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Council members skeptical over incentive deal for AthenaHealth

Friday, January 24, 2014 by Michael Kanin

Austin City Council members Thursday expressed no small amount of skepticism about an economic development incentives deal that would bring a new AthenaHealth Research and Development facility to the former Seaholm Power Plant. Concerns – mostly from Council Members Laura Morrison, Chris Riley and Kathie Tovo – included whether incentivizing the facility’s move to Seaholm was appropriate, given suggestions of market demand for the facility.

 

Morrison was plain. “At the end, I think AthenaHealth is a great company, a great fit for the City of Austin,” she said. “And if we look back to the original generation of this program – when the city was in big trouble and really needed to be promoting bringing companies to town – we are in a different world today.”

 

She pointed to a Forbes magazine ranking of the cities with leading economic momentum, noting that Austin was at the top of the list. “I don’t see how it makes sense for us to be having to subsidize companies to come into town at this point when we have the most economic momentum in the United States,” Morrison continued.

 

Moments later, she added: “I’ve supported almost all of the economic incentive deals as we look at what role they play. This may well be the time for me to draw the line in the sand.”

 

Council members are set to vote on the AthenaHealth incentives package next week. Should they approve it, the Boston-based company would get an annual grant that would total $679,500 over 10 years. The value of other incentive costs to the city would total $4.26 million over that same time frame.

 

In return, AthenaHealth officials would promise to bring 607 positions to the city. According to the deal, the company would hire 90 percent of the new workforce from the Austin region. The average annual wage of the new hires would be $132,085. The company would also commit to more than $7 million in business personal property investments that would contribute to nearly $6 million in total direct benefit dollars for the city.

 

Texas Gov. Rick Perry has also directed funds from the Texas Enterprise Fund to the tune of $5 million to lure the company.

 

Morrison pointed to the fact that, because the positions would be mostly non-entry software development roles, the project would draw from a population that is not heavily represented in the region.

 

“While it’s great that the company is looking to hire locally, we don’t have (enough) software people that are unemployed right now,” she said, noting that the move could lead to poaching from existing Austin companies.

 

That issue was among three that Morrison pointed to as complicating factors. The third was a more specific worry about the need to incentivize tenants for the Seaholm building.

 

“Seaholm is one of the coolest buildings in the city…it was with some disappointment, but facing the reality of the situation that – even though we had originally envisioned it as a retail or an open-to-the-public space, that because of the market…we did sort of have to back off our goals,” she said.

 

Riley echoed that concern. “This building is such a jewel and a treasure, there are so many companies that would love to be in that kind of a setting; why should we need to provide incentives? Why couldn’t the private sector jump in and do this without any public support?” he asked.

 

Seaholm developer John Rosato suggested that this was a broader policy issue about economic incentives generally, and that he was not the appropriate person to address that issue.

 

For her part, Tovo pushed Rosato over his timeline. She referenced a hint from Rosato during his argument for Council approval of the Seaholm deal that he’d had a potential office tenant in mind for the Seaholm project.

 

Then calling for an amendment that would allow developers to lease most of the decommissioned plant as office space, Rosato told Council members in 2012 that he’d received a letter of agreement that would put an unnamed “100,000 foot tenant” in the Seaholm facility.

 

“Without amending (the agreement)…we would have had to tell a 100,000 square foot tenant ‘sorry,’ Rosato said at the time.

 

Tovo returned to that statement. She pressed Rosato to reveal the name of the potential tenant. Rosato stood firm. However, city staff implied that the timing of the AthenaHealth application would mean that it was likely not the firm Rosato had mentioned.

 

Rosato did not elaborate further.

 

In 2012, Rosato offered a rosy projection. “There was a period in there where nobody thought we’d build anything again,” he told the In Fact Daily. “But two years ago we started really going back out to the market and really trying to bring people back in…What we noticed was the brokers’ community kept bringing us high-tech firms, essentially.”

 

Some Council members appeared frustrated with the notion that Rosato’s call for an allowance for office space at Seaholm had morphed into a request to the city to incentivize a future tenant.

 

The concerns from Morrison, Riley, and Tovo were sprinkled with calls to leave at least some portion of Seaholm accessible to the public.

 

Rosato promised that this would happen.

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