In exchange for millions of tax dollars the subsequent economic development policy would bring among others a $4 billion investment from Samsung, thousands of jobs and a new operations campus from Apple, The Domain mixed-use development and a multibillion-dollar pharmaceutical company in a deal with Merck.
Nearly half of the agreements struck under the policy relocated several large companies specifically into Northwest Austin along US 183 and MoPac. Since 2003, deals made with companies such as Apple, eBay, National Instruments, Visa, Websense, HID Global and LegalZoom have brought nearly $600 million in investments and 10,000 jobs to the area.
Fifteen years later Austin is nearly ready to adopt the first major rewrite of its economic development policy. Conditions today, however, stand in stark contrast to those of 2003: the unemployment rate is at a near-record low; the city’s economy is creating more jobs than job seekers; and U.S. News & World Report has named Austin the best place to live in the United States for the second consecutive year.
As Mayor Steve Adler has often stated, Austin’s economy has prospered, but not for all Austinites. Residents face a citywide affordability crisis; low-income Austinites are being displaced as their neighborhoods become gentrified; outer areas of the city lack resources as fundamental as grocery stores; and although some of the world’s largest companies from Google to Facebook have opened offices in Austin, many of the city’s small and local businesses are struggling to stay open.
City Council is scheduled to vote on the updated policy when it returns to the dais Aug. 9. City leaders say the updates to the policy aim to address these needs and focuses on building an economy that is socially conscious and equitable.
Helping the economy find its way
At the center of Austin’s economic development policy is its use of financial incentives through Chapter 380 agreements. Chapter 380 refers to the Texas Local Government Code, Section 380 that allows municipalities to contract with private partners to promote economic development.
David Colligan, manager of Global Business Expansion at Austin’s Economic Development Department, said during the national economic downturn of the early 2000s Austin negotiated its Chapter 380 contracts with a focus on the “old-school ways” of stimulating the citywide economy: through general job creation and large-scale private investment.
Along with the multibillion-dollar investment from Samsung’s semiconductor plant, Austin’s economic development policy helped shape the investment of hundreds of millions of dollars into the local economy from outside companies, including Visa, Apple and HID Global and projects such as The Domain.
Although Colligan called the policy effective he refrained from calling it successful.
“Success would’ve meant that equity would have been addressed, and we would have seen all boats rise instead of a few,” Colligan said. “Success today looks very different from success in 2003.”
The modern needs of Austin
Mike Berman, spokesperson for the Greater Austin Chamber of Commerce, said although the economy 15 years ago needed general stimulation, today the focus is ensuring the positive impacts of Austin’s prosperity reach all corners of the city.
“Our [economic development priorities] are different because we are coming from a place of strength,” Berman said. “We want to bring that opportunity to everybody in the community at all levels of the economic spectrum.”
The draft of the city’s updated policy highlights a set of guiding principles in which Austin aims to root all its economic development deals.
These principles include enhancing the quality of life throughout areas of the city; incentivizing the creation of middle-skill jobs, or those that may not require a four-year degree, and equitable benefits; supporting small and local businesses; promoting equitable hiring practices; and controlling affordability.
Colligan said among the new policy’s most important focal points is the aim to direct economic development to areas of the city that have been excluded from prosperity. The city will seek out business partners that can fulfill the needs of disadvantaged areas and customize community benefit packages, whether through building a grocery store, providing job opportunities for the hard-to-employ or transportation improvements.
“Austin is looking to work with more socially conscious private partners,” Colligan said. “If it’s a developer, we want a developer who understands the culture, the community and the people in a given area.”
A small-business focus
If the old policy was a one-size-fits-all focused on attracting a few large-scale companies to relocate to Austin, Colligan said the new policy looks inward and focuses on small and local companies that are looking to expand.
The city will be able to offer help to expanding businesses through programs that alleviate regulatory pressures, by financing some expansion expenses or matching local talent with open positions.
All agreements with large-scale and local-scale companies will be performance-based and updated compliance records and details for each deal will be publicly available on the city’s website, according to the policy’s text.
District 7 Council Member Leslie Pool has been a vocal critic of the city’s agreement with The Domain and has even called for a repeal of the deal that sent roughly $2 million to property management company Simon Property Group in 2017.
Pool, who has advocated for changes to the city’s economic development strategies, said she felt confident The Domain deal would not be replicated today.
“We are changing the basics of the program; we have checks and balances; council is more closely monitoring the programs,” Pool said. “And it’s looking at smaller contracts and a larger number of entities throughout the city.”