Get more from Visa for incentives
Thursday, the public and the Austin City Council will have a chance to weigh in on $1.6 million in tax incentives the city of Austin has tentatively offered Visa Inc. The item is listed as one for possible action, so the council could vote the same day.
The city’s analysis concluded the tax incentives deal with Visa would generate nearly $7 million more in city tax revenue and utility purchases over 10 years than the company and its employees would require in city services. Like other incentives deals, it sounds like a win for taxpayers and a win for Visa. But there are legitimate questions about whether Austin is getting its money’s worth when granting tax incentives. The New York Times reported this week that the state of Texas has awarded more incentives than any other state. Texas dispensed $19 billion a year under Gov. Rick Perry, the newspaper reported. Since 2007, Austin has awarded more than $14.2 million in tax incentives. The largest single tax incentive deal for $8.6 million was given this year to cash-rich technology giant Apple Computer.
The question about whether tax incentives to lure jobs are adding value to Austin or mostly enriching the companies that receive them, and therefore, detracting from the city’s overall welfare, is one that should be debated as the city moves forward in revising its tax incentives policies. For now, we urge the City Council to strengthen the Visa deal for the folks who are subsidizing it — Austin residents. There are things the council can do to make it better. Start by ensuring that a certain percentage of jobs go to Austin workers. Also, work out an agreement with Visa to partner with local entities to train college graduates for the jobs being created. The city could and should provide for exemptions, but the city should set stringent requirements for an applicant to obtain them.
Under the proposal, the city would award incentives over 10 years to the global credit card and payments giant, which in turn would locate a global information technology center in an existing building at 1230 Research Blvd. in Northwest Austin.
The company’s incentives application says Visa would agree to employ more than 800 workers at the Austin site by the end of 2017, with an average salary of more than $113,000. Of those, 794 would be new jobs and at least 70 percent would be filled with local hires, according to the company. Visa would spend $18.7 million for improving the building and another $8.7 million for purchasing business equipment. Perry already has offered the company $7.9 million from the Texas Enterprise Fund, also public dollars. If Austin City Council members do approve the deal, Visa still would have to approve it.
Austin is competing with locations in Colorado and Virginia, according to the Greater Austin Chamber of Commerce. Even so, the city’s economy is growing, and more than two dozen companies have moved to Austin this year without tax incentives.
A major flaw with Austin’s incentives rules is that they don’t require that a certain number/percentage of new jobs generated by companies that receive tax incentives go to Austin residents. Even worse, the city does not track that figure, which could be accomplished by annually surveying companies that get tax deals. So the city does not know how many of the jobs being generated are benefiting Austin workers. Visa, for example, says 70 percent of the 794 new jobs would be filled “locally.” Many take that to mean those jobs would be filled by Austin residents. But the city’s definition of local hiring includes five counties: Travis, Williamson, Bastrop, Hays and Caldwell. So while Austin taxes provide the incentives that generate jobs, there are no requirements that the company hire Austin workers.
City officials will tell you that their surveys of commuter patterns indicate that 60 percent of people who work in the city live in the city. But that is an average that is based on both public and private sector jobs, including companies that don’t get city tax incentives. The city could get a far more accurate figure by surveying compa- nies that get such incentives.
Though Austin has many workers with the skills Visa would require, the city estimates that the demand is greater than the available supply. That offers another opportunity for the city and Visa to work together with Austin Community College or another entity to cross train people with college degrees so they have the skills to fill Visa jobs.
Few will blame the council for trying to negotiate a better deal for Austin taxpayers — even if Visa balks.