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Tovo, Martinez disagree with Mayor over rejection of incentive deals

Wednesday, June 11, 2014 by Jo Clifton

After learning Monday that National Instruments and Dropbox terminated economic incentive agreements with the city, Austinites learned Tuesday that a third company, U.S. Farathane, also ended its participation in the program which gives companies tax breaks or fee waivers in return for promises of good wages and other benefits for new employees.


For Mayor Lee Leffingwell, the National Instruments decision is a sign that Austin’s incentive program is “dead in the water.” (See Austin Monitor, June 10) Council Members Mike Martinez and Kathie Tovo saw it differently.


Tovo said, “I don’t agree with the Mayor’s assessment that the city’s incentives program is ‘dead in the water’ – but I do believe that as the fastest growing city in the nation, Austin should re-evaluate whether and under what circumstances to continue to provide financial incentives to companies.”


Leffingwell said in a statement Tuesday, “It concerns me that we have greatly diminished the effectiveness of our incentive program by placing burdensome conditions into the agreements. These obligations range from exceedingly difficult reporting requirements, to new provisions regarding prevailing wage and minimum living wage, and other requirements.”

The news from National Instruments, Dropbox and U.S. Farathane brings the number of companies canceling economic development deals with the city to nine out of 21, he said.


“I maintain that these incentives have played an important part in Austin setting the pace in regard to our unemployment rate, and well respected national economic standing,” Leffingwell wrote. “We must remember that past and present success is no guarantee of future success.”


Although neither National Instruments nor U.S. Farathane cited the provisions of the economic incentive program as reasons for their departure from the program, Dropbox Corporate Comptroller Brad Silicani wrote, “We need to direct the full energy of our employees toward the growth of our company. We lack the bandwidth to track our compliance with the agreement, but remain very excited about our future in Austin …”


National Instruments’ letter cited “difficult conditions in the test and measurement industry and the global economy” in deciding not to expand its workforce. Martinez, referring to the National Instruments announcement, said the Mayor’s comments were, “as he admitted, purely speculative and the Mayor has no basis for saying it is because of our new policy.


“As it relates to Dropbox, Dropbox decided they didn’t want to comply with our MBE/WBE program,” Martinez said, referring to the city’s requirements for hiring and working with companies owned by women and minorities. “That has been a longstanding part of our economic incentive package. If they don’t want to comply with the policy, they can’t be a part of the program. So I think the policy is working.”


Tovo added, “Based on its official press statement, National Instruments shifted course with regard to an expansion here in Austin because of changing conditions within its industry. Neither the Austin deal nor the $4-plus million in incentive money appear to have been factors in the decision, and I fully expect companies will continue to choose to locate or expand here in Austin, with or without financial incentives to do so.”


Tovo said Dropbox’s decision to locate in Austin but not to participate in the incentives program, indicates that Austin’s “talented workforce and other advantages make it an attractive place to do business. Dropbox will be a welcome addition to Austin’s technological landscape.”


Dropbox’s Austin incentives totaled $244,500 over 10 years. In return, the company was scheduled to invest $5.5 million, creating 170 jobs with an average annual salary of $59,000. Dropbox also struck a $1.5 million deal with the state’s Texas Enterprise Fund, in which it is still participating.


U.S. Farathane agreed in 2012 to a $212,000 incentives package with a pledge to create 228 jobs and invest more than $26 million. However, according to the company’s attorney Michael J. Cleland, the company “remains committed to the project and to the City of Austin despite its termination of this Agreement.”


National Instruments’ deal with the city was for $1.7 million in tax breaks in exchange for building a 300,000-square-foot addition to its North MoPac Boulevard headquarters and hiring 1,000 new engineers and technicians at an average salary of $72,000. National Instruments also opted out of similar deals with Travis County and the State of Texas.

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