[08:04:16]

>> good morning, everyone.

And it is a monday morning.

It is october 29th.

It's shortly after 9:00.

9:03 A.m.

We are in city council
chambers and there being a
quorum present I'll call to
order this meeting of the
council special committee on
economic incentives.

And we do have just a few
agenda items this morning.

The first one is the
approval of the minutes of
the september 26th, 2012
regular committee meeting.

We've got a motion by
councilmember morrison.

Second by commove.

Any discussion -- by
councilmember tovo.

Any discussion?

All in favor say aye?

 that motion
carries on a vote of three
to zero on the mayor
temporarily absent.

Next sour citizens
communication and we have
only one citizen signed up
so far, christina
(indiscernible).

You will have three minutes.

I know you were back there
writing your speech.

Sorry.

>> Morning [inaudible].

Substitute fog greg who is
on vacation.

I just wanted you all for
holding this incentive
taskforce that we're really
excited to see results and
really appreciate your
leadership on it.

I know that we're really
interested in seeing what
comes of it.

Working in construction the
last 10 years and seeing the
poor construction conditions
and that it's getting worse
and worse that we would like
to see the city take the
lead on ensuring living wage
jobs for the construction
workforce and training to

[09:06:00]

allow disadvantaged workers
an opportunity to get better
jobs in the construction
industry.

And that also through
training that will prevent a
lot of the injuries that we
see because a lot of the
training will include safety
as well.

So we're hopeful that these
things can happen and look
forward to working with you
all to do that.

>> Martinez: Are there any
other citizens that would
like to speak to the
economy.

So the next item is item 3,
which is a comparison.

We've asked for a comparison
between what the city has in
place and what the county is
developing in terms of their
new policy.

They're also going through
kind of a revision process.

And so I wanted bryan to
present to us essentially
what we have on the ground
now and what the county has
and probably what they're
contemplating.

Is that also in this
protection?

>> Everything in here is
based on a draft policy that
they're looking at.

They may not even go forward
with the policy, from what
I'm told, but they are
looking at -- their previous
policy expired, so these are
some of the areas that
they've put in their draft
policy, which leslie broader
also presented at the last
meeting.

So what we did was really
look at those and do a
comparison.

>> Martinez: Great.

Thank you.

John, just flip it.

Okay, great.

Thank you.

So the first thing that we
looked at are the targeted
industries.

And so when you look at that
you can see the areas where
there are similarities
between the city of austin
and travis county and then
some areas where they are
different, if you will.

And I can read through those
if you would like,
convergent technologies,
both city and travis county
have those as target
industries.

Creative media, corporate or
professional headquarters,
corporate and life sciences,
businesses providing
substantial opportunities
for economically
disadvantaged.

[09:08:00]

And the city of austin
differentiates with advanced
manufacturing, muleta media
technologies.

And then travis county
incorporates regional live
entertainment or fine arts
facilities, research and
development facilities and
businesses located in
reinvestment zones.

Next what we looked at are
the investment flesh holds.

As we've discussed, the city
of austin does not have
minimum thresholds in terms
of an investment to qualify
for an incentive whereas
travis county has a minimum
investment of 25 million.

And in job creation the city
of austin also does not have
a minimum threshold for job
creation whereas travis
county has a minimum
threshold of 50 new full
time jobs.

I just want to mention the
figures there for travis
county, the 25 million, was
revised down from their
previous threshold of
100 million.

And the 50 new full time
jobs is revised down from
the previous threshold of
500.

>> Martinez: Say that
again?

So it was 500 in the
previous policy?

>> It was 500, correct.

>> Martinez: And now it's
50.

It's still contemplated, but
the proposal on the table is
contemplating going down to
50.

>> Correct.

I think they're looking at
going tuned the previous
thresholds were significant
enough that a lot of
projects would not qualify
for any incentives at the
county level.

>> Martinez: Councilmember
tovo?

Sorry, bryan, we may stop
you point to point?

>> Tovo: Is that how you
would like to handle it?

>> Martinez: I think there
are questions that will come
up along the way.

>> Tovo: I wonder if you
could talk a little bit
about -- I know we've talked
a few times about the number
of jobs that are
typically -- that the city
of austin is typically
looking for in the
incentives.

I see that we have the
flexibility of not having a
minimum job creation number,
but what is it in practice?

>> In practice the smallest
number of jobs that have
been part of a chapter 380
agreement is 200.

Since I've been here.

And if you look at all the

[09:10:00]

chapter 380 agreements we
don't have any below that
threshold.

And really the reason isn't
that it has to be 200 or
more, it's the fact that
when we look at utilizing a
chapter 380 agreement we're
looking at the incremental
growth, and those projects
that have smaller numbers of
jobs or a smaller capital
investment generally don't
generate enough of a
economic impact to utilize a
chapter 380 agreement.

You may have a project where
there's 100 new jobs, but a
significant capital
investment.

It doesn't usually happen
that way.

Usually a larger capital
investment has a larger job
total, but if there was a
project that had a
significant capital
investment we wouldn't say
it didn't hit 200 jobs so
therefore it wouldn't be
eligible.

It's really looking at that
incremental gain, if you
will, in terms of revenue to
the city.

>> Tovo: So what do you
think the argument is for
having no minimum investment
requirements?

>> Flexibility.

Being able to look at each
project individually instead
of saying basically without
hitting a certain number
you're not going to qualify.

What we're going to look at
is the total economic
impact.

So if it's a smaller level
of job creation, but a
larger capital investment,
it would give us the
flexibility to look at that
potential project for
incentives.

>> Martinez: I think the
other component is if it
fits within I guess the
diversity of job types that
we're trying to create, such
 fair thin
case where it's very
difficult, hard to employ
workforce that is mostly
transferring, I think it
would preclude us in some of
those events.

>> Tovo: So you're
thinking an example they
probably wouldn't have met
the minimum capital
investment if we had set it
up [overlapping speakers]

[09:12:02]

>> the job count for that
project was somewhere around
239.

So it was higher threshold
than the projects that have
been at the lower end of
those that we've done
incentives for.

>> Tovo: Okay.

Thanks.

>> Morrison: If I could
just add, for me the more
important number is the net
benefit in terms of the web
loci or if we're going to
change that I don't know,
but to make sure that the
net benefit is big enough to
actually be considering it.

>> Right.

And it's the smaller
projects that sometimes
don't have the significant
enough net benefit from
which to draw for an
incentive.

>> Morrison: Right.

>> Martinez: Thanks,
bryan.

>> Sure.

The next slide here looks at
the requirements for
incentives.

So we'll start with the city
of austin.

Any project has to score a
minimum of 60 on the matrix
to be considered for an
incentive.

We also require that the
investment must be located
within the city of austin's
desired development zone.

The project must comply with
city of austin code and
water regulations on all
projects during the term of
the agreement.

They have to work with local
organizations to expand the
pool of diverse candidates
in hiring and recruitment
efforts, adopt and adhere to
a supplier diversity policy.

Comply with applicable
standards and principles of
the city's mwbe ordinance
for all construction
associated with the project.

Agree to not knowingly apply
any individual not lawfully
 and
adhere to the company's
equal employment policy.

Travis county requires that
the project does not
transfer employment from
within the county.

The project must be
competitively cited.

Must have benefits including
domestic partner benefits
and have equal opportunity
for employment.

>> Martinez: So bryan, do
we ever see cases where they

[09:14:00]

comply with one for the
county, but don't apply to
the city?

So the city has a litmus
test domestic partner
benefits.

We don't.

Are there times where they
will agree to that with the
county and not with us for
any reason?

>> No.

If they're going to have
domestic partner benefits,
they will have it.

We incorporate it into our
matrix, but it's not a
policy rick perry, so
they're not required to have
that to be eligible for
incentives, however if they
don't have domestic partner
benefits we incorporate that
into our matrix score, so it
could impact their ability
to qualify in that capacity.

>> Martinez: And on the
mbe, wbe program, what are
the standards and principles
that must be adhered to?

>> Those are set out in the
mwbe program ordinance and
it's participation goals and
they're specific to each
project.

There are general goals and
then there's also the
opportunity to look at
project specific goals,
which is going to have
components that are specific
to the scope of work, if you
will.

But what that really says is
they have to hit certain
participation goals for mwbe
businesses associated with
the construction.

If they don't hit that they
have to show that they've
used best faith efforts in
terms of soliciting bids and
getting those bids in.

And they work with s and br
on that whole process.

>> Martinez: So if we were
to contemplate adding safety
training measures and some
of the other items that
liuna and workers defense
projects have repeatedly
discussed, really we could
just amend our current bme,
wbe program and it would
apply to all economic
incentive agreements moving
forward.

We wouldn't have to
necessarily rewrite the
economic incentive policy.

>> Right.

So I guess if legally that
would be the method you
would go with, which would
be updating the mwbe
ordinance which we require

[09:16:00]

them to adhere to that would
be a way to address that.

>> Martinez: And is our
economic incentive policy an
ordinance or is it simply a
pollen acted upon a
resolution by council?

>> I believe it's just a
pollen acted by
resolution -- a
policy enacted by
resolution.

>> Morrison: I'd like to
go back to the question of
domestic partner benefits
and you said that that's
actually considered in the
matrix score.

I didn't realize that.

Can you tell me -- I realize
that -- it was my
understanding that it was
just a matter of them
telling us yes or no, do
they provide domestic
partner benefits, but are
you saying that there's one
of the elements of the
matrix that actually it
would affect the number that
they get?

>> Potentially.

We look at the benefits that
they provide as a whole.

So you look at what types of
insurance they provide, all
the different things that we
look at, and we also ask on
basketball.

To we look at all -- we also
ask on domestic partner
benefits.

Would that reduce their
score potentially?

More likely it would be be
if they didn't provide
domestic partner benefits
and we are benefits as well
we would look at that
cumulatively and that could
reduce their score.

>> Morrison: So you're
saying that one of the
factors, one of the line
items in the score is the
benefits package.

>> Correct.

>> Morrison: A score on
the benefits package.

>> Correct.

>> Morrison: I just want
to throw out that one of the
concerns I've heard is that
the scoring in the matrix is
relatively subjective,
and -- or at least it's
perceived to be.

And part of that might be
that we don't get a lot of
backup information about how
that score was arrived at.

I think that's one thing to
keep in mind.

And then a second question i
have on the city of austin
requirements, the fourth
bullet, work with local
organizations to expand the
pool of diverse candidates.

How do we -- what does that

[09:18:01]

end up looking like?

>> We have all of the
companies that we're working
with meet with all of our
chambers of commerce.

And what our expectation is
that they'll utilize those
various chambers for
recruitment efforts.

So for example, working with
the greater austin hispanic
chamber of commerce, we want
them to use that
organization for recruitment
efforts.

We want them to recruit a
diverse pool of candidates
so we use various
organizations for that
purpose, specifically.

And we make sure that they
do that.

>> Morrison: So we make
sure that they meet with
them.

Is there any measure of how
effective that is?

>> We make sure that they
not only meet with them, but
they utilize them for
recruitment efforts.

They have to demonstrate
that they did recruit.

So putting job openings on
their websites, etcetera.

We do look at what they've
done.

What we don't look at is how
many do they actually hire
as a result of that, but we
look at how they made the
efforts in terms of
recruiting a diverse pool of
candidates.

>> Morrison: Thank you.

>> Tovo: Do you have a
sense of how travis county
intends to measure their
bullet number one, if they
adopt that into their
policy?

>> I think what they're
basically looking at is, for
example, a company that's
located in one part of the
county and wants to move to
another part, they're not
going to provide any type of
incentive for something that
just transfers employment.

I think it's something that
they could look up up front.

And quite frankly we
wouldn't do that either.

If a company is simply
moving from one location in
the city to another, there's
not going to be necessarily
a net benefit from that.

We're not looking at moving
people around, we're looking
at job creation.

So my assumption is that
would not be something
monitored, but something
that would be addressed up
front.

And if a company was
intending to do that, they
simply wouldn't move forward
with the process.

>> Morrison: That was a
much more literal
interpretation than I was
reading into that first
bullet.

I thought it was -- anyway,
I thought it was intending
something else.

[09:20:06]

I wonder which of the line
items on the firm based
evaluation criteria domestic
benefitsand health insurance
benefits falls into?

I'm not sure where a company
might be evaluated in terms
of the scoring criteria
based on those measures?

>> I don't remember the
exact number, but we have
one specific score that is
relative specifically to the
types of benefits that that
company provides and it's
consistent for all of our
incentives in terms of
looking at the incentive
score, the matrix score, I'm
sorry, with regards to the
type of benefits they
provide.

I'll have to pull an actual
matrix to look at what area
that falls under, but it is
one that we look at for all
of our projects.

>> Morrison: That would be
great if you could show me
where that is.

Thanks.

And is there something along
the lines of what
councilmember morrison
mentioned, some kind of
backup document that really
would explain to council and
to the public how the -- why
a company got 15 points
rather than 25 on, say, is
the firm a recognized target
industry identified by city
policy?

Or would explain the actual
point count.

>> We try to do that within
the matrix itself.

And whenever we complete
that we put a narrative with
it in terms of, for example,
the net benefit to show
whether it's small, medium
or large, the number of
jobs, etcetera.

So within the matrix itself
we don't just put a score in
it, we actually put a score
in it with a narrative, if
you will, or a written
verification as to why that
score was reached.

>> So what we see now is
sort of as much rational as
exists.

>> Correct.

And obviously then the
business information form
acts as a backup for a lot
of that determinist in terms
of the information provided
within that.

>> Tovo: Thank you.

[09:22:05]

>> For the city of austin,
as mentioned, there is a
score of less than 60, there
would be no additional
consideration for an
incentive.

A score of 60 to 80 points
would be eligible for up to
30% of present value of
sales and property taxes for
10 years?

81 Plus points would be
eligible for up to 50% of
the present value of sales
and property taxes for 10
years.

Any project -- and this
isn't part of our matrix,
but it is part of what we
look at, is any project
being considered for an
incentive must demonstrate a
positive net benefit
according to our web loci
analysis.

Extraordinary economic
impact, a firm that meets
the threshold for
extraordinary economic
impact may qualify for an
investment of up to 100% of
the present value of the
total estimated tax
liability for up to 10
years.

The threshold for
extraordinary economic
impact are as follows, the
firm is in a targeted
industry, the firm is
involved in a leading edge
technology, state economic
development funds are
available to the firm or the
firm will generate 500 or
more jobs.

That basically says is with
the extraordinary economic
impact that gives some
additional flexibility to
utilize a higher level of
incentive.

>> Martinez: For me bryan
when I look at this the
comment that I want to make
is this is a message that i
think is wholly and
completely lost on the
public because what we hear,
what I hear the most is
you're giving away all of
our taxes every time you do
these deals.

And really what this these
is a maximum of 50% of their
property tax value is what's
used as the incentive.

And even if that case it
still is cash positive based
on the loci matrix that's
used for granting this
award.

Is that correct?

>> It's correct.

What I also must say is that

[09:24:00]

we can go higher than 50%
for a project that meets
extraordinary economic
impacts.

>> So what is the criteria
for going higher?

>> That's what's list ted
bottom of this slide, which
is the firm is in a targeted
industry, the firm's
involved in a leading edge
technology, state economic
development funds are
available to the firm or the
firm will generate 500 or
more jobs.

>> Martinez: And how many
of the agreements we have
done have gotten up to 100%?

>> Samsung and apple are the
two.

>> Martinez: Mar so only
two out of how many did we
say, nine?

>> I want to say we've done
14.

Some aren't active.

Some very completed, some
aren't active and have have
been terminated.

>> Martinez: Councilmember
morrison.

>> Morrison: You note to
be extraordinary the firm
has to be in a targeted
industry.

Have we ever done one not in
a targeted industry and it's
not a requirement?

>> An incentive?

The closest -- we look at
manufacturing, we look at
what area they're going to
be involved in, so I would
say the closest one that
would fall perhaps on the
borderline of a targeted
industry is u.s. fair than.

That being said we do want
to grow the target
manufacturing area and
target those jobs that
create opportunities for
lower skilled workers if you
will.

It is something we're
targeting is the area of
workforce on those
particular jobs.

>> Morrison: I would like
to adhere that I think one
of the questions that's been
raised has been how did we
arrive at that targeted
industry.

I know we work with the
chamber on that.

I think it's one thing that
we might consider is adding
some transparency and
dialogue on the discussion
so folks can understand
where that comes from and we
can have as council a little
more oversight into defining

[09:26:20]

that.

>> Morrison: D the firm
meet one or two of these or
do you want the firm to meet
all four?

>> They don't have to meet
all four.

It could be just one of
them.

State level incentives only
come into play for jobs that
pay a higher level, wages
that are either equal to or
above the county average.

So I believe right now it's
under 52,100 a year.

So projects that will be
available for state funds,
if you will, have to hit
that level.

So it's that -- it's also
looking at the level of the
employment.

Most of the projects that we
work on don't generate that
500 job threshold.

Obviously that's a criteria
or a category that most of
the firms won't hit for the
purposes of extraordinary
economic impact.

But it does give us the
flexibility as it's written
just to hit one of those
specific items in order to
recommend a higher incentive
than what's outlined in the
matrix.

>> Morrison: Is that
themation nail for having
the state economic
development funds available
as a criteria?

Because they set the bar
high so if they're offering
funds, it makes it a good --
a good bet for us?

What is the rationale for
having that on there?

[Overlapping speakers]

>> that's part of it.

It's also leveraging our
incentive with state
incentives in order to have
a higher incentive package,
but also those higher
incentive packages are only
going to be available
generally for a project that
generates significant job
opportunities and also at a
rate of pay that, as i
mentioned, equal to or
higher than the county
average wage.

[09:28:04]

>> Tovo: Okay.

>> Go ahead?

>> Martinez: Yes, please.

>> So next slide looks at
the way that travis county
is currently contemplating
utilizing incentives.

So an investment of 25 to
100 million, the level of
incentive would be
25 percent of the property
taxes that that project
would generate?

5% of
the property tax increment.

And 200 million plus, 45% of
the property tax based
incentive.

They also look at additional
incentives, if you will, and
a way to increase that
potential incentive.

One being six percent for
job.

Job creation being 50 to 100
new jobs.

An additional percent for
100 to 200 new jobs and
additional 15% for any
project that generates 201
or more new jobs.

They also then look at leed
certification.

You can see here based on
the level of leed
certification that a
building would obtain they
would be eligible from two
percent up to five percent
of an additional incentive.

If it's located within the
desired development zone it
would be eligible for an
additional five percent and
then an additional five
percent for it's located in
an activity center as
identified in the travis
county comprehensive plan.

So when you take all of
these and you layer one on
top of the other, the
maximum incentive based on
this criteria totals 75%.

>> Morrison: I guess one
of the things I wanted to
throw in here is that i
think the concept of a bonus
structure could be helpful
when we're looking at
requirements or desirable
factors that might cost more
money because that was sort

[09:30:00]

of my experience with our
last one when we were
talking about maybe having a
wage floor, prevailing wage,
what we got back was the
numbers don't work and they
hadn't really incorporated
that into thinking and their
bottom line and it's
frustrating for me as a
councilmember to hear, well,
we don't have any -- there's
not going to be any back and
fourth once it gets to us.

But if in fact there was a
mechanism for acknowledging
that it's going to cost them
more money, that could help
the dialogue.

If it's beyond what we feel
really needs to be a
requirement.

>> So that completes the
comparison of the policies
lining one up against the
other.

What we also discussed then
were some of the recurring
issues that have come up as
a discussion point from this
committee and in council
meetings with regards to the
incentives.

So one of the areas that has
come up is the hiring of
disadvantaged workers.

Another area residency
requirements for new hires.

And then as we had just
mentioned, the creation of a
bonus structure for
incentives.

Some other areas that have
come up that are more
indirect, if you will,
related to these project are
prevailing wage for the
temporary construction jobs.

A wage floor for the
temporary construction jobs
and then osha training for
the temporary construction
jobs associated with these
projects.

At the last meeting you
asked us to gather some of
those things that seem to be
recurring issues, so I think
we've addressed all of
those.

If there are others that
we've missed we can discuss
those.

But from the discussions
from our notes these are the
main issues that had been
resurfacing.

>> Martinez: When the
county talks about residency
requirement issues,
obviously they speak to

[09:32:01]

travis county.

What has come out of those
conversations that you know
of or what have you found in
other cities that relate to
residency requirements and
the enforcement of that?

>> Let me first speak to
travis county.

While this is something that
they've discussed and is
contemplated within the
draft policy, my
recollection is the most
recent agreement that they
did with hid global does not
have a residency requirement
associated with it.

So I think it's one of those
areas that maybe has been
discussed, but it hasn't
really been vetted
thoroughly, put through a
process of determining what
the appropriate way to do
that.

I'll have to look at some of
the other communities.

I believe -- I don't want to
be wrong here.

I want to say bexar county
is 25%.

>> Martinez: 25% Residency
requirement?

>> Right.

>> Martinez: Is it
monitored via random audit
sample?

>> I don't know how they
monitor that.

I don't know if it's simply
an affidavit or if they're
actually going out and
verifying that by doing a
sampling of payroll data and
things of that nature.

We can look into that for
you.

>> Martinez: And so i
guess the same question
applies to any of the other
direct or indirect issues.

What are some of the things
that you're finding or are
you finding anything that is
applicable to the
conversations that we've
started here?

>> Well, I just know that in
terms of our discussions i
think there are a lot of
questions that still need to
be addressed.

So let's just touch on
residency.

Do you define that?

Is it city of austin, is it
travis county?

City of austin has a
footprint in three counties.

That complicates it a little
bit.

You also have the discussion
related to what if they're a
resident when they're hired?

Our agreements are generally
10 years.

And they move to leander in
year 3.

Are they still a resident or
is it just when they were
hired?

[09:34:01]

Conversely, if they moved
here for the job and took
residency in the city of
austin, is that considered a
local hire for that purpose?

And when we look at the
economic impacts of these
projects, as I've mentioned
before, we look at commuting
patterns.

So 60% of the people that
work in austin live in
austin.

So we discount the economic
impact of those jobs by 40%,
if you will.

We don't make an assumption
that 100% of the people are
going to live here.

So the associated benefits
from those individuals
working here, spending money
here, generating sales taxes
here, are discounted to
basically a count for
existing commuting patterns
so we don't paint an overly
rosie picture, if you will.

The difficulty becomes in
determining how we want to
address residency, how we
want to monitor that and how
that would play out
throughout the life of an
agreement.

>> Morrison: Councilmember
morrison.

More.

>> Martinez: Councilmember
morrison.

>> Morrison: Could you
speak to the hiring of
disadvantaged workers?

Because I think that for me
that's an important point
that if -- it's a great goal
to have, but I'm interested
to know how we might monitor
that and put some hard teeth
into that as opposed to just
a suggestion that -- that
they'll make a good faith
effort to do that?

Have you given that any
thought or seen that used
around the state?

>> I think there are two
things that come into play
here.

I think one is the temporary
construction prosecute jobs
and hiring the disadvantaged
workers for that or are we
talking about the direct
hires from the company as a
result of expanding here?

>> Morrison: Both.

>> It requires further
discussion?

Terms of how we would
monitor that.

I think when you look at
economically disadvantaged
there are a variety of
different indicators that
fall within that category.

One being where you live.

So that's the easiest way to
look at it is to just say
okay, based on their zip

[09:36:00]

code or the census track
that they're in they would
fall within a category of
economically disadvantaged.

The more difficult is i
think if you're unemployed
for two months or more you
would fall within that
category.

So we really would need to
determine what and how we
would go about verifying
that type of requirement in
an economic development
agreement whether it be the
construction jobs or full
time jobs.

>> Morrison: And if i
recall properly, we were
also talking about folks
with disabilities, folks
with criminal backgrounds.

>> Yeah.

It wasn't like I was hitting
all of them, but there are a
variety of different
components that fall within
that definition.

And so we would need to be
clear what specifically what
those entail and then also
determine how we would be
able to verify that
information.

And I will say with regards
to the temporary
construction jobs, we don't
account for those in our
economic analysis and we
also don't have staff
capability within egrso to
go out and do the monitoring
of those construction jobs.

We have one full time
compliance person on staff
and I know that her hands
are quite full with our
existing agreements, working
with our third party and
making sure that companies
that we're working with have
hit their benchmarks as part
of their compliance process.

>> Morrison: I guess we
need to contemplate if we're
going to add more
requirements we might need
more staff to go along with
that.

>> Martinez: I know in our
current agreement, bryan,
one of the ways we verify is
through payroll sheets.

It's not like it's labor
intensive to get a payroll
sheet e-mailed to the city
and us verify that they're
applying prevailing wages.

>> When you're talking about
the payroll then, we're
looking at obviously the
full time employees from the
company.

Going out and doing that, as

[09:38:00]

I mentioned, on the
temporary construction jobs,
is an additional area where
we don't currently have the
staff to do that.

Realize we also go on site,
check all those payrolls and
then we have a third party
also go out and verify.

So the question is does the
third party also verify the
temporary construction jobs?

How do we do that?

I think those are areas that
need to be discussed in
terms of what's the best
structure, if that's
something that's desired
going forward.

>> And I absolutely
understand and realize that
it could prove to be
difficult and that would be
something we would have to
contemplate if we added some
requirements.

But one of the conversations
that comes up is trying to
separate the temporary
construction jobs from the
permanent jobs.

And while I understand that
there is a major difference
between those two, there
isn't a difference in my
mind in that there are still
taxes being abated during
construction because
whatever the agreement has,
it's sales tax that are
being abated until the
capital investment is
complete.

And then it's property tax
and sales tax from that
point forward.

So there are some folks
trying to argue the point
that no property taxes are
being abated during the
construction, therefore no
incentives have started.

From property tax standpoint
that's probably true.

It's probably minimal, but
it's the sales tax of all of
the products and materials
that are purchased to
construct that facility.

>> I think for point of
clarification, we don't
abate any of the sales taxes
during that period of time.

What we look at is the
economic impact of the
project which incorporates
sales taxes.

So if we're using a per job
incentive instead of juts a
property -- just a property
tax base incentive, that
incentive doesn't pay out
until the full time jobs are
created and verified.

>> Martinez: So through
construction there's no
forebearance, if you will,
if it's not an abatement, of

[09:40:02]

sales tax?

>> Correct.

>> Martinez: They pay 100%
sales tax on all of the
products, all of the
materials that are used in
the construction of the
facility?

>> Correct.

>> Martinez: Thank you.

That's not clear, I don't
think, from the
conversations that I've had.

We need to make sure we
clear that up.

>> We incorporate that into
our analysis, but we don't
go out and directly abate
the sales tax.

>> Martinez: For me it
doesn't change the fact that
I think we should try to
improve on the construction
side of it, but I think it
should be a very clear
message because it's not
clear in conversations that
I'm hearing.

Councilmember tovo.

>> Tovo: Actually, I have
a question for you,
councilmember martinez.

You had mentioned before
that one way of getting at
the prevailing wage -- i
think this is your point.

Prevailing wage and training
and perhaps a floor on wages
would be to amend the mbe,
wbe ordinance.

Do you want to speak to that
or maybe our staff could?

>> Martinez: What I see in
this presentation is a
requirement -- these are
what I presume, bryan, are
hard and fast requirements
on the city's side for a 380
agreement.

And one of the bullet points
is to comply with the
applicable standards and
principles of the city's
mwbe program ordinance for
all construction associated
with the project.

And so it specifically
speaks to construction,
which is a sticking point or
a conversation point, if you
will, of where this
committee might head for
recommendations.

And so what I see as appear
additional opportunity,
maybe we don't have to
radically change the
economic incentive program,
maybe there are minor
changes.

What we need to do it go
back to our long-standing
ordinances such as the mwbe
program and contemplate
amendments through that
subcommittee and bring that

[09:42:00]

to council, therefore it
would apply to any 380
agreement moving forward.

>> Morrison: And in your
mind would that include the
elements we have talked
about in past discussions of
this sort, prevailing wage,
wage floor and training?

>> Martinez: I would
presume that would be what
we would discuss, whether or
not it included it, that's
up to the council, but yes.

That would be part of the
conversation.

>> Tovo: And I'm very
supportive of having that
discussion and look forward
to it.

I guess I just wanted to
talk through what the
advantages might be of that
approach rather than
amending n the end it has
the impact of --

>> Martinez: Because it
applies to everything under
mwbe and not just economic
incentive agreements.

It applies across the city.

>> Tovo: But certain of
those elements do apply
across the city already,
right?

>> Martinez: Sure.

The city does procurements
and construction projects
all the time.

If we're going to improve --
if we want to improve a
policy and have a more
meaningful impact, it could
be better done at that
ordinance level as opposed
to this policy level.

Because it would apply to
this policy and it would
apply to every other
construction project that we
do as a city.

>> Tovo: I know we had a
discussion either on this
subcommittee or the mwbe
subcommittee about how they
are enforcing that.

I'm not sure how we ever
closed that loop, how
they're enforcing that on
city jobs.

>> Martinez: I don't know,
to be quite honest, but
there are different.

The point that I made was
one of the points made at
that point in that it's a
verification through
payroll.

You simply turn over a
payroll sheet and it's
verified.

Now, as was discussed as
well, there are folks that
while on paper may look like
it's compliance, it depends
on whether they're sent, to
what job and what role
they're in that day.

There needs to be, I guess,

[09:44:02]

some verification of what's
on the payroll, but that's
one way that it's done.

>> Tovo: Yeah, seems to
make sense.

A couple of other things i
wanted to throw out for
discussion, you know we have
at least in the chapter 380
agreements that I've been on
council to discuss, the --
we have discussed multiple
times domestic partner
benefits or that is a
consideration, but I wonder
if it's not time to make
that a requirement for
that's a minimum threshold.

I wanted to throw that out
to my committee members.

And I wonder too if we could
do some more thinking and
research about insurance
generally and how other --
whether there are any other
models out there for
measuring -- how we might --
anyway, let's keep talking
about how we might consider
insurance benefits generally
within these chapter 380
agreements.

And I was interested to see
the county's suggestion that
leed certification be a
component for extra
incentives and I think that
also -- I'd like to see that
added to our list of
discussion points.

It doesn't need to be leed
certification because we
have a good green builder
program too, but some level
of environmental excellence
be added, if not as a
minimum, at least for
consideration as an extra
incentive.

I think that's my last.

But I am interested in the
other things on here.

I think it would be good to
do some thinking and looking
and talking through how to
get at the question of
residency to assure that the
jobs that are created, that
we expect to be created are
going -- are local.

A significant number of them
are going to stay local
within the city of austin.

>> Morrison: It's
interesting that travis
county has or may have or
did have requirements that
don't exactly line up with

[09:46:00]

ours, and that makes sense
to some degree.

And on the other hand, if
they have some requirements
that we're interested in, if
they're giving us an
incentive, we don't even
have to add that as a
requirement because we would
be assured that they would
be requiring, say, for
instance, domestic partner
benefits.

But I guess my question is
can you tell us how many 380
agreements we have done,
which ones or how many have
had involvement with a 380
agreement with the county
versus how many that have
not?

>> Involvement with the
county would be samsung,
apple and hid global from my
recollection.

>> Morrison: Not u.s.

Farathane?

>> No.

>> Morrison: So the
majority of them are just
the city and not the county.

>> And I think when you look
back at where they're policy
was, it's easy to understand
with the thresholds that
were in place because a lot
of those projects didn't
necessarily hit that minimum
job creation requirement
that was part of their
previously adopted plan.

>> Martinez: Great
conversations.

I want to go back to
something I said early on
when we first started
meeting is I'm not opposed.

Obviously we have hard and
fast rules.

Not opposed to hard and fast
rules as list must test to
get in the door, but for me
I want to make this an
economic incentive policy.

I want companies to be
incentivized to do things
and so I will be looking
towards all of the things
that we're talking about
much similar to what the
county is doing as an
incentive.

So you could get an economic
development agreement with
the city of austin, but you
may only get 30% of your
property taxes abated.

But if you do all of these
other measures that we're
asking you to, you could get

[09:48:00]

up to whatever amount that
may be, 80%, 75%.

Again, that incentivizes
them and it incentivizes
them on an ongoing basis
each and every year.

One year you may get 30%,
the next year 80%, the next
year you may get 50%.

Just depending on how you're
complying with the new
policy.

It should really be
incentive based as opposed
to what I see.

When you start adding litmus
tests it's a granting.

It's a 10-year grant.

And I just want us to be
wary of that.

Again, there are some things
that we absolutely must have
to get in the front door,
but to get to a high
abatement of property and
sales taxes I really think
we should create this well
rounded incentive program.

And I think you're right,
councilmember morrison, the
county has some good stuff.

I really like their
incentive for the amount of
investments that's tiered.

That to me makes sense.

That is where you're going
to reap those property taxes
back by the amount of
capital investment and
infrastructure.

And so I can certainly
understand that.

New jobs created makes a lot
of sense to me.

So those are the kinds of
things that I really am
looking forward to trying to
implement or add to our
current policy as well as
the indirect issues of
construction industry and
some of the other stuff
that's come up.

>> So I can put something
together and take a stab at
that and look at how that
can be corporated, whether
it's in the matrix or some
general bullet points.

>> Martinez: I think
that's where we're headed.

I didn't know what you had
on agenda item 4 as a
synopsis.

>> I skipped ahead.

That was the synopsis was
looking at the recurring
issues, if you will.

So I jumped ahead on an
agenda item there and kept
rolling with it.

[09:50:00]

>> Martinez: That's
completely fine.

Councilmember morrison.

>> Morrison: I wanted to
add that I think we have
some process questions to
address also that have been
brought up, especially by
some of the folks that have
been speaking to us,
liveable city, a lot of
theirs are process oriented.

The issue of having a
broader dialogue about
target industries inch is
process oriented.

Some of the issues about how
we actually can measure
compliance, even if it's,
say, for instance, hiring
disadvantaged workers.

Even if it's just in the
bonus structure versus a
requirement, we need to
think about how we can put
some real teeth into that.

And then I do want to
mention a couple of those
things that have been
brought up.

There was a suggestion that
we have more discussion, at
least at the council level,
at least in executive
session, about competition
that may be involved with
the applicant.

Let's see.

There were also -- there was
also a suggestion of
providing a better
measurement of cost to the
city in terms of processing
an application.

And I don't know how we
might actually do that, but
in terms of the cost -- the
cost of staff time -- and i
don't know exactly what that
would look like, but that
was an issue that was
brought up and I don't know
if that goes beyond, you
know, this is the size of
our egr division and it's
this many staff members.

I don't know if there's any
way that we could pull that

[09:52:02]

out.

And I don't know if there's
any way that we can if there
are options and alternatives
for making our web loci
analysis more rigorous than
it is.

Web loci I think is somewhat
standard.

I don't know if we know of
any other options.

It was what was adopted in
our last go round and so
there's been some
suggestion -- we get
questions about that.

I don't know if there's a
better tool that's come on,
become available in the past
three or four years that we
might consider.

>> There are a variety of
tools out there.

Obviously web low guy was
the one requirement that we
utilize.

I think the one thing to
keep in context here is when
we do our analysis we're
only looking at the direct
benefits.

A lot of the software and
the analysis that are done
will look at more indirect
benefits so the secondary
and tertiary jobs that may
be developed from the job
itself.

That being said we could
look at how other programs
would also just focus on the
direct benefits.

We could look at a potential
of looking at direct and
indirect.

A variety of different
things.

So it's something that could
be looked at.

It just needs a little time
and research done towards
that with any particular
recommendation that may come
as a result.

>> Morrison: And web loci
at this point does have some
measures of indirect costs,
is that correct?

>> Our analysis that we do
is specifically direct
 so when you say
indirect, indirect is going
to be --

>> I said costs.

>> Costs.

I'm sorry.

We look at the -- we look at
the indirect cost, if you
will.

I mean, when you have new
jobs come here, we look at
what's the demand on
infrastructure, on public
services, on libraries, all
of those parks, all of those
things.

You can't specifically tie
towards those particular
jobs, but we do still want

[09:54:01]

to incorporate the costs so
that we're giving a fair
comparison of the benefit.

>> It's interesting when you
look at the -- I'm sure you
have looked at the numbers.

The big numbers that really
jump out are the additional
revenue to austin energy and
the additional cost to
austin energy.

That's always been sort of
striking with me.

>> I have.

>> Morrison: Those numbers
dwarf all the other numbers.

>> They do.

Especially when you're
dealing with a larger
employer, it's a big portion
of their overall expense.

You know, when you also look
at those, it incorporates
all the cost and so it's not
just the cost of what is it
cost to provide power.

It's all the infrastructure
associated with it as well
that's spread out across the
community.

>> Martinez: I think it's
incentivizing to an industry
or a company that wants to
moves here based on the
rates we're able to provide
compared with, let's say,
another city that is held by
a private market.

Where there's very little
control or little influence,
if you will.

>> It really just depends on
the region and the cost of
power associated with it.

There are areas that are
powered primarily with hydro
and often times that's
cheaper, but there are other
areas where the revenues
are -- the cost providing
power or purchasing power
are higher than here as
well.

So it just depends on the
location often times.

>>

>> Martinez: I want to
make one last point because
I don't want -- bryan, i
want to publicly thank you
for all the work that you
guys do.

Eve, kevin, all of you.

I think it's important that
we keep an economic
development policy moving
forward.

And we keep doing what we've
done.

It's been very successful.

But we are contemplating
changes.

And so I don't want you to
think from my perspective

[09:56:05]

that I don't think you're
doing a good enough job so i
have to get more involved in
it.

That's mott my goal and i
don't want to speak for my
colleagues, but I believe
it's not their goal either.

But when you look at other
policy decisions that
council makes that's
potentially tens, 20's,
hundreds of millions of
dollars and I'll give the
direct example that I'm
intimately familiar with.

Negotiating a contract with
the austin firefighters
association for a fewer
ration of time.

Very costly.

And we direct staff and say
these are our values.

We don't get involved in the
negotiations.

We don't get involved.

We don't mess with what
happens.

But we do get periodic
updates as a council.

And we do give staff our
subjective feedback, but
give feedback as to whether
or not we believe this is
what's right for the
firefighters and for the
city and for the council and
for our budget.

That's kind of how I'm
viewing this and the changes
that we may be
contemplating.

I'm not trying to rewrite --
I don't think we need to
rewrite everything.

I don't think council needs
to be involved in
associations.

But I do think we can
improve the process that we
currently have so that, one,
it's very incentive based
and two, that it's as
transparent as forthcoming
as possible throughout the
process and not just at the
11th hour, at the very end
where everybody comes down
here and just fights to the
death until the very end
hoping they can get four
votes.

I think we're in the right
direction.

We're not good on
everything, but I think
we'll improve this
dramatically.

>> I think that flexibility
is the key.

It's not it's this way or no
way.

It's looking at certain
areas and if they do
incorporate those looking at
a bonus structure for it as
opposed to saying if you
don't do this, it's not

[09:58:01]

available.

Obviously we have our core
areas that are going to be
required.

That being said, if we're
looking at additional areas
that we want to address, i
think it's important to look
at it with flexibility and
allowing additional
incentives if a company is
willing and able to meet
those specific parameters.

>> Martinez: Councilmember
morrison.

>> Morrison: In terms of
moving forward, if we -- i
like the idea of now pulling
all of those options
together and coming up with
a framework that they could
work within, I think some of
the discussion then will be
first of all to make sure
the list is complete.

That we really have all the
things on the table that we
want to talk about.

But then the discussion
might be what belongs in a
core area and what belongs
as a core item or not.

For instance, domestic
partner benefits, which I'm
also in line with
councilmember tovo here,
that I would like to see
that.

But maybe what we can do is
come out of this committee
with recommendations, and
where we don't agree we can
just lay them on the table
what the alternatives are
and we will then take it to
the full council to hash
through it.

The other piece of filling
that in would be even on the
ones where we agree that we
want them to be part of the
bonus structure and how
much -- what percent should
that be and how do we keep
it from being more than 100%
overall.

That would not be a good
thing.

So I'm looking forward to
this.

>> Martinez: That would
come out of your pocket if
it's more than 100%.

[Laughter]

>> Morrison: I'm looking
forward to it.

I think we're making
progress here and getting
those things all laid down.

And I guess if you all can
come back with that list and
that framework, as well as
the process questions to get
those laid out and make sure
we're able to talk about
them.

I look forward to that.

>> Martinez: Just so you
will know, councilmembers,
and so staff will know, i
have asked the building
trades association and some
of the members of liuna to
present at the next
committee meeting.

They're going to actually --
hopefully they're going to
break down an actual
construction project where
they worked with a
contractor that paid a
prevailing wage and
established a wage floor and
try to demonstrate the
overall impact to a
potential construction
project to give us a real
example, if you will.

Because we don't know what
that -- we were told in one
case it would be five
percent.

We were told in another case
it would kill the deal.

Obviously we know which
perspective they're coming
from.

They believe it's minimal
impact, but at least we'll
have that information and
we'll allow staff to look
through that information as
well and give your
perspective.

>> Right.

For example, if it's an
average of an additional
five percent perhaps then
there's a five percent
bonus.

But I think in determining
the appropriate bonus, if
that's the direction we
would go, we would need to
know the approximate cost.

>> Martinez: So on a
25-million-dollar project --
let's say the minimum
investment is 25 million.

Over a 10 year period at
five percent, we're talking
about $125,000 a year to
have a wage floor and a
prevailing wage.

That to me is pretty minimal
compared to the amount of
taxes we're going to abate
over 10 years.

So that to me is
significant.

I want to know -- I want to
hear those examples.

>> Morrison: I agree.

I just want to mention that
we might also want to think
in terms of the example you
gave is a one-time cost of
five percent, so it's not
necessarily that you would
then have to do five percent
every year, but you could
actually spread it out
potentially.

>> Martinez: All right.

Any other comments or
questions?

I believe we've scheduled
the next meeting.

I don't have that date in
month of me.

>> I've tall been scheduled.

I don't know the date off
the top of my head.

>> Martinez:
November 13th.

Great.

Thank you.

Without any further
questions, we stand
adjourned until
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