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Texas Estimates Hurricane Harvey Won’t Be an Overall Economic Hit

Construction workers excavate and widen Brays Bayou as part of a nearly $500 million flood control project on March 22, 2018, in Houston.

Construction workers excavate and widen Brays Bayou as part of a nearly $500 million flood control project on March 22, 2018, in Houston. David J. Phillip / AP Photo

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The large geography of the affected region and a significant influx of rebuilding funds helped lessen the disaster’s economic damage to the Lone Star State, according to a new analysis.

Texas’ robust economy helped the state sustain the economic shock of Hurricane Harvey with the spending required to rebuild eventually resulting in a projected $800 million gain in economic activity, according to an analysis from the Texas Comptroller of Public Accounts.

In August 2017, Harvey hit the Gulf Coast and lingered for days, dropping unprecedented amounts of rain in the greater Houston area. The storm damaged property, displaced families and disrupted businesses. More than 180,000 homes were damaged in the Houston area alone.

Using the Regional Economic Models, Inc. model, the Texas Comptroller was able to estimate the economic impact to the state by comparing productivity losses like utility outages and lost wages to rebuilding gains like spending from insurance companies, all levels of government and nonprofits. Most rebuilding funds are being spent on construction, equipment or consumer goods like pantry items.

Sectors hit hardest by Harvey included the oil and gas, health care and manufacturing industries with all others lumped into a separate category of productivity losses.

Texas saw a large influx of disaster funding—some of it still waiting to be spent—from the Federal Emergency Management Agency, flood insurance, other insurance, Small Business Administration loans, state and local government spending, nonprofits, and personal savings. Coupled with the fact the damage was spread over a large geographic area consisting of eight different government bodies, the blow from Harvey was not as bad as had it hit a smaller region, said Joyce Jauer, senior revenue analyst for the Texas Comptroller.

“Houston was able to rebound quite quickly,” Jauer said during a Wednesday webinar hosted by REMI. “However the coastal areas had a much harder time, especially because of their reliance on tourism.”

First-year losses for the Coastal Bend Council of Governments and South East Texas and Golden Crescent regional planning commissions fell between $350 million and $800 million each, according to the comptroller’s office. Membership industries like clubs, theaters, and telecommunications and entertainment services also suffered.

By comparison, the Capital Area and Alamo Area councils of governments and North Central Texas region, which were farther away from the coast than the worst hit areas, saw $1 billion to $2 billion first-year gains. The health services, food and beverages, rental housing, motor vehicles, furniture, and clothing industries all thrived as people recovered and replaced what was lost.

Automakers have seen a reduction in vehicle purchases the past year because so many were replaced in the immediate aftermath of Harvey, Jauer said.

“Manufacturing was able to go online again by the second or third month,” she added. “Small businesses struggled longer than large businesses to bounce back.”

The comptroller estimates Texas’ losses will reach $19.8 billion in the first three years since Harvey and economic gains at $20.6 billion—a net gain of $800 million.

Source: Texas Comptroller of Public Accounts

One factor not taken into account by the model was economic losses resulting from people choosing not to migrate to the part of Texas affected by Harvey, Jauer said.

“Texas has a diverse economy and, fortunately for us, the loss balanced out and was distributed over a larger geography,” Jauer said.

Dave Nyczepir is a News Editor at Route Fifty and is based in Washington, D.C.

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