Apple seeks Texas leverage

The March 9 announcement by Gov. Rick Perry that Apple would expand its presence in Texas with a $304 million investment in Austin that will create more than 3,600 new jobs was greeted with predictable fanfare. A key part of the deal for the new campus that would more than double the size of Apple’s workforce in Texas over the next decade was an investment of $21 million in state taxpayer dollars over 10 years through the Texas Enterprise Fund (TEF).

Perry said the Apple deal “adds to the growing list of visionary high-tech companies that have found that Texas’ economic climate is a perfect fit for their future, thanks to our low taxes, reasonable and predictable regulations, fair legal system and skilled workforce.”

Perhaps overlooked in the hoopla was a single sentence near the end of the announcement from the governor’s office: “The agreement is contingent upon the finalization of contracts and a local incentive agreement with the City of Austin and Travis County.”

In the following week, however, it became apparent that this contingency was a key factor as Apple openly shopped the deal to Mesa, Ariz. The Austin City Council is expected to approve a waiver of real and personal property taxes on the new development worth at least $8.6 million over 10 years; Travis County is expected to offer additional incentives that may need to be substantial after Mesa Mayor Scott Smith said, “There is no doubt we would be neck and neck and provide anything Austin could provide and then some.”

There is already a significant Apple presence in Austin, with a customer support center that has grown to 3,500 employees over the past 20 years. A report from Kevin Johns, Austin’s director of economic growth and redevelopment services, indicated the Apple expansion would create 650 new full-time jobs with an average salary of $63,950 by the end of January 2015, with another 2,985 jobs added through 2021. The company would build a 200,000 square-foot structure, followed by an 800,000 square-foot expansion as needed.

Although the Austin project cannot be characterized as a done deal just yet, a March 15 report from Bloomberg suggests Apple will proceed with the Texas deal after it extracts maximum concessions from government entities here. The report suggested the Arizona bid faltered after Apple failed to obtain unspecified “tax policy assurances at the state level” and faced issues on its preferred site, which is controlled by the state land department.Apple is the world’s most valuable company with a market capitalization of $546 billion and a reported $100 billion in cash reserves and about 64,400 employees worldwide.

Business Journal editor James Shannon offers a weekly column of business news for readers of The Examiner. For more details, see the editions of the Business journal published monthly in Beaumont, Port Arthur and Greater Orange. Check out the blog at setxbiz.blogspot.com or e-mail james@beaumontbusinessjournal.com.