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National Instruments nixes expansion; Mayor calls incentive rules onerous

Tuesday, June 10, 2014 by Mark Richardson

National Instruments, the Austin-based high-tech firm with a global reach, has opted out of an estimated $7.4 million economic development deal with Austin, Travis County and the State of Texas. The deal, struck in mid-2013, would have brought as many as 1,000 new, high-paying jobs to Austin over the next decade.

 

Mayor Lee Leffingwell said Monday he thinks the National Instruments decision is a sign that Austin’s incentive program is “dead in the water.”

 

Company officials notified local and state governments of their decision in a May 22 letter, citing weakness in the test and measurement industry and the global economy as the reason they were calling off the $80 million expansion of their Austin facilities. In that letter, National Instruments said it is still committed to maintaining a strong business and community presence in Austin.

 

However, Leffingwell said he believes that part of the reason for the company’s decision was the burdensome conditions Austin put into the agreement.

 

“The agreement they signed with the city was very onerous, and not very conducive to being much of a benefit to them,” he said. “Included in the agreement were all the new provisions with regard to prevailing wage, minimum living wage and other requirements regarding their workforce.”

 

“Whether or not that had anything to do with it, I don’t know,” Leffingwell said. “But I would expect that others might be doing the same in the future. It’s not only very hard to comply with them and have any incentives left over, but it’s very paperwork intensive and expensive to document the process.”

 

Leffingwell said the National Instruments pullout could mean the end of the city’s economic incentives program.

 

“I do believe that, for all intents and purposes, the city’s economic incentive plan is dead in the water,” he said. “I’m not going to mention any names, but I have heard about other companies considering dropping out of the program. It’s similar to what happened with the J.W. Marriott fee waivers program. As they dug into it, they found that the limited number trades they had to pay a prevailing wage basically overcame the value of the fee waiver.”

 

The Travis County Commissioners Court has scheduled an item on today’s agenda acknowledging National Instruments’ decision to end the incentive deal. Contacted Monday, Travis County Judge Sam Biscoe said through a representative that he had no comment on National Instruments ending the deal. Officials with the Texas Enterprise Fund, which was responsible for the state’s portion of the agreement, did not return a phone call seeking comment Monday.

 

The incentives agreement, signed by all the parties in July of last year, was predicated on National Instruments building a 300,000-square-foot office building next to its existing campus on North MoPac Boulevard. The new operation was scheduled to hire up to 1,000 engineers and technicians at an average annual salary of more than $72,000.

 

National Instruments currently employs 2,600 people in Austin and more than 7,000 around the world.

 

The company’s first deadline under the incentive deal was July 31, the anniversary of the deal. The incentives were in the form of tax breaks – $1.7 million from the city and $1.3 million from Travis County. The company has not received any of those funds to date. It has also not received any of the $4.4 million promised by the Texas Enterprise Fund.

 

Nationals Instruments was founded in 1976 in Austin and has seen steady growth, posting annual profits and increased market share for the past 35 years. The company’s products range from data acquisition hardware to testing and control hardware to industrial application software. The company reported about $140 million in operating income from net revenue of $1.17 billion in 2013.

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