Unknown: The cost of living in San Francisco is three times, Arizona. So we had a lot of people locating here and working virtually from our state. Now they want to stay here, we're going to need all hands on deck because the gravity of this crisis is very, very real. And there is no guarantee that New York City just comes back the way we wanted to. There's an entrenched culture that needs to be respected in Texas, because that's why Texas is the way that it is. Katie Schoolov: Arizona land of snowbirds and the Grand Canyon retirees and ATVs is rapidly gaining a reputation of an entirely different story. It's
becoming an epicenter of electric vehicles and self driving tech, as well as a new surge in semiconductor manufacturing as the US tries to address the worldwide chip shortage. Unknown: I would say Arizona is the semiconductor capital of the world. This is going to be the hub Intel's $20 billion investment in Arizona, building two new fabs and Taiwan semi is something that I don't think has gotten the attention it deserves. Katie Schoolov: Taiwan Semiconductor or TSMC is indeed building a $12 billion chip manufacturing plant in Phoenix. Tesla rival lucid motors built a brand new electric vehicle factory in the state along with Nikola and Electra meccanica. And Wei Mo's, fully driverless rides are now available to the public in Arizona only.
Unknown: So cost of living. It is the great environment. People love it. People love to be in Arizona and I think that also helped us to attract talent all over the place. Katie Schoolov: In 2020. Phoenix attracted more residents than any other US city for the fourth year in a row. 634 companies relocated or expanded in Arizona between 2015 and 20.
creating 13,000 jobs in manufacturing alone. We headed to the desert to ask the governor big companies and those living amidst the boom How is it changing the state and why Arizona the sixth largest state by area Arizona first became well known when a major mind opened there in 1854. And copper mining remained its primary industry for nearly a century. Slow to grow. It became the 48th state in 1912 and didn't
experience a population boom until after World War Two when air conditioning became widely available. Phoenix has been growing ever since. Now surrounded by a vast sprawl of suburbs and agriculture. Unknown: Everybody knows the five C's of Arizona copper cattle, cotton climate and citrus. I think you could add two, maybe three additional C's, you've got chips, you've got electric cars, and you've always had construction as well.
Katie Schoolov: During World War Two, GM started using about 4000 acres outside Phoenix to test parts its supplied to us army tanks, Toyota, Ford, Chrysler and others were all soon testing their cars on Arizona tracks to aerospace manufacturing has also been huge. Raytheon has made missiles in Tucson since the 50s and recently expanded there. Boeing has built its Apache helicopters in Mesa since the 80s. In 1969, Motorola kicked off another state trend when it began manufacturing semiconductor wafers at a factory in Mesa. But during the Great Recession, 300,000 Arizonans lost their jobs and home values were down $100,000. So in 2011, the Arizona Commerce Authority was formed to attract new high paying jobs. One of the first
big wins came in 2015 when Apple invested $2 billion to build a data center outside Phoenix in the years since the list of companies relocating or expanding in Arizona has exploded. Caterpillar, Infosys benchmark electronics blue yonder insight, zoom, cognizant, and many more. Businesses growing in the state in the last decade have promised to bring almost $34 billion and 191,000 new jobs in exchange for some big incentives. Unknown: We have a Foreign Trade Zone program. We also have some quality job tax
credits. So as a company creates jobs and makes capital investments, those programs are available to all companies Katie Schoolov: filling all these new jobs are lots of high skilled workers flocking largely from California to states with a lower cost of living while the pandemic allowed them to work from home. Unknown: If I can work in Arizona, I can have twice the house a newer house with a pool. The cost of living is cheaper, my taxes are cheaper, and I can tell at work. Why wouldn't I live out here? Katie Schoolov: Real estate agent and single dad Chris Barker was raised in Arizona. After 16 years in Maryland. He moved back to Phoenix
with his two teenage kids during the pandemic last year, but it wasn't the same. Unknown: A lot of the beautiful things that I used to enjoy about Arizona have kind of gotten spoiled. Slide rock in Sedona snowbowl all these like cool places that Arizona had to offer one now there's just such influx of people that it's almost miserable. I can see like the pollution is thicker. There has been, obviously a lot more traffic.
Katie Schoolov: But for many, the cost of living is still a big plus Unknown: the cost of living in San Francisco is three times, Arizona. So we had a lot of people locating here and working virtually from our state. Now they want to stay here. Katie Schoolov: The business friendly regulatory environment and lower taxes are also a drop. The Tax Foundation ranks Arizona
24th for business tax climate while California comes in 49th. Unknown: In Arizona, we've eliminated wipe off the books 2751 regulations since 2015. That's the equivalent of $150 million tax cut, and that's the direction Arizona is going to continue to go. Katie Schoolov: This coupled with Arizona's long history of manufacturing has helped the state attract an entirely new industry electric car companies. Although Arizona lost a bid for Tesla's first Gigafactory to Nevada in 2014, the state's big break into EVs came in 2016 when lucid Motors announced it would build its $700 million electric car factory in Casa Grande. Unknown: We had an extensive survey of about 65 sites right across the US against the whole range of criteria. And we made a really good
decision here to come to Arizona. Katie Schoolov: And then there's Arizona is proximity to Mexico, where companies are making components for GM electric vehicles and for lucid. Unknown: It was our third interview with lucid the final question was How is your relationship with Mexico and Mexico is Arizona's number one trading partner it's not even close.
Katie Schoolov: Evie companies in Arizona can easily access supplies from nearby California and beyond via a major railroad system and I attend a major trucking route. Unknown: That was the very attractive thing about Arizona that we have this being close to supply chain being close to our headquarters having enough space to grow that's what we found here. Katie Schoolov: Loose it broke ground on its 590 acre factory in 2019. After some delays loose it says its air dream edition is now in production there with customer deliveries coming later this year. Unknown: The workforce force work role for an author 4000 people their Katie Schoolov: electric semi truck maker Nicola which made headlines for some big missteps last year is headquartered in Phoenix. It's building a new factory in Coolidge, Arizona scheduled to start producing its niccola tray in 2022.
Unknown: Phase one of Coolidge is is basically done on the exterior. So now it's all the interior work at this point. It's on schedule. We should we intended to have that first phase complete and in operation this year, and we're on track to do that. Katie Schoolov: Another electric vehicle being manufactured in Arizona is the single seat three wheel solo. Electromechanical says
its new factory in Mesa, which just broke ground will create 500 jobs and eventually produce 20,000 solos per year starting in early 2023. It's also creating sharing pods of solos, similar to short term rentals of electric bikes and scooters Unknown: between being near our target market on the west coast and the willingness for these five municipalities to test that solo share. That was probably the tipping point for us that really helped us decide on Arizona.
Katie Schoolov: Rivera says access to the Eevee supply chain much of it now being manufactured in state was a huge factor in choosing Arizona, Unknown: the secondary supply chain, the tier one suppliers who are all going to support us in addition to those that are already here, supporting lucid and Nikola, for example, Katie Schoolov: UAC J Whitehall, a leading supplier of aluminum components for EVs just announced its opening a new plant in Flagstaff. Lithium ion batteries are also a crucial part of the Eevee supply chain and battery recycler lifecycle is now building a new recycling facility in Gilbert, Arizona. And now Atlas motor vehicles known for its electric x t pickup truck recently announced it's building a production line for battery packs and sells at its headquarters outside Phoenix. Unknown: A number of our employees that came from California, they love that for the price of an apartment with three roommate. They can have a house and by themselves and that's very appealing, but they still have the benefits that they had in California. Katie Schoolov: On top of a growing supply chain and robust manufacturing Arizona is known for ideal testing conditions for vehicles. six major
test tracks or proving grounds are scattered in remote Arizona deserts where major car companies can discreetly test their new cars. GM Ford, Toyota, VW, Chrysler, and Nissan all tests their cars on these tracks. low rainfall and winds allowed testing almost every day of the year. The extreme desert heat is also a draw Unknown: here in the summer, it's as hot as it gets anywhere. Which is not great. Well You're in
the middle of it, but it's great for testing vehicles in hot weather. Katie Schoolov: Arizona is now one of the first testing grounds for driverless cars to they've become a common sight in some cities surrounding Phoenix, which have ideal wide streets for testing designed on a grid. Unknown: I think that there is truth to the fact that the infrastructure here is fantastic, right. But I think that the bigger and more appealing attraction is the forward dynamic and forward thinking government here and the fact that you bring in companies like Uber and Waymo, and cruise, the willingness to allow those kinds of companies to test Katie Schoolov: in 2015, Governor Ducey signed an executive order allowing testing of autonomous cars on public roads. Since then, Waymo, Uber,
Chevy, Ford and cruise have all tested their self driving cars in Arizona. Although Uber sold its self driving division last year, five years after it began testing in Chandler, Arizona, Google's Waymo now offers fully driverless rides to the public there. Now Walmart is testing self driven deliveries by GM owned cruise cars in Scottsdale and autonomous semi truck company two simple announced a major Tucson expansion in January before going public in April. Unknown: We are the first and only autonomous driving company to be publicly traded. It's
really a validation of our shareholders confidence in us and our technology. Katie Schoolov: Semiconductors which have a long history of being made in Arizona are another crucial part of self driving tech and the electric vehicle supply chain. Intel started making chips there in 1980 and now has plans to rapidly expand in the state as demand surges. Chips are in short supply after the pandemic up ended supply chains and caused consumers to buy more electronics. Intel which says its tech powers nearly all autonomous vehicles has four factories in Arizona and two more on the way. Unknown: Today Intel is announcing a new $20 billion investment, the largest private sector investment in Arizona history. These facilities
will add 3000 high tech high wage jobs to the state of Arizona. Katie Schoolov: Amid the worldwide shortage the US share of global chip manufacturing fell from 37% in 1990 to just 12.5% in 2019. The world Unknown: more than ever is counting on Intel to deliver you know innovative products.
Katie Schoolov: Intel's two new Arizona factories are scheduled to be online by 2023 and will make Arizona its biggest manufacturing site in the world. And it's far from alone. TSMC, the world's largest contract chip manufacturer with customers like Apple and Qualcomm has a goal to manufacture 20,000 chips a month and it's new Phoenix fab by 2020. For the first factory of its kind in the US, Unknown: Arizona is considered one of the top four states in the country for the concentration of semiconductor talent.
This will continue to elevate Arizona's position to a top state in the country. Katie Schoolov: Chips are vital for powering our modern lives. But making chips takes an incredible amount of water, two to 4 million gallons of water a day for a typical fab. And water is not exactly plentiful in the desert. Arizona's biggest water source is groundwater, which is accessed by Wells. But deeper and deeper wells at big farms are using up groundwater faster than it's naturally replenished. So some manufacturers have
added on site water recycling at their factories, Unknown: overall. Lyon portion of our water is reclaimed. In order I would say more than you know 80 to 90% is reclaimed. So that's very, very significant. And we use in billions of
gallons, you know, per year for the overall company. Katie Schoolov: Intel says it treats 9 million gallons of water a day adding much of it back into the local supply for things like irrigation. Arizona has a history of reusing almost all its grey water to cool power plants and to water fields, storing water banks in underground aquifers and restricting irrigation in urban areas. Unknown: We are using less water today than we did in 1957. With six times the population.
No one is better in the country than Arizona with water. Israel's probably the best in the world at water with Arizona right behind them taking advantage of the generational projects like the central Arizona project and then the drought contingency act that we passed in this administration. And before that we had the groundwater management act so we continue to focus on water, Katie Schoolov: major tributaries, and 336 miles of manmade canals allow 36% of the state's water to come from the Colorado River.
Unknown: The growth has not been limited by water at this point. The water this year is extremely well utilized. The Colorado River sometimes doesn't even make it to the ocean because it's all used every every drop of it. Katie Schoolov: Lucid also recycles the water it uses to make Air.
Unknown: So we have a water treatment system in our our plan so we double treat the water and we put it back into the system. Katie Schoolov: Making cars and chips takes a huge amount of energy to US News and World Report ranks Arizona as the second most reliable power grade in the country, and its energy costs about half of California's industry rates. Unknown: But I would say is great about Arizona is just the overall infrastructure when it comes into power. When it comes to the stability of what we need to count on to run this world class operation.
Katie Schoolov: 14% of Arizona's electricity comes from renewable sources, thanks largely to its ranking as the sunniest state, it generates the fourth most solar power of any state and ranked second in solar energy potential. But all that consistent sunshine also means intense heat. At an average of 99.1 degrees, Phoenix had its hottest month ever recorded last August, and last year was the driest on record for the state. Although Arizona doesn't suffer
from the myriad of natural disasters that California and Texas face. The state does have dust storms, flash flooding and significant fires. Unknown: I think there's a lot of people who are moving here who have not moved here during the summer. So I'm like, I don't know if they know what they're quite getting into. Katie Schoolov: But in recent years, the heat certainly hasn't kept people away. Arizona's population has been on a steady rise for the last decade, up 13.9% between 2010 and 2019. The upside
for the incoming Evie companies and chip manufacturers is the availability of skilled workers. Unknown: We are graduating 9000 students a year from our three universities in the semiconductor industry. Katie Schoolov: And CNBC is mostly recent top states for business rankings Arizona came in 20th. But we're looking specifically at workforce Arizona ranked second. And many of those workers are coming from California. U haul which itself is headquartered in Phoenix and manufactures much of its equipment in Arizona found California was the top state people move to Arizona from more than 10,000 truck customers rented one way from California to Arizona in 2020. Making Arizona fifth on its annual list
of growth states up 15 spots from 2019. There's no denying that all these people, especially from wealthy California, are changing the fabric of Arizona starting with the real estate market. While Arizona comes in right at the middle of the cost of living index. A typical Arizona home value is about $329,000 About half the typical home value of California, at least for now.
Unknown: My mortgage is three times less than what our rent was in Seattle. Katie Schoolov: During the pandemic last year, Arizona native Brooke Sanders Silverman and her family moved back to 1000 square foot home that she bought in Tucson in 2010. Unknown: When you have a four year old running around, it's like the space gets a lot smaller, quicker. Katie Schoolov: They intended to quickly upgrade to a bigger house Unknown: probably three to four days a week either by mail or phone, I get an offer to buy my house for full cash. Katie Schoolov: But She declines these offers because her own home search has been unsuccessful. She put in an offer $10,000 above asking price on her dream home in September, and another offer a couple months ago.
Unknown: We went in for full offer and I think it went for about 100 over. I'm just I'm just baffled by these all cash offers sight unseen, they don't want to inspection. The cost of living has gone up so much that I don't think a lot of retirees can afford the current housing market as a whole. We're looking at
anywhere between 30 and 40% increase from July up until now of home values. And that's nuts. Katie Schoolov: You walk over here. Sanders Silverman's daughter is starting kindergarten next year. And CNBC ranked Arizona schools all the way down at 47th. Her parents were both teachers in Tucson.
Unknown: What our teachers make here is offensive. I mean, there's no way that they're going to be able to stay here if our you know, cost of living keeps elevating the way that it is in the last few months. And so if we continue to lose our teachers and our good teachers because they can make way more in another state and I think our education is going to continue to decrease. Katie Schoolov: Aside from pricing out existing residents. The population and manufacturing booms have also led to worsening pollution with the American Lung Association finding that nearly all Arizonans are breathing unhealthy air with Phoenix and Tucson worsening in all categories last year. The population boom is shifting Arizona's politics to when Biden won Arizona in November. It was the first time
Arizona turned blue since 1996. You'll see a lot Unknown: of flags of commie Fornia you know you can visit but leave your politics at home California chasing people out there punishing people and producers with lack of a quality of life with onerous taxes and regulation. Arizona is going to remain Arizona Katie Schoolov: as more young professionals relocate from states like California, and the states, Asian and Latino population grows, too, it's no surprise that demographics and politics are changing. The state also had a large voter turnout from members of its 22 Native American tribes.
Unknown: As more and more people move here from Washington State of California, there is a very big undercurrent of people that are upset about it, and they hate it, you know, because not only are they making this place unaffordable for the people that are considered native or have lived here for a long time. But they're also changing the politics. Katie Schoolov: Regardless of politics, Arizona is certainly changing as new people and new AV and Chip companies solidify its reputation as a hub of advanced manufacturing.
Unknown: It really has become a center of excellence here that's just going to get bigger and more important as we go forward. Does there's enough momentum now I think that's inevitable. MacKenzie Sigalos: New York City, arguably the epicenter of the world, one famous song goes that if you can make it there, you can make it anywhere. And it's true. Those that make it make it really big. It's the richest city in the world with a
total wealth of $2.7 trillion dollars 113 billionaires and 25,000 people with ultra high net worth, but the Coronavirus pandemic has rocked the city. At one point the fatality rate was about 10% in over 30% for those hospitalized.
In April, nearly one out of every three new yorkers was out of work and total consumer spending was down by over 40%. The tourism industry, which supported almost 400,000 jobs and generated almost $70 billion in 2019 came to a screeching halt. shootings and murders skyrocketed. Unknown: We talk about economic recovery, rich people don't need a recovery. They're actually richer right now than they were before.
The best case to make for New York is invest in the bottom. MacKenzie Sigalos: The consequences are a potential budget shortfall of at least $30 billion in the next few years, while the area will be getting nearly $24 billion in federal aid soon. State and local officials say that that's not enough. Good morning all raising taxes on the wealthy is one part of Governor Cuomo his proposal if you Unknown: in raised income taxes, top rate, which is currently MacKenzie Sigalos: it would make New York the area with the highest state and local income tax in the nation. Unknown: Most successful New Yorkers are doing great and asking them to pay more is very appropriate. But I think there is a balance that
one has to maintain if you need that iceberg to melt faster and faster. And the next thing you know a big chunk of the tax base has fallen off and floated away. In general migration declines with income, you know, if the rich really just wanted to find a low tax place to live, they've had generations to figure out how to make it work, you then have to cut dramatically.
MacKenzie Sigalos: Another part of this proposal is to cut Medicaid and school spending. Unknown: Cutting Public Services is a very dangerous thing to do both economically, politically and also morally those actually do drive people to leave the city MacKenzie Sigalos: between January and December of 2020. About 93,000 More people left the city than moved in. That's not that much considering New York
City's total population is 8.3 million. But those that left brought $34 billion in personal income with them. Unknown: Is this the collapse of New York City or any other city? No, it's not. There's so much
the New York has to offer. But is it a serious challenge that policymakers need to be grappling with right now? Yes, it is. MacKenzie Sigalos: Watching the city go through this crisis has been really difficult. I was born here and I spent half of my career here. We spoke to experts to find out what some of the challenges are and the potential path to recovery.
economists often refer to post recession recoveries with a letter L U V. or A W. A V is the ideal meaning the economy fell sharply but then will also rise sharply. The Coronavirus pandemic has introduced something we haven't seen before the K meaning that a portion of the economy recovers like the Wii and this case, those who worked from home were able to save and benefit from a sharp rise in asset values. Some corporations did very well to for others, the pandemic has been quite the opposite. In 2020 662,000 jobs were
lost and bankruptcy surged by 40% leading industries like hospitality entertainment, food service or travel were completely shut down. Unemployment in the city is at 13.1% and even higher for those below the poverty line. Unknown: What New York City in New York St needs to do is actually spend money right now and they could spend money really like building affordable housing, rebuilding the roads, rebuilding the bridges and all those things going to put people back to work cutting corners is guaranteed to backfire. First I'm championing a billion dollars in cash relief for the extremely poor then I've proposed trying to get high speed internet to the 29% of New York City residents who don't have it. And I
proposed a People's Bank to help reduce the proportion of New Yorkers that are unbanked and underbanked. MacKenzie Sigalos: on the fiscal side, the city initially projected a budget shortfall of $8.33 billion for fiscal year 2021. But amid your review in February of 2021, showed that a better than projected revenue from income and from corporate taxes is looking to generate a surplus of nearly $3.4 billion. In the medium
term, the outlook is not as good. The study is projecting a $15.6 billion dollar deficit for fiscal year 2022 through 24, mainly due to a decline in property tax collections for the state. Governor Cuomo is estimating a $15 billion deficit for just fiscal year 2022.
Unknown: policymakers should not overreact to the revenue shortfall they have right now. It's not very significant for all of the concerns about our revenue declined in New York. tax collections were down about 1%. Last year, that's well within the state's ability to cover. Now the state's
expenses keep going up. So flatline revenue is still a challenge for the state because those expenses keep rising. But nonetheless, this is manageable.
MacKenzie Sigalos: Regardless, city and state officials are feeling the pressure. There are a number of proposals for the road ahead. President Biden's American rescue plan signed on March 12, includes nearly $24 billion the various levels of the New York government, that $6 billion will go to the city, Unknown: when you look at the wealthiest people in the city and the wealthiest people in the state. Their wealth increased $88 billion,
right. So the deficit is not kind of arbitrary. The deficit is a failure of city and state policy to tax the wealthy that are gaining the most from the economy and reinvest it into the rest of the economy so that they can see some gains as well. We don't really have data, we do have a lot of anecdotal evidence right now that the wealthy are leaving high tech cities and states during Covid. If they leave, there's a huge fiscal crisis. How do you pay
for all of these services? And that affects everyone, the people who stay either have a higher tax burden, or will receive fewer government services. So there's a real question that policy makers need to address right now. How do you keep these people here? How do you make sure that post pandemic they want to come back? We're moving to a virtual world in which people have choices. The city has got to figure out that these folks are not the enemy.
MacKenzie Sigalos: In 2018, the top 1% made up 42.5% of total income tax collected by the city. According to the independent budget office that was $5 billion in revenue for the city. In January, Cuomo proposed a top tax rate increase of up to two percentage points. Unknown: New York is probably the best place in the entire planet, potentially, to get really, really rich and taxes is not even the priority. Studies have shown that we could probably increase our taxes 60 to 70%. And at the end of the day, the millionaire flight that would happen would be overshadowed by all of the money right the state would still show the city would still show a net positive in revenues.
MacKenzie Sigalos: In addition to New York State's top tax rate of 8.82%. The city levies its own income tax, which can be as much as 3.876%. According to the tax Foundation's calculations, New York is the third most expensive state to live and do business in CNBC does a similar ranking, but it looks at the state's attractiveness for business on that list. The state ranks 27th Unknown: New York City has a very high municipal income tax. And if people are not physically working there, New York City doesn't get that revenue. So as those Midtown Manhattan offices empty out, so to the city's coffers, we can ask the fundamental questions about what sort of society we want, what sort of tax treatment we want. We also have to just grapple with
economic realities, which is there is a tipping point at which people will leave MacKenzie Sigalos: income taxes are just one part of the story. New York City depends even more heavily on property taxes. According to a report by the Real Estate Board of New York investment and residential property sales were down 46% in 2020. That meant a $1.6 billion loss in revenue for the city and state combined. But there's some indication of
recovery January 2021, was a huge month was sales were $6 billion nearly 40% up from January of 2020 Unknown: as taxes slump because values are down the city instead of making tough decisions about its own budget will simply seek to raise rates or to target higher taxes on the remaining value on the remaining land. Lord's on on the remaining businesses and high earning individuals in the city to make up for the loss and create kind of a vicious cycle in which they push away people and businesses and lose more. MacKenzie Sigalos: The fear of high income earners leaving cities or states because of high taxes is common among lawmakers and experts alike. Unknown: It's very intuitive. If what we know about millionaires in general is they're no They're well known to avoid taxes. And have you
know, there's sort of this income defense industry of accountants and, and lawyers and wealth managers who are helping them reduce their tax burden. And so this fits in with the idea of millionaire tax flight MacKenzie Sigalos: Young says that, well, there are anecdotes, the data doesn't support it. He's been analyzing tax returns of the wealthy for over a decade, Unknown: 2.4% of millionaires a year change their state of residency, one at eight of those moves is chasing lower taxes. So we've got
a small fraction of a small fraction. This amounts to like 0.3% of the millionaire population that's moving for tax purposes, MacKenzie Sigalos: a street tax increase on the rich is not the only option. Others like the city's independent budget office have proposed a mixture that would both cut costs and raise revenue. Unknown: The reason you don't see like something approaching an exit in the wake of this is that the value proposition as it's often put of New York hasn't been completely destroyed unnecessarily. I think a lot of really high income
high earning people would in fact probably prefer to live in New York prefer the lifestyle of New York, if they could be assured that it was coming back. MacKenzie Sigalos: This is not the first time that New York City experienced a major downturn. In fact, the city has a long history of them from the 1918 flu pandemic and the Great Depression, to 911 and the oh eight recession. Each time critics have proclaimed the end of the city and each time they've been wrong. The
mayor Unknown: who guided New York City through its greatest crisis is Fiorello LaGuardia. He was the mayor of the city during the Great Depression and World War Two. He worked in a time when the federal government was willing and ready to invest lots of money in its cities. But in the decades after World War Two, over time, the idea of the federal government supporting New York City was no longer in fashion. MacKenzie Sigalos: In the 1960s. The working poor thrived in New York City, there was a free public hospital system, free university tuition at City University of New York schools, a large public housing system, cheap and reasonable subway service, and generous salaries for public service workers. But the services Won't
they weren't cheap. And by 1975, the city was played by a fiscal crisis. It was a time of rising conservatism and the city became a symbol of what was wrong with big government. Unknown: By giving a federal guarantee we would be reducing rather than increasing the prospects that the city's budget will ever be balanced.
MacKenzie Sigalos: President for denied federal aid, and banks forced city officials into an austerity program that cuts social services. Now, the city avoided a bankruptcy. But historian Phillips fine argues that the austerity measures transformed the city's politics, its character, and its demographics Unknown: forever. And in certain ways, the development of the city became much more geared toward the idea that you have to craft city policy with an eye towards retaining and attracting wealthy residents, businesses and doing whatever you can to make sure that they stay here, I would say that in the 90s, if you were going to be a top flight employee of a first tier firm, you had to work in New York. So it's what I would call the network effect. And I would say today, that
proposition has changed dramatically. MacKenzie Sigalos: From 1977 to 1997, the top tax rate on earned income more than half, the state's gross domestic product exploded and the wealthy got substantially wealthier while the poor became poor. Unknown: That's a development that played out over the 80s 90s and the past 20 years of the 2000s. Many of the crises that we've seen in the
city, they've affected people very differently depending on where they are in the economic structure. MacKenzie Sigalos: And here's following the Great Recession, New York City experienced its strongest expansion in decades. This time, though, the economy is in shambles. The state and City's fiscal situation are looking better than previous downturns and not as bad as initially predicted. And the fact that Americans in general have more savings than ever before bodes well for recovery. Unknown: If all of these people felt some assurance that that the city was going to rapidly get moving again and that the city and state were not going to clobber we prosperous, profitable businesses with even higher taxes. I think it
would be there, the outlook would be more positive and optimistic. But right now, I think it's just we're in an atmosphere of great uncertainty. Public services need to be protected and expanded to deal with crises, such as the pandemic. Those are actually, I think, much more important in driving people out of New York or could be more important, then tax increases MacKenzie Sigalos: manageable by historical standards. What sets this pandemic apart is the unprecedented uncertainty short term, that means the speed in which the vaccine will be widely available, and the arrival of federal aid.
Long term, it will depend on whether the city is able to retain its agglomeration economics, that could be at risk if work from home policies are sustained. Unknown: You know, we've heard this story for 1000s of years and the cities always enter we've had plagues before and the cities came back. New York has proven resilient, it will continue to, but that doesn't mean that everything will be normal. We're gonna
need all hands on deck because the gravity of this crisis is very, very real. And there is no guarantee that New York City just comes back the way we wanted to. Katie Schoolov: They say New York is still can't bring myself to leave. I've been trying to stop bleeding, bleeding. I wish we never made. Texas in many respects, stands alone. It's huge. Its
iconic. Its people are proud. And lately, a growing number of businesses and billionaires have decided they'd rather be a part of the Lone Star State than say California. Unknown: This has turned into an absolute tidal wave. They are looking for a state that gives
them the independence, the autonomy and the freedom to chart their own course Texas is big, wide open spaces, there's room to grow. And it's got a very business friendly environment that makes businesses willing to move here to Katie Schoolov: Austin is where Tesla is building its giant new giga factory. Oracle moved its headquarters and Apple's building its second largest campus. Governor Abbott talk to tick tock
about a possible US headquarters there to CBR E and Charles Schwab both relocated their headquarters from California to the Dallas area in recent months. And Hewlett Packard Enterprise is headed to Houston, that pandemic Unknown: in particular has had a really interesting effect, right? If you can work from anywhere, you can still be employed and you know, San Francisco but living in North Texas, our real estate costs are a third of what you get in, you know, the Bay Area. Of course, it all depends on having electricity to keep the the web, you know, going, especially if you're going to be telecommuting, Katie Schoolov: but long before its power grid was decimated by February's historic winter storm, Texas was experiencing a major bill. The state's economic development agency says there's been a tremendous increase in corporate relocations since the pandemic hit with nearly 200 projects in the works at the end of 2020.
Unknown: I think a lot of businesses see that and say, You know what, I can run my business without this massive government interference that I get from running my business in places like California or New York, Katie Schoolov: Texas and California are the two most populous states with a fifth of the nation's people between them. As the largest democratic state and largest Republican state. The rivalry between them is no surprise, while California's population and job growth both slowed to a trickle, Texas added more residents than any other state in 2020. With no
income tax, Texas has attracted wealthy individuals like Joe Rogan, Elon Musk, Drew Houston and Joe Lonsdale to make the move. Unknown: One of the reasons I moved here is is it feels like being extra American in a way. You know, it's like extra pull yourself up by your own bootstraps. Katie Schoolov: As the ninth largest economy in the world, Texas has always been a major business hub in CNBC, his rankings of top states for business Texas came in second. Dallas has
long been the financial capital of the giant state. Unknown: incredible amounts of people are moving to Dallas right now. We picked up Toyota StateFarm can't even name all the companies. Katie Schoolov: Manufacturing is huge in Central Texas.
Houston is home to big oil and energy where major names like Exxon and shell have been since the early 1900s. largely thanks to oil and natural gas Texas has been the country's top exporter for 18 consecutive years. The state's economic development corporation says Texas is home to 50 fortune 500 headquarters, more than 1600 foreign owned companies and 2.7 million small businesses. Its civilian workforce of 14 million is second only to California's 18 point 7 million.
Unknown: Texas has a world class educational institutions, the University of Texas System, UT Austin, the Texas a&m system, Houston, Dallas, and that's part of what makes it so attracted to so many of the companies coming here. And as Katie Schoolov: the pandemic created a work from anywhere mentality data from the US Postal Service shows that Texas was the second most popular destination for people leaving the Bay Area. Unknown: The cost of living here is normal.
It's not artificially inflated. So you can actually come out here and in actually make a decent living without having to spend $4,000 A month living in a studio apartment with rats. Katie Schoolov: And although California is top of mind when it comes to big tech, Texas has a rich history of tech business to Texas Instruments pioneered the development of silicon transistors out of Dallas in the 50s. In the 80s,
three engineers from Texas Instruments broke off to form compact developing the first portable laptop sized computers out of Houston. Dell was founded by a freshman at University of Texas at Austin in 1984. IBM has had a major presence in Austin since the 60s, while Microsoft is a major employer in the Dallas area. Unknown: You think about California, it's the 40 niner, right, the 1840 niner, who came to California to strike it rich and go the Gold Rush and the birth of Levi jeans and everything like that. So in the northern part of California, you've got tech companies, and so it's moved from gold to silicon, whereas Texas is a different story. Texas is Tejas, right? It's the
Caddo word, and it means traveller or friend. And in Texas, we celebrate the Six Flags of Texas. And so the idea of Texas I think, is very different. It's about coming together. It's about bringing different things to the conversation, throwing your stuff into the mix and seeing what emerges from Katie Schoolov: that. With a big new presence
from Apple, Tesla and Oracle, some are asking if Austin will be the next Silicon Valley. Unknown: We want to learn from Silicon Valley. We want to take, you know, copy some of the great things from Silicon Valley. We love great people moving here from Silicon Valley, but we don't want to be in Silicon Valley. People really love being in Austin that has forced and propel tech companies, large ones to establish offices here. Katie Schoolov: Austin is also home to South by Southwest which Goswami has been involved with since its early days as a tech festival. He
graduated from Stanford and moved to Austin in 1995. To work for tech company trilogy, which also relocated from Silicon Valley. Unknown: We want people to become part of Austin, we want them to come and leave some of the California baggage in California. Katie Schoolov: Some say a major difference for companies starting in Texas instead of California is in funding models. Unknown: What happens in Austin is a lot of bootstrapping. And then oh, you've got something,
let's go add some funding to it. But you've got something that's proving itself out, right. Whereas in California, they'll they'll go fund something with just that idea. We have some VCs here. We have some funds here. Is it competing
with Silicon Valley? No, not even close. But California Katie Schoolov: had $65.6 billion in VC investment in 2019. By far the highest of any state, Texas came in fifth at 3.7 billion.
Unknown: While there's some investors that would only invest in Silicon Valley, there were only more and more investors who are willing to go do it. Other places. Katie Schoolov: Investors like Josh bear say funding a startup in Austin has gotten much easier. Unknown: I've been here more than more than 20 years. It's the best it's ever been this huge
influx of all these people, capital ideas, and that's just making it all happen faster and easier. And so I think that's COVID-19 really pushed everyone over the edge. I've put together a deck on Friday, and by Tuesday, we had the round done $5 million, and that was all in Texas. That would not have been possible. Seven years ago. Katie Schoolov: Last year, Lloyd Armbrust launched a PPE manufacturing company in an Austin suburb called Pflugerville. It produces up to 1.2 million masks per day,
Unknown: I wouldn't have done it in California. There's just no way the regulations border on the ridiculous. Katie Schoolov: The Pflugerville Economic Development Group offered him more than $1,000 for each job he brought to the area. Austin offers
similar incentives like big property tax rebates at Samsung's proposed new chip factory. Armbrust first moved to Austin in 2011, relocating an earlier company he started from the Bay Area. Unknown: Hiring was the number one reason that we came here in 2011. There was just access to really
smart people. And there wasn't that competition, you get into Facebook, but then Uber is coming at you and saying, like, Oh, I'm going to give you $100,000 More and stock. And it's it's very, very hard to compete with that.
Katie Schoolov: More than 200 companies have relocated to Austin since 2017. And more than 70 of them came from California. SpaceX is expanding in South Texas where it already has a launch site, but Elon Musk is growing his presence in Austin too. He moved his personal home from LA to Austin, Tesla cybertruck will be built at the new giga factory in Austin. And the boring company is opening a big space next door to armrest. Unknown: Probably the funniest reason that I don't think a lot of people are realizing is because across the street is the private airport when you know someone's looking at Texas they're saying how can I get around? And I think having access to that private airport is actually a really big Katie Schoolov: deal. Getting around the huge
sprawl of Texas especially as more people move in means traffic is a problem. Unknown: So you know a horrible I 35 is like it's a it's dumpster fire. A toll road Katie Schoolov: with the country's highest speed limit at five miles per hour offers one alternative to the infamous traffic on Austin's i 35. And there's a $20 billion high speed rail project in the final planning stages, it would go the 200 plus miles from Dallas to Houston in 90 minutes, Unknown: you can drive for 12 hours, and you're still in Texas, like it's a big steak. Katie Schoolov: At 1.6 times the size of
California, Texas is the second largest state after Alaska. And all that land is a big draw for manufacturing sites. Unknown: There's plenty of room like there are just farmer's fields waiting to be developed everywhere around me. Of course, that translates into you know, cheaper rents and cheaper rates, we wouldn't be able to be successful in California with this business unit economics wouldn't make sense. Katie Schoolov: And all this space leaves room for a lot of cultural variety beyond the Texas cowboy stereotype.
Unknown: It's not like hey, come to Texas and you have to wear cowboy boots, and you have to have a cowboy hat and engaging everything super Texan that's not the case. My neighbor was white. My other neighbor was Vietnamese neighbor that was Indian, another neighbor, if that was black and Spanish, and so forth, and so on. So
there's a diversity here that I think is hard to talk in a way that a lot of people don't really think Texas is Katie Schoolov: colio noir grew up in Houston and now lives in Dallas, he worked for the NRA from 2013 to 2019. But he didn't touch a gun until he was in his mid 20s. In Texas, Unknown: I'm left to enjoy my ability to exercise my right without any unnecessary restrictions in a way that I can't say in a lot of other states. A good 75 80% of the guns that I own. Now in Texas, I wouldn't be able to in California, Katie Schoolov: whether it's individual rights or business friendly regulations, Texas government has a reputation for being hands off.
Unknown: That to me, was one of the biggest differences between Texas and California. It's the fact that we understand like we place a high premium on freedom and independence, Katie Schoolov: California handled the pandemic far more strictly than Texas. Just one example of the state's differences in approaching regulation. The government Unknown: there is so oppressive, that they shut down a massive manufacturing facility.
During Covid. Katie Schoolov: Elon Musk cited freedom from regulations as a reason for his move to Texas. Last May Musk openly defied state shutdown orders by reopening his plant in Fremont, California. When the county pushed him to shut
down again. He threatened to leave California altogether. Nobody has been wanting for a long time. And I think they're taking it for granted a little bit fewer Covid related regulations in Texas allowed businesses to stay open, but Texas has a higher death rate than California. Despite
warnings from Biden officials. Governor Abbott lifted statewide mask requirements and business capacity limits on March 10. Austin didn't immediately follow suit. Starting today
Unknown: it's masks off in Texas. The city says it is keeping masks in place for now. But then last night the State Ag threatened to sue the city if the city and county didn't comply with the state's mandate lips. Katie Schoolov: Texas his political climate also comes with fewer taxes. Unknown: This is a personal income tax form in California. I never want to see one of these in the great state of Texas Katie Schoolov: at 13.3%. California has the
nation's top marginal income tax rate. Texas is one of a handful of states with no income tax, Unknown: no matter which way you measure it. It is way cheaper to live your life and to run your business in Texas than California. Its taxes its cost of doing business. Its overhead its labor, the Tax Katie Schoolov: Foundation ranked Texas as the 11th best state for business and its 2021 state business tax climate index. California came in 49th. The Texas cost of living is also far lower.
Unknown: I'm priced out of California, and people would consider me pretty wealthy. I'm sure I can't go to California and move my family there. It's I couldn't afford it.
After living in San Diego for about seven years. We were hoping to have kind of a larger family and move into a bigger house which in California is very difficult, right if you want a place with good schools, Katie Schoolov: red Alder moved to Austin from San Diego in 2015. While taxes property taxes are some of the highest in the nation, Alder still preferred the tax system in Texas. Unknown: We went from about 1.25% property tax to 1.7 and then got rid of the income tax. So for
us on the tax side, it was definitely a net gain moving to Texas, if you move to Texas, they charge the same property tax to everyone. But in California, there can be this huge disparity which I think is kind of an undo and in my opinion, unconscionable burden placed on younger people and newcomers Katie Schoolov: that alter was surprised at the high cost of utilities in Texas take his water bill, for example. Unknown: So it was like $12,000 just to connection fee. And then on top of that, you know
I think our overall bill was like two I can't remember 202 50 And that was just for inside our house. Katie Schoolov: Alder moved his family back to California in 2016. Unknown: It was ready to say bye to Texas. Katie Schoolov: But now they're getting ready to move to Nevada. Unknown: My dream is to be able to see California from my front porch, but not necessarily, you know pay the high taxes or the high housing costs. Katie Schoolov: While housing is still far cheaper in Texas than California, the population boom is taking the Texas housing market with it. Austin home sales in January, for
instance, were up nearly 24% and inventory was at a record low. Frisco, Texas topped the Census Bureau's list as the fastest growing large city in the country, Texas cities took six of the top 15 spots. While Irvine was the only California city that made the list. More than 43% of Frisco homeowners have lived in the same home for less than 10 years. Unknown: market right now is just insane. I mean, I'm looking at places and they're being snapped up in two weeks.
They're coming in and they're pushing up people who have lived there for generations. In fact, it could happen at a greater rate. Because the way that the property tax system works, it kind of out of it has like almost gentrification built into it.
Katie Schoolov: Property taxes and taxes rise with the value of the home. So housing demand raises taxes for current homeowners. Unknown: Is that sort of like auto gentrification that's built into the Texas Real Estate model? Is that a good thing? I think, ultimately, yes. And the reason why is because it generates wealth for everyone. The businesses that are coming in here are paying a lot more than the minimum wage. And I think that's just gonna lift everybody up.
And everyone keeps talking. Austin is like the California of the South. No, it's not. It's still Texas. It's nasty. It gets hot. It gets slimy, It's muggy.
Katie Schoolov: We can't talk about Texas without mentioning heat and humidity. Unknown: It's hot for three months straight. And there's no expected reprieve.
Katie Schoolov: Texas heat has led to terrible droughts and wildfires in the state, just like in California. And while California has earthquakes, Texas has hurricanes. The deadliest natural disaster in US history was a sudden hurricane in 1900 that hit Galveston, killing more than 8000 people. In 2017. Hurricane Harvey took at least 68 lives and flooded more than 300,000 structures causing $125 billion in damage. And in February and unprecedented winter
storm killed at least 80 people and left 4.4 million residents without power and more than 7 million without clean water for days. The Republicans Unknown: have been in charge for a very long time here. They believe in small government, they
believe in less regulation. And it's all good until the entire state goes in the dark and you get $50 billion in lost property in insurance losses for businesses. Katie Schoolov: While the rest of the country draws power from two national grids. Texas is the one state that's disconnected largely to avoid federal regulation. Some blame this independence for the failure. Unknown: We're stranded in terms of the operation of our grid by and large. The reason that the grid
failed is because we have huge and peaking demand, thanks in part not only to the storm, but also because our population has swelled so much. And really, our infrastructure has not kept up with it. Katie Schoolov: By early March, huge power companies started filing for bankruptcy after Texas has free market power grid system led to build in the billions. Unknown: When a company is looking at its critical infrastructure checklist for considering a move Texas is definitely going to fall down on that metric. And I think it's going to impact a lot of decisions here in the going forward future. Katie Schoolov: As Fallout continues from February storm, some Democrats say it could be the catalyst that turns Texas blue.
Unknown: I think it's not a question of if it's a question of when in Texas, all of our big cities are liberal, they vote Democrat. Katie Schoolov: A catchphrase has even emerged from those who prefer not to see political and cultural shifts in Texas. Unknown: So don't California, my Texas, essentially saying, if you're going to come to Texas, come to Texas, we won't come one commodity. Welcome, everyone. However, you're leaving California for a reason. Yeah. So you can come
over here because you'd like to lower income tax or the lack thereof. But at the same time, if you continue to vote for the people who were like the people in California, who were instituting these high income taxes, it's, it's gonna follow suit this next year. I think it's going to feel like the past 10 years compressed into one from the announcements of new people moving here and companies coming here and new things launching. Katie Schoolov: Well, the trend is indisputable debate remains about whether it will in fact, change Texas long term. Unknown: Everything that Elon Musk is today is because of California. Like his first and second third star was PayPal all that was in California yet instead of saying hey, let's improve California and make California really a great place. He's like I'm leaving So he brings a
transactional mindset. He doesn't bring a long term mindset to Texas. Right? It's just the place for him for now. There's an entrenched culture that needs to be respected in Texas because that's why Texas is the way that it is. And why is such a such a sought after place to live now? And so don't try to uproot it just to spice. What bring a little bit of what culture you brought from California. Just kind of sprinkle it a little bit
there and then leave Texas as it is and enjoy it. Try to appreciate what Texas is and just brace the freedom
2022-01-22