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Aerial view of the Tesla factory in Freemont, Calif.
It could be the biggest Austin economic development project in a generation. One observer calls it a "get-out-of-jail-free" ticket to overcome the devastating economic impact of the coronavirus pandemic. But Tesla, the high-flying builder of electric vehicles, has asked local officials to react quickly and fully to its requests. If not, Tesla could flee to a rival location in Tulsa, Okla.
Tesla, a Palo Alto, Calif.-based company, has three objectives.
- Property tax abatements of $68 million and $14 million from the Del Valle Independent School District and Travis County, respectively, over a 10-year period. This means that Tesla would be paying approximately 20 cents on the dollar of the tax bill it would otherwise face. Still, say those familiar with the proposal, the Tesla payment would represent a huge boon to DVISD, a relatively poor school district that has 11,200 students in 10 schools. Eighty-four percent of the students are Hispanic.
- Rapid approval of environmental permitting from the city of Austin. While Tesla's proposed site is not in Austin's city limits, it is within the city's extraterritorial jurisdiction (ETJ), an area extending out from the city in which Austin controls development that affects the environment.
- Fast-track approval of all considerations by no later than July 31 so that Tesla could begin construction soon thereafter.
Seeking incentives
Some might think that the $82 million in tax abatements is pocket change for Tesla, a company with a market capitalization of $185.5 billion as of June 19. That is several times higher than General Motors' market cap of $38.1 billion and Ford Motor Co.'s market cap of $24.8 billion.
But a source familiar with Tesla's thinking says the property tax concessions are essential, and if not granted, are a deal-breaker. While the company is financially strong and its chief shareholder, Elon Musk, is wealthy enough to launch a manned space vehicle, the valuations on an automotive plant and its highly specialized equipment can be so high that thin profit margins "go upside-down very quickly, so what [the taxing bodies] do is very important."
Tesla property tax impact. (Travis County Commissioners Court)
Choosing the site
Also critical is how the city of Austin's environmental regulators will consider the 2,100-acre site, where owner Martin Marietta now conducts sand and gravel mining. Tesla is said to be concerned with environmental standards in Texas that primarily relate to ranch water tanks—artificially created ponds dug to slake the thirst of cattle.
Those regulations, according to a source familiar with Tesla's application, require 300-foot setbacks from the tanks because of "wetlands" that surround them. If that standard were applied to Martin Marietta mining pits—which looks like a war zone after an aerial attack—there would be no land worthy of development, said a source. That source and others declined to be identified because they were not authorized by parties involved to speak publicly.
Tesla's proposed site is near corner of the intersections of state highways 71 and 130, east of the Austin-Bergstrom International Airport.
The rush to approval
Tesla's request for a "go-fast" processing of its application could present a significant challenge to the city of Austin, which is now overwhelmed with the need to respond to the COVID-19 pandemic and recent protests against police violence. According to observers, there is a real question whether the city has the capacity to focus quickly and in depth on the Tesla application.
Asked why Tesla is in a rush during a time when auto sales have declined sharply, a source familiar with Tesla's thinking said that for every day of lost production, there is lost revenue. "It's just the way business looks at it."
Still to be determined is whether Tesla's expectations about speed of movement align with the city's. Austin City Council is not scheduled to meet again until July 30. There is uncertainty about whether Tesla will wait that long. "The city of Austin can stand only so much pressure," said a source.
Supporters and opponents
Tesla is not without advantages in its pursuit. The firm believes it has allies within the Travis County government and DVISD, as well as in the Greater Austin Chamber of Commerce and "up and down" the ranks of state government. "The support so far has been remarkable," he said.
DVISD Superintended Annette Tielle said in a statement last week, "The addition of a company who has the ability to support our community both economically and academically would be advantageous for our students and accelerate our efforts to mentor and develop the workforce of the next generation." The DVISD board will next take up the proposal during a closed session at a meeting on Wednesday.
The Travis County Commissioners Court will receive presentations on the proposed agreement from staff and Tesla representatives at a meeting on Tuesday. In the presentation, which was made public last week, the county staff wrote that the proposal "results in a substantial benefit to the community and a net fiscal benefit to the County."
Commissioner Gerald Daugherty told Austonia that the proposed factory would benefit DVISD more than the county—equating it to the 2005 economic incentive deal Manor ISD entered into with Samsung. He added that the prospect of 5,000 jobs, most of which would go to skilled workers without college degrees, was alluring. "Let's face it, today in America manufacturing is really one of the more difficult areas to bring to your community," he said. "That's a pretty enticing deal for us."
A person familiar with Tesla's thinking said there were alternative plans if the manufacturer could not win speedy approval of the Austin site, but declined to give details. Tulsa has been mentioned publicly as a competing destination. The source declined to say whether there were alternative sites in Williamson County, which has been an ardent suitor of Tesla, or elsewhere in Texas.
Tesla job creation over time. (Travis County Commissioners Court)
Travis County projects 5,000 Tesla jobs over the next several years.
While Tesla is unlikely to face opposition from neighborhood groups, because there are few neighborhoods in the area of the proposed site, it may well face challenges by the United Auto Workers, which has sought to organize Tesla. The firm's plants now are non-unionized. And the UAW, through allies in the local Workers' Rights groups, has political support in Austin that could become a factor in decision-making.
Rick Levy, president of Texas AFL-CIO, urged local officials to consider what he called Tesla's troubled history with taxpayer subsidies—and its flouting of government authority. He said Elon Musk reopened the company's Fremont, Calif., factory in defiance of a local county shelter-in-place order, meant to limit the spread of COVID-19.
So, you wanna give Billions to a billionaire? What’s it like to work for Tesla? Have they ever kept their promises… https://t.co/TAc1Gr6yD8— rick levy (@rick levy) 1592859690.0
In a phone interview on Monday, Levy worried that if Travis County gets Tesla to agree to worker protections and other terms, it may be hard to enforce compliance. "I'm not totally sure that it's possible because when somebody is as big as this operation is, does the tail wag the dog or does the dog wag the tail?" he said.
The optics of giving a public subsidy to a billionaire-owned company are unpalatable to some.
Mayor Pro Tem Delia Garza, whose district runs closest to the proposed factory site, said in a statement to Austonia: "For me, any consideration of an opportunity like this one for residents in Southeast Austin and Travis County must include good union jobs and fair wages. I'm also concerned about some of our small businesses struggling right now, and what kind of message is sent to them for government to help wealthy corporations."
Why Austin
Asked what makes Texas attractive to Tesla, a source said that Texas' "entrepreneurial, pioneering personality" matches that of Elon Musk. As for Austin, the city carries the added advantage of a highly-educated labor pool deep in engineering and technical skills. "There are not a lot of sparks flying, welding and molten steel going on in a Tesla plant," he said. "It's pretty clean and robotic."
Those employed would fall into two groups, those with advanced management and engineering backgrounds, and skilled labor. Also, he noted that construction of a plant would require a substantial force of workers from the building trades.
Austin Business Journal reported Monday that Tesla may also relocate its headquarters to Austin, following Musk's ongoing conflict with California lawmakers over COVID-19 policies.
Transportation was clearly an issue in the location of GM and Toyota plans in Arlington and San Antonio, respectively. I-35, I-30 and I-20 are all near Arlington, and I-35 and I-10 converge in San Antonio. The proposed Tesla site adjacent to SH 130 is clearly at an advantage. "That is a yet-to-be maxed-out highway, and gives access both north and south." To the north, SH 130 connects with I-35. To the south, it intersects with I-10, running east and west. Rail service has not yet been discussed, he said.
Not yet known is the ultimate capital investment Tesla will make in the site in the plant and its equipment, but a source called it "staggering." In a presentation prepared for Tuesday's meeting of the Commissioners' Court, the court's staff said the real property investment was $410,316 and the personal property investment, apparently the building and equipment, would be $682,294—for a total of $1,092,610 over 10 years.
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Popular
(Austonia)
By Jo Clifton
Members of the city’s living wage work group urged City Council Tuesday to raise the city’s living wage to $22 an hour for the upcoming fiscal year. They said the wage should apply to all regular and temporary city employees except employees of the summer youth program, regardless of position or number of hours worked.
Council members Vanessa Fuentes, Ann Kitchen, Chito Vela, Kathie Tovo and Pio Renteria have already signed on to a resolution on the June 16 agenda calling on the city manager to adopt a living wage of $22/hour in next year’s budget.
The current living wage is $15/hour and that has not changed since 2018. City management raised employees’ wages to $15 as a result of a recommendation from the living wage working group in 2015.
The Human Resources Department convened the working group again this year, asking for its recommendations on a living wage. According to staff’s calculations, providing a $22 minimum wage would cost the city between $18.2 million and $22.8 million, not including wages for police.
Carol Guthrie, business manager for AFSCME Local 1624, told Council during its work session that it’s time to raise wages so the city can meet the demands of the public and its own employees. With inflation, gas prices and rising housing costs, Austin city employees are suffering and underpaid, she said.
While the city raised its minimum wage to $15 in 2018, it failed to keep raising that amount, which should have become $16.83 the following year.
According to documentation provided by the city, as of the end of April, the city had more than 2,474 vacancies, compared to about 1,559 on May 1, 2019. The vacancies include 78 at Austin Resource Recovery, 266 at Austin Energy, 96 in Public Works, 237 at Aviation, 133 at Parks and Recreation, 357 in the Police Department, 198 at Emergency Medical Services, and 126 firefighters.
City employees are suffering, Guthrie said, with some working so much overtime that they have become injured and ended up on the disability list.
City leaders did not foresee the pandemic, nor did they foresee the freeze. “And those additional stressors have played a big role in where we are at today. But something’s got to give. We need more workers. We cannot hire workers. Those who work here – they’re done, they’re spent. They need your help. We’ve got to be competitive. We have got to raise the wage for these workers.” The private sector is now hiring at $20 an hour, Guthrie said, and the city is not able to compete.
Rachel Melendes of UNITE HERE, the union representing some airport employees, said working at the airport is “too stressful. They are overwhelmed,” she said, noting that many airport workers arrive at 3:30 a.m. and leave at noon. “And despite their hard work they are not able to support their families on the city’s wages.”
Fabiola Barreto of Workers Defense said her group has been observing that “the folks constructing the city are not reaping any of the benefits. They’re moving to Buda and Kyle,” because they can’t afford to live in Austin.
Complicating matters, every Council member is aware of the fact that, as a result of state law, they can’t raise taxes more than 3.5 percent without the permission of voters.
Council Member Natasha Harper-Madison voiced her support of the wage proposal. She said she is telling people in her district that they should be prepared to move out of Austin as prices rise higher. That would be better than waiting until they have missed rent payments, she said.
Council Member Alison Alter told her colleagues she is committed to a wage increase, but could not commit to a specific number. She said, “Keeping our workforce competitive is the highest priority.”
Kitchen said it was her goal to reach $22 as recommended by the working group. She said it was particularly important that the public understand the trade-offs city management might have to make in order to pay the amount employees need. She told City Manager Spencer Cronk, “Get us to $22. If you can’t get us to $22 … tell us why.”
Guthrie told the Austin Monitor after the meeting that she and other members of the working group would be at the Council meeting next week to push for adoption of the $22/hour resolution. However, she said she was disturbed that the working group put in so much effort seven years ago to tell the city to raise wages, but there was no action on their recommendations after the city raised the living wage to $15.
Guthrie said she and others would be ready to fight for their wage proposal. In addition to AFSCME, other members of the group include representatives of Central Texas Interfaith, Workers Defense Project, Laborers’ International Union 1095, IBEW Local 520, the Austin chapter of General Contractors, Plumbers Local 286, Greater Austin Hispanic Chamber of Commerce, the Austin LGBT Chamber, UNITE HERE, Local Progress, Texas Antipoverty Project and the Equal Justice Center.
(Austonia)
When Mark Coffey moved to Austin in 1986, it was the land of Stevie Ray Vaughan shows, MTV and new opportunities.
Now, it may be the land of limited housing, property tax hikes and California license plates—but many are still choosing to stay for remnants of that old-school charm.
Austinites love to lament the loss of “Old Austin”—they’ve been saying it since 1884. And with one-bedroom rents up 112%, home appraisal rates up 56% and the cost of living on a seemingly endless upward trend, it's hard not to see Austin's past through rose-tinted lenses.
But even in money-stretching times like these, some Austinites are taking a break from their usual complaints to remind themselves why they choose to stay.
Mark Coffey has stayed in Austin for decades due to its uniqueness, inclusivity and community. (Mark Coffey)
As a near-original Austinite, Mark Coffey didn't have too much trouble buying a house or finding a job with pension benefits at a local utility service decades ago. Still, he said he's stayed in Austin for more than financial security.
"Despite the cost of living, the brutal heat and traffic... I think the trade-off is that Austin has always kind of had that sense of possibility," Coffey told Austonia. "Of all the cities in Texas, it's been the most open to change and future possibilities and I don't think that's ever completely lost."
Austin's unique spirit has attracted like-minded small-town Texas kids looking for community. Gabriel Rodriguez, who grew up in the Rio Grande Valley, moved to Austin a few years ago after graduating from Texas State University and still hasn't become bored with the vibrant live music scene.
Gabriel Rodriguez, who has experience as a musician has found a home in Austin's live music scene and with Austin FC. (Gabriel Rodriguez)
"The big thing to me was the music," Rodriguez said. "That's what made me want to move to Austin in the first place... I grew up in a place that didn't have that."
Coffey, Rodriguez and many others have also found the Austin spirit with Austin FC, the city's first major league sports team, and its vibrant and community-minded fanbase.
Reason for being in love: Austin FC.
— Micky Ruñoz (@HighMs66) June 7, 2022
"Austin FC has come around and it's caused both old and new Austinite to kind of rally around something that like, yeah, this is our club, but it's also a statement about the kind of community we want to be," Coffey said.
For others, like Michelle Sanchez, Austin is home for many reasons—namely, a famed food scene, family and plenty of outdoor activities.
Proud, Austinite. I love Zilker (all the greenbelts), people for the most part are friendly, soccer, the food, and the fact that my family lives here. <3 I have thought about leaving once my contract is up.
— Michelle Sánchez (@MichelleS_tv) June 7, 2022
In a Reddit post that saw nearly 800 comments, dozens of users pointed to outdoor activities—from Barton Creek's Greenbelt swimming holes to paddle boarding on Lady Bird Lake and trails dotting the city's outskirts. Others said that despite its flaws, they've never found anywhere better.
"Austin doesn't do anything spectacularly, but does more things adequately than most anywhere I can think of," user boyyhowdy said.
However, for some, those "adequacies" still aren't enough to stay.
Over austin too. I resigned a (sub)lease for a super small studio that’s 40% lower than the average 1 bedroom in Austin. This will be my last year in Austin, so I’m staying to save money then move to a city with actual public transit and ditching my car.
— amanduh (taylor's version) (@hey_amanduhh) June 7, 2022
Rodriguez said he's thought of leaving too. But whenever he thinks too long about the city's flaws, he finds solace in Austin's live music venues, including his favorite, Moody Theater. Coffey, meanwhile, recommends longtime spots like Continental Club, the Broken Spoke or even South Congress for a quick "old Austin" fix.
And with housing prices showing signs of slowing down and longtime haunts like Austin's longest-standing grocery store opening back up, there still may be time to reignite a romance with what "Keeps Austin Weird."
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