Update: The city has a clear and concise document about Chapter 380 agreements – it’s worth a quick read.
CM Zimmerman’s latest machinations are an attack on Austin’s eight existing Chapter 380 agreements with companies Austin recruited to the area. His plan is for Austin to reduce its agreed payments to those eight companies by 50% for one year. The “savings” would be given back to property owners, including businesses, via a lower tax rate for one year only. The typical homeowner wouldn’t see much in savings — just a few bucks spread out over the course of a year.
Economic development can be an easy thing to attack when times are good. Chapter 380 economic development agreements, fee waivers, and so forth look like corporate welfare & wasteful spending. While reducing spending and the associated taxes is a laudable goal, defaulting on our Chapter 380 economic development agreements with 8 companies is extremely shortsighted and misguided.
I’ve read through 4 of the 8 Chapter 380 agreements that Zimmerman wants Austin to break. Almost all of the agreements have ongoing requirements for this year and beyond. The companies must meet those requirements for the city to provide their incentive or payment.
Those requirements include things like:
- requiring the company to focus on minority hiring (quotas to Zimmerman)
- requiring a certain percentage of hiring & recruiting to come from the greater Austin area
- requirements that X number of jobs be created in some year followed by more jobs in following years
- requirements that jobs created pay at least a certain amount, increasing yearly
- requirements that local businesses are used for things like construction of a site location
- requirements for local workforce development & training
- requirements that companies adhere to certain environmental standards for their sites
- requirements that companies meet certain standards of fairness in hiring & benefits
- requirements that a site location be a minimum dollar amount of construction (like the $4 billion invested in Samsung’s site)
Economic development agreements are often just one part of a much longer involved process. That is particularly true for the recruitment of companies to relocate to Austin and for companies already located here to expand here rather than in some other city that is recruiting them. Those relationships and deals often take years, not months. It requires a great deal of trust which requires a great deal of time. Zimmerman’s proposal is that Austin break that trust with 8 companies that we’ve made agreements with in order to provide a few dollars in another tax break to homeowners (and businesses) for one year. We would go back on our word and put us in default on those 8 agreements.
When times are good and we have extremely low unemployment and a lot of migration to Austin it is tempting to consider reducing or killing off existing economic development deals. We don’t need more jobs here, right? In fact, we’ve done so well bringing jobs to Austin and diversifying that we were one of the least-affected cities when the Great Recession hit in 2008. It wasn’t nearly as bad here as most of the nation had it. Fortunately, Zimm wasn’t on the City Council in the early & mid 2000s trying to kill off economic development deals back then — and crippling our economy just in time for the 2008 collapse.
Stopping economic development work, killing off our existing deals, or defaulting on our agreements by reducing payments by 50% as Zimmerman has suggested, would be national news. Every company would hear about it. It would have major ramifications. It would destroy our ability to attract and retain quality employers for years, decades perhaps. Expansions would go elsewhere because we went back on our word. We would introduce massive uncertainty into the marketplace on purpose.
Mortgage our future just to give a few dollars to homeowners for 1 year? Apparently that is the plan. It reminds me of the Over65/Disabled un-rescindable/permanent freeze that CM Gallo introduced and CM Troxclair continued to pursue even once it was made clear how bad a law it was, how risky it would be for Austin, and how little support it had.
Zimmerman and his kind apparently want to cash out everyone’s past investments in this city to line their wallets now — future be damned. They refuse to invest in the city’s future & just want their tax dollars back to spend on themselves. F that. Austin should keep its word and protect its future, not risk it for a one time tax savings of a couple bucks.