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Council panel urges wage floor for economic development deals

Wednesday, November 28, 2012 by Michael Kanin

Austin City Council members will consider adding an $11 an hour wage floor to its list of core requirements for companies interested in reaping city economic development incentives. As currently proposed, that stipulation would include the wages of construction workers who build facilities associated with the agreements.


On Tuesday, Council Members Mike Martinez, Kathie Tovo and Laura Morrison voted in favor of the wage floor as one of a series of recommended changes to the city’s economic development incentives criteria. Mayor Lee Leffingwell, the fourth member of the subcommittee charged with reviewing Austin’s incentives policy, was opposed. Though other suggestions brought some discussion, none came with the level of concern attached to the $11 hour floor and the potential inclusion of construction workers in that calculation.


Council created the subcommittee some months ago to study Austin’s economic incentives policy to clarify and amend the list of characteristics and demands the city imposes on companies looking for tax relief in exchange for relocating to Austin.


As the committee worked, it became clear that the main point of contention was over an inclusion of a wage floor. Worker advocacy groups maintain that costs for including construction workers in an $11 an hour wage floor would be minimal. But contractors have said that even that figure could prove to be prohibitive. Meetings conducted as recently as earlier this week between contractors, the Greater Austin Chamber of Commerce and workers’ interest groups failed to close that gap.


Still, Martinez felt strongly enough about the inclusion of the wage floor that he offered it for a vote. Morrison and Tovo agreed. Leffingwell did not.


The mayor tried to offer an amendment that would have made the wage requirement an option only for companies interested in bonus incentives. His colleagues did not budge. Leffingwell continued to vote against provisions that he thought would be detrimental to the city’s economic incentives program. These included a motion from Morrison to have staff present Chapter 380 agreements to Council members in executive session before sending them on to interested companies, and one from Tovo that would have ordered staff to ask interested firms to divulge information about competing incentives packages. Chapter 380 refers to the Local Governmental Code that provides legislative authority for Austin and other Texas municipalities to provide incentives, such as grants or loans, to promote economic development.


Both the Morrison and Tovo motions failed. However, other procedural suggestions from Morrison – including an annual report on the city’s target industries and a call for the city’s Economic Growth and Redevelopment Services Office to offer more detail about the scores it assigns to potential incentives projects – were successful. 


Martinez also offered provisions that he hoped would help offset some of the concerns of the contracting community. During conversations about changes to the incentives criteria, contractors expressed concern that, if wages drift upward, that prime contractors may delay payments.


The Council member pitched the idea of a collateral pool to help contractors cover those expenses until they are paid. After the hearing, Martinez explained the concept of a pool to In Fact Daily. He said that such a device would set aside a small percentage of construction costs for use by contractors who need to cover salaries. Martinez added that financing for the pool would probably come from the city.


The next step for the revised economic incentives criteria is a full vote by City Council.


On Tuesday, Travis County Commissioners also approved a similar set of incentive criteria.


After the meeting, Workers Defense Project business liaison Gregorio Casar called Tuesday’s vote “historic.”

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