Incentive proposals target middle class, creatives in push to address affordability

After more than a year of community input and research, the city is taking the next steps to dramatically overhaul its policies for economic incentives to grow businesses in Austin.

The proposed changes, which will be presented at today’s City Council work session, would see the Economic Development Department move away from a focus of pursuing only large corporate campuses such as Apple and Samsung in favor of smaller programs intended to help small businesses grow and help area workers get training to step into “middle-skill” jobs that come with a stable middle-income salary.

That shift is intended to address the city’s growing affordability gap and improve the economic livelihood of longtime residents and local musicians and creatives, all of whom are increasingly being priced out of the city as high-paying jobs in technology and other growth industries accelerate the rise of housing costs.

The new incentive tools will tap into a variety of previously unused portions of Texas state law covering economic growth and business incentives and could allow for direct grants to small businesses for job training, a variety of tax abatement programs, loan programs and location-based programs that are seen as one method of preserving music venues and arts spaces that have become increasingly scarce in the past three years.

After today’s presentation, the city will take a month to gather community feedback on the proposals, and it is expected that Council will see a resolution and two ordinances at its June 14 meeting that would create the framework for staff to have the programs in operation by this fall.

“I hope that five years from now we look at an Austin that has been able to take control of this narrative around affordability, and we’ve preserved a lot of the unique locations and places around our city and a lot of the businesses that make this city feel authentic and real,” said David Colligan, director of global business expansion and one of the leaders in revising the incentives programs. “From an economic development perspective, we want to still have the music industry here, still have the creatives all around the city, and not just in one central area.”

The city’s current ordinance and rules covering use of the state’s Chapter 380 agreements statute were implemented in the early 2000s when the fallout from the big tech bubble burst spiked the area’s unemployment rate. At that time the sole objective was attracting as many jobs to Austin as quickly as possible, which led to job incentives agreements that were uncapped in their total reimbursements and not focused on any specific job sectors or local populations.

Colligan said the new programs will have caps to limit their total cost to the city and will likely cover only a portion of a company’s cost to grow its workforce. He said the variety of programs that will be implemented in the coming years – with equity and increased opportunity for economically challenged populations as a priority – will cause the city to have to use tax dollars to fund some efforts, rather than counting on increased tax revenue from new jobs to cover all costs.

“The way the traditional recruitment model works, and the way we adapted our funding model for doing these types of things, has always been revenue positive because the focus was, ‘How do we generate prosperity for the city of Austin?’” he said. “When you shift the theme to say, ‘How do we address equitable economic development for the city’ in a range of activities from small business to large business, you won’t always be revenue positive.”

Mayor Steve Adler said he’s in favor of creating an array of programs using state and local code to address the city’s growing affordability gap. As part of a partnership with Travis County, the city has a stated goal of training 30,000 residents in middle-skill jobs in the coming years and moving another 10,000 into middle-class income levels as well.

“We have the first workforce development plan we’ve ever had, focused and telescoped on a single metric – taking 30,000 people not trained for middle-skill jobs and get them trained, and taking 10,000 people and put them into middle-skill jobs,” he said. “There’s a cost to pay to put 500 people into that, and you can pay it in a grant to Capital IDEA, (Austin Community College) or Workforce Solutions. If you told me you had a way to support those 500 kids but it would only cost me half as much, I’d be interested in hearing about that.”

Adler said he doesn’t expect the new policies to move Austin away from being a tech-heavy city, but hopes that better access to job training and career advancement will steer more income to communities that are being increasingly marginalized.

“I want people trained in middle-skill jobs because that moves people out of poverty and improves health outcomes because people can afford to go to clinics as they need to,” he said.

“Someone who gets a certificate to be a welder gets a job making $100,000 a year, and that’s not a four-year degree. We should be able to have tons more welders, but people can’t take advantage of that because they’ve already got two jobs. It’d also be really nice to use these to make more creative spaces, places for music venues and artist spaces for performance or display and exhibition.”

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Photo by Ed Schipul (Flickr: Austin Texas) [CC BY-SA 2.0], via Wikimedia Commons.

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