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Economic Development Department changing perceptions, funding

Monday, August 11, 2014 by Elizabeth Pagano

Changes are coming to Austin’s Economic Development Department this year, with a new source of revenue and a plan to change the public’s perception of its mission.

As the FY2015 budget cycle gets into full swing, the city is in the process of shifting funding for the department away from transfers from Austin Energy and other city utilities to the General Fund. This is the second year of a four-year transition.

The agency is also in the process to changing its public image. With financial incentive agreements to lure businesses to Austin falling out of favor with a significant segment of the public, Department Director Kevin Johns says the agency is turning its efforts to increasing the city’s affordability.

As the city has turned its eye to increasing affordability, a program that increases costs for the average citizen in order to fund people moving here has become markedly less popular.

This year’s budget attacks that perception on a number of fronts, most notably in the continuing shift away from Austin Energy-backed funding. Austin Energy estimates that it will save more than $3 million next year by decreasing the share of the Economic Development budget it is required to pay.

The switch shifts costs from Austin Energy and onto the General Fund and other utilities. As of this year, the Economic Development Department is funded by Austin Energy, the Austin Water Utility, Austin Resource Recovery and the General Fund, based on a percentage of their gross revenues.

Next year, the Economic Development Department will start with a $1.5 million balance, which greatly lowered the level of funding that it needed from the General Fund and utilities overall. In the future that may change but the funding will continue to be based on a percentage of the gross revenue of the utilities.

In all, the Economic Development Department has a budget of about $43.5 million.

That includes funding global businesses recruitment and expansion, which takes up 33.8 percent of its budget. That is still the biggest single chunk of expenditures, but the department also manages other programs that are less of a PR problem than the city’s economic incentives.

The Economic Development Department is working to change public perception of its focus. Department Director Johns makes note of the challenges that Austin still faces despite being ranked the fastest-growing city for the fourth year in a row, and one of the best U.S. cities for small businesses.

“Despite the success and recognition, Austin is still faced with the challenge of a growing income gap and steady increase in the suburban poverty rate, increasing the demand for basic services,” wrote Johns. “Our goal is to eliminate economic blind spots and leverage private investments… Employment for the poor, globalization, hard to find capital, regenerating our city – these and other important issues need to be addressed.”

The department is also responsible for redeveloping underutilized city land (such as the Mueller development) small business development and promoting cultural arts and music.

Thanks to an increase in hotel occupancy taxes, the Cultural Arts division is poised to get a big boost next year. The department gets a little more than a penny out of every nine cents that is generated from that tax. That share increased more than $1 million last year, and the department now has projected $9 million for cultural contracts next year.

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