Full text of The Southwest Economy : Third Quarter 2014

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DALLASFED
THIRD QUARTER 2014

Southwest
Economy

}

Budget Balancing Act:
Health and Education
Stretch Texas Resources
PLUS
ffMexico’s New Banking Measures Aim to Increase Credit,
Transparency

ffOn the Record: South Texas County Hopes to See Lasting
Gains from Eagle Ford Shale Oil Boom

ffSpotlight: Cities Look to Regenerate Activity at Old Malls

PRESIDENT’S PERSPECTIVE

I

must strike
}Legislators
a delicate balance
between investing in
important state services
and projects while not
sacrificing the lowtax, lightly regulated
business climate that has
helped propel Texas’
superior economic
performance.

t’s no secret that Texas’ economic growth has led
the nation during the economic expansion and
helped drop the state’s unemployment rate to
a six-year low. Without the 1.1 million jobs created in Texas since December 2007, the nation would still
be 350,000 jobs below its prerecession employment peak.
However, improvement in the state’s fiscal picture lagged
behind, and in mid-2011, state lawmakers confronted a $20
billion budget shortfall and reduced Texas outlays by 10
percent.
With the memory of those painful cuts still fresh in our
minds, it is reassuring to learn that the state’s fiscal outlook is solid even as total spending reaches all-time highs,
senior research economist Jason Saving notes in this issue
of Southwest Economy. Texas’ 8 percent revenue growth
in the first half of the year—bolstered by an annual contribution from sales tax that is larger than all of Texas’ other
taxes combined—is nearly double the average 4.2 percent
revenue growth for the rest of the states.
Without the revenue growth, the state cannot pay for
education and the rising costs of health care (which together represent 75 percent of the state budget). The state’s
population has grown to 26.5 million, and a workforce of
11 million Texans produces $1.5 trillion worth of goods. As
the economy prospers and the population grows, legislators
must strike a delicate balance between investing in important state services and projects while not sacrificing the
low-tax, lightly regulated business climate that has helped
propel Texas’ superior economic performance.
Heading into the final quarter of the year, the Texas and
U.S. economies are poised to finish strong. And although
fiscal challenges and difficult choices remain, Texas’ ability
to balance its fiscal responsibilities with available resources
stands as an example to our national leaders of the benefits
of prudent stewardship.

Richard W. Fisher
President and CEO
Federal Reserve Bank of Dallas

Budget Balancing Act:
Health and Education
Stretch Texas Resources
By Jason Saving

}
ABSTRACT: Texas legislators
confront a key challenge:
how to make much-needed
investments in health,
education and transportation
without sacrificing the fiscal
structure that has propelled
the economy over the last few
decades.

J

ust three years ago, following
the Great Recession, Texas
found itself in dire fiscal straits.
Legislators convening to
write the 2012–13 biennial budget were
confronted with a shortfall exceeding
$20 billion.1 They closed the gap, which
amounted to 10 percent of their original
spending plan, through a combination
of spending reductions and revenue
increases.
As a result, the 2012–13 budget fell
in dollar terms—an unusual occurrence
(Chart 1). The ensuing debate centered
on the sources of Texas’ funding and
how that money is spent. There were
suggestions that education, health and
transportation expenditures not be
reduced—without fully taking into account what proportion of the budget they
consume or whether it was even possible
to undertake significant cuts without
touching those areas.
Others, looking at funding sources,
noted that many of the taxes levied by

Chart

1

the state, such as on energy and alcohol, held up reasonably well during
the difficult economic times. But, they
wondered, are the taxes that remained
reasonably strong during the recession
representative of where the state gets
most of its revenue?
At the midpoint of fiscal 2014,
a steadily improving economy has
substantially bolstered the state’s fiscal
outlook.2 Total spending reached a new
high (though still lower than 2010–11 on
a per capita basis) and state revenue has
grown at a robust pace.
Revenue has risen faster in Texas
than in most of its large-state counterparts—though less than in California,
which is finally emerging from a much
deeper recession than Texas experienced
(Chart 2). Overall, the state’s 8 percent
revenue growth is nearly double the 4.2
percent rate for the rest of the nation,
underscoring that the Texas fiscal situation not only is improving but is doing so
at a more rapid pace than in the rest of

Fiscal Pressures Caused Rare Decline in 2012–13 Budget

Billions of nominal dollars

250

200

150

100

50

0
2004–05

2006–07

2008–09

2010–11

2012–13

2014–15

SOURCE: Texas Comptroller of Public Accounts.

Southwest Economy • Federal Reserve Bank of Dallas • Third Quarter 2014

3

the country.
Still, the recent uptick doesn’t preclude that austerity may once again be
required sometime in the future. Through
good times and bad, legislators confront
a key challenge: how to make muchneeded investments in health, education and transportation infrastructure
without sacrificing the lean and efficient
fiscal structure that has helped the state’s
economy to outperform the nation over
the last few decades.
Moreover, within the budgetary
calculus, the sales tax is a particularly
important revenue source, and education

Chart

2

and health services (together accounting for three-quarters of state spending)
are key recipients whose size invariably
makes them targets for spending cuts.

Tax Revenue Sources
The state imposes a variety of taxes
and fees—including a cement production tax, a fireworks tax and a coastal protection tax—most of them unfamiliar to
the average Texan. But not all state taxes
are created equal; the sales tax is vastly
larger than other levies (Chart 3).
The Limited Sales and Use Tax,
introduced in 1961, imposed a 2 percent

Texas Revenue Growing Faster than National Average

Percent change*

10
8
6
4
2
0
–2

California

Texas

U.S.

Florida

Ohio

New York

*First half of FY2014 compared with first half of FY2013.
SOURCE: Rockefeller Institute.

Chart

3

Sales Tax Top Source of Texas Tax Revenue

Billions of nominal dollars

30
25

25.9

20
15
10
4.8

5
0

Sales

Franchise

4.5

Energy

NOTE: Data for 2013.
SOURCE: Texas Comptroller of Public Accounts.

4

3.9

Auto

3.2
Gasoline

2.6
Sin

1.8

1.1

Insurance

Other

levy on most retail purchases, although
like today, there were exemptions for
certain goods, such as groceries, whose
taxation would disproportionately impact the poor. This was done in an effort
to make the sales tax more progressive
than it would otherwise be. The current
statewide rate of 6.25 percent was authorized in 1990.
The sales tax accounted for 54.3
percent of all state tax revenue in 2013,
the last year for which complete data are
available (Chart 4). Over the last seven
years, that proportion has changed
only slightly, starting at 54.8 percent of
revenue in 2007 and remaining within 3
percentage points since.
Economists generally find that
people’s consumption is more stable
than their income from year to year.
Income can fall to zero when someone
is laid off, but food, clothing and shelter
are still purchased. Thus, levies such as
the income tax tend to swing dramatically with the business cycle, tumbling
during downturns and recovering just as
dramatically during recoveries.
The second-largest state tax revenue
source is the franchise tax, a business
assessment on gross receipts. The tax, a
form of which dates back to the 19th century, is essentially a payment for the right
to conduct business. Firms are taxed on
their total revenue minus their wage or
merchandise costs (whichever is greater)
up to a maximum of 70 percent of their
revenue. While initial discussions called
for all but the smallest of businesses to be
taxed, the current incarnation exempts
the first $1 million in revenue, which
removes the bulk of enterprises from the
reach of the franchise tax.
The franchise tax is commonly confused with a corporate income tax. But
there is an important difference—firms
that lose money can still owe franchise
tax if their revenue is high enough,
whereas a money-losing firm would not
generally incur an income tax liability.
Yet the franchise tax is also not a straight
tax on revenue because of the deductions
it allows for compensation or merchandise costs. The state Supreme Court has
provided legal clarification about the
franchise tax, ruling that it is not a corporate income tax despite certain similari-

Southwest Economy • Federal Reserve Bank of Dallas • Third Quarter 2014

Chart

4

Sales Tax Larger Than All Other State Taxes Combined

Sin
6%

Insurance Other
2%
4%

Gasoline
7%
Auto
8%

Energy
9%

Sales
54%
Franchise
10%

NOTE: Data for 2013.

Funding Education, Health Care

SOURCE: Texas Comptroller of Public Accounts.

ties—an important distinction in Texas,
whose constitution bans individual and
corporate income taxation.
The franchise tax accounted for 10.1
percent of state revenue—less than onefifth the amount the sales tax provided
in fiscal 2013. Franchise tax revenue has
also exhibited volatility over time, falling
to 8.5 percent of state revenue in 2007,
though it has generally remained within
a percentage point or two of its 2013 level.
Next are the state’s energy taxes:
a natural gas production tax and an oil
production/regulation tax. Most striking
is the degree to which these taxes swing

Chart

5

as economic conditions change. In the
2007–13 period, these levies ranged from
a low of 4.9 percent of state tax revenue
in 2010 to highs of 10 percent in 2008 and
9.4 percent in 2013 (Chart 5).
It isn’t surprising that oil and gas revenue would strengthen during a period of
exceptionally strong energy production.
However, the near doubling of its share
of overall revenue illustrates the conundrum associated with narrow sectoral
taxes: Revenue rises dramatically during
good times for the sector but can fall just
as dramatically, often when a state can
least afford it. Even so, the contribution

Tax Trends Relatively Stable, Except for Energy

Percent of total revenue

60
50

Tax types
Sales
Other
Franchise
Energy
Insurance

40
30
20
10
0
2007

2008

2009

SOURCE: Texas Comptroller of Public Accounts.

of energy taxes to the state’s fiscal coffers
remains modest.
Other state taxes include automobile taxes, the gasoline tax, “sin” taxes on
alcohol and tobacco, insurance taxes and
a grab bag of lesser levies such as the previously mentioned cement and fireworks
taxes. These smaller sources collectively
account for about one-quarter of state tax
revenue.
Two other kinds of taxes provide no
revenue for the state. The individual income tax—levied in 43 of the 50 states—
has been banned in Texas since 1993
following a failed effort to introduce one.
The second is the property tax, which
school districts and other local government entities collect.3

2010

2011

2012

2013

States provide many services for
their residents, from operating state parks
to staffing driver’s license offices. But the
bulk of state spending in Texas—as in
most other states—is devoted to health
and education.
Health spending accounted for
41 percent of the state budget in fiscal
2013 (Chart 6). These expenditures flow
primarily to Medicaid recipients, though
they also include other programs such as
the Children’s Health Insurance Program and some public hospital funding.
Health outlays have expanded rapidly
in recent years amid soaring medical
costs and a state population growth rate
that was double the nation’s. As late as
2007, health and education spending
were roughly equal in Texas, but by 2013
health had grown 20 percent larger than
education (Chart 7).
While health spending is a large
and growing portion, Texas ranks last
in the proportion of its residents with
some form of health insurance coverage.
To be sure, part of this stems from the
state’s large undocumented population,
which is more likely than citizens and
legal residents to lack coverage. But part
of it results from the exceptionally low
income level at which Medicaid eligibility
is cut off in Texas: just 20 percent of the
federal poverty line, the second-lowest
cutoff in the nation.
Education spending accounted for
one-third (33.7 percent) of the state bud-

Southwest Economy • Federal Reserve Bank of Dallas • Third Quarter 2014

5

Chart

6

State Outlays Flow Mostly to Health and Education
Government
Public safety and operations
corrections
3%
5%
Transportation
8%

Other
9%

Health
41%

Education
34%
NOTE: Data for 2013.
SOURCE: Texas Comptroller of Public Accounts.

Chart

7

Medicaid and Other Health Expenditures Make Up
Largest Component of Budget

Billions of nominal dollars

45
40
35
30
25
20
15
10
5
0
2007

2008

2009

2010

SOURCE: Texas Comptroller of Public Accounts.

get in fiscal 2013. This expenditure is split
roughly evenly between K–12 education
(which the state funds in conjunction
with local school districts) and state colleges and universities.
Even with such a large share, Texas
lags other states in per-capita education
outlays. The National Education Association estimated that Texas ranked 46th
among the 50 states in per student K–12
education spending in 2012–13.4 Yet
educators were remarkably efficient using what they received, at least by some
measures: Texas fourth-grade math test

6

be needed to fully address infrastructure
needs, implying any sustained rise in
transportation spending would come at
the expense of education or health care—
areas where few believe existing needs
are adequately met with current funding
though they dominate the budget.6
Public safety and corrections—seen
by many as the cornerstone of state government services—ranks fourth, at 4.6
percent of state expenditures. This broad
category encompasses state law enforcement personnel, prisons and certain
associated equipment and training.
Surprisingly, spending to operate
the machinery of state government—
the executive, legislative and judicial
branches—collectively consumes only
2.9 percent of state expenditures. The
remaining 9.3 percent is primarily devoted to employee benefits and natural
resources and recreation, along with
other smaller items.

Array of Additional Funds

Texas collected $47.8 billion in tax
revenue in fiscal 2013. However, it spent
$93.6 billion during that period. An array
of additional funds allows the state to
comply with a balanced-budget requirement mandating estimated revenue
Health and human services
equal projected expenditures.
Education
Other
Texas received a total $99 billion,
Transportation
with the federal government contributing
Public safety
$32.5 billion (Chart 8). The federal sum
Government operations
represented 32.8 percent of state revenue,
exceeding the sales tax’s 26.1 percent and
dwarfing the other taxes Texas imposes.
The majority of the federal money is
2011
2012
2013
earmarked for health (65.3 percent),
education (17.9 percent) and transportation (8.8 percent), though a small amount
results placed students 24th in the nacomes in the form of grants for a variety
tion, with each ethnic group in the state
of purposes.
outperforming its national peers on the
Another significant source is what
exam.5
legislators sometimes call “nontax
Transportation and infrastructure
revenue enhancements”—assessments
represents the third-largest Texas outlay, that raise money for the state but aren’t
accounting for 8.1 percent of expendiofficially considered taxes. This category
tures in 2013. This spending is primarily
covers more than 200 revenue sources,
devoted to roads and bridges, which
including marriage and sport licenses,
recently received a grade of C from the
driver’s licenses and any surcharges for
American Society of Civil Engineers—un- point penalties from traffic law violaexceptional though slightly above the na- tions, coin-operated (gambling) machine
tional average of D+. An estimated $4 bil- licenses and bingo prize fees, exam fees
lion per year in additional funding would for teachers and boaters, combative sport

Southwest Economy • Federal Reserve Bank of Dallas • Third Quarter 2014

Chart

8

Federal Transfers Are Key Revenue Source for Texas

Billions of nominal dollars

50

47.8

40
32.5
30

20

10

0

7.9

Texas taxes

Federal
transfers

Nontax
revenue
enhancements

6.4
2.5

1.9

Investment
and land

Lottery

Other

NOTE: Data for 2013.
SOURCE: Texas Comptroller of Public Accounts.

licenses (for boxers and martial artists)
and fees for the use of state parks. Nontax
revenue enhancements collectively
contributed $7.9 billion to state revenue
in 2013—about as much as the franchise
and gasoline taxes combined.
Other revenue sources available to
the state include interest and investment
income, lottery proceeds and land income, as well as the sale of certain goods
and services to localities or the public.
Combining these with the other revenue
sources yields the state’s $99 billion in
receipts during fiscal 2013.

Future Funding Challenges
Texas has become the nation’s
second-largest state, with 26.5 million
residents and annual economic output
(state gross domestic product) of $1.53
trillion. The state has a large and complex
set of revenue and expenditure sources
that need to be understood as future tax
and spending decisions are made. While
expenditures flow to many areas, education and health care consume 75 percent
of the state budget.
Looking to the future, lawmakers
must keep a watchful eye over challenges
facing Texas’ main revenue source—the
sales tax. The growing presence of Internet commerce and ongoing issues over
sales tax collections on these transactions
could disproportionately impact sales-

tax-reliant states such as Texas. Additionally, Texas’ relatively high sales tax rate
might potentially divert commerce to
other states.
Then there is Medicaid. With the
state opting out of Medicaid expansion
under the Affordable Care Act (ACA),
approximately 1.2 million Texans who
would have received coverage under that
program are unable to obtain it. However, it is also worth noting that Congress
and the president explicitly excluded undocumented immigrants—a key group
among the Texas uninsured—from ACA
coverage.
Thus, states with high proportions
of undocumented residents could expect
to continue experiencing higher levels
of uninsured regardless of the degree to
which they embrace ACA (though the
levels of the uninsured would obviously
be lower with ACA than without). Moreover, Texas finds itself stymied by federal
law in its efforts to make Medicaid more
cost-effective, for example by implementing modest copayments to discourage casual use of Medicaid services.
Efficiency measures like this would not
reduce uninsured rates but could slow
Medicaid cost growth and lessen state fiscal pressures.
Texas’ population expansion is also
an important issue. Realizing a population growth rate that exceeds the national

average is, all things considered, a blessing rather than a curse. But it is unclear
whether education funding will be sufficient to keep pace with future employer
demands. Population growth can also
strain other state services such as health
care, transportation and infrastructure,
and criminal justice. Failing to properly
address these needs could result in a less
productive workforce, which would slow
the state’s future growth rate.
Seldom pointed out in this context,
however, is the role played by Texas’ lowtax, lightly regulated business environment in helping the state annually grow
about a percentage point faster than
the nation over the last four decades.
The challenge that state lawmakers will
increasingly confront is how to address
mounting health and education needs,
possibly requiring additional revenue,
without sacrificing the tax and regulatory
attributes that have helped the state’s
economy consistently grow faster than
the nation’s.

Saving is a senior research economist
and advisor in the Research Department at the Federal Reserve Bank of
Dallas.
Notes
The Texas Legislature convenes in January of each oddnumbered year to write a budget for the following two fiscal
years. Thus, it will convene in January 2015 to write the
2016–17 budget.
2
The Texas fiscal year begins on September 1, so the
midpoint would be March 1.
3
Because education funding is a joint state/local
responsibility in Texas, it should be noted that local school
property tax developments can still influence state tax
allocation decisions.
4
“Rankings and Estimates: Rankings of the States 2013
and Estimates of School Statistics 2014,” by NEA Research,
National Education Association, March 2014.
5
Overall secondary education graduation rates in Texas
remain very low relative to the national average.
6
For more information, see “Texas Transportation
Needs Summary,” by the 2030 Committee of the Texas
Transportation Commission, February 2009.
1

Southwest Economy • Federal Reserve Bank of Dallas • Third Quarter 2014

7

ON THE RECORD
A Conversation with Joel Rodriguez

South Texas County Hopes
to See Lasting Gains from
Eagle Ford Shale Oil Boom
Joel Rodriguez took office in 2003 as La Salle County judge, the
area’s chief administrative and judicial officer. The South Texas county
had among the largest oil production increases in the booming
Eagle Ford Shale from 2010 to 2013. The Eagle Ford is one of the
most productive formations brought online with hydraulic fracturing
technology. As a result of the boom, wages and employment have
soared, but so have rents and food prices.
Q. How has the oil boom changed
life in your community?
The younger people are seeing opportunities here that they would never
have seen. You have a number of families
that have remained in these small communities that are very close-knit; it gives
young workers an opportunity to provide
for their families.
Your elderly population, your disabled have been hit hard because their
income is only adjusted on a national
basis, and it is not adjusted based on
the increased costs that are due to local

changes in supply and demand. Food,
electricity, gasoline, labor, housing—all
of it is higher.
On infrastructure, we have been
pounded pretty hard. Let’s look at traffic.
In 2012, there were over 400 accidents
with injuries, 52 percent of which were
commercial-related, versus Dallas,
Houston or San Antonio, with a 5 to 7
percent share.
We’ve also had to adjust from seven
police officers to 22. Our volunteer fire
department is being replaced by a fulltime fire department.

Q. How fast did change occur?
Our tax base when I first came in
[2003] was like $130 million, and then a
few years ago [2008] it went up to $400
million, and then $800 million, then $2.6
billion, then $4.7 billion. I haven’t seen
the 2013 numbers. I’m curious.
I met with Chesapeake [Energy
Corp.], and their properties’ value was
$1.6 billion in La Salle County alone.

Q. What is it like being the county
judge in the midst of an oil boom?
Busy—it’s very, very busy. You’re
spread out really thin. On New Year’s
Eve, I was working at home until 5 in the
morning because I’m the type where in
my mind I have to finish it. I’ve had a lot
of those evenings where I work straight
through.

8

We’ve had more appeals from
Justice of the Peace court than ever
before. I think the JP is getting 100 tickets
a month. The restrictions on commercial driver’s licenses are very strict, and
they [drivers] can’t afford the tickets on
their driving records. So they appeal it
to county court, and the county court is
being overrun by appeals.
I’ll have a docket call. It takes 25 to
30 percent of my time. There are other
things. Probate cases have also really
shot up. For many years, we would have
people who would leave La Salle County
and didn’t value their land. They just left
it, goodbye. With minerals, they’re coming back and they want to probate their
estates, figure out the minerals. The oil
companies force them to do it.

Q. At what point did you realize that
something was happening in La
Salle County that would dramatically
change life here?
In 2008, we had a road that was
damaged by a company that was actually
drilling in McMullen County [directly
east of La Salle]. I really think that was the
very first Eagle Ford well. Our attorney
looked at the production numbers and
said, “This is phenomenal.” We were in
mediation, and I remember him saying,
“Just give us 1 percent of your production
for a settlement.” We ended up settling
for $400,000 in damages. That’s where we
found out how serious the production
was.

Q. Is La Salle County able to recoup
the public costs of energy industry
activity?
There’s additional revenue coming—quite a bit of additional revenue—
but as far as recovering the costs, no. Immediate recovery isn’t going to happen.
The biggest concern about all your
shale plays is that they have a shelf life,
and when do the diminishing returns
hit? We’re hearing from the industry that
in 15 years it will start to dwindle down.
So we’re trying to aggressively handle
and construct as many projects before
that curve starts going down. The biggest
fear I have is that it’s so hard to determine when it will go down.
If you don’t issue debt for infra-

Southwest Economy • Federal Reserve Bank of Dallas • Third Quarter 2014

are very active in the food bank. We are
}We
seeing more and more people participate
because food is outrageous—$6 for a box of
Froot Loops. Seriously.

structure, it may have some effects
later on. You can’t go on a pay-as-yougo basis because energy exploration
has so much impact. In some places,
you have 20,000 vehicles a day. If you
have an overweight truck, then it has
higher impact. They say one truck is
equal to 1,200 vehicles. If you have
1,000 of them, that’s 120,000 vehicles a
day equivalent, and it just goes on. It’s
scary.
Our intention is to spend $100 million on county roads. We’ll never have
a chance to do this again. These roads
and bridges are holding over from the
Great Depression.
We’re working on the parks; we’ve
got the jail. What’s needed? We still
don’t have a hospital here. It’s always
going to be an issue. [The nearest hospital is 15 miles away in Dilley in Frio
County.] We’re building three new fire
stations and three community centers.

Q. Weekly wages on average are
up more than 13 percent in La Salle
County over the last couple of years.
Are there problems filling jobs?
Where do teachers and newcomers
live?
We’re seeing with some restaurant
jobs that they’re having a hard time
retaining people because of a lack of
long-term housing. There’s plenty of RV
housing, but it’s really inflated.
Teachers commute; they double
up with other teachers. With our police
officers, we have some FEMA [Federal
Emergency Management Agency] trailers that they’re living in.

Until we build the fire station, we
have the emergency operations center,
and it has some temporary quarters. The
firemen are living there. There are three
different shifts. They’re working out of a
temporary building. The issue was that
the volunteer fire department was so
beat that we needed to get some immediate help to respond.
The county population was about
7,000 in 2010 and now is 10,000 to 12,000,
easy. The concern always remains: How
much of that is transient—here during
the week but they have a homestead
somewhere else.

Q. Are the costs of some things getting too high for some people?
During the election I saw some
people who were just eating wieners for
supper. Good people, disabled people
… too proud to ask, but they’re having
a really, really hard time. It was sad. We
are very active in the food bank. We are
seeing more and more people participate because food is outrageous—$6
for a box of Froot Loops. Seriously. It’s
an extremely high cost of living—$7 per
pound of Oscar Mayer bacon.

San
Antonio
35

35

Zavala

Frio

* Cotulla

Dimmit

35

La Salle

35

Webb

Laredo

*

Atascosa

Mc
Mullen

Duval

Q. How many people are living in
trailers and temporary housing?
I’d say 2,000 people. Also, you have
the “man camps” that have trailers.
Mostly, your oilfield sites already have
headquarters and bunks, and they use a
bunch of trailers. They don’t even come
into town anymore. They actually live onsite like a little community. That’s where
you run into the issues with public water
supply and protecting the public. If they
are hauling water, it has to be in potable,
approved containers overseen by the
Texas Commission on Environmental
Quality.

Q. Is there a public health hazard?
Yes. Anytime you’re dealing with
water, you don’t know what’s been in
the containers. You don’t know if the
water has been treated. If it’s not a public
source, you don’t know what kind of
contaminants may be in the water. In
our case, there was an issue of coliform
bacteria, stagnant water. It was nothing
intentional. Anytime they set up a man
camp, there is no guarantee that the
water is going to be safe.

Q. Is there any way to be prepared
for this?
No. We’ve all been reactive. We’re
good at being reactive and adjusting.
The hardest thing is that the communities have to get a belief: If communities feel that the shale play in Texas is
going to be here for a while, they need
to seriously invest in their infrastructure—whether it’s new buildings, new
schools, new roads—because they may
not get another chance. You have to take
advantage of it.
Hear additional excerpts of the
interview at:
www.dallasfed.org/research/swe/
index.cfm.

Southwest Economy • Federal Reserve Bank of Dallas • Third Quarter 2014

9

NOTEWORTHY
CHILD MIGRATION: Crossings Surge as Smugglers Exploit U.S. Policy

M

ore than 62,000 unaccompanied children were apprehended along the U.S.–Mexico border between October 2013 and July 2014, nearly 50,000 of them taken into custody in South Texas—representing a 148 percent increase over prior-year levels. By comparison, such apprehensions along
the rest of the border increased 16 percent. Most of the children come from Honduras, Guatemala and El
Salvador.
While economic conditions along with gang violence in the home countries have been cited as
motivating the migration, government data indicate the Central American economies continue to expand
at around 3 percent annually, the region’s average since 2010. Additionally, while homicide rates are high,
they have decreased in El Salvador and remained flat in Guatemala, while rising in Honduras.
Anecdotal reports suggest that smugglers have played a key role in the recent activity by promising
parents that their children will be admitted into the U.S. and reunited with family members already here.
Federal immigration policy dictates that children from noncontiguous countries be reunited with a family
member in the U.S., if possible, while awaiting a court hearing, which can take years. Child migration is
particularly profitable for smugglers because, while adults must evade detection to improve their chances
of staying in the U.S., children need only to cross the border.
—Chelsea LeHew

ENERGY: Condensate Ruling Could Expand Eagle Ford Shale Exports

T

wo months after the U.S. Commerce Department allowed two Texas-based companies to export
condensate, an ultralight oil, a tanker left Galveston for Asia in August, carrying the first shipment.
The federal decision could clear the way for sale abroad of oil from South Texas’ Eagle Ford Shale
formation that could equal 25 to 50 percent of last year’s total output. Nationwide, condensate made up
approximately 12 percent of 2013 oil production.
With few exceptions, crude oil exports are banned under a 1975 federal law. The Commerce Department’s Bureau of Industry and Security ruled that Irving-based Pioneer Natural Resources Co. and Enterprise Products Partners LP of Houston may export condensate.
Under the 1975 law, only exports of finished petroleum products, such as gasoline, diesel and jet fuel,
are allowed. Officials defined condensate as a finished petroleum product because it is subject to some
processing.
Following the decision, the price of benchmark West Texas Intermediate crude oil spiked to $107.25
per barrel—nearly $4 higher than the second-quarter average price—on anticipation that the export ban
would be eased further. The price subsequently fell when officials indicated that existing policies will
remain in place while the Commerce Department considers new industrywide guidelines.
—Kristin Shepard

BUSINESS CLIMATE: Texas Edges Out Florida for Survey’s Top Spot

T

exas has been named the best state for business in a survey conducted by Chief Executive magazine, a distinction it has held since the annual ranking began in 2004. Texas edged out No. 2 Florida.
Texas graded well for job growth, taxation and regulation, and workforce quality—a measure of
employee work ethic, workforce education attainment and labor costs. Florida advanced on the basis of
quality of living environment.
The magazine’s rating is based on responses from more than 500 chief executive officers, who are
asked about their home state’s business environment. Among states in the Eleventh District, Louisiana
improved the most, jumping from 40th in 2009 to ninth in 2014, while New Mexico, after reducing its
corporate income tax rate, advanced from 33rd in 2012 to 30th in 2014.
Although Texas remained first overall, it ranked ninth in terms of quality of living environment, a category that includes public education, public health, real estate costs and access to public transportation.
According to the 2012 American Community Survey, 81 percent of Texans age 25 and older hold at least
a high school degree, the lowest such share in the nation. Additionally, Texas has the highest percentage
lacking health insurance, 23 percent.
—Sarah Bindner

10

Southwest Economy • Federal Reserve Bank of Dallas • Third Quarter 2014

SPOTLIGHT

Southwest Center Mall, Dallas

Cities Look to Regenerate Activity at Old Malls
By Michael Weiss

S

itting on 96 acres at the
intersection of two freeways,
Southwest Center Mall in Dallas was built in 1975 to serve a
growing suburban clientele. Over time,
merchants occupied nearby strip malls
to pick off some of the traffic traveling to
the shopping mall, which boasted five
major anchors in 2000.
The mall today retains only two
original anchors. The city of Dallas is
working on a $72.3 million package to
regenerate sales-tax-producing retail activity in and around the mall. It’s the kind
of effort playing out across Texas as cities
commit funds to jump-start once-vibrant
revenue sources that have morphed into
enormous underutilized tracts.
Houston officials have fashioned a
nearly $70 million plan to resuscitate the
area around Greenspoint Mall, which
lies along Interstate 45 and Sam Houston
Parkway, not far from Bush Intercontinental Airport. City leaders in the Dallas
suburb of Arlington have identified the
Six Flags Mall area for redevelopment
as part of its business plan to “build a
thriving community.” Owners of the
mall, across a freeway from its namesake
amusement park, seek to transform it
using a Hispanic shopping theme.
The concept of the traditional,
covered shopping mall, which epitomized retailing in the 1980s and 1990s,
is stagnating. Since 2007, the number
of regional malls with 1 million square
feet or more of space has held constant
at around 500, according to real estate
researcher CoStar Group Inc. The Mall at
University Town Center in Sarasota, Fla.,
scheduled for completion in October,
will be the first traditional covered facility

to open since 2006.
Retailers confront a changing landscape that accelerated with the recent
financial crisis, prompting some mall
stalwarts such as Plano-based J.C. Penney and Fort Worth-based RadioShack
Corp. to review store count. Others have
also sought to boost efficiency by reducing store size, in some cases moving to
free-standing, nonmall units.
Internet sales figure in the change.
E-commerce, which amounted to about
2 percent of U.S. retail sales in 2002, increased to 6 percent in 2013, according to
Census Bureau data. E-commerce sales
were $263.37 billion in 2013, while overall
retail activity totaled $4.53 trillion.

Tax Collection Impact
Because state and local governments in Texas collect up to 8.25 percent
in sales tax on brick-and-mortar retail
sales, the movement of transactions to
the Internet—where tax collection is hit
and miss—is noteworthy. The retail sector generated approximately 28 percent
of taxable sales in Dallas during 2010,
according to data compiled by the city’s
chief financial officer. Each 1 million
square feet of occupied retail space accounted for $800,000 in city revenue.1
Traditional retailing is a business
of critical mass. Shoppers migrate to
areas where they perceive that they have
choices—in essence, the ability to search
for several different kinds of items in one
trip. There is also the expectation that a
concentration of outlets and the accompanying competition lead to lower prices.
Salvaging a mall that’s fallen on hard
times involves changing retail momentum, making the task more involved than

simply dealing with a huge covered space
surrounded by acres of parking. Gaining
consensus on a revival plan is often complicated by multiple-party ownership of
malls. Once a mall appears faded, the
perception of blight tends to drive away
potential customers.
Windsor Park Mall, a 1.2-millionsquare-foot facility on 68 acres abutting
northeast San Antonio, lost its last large
retail tenant in 2005. Today, the space
that Dillard’s and Waldenbooks and
more than 100 other stores occupied
houses the headquarters of Rackspace
Hosting Inc., a cloud computing company. Project supporters point to it as an
example of redevelopment potential.
Private investors and a development corporation backed by the city of
Windcrest purchased the mall for $27
million in April 2007. City-issued bonds
financed a $100 million transformation from mall to technology office, and
the Texas Enterprise Fund committed
another $30.5 million if Rackspace met
hiring targets statewide. While a shaky
economy derailed the original goal of
bringing 4,500 jobs to the former mall
by Dec. 31, 2012, the company said it
attained a revised benchmark of 1,774
jobs, with annual median pay of $51,000.
The company also received a 14-year
property tax exemption.
Meanwhile, land around Windsor
Park has changed hands in anticipation
of an influx of businesses serving a new
clientele—Rackspace workers, who totaled about 3,000 at the start of the year.
Note
Data from a city of Dallas memorandum to members
of the budget, finance and audit committee by Jeanne
Chipperfield, chief financial officer, Nov. 4, 2010.

1

Southwest Economy • Federal Reserve Bank of Dallas • Third Quarter 2014

11

Mexico’s New Banking Measures Aim
to Increase Credit, Transparency
By Edward C. Skelton

}
ABSTRACT: The overhaul
of Mexico’s banking laws,
enacted as part of President
Enrique Peña Nieto’s wideranging economic and
business structural changes,
is designed to increase credit
to small and medium-sized
businesses while enhancing
regulatory oversight and
transparency.

P

and foment broader economic development in the long run. The new law—“Ley
para Regular las Agrupaciones Financieras”—has the potential to increase the
productivity of small and medium-sized
businesses and help workers borrow
against their future income, improving
social mobility and income distribution.2

romises of wide-ranging structural reforms aimed at boosting
long-run growth and economic
development accompanied
Mexican President Enrique Peña Nieto’s
arrival in office in December 2012.
Changes have followed, including
legislative approval of plans to modernize important sectors of the economy,
most notably a constitutional amendment ending state monopolies over
oil and gas as well as electricity.1 Other
moves affect telecommunications and
broadcasting, anti-monopoly rules and
penalties, education, fiscal policy, and
congressional and local elections. The
overall economic package is forecast to
add 1 to 2 percentage points to growth in
the medium- to long-term.
A less heralded development,
involving the banking system, could
provide the biggest immediate economic
boost. By making it easier for households
and smaller enterprises to access credit,
Peña Nieto’s financial system overhaul
seeks to bolster growth in the short run

Chart

1

Increasing Competition
Mexico’s banking industry is highly
concentrated—its five largest banks hold
72 percent of system assets. Moreover,
the country’s banks have a reputation for
high fees and interest rates, conservative
credit policies and indifferent service.
The nation’s central bank, Banco
de México, in an effort to reduce commercial bank charges and commissions,
publishes on its website the institutions’
fees and interest rates and requires them
to divulge the true cost of borrowing.3
Banks are very profitable, with
consistent and strong earnings for more
than 15 years (Chart 1). Banks managed
to post a return of 1.1 percent of assets

Mexican Banks Post Strong, Consistent Profits

Annualized return on average assets (percent)

2.5
2
Mexican banks

1.5
1

U.S. banks
.5
0
–.5

1

c-0

De

2

c-0

De

3

c-0

De

4

c-0

De

5

c-0

De

6

c-0

De

7

c-0

De

8

c-0

De

9

c-0

De

0

c-1

De

1

c-1

De

2

c-1

De

3

c-1

De

NOTE: Shaded areas denote Mexican recessions, as defined by the Instituto Nacional de Estadística y Geografía (INEGI).
SOURCES: Comisión Nacional Bancaria y de Valores; INEGI; Reports of Condition and Income.

12

Southwest Economy • Federal Reserve Bank of Dallas • Third Quarter 2014

in 2009 when real (inflation-adjusted)
per capita gross domestic product (GDP)
declined about 9 percent. By comparison, U.S. banks’ losses totaled 0.1 percent
of assets that year.
For its part, the Mexican Bankers
Association rejected the argument that
industry profitability is excessive, saying
earnings are proportional to risk. Those
returns have spawned recent market
entrants, who have set up shop with the
backing of government officials seeking
to increase the number of commercial
banks.4
Recent regulatory changes aim to
increase bank competitiveness partly by
explicitly prohibiting bundled sales of
financial products. For example, it was
common practice for banks to require
consumers receiving an auto loan to
purchase insurance from the same financial group or to require borrowers to also
maintain a deposit account.
To further promote competition,
customers will be able to more easily
transfer accounts and loans to other
institutions, allowing greater mobility of
deposits and consumer loans. Prior to
the change, borrowers could generally
only refinance a loan with the existing
holder of the credit. The new law allows
subrogation, meaning that when the proceeds from a new loan are used to satisfy
a prior lien, the new lender replaces the
prior lienholder. Subrogation makes it
much easier for borrowers to refinance
mortgage loans with another lender.

Assessing Competitiveness
Mexico’s newly autonomous and
empowered antitrust commission
(known by the Spanish acronym Cofece)
turned its attention this year to the country’s concentrated banking industry, with
agency head Alejandra Palacios characterizing the sector a top priority.
In March, Cofece began preparing a
study of the financial sector and drafted
a series of recommendations to boost
competition. The commission is expected to present the study to Congress
in the third quarter. Cofece also has the
power to open formal investigations of
specific banks, which could lead to price
regulation, forced asset sales and other
actions. Under the new competition law

(one of the structural changes), court
challenges cannot delay commission actions (except forced asset sales).

Smaller Business Credit Access
Arguably the banking system’s
greatest weakness involves small and
medium-sized businesses’ difficulty
obtaining credit. Only 32 percent of
all established “formal” businesses in
Mexico have arranged financing via either a loan or line of credit, according to
the World Bank’s Enterprise Survey.5 By
comparison, a rate of 80 percent is prevalent in Chile and 66 percent in Brazil. For
small and medium-sized businesses, the
situation is worse—18 percent of formal
businesses with fewer than 20 employees
have access to regular financial channels
in Mexico, compared with 73 percent in
Chile and 43 percent in Brazil.
Instead, both large and small Mexican businesses rely on their suppliers for
financing (Chart 2). A recent academic
study found that when compared with
similar firms without credit access, small
and medium-sized businesses with
the ability to obtain any type of formal
financing were better able to grow and
increase employment.6 And, to the extent
that access to credit helps firms grow, the
economy as a whole realizes productivity gains, by absorbing workers from less
productive enterprises, expanding the

Chart

2

the banking
}Arguably
system’s greatest
weakness involves small
and medium-sized
businesses’ difficulty
obtaining credit.

Mexican Businesses Rely on Suppliers for Financing

Percent of businesses

90
80
70
60
50
40
30
20
10
0

Suppliers

Banks in Head office Development
Mexico or subsidiary
banks

Foreign
banks

Issue
credit
directly

None/
self-financed

NOTE: Data add to more than 100 percent because some businesses have more than one source of credit.
SOURCE: Banco de México, Evolución Trimestral del Financiamiento a las Empresas, First Quarter 2014.

Southwest Economy • Federal Reserve Bank of Dallas • Third Quarter 2014

13

capital stock and achieving efficiency
gains within individual firms.

Bolstering Regulatory Oversight
Mexico’s financial overhaul should
help regulators and improve consumer
rights. Condusef, a consumer watchdog
government agency, will be better able
to increase transparency and punish potentially abusive practices. Significantly,
Condusef will also be able to directly
counsel and advise consumers on financial products and services. The new law
also creates an independent arbitrator,
housed within Condusef, to resolve
customer complaints about financial
institutions.
The initiative also establishes new
oversight. The Bureau of Financial Entities (Buró de Entidades Financieras)
will issue information on the practices
of each financial institution, maintain a
list of sanctions imposed and improve
consumers’ access to information.
The new measures also increase the
authority of the Banking and Securities Commission (known by its Spanish
acronym, CNBV). The regulator will
publish the amount of fines and other
punishment, including pending actions.
In the past, authorities could not divulge
bank sanctions until all appeals were exhausted, delaying disclosure sometimes
by years.
Regulators are to periodically assess
lending to ensure efficient credit flows
and evaluate how well banks support the
most productive sectors of the economy.
The CNBV will have the authority to
direct institutions to lend to specific sectors or industries, focusing on small and
medium-sized businesses. It is unclear
how this will work in practice. A regulator
requesting a bank to increase its lending
is unusual and gives rise to concerns that
banks may face undue pressure or that
credit could be misallocated.
Capital rules outlined in international banking reforms, known as Basel
III, are included in the law as are new
liquidity stress tests and contingency
planning requirements.7 Another legal
change was tightening the liquidation
process for insolvent banks and clarifying how banks are declared insolvent.
Before the change, legal uncertainty

14

surrounded the conditions under which
insolvency could be declared and the
mechanics behind bank liquidation,
including payment to eligible depositors.
Besides laying out a resolution process,
the law establishes a process to determine if a failing institution is systemically important to the entire financial
system. Institutions won’t be designated
systemically important until failure, and
secondary legislation will be necessary to
establish special resolution facilities for
such banking operations.

Strengthening the Legal Regime
Banks should directly benefit from
a strengthening of loan guarantees and
the recovery of collateral as well as a
streamlined bankruptcy process. Previously during bankruptcy, debtors used
now-closed loopholes to prolong debt
resolution. The law makes it easier during a liquidity crunch to obtain bridge
lending—temporary financing until
more permanent arrangements are in
place.
The reform also allows banks to
recover cash pledged as security on a
credit without filing a formal lawsuit and
receiving a judicial order. To implement
these changes, the law creates a system

of specialized courts and judges and also
makes it easier to secure loans. The new
system will shorten the period necessary to repossess collateral and enforce
loan guarantees. In turn, the changes are
expected to promote credit growth.

Development Bank Emergence
In addition to commercial banks,
Mexico has six state-owned development banks (see box). Traditionally,
the development banks have been risk
averse. Under the new rules, they will
have greater operational flexibility via an
expanded mandate requiring them to
promote economic development in their
areas of specialization, explicitly financing small and medium-sized enterprises,
infrastructure and innovation. Development banks will also be allowed to take
on more risk, as long as core capital
(typically equity and reserves) is not
significantly affected.
Previously, the banks confronted
restrictions on short- and medium-term
loan issuance. There also were rules
prohibiting more than one loan to the
same borrower. The new rules allow
loan guarantees for borrowers without
finance ministry permission. Development banks may also lend based on

Mexico’s Development Bank Specialization
Mexico’s six development banks each specialize in a different area of the economy.
Individual institutions seek to provide access to savings accounts, checking
accounts and financing for individuals and businesses as well as provide technical assistance and training. The development banks and their areas of focus are
shown below.

Development Bank

Specialization

Nacional Financiera (Nafin)

Small and medium-sized businesses

Banco Nacional de Obras y Servicios
Públicos (Banobras)

Public infrastructure, especially
municipal projects

Banco Nacional de Comercio Exterior
(Bancomext)

Foreign trade for exporters and
importers

Sociedad Hipotecaria Federal (SHF)

Housing, including housing
development

Banco Nacional de Ahorro y Servicios
Financieros (Bansefi)

Lower-income households and
the unbanked

Banco Nacional del Ejercito, Fuerza
Aérea y Armada (Banjercito)

The armed forces

Southwest Economy • Federal Reserve Bank of Dallas • Third Quarter 2014

pledged collateral, rather than only on a
borrower’s primary repayment capacity.
By granting more credit, the development banks could play an important
economic development role.
Mexico’s commercial banks have
expressed concern, citing the market
distortions attributable to state backing
of development banks. The commercial
lenders argue that greater development
bank activity would be helpful and
complementary only if concentrated in
indirect financing such as credit guarantees. Regulators, meanwhile, opined
that the changes will allow development
banks to better serve areas where the
commercial banks do not operate.

Remaining Hurdles
Although the financial overhaul
should help spread financial services
and encourage economic development
within Mexico, it does not address all
the structural weaknesses impeding
the development of the financial system. A high level of informality is the
biggest issue.
Workers and businesses in the
informal sector operate outside the
regulatory umbrella and generally are
unable to document their income or
payment history. As a result, access to
credit mostly occurs informally, such
as from family or friends. Close to 60
percent of the country’s workers are
employed outside the formal sector,
and informal economic activity totals
approximately 30 percent of GDP,
according to estimates by Mexico’s National Institute of Statistics, Geography
and Informatics.8
Recovering collateral is yet another
impediment to credit access. On average, it takes commercial banks three
years to repossess a house after its mortgage has become delinquent. In some
cases, the process can run 10 years.
The new measures don’t fully address the difficult collateral recovery
process and require legislative approval
of secondary laws that are expected to be
introduced later this year. Plans include
creation of specialized courts and judges.
While development banks will
have more leeway to incur some losses,
it remains to be seen if regulators and

the Mexican Congress will tolerate
shortfalls, which have traditionally
been viewed as coming directly out of
taxpayer pockets.
Last, authorities estimate 200 regulatory revisions will be required to implement the financial measures. Consequently, there is some risk that the spirit
of the law may be lost in the process.
And, although regulatory authorities
will assess the banks’ lending practices
to ensure they are fulfilling their role as
financial intermediaries, there are currently no objective standards to measure
compliance.

Finance
}Mexico’s
Ministry forecasts the
new measures will
boost annual growth by
0.5 percentage points
between 2015 and 2018,
mostly through increasing
consumption and
investment.

Looking Ahead
While transformation of Mexico’s
energy, telecommunications and
fiscal laws have gained public attention, changes to the financial system
could have the most direct effect on
small and medium-sized businesses.
Domestic lending to the private sector
is expected to grow to as much as 40
percent of GDP by 2018, from about 25
percent in 2012 (Chart 3).
Mexico’s Finance Ministry forecasts the new measures will boost
annual growth by 0.5 percentage
points between 2015 and 2018, mostly
through increasing consumption and
investment. To the extent that financ(Continued on back page)

Chart

3

Private Sector’s Access to Credit Low in Mexico

Private sector credit as share of GDP (percent)

200
180
160
140
120
100
80
60
40
20
0

Mexico

Latin
America,
average

U.S.

Chile

Brazil

Colombia

Peru

SOURCE: World Bank, survey data as of 2012.

Southwest Economy • Federal Reserve Bank of Dallas • Third Quarter 2014

15

Federal Reserve Bank of Dallas
P.O. Box 655906
Dallas, TX 75265-5906

PRSRT STD
U.S. POSTAGE

PAID

DALLAS, TEXAS
PERMIT NO. 151

Mexico’s New Banking Measures Aim to Increase Credit, Transparency
(Continued from page 15)

ing is more available to households
and smaller businesses, informality
could decline, improving efficiency and
broadening economic development.
Still, overall benefits will be determined
by whether the new rules work as
designed.
The financial sector is anticipated to
function as a more effective development
tool. The goal is to establish a virtuous
cycle allowing more Mexicans to acquire
the necessary resources to make their
business plans a reality and establish
productive enterprises in the formal market, creating quality jobs and sustainable
future growth.

Skelton is a business economist in the
Financial Industry Studies Department
at the Federal Reserve Bank of Dallas.

DALLASFED

Notes
For more information about the energy reform, see
“Reforma Energética: Mexico Takes First Steps to Overhaul
Oil Industry,” by Michael D. Plante and Jesus Cañas,
Federal Reserve Bank of Dallas Southwest Economy,
Second Quarter 2014.
2
The published law can be found at www.diputados.gob.
mx/LeyesBiblio/pdf/LRAF.pdf.
3
Banks must reveal the true cost of financing through
the Costo Anual Total (CAT), which is equivalent to the
annual percentage rate used in the U.S. More information
is available (in Spanish) at www.bancodemexico.gob.mx/
waCalculadoraTarjetaCredito/MasInformacion.jsp.
4
For more information, see “Mexico Develops Niche
Approach to Expansion of Banking Services,” by Edward
C. Skelton, Federal Reserve Bank of Dallas Southwest
Economy, First Quarter 2013.
5
The survey of 1,480 Mexican firms was conducted
between August 2009 and June 2010.
6
See “Access to Credit and the Dynamics of Informality in
Mexico,” by Oscar Sanchez, Inter-American Conference on
Social Security, Working Paper no. 0114.

For more information about Mexico’s adoption of Basel III
capital standards, see “Mexican Banks Get Ahead of New
Global Capital Standards,” by Edward C. Skelton, Federal
Reserve Bank of Dallas Southwest Economy, Third Quarter
2012.
8
Among other benefits, the fiscal reform passed in October
2013 was designed to reduce the size of the informal
economy. For more information about informality in
Mexico, see “Informality in Mexico,” by Nicola Brandt,
Organization for Economic Cooperation and Development,
OECD Economics Department Working Paper no. 896,
October 2011. Informality varies by geographic region, and
regional differences in formality help explain disparities in
economic growth and development. See “The Determinants
of Informality in Mexico’s States,” by Sean M. Dougherty
and Octavio Escobar, Organization for Economic
Cooperation and Development, OECD Economics
Department Working Paper no. 1043, April 2013.

1

7

Southwest Economy

Mine Yücel, Senior Vice President and Director of Research

is published quarterly by the Federal Reserve Bank of
Dallas. The views expressed are those of the authors and
should not be attributed to the Federal Reserve Bank of
Dallas or the Federal Reserve System.
Articles may be reprinted on the condition that the
source is credited and a copy is provided to the Research
Department of the Federal Reserve Bank of Dallas.
Southwest Economy is available on the Dallas Fed
website, www.dallasfed.org.

Federal Reserve Bank of Dallas
2200 N. Pearl St., Dallas, TX 75201

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