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Austin tech scene braces for impact of Freescale’s sale

This article was written by Brian Gaar and appeared in the Austin American-Statesman on 03/03/15.

Austin tech scene braces for impact of Freescale’s sale

As the dust starts to settle from the announcement that Austin’s Freescale Semiconductor will be sold to a Dutch chipmaker, analysts say the city’s tech scene should be able to absorb any layoffs that might come with the loss of a corporate headquarters.

The news broke Sunday evening that Freescale is being acquired by NXP Semiconductors NV in a cash and stock merger worth more than $11 billion.

That could be a potentially big hit to Austin, as Freescale is one of the city’s biggest and most important technology companies. It employs about 5,000 in Central Texas and is a leading supplier of chips for the automotive and digital network industries. The company employs about 18,000 worldwide, with operations in more than 20 countries. Freescale’s stock surged on Monday following news of the planned deal, ending the day up 11.8 percent, or $4.25, to close at $40.36.

Freescale officials seemed to acknowledge that some layoffs could be forthcoming in a document filed with the U.S. Securities and Exchange Commission.

In a document titled “Freescale Employee Q&A,” the company wrote: “In any strategic combination, there will be synergies that result in some reductions. That will be the case here. While we are very early in the process, we expect the vast majority of Freescale’s team will have the opportunity to be integrated into the new company and have new opportunities for advancement and growth.”

However, economists and analysts interviewed by the American-Statesman agreed that, should layoffs happen, Austin’s tech scene is robust enough to absorb the hit.

“Losing the headquarters of a major technology company is unfortunate, but I don’t think it (will) negatively impact the Austin tech scene,” said analyst Patrick Moorhead of Moor Insights & Strategy.

Moorhead said he expects layoffs “based on the makeup of the acquisition,” but said the local job market will absorb them.

There are “always risks in losing a corporate headquarters,” said economist Brian Kelsey, principal of Austin-based Civic Analytics. “For example, most companies keep research and development activities close to home.

“Such investments in innovation can have important spillover effects for local economies,” he said. “So, if less R&D happens in Austin as a result of Freescale’s sale, then that is a potential downside.”

Estimates show that a net loss of one job in the semiconductor manufacturing industry in Austin takes another two jobs with it, Kelsey said, citing data from researcher EMSI.

“So, if there are significant layoffs at Freescale, and those workers can’t fill job openings in the industry elsewhere, then the local economy would feel it,” Kelsey said.

Austin’s semiconductor industry has shrunk in recent decades. It currently accounts for 10,000 to 15,000 jobs in Central Texas, down from about 30,000 two decades ago, according to Austin economist Angelos Angelou.

There’s also the question of Austin’s larger reputation as a tech hub. Freescale’s sale raises the question: Is losing the headquarters of a smaller semiconductor company offset by having a piece of a larger one? The new company will be the fourth-largest semiconductor company in the world, according to Freescale officials.

The presence of NXP in Austin could signal new opportunity, said Jon Roberts, principal of Austin economic development firm TIP Strategies.

“I tend towards an optimistic view,” Roberts said. “Whatever we lose in the short term is a function of necessary re-orientation in the industry. With the right positioning, NXP can be a real boon to Austin.”

Kelsey argued that Austin’s reputation as a tech sector— Dell Inc. notwithstanding — has never been based on the number of corporate headquarters located here.

The presence of corporate headquarters helps stimulate activity in the tech sector overall, he said, as many of Austin’s smaller firms were started by people who perhaps moved to Austin for jobs at larger companies like Dell or Freescale and then eventually decided to become entrepreneurs.

But ultimately, “Austin’s reputation is built more on our entrepreneurial economy, not large Fortune 500 companies,” Kelsey said.

GeoDesign: The Next Step in Data-Driven Decision-Making for Community Planning

This post was written by Nathan Brigmon, GIS Analyst at Civic Analytics.

In January, I attended the 2015 GeoDesign Summit in sunny Redlands, CA to give a “lightning talk” on the application of GeoDesign in urban planning. My topic was using interactive 3D models and scenario planning to measure the impact of urban rail in Austin, TX. I received a lot of great feedback, met really smart people, and learned a lot about GeoDesign and why we’ll be seeing more of it in the future. This post introduces GeoDesign, provides examples of how GeoDesign is being applied in planning, and offers a few lessons I learned from using GeoDesign in the planning process for urban rail in Austin.

GeoDesign is the intersection of people, geographic science, design, and information technologies. It represents a new way of thinking about how we should respond to today’s planning and design challenges. But like most bold, new ideas, GeoDesign is going through a bit of an existential crisis in terms of how we define the practice. Here is a commonly used framework, shown at the Summit, to help visualize where exactly GeoDesign can be found:

geodesign_1

Here are a few of my key takeaways from the GeoDesign Summit:

1. Statistics are critical. Noel Cressie, a rocket scientist from the University of Wollongong, Australia, stressed the need for GeoDesign practitioners to make more room for statistics, the science of uncertainty. Working with clients, our goal at Civic Analytics is to help people get from (a) uncertainty to (b) data to (c) information to (d) decision-making. In a world of uncertainty, we need statistics. Cressie was spot on.

2. Data collection can be fun. Ulf Mansson, a sustainable engineering and design specialist, showed us how GIS data is being used in Minecraft to explore how we think about our world. His team created a virtual Stockholm called “Blockholm” with real GIS data, which allowed kids and adults to plan, build, and change the infrastructure. This led to interesting conflicts and forced discussions about tradeoffs among the participants, illustrating how the gaming industry has great potential for exchanging ideas involving the real world.

3. Confront people with data. Joe Minicozzi, an architect with a mind for taxation economics, showed us incredible data on how Walmart stores usually return less value per acre than downtown structures, despite having 20 times more acreage. He pointed out how some U.S. cities are actually “going broke by design.” The key to fully understanding these issues and reaching consensus with stakeholders about how and why communities want to grow is to be able to visualize these facts, making it easier for most participants in a planning process to interpret data and reach their own conclusions. GeoDesign solves this problem.

4. Crowd source whenever possible. The finale of the Summit was a roundtable discussion with ESRI CEO Jack Dangermond on the purpose, reach, and ambitions of GeoDesign. Using web-based GIS, he wants to recruit users (in an openstreetmaps.org type effort) to map biometric imagery across the country and eventually the world, which in turn would be used to inform and strengthen National Park policy. The resulting dataset would then be available for any country interested in environmental policy.

The GeoDesign Summit revealed great promise for those hoping to inform decision-makers with good data, however, it was clear the field still has growing pains to get through. Which brings me back to Austin and urban rail.

geodesign_2

Working as a member of a University of Texas at Austin research team, I helped create an interactive 3D model of the proposed urban rail line, allowing anyone to view, comment, and explore the impacts of build and no-build scenarios.

GeoDesign allowed us to validate data in a third dimension–it gave us the ability to examine height, density, and form impacts resulting from land use decisions–which was a significant improvement over 2D maps.

geodesign_3

Because GeoDesign technology was not very well known at the time, we did not use or discuss it as much as we could have with internal and external stakeholders until the end of the project. One of GeoDesign’s most powerful features is helping people consume or interpret data in a way that appeals to planners and non-planners alike–it facilitates decision-making during a planning process, allowing for more informed and, hopefully, participatory debate about planning alternatives.

If I could do this process over again, I would encourage our planning team to better integrate 3D modeling earlier in the process. 3D models are more intuitive to non-planners and therefore promote transparency in a public decision-making process. That is why GeoDesign is so promising. The combination of modeling capability, interactivity, and feedback provides a platform for more collaborative, transparent, and data-driven decision-making. It’s a common language for designers, planners, programmers, city officials, and citizens.

As planners, we are challenged to make sense of ever larger and more unwieldy data sets–and derive meaning from them for technical and non-technical audiences. GeoDesign is an exciting advancement that holds a lot of potential for transforming how we design and conduct planning processes.

For more on how we’re using GeoDesign at Civic Analytics, please watch this short video.

Austin most economically segregated major metro area in U.S.

This article was written by Dan Zehr and appeared in the Austin American-Statesman on 02/24/15.

Report: Austin most economically segregated major metro area in U.S.

No large metro area in the country is more economically segregated than Austin, according to a new report that underscores growing concerns about the divides in Central Texas and the impact they could have on the region’s economic prosperity.

Previous research found high levels of income and education segregation in the Austin area, but a new study released Monday by the Martin Prosperity Institute found that the region also suffers from a distinct separation between workers in knowledge, service and working-class occupations.

The metro area’s elevated levels of income, education and occupational segregation combined make Austin the most economically segregated large metro and the third-most segregated among metros of all sizes, the study said.

“It is not just that the economic divide in America has grown wider,” the report said. “It’s that the rich and poor effectively occupy different worlds, even when they live in the same cities and metros.”

Denser and more populous metro areas tended to post higher rates of economic segregation, the authors said. Yet a series of studies by the Martin Prosperity Institute, an economic think tank based at the University of Toronto, suggest that a large creative class also tends to exacerbate those divides.

Other metro areas in Texas didn’t fare much better than Austin did: San Antonio ranked third, Houston fourth and Dallas seventh among the 10 most economically segregated large metros in the country, according to the report.

Among metro areas of all sizes, college towns tended to show greater levels of economic segregation. Tallahassee, Fla., home to Florida State University, ranked as the most economically segregated of all metro areas, regardless of size.

The results reinforced a growing body of research that has found high levels of income and educational segregation in Austin and other Texas metros – as well as the impact these separations could have on economic opportunity in these cities.

“These advantages are being compounded by where we live,” said Richard Florida, a director at the institute and co-author of the report.

Economic segregation has gained such an intense research focus in part because studies indicate that where someone lives or grows up can have significant influence on their life prospects. An impoverished neighborhood “almost reproduces disadvantage,” Florida said, while the benefits of an affluent neighborhood tend to compound the advantages of those born there.

A 2013 study by the Equality of Opportunity project found that metro areas with lower levels of racial and income segregation tend to see their young residents climb higher up the income ladder than less-integrated cities.

By one of that study’s key measures, Austin’s upward mobility rate trailed only three other Texas metro areas — Dallas, Killeen and Waco — and it lagged well behind the tech-savvy hubs in Silicon Valley, Seattle and Portland, Ore.

A separate study found that Austin posted the ninth-highest rate of income segregation among the country’s 100 largest metro areas — with divides between Austin’s low-income and affluent residents jumping during the 1990s, when the region’s tech economy and population boomed.

Yet this new study by the Martin Prosperity Institute found that Austin is now equally divided – and perhaps in some cases, even more divided – when viewed in terms of occupational class and educational attainment.

Residents in knowledge-based jobs, service-oriented jobs and working-class jobs — such as manufacturing — tend to live separately, the study found. Austin ranked among the 10 most-segregated metro areas by each of those three measures. Meanwhile, workers without a high school degree were more separated in Austin than in any other large metro area, according to the report.

Those divides have sparked a rising level of anxiety in low-income neighborhoods, Florida said. However, he said, because many of the most economically segregated metros have also posted some of the country’s most rapid economic growth rates in recent years, they have the resources to address the issues — if they choose to deploy them.

“The more I look at this, the more I’m coming to conclude that economic segregation and persistent poverty … are bigger problems than gentrification and housing affordability,” Florida said.

Inequality isn’t new to Austin or anywhere else, but questions of housing affordability in a booming city have made the issues more acute here, said economist Brian Kelsey, principal at Austin-based Civic Analytics.

“The gap hasn’t grown much wider in Austin in the last 15 years, as even the most highly educated have faced stagnant wages,” Kelsey said. “But the effect is cumulative in an environment of rising housing costs.”

Rising home prices and rents have created conditions where only well-educated and skilled workers can keep up, he said, especially in neighborhoods closest to the downtown core.

“While this isn’t unique to Austin, economic segregation is magnified here along race (and) ethnicity lines,” Kelsey said. “Our severe disparities in educational attainment according to race (and) ethnicity give our economic segregation in Austin a particularly pernicious quality.”


 

Apple’s Expansion in Austin

This article was written by Brian Gaar and appeared in the Austin American-Statesman on 02/22/15.

Apple’s Austin expansion moving swiftly, documents show

While Apple Inc. has been tight-lipped about its local presence, city and county documents obtained by the American-Statesman paint a picture of a company that’s moving full speed ahead with its expansion plans in Austin.

The technology giant has already created more than 900 full-time jobs in its Austin operation as of the end of 2013, the most recent year for which data is available, according to a report the company filed with Travis County. That’s on top of 3,100 local positions the company agreed to retain. As of the end of 2013, Apple reported 4,091 full-time employees in Austin.

What’s more, in a report last month to the city of Austin, Apple said it is about 67 percent completed with its Americas Operations Center, which it has valued at more than $348 million.

Taken in total, the documents suggest that Apple is outpacing its agreed-upon performance metrics, for which it is scheduled to receive millions in incentive payments from the city, county and state.

“All in all, I think the Apple deal has been good for Austin, especially since Apple is delivering ahead of schedule,” said tech industry analyst Patrick Moorhead of Moor Insights & Strategy.

In 2012, the Austin City Council approved $8.6 million in tax breaks for Apple in exchange for the Cupertino, Calif.-based company establishing its Americas Operations Center here. Apple also is in line for $21 million in state incentives for the project, along with between $5 million and $6 million from Travis County.

Apple, in turn, agreed to create more than 3,600 new full-time jobs in Austin while retaining at least 3,100 existing full-time jobs. The company also agreed to spend $282 million on new buildings and equipment in Austin over the next decade.

In its agreement with the city, Apple agreed to create 300 new full-time jobs in the first “employment year” of the contract. That year will be the first full calendar year after the issuance of the final certificate of occupancy for phase one of its Americas Operation Center. That hasn’t been issued yet, officials said.

From the city’s perspective, Apple is not required to submit a progress report until 2016, said Rodney Gonzales, deputy director of the city’s economic development department. The company would not receive city payments in the form of property tax rebates until after 2016, he said. Apple has so far received a $5.25 million incentives payment from the Texas Enterprise Fund, state records show.

For Apple as a whole, these are good times. Last month, the company reported another strong quarter thanks to its new plus-size iPhones, which helped the company smash sales records for the holiday season.

Apple said that it sold 74.5 million iPhones during the three months that ended Dec. 31, beating analysts’ expectations for the latest models of Apple’s most popular gadget, introduced in September. The surge in iPhone sales drove the company’s total revenue to $74.6 billion, up 30 percent from a year earlier.

Apple’s local project is planned to be built in two phases in Northwest Austin, near its current customer support center.

While the company agreed to spend $282 million on new buildings and equipment in Austin over the next decade, the total value of the project is estimated at more than $348 million, according to documents it provided to the city.

The company’s local investment is expected to include seven new office buildings with a combined 1 million or more square feet of space. Those buildings will house an estimated 3,600 new workers needed to support Apple’s continued growth. The average wage for those new jobs will be $54,000 a year in the first year of the expansion and will expand to $73,500 in the 10th year, according to the incentives agreement.

Apple’s local incentive deals were controversial, as critics argued that the technology giant didn’t need additional millions in incentives from taxpayer dollars.

However, Apple’s presence in Austin benefits the regional economy, said Brian Kelsey, principal of Civic Analytics, an Austin-based economic development firm.

“Given the company’s performance over the last few years, Apple shouldn’t have any trouble meeting their obligations under the tax incentive agreement with the city, so, from that perspective, it’s probably a ‘good’ deal,” he said. “Assuming the city’s cost-benefit analysis is reasonably accurate, Austin’s tax base is better off today with Apple’s larger presence here than it otherwise would have been.”

Incentives, he said, are the price cities pay for economic development projects on the scale of Apple. Kelsey called them a “calculated gamble.”

“Of course, you’re never likely to know what would have happened if the city of Austin refused to offer tax incentives,” Kelsey said. “Personally, I think economic development would be much improved if we didn’t have to give up revenue in the form of tax abatement that would go to fund schools, and especially perhaps career and technical education that would go a long way toward training future workers for tech firms.”

Others said that Apple’s presence will help further bolster Austin’s credentials as a tech hub.

“The Apple brand has the ability to attract other companies to Austin as well, because they trust that Apple has done their due diligence and chose Austin,” Moorhead said.

Jon Roberts, principal of Austin economic development firm TIP Strategies, said Apple’s presence helps create an ecosystem of innovative tech companies, which helps retain talent.

“We shouldn’t be playing this game,” said Roberts, referring to incentives. “But, given the fact that we are, are we using them in right way? And I’d say we’re using them as well as anyone is using them.”

Additional material from the Associated Press.

 

America Needs The Texas Economy To Keep On Rolling

This article was written by Joel Kotkin and appeared on Forbes.com on 02/11/15.

America Needs The Texas Economy To Keep On Rolling

In the last decade, Texas emerged as America’s new land of opportunity — if you will, America’s America. Since the start of the recession, the Lone Star State has been responsible for the majority of employment growth in the country. Between November  2007 and November 2014, the United States gained  a net 2.1 million jobs, with 1.2 million alone in Texas.

Yet with the recent steep drop in oil prices, the Texas economy faces extreme headwinds that could even spark something of a downturn. A repeat of the 1980s oil bust isn’t likely, says Comerica Bank economist Robert Dye, but he expects much slower growth, particularly for formerly red-hot Houston, an easing of home prices and, likely, a slowdown of in-migration.

Some blue state commentators might view Texas’ prospective decline as good news. Some, like Paul Krugman, have spent years arguing that the state’s success has little to do with its much-touted business-friendly climate of light regulation and low taxes, but rather, simply mass in-migration by people seeking cheaper housing. Schadenfreude is palpable in the writings of progressive journalists like the Los Angeles Times’ Michael Hiltzik, whorecently crowed that falling energy prices may finally “snuff out” the detested “Texas miracle.”

Such attitudes are short-sighted. It is unlikely that the American economy can sustain a healthy rate of growth without the kind of production-based strength that has powered Texas, as well as Ohio, North Dakota and Louisiana. De-industrializing states like California or New York may enjoy asset bubbles that benefit the wealthy and generate “knowledge workers” jobs for the well-educated (nationwide, professional and business services employment rose by 196,000 from October 2007 through October 2014), but they cannot do much to provide opportunities for the majority of the population.

By their nature, industries like manufacturing, energy, and housing have been primary creators of opportunities for the middle and working classes. Up until now, energy  has been a consistent job-gainer since the recession, adding  199,000 positions from October 2007 through October 2014, says Dan Hamilton, an economist at California Lutheran University. Manufacturing has not recovered all the jobs lost in the recession, but last year it added 170,000 new positions through October. Construction, another sector that was hard-hit in the recession, grew by 213,000 jobs last year through October. The recovery of these industries has been critical to reducing unemployment and bringing the first glimmer of hope to many, particularly in the long suffering Great Lakes.

Reducing the price of gas will not change the structure of the long-stagnant economies of the coastal states; job growth rates in these places have been meager for decades. Lower oil prices may help many families pay their bills in the short run. But there’s also pain in low prices for a country that was rapidly becoming an energy superpower, largely due to the efforts of Texans.

Already the decline in the energy economy, which supports almost 1.3 million manufacturing jobs, is hurting manufacturers of steel, construction materials and drilling equipment, such as Caterpillar. Separately, the strengthening of the dollar promises harder times ahead for exporters  in the industrial sector, and greater price competition from abroad, amid weakening overseas demand. Factory activity is slowing, though key indicators like the ISM PMI are still signaling that output is expanding.

Right now in Texas, of course, the pain is mounting in the energy sector. Growth seems certain to slow in places such as Houston, which Comerica’s Dye says is “ground zero in the down-draft.” Also vulnerable will be San Antonio, the major beneficiary of the nearby Eagle Ford shale. The impacts may be worst in West Texas oil patch towns like Midland, where energy is essentially the economy.

Yet there remain reasons for optimism. Cheaper energy prices will be a boon for the petrochemical and refining industries, which are thick on the ground around Houston and other parts of the Gulf Coast. The Houston area is not seeing anything like the madcap office and housing construction that occurred during the oil boom of the 1980s. Between 1982 and 1986 the metro area added 71 million square feet of office space; including what is now being built, the area has added just 28 million square feet since 2010. Compared to the 1980s, the residential market is also relatively tight, with relatively little speculative building.

The local and state economies have also become far more diversified. Houston is now the nation’s largest export hub. The city also is home to the Texas Medical Center, often described as the world’s largest. Dallas has become a major corporate hub and Austin is developing into a serious rival to Northern California’s tech sector.

Texas needs to increase this diversification given that oil prices could remain low for quite a while, and even drop further after their recent recovery.

This is not to deny that the state is facing hard times. Energy accounts for411,372 jobs in Texas, about 3.2% of the statewide total, according to figures from Austin economist Brian Kelsey quoted in the Austin American-Statesman. If oil and gas industry earnings in Texas fall 20%, Kelsey estimates the state could lose half of those jobs and $13.5 billion in total earnings.

Low prices also could also devastate the state budget, which is heavily reliant on energy industry revenues. A reduction in state spending could havedamaging consequences in a place that has tended to prefer low taxes to investing in critical infrastructure, and is already struggling to accommodate break-neck growth. The only good news here is that slower population growth might mitigate some of the turndown in spending, if it indeed occurs.

But in my mind, the biggest asset of Texas is Texans. Having spent a great deal a time there, the contrasts with my adopted home state of California are remarkable. No businessperson I spoke to in Houston or Dallas is even remotely contemplating a move elsewhere; Houstonians often brag about how they survived the ‘80s bust, wearing those hard times as a badge of honor.

To be sure, Texans can be obnoxiously arrogant about their state, and have a peculiar talent for a kind of braggadocio that drives other Americans a bit crazy. But they are also our greatest regional asset, the one big state where America remains America, if only more so.

State of Human Capital in Austin 2015: Growth, Prosperity, & Inequality

Now that inequality appears to be politically palatable enough for polite conversation at the national level–despite certain notable people saying so for years–we’re left with the question of what to do about it.

Austin is struggling to find a path forward, as well, even though the debate here occurs primarily under the headline of “affordability.” But we’re really talking about the same core issue: inclusive participation in economic development.

But first, some data. Here are a few slides from an upcoming talk on the state of human capital in Austin. Click on the images to make them larger.

Austin’s economic development scorecard since 2000:

austin_scorecard

Including the astounding growth of Austin’s well-educated population:

austin_winning_war_for_talent

Which has done very little to raise average wages lately:

austin_wage_growth_flat

But transformed Austin’s economy in the 1990s, as average earnings for bachelor’s+ workers nearly doubled:

austin_wage_inequality_education

Giving rise to the “Two Austins” narrative that defined many city council races last year and, in my view at least, is the single biggest threat to Austin’s economic development:

austin_wage_inequality_race

Now, what to do about it. Seems to me there are four related and very complicated questions that we need to wrestle with:

1. Austin is adding bachelor’s+ people at a much faster pace than jobs are being created for them. What is the ripple effect on the labor market and how is underemployment impacting affordability?

2. Being The Human Capital cuts both ways. It’s the foundation of Austin’s economic development success. But is our success in attracting and retaining highly educated and skilled workers undermining the need for a sense of urgency and more investment in human capital development to ensure inclusive participation?

3. Austin is among the U.S. leaders in growth of so-called “middle-wage” jobs, which the National Employment Law Project and others have identified as jobs that pay in the range of $13.84 to $21.13 per hour. However, there’s a popular narrative that I hear regularly that suggests Austin is creating a lot of high-wage jobs and plenty of low-wage jobs but middle-wage jobs are lagging. Both of these things can’t be true. Either the research on middle-wage jobs in Austin is wrong, or there is something else going on that is shaping perceptions of Austin’s labor market in a way that does not conform with reality. Perhaps being among the U.S. leaders in middle-wage jobs is not enough–i.e. even at middle-wages people are struggling to keep up with rising costs of living in Austin? Or, even though we’re among the U.S. leaders according to growth rates, perhaps the middle-wage share of total employment has declined in a way that’s forced middle-wage workers to compete for lower-wage jobs.

We should sort this out and secondary data alone isn’t going to be sufficient.

And perhaps the thorniest question of them all:

4. What is the proper role for economic development policy–and the public sector in general–in addressing the inequality that’s fueling concerns about affordability, gentrification, and so many other challenges facing Austin?

What, if anything, can a city or a region do about it?

I understand we’re in the middle of transforming city government in Austin. These questions would be a good place for an economic development committee to start.

Report: Austin’s advanced-industry growth fastest in U.S. since 1980

This article was written by Dan Zehr and appeared in the Austin American-Statesman on 02/03/15.

Report: Austin’s advanced-industry growth fastest in U.S. since 1980

The rapid growth of high-tech and other advanced industries transformed many of the country’s metro-area economies over the past three decades, but no metro changed as quickly as Austin, according to a new study from the Brookings Institution.

Since 1980, when Central Texas featured a staid economy based primarily on higher education and state government, the area’s high-tech and other research-intensive industries have boomed, adding jobs and expanding their output at rates faster than any of the country’s 100 largest metro areas, according to the Brookings Institution study of 50 advanced industries.

Austin maintained its momentum in recent years as well, the report said, with the area’s 2010-2013 job and output growth rates both ranking among the top 10 nationally.

“Austin wasn’t built primarily on firm attraction. That’s what’s interesting,” said Mark Muro, a policy director and fellow at the organization’s Metropolitan Policy Program.

Instead, a leading research university, a strong workforce, an entrepreneurial ecosystem and an attractive quality of life helped drive the area’s rapid transformation, Muro said.

“Austin strikes me as a product of some good fundamentals, some luck and then synergies,” he said. “You’re now seeing the interrelationships of manufacturing, energy and services activities.”

As for 2013, local employers in Brookings’ 50 advanced industries provided more than 106,000 jobs – roughly 12 percent of all the jobs in the metro area, the report said. Those workers brought in average earnings of $103,950, almost double the average earnings in all industries.

Those workers helped produce $24.1 billion of output in 2013, the report said, accounting for almost a quarter of the regional economy and good for the eighth-highest share in the country.

The current figures were consistent with previous analyses of the Central Texas tech economy. In a 2013 study for the Austin Technology Council, local economic development consultant Brian Kelsey found that the area’s tech-specific industries accounted for roughly 21 percent of the region’s economic output and 9 percent of its job base.

At the time, Kelsey said Austin had maintained a strong advantage in its existing tech industries while starting to develop new areas of expertise.

The Brookings report underscored that point. Muro and his colleagues looked at location quotients—essentially, the concentration of industry activity in an area versus the country as a whole —and found that Austin had a very high measure in 11 different industries.

“The depth and breadth of the Austin advanced industries economy has become really compelling,” Muro said, “and it includes manufacturing industries, which I think nationally is less known.”

Such diversity could help shield Austin from the disruptions that can sweep through advanced industries, he said. However, the report urged both the public and private sector to heighten its investments in science, technology, engineering and math (STEM) education to insure a sufficient pool of talent to fill these high- and middle-skill jobs – an issue consistently raised by many of the area’s tech companies and the Greater Austin Chamber of Commerce.

In its most recent monthly analysis of online job openings, the chamber again found that many of the 10 most common openings required computer and programming skills. Six of the 10 occupations in highest demand fell into the advanced industries studied by the Brookings report.

“These are fast industries with a lot of disruptive trends in them,” Muro said. “You can be disrupted, but that likely won’t happen if you maintain the good … innovation system inputs (and) a STEM workforce. Clearly, training and skills of enough people, and the right people with the right skills, is a challenge everywhere.”

Abbott: Time to kill state’s Emerging Technology Fund

This article was written by Laylan Copelin, Brian Gaar, and Lori Hawkins and appeared in the Austin American-Statesman on 01/30/15.

Abbott: Time to kill state’s Emerging Technology Fund

Moving to stop using state money to fund startup businesses, Gov. Greg Abbott on Thursday proposed killing the Texas Emerging Technology Fund and using part of the fund’s unspent balance to bolster research at Texas universities.

Abbott’s proposal — which would need approval from the Legislature — comes after an audit that criticized some of the technology fund’s operations and some high-profile bankruptcies of startups it had helped. That combination has soured state leaders on using taxpayers’ dollars to underwrite risky ventures.

The plan would create the Governor’s University Research Initiative, which would provide matching funds to help Texas institutions of higher education recruit prestigious, nationally recognized researchers to their faculties — which would both elevate Texas’ public universities and serve as catalysts for economic development. A portion of the Emerging Technology Fund is already used to recruit top researchers and faculty to universities.

The other half of the tech fund’s balances would go to the Texas Enterprise Fund, a deal-closing fund used to encourage companies to relocate or expand in Texas.

Abbott’s office says there is slightly more than $100 million available in the fund.

While acknowledging the Emerging Technology Fund’s impact on the state’s — and Austin’s — high-tech sectors, industry experts and economists said that with venture capital once again flowing to early-stage companies, it makes sense to reconsider how the state supports research and innovation.

“The ETF generated a lot of controversy, and there was a lot of politics involved,” said Bernard Weinstein, an economist at Southern Methodist University’s Cox School of Business. “On the surface, this proposal sounds like a sensible policy change. I’m always pleased to see more resources going into universities, particularly in research. Hopefully this eventually leads to technological change, inventions and commercial applications.”

Austin economist Brian Kelsey, principal of economic development firm Civic Analytics, called the move unfortunate, but said it’s not surprising “given Abbott’s skepticism about the state’s role in economic development under Perry.”

“Even critics of incentives in general viewed the ETF in a more positive light than some of the other tools, especially the Enterprise Fund,” Kelsey said. “Not every firm wants the state as an equity partner, but overall the ETF has been a valuable tool for supporting innovation-based economic development in Austin.”

State Sen. Troy Fraser, R-Horseshoe Bay, said he has agreed to sponsor legislation to make Abbott’s proposal a reality.

“The criticism was that we were investing in some startups without knowing what we were getting,” said Fraser, whose district includes part of Travis County. “We tried to remove some of the risk.”

Jenny LaCoste-Caputo, a University of Texas System spokeswoman, said, “We appreciate Gov. Abbott’s recognition of the value of the state helping universities recruit faculty to advance learning, research and the state’s economy, and look forward to working with him and the Legislature as his proposal works its way through the process.”

The Legislature created the Emerging Technology Fund in 2005 at former Gov. Rick Perry’s request. The fund was intended to expand and diversify the Texas economy by assisting startups and encouraging commercialization of university research.

As of September, the fund had awarded more than $442 million to companies, state universities, foundations and research consortia, according to the fund’s most recent report from the governor’s office.

Of the 144 companies receiving taxpayer investments, nine have been purchased or had other successful exits from the tech program while 18 have ceased operations, often failing to repay the state, according to the Emerging Technology Fund’s 2013 annual report. The jury is out on the others. Nationally, about 40 percent of venture-backed companies fail, 40 percent return moderate amounts of capital and 20 percent or fewer produce high returns, according to the National Venture Capital Association.

Isaac Barchas, Austin Technology Incubator executive director, said the Emerging Technology Fund played a crucial role in providing seed stage money to Texas startups following the financial downturn that began in 2008.

“It was a nuclear winter in 2009, and the only funder actually up and running was the Emerging Technology Fund,” Barchas said. “The fact that we had that was extraordinarily important because it helped a bunch of promising companies that wouldn’t have otherwise been funded.”

Austin entrepreneur Brendan Coffey said his company, HeatGenie, wouldn’t have gotten off the ground without the $250,000 it received from the fund in 2008.

The company, which received a total of $1 million, has developed technology that allows prepared foods to be heated in their containers without using a stove or microwave. HeatGenie is now partnering with two major brands to commercialize its product.

“We didn’t have a prototype or a model, so we needed someone who could buy into the concept,” Coffey said. “ETF had a good system for analyzing the business opportunity and the technology. We wouldn’t be here without that seed funding.”

Barchas said that while Abbott’s plan would change how the state involves itself in technology, he’s encouraged that the proposal would continue to invest millions in university research.

“The state of Texas is effectively renewing its commitment to innovation. We’re just going to bet on innovation in a slightly different way,” Barchas said. “No other state can afford to do this — not California, not New York, Michigan or Illinois. And that gives us a big advantage.”