Robert W. Gilmer

Timothy K. Hopper

English

Research Papers in Economics

Houston Business
A Perspective on the Houston Economy
Bryan–College Station:
More than a College Town?
Texas A&M University
has been at the
center of the region’s
past growth, but
an enrollment cap
and flat spending
may limit the
school’s future role.
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T hree distinctive features characterize the
economy of the Bryan–College Station metropoli-
tan area: it perennially has the lowest unemploy-
ment rate among Texas metro areas; it has a record
of solid economic growth, despite a remote location
on the Texas highway system; and it is the home of
Texas A&M University. This article examines the
economy of the Bryan–College Station (B/CS) met-
ropolitan statistical area (MSA), located just 95 miles
northwest of Houston. The MSA consists of Brazos
County, population 128,000, with almost all local
economic activity concentrated in Bryan and Col-
lege Station. Texas A&M University has been at the
center of the region’s past growth, but an enrollment
cap and flat spending may limit the school’s future
role. Indeed, B/CS’s future depends on an economic
base more independent of Texas A&M, and the
region already shows signs of becoming more than
a big college town.
TEXAS A&M UNIVERSITY
In 1865, William Joel Bryan donated land for a
projected townsite on an extension of the Houston
& Texas Central Railroad, and the following year,
the town of Bryan was made the seat of Brazos
County. In 1871, the Agricultural and Mechanical
College of Texas—located five miles south of Bryan
in College Station—became the state’s first venture
into higher education.
The Agricultural and Mechanical College opened
in 1876 with six faculty members and 40 students.
The school’s original charter offered males a cur-
riculum of agricultural and mechanical arts, without
excluding scientific and classical studies and includ-ing military education. In 1963, the school began
to offer limited coeducational opportunities for
women, and by 1970 it was fully coeducational.
It was renamed Texas A&M University in 1963 in
recognition of its new and diversified role.
After World War II, enrollment was fixed at
about 8,000 men until 1963, but the number of
students mushroomed under coeducational poli-
cies. By 1980, enrollment had grown to 33,500,
and in 1990 an enrollment cap of about 43,000
was imposed. Today, Texas A&M’s College Sta-
tion campus is the fourth largest in the nation and
second largest in the state, with women making
up 43 percent of enrollment. The local economic
impact of this explosion in the number of
students was profound, and the B/CS communi-
ties spent 20 years coping with university expan-
sion as their first economic priority.
Texas A&M’s growth brought two important
local results. One was the shift of economic
influence from Bryan to College Station. Bryan
served as the retail and service center for Texas
A&M throughout much of its history, with Col-
lege Station little more than the rail stop its
name implies. However, as Figure 1 shows,
College Station’s proximity to campus and
vibrant economy kept its retail sales growing
much faster than Bryan’s over the past decade.
Despite the long-standing rivalry between the
towns, they have put aside their differences
enough in recent years to develop such joint
programs as a common 911 emergency pro-
gram, a landfill, an animal shelter and a shared
Chamber of Commerce and economic develop-
ment board.
The second and most important effect of
rapid growth at Texas A&M was simply the
university’s large and growing influence on both
communities. One local business and commu-
nity leader described the relationship as “like
sleeping with an elephant.” For example, deci-
sions made by the university in past years
concerning new dormitories could make or
break the local apartment market. A 1994 esti-
mate of the impact of direct spending by Texas
A&M on the local community placed it at $572
million. This includes wages and salaries for
2,500 faculty members and approximately 10,000
staff; the cost of various supplies, utilities and
other services; and expenditures by visitors for
commencement, conferences and professional
meetings. This figure directly makes up 30
percent of total personal income in the B/CS
area, and (even allowing for substantial leak-
ages of this income out of a relatively small
metro area) as the money is respent, it means that
50 to 70 percent of B/CS income stems directly
or indirectly from the school’s activities.
THE LOCAL ECONOMY
The B/CS unemployment rate is always
among the lowest in the state, near 3 or 4 percent
throughout the 1990s and typically half the state
average. Why? Partly, this is because the stable
government sector makes up 40 percent of
wage and salary employment in B/CS. We find
nothing comparable in other Texas metro areas;
such government centers as Austin, San Antonio
and Killeen–Temple have less than 30 percent of
total employment in government. Additionally,
the volatile goods sectors of mining, construc-
tion and manufacturing provide less than 12
percent of B/CS employment, among the lowest
shares in the state. In contrast, goods production
makes up 19 percent of employment in Dallas,
21 percent in Houston and 29 percent in such
small metro areas as Longview or Sherman.
Table 1 shows location quotients that illus-
trate the concentration of private employment in
B/CS relative to private employment in the state.
Calculating the distribution of employment in
B/CS and in Texas for each private industry
sector yields a ratio called a location quotient:
LQi =  
percent share of industry i
in private employment in B/CS
percent share of industry i
in private employment in Texas
Figure 1
Total Retail Sales, College Station and Bryan
Index, 1984:1 = 1
.7
.9
1.1
1.3
1.5
1.7
1.9
2.1
2.3
2.5
2.7
College Station
Bryan
’94 ’93 ’92 ’91 ’90 ’89 ’88 ’87 ’86 ’85 ’84
SOURCE: Texas Comptroller’s Office.If this ratio is significantly greater than 1, it
shows an unusual concentration of employment
in B/CS compared with the state.
These ratios show that the region has re-
tained strength in its traditional agricultural sec-
tor as part of the rich Brazos Valley, although
farming, poultry and cattle have continued to
decline in influence in recent years. Otherwise,
the only sources of real strength that stand out
in these aggregate numbers are retail trade
sectors, personal services, movies and amuse-
ments, and other local services—all tied to
serving a large and transient student body.
LOOKING FORWARD
The imposition of an enrollment cap at
Texas A&M has provided the B/CS community
with the opportunity to catch up with university
growth, as spending per student (apart from
inflation) had flattened out a decade earlier.
Already, however, the question has become:
where will future growth in B/CS come from?
One direct approach has been to open a new
campus. Blinn College, with its main campus in
nearby Brenham, will soon open a new branch
in Bryan. The new campus will consolidate
several locations now operating in the B/CS area
and reinforce Blinn’s long-standing ties as a
feeder campus for Texas A&M.
Beyond that, the B/CS metro area has al-
ready developed two important regional roles
that broaden its economic base beyond Texas
A&M. First, it has capitalized on the extraordi-
nary concentration of restaurants and retail
stores that developed to serve the student popu-
lation, and it has become a significant retailer
for the surrounding region. Second, partly
stimulated by the College of Medicine at Texas
A&M, B/CS has developed a growing health
services complex, with two hospitals and a large
clinic. As cost-cutting and reliance on primary
care facilities push medical procedures out of big
regional medical centers and into local com-
munities, B/CS should see continued growth in
health services.
The $82 million George Bush Presidential
Library will provide another immediate boost
to the local economy when it opens in 1997.
The hospitality industry is already the second
largest industry in B/CS, mostly due to Texas
A&M campus visitors, alumni, training pro-
grams and athletics. Based on other presidential
libraries, initial-year visitors could number as
high as 450,000, with 300,000 visitors per year
thereafter. Even a fraction of this number would
take the local hotel and restaurant industry to a
new plateau.
The B/CS business community has benefited
less than might be expected from the presence
of a major research university. There are local
success stories of new businesses and spin-offs
from university research—mostly in consulting
and technology—but they are few. Looking to
the future, Texas A&M and the B/CS economic
development foundation have created a tech-
nology transfer program for local economic
development. The university scans its research
for marketable concepts, and a local incubator
program offers free rent, utilities, and marketing
and legal advice. Based on successful programs
at Stanford, Auburn, Princeton and other uni-
versities, the plan is for the talent and initiative
of Texas A&M faculty and graduate students to
help build local businesses. If successful, the
program would provide a substitute for higher
Texas A&M budgets and a continued role for the
university in local economic growth.
— Robert W. Gilmer
Timothy K. Hopper
Table 1
Location Quotients for Private Employment
In Bryan–College Station, 1982 and 1992
Industry 1982 1992
Agriculture 1.66 1.94
Mining .55 .77
Construction 1.26 .86
Manufacturing .60 .54
Transportation and public utilities .70 .61
Wholesale trade .58 .73
Retail trade 1.64 1.49
Building materials 2.05 1.19
General merchandise 1.79 1.54
Food stores 1.82 1.52
Auto dealers and gas stations 1.35 1.29
Apparel stores 1.79 1.39
Furniture stores 1.23 1.58
Eating and drinking places n.a. 1.63
Miscellaneous retail n.a. 1.91
Finance, insurance and real estate 1.01 .71
Services 1.00 1.12
Personal services 1.26 1.11
Motion pictures 1.61 1.30
Amusements 1.31 1.41
Social services 1.28 1.91
Membership organizations 1.23 1.27
NOTE: n.a. = not available.
SOURCE OF PRIMARY DATA: County Business Patterns, Bureau of the Census.For more information, call Bill Gilmer at (713) 652-1546.
For a copy of this publication, write to
Bill Gilmer • Houston Branch • Federal Reserve Bank of Dallas
P.O. Box 2578 • Houston, Texas 77252
The views expressed are those of the author and do not necessarily reflect the positions
of the Federal Reserve Bank of Dallas or the Federal Reserve System.
T he Houston economy continues to draw
strength from the national economy and from
improved energy markets. Through May, local
employment gains totaled 3.1 percent for
the previous 12 months, led by advances in
goods production. Despite low natural gas
prices, oil service and machinery profits have
been strong. Chemical markets have slowed
but continue to generate excellent profits;
refining margins have swung sharply positive
in recent weeks.
RETAIL SALES AND AUTOS
Winter goods have cleared out, and retail
inventories have been in line for spring and
summer. Despite a high dollar value for over-
all retail sales in Houston and brisk local
hiring by retailers, the bottom line is hurt by
price reductions made to generate traffic in
individual stores.
Auto and truck sales in May rebounded
from a weak March and April to register a
10-percent increase this May over a year
earlier. The turnaround leaves Houston auto
dealers 1 percent ahead of last year’s sales
pace.
UPSTREAM OIL AND NATURAL GAS
Crude oil prices moved past $20 per barrel
in mid-April and stayed in the $19–$20 range
much of May and June. Prices fell under $18
as OPEC met to set production quotas in late
June, and Houston-based companies seem
to be basing plans for 1995 on prices near
$18 per barrel. Natural gas prices followed
a similar pattern, as Gulf Coast spot prices
slowly moved up from $1.55 per thousand
cubic feet in April to $1.70 in mid-June but
slipped back to $1.55 when oil prices fell
under $18.
Oil services and machinery demand re-
mains seasonally flat, with prices soft and
inventories up. Companies with good access
to international markets have fared best, as
improved oil prices have spurred overseas
 
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activity. Activity in the Gulf of Mexico con-
tinues to improve. Day rates for rigs drilling
in the Gulf remain depressed, despite more
rigs going to work and the movement of Gulf
rigs to other basins.
REFINING AND CHEMICALS
Gasoline and other oil product prices
turned around sharply in April and May, with
wholesale gasoline prices rising 25 percent.
A heavy driving season and limited imports
kept retail gasoline prices at 10-year-high
levels through late June. After a poor first
quarter, refining margins have strengthened
substantially, and refiners are looking for-
ward to a good year in 1995.
Prices for key petrochemical products are
flat, and demand has eased slightly in the
past two months. Inventories are accumu-
lating, but stocks remain well below usual
levels. Despite leveling off, prices remain high
enough to provide excellent profits. Several
very large chemical construction projects
have been announced along the ship channel;
industry construction around the world has
sharply improved the local market for engi-
neering and construction personnel.
HOUSING
New home sales in May were up 15 per-
cent over May of last year, with lower interest
rates and a low unemployment rate given
credit. Optimism by local builders was re-
flected in the year’s highest level of housing
starts. Despite the positive May results, year-
to-date sales lag 1994 sales by 21 percent.
Existing home sales also improved from a
weak April, but May sales lagged those of
May 1994.
Apartment construction is up by one-third
from last year, but concerns about over-
building signal a slowdown ahead. Fewer
multifamily starts are planned for the second
half of this year, and starts will remain slow
through next year.

Bryan-College Station: more than a college town?

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Bryan-College Station: more than a college town?

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