Chad (00:01.168)
Greetings and welcome back to Zac Cast, your official podcast for local government nerdery. I don't know why you're holding back this this giggle here, Patrick, but I felt like that was a normal introduction.

Patrick (00:12.642)
I I feel like because the countdown is so funny to watch you like pause for the five second countdown, it's amusing to me. I don't know why.

Chad (00:20.32)
Well, either way, I'm Chad, that's Patrick, and we're back here for another wonderful, exciting edition of ZacCast. I want to start with something completely unrelated to city government, Patrick. but because it's completely unrelated, I'll let you have the right of first refusal here. If you have a topic you want to discuss, before that, I'll I'll defer to you on that one.

Patrick (00:43.72)
and your topic is not the Texas Ohio State game.

Chad (00:47.032)
No, I will save that for for later.

Patrick (00:49.258)
Okay. for everybody in Texas right now, my only sports topic at this moment is the Astros are currently one game above the Rangers. So

Chad (00:58.01)
Yeah, but isn't everyone in the AL West kind of garbage this year or like mediocre?

Patrick (01:02.048)
We're above five hundred, but there was a while where the AL West leader was below five hundred. Yeah. I think we're like one or two games above. It's it's not been a good year for the AL West, but I actually think it will be a decent year. It's not gonna shock me if a team in the AL West actually makes the the AL championship game. We'll see. So I don't know. We've had a lot of injuries and to be fair, the AL West has been really injured. It's not that the teams aren't very good. It's it's especially in the pitching staffs, I think the injury bug has been pretty bad.

Chad (01:07.278)
Yeah, that's wild. Not a good year for the

Chad (01:21.786)
I don't know.

Patrick (01:32.108)
Seattle got hit pretty hard. We got hit hard. The Rangers got hit hard. So, you know. It we'll we'll see where it goes. And you were really worried. Right. Let's talk about you sweating bullets on Saturday night.

Chad (01:38.244)
Yeah. And then and then because their pitching staff. Then their pitching staff is down, then they also got hit hard. The I was just I was trying to do the pun here and you won't keep talking over me. So never mind. Won't get to entertain our listeners with some really, really awful jokes. we'll just move on because yes, apparently I was I was sweating bullets. honestly, folks, I was mentally and emotionally prepared at about what?

nine thirty or so on Saturday night that I was gonna I was gonna walk in here to this recording session and just have to take my licks. So if you want to get into football now, we can do that. But from the feedback that we get, most people like us to talk about things that are important first and then then they stick around for the the banter.

Patrick (02:09.645)
Uh-huh.

Patrick (02:28.245)
Yes, I I would agree. And then gets a football. We we can do that, but let's be let's be real. It's really early in the season. Ohio State should have never lost that game. That's a hundred percent on their coaching. Period. They made some terrible decisions. They had the missed field goal. They went for it on the fourth down. Like just so many bad decisions.

Chad (02:44.324)
Yes, it was a really terrible decision to miss the field goal. Like someone should have said, Should we miss the field goal or make it? Let's make it instead. That's what they should have said.

Patrick (02:47.968)
Well

Patrick (02:54.303)
Yep. Going forward on fourth down in that situation was a bad decision as well. And that was game changing. So, I mean, it look, I'm happy that y'all came back and won for you. 'Cause I I know your mental your mental health and stability of sportsness needed it, okay?

Chad (03:04.942)
No, you're not. For me, maybe, yes.

Chad (03:11.074)
I was fine. I was at the FC Dallas game. just just slightly kind of following it on my phone. every time that there's been a big Texas game where I have been at an FC Dallas game, we have lost. Of course, both of those times previously were Georgia. so I I already had an expectation going in that fate was probably not gonna be on my side. and then after the first like five minutes of the game, I was like, Yeah, that was that was correct.

But I mean, some of those things were pretty fluky too. That interception that Cam Coleman caused, bouncing off the ground. Like it didn't he bounced off the ground, the ball did not hit the ground. It like a legitimate interception. But that kind of stuff never happens.

Patrick (03:51.939)
Yeah, no surprise here, there's been a lot of drama in Austin all week long. Pretty standard. Right? You don't want to talk about this? Sark going to party real hard on Saturday night. And then the drama. you haven't seen the drama about the the the meme video that was going around about the reporter. Yeah.

Chad (04:00.214)
Okay. What drama?

Chad (04:06.158)
I've not seen any of that.

Chad (04:11.682)
I know about the drama where Arch Manning was somewhat undiplomatic and and commenting about, you know, social media memes and stuff.

Patrick (04:20.27)
Yeah, it didn't it didn't go well for And I mean it's just it's it's been rough. But let's talk positive things. University of North Texas won their game big over UNLV. We're season ticket holders now, Chad. So we have like speak about UNT football. Okay. And the we are. And then the old UN T football team, which is now at OSU, beat Oregon. So so we have to talk about that one as well. But anyways, let's let's get into your

Chad (04:31.664)
Go mean green. We're also alums, so

Chad (04:40.228)
That was that was interesting.

Patrick (04:48.984)
Total moment of nerdery and go.

Chad (04:51.3)
Okay.

So let's stop talking about sports for a minute so that we can talk about some other kinds of sports. Okay. So my oldest son plays youth soccer, right? And there's this app called Rankings. And basically what they do is they just ingest scores and and you know schedules and things like that from a variety of different sources. The most prominent one is called Got Sport. That's pretty much the one that every league and every tournament uses.

Patrick (05:03.277)
Yes.

Chad (05:22.896)
To you know, to put their brackets out there and and show you the results of the games. So they ingest all of these scores and results and they try to match them up with the teams that are in their database so that they can produce you know, rankings in the state, in the region, across the country, right? And so my son's team is brand new. The for those of you who don't follow youth soccer, there's been a massive change as of this past summer. Previously,

The age groups were based on calendar year of birth, not school year, right? Baseball's I is it's I assume still it is it when I was in little league, it was always based on the school year.

Patrick (06:03.554)
Baseball's a May first date where you can have some great exceptions based on age. It's a really weird system. Right.

Chad (06:08.036)
Yeah. So it's more or less school year. but either way, so we switch up from from calendar year to school year, and every team basically is just thrown in turmoil all summer. Pretty much everyone's shuffling, everyone's trying out for new teams. Right. So our team in particular is completely brand new, new coach. we have half the kids came from a different team in the club. and then they moved over to this coach, and then the rest of the

kids are are new. so like there's no continuity at all from any historical record in this database. So as I'm, you know, checking the rankings, cause one cool thing is it'll predict results for your next game. So like we we had a big tournament over Labor Day weekend. And so trying to, you know, see how we stack up with the teams that we're supposed to play.

Patrick (06:52.077)
Mm.

Chad (07:02.756)
But as we were going through the tournament, I realized like it wasn't pulling in the the games from the tournament. So I had to do some sleuthing, figure out how do I add these sources to my team so that we can actually have the the wins that they accumulated over that tournament incorporated into our rankings. Right. So

Patrick (07:22.152)
I feel like this is a violation of terms for service.

No? No? okay. All right.

Chad (07:29.864)
I mean, not me. Maybe maybe they're violating terms by scraping these websites. I don't know. That's not my problem. so so I add I find the source, I add it, all of the games from the tournament, which they happen to win. They play great. they go in there now. So like I'm I'm expecting that we're gonna get moved up in the rankings, right? After we we beat some really good teams in this tournament. And funny enough, when I check it the next day, we've

Patrick (07:34.731)
Okay. Okay.

Chad (07:58.308)
Gone down significantly in the rankings from like 41st down to like 75th or something, right? In the state. And I'm like, that's weird. So I I go and and look through it and it's basically pulled in all of these games from the past two years for this totally different team that's part of our club, but is not the team that, you know, that we are. And lots of losses for that team, unfortunately. So now we have like two years worth of worth of history that doesn't relate to us, dragging our rankings down. So

They have this system. If you pay for the like pro subscription, which I do, because that's you know, got to be extra. So if you have the pro subscription, you can go in and delete sources, right? So I go with the I diligently look at double check every single one of them, make sure that I'm deleting the right ones, not the wrong ones. And then I click the button to approve and it says make sure that you're a hundred percent right. And I say, I am, believe me. so I accept it and they go away, and then our rankings go back up. And I'm like, sweet, the world is.

Patrick (08:34.402)
Yeah, it's money making. Yeah.

Chad (08:58.596)
back, you know, in its normal position. Then then like next time I go check it a couple of days later, all of those sources are back attached to our team. So I'm like, what the heck? Now our ranking is dropped again. We have all these things to get like I didn't I just do this so I do it again. Three times this happens. So finally I'm like, all right, I'm gonna I'm gonna do something I never do, which is talk to people that I don't know. I'm gonna actually send a support email and say, hey guys

You've got this problem. here's how you can fix it. Here's why it's a problem. Like it's just simple entity resolution, same stuff that we do for sales tax audit. It's like it's a domain that I c I I I have a pretty good understanding of of how how do you do this? How do you match up dis disparate records to one another? So I I give them some feedback and they they respond to me and they say, actually, what you need to do is you need to go back to the tournament that is already over.

And that is staffed by volunteers. And you need to have them change the team name in their system so that we can pull it properly.

Chad (10:08.74)
And I'm like, what? Are you serious? And so it it was late and I was frustrated. So I I shot off kind of a a terse email in response. and then I felt bad about it the next morning and I wrote an apology and I was like, sorry about this, I appreciate you guys, but here's what we have to do. And but anyway

Patrick (10:17.122)
huh.

Chad (10:30.776)
It's just really, really frustrating, Patrick, that I can't get this working.

Patrick (10:36.631)
Mm.

Chad (10:38.978)
It's just really frustrating that we can't get like even if your algorithm on its own is too greedy and it will just connect all these different data sources, if you have a human saying this is not the same team, like that's a pretty high value signal. You should be able to adjust your algorithm to say, This is a definite no, stop adding it back whenever we re rerun all these things. You know what I'm saying? It's just frustrating.

Patrick (11:05.155)
Right. Well, also, don't you feel like it's just like a database record issue of just making an adjustment?

Chad (11:13.73)
It's super simple. I mean, when you go through these algorithms, you have, you know, multiple different checks and they each produce scores. And then based on those scores, if it meets a threshold, then you'll automatically, you know, connect these records together. and

Patrick (11:15.277)
Right. Yeah.

Patrick (11:27.329)
An example of this in our world would be like there's a McDonald's and then there's a McDonald's garage. Right? And like if our system picked up McDonald's garage like as if it was a McDonald's burger, we would we'd have to go in and adjust the algorithm to pick it up differently. That's a example.

Chad (11:33.39)
Right. Or there's a sonic

Chad (11:46.38)
Or like Sonic in particular. So if you pull a point of interest about a sonic drive-in, the point of interest is going to say sonic drive-in. But a lot of your sales tax permits will say SDI of whatever city. Right. Like that's the outlet name. So you you learn a heuristic that what if it says SDI of dot dot dot, that's probably a Sonic, right? And so you can update your rules and your machine learning algorithms, like to pick these things up. But part of that step

Patrick (11:51.405)
Mm-hmm.

Chad (12:14.764)
is also or can be a like a a ban list. Like here is a specific record. It should never be attached to that record. Right. It's super simple, one database table, and then your problem is solved. But to delegate back to your customer to like please go back and you fix our data, it was just crazy to me.

Patrick (12:35.511)
Yeah, and I think this is a bigger question about data in general, right? Like

Yeah, especially with AI, because AI allows you to analyze data, but AI doesn't always see the difference between what we're looking at. So so right now we're doing this really cool analysis project. I'm not gonna go into detail with what we're doing, where it's at. But we're doing this really cool analysis project that is looking at a massive development and it wants to know if I develop this, what is gonna happen to the property values in that area and what's gonna happen to the character.

of the area based on that development. Well, this development's been done in other places before. And historically over the last 50 years, there's been lots of developments like it that have been done all throughout the United States. And so there's a you've got to go get that data so that you can see okay what happened before, what happened after, not necessarily from a valuation standpoint on its own, but also what happened to the character. So for example, did this development

Cause any type of major property improvements to happen on existing properties? Did this cause redevelopment to happen? So a teardown of an existing improvement and something to be rebuilt. And the the problem with that when you go look and you dive into data is you're not always going to have like a direct data source that says this this home was torn down in twenty twenty two, right? You're gonna have basically a significant change in valuation.

that's going to occur that's going to flag something for you so that you can run further analysis on it to see whether that was a significant change or not. It's just not it's not clean, clean cut and simple. And I think a lot of times in all systems, not just software design or analysis work or anything like that, I think a in a lot of times if it's if it's not clean and easy, if it's not just like the data source is there for me to do a quick comparison, it's it can't be done.

Patrick (14:33.07)
Because it's too hard or it's too difficult. But there are ways to do it. There are ways, you know, we work through this with our team when we're doing these analysis projects all time. And I can't remember what you said yesterday when we were on a team call specifically on this project, but you kind of you went through like a logical way in which we could find it, but it was like four steps to find it. And I just don't I I I think

The point I'm trying to make is

them putting that back on the customer is almost basically just throwing their hands up and saying it's too difficult to actually do it. Cause they they know that's not going to happen, right? They know that if I went back to the city and I said, Hey, I want you to to go look at this and and you're gonna have to tell me all the houses that were torn down. Well, one, we're not getting paid by those cities that we're w looking at, so they're never going to do that. And two, it's just it's basically just

Chasing after something you're you know is not going to be done instead of finding a solution to the actual problem. I think a lot of times we bring to the table we have a problem, yet we don't work through the complex way in which to get a solution to that problem, even if it's like a 95% solution. Doesn't always have to be 100% solid. You can get a lot of the answer with 95% of the answer. Is that did I give enough information there for people to understand that without giving away the project? I'll be very excited to talk about this project when we're

Chad (15:56.622)
I think so. Yeah. Yeah. The problem is like data are messy no matter what field or domain that you're working in. When you're especially pulling in data from a third party or lots of different sources.

You're never going to be able to just go back in and say, no, we need to get the data source to clean it up. Like I would love for the Comptroller to do any s kind of quality ish control in the data. we're we're working on a we're working on a system that will pull in all of the active sales tax permits across the whole state, you know, geocode them and kind of build a repository for a variety of other reasons that we need it. And I mean, you'll see addresses that are like,

Patrick (16:26.592)
Yeah.

Chad (16:43.352)
Nine miles north of FM seventy five. It's like that's not a mailable address. Why is the comproller accepting this? Or like city names that are misspelled? How do you, as as a data owner, like these are sales tax permits that the comproller is issuing? How are they not checking that the name of the city is correct? How are they supposed to be doing these audits if they don't even have that

level of integrity in their data. But there's no way that we're going to be able to go back and say to the comproller, you need to fix this, because then they'd have to go back to the business and say, will you please amend your permit? It's like this these things are just not going to happen. So you you just have to be, you have to be able to build resilient systems that can handle it.

Patrick (17:28.712)
When you say resilient systems, go go a little bit more into detail about a resilient system. From from a like a data standpoint. 'Cause I I I think that's kind of important for people to hear.

Chad (17:34.047)
Chad (17:38.638)
Okay. I I mean I don't want to get ne necessarily well, first of all, I don't want to get too in the weeds. but I may also not want to get too technical.

Patrick (17:44.932)
I actually think people care about this more than they care about college football, to be honest.

Chad (17:48.76)
Or soccer rankings for for youth, you know, pre MLS next clubs. okay, so so one thing that we deal with a lot is misspellings, right? And so there are algorithms that you can use to normalize words to account for those kinds of things. Okay. maybe you split a word into what are called n-grams. So like every three words, you kind of just have like a

Patrick (17:50.84)
Or soccer.

Yes.

Chad (18:18.082)
rolling window of I'm sorry, not every three words, every three letters, right? A rolling window of that three letter segment. And then you can come do comparisons on those. So if if maybe you just had two letters that got swapped, like little Caesar's A E versus little Caesar's EA, right? then you could do some comparisons to see how how close are all of these groups. There's also some things called like the Levenstein distance, which basically says if I have this word

And I have this other word, how many of those letters would have to change to make them identical? Right. And so you can, you can that's literally just looking at the at the letters. Like it again, so Caesars versus Caesars. If if I switch the E in the A, right, then that Levenstein distance means it only requires one switch of those letters to have the same word. Right. So

Patrick (18:54.872)
Like looking at syllables, right? Looking at sounds. That's what Levenstein means.

Okay. Okay.

Patrick (19:14.436)
Right. Okay.

Chad (19:16.288)
based on that score, you can tell how close are these two pieces of text to each other, how similar are they? there are also some algorithms for you doing things like what does this word sound like? Right. So there's a there's a sound ex algorithm and a metaphone algorithm that you can use. And it basically turns these words into representations of the sounds. And so you can say, do these words sound similar if you were to say them out loud?

Right. so if you were just hoping to match these two businesses by the name, you might run into a lot of problems if the data quality is poor. But if you can build in all of these other steps where you can you can use those things to judge how close they are on on different axes, then you can build more of a composite understanding of how similar those two pieces of data are.

And you can do this not just with text, right? when we talk about things like you know, language models, the way that those work is that they they break a corpus of text down into what are called tokens, which may be a full word or they may be like a a stem of a word. so like you know, running,

Run would probably be a token. And then you might have an N I N G as a token. Right. So so you break these things down and you through a bunch of sophisticated machine learning, you can figure out the relationships between them and then you turn them into a long series of numbers, right? And then you can use those numbers to compare how similar words are to each other, right? And that that's a lot more complex because it involves a lot of machine learning.

versus just some sort of quick and dirty, you know, algorithms and and math calculations. But you could also do that for things like let's say

Chad (21:26.734)
Census data. If you were to take census block groups and you wanted to compare which block groups were similar based on certain characteristics. So maybe you've you look at household income, household size, number of you know vehicles, personal vehicles that each household has, right? Just say you have just like 40 different attributes that you wanted to compare against. When you had your whole list of census block groups, you just take all of the data in each attribute.

normalize them. So maybe you take like what percentile is this particular block group among the population, or you can normalize it in a bunch of different ways. you can use a Z score, which will take how how far away are you from the the how many standard deviations away from the median are you in this block group, right? But you have to normalize all these attributes. And then you can create basically that same list of the normalized attributes. And then you can also compare how similar

Patrick (22:17.605)
Right, right.

Chad (22:26.196)
any two block groups are. so like that you you can go into a very deep rabbit hole trying to figure out how to do those kinds of comparisons. But there's a lot of different options for you. The question is, how robust are you taking? Like how much effort are you taking to build a system that's robust that can take into account multiple different things? Mm-hmm.

Patrick (22:44.687)
Well, I mean, yeah, correct. And and it breaks right into account for multiple different things. And then also like, how close are you trying to get to a hundred percent in in the quality of the response, right? I think that's the the the bigger question too. There's there's always gonna be a there's always gonna be a difference in the answer or in in in the quality of the answer a little bit from a standpoint of do am I trying to get ninety percent of the way there so that I can see which way the wind blows, or am I trying to do this with a hundred percent certainty?

Obviously the hundred percent certainty is a lot more difficult to get to. And in some cases, not always you don't always have that ability. but I I think that's I just think it's interesting when we look at difficult, complex issues. there are so many more tools available for us now than there used to be. And I'm I'm talking internally, more like Zac Tax for a minute. There are so many more tools now that we've been able to build and

And and frankly, people, right? Like we've been able to invest in that data science piece. We've been able to invest in you know, the staff members that have the capabilities to do that to go and do it. Also, technology just has allowed it and put it kind of at the tip of your fingertips now, right? Where it wasn't before. I I remember when was the first time you talked to me about the Lovenstein it was it when we were building kind of the the HR app?

Chad (24:12.386)
Mm, I no, it was like the very first time that we were building the audit system into like V 1 Zac Tax probably almost ten years ago. Mm-hmm.

Patrick (24:21.187)
the automation within the auto system, yeah. Okay. Right. Okay. So I mean, that was way over my head then, probably still way over my head now, but super nerdy. and I just I don't know. I I just thought that was an interesting conversation to have. I know that we just went down a rabbit hole of total data nerdery there, but I thought it was an interesting conversation. All right, what else we got topic wise today?

Chad (24:42.852)
Yeah, if you're still here, man, I appreciate you. I have nothing else. We can I mean there's a whole lot going on. there's a whole lot going on we could talk about, but a lot of it is probably not germane to our particular podcast. So I will once again, I'll defer to you on what whatever you have next for our our discussion.

Patrick (24:52.1)
Sweet.

Patrick (25:07.631)
Okay, I have a topic. It's a totally unprepared topic. And this could be like a short and sweet podcast today, people. Get you get you home in forty minutes probably.

Chad (25:12.368)
That's fine, yeah.

Patrick (25:17.775)
So a post on my personal Facebook from a buddy of mine and Chad, I know you're super involved in Facebook. Literally never get on the thing, but yeah, a hundred percent. he posts there there's a certified financial planner that that posts this thing and and I'm gonna read it real quick. Forty percent income tax on everything I earn, fifteen point three percent self employment tax on nearly every dollar of business profit.

Chad (25:24.674)
I check it every day.

Patrick (25:42.353)
Twenty three point eight percent capital gains tax when my investments grow, nine point seven five percent sales tax, which means he lives like California, four percent inflation tax on everything I save, and eleven thousand dollars a year on the property I own. At some point you have to ask how many times can the same dollar be taxed before it finally belongs to you? Now, the friend of mine's reaction to this was we're being taxed to death.

Chad (26:07.14)
Was it your friend that posted this or was your friend commenting on this?

Patrick (26:11.568)
My friend was commenting on this. He was basically like reposting it, right? And and it got picked up by the good financial sense guy. I know he's big on Twitter too. but the good financial sense guy picked it up and he posted about it and, you know, basically about where you pay taxes and, you know, if you buy a house, you have property taxes every single year. He he restates the whole thing. He doesn't actually go into it anymore. My reaction was different. I actually had this reaction which was more

Thinking about it from an entrepreneur standpoint. You and I have talked about this. I don't know if we've ever talked about this on the podcast, but you and I have talked about the things that we didn't know when we started a business and some of the hurdles that are in your way when you start a business. I think, for example, the self-employment tax, right? Self-employment tax is only paid. you know, if you're an LLC, if your form is an LLC, and this is, you know, I I'm talking to kind of like the side hustlers.

And the entrepreneurs and folks that are really thinking about getting in the business, right? as we talk to city people all the time, we're like, look, if you're really good at something, build a side hustle around what you're really good at. because there's such a need for skilled people and there's just not enough people. So you can you can build a lot off of that. but one of the hurdles to that is the tax system and the cost of that, especially if you just form as an LLC. So you remember when we originally started as a business, we formed as an LLC.

So everything we made was just straight pass through income. you paid self employment tax on it. So you paid your tax rate plus, you know, basically both sides of social security and a self employment piece. And then as we grew, and I I don't remember what the revenue number was, but as we continued to grow our revenue, we kind of started to ask those questions and we were able to hire, you know, hire Doug as our CFO and we were able to, you know, hire a good accountant.

and kind of go through this process. And that's when we reformed as an S Corp, right? and we're still in LLC, but we're like Yeah, we file as an S Corp, right? So we declare it as an S Corp. And and I'm going through this to talk about what I think we should do in today's world from a governmental standpoint. But

Chad (28:12.432)
So we we file as an S Corp, yeah.

Patrick (28:29.062)
So then we refile there. And then the way that it works there is we don't pay a forty percent income tax. Like let's just let's just talk honestly about what income tax looks like for a business owner in today's world. And there are some things wrong with the process. Say that out loud. But as an S Corp, you take a salary. And on a salary, you pay normal W two taxes just like you do. And the business pays the you know, the the social security side or the Medicare Social Security piece on the self employment tax. That's that's wrapped up in the business's cost. And that's a business expense instead of being

Taken out the ownership. And there's W 2 income, just like your normal day job would have W 2 income, and you pay taxes there. Then everything else is what is called a distribution, which gets taxed at capital gains rates. But in today's world of taxation, there is also the QB deduction, which basically takes 20% of your business's earnings and removes that from any taxation at all. Right.

before it passes through to the ownership. So 20% of basically what gets passed to the ownership is untaxed before it gets there, until you hit a certain income threshold, which for most small businesses you don't hit until you've really built your small business to a specific level. Right. All of these things are barriers to entry for entrepreneurs. The reality of it is is that you're you're paying somewhere 20 to 24% in taxes by the time it's all said and done. If you're making a

A fairly decent income. Like if you're making city manager money, $200,000 plus, right? you're gonna be somewhere from like 18 to 24%, depending on where you are, based on how that's structured. But if you went into this just as an LLC, yes, 100%, you're probably paying 33 to 40 percent taxes on the money that's made. We did not learn that. I don't remember how many years it was. Maybe you can remind me, but we did not learn that for a while. It took us a long time to figure out that we should be filing differently, if I remember.

Probably around the time you rolled out. Do you remember?

Chad (30:26.798)
Yeah, it was around that time. Cause we weren't really taking salaries until until we left.

Patrick (30:30.161)
Okay. So I I Right. Yeah, we were kind of investing in the people who were W two at the time. Ownership in just a straight up LLC, it's hard to be W two, easier to do it in the S Corp functionality. So anyways, we just didn't learn those lessons until really down the road. Probably, you know, if you rolled out in twenty eighteen, twenty nineteen, I mean it so we were we were doing that for ten years basically, close to it. so I bring all this up.

To say that's such a barrier to entry for entrepreneurship. If if we really want to grow the economy, we really want to grow the US economy, we should make it easier entrepreneurs. And one of those easiest ways to do that is when you go file your taxes and you go into a system, there should be a pretty easy way in which it would say, You're filing as an LLC. If you moved over to an S Corp right now, right? If you moved over to an S Corp,

Then it would change the way all this filing was done and you could readjust all these numbers. Instead of going through a whole process where you have to file like 1040Xs and, you know, try to get the IRS to change your filing within that year, which by the way, when we did it initially, they denied us, right? We had to change it for the following year. They wouldn't change it for the year that we were in. and I just had a friend of mine that actually got it changed within the year he's in, which I was proud of him for getting it done.

Chad (31:53.976)
talking about like when you go to the McDonald's and you and you you like you go to the drive thru and you order like three different things and then the person on the other end says, I'm gonna make that a combo or, you know, I'm gonna do this weird thing with our menu and save you two dollars. The IRS should be doing that, is what you're saying.

Patrick (31:55.357)
But it makes it difficult.

Patrick (32:11.505)
Yeah, like you you go buy a double you go you go buy a double quarter pounder with cheese, a small fry and a medium drink, and they say, actually, if you just buy a medium combo, it's 49 cents cheaper. Right. I don't know why we don't make it easier on people because we already know so much about what they're doing and how they're making that money. I don't know why we make it don't make it easier on them because here's the here's the issue. And there's two issues that I look at from an entrepreneur when it comes to starting a business and how you run a business.

From a financial standpoint that I think is extremely important. One, let's say you are paying thirty five to forty percent in taxes because you're not filing correctly, which, you know, we did for a very long time. That's twenty percent of your revenue, of your margin, right? That you're not able to reinvest back in the company and you're not able to grow with, right? Or it makes you uncompetitive because you have to charge more against a company who has a better filing standpoint. you know, we can get into a lot of topics of conversation about not going up against big

Behemoth companies, but we chose to do that, and it's gone pretty well for us. the second thing is, and this is the hardest thing, and we may have talked about this before on the podcast. The toughest part about being an LLC or an S Corp is no matter whether ownership or partnership takes the money home, if you leave cash in the company, it doesn't matter. If you leave that cash in the company, you are going to be taxed on that cash.

Even though you're using that cash to reinvest in the company's growth. Right. So we have a system that basically is set up to discourage you from reinvesting back in the company because you're going to be taxed on cash that you don't have act, you don't really have access to. Right. So it can be very difficult on somebody who's starting to start a company because you may make so much money, you may want to leave, let's just say, you know, blanket, I want to leave $100,000 in the company so that we can grow the company.

You still have to pay twenty thousand dollars of taxes on the hundred thousand dollars of money that you left in the company. And so it makes it difficult, especially on small businesses. Now, granted, once you're larger and you have plenty of cash flow and you have cash flow to do distributions to pay taxes and those type of things, it's not that big of a deal. But as a it it's such a barrier and and in my opinion, it's such a reason why small companies fail is because they're living on the thin ice for so long until they kind of get over that hump. And I I don't

Patrick (34:37.964)
I mean, maybe you can talk about what that hump was for us. I I always felt like that hump was when we, you know, when you hit a million dollars a year in revenue, I felt like that was the hump where things were just more comfortable to be able to handle the tax incidents and everything else that happens within the business. but we're just we don't create a system that makes it easy on the small business.

Chad (34:59.29)
So can I can I pivot this to a slightly more germane direction? Because cities don't really have any control over income tax policy. but it is a barrier to entry. It does make it hard. It does unless you have a really stable W two job, like and you side hustle, like it is super, super risky, right?

Patrick (35:04.308)
Yeah, absolutely.

Patrick (35:21.502)
Yeah, which is what we did. Right. I know it's been a long time since we talked about our origin story, but you know, we right. We started in nine, ten, right? Didn't really didn't leave a job until nineteen was when you left, right? And I left in twenty. So yeah.

Chad (35:27.088)
Yeah, episode one. but it it Yeah.

Chad (35:37.776)
But that's just one barrier to entry for a small business.

There are many other ones that cities put up, like parking minimums, like building codes that are over-engineered. zoning restrictions can be a barrier to entry, just complex development processes generally, right? If if you need a lawyer to go through the development process, that's a huge barrier to entry for a small entrepreneur just trying to test out whether or not their business model works.

It's funny because the Strong Counts podcast, they actually talked about this quite a bit on the most recent episode. when you're just starting out and you like you have a plan for a business model, it's not proven. What is what is financing what? They want proven business models. So, you know, you're gonna go get a loan, you're gonna get a loan for a certain type of business or a certain type of building, certain type of apartment complex. You know, name it. It's gonna be something that that some analyst

Patrick (36:24.198)
Mm-hmm. Right.

Chad (36:40.612)
you know, in a corporate office can look at not know really anything about the market that you're going to serve and say, I feel pretty good about this because I've got 10 comps that have worked in the past, right? But if if you don't have, if you have a seedling of an idea for a business, you're being evaluated against against a quote unquote proven concept, right? Like that's that's your standard that you have to meet in order to to even get started.

it's like we really need a cities to provide opportunities and an environment for people to try things and like de-risk those those entrepreneurial endeavors in a way that reduces those barriers to entry, right? 'Cause if you can't even get started, then there's just so much we're leaving on the table. So like when we talk about economic development, this is a huge part of it that I feel like does not get enough attention.

Patrick (37:45.415)
A hundred percent I think you're spot on. Like it's n it's not just federal tax policy that's the barrier, right? it for sure cities are a barrier. You know, there's local governments, you know, create this for for lack of a better term, they're comfortable with what they know, they're not comfortable with what they don't know. And so, you know, in any good startup

Any good small business is a is a creative monopoly. Right. It's it and what that means in in my term, I'm actually taking a term from Peter Thiel, by the way. but what I mean by that is is that you have an idea that somebody else has not had, right? You have an idea that's going to change something, that's going to make things easier, that's gonna have less friction than somebody else does. And in cities

Those ideas typically are frowned upon because they're they're unknown. The unknown is scary, right? The unknown is scary from a political process. The unknown, you have to find a champion within city hall to help you through that. and it's mainly because we're we're just scared of failure overall, right? inside of a city hall. I'm speaking more from a city management perspective. And because we're scared of failure, we put barriers in front of those things that keep the unknown from happening, right?

Chad (39:12.492)
And but what do those barriers do? They bias towards national credit tenants, large developments, right? Like any city who's saying we really want to foster local development and hasn't revo revisited their zoning code and their parking requirements to to remove some of that inherent bias that we already have sort of baked into the cake towards towards bigger businesses, national businesses, you know, is is losing a humongous

Patrick (39:13.143)
and y

Chad (39:43.406)
like quick win that they could get. Right. Like you're you're basically your your s for your starting point is already taking those small local businesses and shoving them off to the side.

Patrick (39:58.038)
Well, I mean, first off, let's let's put this in like really simple terms, right? The first thing you could remove that would significantly improve barriers would be parking requirements. Just eliminate parking requirements altogether. Right? That that's the the easiest first step that you can take.

Chad (40:10.596)
But this is this is the thing I don't understand about

What is the risk to the city if there's quote unquote not enough parking for a business? That that there's gonna be like

Patrick (40:22.451)
I've never heard a good answer to that that's like on the city side.

Chad (40:26.884)
So then so then why are we imposing that on a business? Like why are we the ones that know better how much parking that business needs than them? Who's actually putting the money where their mouth is? You know what I'm saying? It's like if if the business thinks they can go ahead.

Patrick (40:40.787)
Well I mean isn't is it it

Patrick (40:46.781)
Yeah, I mean I just I just think that's a it's a it's an artifact of, you know, old school like Euclidean zoning, right? Like it's just been around for so long, we just always had it. I I mean at the end of the day, I think that's that's really what parking requirements are. They're just a fossil. And we've never been able to get rid of There now, to be fair, there are some cities that have gotten rid of them. But the free market really can handle parking. Like it it really can.

and if if you're gonna do some type of regulation and parking, you should regulate over parking. If you're gonna regulate anything when it comes to parking, that's what you should regulate. You should never let your Walmart store build as much parking as Walmart has in their national standard. It's a waste of space and it's a waste of revenue for the city long term because all those all those sites that surround it. Now, granted, I know we're talking about a Walmart here, but the the reality of it is that Walmart builds parking for four days of the year.

And they only use all that parking for four days of the year. So why build it all?

Chad (41:50.136)
N now they use a lot of it for their drones. Right. They don't actually need all that parking, so they just stick their drones in there.

Patrick (41:54.195)
Yeah. Correct.

Yeah, correct. Yeah. and and so but I I I want to get get back to that from a barrier standpoint. There are some really easy barriers that that you can remove to make it helpful for, you know, those folks to do that. The the CO process is another one, right? COing for multiple uses inside of a single space. That's a that's another thing that would allow that. whereas cities can tend to be and and when I say CO, for those people who listen to us that are not city people, certicular.

Occupancies usually are tied to a specific type of use. and in some cities always tied to not only like the parent level use, but also like the child level use. So it's not just like office, it's medical office, right? But if they would tie that CO to just office space, then you could have lots of different styles of offices that are inside of that space as well. and the fight there is gonna be with the fire department, right? Because there's different standards in the basically the national fire code.

there's different standards for different types of offices. So I but all that being said, like these are barriers that we can have conversations about that would greatly increase the ability for healthy, naturally grown, organic business development to occur within your city. And, you know, if if you look at really, really well-run cities with great revenue sources, they probably have

really healthy small business foundations to them. So yeah, I I think it's a great point, Chad. So now that we got that off my chest.

Chad (43:37.008)
Thank you.

Chad (43:41.432)
We should have started with that one 'cause it was actually more relevant to the to the podcast.

Patrick (43:45.589)
I I I thought the soccer one was good. I mean I think that's a

Chad (43:51.342)
I mostly just wanted to vent a little bit.

Patrick (43:55.499)
Well, I'm I'm glad that you got that out there. so it's it's gonna be interesting. I

You know, we're wrapping up budget season right now, right? In a lot of these cities. It has been a tough budget year. Very, very tough budget year for cities. and it's been extremely difficult in the political process. We've got a lot of things coming down the pipeline politically. Midterms are almost here. I've been looking through a lot of, you know, this is just me from my old Texas A days and looking through polling data.

There's just a lot of change that's occurring right now in people's mindsets and thoughts. And so it's gonna be very interesting as we get to that, you know, November date in the midterms to see where people go and and what they're thinking. we do most of our business in the state of Texas. So, you know, watching the election here has be, you know, w when when in our lifetime has Texas really ever been like a national story? obviously Texas right now is a national political story.

about what is happening in the state of Texas. I believe a lot of that is because there's been such significant overreach by the state legislature in regards to local control. I think they've removed a lot of local control elements. And, you know, I I feel strongly that we should make politics local again. but it's gonna be interesting what happens in this election cycle to see if there actually if if there is a swing that happens. And, you know, if you're not watching that on T V it's on the national news almost every night. So

Pretty pretty open. I know you don't watch the news that often, Chad.

Chad (45:33.828)
I don't. I follow it, but I don't watch I don't sit and watch T V news, no.

Patrick (45:40.382)
Right, right. So but you know, our say what?

Chad (45:41.082)
Do you

Chad (45:46.33)
Go ahead. No, I was just sort of expelling. Go for it.

Patrick (45:52.631)
No, I mean other than that, I mean, I think we're we're kind of ready to wrap up. I I just, you know, look, let's get through budget season. we've got ICMA coming up. try to get some folks outside of the state of Texas for a little while. we've TML is in November this year, so we're excited to do that. and you know what we're seeing right now is kind of a need to get past the budget process. and

We need to get past the budget process. We need to get past the election. Maybe things will calm down. It's been a long time since I felt this uneasy. but and I feel like city staff members and and city managers are beat down right now. So it'd be nice to get a couple of months of a break if we can find it.

Chad (46:43.568)
Agreed to all of you living through that grind right now. God speed to you and just keep keep the faith. What is it that that Dr. Bland there's there's the the Bible verse that he always quotes. I can't remember which one it is.

Patrick (46:54.134)
Yeah.

Chad (47:06.298)
Do you remember like he a

Patrick (47:07.23)
I yeah, I don't remember. I don't.

Chad (47:12.42)
Well, if I can think of it, I'll put it in the show notes. Apologies for that sort of extemporaneous digression there. he well, no, he would not be because we forgot what it was. It's a really good one though. Like w he gave his like all semi farewell speech, I think two years ago, a year and a half ago at the the student alumni luncheon. And he that was how he ended his speech. So obviously it stuck with me well enough to remember.

Patrick (47:17.046)
Bob would be so proud of us for remembering what he told us.

Patrick (47:32.79)
Mm-hmm.

Chad (47:40.324)
That it was something to remember, but not well enough to actually remember what it was. d do you want to go ahead, since we have a couple more minutes, do you want to go ahead and get whatever is off your chest or on your chest off of it with regard to football?

Patrick (47:56.886)
Look, I mean I'm in I'm in Aggie syndrome at the moment, right? Like we're gonna go win a national championship. Everything's gonna be great.

I mean, I didn't have two different quarterbacks in the game last week. I did. He was one quarterback in the first half and a second quarterback in the second half. Look, we're fantastic right now. got a big game this week against Kentucky. I'm smiling when I say that. and it's it's gonna be good. Who do y'all have first? I think we're I think we're at home.

Chad (48:25.358)
Is that at home or is that on the road? so we have we got UTSA at home and then we travel to Tennessee.

Patrick (48:37.639)
U T S A at home and then you travel to Tennessee. you have L S U this year?

Chad (48:40.336)
And then we have Oklahoma. We do in Baton Rouge.

Patrick (48:43.824)
LSU too? Ooh. Okay. Okay. And then but no Georgia?

Chad (48:46.222)
Mm-hmm. And all miss.

Chad (48:53.252)
Not this year.

Patrick (48:55.977)
Okay, okay. So

Chad (48:56.09)
We've played them three times in the past two years, so that's I'm pretty sure that's three times more than y'all have ever played them since you've been in the SEC.

Patrick (49:06.561)
Probably so. Yeah. Absolutely. It because we haven't been the SEC championship. You could say it out loud. Go ahead. but yeah. We the last thing I want to say is I I d I did think the funniest text of the start of college football season was Doug, because Doug's a Nebraska fan. They ended up winning a game, but literally three minutes into the Nebraska's first game, Doug said the season is over. I have to point that out.

Chad (49:24.698)
They did.

Chad (49:30.116)
Doug is turning into like 2016 Charlie Strong era me when it comes to football. I've had I've honestly had I don't blame you. I I've had a much more difficult time getting like really amped up for the football season. Like I'm excited, I still, you know, I care. but I've been trying very, very hard to keep more level expectation wise.

Patrick (49:35.861)
That's true. Where we actually got concerned about your mental health because of sports.

Chad (49:57.86)
like emotions during the games. Like I haven't actually watched the first two games live, which has been very helpful. Just kind of follow it, go back and rewatch it when it's over.

Patrick (50:10.529)
T to be fair, I think it's really hard to get into college football when it's a hundred degrees outside for like the fiftieth day and we haven't had rain for sixty six days. Right? Like I I feel like fall is like the the sense of the start. Somebody put up some some pumpkins in a restaurant the other day, and I thought to myself, I know it's mid September and I know it's time to put pumpkins up, but it's still a hundred and two degrees outside. It's hard. So yeah.

Chad (50:35.832)
It's supposed to get into the eighties next week. Upper eighties, but still.

Patrick (50:40.061)
I man, I cannot wait. I'm telling my kids' football practice at six o'clock at night has been brutal for weeks. It's so hot. but I am I am for sure looking forward to that.

Chad (50:49.892)
Yeah, so they push ours back. They push ours back. It starts at seven fifteen right now. So, you know, we get down to like eight forty five. It's super late for a fifth grader. so yeah, I'm also looking forward to the temperature going down so we don't have to start practice so late.

Patrick (51:03.969)
Yeah.

Patrick (51:09.557)
Yeah. Well, we're almost there. We can see the light at the end of the tunnel. So, but I am missing Switzerland. Switzerland was very nice. The weather was beautiful. So I I will I will take that. Ooh. Okay. I'll be in California in like yeah. Okay. My travel schedule coming up. I've been in California in like two or three weeks, and then I'm at I think I have one more trip.

Chad (51:19.578)
I'll be in London in like three weeks. Four weeks. I'll be in London in a month. So gonna go see another Chelsea game.

Patrick (51:36.183)
that have to take end of October and then we're back to Texas conferences in November. So excited to kind of knock all those out, see everybody. But yeah, it's gonna be it's gonna be a good time. I'm excited about football season though. I mean let's let's let's give it the excitement it deserves. And the Cowboy season is already over so we can go ahead and write them off. We don't even have to talk

Chad (51:56.666)
Fine. I didn't even watch a single game last year. I made a vow not to to you and Doug. I made a vow I would not watch a single game. so now that that season's over, I'm allowed to watch them again, but I just don't really have a lot of interest.

Patrick (52:09.675)
Uhhuh. Yeah. Yeah. So you've become a soccer fan.

Chad (52:15.182)
I do like soccer. It's it's a two hour game. You get in, you get out, it's action pretty much the whole time. and yeah, I don't know. it certainly beats sitting through a three and a half to four hour football game where there's maybe like thirty minutes of actual action and it's just littered with three and a half minute commercial breaks.

Patrick (52:39.467)
Gotcha. Well, anyways, I hope you enjoy this podcast on your drive to work or your drive home. but yeah, that was that was great, Chad. We'll catch up and keep this up throughout the fall. So we will be back on air in about two weeks.

Chad (52:55.364)
See you Pat

Patrick (52:57.985)
See ya.