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Changes proposed for Chapter 380 agreements

Wednesday, December 6, 2017 by Jo Clifton

During Tuesday’s City Council work session, David Colligan, the manager of global business expansion in the Economic Development Department, and economist Jon Hockenyos presented an outline of their plans to revamp the city’s incentive policy for recruiting businesses under the state law known as Chapter 380.

The biggest changes  as dictated by a Council resolution earlier this year would include an emphasis on middle-skill jobs; increased employment opportunities for hard-to-employ populations; increased availability of affordable commercial space for small, local businesses; and development of vibrant, mixed-use commercial corridors.

In 2003, when the city last approved its values for economic development, there were just three values: quality jobs, quality investment and revenues for the city in the form of taxes and utility payments. There was no emphasis on helping small businesses, whether local or otherwise, but apparently that is going to change.

After surveying various stakeholders and holding extensive community workshops, the Economic Development Department concluded that equity and diversity as well as workforce development should be added to the department’s values. But the No. 1 value on the list developed by community leaders was called “place.” That one word refers to “the value of impacting low opportunity areas of the city and prioritizing jobs in areas of high unemployment,” according to a departmental summary.

Quality jobs, the No. 1 goal in 2003, dropped to third in this list, and quality investment, which was second in 2003, was fifth. City revenue ranked seventh out of the eight economic development values on the new list, according to Colligan.

Hockenyos said that although Austin has an unemployment rate of just 2.4 percent, the city needs to make sure that it is resilient and that its economy is sustainable. In addition, Austinites are committed to equity and opportunity for everyone.

In response to a question from Council Member Jimmy Flannigan, Colligan said the city has been very selective in deciding which businesses to partner with in Chapter 380 agreements. The city currently has nine active agreements and four that have been completed. A number of other companies that had such agreements decided to end those agreements ahead of schedule, as permitted by their contracts, he said.

After listening to some conversation about having short-term agreements for small businesses, Flannigan said sometimes it is better to have a long-term deal than a short-term one.

“My fear, moving forward, is our resiliency to the national economy. And this chart,” he said, referring to a chart showing that Austin’s unemployment rate goes up and down with the national rate, “is a little frightening, in terms of how susceptible we are to the whims of decisions made out of our control. And to the extent that our Economic Development Department can insulate us against those trends, that will be the thing I’m looking at.” Flannigan said that although he supports all of the city’s efforts to promote equity, “if national trends go in a bad direction, I want to make sure we don’t get stuck holding the bag.”

Colligan and his team, including Hockenyos, urged an expansion of tools and programs to meet the needs of small businesses and the difficult to employ. They urged also that the city incentivize middle-skill jobs for existing residents and support local, creative, cultural and heritage businesses and respond to specific issues in areas such as East Austin.

Likely the most controversial of their recommendations was to explore removing or lowering regulatory barriers for companies participating in Chapter 380 agreements. Those regulatory barriers include the city’s demand for a living wage, health insurance for employees and their dependents, and construction worker safety.

Council Member Ellen Troxclair is not really a fan of city recruitment of businesses. However, in Council she is in the minority on that question. She told the Austin Monitor, “I guess if the city is going to be in the business of recruiting businesses, then a whole range of businesses should be included, and I liked the general direction that they were going. My preference would be that the city focuses on having a predictable regulatory environment and easy permitting process and systems in place that would allow more small and large businesses to thrive, regardless of whether or not they’re part of the program. And I think that you reduce the need for government incentive programs when you have a naturally attractive structure in place.”

Any changes to these economic development goals are likely to happen next spring.

Photo of The Domain by peter french made available through a Creative Commons license.

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