In a chaotic meeting last Thursday, council promised
health and prosperity to all city residents, offering a $61 million incentive
package to an expanding multi-national corporation, and loaned a $44 million
hospital to a Catholic corporation. Councilmember Eric Mitchell lambasted the
other city council members with a fiery note charging conspiracy in the
hospital deal; Gus Garcia complained from the dais that Hispanics “drink too
much;” and Max Nofziger pulled a surprise disappearing act that left the
council quorumless, forcing the meeting’s closure.
The first hot-ticket item of the day was the
consideration of an abatement on new property taxes to the Korea-based Samsung
Semiconductor corporation. The company, looking for a site on which to build an
estimated
$1.3 billion chip manufacturing plant, is torn between Portland,
Oregon, and a location just outside of northeast Austin, according to city
officials. Austin’s deal includes an offer to annex the plant into the city
less than a year after the abatement is granted.
Chamber of Commerce vice-president Angelos Angelou
says
Austin will lose the bidding war without the giveaways – Portland’s incentive
package is $31 million higher than Austin’s. The Chamber designed an abatement
policy earlier this year, which grants an property tax abatement of up to 55
percent for companies that invest at least $250,000 in capitol per employee, at
the request of the Mayor, with no input from city staff. The policy was adopted
by both the city and Travis County this spring. Now, the Chamber is heading up
closed negotiations to lure Samsung – which is expected to employ between 500
and 1,600 workers – to Austin. With the exception of Todd, councilmembers don’t
seem to be involved in the process. At least three council officials say they
have not even talked to anyone from Samsung. “I haven’t seen one person from
this company,” Garcia said Thursday.
Under the policy, the proposed Samsung plant could get
at least a 40 percent reduction on new property taxes. Assuming the plant lays
down a $1.3 billion tax base – the estimated value of the plant, according to
city staff – that amounts to a $3 million annual freebie from city taxes alone
for the next 10 years, assuming a constant property tax rate. Plus, the plant
can get an extra 15 percent exemption if it hires up to 40 percent of the
workforce from a proposed training program. That’s an additional $1 million
deduction a year from potential city property taxes, for a total of $4 million
annually, or $40 million in 10 years. Throw in $21 million worth of incentives
like waivers for development and capital recovery fees, and energy efficient
savings and rebates, and you get an idea of just how badly the Chamber and the
council want Samsung.
On Thursday, Ronney Reynolds pointed out that the city
will still be able to collect at least 45 percent of Samsung’s tax base if they
move here, which would amount to an estimated $3.3 million in property taxes a
year, assuming a constant property tax rate. Twenty percent of that, or $1.5
million, will be funneled into a workforce development board, whose members
will be appointed by the Mayor and the County Judge. The board will oversee a
hi-tech training program. It was this training program that won the votes of
Brigid Shea and Jackie Goodman, both of whom have expressed their aversion to
tax abatements.
Max Nofziger cast the only dissenting vote. He says
any
stimulation to Austin’s hot economy could backfire, resulting in an economic
fallout tantamount to the Eighties bust. “I welcome Samsung to Austin, and [I
welcome them] to pay their full load of taxes just like everyone else,” he
said.
Eric Mitchell, vacationing with his family in Florida,
did not leave word on his position. Two months ago, he abstained from voting on
the abatement policy after a proposal to use collected taxes to pay for the
proposed Austin Redevelopment Authority (ARA) failed. ARA is Mitchell’s $75
million plan to revamp 11th and 12th streets in East Austin. n Despite Mitchell’s absence, he still managed to give
the other councilmembers fits during Thursday’s discussion to lease the
management Brackenridge Hospital to Seton Medical Center, part of the Catholic
Daughters of Charity health care chain. Mitchell has consistently opposed
leasing the hospital to Seton, and instead prefers that hopital management fall
into the hands of the Austin Hospital Authority, an entity created by the
council two years ago to ensure public accountability at the city’s century-old
hospital.
In a letter read by his executive aide on Thursday,
Mitchell lambasted council for denying his request to defer a vote on the
hospital lease for a week. Such requests are usually granted, most recently in
March when Shea went to Germany for a global environmental conference.
“Evidently, that courtesy is extended to everyone
except myself,” read the letter. He added that a “carefully orchestrated” plan
had undermined the Austin Hospital Authority and kept Austinites “misinformed
to believe that Brackenridge Hospital is not, or cannot be, viable. This is not
true.” He did not, however, reveal the participants in this plot.
Councilmembers defended their snub of Mitchell’s
request, saying that delaying the vote would have delayed the hospital transfer
at least three months, since the lease agreement must also be approved at a
series of regional and national Daughters of Charity meetings.
Mitchell’s presence would likely have done little to
change the outcome of the vote; the council unanimously approved the deal,
which requires that Seton buy
$10 million worth of Brackenridge Hospital
equipment and lease the remaining equipment and facility for $2.2 million a
year over the next 30 years (inflation not included). Seton has a renewal
option for another 30 years, at a cost of $10,000 a year (inflation not
included.)
Following the vote, Garcia gave a rambling speech,
seemingly to say that whoever manages the hospital is not as important as
preventative efforts like maintaining a regular exercise routine and healthy
diet. He then diverged into a criticism of the Hispanic population. “We drink
too much. We have too much alcoholism in our community and we need to address
that.” n Lastly, four hours behind schedule, the councilmembers
were set to begin a public hearing on an application for a $9 million loan from
the U.S. Department of Housing and Urban Development, when they discovered that
Nofziger was missing from the chambers. Council aides were not surprised,
saying that more and more frequently Nofziger has been up and leaving meetings
without telling other councilmembers. Garcia and Goodman also left (though they
let their colleagues know), so Nofziger’s departure left only Todd, Shea, and
Reynolds. Todd hastily shut down the meeting. n This week in council: Council will vote on on a
resolution to support and implement the recommendations of the Juvenile Justice
System Audit, and is scheduled to appoint the members of the Austin Higher
Education Authority, Inc. n
This article appears in June 2 • 1995 and June 2 • 1995 (Cover).