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Why is Apple Getting Tax Incentives?
Austin Won Apple Without Competition
‘The Arizona Republic’ Reported
by Ken Martin
© The Austin Bulldog 2012
Posted Friday, March 16, 2012 5:46pm
Updated Friday, March 16, 2012 6:13pm
 The Arizona Republic, that state’s largest newspaper, yesterday reported that Phoenix was never in the running to attract the Apple Inc. facility for which Texas has committed tax incentives, and both Austin and Travis County are considering doing likewise.
Governor Rick Perry is offering Apple $21 million in incentives over 10 years and the City of Austin is considering sweetening the deal with $8.6 million, according to the Austin American-Statesman. Travis County is also considering incentives.
Those incentives were based on the premise that Apple was considering Phoenix and Austin.
However, The Arizona Republic’s story published yesterday reported Phoenix “never had a chance” because the proposed site was on state land and “state trust land did not excite them” (Apple), so there was no Phoenix site reasonably in contention.”
“According to (Phoenix) Deputy City Manager David Krietor, who oversees the city’s economic development efforts, Phoenix did not even know Apple was considering the city until it was too late,” the Republic reported. When he found out, he hustled to clear obstacles for a site, to no avail. “The state Commerce Authority said we had been crossed off the list,” Krietor said, “but we didn’t even know we were on the list. In retrospect, we had no chance to make our case.”
The Statesman has reported that Apple plans to spend $304 million on land, buildings, and equipment for a 38-acre campus to be built in two phases at West Parmer Lane and Delcour Drive in northwest Austin. The new campus would create some 3,600 jobs at an average annual wage of nearly $64,000, 93 percent of which would be local hires, Mayor Lee Leffingwell told the Statesman.
Tax incentives are designed to woo companies when there is genuine competition for a business that promises to bring investment and jobs.
So why is Apple in line for millions of dollars in tax incentives?
Two prominent Austin men are asking that question and warning the mayor and county judge not to waste tax money to woo a company already committed to coming here.
Ed Wendler Jr., president of E.W. Development Co., and attorney Bill Aleshire of Riggs Aleshire and Ray PC, e-mailed Mayor Leffingwell and Travis County Judge Sam Biscoe this afternoon about the report that there really is no competition for the Apple expansion in Austin.
“Neither the Travis County Commissioners Court nor the City Council has voted in a public meeting to extend any tax abatements to Apple,” the statement said. “But, if The Republic (Arizona) news report is correct, Apple has already decided to come here. Granting a tax break to a company after they’ve chosen to come here is not an inducement for economic development, it’s an unlawful (and stupid) gift of public funds. With Mayor Leffingwell’s leadership, that’s exactly what Austin did with the F1 race as well, a race New Jersey got for free.”
Efforts to reach Mayor Leffingwell for comment late today were unsuccessful. The mayor’s policy director, Amy Everhart, said, “Our understanding is they (Phoenix) are in competition. You’ll have to talk to economic development because the mayor would not be aware of the details.”
Melissa Alvarado, media contact for Economic Growth and Redevelopment Services, initially said the department director and economic development manager were not available for comment. Alvarado later e-mailed a statement saying:
“We can’t confirm or deny the reports. We have no way to verify the information because we’re not privy to the specifics of what the company is considering as its options, but what we can say is that the company informed us from the beginning that Arizona and other locations (not disclosed) were under consideration, which was the impetus for the proposal.
“The city did a practical analysis as it would do with any economic development proposal and the return on the investment for this project would be over $14 million. Our main focus is the merit of the project and bringing those jobs to Austin.”
“This tax kickback game is one you should stop playing,” said Wendler and Aleshire’s message to the mayor and county judge. “It is unaffordable, unnecessary, and a betrayal to current residents who suffer instead of gain from the net results. Because Austin throws tax breaks around like candy from a parade float, it’s become almost malpractice for company representatives not to play this game as well. And it’s a risk-free bluff the companies can play because they are never required to swear an oath that without the tax kickback, the company will go elsewhere.
“Sell Austin, if you must, for its unique quality, but don’t sell us out,” the statement said.
Travis County Judge Sam Biscoe also was not available for comment.
To read The Arizona Republic story, click here.
To read the Statesman editorial, click here.
Disclosure: Bill Aleshire is attorney of record for two open-records lawsuits against the City of Austin, both of which are still pending.
This report was made possible by contributions to The Austin Bulldog, which operates as a 501(c)(3) nonprofit to provide investigative reporting in the public interest. You can help sustain this kind of reporting by making a tax-deductible contribution. |
Comments
Great article as usual!
Last Thursday, when the city's Economic Department presented a summary of the Apple incentive package to the Austin City Council, there were several obvious issues with the proposal: 1) The new Apple construction will be located in the Round Rock ISD, not Austin ISD, 2) The city's Return on Investment calculation (ROI) that showed a $14.6 M return was based on incomplete information because the economic benefit model does not take into consideration the physical location of the facility which will be far north Austin, 3) over 1,000 of the jobs created are non-permanent, temporary contract jobs with no benefits, and most importantly, 4) it is a high probability that they would have built here anyway given they are adding to an existing site.
Thanks for keeping us informed, Ken.
I moved here in 1984. No one paid me to come. I fell in love very quickly, because of the soul of Austin. I built a small business here and put myself through college. A few years later, paper in hand, I sold that business and went to work for an international conglomerate, then moved into consulting for the Fortune 500, a small employee-owned firm. Leaving that, I went to build another small business of my own, now focusing more on empowering our small, local non-profits and businesses. I bought a retail business. It didn't work out as I'd desired. Bummer. Throughout all of this, nobody paid me to employ the folks I employed and/or contracted with.
Austinites have invested in Austin. There is no reason to give away our hard-earned tax dollars to anyone else so a politician can grease their resume. Politicians may measure progress by "creating jobs", but they are the only ones. And, as we learned, for every action, there is an opposite but equal reaction. This shows plainly in the Walmart effect.
I also agree that Apple could be a much better world citizen. They sell shiny objects to Americans made with hazardous materials by child labor in other countries in working conditions we'd never allow here. They all do, though, to be fair. Primarily because of the myth of lower prices and not dealing with things out of sight and out of mind.
But there is certainly no reason to subsidize that business model. As my free-market friends like to tell me, the market will tell us. There is no reason for the government to subsidize any business. The only reason might be for us to gain something out of it. We won't gain jobs. They will only be slid around.
If we create the town we want and stick to enhancing the core soul of Austin, the growth will occur as it has for decades - even without any incentive. And I assure you, we can live without anybody that says we must pay them to come here. We have reached the critical mass of a city. If we invest in ourselves, the others will only want to live here more. If we invest in outsiders, then only those coming here will want to live here more, if only for the amount of time it takes to dig the gold out of the hills before moving on to the next mountain to exploit. There is a reason that Bain Capital was successful, but it doesn't take a brainiac to understand why.
We need some business people on this Council, who understand an income statement, beyond just Ms. Cole. These jokers are a bunch of dunces who can't even see when they are being bluffed. Austin should be able to do better than this.
The New York Times report today says Apple is spending $10 billion on a stock buy back. http://nyti.ms/xa2t5r “...using up some of the company’s cash hoard of nearly $100 billion and likely attract a new group of investors to buy the stock.”
One analyst quoted in the article estimated that by the end of 2013, Apple will have a total cash balance of $180 billion.
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