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Spelman raises concerns over city’s economic agreement with eBay

Friday, April 8, 2011 by Michael Kanin

Council Member Bill Spelman raised concerns at Thursday’s Council meeting about the pending economic development agreement between the city and online auction site eBay.

 

Austin’s Economic Growth and Redevelopment Services Office predicts that the deal will net the city $3.1 million in direct commerce over 10 years. That figure includes the projected costs of the agreement, which would run the city $9.3 million.

 

According to the agreement, city benefits are tied closely to the projected salaries of the 1,000 employees that eBay has said it will hire. Those positions, the majority of which will be for software engineers, will provide an average yearly salary of $122,575.

 

The close relationship between projected eBay salaries and the benefits to the city were a matter of concern for Spelman. “I’ve got serious concerns that eBay – at least over a 10-year period – is not going to be able to hit both (average salary and hiring) targets,” he told In Fact Daily.

 

“Right now eBay is in a very preferred position relative to the rest of the software industry because they own a very lucrative niche and there are no important competitors in that niche,” he continued. “In the next 10 years, we can be almost certain that somebody is going to try and attack that niche and undercut them.”

 

Spelman made his worries clear as staff presented the deal to the Council. He began by hammering on the details of the contract – asking staff if eBay could roll its hiring numbers over if they’d missed a target in any given year, and still receive an incentive for the current period.

 

Brian Gildea of the Growth and Redevelopment office told him that they could not, but that they would be still be eligible for incentives moving forward. However, to collect on those benefits, the company will have to meet any previous goals that it had missed and hire the number of employees assigned for the current year.

 

Spelman then looked at the broader picture.

 

“We only get benefits if the people … working at eBay live inside the City of Austin, is that right?”

 

Gildea told him that this was correct “to a degree.” He added that when his office looked at the deal, they assumed that 60 percent of the future eBay employees would indeed live within Austin‘s city limits.

 

Spelman asked where he got that figure.

 

“It’s from the information we got from our demographer and by community patterns,” Gildea said. “For example, how many jobs that are in Austin that are filled by residents … and vice versa.”

 

After the hearing, Gildea told In Fact Daily that he wasn’t all that concerned about the relationship between salaries and city income. “It’s an important component,” he said. “(But) at the same time we want to look at other job creation opportunities. Our thought process is when you have a company like this creating these higher paying wages, there are going to be other jobs created as a spin off.”

 

Spelman was confident that Austin will be covered in the event that the salary projections don’t match eBay’s figures. “If they can make it, they can make it,” he said. “If they can’t, its okay – we’re not going to be liable for paying them if they can’t make those targets. So I think it’s probably not an unreasonable contract.”

 

Spelman added that he was somewhat worried about the precedent that the city might be setting with the deal. “I want to be sure that anytime we’re going to do something like this in the future that we’re absolutely certain that we’ve got the right estimates for what percentage of those people are going to be living in town … and that we’ve got a pretty iron clad certainty in the contract that they’ve got to hit both the wage numbers and the job numbers,” he said.

 

In addition to the new jobs, eBay has promised to make $430,000 worth of improvements to their Austin offices and “invest $4.5 million in business personal property.”

 

There will be a public hearing on the deal at a special called Council meeting at 2pm on April 12.

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