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Council to hear proposals linking wage rules to development deals

Thursday, October 24, 2013 by Michael Kanin

Council members remain at work on potential amendments to a proposal from Council Members Mike Martinez, Kathie Tovo, and Laura Morrison that would link wage requirements to city economic incentive deals. It was unclear as of Wednesday afternoon just what form those amendments might take.

An up or down Council vote is expected as part of today’s agenda.

At Tuesday’s work session, Martinez made clear that he would entertain a range of alternatives as he and his colleagues discuss the matter. “If there are amendments to be made, I may not vote for them, I may vote for them but what this body decides as a complete outcome – that’s a process, and I’ll be supportive of it,” he said.

Still, it appears as though Mayor Lee Leffingwell is not yet ready to jump on board to a wage requirement should it be attached to the city’s economic development incentives. “What I would support today is a proposal that would put prevailing wage and minimum wage at the end as a potential for a bonus,” he said. “At least (we’d) be able to enter into that discussion. But I really believe that the way it is now, we’ll never enter into that discussion: Companies considering locating in Austin won’t initiate the discussion.”

Leffingwell called the proposal a “job killer.”

The Martinez, Tovo, and Morrison proposal would feature, as Martinez put it, a menu of options for firms seeking economic development agreements from the City of Austin that could lead to a 100 percent tax rebate. The changes would offer a graduated scale where interested parties could seek less than the full rebate.

The criteria would include provisions for a company willing to hire from traditionally difficult-to-employ populations – in addition to an extensive definition of what those populations are – a willingness to employ at least 75 percent of its incoming workforce via City of Austin residents, and a willingness to locate near public transportation centers.

The wage requirement, however, would be a base demand: Without agreeing to that provision, interested companies could not expect to receive an economic development incentive. Current matrix language defines the wage section as an order to “ensure that all workers are paid at least the City of Austin’s living wage, including full-time employees, contract employees, and construction workers hired for construction work funded by the firm.”

The sponsors have designed an exceptions process for the wage requirement, as well as provisions that would otherwise mandate domestic partner and health insurance benefits.

Still, Leffingwell remained concerned about the idea. Indeed, the Mayor told his colleagues that he did not find the exceptions process to be meaningful.

Martinez put the matter in context, noting the recent history of the issue before a special committee convened to examine the city’s economic incentives policies, and the last-minute deals that included prevailing wage requirements. “We’ve been talking about this for 18 months. We continue to have these conversations every time an economic incentives agreement comes to us, all we’re doing is codifying the same conversation we’ve had over the last several years and putting it into the process,” he said.

At least one of those deals – the White Lodging JW Marriott Development Agreement – ended in no small amount of confusion for all parties. There is also a pending lawsuit that grew out of those issues.

The sponsors have also offered something of a companion resolution that would kick off the exploration of a small business loan program that would, among other goals, offer smaller construction firms the ability to come up with up front cash to pay the higher wage mandates. State law prohibits the city from loaning money. The resolution instructs City Manager Marc Ott to look into the potential of a third party lender. Obstacles, including the question of collateral in that event, remain.

Council Member Bill Spelman told his colleagues Tuesday that he wasn’t yet sure how he felt about the changes to incentive deals. He did, however, express some surprise at the level of flexibility included with the new matrix. Mayor Pro Tem Sheryl Cole wondered about economic incentive deals already in the pipeline – and whether the new rules would apply to those proposals. Assistant City Attorney Cindy Crosby told Council members that this was ultimately their decision.

Though there appeared to be no eagerness to inflict a new set of rules on old applications, Martinez pointed out the obvious: “Either way, I’m fine with it because, I promise you, when it gets to the Council, we’re going to have the same conversation.”

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