City Hall Hustle: What's Your Incentive?
'Economic development' is a horse of many different colors
That was the case with Item 11 last week, creating an enhanced review process for economic incentive proposals. Making good on a council directive from February, it calls for a formal cost-benefit analysis and assessment of a proposal's direct and indirect costs, along with expanded public notification procedures: a public presentation to council, with info posted online prior, and council approval delayed until the next meeting.
To some in council chambers, it wasn't good government but good jobs at stake. The Rev. Fred Krebs of Austin Interfaith began by stating: "Austin has a poverty rate of 17 percent, a child poverty rate of 22 percent, and an uninsured rate of 25 percent. And what's most shocking of all, these rates are higher than both the Texas and national average. ... Austin is becoming the poverty capital of Texas. And this is deplorable." Austin Interfaith was calling for any company receiving city incentives to pay a livable wage (and then some, really): $18 an hour with benefits, as well as pledges of career advancement. Said one council aide: To meet AI's demands, "you'd have to raise some of our salaries."
AI's proposals careened into reality on the dais; Council Member Sheryl Cole said: "I am concerned that we still have people in this community who are unemployed, underemployed, are only qualified to receive low wages. ... For us to adopt a policy that totally excludes them from incentives ... is troubling to me." AI's Minerva Camarena responded: "We don't need more low-wage jobs. They exist." To which Cole countered with some sobering statistics: "The unemployment rate in the African-American community is upwards of 30, 40%. ... And the statistics for the Hispanic community are worse than that." AI did win one victory: Bill Spelman, quizzing staff on the fiscal assessment tool (city economics engine WebLOCI), pondered how to take salaries into account, before settling on a low tech solution: The council could set a "floor" for wages, below which companies wouldn't be considered.
The assessment was the center of discussion for another speaker, crammed with concerns apart from AI's: ChangeAustin's Brian Rodgers, who called for a third-party analysis of economic agreements. The incentives-excitable maven of Stop Domain Subsidies, Rodgers paraphrased the city's economic policy thusly: "We don't have an economic development department. We have given that over to the chamber of commerce." More precisely, to the chamber's Opportunity Austin initiative, a real estate-heavy group dedicated to local growth. (The Opportunity Austin website lists the Samsung expansion and the Home Depot and Hewlett-Packard data centers – three of the seven groups to sign economic agreements with the city – as "notable successes.")
"So what we have is an economic development policy of a city that is driven by real estate interests," Rodgers said. While reflecting some fuzzy math, Rodgers' argument still stood: the chamber's interests stand in growing the entire metropolitan statistical area – stretching roughly from Round Rock to San Marcos – while it's in the city's interest to keep "our tax money," in the form of incentives, in Austin. To ensure more of a local impact, he advocated the computer analysis be run by the Capital Area Council of Governments.
Spelman had a question: if CAPCOG and the city are using the same software, why does it matter? "I don't trust that an in-house analysis will be fair and unbiased," Rodgers said, piquing City Manager Marc Ott's interest: "Are you questioning whether or not staff has the ability to effectively use the model? Or do you have some other concern?" Rodgers replied that city staff "are under a lot of pressure," which Ott rejected. Reiterating his belief that CAPCOG would perform the service for free, Rodgers said, "there are outside pressures not allowing a full airing ... of this issue." Randi Shade sounded off, noting CAPCOG services aren't exactly free, because "the city of Austin is the largest dues-payer" to the entity. Rodgers quasi-conspiratorially continued that "somebody is keeping this third party out of the loop. And that seems to be a political pressure rather than getting to the right answer." Mayor Lee Leffingwell endeavored to close the conversation: "Staff does not make the decision on economic incentive packages. Opportunity Austin does not make that decision. CAPCOG does not make it. The City Council makes that decision."
Ultimately, Leffingwell led the council to a vote, leaving the item's language unchanged and calling Austin Interfaith's suggestions "not fully developed." The item passed unanimously, with a pledge to revisit wage concerns in the future. And the speakers' preconceived notions – alternately envisioning a surplus of local work or a real estate-driven cabal – were aired for all to see.
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