The city has increased the limit on personal net wealth for individuals looking to take part in the city’s procurement program aimed at hiring businesses owned by women and/or minorities.
That adjustment was supported by an analysis of the local economy that found the city’s business growth is likely to have substantially increased the wealth of small businesses intended to benefit from the procurement program.
The procurement program has been under several rounds of study and review in recent years to make sure it is serving its intended purpose of providing opportunities for a larger pool of small businesses and contractors.
The program’s cap on personal net wealth – generally calculated as the sum of all assets (not including a primary residence) minus any debts or liabilities – will increase to more than $2.2 million, up from the previous cap of $1.82 million.
The memo from Edward Campos, director of the Small and Minority Business Resources Department, detailed the steps taken in recent years to adjust the program. A report published last year from a working group included the net worth adjustment as one of 10 major changes recommended from its list of 20 recommendations.
Another major change that led to the upward revision was including more economic indexes in studying the local business climate other than the South Region Consumer Price Index.
Economic consulting firm TXP Inc. was hired to analyze those two facets of the program. It found that the CPI alone was inadequate to measure growth in the Austin area, and suggested also using state employment data on wage growth, the S&P 500 stock index and local housing activity data compiled by Texas A&M University.
That matrix of factors appeared to capture local economic activity for recent years, indicating nearly 15 percent growth in 2021 when local home prices began a sharp increase, followed by a decline of 1.2 percent in 2022.
“Introducing variables into the calculations that reflect capacity to pay (either reflecting income or assets) has the effect of slightly increasing the PNW Limit, from about $1.7 million to around $2.1 million, meaning that the limit will have more than doubled from inception,” TXP President Jon Hockenyos wrote in his analysis. “While $2 million in (personal net wealth) (not including primary residence) indicates financial success, the surge in affluence in Austin means that the financial private sector sets customer targets at ever-higher levels, and individuals who most would consider wealthy may not have adequate access to services such as those provided to SMBR.”
The working group charged with steering revisions to the procurement program has endorsed the changes recommended by TXP, including having the SMBR Department revise the wealth cap annually based on the new combination of indexes to accurately reflect the state of the local business climate.
Last year, Council approved other changes to the ordinances covering the program, including combining construction and construction-related businesses into one category and doing the same for nonprofessional services and commodities contracts.
The memo notes the recommended changes would close out all remaining open items from the initial review of the program, which was first called for in 2020.
The update issued last year cautioned the 10 major changes recommended by the working group were likely to take substantial time to implement, noting they “will take more time, effort and cross-departmental coordination and may require external agency collaboration to implement.”
Photo made available through a Creative Commons license. This story has been changed since publication to reflect the fact that the recommended cap has been adopted as of Jan. 1, and to include the adopted amounts.
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City of Austin Small and Minority Business Resources Department: The city department charged with administering Austin's minority-and-women-owned-business procurement program. That program was first established by the Austin City Council in 1987.
