versus if we are in some kind of pool with thousands of other small businesses, where they can kind of share those risks a little bit more. So, I mean, I'd caveat it with that at least. I, I think-

The insurance industry is, is, is just, I mean, in general, they are... They're known on the market, right, as m- easy money-making machines. It's like investing in Coca-Cola: you're gonna make money. So if, if you buy Allstate stock, you're gonna get a dividend, you're gonna get a return, and, you know, they're, they're just, they're... But these, they're making significant sums of money. Uh, and yes, they're papering losses in specific states so that they can move those losses to other areas. That's happening, and you can make all the environmental arguments you want on the stuff in California. You can, you really can make management arguments about California. I mean, you know, controlled burn arguments, movement of water, all the different types of stuff that has hit the public media sphere at this point. Um, you can make those arguments. Um, but, you know, the reality of it is, is that the insurance industry is, you know, it's... Especially in Texas, man, you, you look at the, the rate increases that have occurred on homeowners insurance in Texas over the last just two years, it's been significant. Significant. My, my personal homeowners insurance has gone up more than 45% in the last year. I don't know what yours is.

Um, I don't think it's been that much.

So, but it's, it's been wild. Um, but, you know, we... M- my biggest issue is just be transparent about it. If you're gonna be a regulated industry and be able to do business in a state the way that they do it, and under the confines of that safety net that we provide you as a public entity, then you should be more transparent about where all your costs are coming in. That's, that's the only thing I have to say there. And this clearly shows me that the insurance industry is a bad actor. Very-

Yeah, so I-

Very clearly. This is no different than banks in 2008, 2009, purposely charging significant overdraft fees and doing things to put people in overdraft by charging fees, and then Bank of America having billions of dollars of settlements that happen because of business practices. I, I, I don't think that's any different.

I think most people will do what they can get away with, while they can get away with it. But I, I think this particular one speaks a little bit... Like, I don't disagree with you. I think this is proof of bad faith.

Yeah.

So, like, we can, we can agree on that one. But I don't think that this is a problem that's gonna go away with one lawsuit, because the ubiquity of all of this data, coupled with massive increases in compute power, it means that everyone's gonna be looking for this advantage, whether it's, like, an actual, um, logistical or, you know, efficiency advantage, or if it's just another way to eke out as much money as they can. Like, everyone-

I still don't know how you-

... is gonna be doing this.

E- exactly. I don't know how you fix it, and, and I'm sorry, but a billion-dollar penalty for Allstate, which by the way, gets rolled back into their numbers-

So they can increase rates

... and then paid by rate payers. Yeah. Um, it's, it's, it's just not gonna fix it at the end of the day. Like, the, the only way you fix this is you tell Allstate, "You can't do business in the state of Texas anymore." Like, you violated the, you know-

You broke the public trust

... prohibition on unfair and deceptive practices by?... just throw them out of the state, and people are like, "Well, you know," you know. Look, you would have plenty of insurers that come in there, that come into the state that wanna insure you if we would fix the reinsurance side of insurance, the catastrophic event reinsurance. Which if you go down to the coast in Texas, everybody on, on the coast is insured by governmental insurance. The Texas windstorm coverage-

Mm

... covers everybody down there, because the private insura- insurance industry doesn't wanna take the risk in those areas. And so my, my comment is, is, okay, pick up s- the reinsurance industry. Y- you're sitting on $35 billion of rainy day funds, put $3 billion in a reinsurance fund, and, and allow smaller insurances to compete, and, and you'll fix it. Create more competition. Um, but now you've got five or six major insurance companies that control the world.

So not to, not to derail again here, um-

Yep

... and I know that we're running long, but speaking of the rainy day fund, can we hit on just one little thing here from the comptroller before we-

Yep

... peace out?

That we've hit, that we've hit the constitutional cap for how much cash we can have in the rainy day fund?

No. The, the biennial revenue estimate is out.

Oh, yeah, go ahead. Yeah.

Texas lawmakers will have $194.6 billion available for general purpose spending, a 1.1 decree- 1.1% decrease compared to '24, '25.

But everything's great.

We just, we just made a bunch of decisions in the last session regarding school funding, under the assumption that this gravy train was gonna keep rolling. Our-

Well, it was two sessions ago, and last session, right?

Yeah, the last two.

So technically-

But the $100,000-

adding up to two sessions

... extra homestead was last session.

Correct. Yes.

And we've been talking about using sales tax to buy down property taxes. Like, n- are we at a point where we can admit that none of that's gonna be sustainable? Like, we all agree on that now.

It's getting pretty close. A- a- actually, if you read the, the last half of this revenue projection, he's actually pretty honest in there about, like, if it's not for severance taxes and for these areas, like, we've really... And, in fact, he pretty much instructs the legislature that they should lift the cap on the rainy day fund, so they can put more money in there to prepare for, you know, catastrophic economic event, right? I, I think we're getting there. I think we're getting really close to that. I think it's something we've gotta really start to think about, and yes, they are kicking that can down the road. By the way, they sat on $4.5 billion that they funded for public schools and didn't fund it. So technically, school districts have not gotten an increase in per capita student cost since 2019. Just throw that out there. They're still funded at 2019 levels. So there's gonna be $10 billion of new money that has to flow into public schools, of the $23.5 billion that they have in surplus, and that's not really gonna be covered in reoccurring revenue issues down the road. So that's a hole they have to dig themselves out of in the next session, not the one we're in now. Uh, yeah, I mean-

They have to do it on 2.5% property tax increases.

Exactly, and the Texas Public Policy Foundation says-

"It's too much!"

..."should be easy. It's too much!" So anyways, that's all we got for you today, folks. I know that was a really long ton of information. Uh, if you got any questions for us, as always, reach out to us, but thanks a lot. Thanks for hanging out with us. Bye, Chad.

Bye, Patrick.