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Charles Schwab wants $3.6 million tax rebate for Austin expansion

Wednesday, July 30, 2014 by Beth Cortez-Neavel

The Austin Chamber of Commerce urged Travis County Commissioners to enter an $8.5 million economic incentive agreement with Charles Schwab Corp., the San Francisco-based banking and brokerage corporation, at Tuesday’s regular session. The company is seeking $3.6 million in tax rebates from Travis County to expand its Austin operations. Some local taxpayer groups are already panning the deal.

Under the agreement, Charles Schwab would purchase 50 acres of land and build a 250,000 to 300,000 sq. ft.  expansion within the Austin city limits, pending the county’s approval of the deal next week.

The rebate would be spread out over a 10-year contract period, and is part of a total $8.5 million cost to the county, which also includes road costs and other infrastructure that the county would have to build around the office space.

Charles Schwab would also receive $4.5 million in state investments from the Texas Enterprise Fund. The state incentive hinges on whether Travis County approves to offer its tax rebate. Charles Schwab and the Austin Chamber of Commerce have not yet brought this matter to the Austin City Council, which has been on vacation for most of July.

Under the agreement, the county would make $11 million over that 10-year period, with a net economic benefit of $2.5 million. Charles Schwab will also make a “good faith effort” to
hire local candidates and use local minority business in construction, said Kelli Keogh with the company.

Charles Schwab anticipates investing over $196.7 million, including construction labor, into the project. The company, which has 927 employees in the Austin area, expects to create 823 new jobs over the course of the contract, with the lowest 10 percent of new employees making $39,733 per year and the average employee making $79,602 per year. The company predicts 145 of those will be entry level jobs. Base salary would be $15 an hour for new hires and $11 and hour for construction workers.

The company is in the process of moving employees out of San Francisco and looking to expand in other cities, like Denver, where they have already received an economic incentive from local municipalities. Glenn Cooper with Charles Schwab said the company is looking at various other locations for the expansion in Phoenix or Charlotte, North Carolina, where they have discussed incentives, but not at the level of discussion that Austin has put in to the process.

“This is a very important project for Travis County, on a number of levels,” said Charisse Bodisch with the Austin Chamber “The important thing to remember here is that should they choose Austin and Travis County, they plan to invest millions of dollars… that’s values that’s not on the tax rolls right now, so that’s new tax dollars that would roll into the county, and that’s tax dollars that will be there for years to come.”

The Chamber’s Pete Winsted said the agreement has been almost four years in the making.

“Frankly, many of the companies already in Austin asked us to go to California and entice ‘X’ company to come to Austin because it creates a broader job base here, it lets suppliers and vendors to those companies cluster around the new arrival in Austin. It makes a huge difference if we stay in this incentive game. I don’t think we can just walk away from that. and if we do shut it down, so to speak, we won’t even make the short list. They will fly right over Austin and head somewhere else,” Winsted said.

“These things take a long time and I feel like we’re giving birth today on a very important project…I can’t imagine a better corporate citizen.

But some commissioners and citizens were wary of the incentive deal Tuesday.

Pct. 1 Commissioner Ron Davis said he was concerned about the “good faith effort” to hire minorities and asked that the current breakdown of employees be sent to the court before next week’s voting session.

“When it comes to certain employment opportunities for specific target folks in this community, (the effort) kind of erodes away,” Davis said.

Change Austin.org, a local political action committee, sent out a notice Monday, headlined “Travis County Commissioners: Please make our day. ”  The notice added,  “Austin taxpayers are already chomping at the bit for a full-on voter revolt. You can give us one more, if you like.”

Pct. 3 Commissioner Gerald Daugherty was concerned about how the county’s vote would look to the taxpayers, and asked for the “bumper-sticker” argument.

“This is not a huge incentive number-wise, relative to what you get out a company like this,” Daugherty said. “What is the bumper sticker response from the chamber if you were to be in front of 200 citizens that, quite frankly are offended by large, very profitable corporations asking for tax incentive? It’s impossible, I think, to convince people that they really might not come here if they don’t get it.”

It all boils down to one thing, Winsted said: competition.

“It would be unilateral disarmament for us to abandon incentive programs,” Winsted said.

David King, a former state employee and Austinite for 35 years, spoke during the public testimony and also sent a letter the commissioners, asking for commissioners to vote against the agreement, or at the least amend it. King said he doesn’t buy the threat that the company will move away if the county doesn’t offer an incentive, and the state rescinds its investment.

“I think Charles Schwab sounds like a good company, but they don’t need these incentives… They just have a simple business case for moving here – it’s in their best interest, King said. “Tax incentives should only be used for local small businesses that are based here in Travis County. Investing in a small, local-based business helps our economy much more than investing in large corporations.”

King said other corporations move to the area without asking for economic incentives, and like Charles Schwab, give back to the community.

King asked that the Commissioners restructure the agreement to include: a “pay-as-you-create-jobs” model so incentives are paid only when a new job is actually created, require Charles Schwab to not be able to protest their commercial property tax appraisals for the duration of the incentive agreement, pay a living wage of at least $18 and hour instead of their proposed $15 and hour and require the company to release to the public documentation on its hiring practices and workforce and political contribution.

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