Posted on 10/31/2003 11:32:21 AM PST by Willie Green
For education and discussion only. Not for commercial use.
The deal was all but done. Until it suddenly went as cold as a day-old cup of coffee.
After months of negotiations, Bethesda, Md.-based HMS Host Corp. struck an agreement to replace the struggling business center at Austin-Bergstrom International Airport with a Starbucks.
The business center had generated about $5,000 a year for the City of Austin's coffers. The Starbucks deal was for $64,000 annually for eight years. Starbucks even agreed to stray from its corporate standards by designing the shop with a noticeable Austin ambiance.
Current airport tenants had first been offered the prime space. But when none showed interest, bidding was thrown open and Starbucks was the only vendor able to make it work.
HMS Host has helped a variety of large corporate chains find space in nearly every major U.S. airport, and the only thing holding Starbucks back from casting its neon-green glow on the shiny floor at ABIA was a nod from the Austin City Council.
With airport officials wholeheartedly supportive of the deal, the council vote was supposed to be just a formality. Representatives of HMS Host and Houston-based Bush Entertainment Inc. -- which would operate the coffee shop after HMS Host built it -- didn't even bother attending the council meeting.
But council members agreed unanimously that Austin's image -- at least the one at the airport -- couldn't be bought and shouldn't be diluted by a national name. The business center was given until the end of October to find a local company to take over the lease.
For many, it's the tale of the Austin business landscape. Unlike other airports, Austin's is packed with local venues, not big brands. The absence of large corporate chains has garnered ABIA widespread praise for keeping Austin Austin.
But is the venerable desire to keep Austin as it is hindering the city's ability to mature economically? Or is it preserving a lifestyle preferred by residents and leveling the playing field for local businesses?
City leaders say they are revamping economic development and streamlining processes to make city government more business friendly. But on the heels of spurning companies such as Wal-Mart, Lowe's, Borders Books and others for various reasons, many in the business community say the city council is sending mixed signals and inadvertently piling onto the perception that Austin City Hall is a formidable place to strike a reasonable deal.
"Austin is starting to go down a very slippery slope," says local real estate attorney Terry Irion, who helps large chains such as Lowe's go through the regulatory process. "It's gotten to where the denials [of proposed projects] aren't being very coherent or accompanied with articulated reasons. It's not just about the environment anymore."
Mike Blizzard, a spokesman for the No Aquifer Big Box Coalition -- a local group that coalesced 20 community groups that have opposed big box developments over the aquifer -- agrees it isn't just about the environment.
Blizzard points to the recent denial of a Wal-Mart in Southwest Austin. He says keeping the nation's leading retailer out of that neighborhood eliminated potential traffic woes, kept nearby residents happy, helped protect the environment and local businesses and "sparked a larger citywide or regionwide debate about the broader social and economic impact of Wal-Mart in particular."
Blizzard says the community won.
The ripple effect
Notorious for being a tough place to do business, pro-growth advocates say Austin should be more amenable when Big Business knocks at the door. They say recent cases of city officials helping discourage corporate giants only further tarnishes Austin's image in the corporate world.
City leaders say the recent cases where corporate chains were shunned don't conflict with the city's new economic development goals. Council member Brewster McCracken, who is decidedly pro-business, says Austin's primary goal now is to add high-paying, skilled jobs to the economy. He says the proposals negated by the council recently -- while they would provide the city with some much needed tax dollars -- don't bring the city any closer to reaching that goal.
But McCracken says he is concerned that the headline-grabbing disputes -- some of which portray council members as meddling deal-killers -- will catch the attention of employers Austin wants to attract.
"I am concerned about the negative ripple effect," McCracken says. "I don't want Austin to be perceived as an erratic and unpredictable place to do business. That's why we need to get away from these [high-profile disputes]."
The ripple effect McCracken fears has damaged Austin's economic prospects in the past, says Mac Holladay, founder and CEO of Market Street Services Inc. in Atlanta. After speaking to employers and site selection firms across the country earlier this year as part of a chamber-commissioned study, Holladay says he discovered that many simply don't even consider Austin as a place to expand and relocate because of its reputation as being a tough place to turn dirt.
Making it hard for businesses to relocate or expand here offers the perception that Austin doesn't want Big Business, experts say. Such a perception even kept Austin out of the running for the Toyota plant planned for San Antonio, says Holladay, who adds that Toyota representatives didn't think Austin would be interested in having the $800 million manufacturing plant.
"The city government, its policies, and the implementation of those policies, plus the lack of [economic development] policies have held Austin back," Holladay says.
"But the City Council and the city manager ... are working in the right direction [by overhauling economic development issues]. Things are changing."
Hindrance or helpful?
Things are changing, but even some council members say that change isn't coming quick enough. In recent months, the council has been consumed with the Big Box debate -- where and if retailers of tens of thousands of contiguous square feet using volume buying to outprice smaller local retailers should be allowed.
City leaders pushing the economic development initiatives say they have had less time than expected to focus on the reforms intended to make Austin more business friendly because of that singular debate.
Council members will continue to be sidetracked by the big box debate until at least December. Some on the council are proposing to ban big box stores in Southwest Austin over the Edwards Aquifer. More moderate council members say they will counter that by proposing new design rules especially for big box stores.
Some say these public fights with large corporations are a distraction and potentially detrimental to economic development efforts, but others believe the clashes are essential and ultimately beneficial because they preserve the quality of life that has brought Austin success.
Even if these high-profile struggles hinder Austin's business-friendly evolution, Blizzard of the no big box group says it will be economically beneficial in the long run.
"Study after study has shown that a healthy environment is a major reason for Austin's economic success," Blizzard says.
Still, members of the business community are worried about unintended consequences.
"A very major concern is the message this sends at a time when we need to be focusing on the economy and job creation," says Tim Taylor, a real estate lawyer and president of the Real Estate Council of Austin. "Best case, it's an unfortunate distraction from what our real focus should be."
Email COLIN POPE at (cpope@bizjournals.com).
Email Mary Alice Kaspar at (makaspar@bizjournals.com).
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