This past Thursday, the Austin City Council approved incentive packages for Dropbox and Websense to bring an estimated 640 additional jobs to Austin. The incentive packages were both approved by a 5-2 vote of the Council, with Counselwomen Katie Tovo and Laura Morrison voting against the proposed incentives.
If accepted, Websense, a San Diego company specializing in cyber security, will to relocate its headquarters to Austin, bringing 470 jobs, with an average annual salary of $82,000, to the City over the next 10 years . City officials expect to see an immediate impact, with 200 of those jobs to be created in the first year. In addition to bringing jobs to the area, Websense will agree to make capital investments of $10 million as part of its relocation activities. To induce Websense to make the move, the incentive package contains performance-based grants from the City of up to $438,000 over the next 10 years, paid annually if hiring criteria goals are met. In addition to incentives from the city, Websense will also be eligible to receive $4.5 million in funding from the state-operated Texas Enterprise Fund.
According to Jim Hagan, the CFO and a senior vice president of Websense, his company has been exploring relocation options with several different cities, and also considering remaining in San Diego. Although Hagan declined to name the other cities being considered, he stated “Austin is not the most low-cost city, so these incentives are important in us making a final decision.” Hagan also indicated that, if the deal is accepted, his firm plans to hire up to 90 percent of the newly-created positions locally. While it remains to be seen whether Websense will agree to the terms of the deal, documents filed with the city indicate that the company is in discussions to locate its offices in the Arboretum area, at 10900 Stonelake Blvd.
The terms offered to Dropbox, a San Francisco cloud-based storage company, are similar to those offered to Websense, albeit on a smaller scale. Dropbox already maintains a small office in downtown Austin, but as part of the deal, it would grow its operations significantly, making capital expenditures of $5.5 million, and bringing approximately 170 additional jobs, with an average annual salary of $59,000, to Austin over the next 10 years. The performance-based incentives offered to Dropbox are worth $244,500, paid annually over 10 years. Similar to to the Websense deal, Dropbox would also be eligible to receive $1.5 million from the Texas Enterprise Fund.
While the majority of the City Council and the Mayor view offering the incentive packages to the pair of technology firms as a “net positive” for the City of Austin, others, including Councilwomen Morrison and Tovo, have voiced concerns about doing so. In speaking against the proposed agreements, Morrison stated “I especially disagree that now is the time that we multiply the number of deals and we do more than ever, for me, it’s very important, and I have to ask this council and community what’s going to happen next month and the following months when staff brings to us No. 4, No. 5, No. 6 and No. 7, are we going to really continue to be doing all these deals.” In addition to concerns voiced on the Council, local residents, including Paul Robbins, have expressed their concerns that these types of deals are leaving certain residents behind, stating “Many of the financial problems Austinites are experiencing are related to uncontrolled growth that [ the City Council] is fueling even more with the incentives [the Council] is voting on today.” While it is evident that not all Austin residents share this sentiment, its clear that not all Austinites share the Council’s views on fostering economic growth for the City.
Offering economic incentives to companies can be controversial, and are not always a surefire way to promote responsible, sustainable growth, however, competition among cities to become attractive locations for companies makes the offering of these types of incentives a vital part of effective economic development. While it is yet to be seen as to whether the incentive packages offered to Websense and Dropbox will turn out to be beneficial to the City in the long run, the fact that Austin is being proactive in attracting businesses to the area is certainly encouraging to local business.
UPDATE: Dropbox has accepted the incentive package offered from Austin.