Viewpoints: Central Texas has incentives — but what can Amazon return?

  • Editorial Board
  • Special to the American-Statesman
12:22 p.m Friday, Oct. 6, 2017 Opinion
Ralph Barrera
Since 2004, 506 companies have come to the Austin region, but only 19 got incentive deals from the city, according to city of Austin data.

With the deadline approaching, Austin and Central Texas leaders are scrambling to put together a proposal for wooing Amazon to the region, knowing they are competing against upwards of 200 cities in the U.S. and Canada for a project so huge — $5 billion — it’s considered an economic transformer for the community that lands it.

It’s no wonder then that the competition has turned into a reality show with contestants, such as Tucson, Arizona, mailing Amazon chief executive Jeff Bezos a 21-foot saguaro cactus. Not to be outdone, the mayor of Frisco offered to build his city around the e-commerce giant, the New York Times reported.

Austin has not engaged in such hyperventilation — at least not publicly.

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We’re encouraged that while city and business leaders are excited about the possibility of landing what many consider the deal of the century, they are taking a more measured approach, weighing whether a project with the physical and economic footprint of a sasquatch will enhance or diminish the quality of life for Austin residents.

“We are who we are,” said Austin Mayor Steve Adler. “We have a culture here and values here.” Amazon’s project “is a unique opportunity just because of its scale,” he added. “We should stay engaged. But I’m not convinced that Amazon wants a community that just throws incentives its way. Austin must stay true to its culture and values.”

Along with that question, some city leaders again are debating the propriety of offering publicly financed incentives to lure rich companies to a city that has had little, if any, problem attracting new businesses. Since 2004, 506 companies have come to the Austin region, but only 19 got incentive deals from the city, according to Mike Berman, a spokesman for the Austin Chamber.

As we have previously noted, incentives — such as tax abatements or direct government payments in exchange for jobs — should be used selectively in cases that fit with Austin’s objectives, values and challenges.

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That, too, should be the guiding principle regarding Amazon, as the region would benefit from a balanced proposal that helps lift communities economically and socially, rather than accelerating trends that are pushing lower-income people out of Austin.

For its part, Amazon is seeking several features – including big incentives — in its request for proposals (RFP) to build a second corporate headquarters, also called HQ2, which eventually will employ up to 50,000 people in “high-paying jobs’ averaging more than $100,000 each in total compensation. Those preferences include:

•A metropolitan area with more than one million people.

•A stable and business-friendly environment.

•A highly educated labor pool and strong university system.

The company also expressed a desire for communities with mass transit and bicycle infrastructure, an international airport and “compatible cultural and community environment for its long-term success.”

Incentives will be key in wooing Amazon’s HQ2. That much is clear from its RFP, which states that incentives should be identified for the project “at the state/province and local levels.” Also, the type of incentive should be specified, such as land, site preparation, tax credits or exemptions, relocation grants, utility incentives, permitting and fee reductions – and “the amount.”

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That is what Amazon wants and likely will get. But Austin and Central Texas should not focus solely on what they can do for Amazon, but what Amazon can do for them regarding their unique challenges, such as growth, affordability, jobs and traffic gridlock.

An excellent starting point for doing that is the Master Community Workforce Plan commissioned by Adler and Travis County Judge Sarah Eckhardt, which seeks to address the region’s twin challenges of affordability and income inequality. The plan targets 10,000 residents currently living at or below 200 percent of poverty for training to secure “middle-skill” jobs by 2021. It defines “middle-skill” jobs as those that require more training or education than a high-school diploma — but less than a bachelor’s degree.

It’s estimated that Austin will have more than 60,000 openings for such jobs by 2021 in fields including information technology, health care, manufacturing, and personal and professional services.

The region needs employees trained to fill those jobs — and Austin, Round Rock, San Marcos and Cedar Park need more such jobs to help others climb out of poverty or near poverty. Since the workforce plan received wide input from regional chambers of commerce, unions and trade associations, academia, nonprofits, workforce training providers and major employers, it represents the critical employment needs of Central Texas.

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It is unclear how many of the 50,000 jobs Amazon is pledging to create would fall in the middle-skill category. If it’s a small number, Amazon still could factor heavily in workforce needs by pledging to provide resources to train and prepare workers for middle-skill jobs.

Proposals are due to Amazon on Oct. 19, so we will see what the Greater Austin Chamber — along with its partners — put together. Amazon will make its decision next year.

In the meantime, the debate over incentives will continue. It should. Publicly financed incentives have proved successful in some instances, such as the $63 million in tax rebates awarded to Samsung. But they also can be wasteful when they are given away without a thorough analysis of their effect on a city’s quality of life. In our view, incentives should remain a tool the city uses selectively.

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