Austin @ Large: Austin at Large

Boosters in the Bust: It's time to think -- NOT just talk -- about economic development again

Austin At Large
One of these facts is not like the others:

1. Median household income in Austin is, far and away, the highest of any major Texas city, and our growth in income during the 1990s was among the fastest of any metro area in the U.S.

2. Austin's cost of living is the highest of any major Texas city; unlike Houston, Dallas, San Antonio, or Fort Worth, our cost of living is above the national average.

3. Austin is one of the cheapest places to run a business, particularly a high tech business -- a less expensive corporate location than either Houston or Dallas, as well as 23 other selected U.S. metros.

It's tempting to dismiss as specious fact No. 3: the finding of a new study by the Boyd Company, a corporate-relocation outfit, which was prominently reported last week in the Statesman not once but twice. But you can be sure that local business and government leaders will make great use of the Boyd study as, in the daily's words, "new ammunition as [they] step up efforts to attract more companies."

Of course, if those efforts are successful, new employers will come in to absorb the 22% of Austin's Class A office space that now stands vacant, and to hire the 30,000 or so recently unemployed Austinites. At which point the cost advantages cited in the Boyd study -- basically, cheaper labor and rent -- may evaporate.


Back to the Future

In any event, Austin's new and unwelcome status as an expensive place to live -- the cost-of-living data in Fact No. 2 is from the last quarter of 2001, well into the bust -- is bound to collide with any claims, genuine or not, that it's a cheap place to work. The Boyd study does not look at the cost of housing for employees -- with its obvious impact on wage demands -- nor at the costs associated with commuting (or distributing goods and services) in Austin's ever-worsening traffic. Both are functions of the rapid growth that many boosters would apparently like to see return.

Which is the real story behind the Statesman's twice-told tale of fairly minor business news -- people care about economic development again. Should they? And more to the point, how should they?

After years of having, literally, more economic growth than we knew what to do with, we're back where we were in the mid-1990s, when Samsung -- the last new major employer to be seduced into Austin-hood -- set up its local shop. Since then, the civic mission has been not to spur but to direct growth -- through the benighted Smart Growth incentive program -- that was already happening without any blandishments. Nobody asked, or paid, CSC or Intel to move to Austin instead of to some other city. When Dell Computer decided to build a major facility in Nashville instead of further expanding here, the company cited its fear that it may have already grown too big for Austin to accommodate. Did anyone try to change Dell's mind?

It would be a shame if, after a few years of hiatus from the booster biz, civic leaders picked up right where they left off. Because the intervening seesaw of intense boom and semi-intense bust -- a bust that hasn't noticeably softened the downside of our growth in population and income -- has left plenty of Austinites wondering if there's not a better way of doing this. This includes many of the leaders of the high tech sector who rode high and fell fast with the economic cycle.


Think Small

Now, the hypothetical company in the Boyd study was a high tech firm with 125 employees and 35,000 square feet of Class A office space. (Which strikes us as an excessive amount of office space; state agencies, for example, are supposed to be limited to just over 100 square feet per employee.) What sort of woo would the city and the Chamber of Commerce pitch to such a firm? And what sort of woo would they pitch to 10 different companies, each with 12 employees, representing several different industries, each making do with 3,500 feet (or much less) of Class B office space, perhaps in East or Southeast Austin?

In the latter case, probably none -- if anything, local authorities could make running such businesses more difficult, through the unpredictable application of Austin's elaborate local codes. Yet the 10 small businesses could meet local social goals -- bringing jobs to disadvantaged communities, putting people closer to their work, supporting mixed-use urban development -- better than the Boyd study's midsize tech firm headed straight for Loop 360.

Even looking solely at the bottom line, many experts will tell you that developing small businesses and start-ups (through strategies like microlending) is where the real action is, since 70% of all local employment happens in enterprises with fewer than 10 workers. Our 10 largest private employers, on the other hand, account for 10% of all jobs -- an alarmingly large number when you think of the impact of Dell layoffs, but a pretty small part of the economic base of a major metro area. Some thriving Austin concerns -- this newspaper, for example -- have never had 125 employees and occupy nowhere near 35,000 square feet of space, let alone Class A space. Where do they fit in?

This is not to needlessly malign the Boyd study, which has to have some basis for an apples-to-apples comparison. But as the booster machine revs up once again, now would be a good time to make some choices about future economic growth. That is, if we really want to be a city. We'll save the Jane Jacobs symposium for another time, but: Just as the suburban model of real-estate development has not helped us provide affordable urban housing (let alone homeownership), the largely suburban scheme of mid-range employers -- mostly in a single (and cyclical) industry in their Class A office parks -- cannot itself provide a stable, diverse urban economic base.

Now is the time to start thinking of innovative alternatives. This is, after all, a City of Ideas.


Due to an editing error, last week's column included the following phrase: "We [the City of Austin] spend more per capita on public safety than any other Texas city . . ." The sentence should have read, "We spend as much per capita as any other Texas city . . ." We apologize for the error.

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KEYWORDS FOR THIS STORY

economic development, cost of living, median household income, Boyd Company, Austin American-Statesman, Samsung, Smart Growth, CSC, Intel, Dell Computer, Class A office space

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