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Council approves economic incentive deals for Websense, Dropbox

Friday, February 21, 2014 by Michael Kanin

Austin City Council members Thursday approved nearly $700,000 in non-property tax based incentives in an attempt to lure two new tech firms, Websense and Dropbox, to Austin. The deal came on a 5-2 tally with Council Members Laura Morrison and Kathie Tovo voting against the measure.


But the real money in these equations comes from the state’s Emerging Technology Fund, which has committed to contribute $4.5 million in incentives.


Though the companies must formally accept the agreements, which is typically a formality.


The 5-2 vote is the third in recent weeks over development incentives. Each time, Morrison and Tovo have represented the no block.


If company representatives accept the deals, one of the firms – San Diego-based cyber security company Websense – would relocate its corporate headquarters to Austin. That agreement would, according to the deal, result in the creation of 470 new jobs.


The other, established cloud-storage company Dropbox, would open a facility that would employ 170 new workers, all of whom the company has promised to hire locally.


The two companies have also promised to make millions of dollars in leasehold improvements and investments in business personal property.


Morrison’s no vote came after weeks of questioning the need for development investments with the City of Austin’s economy appearing to move ahead at full steam. She returned to that theme Thursday.


To that, she added concerns that the development agreements – particularly the volume of them – had not had quite the impact that is intended. “I think that as we think about investing city money and ensuring that people have economic opportunity – in some ways that’s why we do economic incentives issues and programs – for me, I was concerned because when there are a lot of people that are unemployed…it makes some sort of direct sense to be doing economic incentives deals like we are today,” she began.


Morrison turned to a set of charts prepared at her request by city staff. “You can see when unemployment in the hard times (post-2008 crash) was getting high, we were doing a lot of deals,” she continued. “Of course, now, we’re in a position where we are doing great – Forbes named us as having the most economic momentum of any city in the country – so for me, we need to talk about the issue of why do we still do that.


She continued: “I’ve heard that, even though we are at the top of our game, we need to still be making sure that businesses know that we are a business-friendly city so that they won’t stay away. I’ve heard we still need to make sure that we have a diversified economy, and I’ve also heard that we need to keep the momentum going even when we are at the forefront of it,” Morrison said. “Now, those are all issues that are probably important, but it’s time, I think, to look at whether or not they are important to us to still be doing all of these deals.”


Morrison suggested that with the city’s economic engine firing away that now would be an ideal time to “start thinking about our investments more strategically.” That, she suggested, could include more spending on early childhood education – a move that Morrison said would serve as a job creator down the line.


After the meeting, she expanded on those ideas for the Monitor in light of repeated 5-2 votes. “I think it’s time we have this conversation and I know that in the world that we live in, a lot of times, you just have to try to stimulate the conversation and it slowly gets some people thinking,” she said. “Frankly, I think it’s important for my colleagues and the community to be thinking: ‘Really? We want to do 10 of these? Seven of these? This year – more than ever before when our economy is as strong as it is?”


Morrison suggested that “a better question for this Council” would probably have been “here’s 10 opportunities for (Chapter) 380 agreements, how many are you comfortable with? Which ones would you like to approve?”


Meanwhile, Council Member Bill Spelman was able to overcome concerns about whether Websense was actively looking at other locations for their headquarters. Those issues surfaced during a Council briefing on the deals in the wake of a letter that suggested that the firm had already begun to hire its Austin workforce.


Thursday, Spelman worked through the trouble from the dais, eventually buying the notion that Websense could choose to stay in San Diego or move to undisclosed other locations if Austin didn’t provide it with economic incentives dollars.


Council Member Mike Martinez suggested that some opposition to city economic incentives agreement could be traced to misunderstanding. “I believe there is a lot of confusion out there in the community about what we are doing because what they believe is that we are giving their tax dollars away,” he said.


“And what we are doing is taking revenue that comes from this job creation and these companies and incentivizing them to move here.”


After the vote, Martinez elaborated on that concept. “I don’t even think the public at large realizes that this is a fund that was adopted by the entire Council during the budget process that is now used to close these economic incentives deals,” he told the Monitor. “People are still saying: ‘You’re giving away my taxes moving forward – and while it technically is people’s taxes, this is a budget-adopted fund that was put in place back in the fall.”


When asked if he thinks the City could do a better job of getting the word out about the agreements, Martinez replied: “I think we have to because, as you may have seen today, at one o’clock, Dell announced layoffs. Companies ebb and flow and job creation and economic development are part of world-class cities in my opinion. As we keep doing these agreements, we have to do a better job at reaching out to our community and helping them understand the benefits, the pros and cons to it.”

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