Am I the only one who is less than excited about last week’s announcement that the City and County will hand out more than $750,000 in tax breaks to GM Financial Co.? In return, the auto loan financing arm of General Motors Co. will employ at least 490 people at a new $24.5 million facility it will build in Westover Hills, home to most of the city’s call and data centers.
GM Financial will receive a $406,148 tax abatement from Bexar County when Commissioners Court meets Tuesday, and it received a $339,594 abatement from City Council last week. The state is giving the Fort Worth-based company a $2.5 million grant from its controversial Texas Enterprise Fund, which an independent audit found led to tens of millions of dollars in squandered tax dollars by former Gov. Rick Perry, who often used the fund with little oversight to reward political supporters rather than grow the state’s economy.
Stories in the Rivard Report, the Express-News, and elsewhere state that the GM Financial jobs will pay an average of nearly $50,000 a year, according to local officials. Such broad generalities mask some less appealing numbers.
City and county officials will argue that over 10 years more tax dollars will flow into than out of local budgets, but that misses the point. We are spending our time, energy, and money building a low-performance economy. I’m actually surprised these jobs aren’t going to Mexico. Perhaps that’s how Fort Worth-based GM Financial sees us: San Antonio, a city with all the benefits and none of the risks of Mexico.
The City’s tax abatement rules require all jobs to pay at least $11.66 per hour. That’s not a living wage, it’s a working poor wage. Why would any Texas city incentivize a company based elsewhere in the state to come here and hire people at such low wages and offer to forgive half of their taxes in return?
The same rules also state that at least 70% of the jobs must pay $14.96 hourly. Is there something wrong with $15 an hour? Can’t we at least give workers that extra four cents of dignity without worrying over what business owners think about hitting the $15 an hour level? Salaries for leadership and management positions, of course, raise the average wage and leave the impression that all 490 people will be well paid. It’s a false impression.
The truth is most of the new workers will not earn a salary at all. They will earn an hourly wage answering phones and processing auto loan paper. A Forth Worth-based company is coming here because San Antonio offers the things they can’t get at home: cheap land, low-wage labor, and attractive city incentives.
Why not offer GM Financial a far better deal to move their entire company here? Instead we get the back office work and the smart jobs stay in Dallas-Fort Worth.
Is that the SA Tomorrow city Mayor Ivy Taylor and this City Council, that Judge Nelson Wolf and this Commissioners Court, want to build? If so, it’s a blueprint for perpetuating the status quo. It’s a deal with the devil rather than an investment in the future.
The presence of even a subsidiary of a major company such as General Motors is a major boon for the City, Mario Hernandez, the SAEDF president who has announced his retirement next June, said last week.
“The name itself, General Motors, attracts attention of companies all over the world whenever they make an announcement,” Hernandez said. “Having 500 full-time positions, good-paying jobs, will also have a significant economic impact.”
Will it? I found very little attention paid to the news beyond some auto industry websites, which repeated GM Financial’s claim that one appealing aspect of San Antonio is its location in the Central Time Zone, an odd note of appeal for a company located five hours up Interstate-35 in the very same time zone.
With an annual economic growth rate of 3.6% and an unemployment rate of 3.8%, San Antonio can afford to be pickier. Welcome the new jobs, but limit tax breaks to companies that locate in the urban core, where there is abundant land. Let’s not incentivize more sprawl.
Job creation is robust enough that San Antonio employers must import talent to fill skilled labor positions. We simply do not produce enough educated and skilled workers at home. That’s why we should shift our focus and our incentive dollars to appeal to skilled labor and startups. Once more smart, educated workers move here, the jobs will follow.
There is an interesting debate going on in San Antonio right now about the future of the San Antonio Economic Development Foundation, and no less than 22 other entities in the city and county engaged in some form of economic development. Yes, you read that right: 22 different organizations. When I asked for an organization chart showing the 22, no one even had a master list of names. Still, when a private-public committee reconvened recently to report to a City Council subcommittee on economic development, it recommended a stay-the-course approach.
That struck me as polite affirmation of Hernandez’s many years of good service, but it also would perpetuate a Byzantine system that should be streamlined with a new generation of recruiter at the helm. San Antonio’s leadership should hit the pause button and engage in some serious introspection before hiring Hernandez’s replacement.
The SAEDF and its many affiliate partners presently operate without a clear vision or obvious strategy, and with far too little transparency for citizens to participate until after deals like the GM Financial are cut and done.
I am struck by two exchanges I had last week with two prominent and highly successful business leaders in our city. One I will call a conservative builder, the other a tech sector executive and investor. Both are feeling bearish about San Antonio.
The conservative business owner works with municipal governments throughout Texas. While he loves his hometown and his business is thriving, he told me, “You go to Dallas, Houston or Austin and they are different cities with very different economies and ways of doing business. I come home and feel I live in a second or third class city.”
The tech sector leader cited recent unsuccessful efforts to recruit an out-of-state cloud computing service to San Antonio. Incentives were not a factor. Talented programmers were the issue, and San Antonio simply does not have enough to meet the needs of growing companies. Austin does.
“Companies choose Austin because that’s where the talent is, even though everything is much more expensive,” the frustrated tech leader said. “No incentive could change that reality.”
That’s why any honest evaluation of San Antonio’s economic development strategies going forward in the post-Mario Hernandez era ought to start with a conversation about education strategies. If we had shifted education strategies and investment 20 years ago, we would be producing far more college-bound STEM students and not be in the situation we are in today.
Tomorrow I’ll write about elevating our education investment, a strategy that would require the City, County, San Antonio Independent School District, UTSA and the private sector all to work together on a single integrated plan.
At the same time we should put elected leaders, the SAEDF board and representatives from the other 22 economic development entities in the same room and ask one question to start the conversation: Does anyone believe the current system really works?
*Top Image: The San Antonio skyline as the sun rises. Photo by Scott Ball.