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Smaller towns and cities with stable revenue streams and locally funded
job bases continue to beat the odds and in some cases show signs of growth.
Those who have followed our Tales from the Road series are now familiar with
the pattern of economic activity that we have uncovered and continue to report
on frequently: smaller cities with a strong university, a health care based economy,
and local businesses that are supported by travelers and locals continue to hold
their own during these difficult times.
We have reported on Wichita Falls, Texas recently, suggesting that while things
there aren't booming, they certainly are not in the condition that large cities
such as Detroit have come to.
This time around, we are reporting on Waco, Texas, a city that is the first major
stop on the I-35 corridor between Dallas and the Austin-San Antonio area. Last
year, at this time, we noted that economic activity here was fairly good, especially
in restaurants and hotels.
The asterisk in our observations was that we were there for a weekend tennis
tournament, which brings in families from all over the state and generates business.
This year, though, although we are here for the same reason, we are seeing growth,
not just localized and temporary activity from a sporting event. Last year we
stayed at the hotel where most of the tennis folks stay. This year we stayed
in a different part of town, the south side, where the economy is more indicative
of the local scene. The hotel we stayed at had few tennis players, which gave
us a better glimpse into the local economy and activity.
The hotel is strategically placed, just two blocks north of a new hospital whose
parking lot was packed when we passed by it at about 8:00 in the evening. It's
clearly a regional medical center as it has a well marked helipad.
There is an expansion of a freeway system ongoing that rivals that in any larger
city in design, with multiple loops and overpasses crisscrossing over each other.
Accross the highway there is a large mall whose stores and restaurants had plenty
of customers in the parking lot.
We had to wait in line 30 minutes to enter a local chain owned steakhouse, the
privately owned Logan's Roadhouse, while other restaurants in the mall were also
doing brisk business. Shoppers were also going in and out of retail shops such
as Sports Authority, Lane Bryant a division of Charming Shops Inc. (Nasdaq: CHRS),
and Chico's Fashions (NYSE: CHS). Chico's is rounding out a base after a big
hit during the year. The stock is your basic 3-star at the moment. A move above
15.28 would raise it to a 4-star.
Chart Courtesy of StockCharts.com
The rest of the city is mixed. Off the beaten path, there are plenty of shuttered
stores. In the north side, just off the highway there is a closed and shuttered
strip mall where hordes of blackbirds roost as the sun goes down. Just south,
as you head toward Austing, Hewitt, Texas is a different story, with newly designed
banks built next to vacant lots. Inhabited mobile homes take up lots next to
the roadway, while a fairly new looking Dairy Queen is permanentlhy closed and
for sale. Wonder if Warren Buffett knows about this one.
Everywhere there are signs of government money at work, as I-35 is being renovated.
So who says that there isn't infrastructure renewal in the U.S.? And it's clear
that some kind of stimulus money, either from state coffers, or from the Bush-Cheney
years is making its way to Waco. This is not uncommon. As Clinton and Gore left
office, we drove through Arkansas and Tennessee and the amount of highway contruction
that was under way was similar to what we're seeing here.
Housing is also mixed. We cruised one neighborhood, again on the south side of
town and saw a few For Sale signs. But there was nothing compared to what we've
seen in Dallas of late, where during Thanksgiving week we saw an entire block
of housed up for sale in Richardson, a fairly well to do neighborhood.
Road traffic on I-35 was busy, but not at the levels we saw last year. One road
side steakhouse that had been busy the last few times we had come this way, seemed
shuttered. There is still lots of farmland up for sale. Gasoline prices ranged
from 2.49 to 2.57 or so. Gas stations and convenience stores were all doing brisk
business, especially those with liquor sales available.
Perhaps the most interesting bit of news about Waco is the fact that Baylor University,
long the pillar of the community, is starting to put its mone to work. The university
is moving its behavioral services division to ironically, the Wells Fargo business,
downtown. The university's public relations campaign for the move is also interesting,
as it is billing the move as one which signifies that it is starting to expand
its reach into the community at large.
The most symbolic part of the move is that downtown Waco is on the West side
of I-35, an area where the univesity has rarely been present in the past.
Conclusion
The pattern is evolving. Some of the evolution is familiar, some of it hints
at some new twists. And it's easy to see how this could play out for investors
and workers in the next decade.
Large cities are starting to lose their allure and small to midsize towns with
the right mix of jobs and businesses are starting to become attractive.
Perhaps the most important aspect of the transition is that size clearly matters.
In Wichita falls, which is a city of roughly the same population as Waco, we
saw a slightly diminshed but steady economy last month.
In Waco, certainly by the gauge now known as the "new normal," a boomtown is
in the makings. The difference is that Waco has Baylor University, an institution
with very deep pockets. The city is also positioning itself as a regional medical
entity.
It's no accident that the south side of town, where the new hospital is taking
roots, is where the highway building is most aggressive and where the mall is
packed with shoppers.
Still, you get the feeling that the future is somewhat uncertain. Tax and interest
rate policies, almost certain to change within the next 6-12 months will be the
next hurdle. Until then, though, anyone looking for a job, or maybe an adventure,
such as starting a new business may consider a place like Waco.
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