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Council studies $500,000 in incentives for Hanger Group relocation

Friday, January 22, 2010 by Michael Kanin

Austin’s new, more publicly accessible economic development process was on display Thursday morning as the City Council heard mostly favorable testimony on a proposal that would lead to the incentivized relocation of the headquarters of Hanger Orthopedics Group to a facility located in the Domain.

 

If approved, the city package would feature, according to the Economic Growth and Redevelopment Services Office (EGRSO), “economic development grants of $50,000” made annually to Hanger over a period of up to 10 years. It will come before the Council for a vote on Jan. 28.

 

In return for the grants, Hanger, the self-proclaimed “leading provider of prosthetics and orthotics” in the United States will bring with it at least 133 and possibly as many as 250 “new full time jobs,” according to the pending Chapter 380 Agreement. The company will also pledge to spend $6.74 million on facilities improvements and machinery for its new home office, and work to employ what EGRSO calls a “diverse” group of candidates. Austin projects that the overall fiscal effect of the relocation will result in a nearly $875,000 net gain for the city.

 

Council Member Randi Shade, who voiced strong support for the Hanger relocation, seemed to sum up what looks to be an easy path for the agreement. “I have done a ton of research into this company… (and I’m) very happy for our gain and for the opportunities that it’s going to afford a lot of people in this community,” she said. “I will definitely be looking forward to supporting this next week when we get to vote.”

 

Indeed, most of the 10 citizen speakers who addressed Council expressed support for the Hanger incentives. These included officials from multiple Austin-area Chambers of Commerce—some of whom had had the opportunity to meet with Hanger officials prior to the Council meeting–and the president of the Texas trade association affiliated with the health and bioscience industry.

 

But though the tone of the testimony was generally positive, there were some hiccups for Hanger supporters. The first of these came when Paul Skeith of Austin Interfaith told the Council that, despite the fact that his group wouldn’t oppose bringing Hanger to Austin, it was concerned about the lack of a minimum salary requirement for Hanger employees. “What we are asking for,” he told the Council, “is let’s go ahead and finish the job and make the $35,000 floor a requirement for receiving the $50,000 a year.” Skeith also suggested that the agreement include a stipulation that at least half of the new jobs be staffed with local hires.

 

When asked by Mayor Pro Tem Mike Martinez if his firm would be amenable to such requirements, Hanger’s Vice President and General Counsel, Thomas Hartman, replied that the salary floor “doesn’t fit well with the way we do business.” He added that because Hanger doesn’t have a “set scale” for salaries by position, it’s difficult for the company to commit to salary restrictions.

 

Shade got into a tense conversation with Skeith, whose organization is well-known for holding scathing “accountability sessions” with candidates and office-holders. “If you’re going to hold us accountable,” Shade said, “then I thought we ought to be able to do the same it. The point is that you have written over and over and over again,” that the City of Austin had spent $64 million between 2000 and 2007 for 1,400 jobs, or about $46,000 per job. Most recently, Skeith’s wife Minerva Camarena-Skeith and Louis Malfaro cited those figures in an op-ed piece in the I on Jan. 7.

 

But Shade said those numbers were wrong. Actually, she said, the city had paid $5,245,000, or $262 per year per job.

 

Ever-present anti-Domain-subsidies activist Brian Rodgers provided the meeting with another nagging voice. In a presentation that featured a quick run-down of complicated figures—and included a call to purposefully let Austin’s unemployment rate hover at 6 percent—Rodgers tried his usual best to convince Council Members and the general public that growth results in a net loss for the city. 

 

Though his fervent presentation seemed to amount to little more action than a request for more details from Council Member Bill Spelman, it did lead to broader discussion about the costs of growth. This included testimony from University of Texas School of Architecture professor Dr. Michael Oden, who, after asking a few of his own questions about the specifics of the agreement, stuck around to respond to answer Spelman’s summation of Rodgers’ claims—specifically, whether the capital costs associated with the influx of new residents were leaving the city short to the tune of “something like a 100 million dollars a year.”

 

Oden said that the process of sorting out Rodgers’ numbers would be “devilishly difficult,” but that the “big question” he’d posed was a legitimate one.

 

In his closing remarks, Martinez told the Council that he thought that “it is a fair question to ask ‘Does growth pay for itself?’” and suggested that the city may begin to examine just that. Martinez chaired the meeting in the absence of Mayor Lee Leffingwell, who was in Washington, DC, attending the US Conference of Mayors.

 

Still, all indications remain that Hanger Orthopedics will find itself in need of a moving company by next Thursday.

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