Point Austin: How Much for a Hanger?

Austin ponders the latest corporate incentive proposal

Point Austin
I might be able to work up more enthusiasm, one way or another, over the pending city economic development deal with Hanger Orthopedic Group, if I thought that anything I or any other citizen might have to say about the matter at this point would have any impact. Thursday morning (Jan. 21) the City Council kicks off its brand new incentives review process with a public presentation on the Hanger deal, to be followed by the formal proposal and vote Jan. 28. In the meantime, you can review the agreement and the associated documents online and submit comments there as well, through Jan. 24 – though it's worth noting that among those documents, Hanger's "Business Information Form" was only submitted to the city Jan. 15, so we're already behind the curve.

Then there's the fact that Gov. Rick Perry announced Hanger's corporate relocation to Austin Jan. 12 and that the state has already committed $1.5 million from Perry's Texas Enterprise Fund – Austin's contribution is a relatively paltry $500,000 over 10 years – which, according to the governor, "will create $4.7 million in capital investment and up to 250 jobs in Texas." Lest that fail to persuade you that the Hanger deal is done, the company has already negotiated (though not yet signed, pending City Coun­cil action) a major office lease out at the Domain, and business folks back in Maryland are publicly lamenting the loss of a major local employer.

If all this weren't enough, on Sunday the States­man weighed in with its inevitable "move on, nothing to see here" editorial, with the foreboding lead, "Barring an unexpected attack of economic myopia, the Austin City Council is expected to move toward approving incentives to lure Hanger Orthopedic Group to town." Council members can anticipate the Statesman response should their eyesight differ from that of the denizens of the Bat Cave.

Jobs for Sale

Despite the big rush, all in all the Hanger deal looks like a relatively good one for Austin. The company is a major one in orthotics and prosthetics, with 670 patient care centers nationwide and some 3,500 employees, of which 133 will now be based in Austin (another 20 or so are already here in a subsidiary); supporters eagerly sniff another hook for an Austin medical school. In general, these are high-paying jobs, with an annual average salary of $97,000 before benefits (although that figure is skewed high by the big shots); more impressive are the 101 "staff level" jobs that reportedly average $62,000. In return for these and related investment guarantees, the city will pay an annual cash grant of $50,000 for 10 years, beginning next year.

All the documents call these "new full-time jobs," although it remains uncertain just how many will be filled by Austinites, since presumably some of those suburban Marylanders will be perfectly happy to relocate to North­west Hills. But council members have been assured by Hanger that the D.C.-area labor market is relatively strong enough to hold many employees there, and Mayor Leffingwell told the Statesman that "he expects most of the 133 jobs to be created initially would be filled locally." There are no such guarantees in the agreement, and Hanger CEO Tom Kirk was reportedly less munificent-sounding in a recent conversation with representatives of Austin Interfaith.

That workers' advocacy group has offered the most pointed questions about the pending deal. AI executive committee members Minerva Camarena Skeith and Louis Malfaro wrote recently in the Statesman, "City officials should not subsidize private companies unless those companies agree in writing to pay high wages and benefits, hire locally and provide career advancement for their workers." AI is not currently opposing the deal, Malfaro told me, but it believes the city still needs to make certain that these "really basic questions" are fully addressed before the city agrees to economic incentives.

"There's a lot about Hanger to like," Mal­faro said, "and I think they really want to be engaged in the community." But he argued that city officials and the chamber of commerce are already overselling the deal even though, for example, Hanger administrators told AI the company is not guaranteeing any entry-level minimum salary. AI advocates an $18-per-hour floor for any city-subsidized development – "Otherwise," says Mal­faro, "we end up providing secondary public subsidies for families below the poverty line." (The city's economic development office says Hanger has reported the lowest-paying job at $35,000, plus benefits, close to the $37,000 AI marks as requisite in Austin for a family of four.)

Money to Be Made

Certainly all these questions should be thoroughly aired in the public discussions this week, although Perry's announcement and the general momentum have made Austin's process appear superfluous. As these deals go, $50,000 a year is frankly minimal – the truth is, the city will have already spent that much just considering the matter. Over the life of the agreement, attempting to consider all infrastructure burdens and related costs – although such calculations are notoriously wobbly – the city estimates "net benefits" of $875,000.

Bill Spelman, the council member publicly most skeptical of corporate incentives, acknowledged that "the timing is screwed up" on this deal because it's a corporate headquarters relocation that couldn't readily be subject to the city's timelines. "Let's see how the process works this first time," he said, "before we abandon it." He said he doubted an Austin withdrawal would kill the deal outright, but more likely, "We wouldn't be asked again to take part in one of these [state] TEF projects." Considering Perry's record on handouts – he's a staunch free marketer except when it comes to corporate welfare – that would be a mixed outcome. Certainly the symbolic value of good will to a new employer is not to be dismissed. Spelman says we should judge the matter, finally, on the overall costs and benefits to the city and whether the jobs are indeed worth paying for.

The ancillary local economic generation is also undeniable. And there is one other factor most folks will be too squeamish to mention. Over the last decade in our foreign wars, we've been manufacturing a customer base for prosthetics that should keep Hanger and its subsidiaries booming and innovating for quite some time.

There's just nothing like a captive and growing market.

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KEYWORDS FOR THIS STORY

Hanger Orthopedic Group, City Council, Austin Interfaith, Louis Malfaro, Bill Spelman

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