Will Austin Benefit From the Tech Exodus?
It may be too late to keep Austin weird, but will it be downhill from here?
Photo: Jay Janner/Austin-American Statesman, all right reserved.
During the pandemic, the tech exodus from California accelerated. High-tech companies were relocating to less expensive locations to control business costs and, most importantly, to lure workers who prefer to live outside ultra-expensive Silicon Valley or San Francisco.
Arguably, the most notable of these destination cities is Austin, Texas, a quirky college town that has been booming for well over a decade. Specifically, there are 109 Austin-based companies and 45 companies outside of Texas either relocating or expanding in Austin. That’s a total of 154 companies.
Many of these companies aren’t scrappy little start-ups, either: Elon Musk is moving Tesla’s corporate headquarters to Austin. Apple is expanding its operations there. Samsung is building a chip production facility in Taylor, Texas, a small town 30 minutes away from Samsung’s existing footprint in Austin, Samsung Austin Semiconductor.
Moving to a town like Austin makes a lot of sense for these types of companies. Austin is a great city for foodies, music and film fanatics, even Formula 1 enthusiasts. It’s likely that the newly-relocated employees will find something they love about the lifestyle and culture it offers. Plus, Austin is home to as many quality universities as it is music festivals, giving these companies access to some of the best talent in the country.
But Austin’s population has grown 20% over the last decade, and it has been struggling to maintain its quality of life, much less its romanticized charm.
Austin: then and now
Austin had a little special something when I attended the University of Texas at Austin in the 90s. (Hook ’em! 🤘) At that time, a student could live for $225/mo rent with a roommate.
The city was filled with musicians, artists, intellectuals, and eccentrics of all kinds that kept Austin weird. It was the live music capital of the world—on any given night, dozens of local and touring bands were playing downtown venues for meager cover charges.
Austin was completely different from the west Texas town I grew up in, and I loved it. But I followed my employer. My job took me to NYC.
Seven years later, I returned to Austin. Living expenses had exploded. The city’s population growth outpaced its infrastructure, and commutes became a thing.
With that, the residents changed. Those musicians, artists, intellectuals, and eccentrics were forced out of the city. (If you are curious, read more about the repercussions from Austin’s economic deals during the dot-com bust in 1999, when it went downhill for the Austin music scene.)
Financing Austin’s next boom
Austin has been a boom and bust town. And it keeps booming.
Unfortunately, this tech exodus may create the same issues in Austin that tech companies created in San Francisco and Silicon Valley. This next wave of soaring housing costs, even longer commutes, and rising homelessness may be the tipping point for many locals to make a move.
And when big companies relocate, they get significant incentives. Austin alone has nine active incentive agreements totaling more than $112 million. For example, Apple should receive $8.6 million in tax rebates from the City of Austin.
Travis County is kicking in too. Tesla may be eligible for $60 million in property tax rebates from the county. In addition to Tesla, Travis county has active incentive agreements with Samsung Domain/Simon Properties, Fotowatio Renewable Ventures Solar Farm, East Blackland Solar Project, Apple, HID Global, and Charles Schwab.
And those incentives add up. For example, Samsung is negotiating a rebate of $805 million over 20 years between the city and county in exchange for creating at least 1,800 six-figure jobs.
What about housing?
The $805M investment in Samsung is just one deal is a big chunk for a city that is battling a surge in homelessness. And that is just for one deal…
Meanwhile, increasing housing costs have been driving more people onto Austin’s streets and its homeless problem to the surface. In 2019, a San Francisco-style public-camping ordinance took effect that allowed open public camping in nearly all public spaces. Tent cities began appearing in Austin— under highways, at bus stops, along strips of wooded areas beside roads.
Two years later, the homeless population doubled. Homelessness is a problem that the city could no longer ignore.
Public camping was banned in May of this year. Now, Austin must invest in long-term solutions for its homeless citizens.
This October, Austin city and Travis County leaders announced a $515 million plan to provide 3,000 housing units. The city and Travis County have pledged around $268 million taxpayer dollars, and they expect to find another $131 million from other public sources.
To bridge the funding gap, officials are asking taxpayers to make donations for the remaining $116 million. (If you want to contribute, donate to Austin Community Foundation’s Finding Home ATX fund.)
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Proceed with caution…
Back to Samsung, the company is already one of the area’s largest employers after building its first plant in Austin. However, the area around the plant has exploded. Major thoroughfares have become highways that back up for miles. Rolling hills are now dotted with strip malls and McMansions.
The new Samsung plant does mirror the Foxconn/Wisconsin deal, but who is ensuring that these incentive deals are a fair deal for taxpayers?
Let’s be honest. Samsung’s announcement comes months after the parole of Samsung’s chairman, Lee Jae-yong. He has been convicted twice of bribery in South Korea. He’s also been indicted for unfair trading and stock manipulation. Mr. Lee isn’t above greasing palms to get favorable terms.
Protect us, the taxpayers
Lawmakers should ensure that the payback is there for taxpayers in the local community. With 45 companies moving to Texas, central Texas will have to update its infrastructure to support its new neighbors.
The city may not be ready for the 1,000 people moving to Austin each day. Housing costs are exploding, yet again—homelessness has doubled in two years. Traffic is worse than ever, and there seems to be little political will to implement a meaningful public transportation plan.
Hopefully, infrastructure investments will be tied to big tech moves into cities like Austin. Investments in housing and infrastructure will help stabilize rents and shorten commutes. If not, shouldn’t the question shift from whether tech workers will follow their companies to whether Austin residents will embrace them?