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Council debates community-benefit standards for development deals

Thursday, May 10, 2012 by Josh Rosenblatt

Highlighted by major economic development deals with Apple Inc. and U.S. Farathane, FY2012 was a big year for the city’s Economic Growth and Redevelopment Services Office. At yesterday’s budget forecast presentation, City Council members wanted to make sure FY2013 is just as big but more equitable for those getting the jobs those companies will bring.

Combined, the deals the city struck with Apple and Farathane are expected to result in more than $300 million in investment and nearly 4,000 new jobs, or more than 15 percent of the city’s current unemployment rolls. The agreements were such a happy surprise that several of EGRSO’s FY2011-12 key performance-measure goals have already been exceeded by leaps and bounds.

The office was hoping 500 jobs would be created as a result of economic development agreements signed during the year; the office’s new estimate stands at 3,853. As for the amount of investment created through these development efforts, the estimated $309.5 million outstrips staff’s goals by nearly $280 million.

Council applauded the efforts of EGRSO and the success of the city’s economic incentive program in general but took the opportunity to debate the standards the city sets for any companies seeking economic deals with the city. Council Member Mike Martinez raised the issue of standardizing the community-benefit guidelines for any development agreements.

“For me, because of some of the successes we’ve had, we also expose some areas where I think we can improve,” Martinez said. “As we’ve seen in some of our more recent economic development agreements, this Council unanimously supports some of these initiatives moving forward as it relates to community benefits. … When you see this Council repeatedly after each deal having to make amendments and adding the same provisions such as a living wage, such as job-safety requirements, and other community benefits, at some point it becomes a policy value that we ought to consider codifying instead of amending every time an economic agreement comes before us.”

Martinez said he and Council Member Laura Morrison hoped to “start a conversation about revisiting the baseline criteria for submitting economic incentive agreements – even including tax incentives or fee-waiver agreements.”

Though Martinez’s colleagues on the Council were supportive of the proposal to re-evaluate those criteria, several expressed reservations about establishing a hard, non-negotiable baseline for living-wage standards. Both Mayor Lee Leffingwell and Mayor Pro Tem Sheryl Cole pointed to the Farathane deal – which many workers’-rights groups fought because some 70 percent of the jobs created will be entry-level positions, with an average wage of $10.80/hour – as a step forward for the city as it tries to simultaneously encourage outside investment while closing the gap between the haves and the have-nots.

“The Farathane agreement was unique and it shouldn’t necessarily always be unique,” Cole said. “When a company is willing to place our hard-to-employ — meaning some who are high school dropouts or are struggling with re-entry because of a criminal record – then we should give bonus points or have that be part of our matrix. We are quickly becoming two Austins, promoting prosperity and high wages for engineers and people in the clean-energy sector, but at the same time we must not forget our hard to employ.”

Leffingwell said that in order to do right by those hard-to-employ citizens, Council needs the flexibility to consider each economic agreement proposals individually, free from a strict wage baseline.

“I would be very careful,” Leffingwell said. “For example, if we initiate a policy where just to get in the door you must pay a living wage to every single employee, we would not have even considered Farathane. There are two different unemployment rates; there are two different populations, really. And we have not paid enough attention to providing jobs, recruiting jobs, creating jobs for people in communities who are undertrained, undereducated, perhaps have criminal records.”

Martinez said that the conversation about what community-benefit standards to write into the economic development guidelines is wide open. He just wants it to take place so that Austin can continue to prosper without leaving Austinites behind.

“Austin is going to remain very attractive; we’re still going to be able to recruit companies to come here,” Martinez said. “But I see no reason why we can’t have a policy that reflects all of our values when we do this recruiting.”

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