State of the City part 3: Economic & Business Climate

In part 3 of State of the City by Shelley Seale, we get a closer look at Austin’s business climate, and some of the challenges small business owners face (yes, including transportation!). Check back tomorrow for part four, where Shelley looks at real estate and the cost of living. To see part one, click here, or here for part two.

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With our city growing and changing around us, we take a closer look at the issues shaping Austin today.

Austin’s business climate is one of the best in the country, says Sean Garretson. As President of Pegasus Planning and Development, he leads a team of urban economists who design policy-related actions to solve problems in communities, revitalizing downtowns and commercial corridors.

“Austin finds itself at the top of many best-of lists, but I also know this first-hand from working in communities all over the country,” says Garretson. “Texas, in general, has very good tools to promote economic development (better than most states), and Austin’s Chamber of Commerce is one of the most sophisticated economic development organizations in the country. Our tax structure is good, we are highly educated and are still a good value proposition—especially for companies moving out of states like California or New York.”

He cites the University of Texas, the second-largest college in the country, along with other higher education institutions such as Texas State and St. Edward’s, as major role-players in generating some of the brightest talent in the nation. “In the ‘game’ of economic development, having the right business climate is crucial; but more importantly in today’s competitive environment, having a talented and young workforce is key. Austin has this in spades.”

Among big cities, Austin-Round Rock-San Marcos was ranked number three for job creation by the U.S. Bureau of Labor Statistics. Austin is pro-business and fiercely entrepreneurial, rated one of the top cities for start-ups in the country. Highly rated for small business friendliness by Thumbtack.com, 95 percent of businesses in Central Texas have fewer than 50 employees. However, some small business owners have found significant obstacles to overcome.

Kathy Setzer and George Reynolds, owners of the Heywood Hotel, experienced multiple and significant challenges, delays and red-tape hurdles during their three-year-plus process of renovating and opening the seven-room boutique hotel in East Austin.

“The current development process unfortunately (and, I think, unintentionally) favors big business,” says Setzer. “Even beyond the standard start-up costs, including very high property and rent costs, the length and complexity of the development process is an enormous and often unexpected barrier to entry for small businesses. When you are talking about a large corporation or a number of wealthy investors, the costs associated with that sort of timeline may be a drop in the bucket. But as independent entrepreneurs, we had to risk our entire livelihood. I think city officials recognize that there is a problem, and they are trying to make changes. But that progress is also, not surprisingly, slow.”

Garretson acknowledges that the growth of the city has given us our fair share of challenges. As a community planner, he says that transportation is also at the top of that list. “This has become our Achilles’ heel. I’ve heard site selectors say, ‘Yes, Austin is doing better than any other city in terms of job and population growth, but if it doesn’t deal with the transportation issue, it will see a major drop in growth.’”

Affordability and equity are other major issues that need to be addressed. Changing demographics have created inequities, further impacted by the increasing cost of living—particularly when it comes to housing. “This has pushed a lot of low- to medium-income families to the suburbs,” says Garretson. “Housing affordability must be better addressed.”

Originally published January 18th, 2015 in The Austinite Magazine.

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