Making Cents of Websense and Dropbox [UPDATE]

A few minutes ago, in a special called meeting, City Council voted 5-2 to approve incentive deals for Websense and Dropbox -- moving or expanding to Austin from San Diego and San Francisco, respectively. CMs Laura Morrison and Kathie Tovo - citing expense and lack of necessity - voted against the deals; other members defended the investment and return.

From the original post:

Although economic development deals in good times are under increasing local scrutiny, City Council is considering two more this week: one for San Diego-based cyber-security firm Websense, and one for San Francisco-based file-hosting firm Dropbox – with a goose from the Texas Enterprise Fund.

Last Thursday, the two deals were briefed to the Council by the Economic Development Department, with these basic terms:

Websense: City to grant $438,000 over 10 years, pending company’s relocation of headquarters and creation of 470 full-time jobs with annual average wage of $82,000 (state TEF contribution $4.5 million); net direct economic benefit to city: $1.7 million

Dropbox: City to grant $244,500 over 10 years, pending company’s addition of 170 full-time jobs with average annual wage of $59,000 (state TEF contribution $1.5 million); net direct economic benefit to city: $594,680

As such deals go, Austin’s 10-year contributions are relatively small potatoes – the bigger prizes are clearly the TEF incentives, which are contingent on local support – but in the wake of the recent $679,500 Athenahealth package that brought that software firm to Seaholm, Council approval won’t be automatic. Council Members Laura Morrison and Kathie Tovo voted against the Athenahealth incentives, mostly under the argument that Austin is currently attracting such firms without similar deals, and also questioning whether the iconic Seaholm building will be sufficiently open to the public.

During last week’s briefing, public commenters and council members questioned whether the benefits of the city’s incentives policy are filtering outward and downward to the wider populace – or instead simply feed “uncontrolled growth.” Defenders of the policy argued that the city’s deal matrix officially measures direct economic benefits only (e.g., in tax increments and the like), and that in fact the indirect benefits of broader job creation (especially with a headquarters move like that of Websense) are just as important to the city. Expect those arguments to be revisited at Thursday’s special-called Council meeting, 1:30 pm at City Hall.

The deals are institutionally somewhat different, in that Websense is considering a headquarters move to the Arboretum area (Stonelake Blvd.) and Dropbox hopes to expand its currently smaller presence Downtown, increasing its 30-person workforce to 200 employees based at 501 Congress. Web savvy Austinites are likely to be familiar with both companies: Websense is well-known for cyber-security software (e.g., warning Facebook users from malware sites); Dropbox is the latest wrinkle in “cloud” storage, allowing users to access files from any of their computers, and simplifying file transfers (e.g., from home to office).

In the fast-changing software universe, both companies have also run into criticism. After Websense applications were reportedly used by Yemen, China, and other governments to control or censor Internet content, the company suspended sales to oppressive regimes, called for other firms to do the same, and was praised by the Electronic Frontier Foundation for “pointing the technology sector in the direction of promoting freedom.” Dropbox, meanwhile, was recently raked by the Washington Post’s Vivek Wadha for hiring practices that indirectly discriminate against female applicants, meaning only 6.3% of the company’s engineers are women. That could be why, according to the city’s proposal summary, “[Dropbox] is focused on increasing the gender diversity of the tech workforce. It has an internal team dedicated to this issue and sponsors a conference focused on women in technology.”

The special-called City Council meeting is at 1:30pm Thursday, Feb. 20, in City Council chambers. More detail on the two proposals is available on the city’s website here.