Transparency is key to making incentives work

rbz Apple Austin Offices 28

This is a view of the main entrance Building 1 of the Apple campus. The new Apple campus in Northwest Austin off Parmer Lane will eventually consist of 1.1 million square feet of office space covering 38 acres and housing all varieties of the technology giant. RALPH BARRERA/ AMERICAN-STATESMAN

While Austin’s economic development policy often gets mixed reviews from folks who live here, out-of-town admirers can’t gush enough about the city’s economic development philosophy.

Earlier this year, Amy Evans  wrote a lengthy retrospective for the National Housing Institute’s “ShelterForce,” that “Austin is in the enviable position of not believing it needs to offer companies incentives to get them to come to town.”

Evans’ piece only mentions at the end some of the local skepticism about the current policy, referencing the high-profile pull outs by  DropBox and US Farathane in 2014 from the program. At the time the companies gave their own business reasons for declining to participate in the program, but many saw their decisions as evidence that the city had regulated incentives too tightly to be of any real value.

Over the weekend, American-Statesman business reporters Lori Hawkins and Tim Eaton took a close look at the performance of the city’s incentive agreement with technology giant Apple. Under the terms of the incentives package, which was signed in March 2012, Apple agreed to create more than 3,600 new full-time jobs in Austin in 10 years while retaining at least 3,100 existing full-time jobs year over year.

In 2012, the Austin City Council approved $8.6 million in tax breaks for Apple in exchange for establishing its Americas Operations Center here. Apple also is in line for between $5 million and $6 million from Travis County.  It appears that Apple is well on track to meet those goals, 2,089 new jobs that been created since 2012,.

The transparency required by Austin has the benefit of providing a clearer window into whether the beneficiaries of such agreements are meeting the requirements set out by the city. However, the question of whether the jobs are the kind of jobs the city needs most is still murky.

Hawkins and Eaton quote Austin economist Jon Hockenyos as saying:

“These are the equivalent of manufacturing jobs in the old days — they’re jobs that pay a solid wage,” he said. “They provide solid middle-class incomes that sustain families. They’re the kind of jobs any city wants to see being created.”

In a later conversation with me, Hockenyos conceded that there is no way to know for sure unless Apple reveals the educational requirements for the jobs that were added. The mix of human resources, administrative, sales, engineering and operations jobs added at the Americas Operations Center in Northwest Austin may well live up to those expectations, but there is no way to prove it for sure.

The mid-range jobs referenced by Hockenyos are crucial to Austin’s future. “Manufacturing jobs didn’t require a college education, he said.”Instead, candidates needed high school education, maybe with some training in specific skills.”

Finding substitutes for those types jobs that the business community and policy makers agree that Austin needs has been tricky. These are jobs that provide a real pathway from low-wage work to middle-incomes and stable housing in a community that is short on both.

Failure on this point means that Austin will continue its spiral into greater economic segregation. In fact, Hockenyos raised the alarm to council members in his briefing last week on the state of the Austin economy.

“One of the key issues for so many communities that struggle with this stubborn level of people who remain hard to employ is that there isn’t much demand, there isn’t much need for workers in many in many places,” he said during the April 27 budget work session. “A big part of the overall problem is not in play here. We need workers of all different kinds. The issue is capacity and access.”

From a policy perspective, that puts the onus on the city council and other government entities to continue to be strategic and transparent as theycontinue to invest in economic development.

It’s a message that it appears that the Department of Economic Development is already attuned to. In its March 2015 report on the performance of the so-called Chapter 380 agreements, the department wrote:

 Today, as Austin is ranked first in overall economic performance and holds an offcial unemployment rate of 3.8 percent, the vision for utilizing this tool is shifting to focus on creating opportunities for those hard-to-employ individuals, as well as families that are in poverty and for those looking to advance into or up from the middle-class. And, there are areas of Austin where the unemployment rate remain unacceptably high not just for adults, but also for youth.

Some of that work has begun with the Fair Chance Hiring rules that were passed in late March, but there is more work to be done. Austin is fortunate at the moment to not need to incentivize jobs for the sake of jobs, so the community (public and private) should turn its attention to using resources to fill in the gaps to build a healthy and prosperous community for all.