Apple Hits Pause as Austin Digs Deeper to Net Texas Plant

By David Mildenberg and Amanda J. Crawford - Mar 16, 2012 7:53 AM GMT+0700

Apple Inc. (AAPL) may spurn Austin and go to the Phoenix area to build an operations center that Texas Governor Rick Perry said last week would bring 3,600 jobs to his state’s capital, according to an Austin official.

Arizona’s biggest metropolitan area remains an alternative for the Cupertino, California-based maker of iPhones, iPads and Macintosh computers, Kevin Johns, Austin’s director of economic growth and redevelopment services, said after a City Council hearing on Apple’s expansion plans.

“There is no doubt we would be neck and neck and provide anything Austin could provide and then some,” Mesa Mayor Scott Smith said. He said his city, just east of Phoenix, was among Arizona sites being weighed for an Americas operations center.

Austin’s council is scheduled to vote March 22 on an $8.6 million incentive, adding to a $21 million state grant and whatever Travis County, which includes Austin, can offer to Apple, which is sitting on almost $100 billion in cash or equivalents. The company’s top tax and government affairs executives met with the council today to discuss the incentives.

“We’re just trying to respond to what seems to be a very fair evaluation of a couple of cities,” Johns said. “We’re offering $8.6 million in tax abatement and in return we expect to receive more than $14 million in benefits, so it is very good for them and very good for us.”

‘Looking Forward’

The company is “looking forward to building a new campus in Austin, which will more than double the size of our workforce there over the next decade,” according to a statement from Kristin Huguet, a spokeswoman. The company has about 3,500 workers in the Austin area today and won’t comment on competition between sites, she said.

Perry, a Republican who bowed out of the race for the 2012 presidential nomination in January, trumpeted “Apple’s commitment to create these new jobs in Texas” in a March 9 statement. The governor said the company’s $304 million investment was made “in exchange” for the state’s offer of $21 million from the Texas Enterprise Fund over 10 years.

The deal was “contingent upon the finalization of contracts and a local incentive agreement” with Austin and the county, according to the governor’s statement. The city’s incentives would be in the form of property tax relief over a period of 14 years, Johns said. He said Travis County is considering a tax abatement plan smaller than Austin’s.

Record Price

Apple, the world’s most valuable company with a market capitalization of $546 billion today, reached a record $600.01 a share before settling at $585.56 on Nasdaq at 5:20 p.m. New York time. The company has about 64,400 employees worldwide.

The company’s Austin area workers are mostly in sales, administrative and finance for the Americas region, Johns said.

Apple’s 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, according to an Austin report. The company would build a 200,000 square-foot structure, followed by an 800,000 square-foot expansion as market conditions warrant, Johns said.

“I can’t get into the incentives that were offered but the state of Arizona was interested in securing this facility,” said Matthew Benson, a spokesman for Governor Jan Brewer, a Republican. “It sounds like they’ve identified Austin as their site, which is not surprising since they have an existing site” there.

Rejected Site

A site in Phoenix was rejected by Apple because the company said it would be too difficult to get permission to build on the property, which is controlled by the state land department, said Dave Krietor, the deputy city manager. He said Mayor Greg Stanton learned of the interest in the location and made efforts to work with Apple about two weeks ago.

“It was too late,” Krietor said. “They already had selected Austin.”

The Texas Enterprise Fund has invested $443.4 million since its creation in 2003, generating more than 62,000 new jobs, Perry said in the March 9 statement. Arizona has a $25 million deal-closing fund established last year with the creation of the Arizona Commerce Authority.

To contact the reporter on this story: David Mildenberg in Austin, Texas at dmildenberg@bloomberg.net; Amanda J. Crawford in Phoenix at acrawford24@bloomberg.net.

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net