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Regional Archives — The Altamont Enterprise, May 25, 2006

Study says: Tech Valley should learn from Austin

By Matt Cook

ALBANY — A new study urges area business leaders to learn from the experience of another state capital.

With a case study of the 1990’s tech boom in Austin, Texas, the University at Albany’s Nonprofit Executive Roundtable presents lessons for Capital Region planners to consider as the Tech Valley movement grows.

Among the group’s findings was that, in Austin, "The boom was not positive for all." Economic and racial gaps continued to widen during and after the boom, the report says. In planning for Austin’s boom, the report says, the non-profit sector was left out, along with the low-income people it serves.

"We would have been celebrating, as we did many times, the number of IPOs [Initial Public Offerings], the number of start-ups, the amount of venture capital invested in Austin, the number of people we were attracting," one Austin businessman is quoted in the report. "What we weren’t making enough note of is the...breakdown of the unemployment rate by demographic group. We kept looking at the median income and the median income kept going up. We weren’t looking at where it was not going up."

Roundtable members think things could go differently for Tech Valley, if the region is prepared. Non-profit workers could help immensely, the report’s authors say.

"Our feeling is that the non-profit sector is particularly sensitive to unmet community needs," said Judith Saidel, executive director of the Center for Women in Government and Civil Society at the University at Albany. Saidel, a roundtable founder, co-wrote the report with Teri Bordenave, president and chief executive officer of Girls Incorporated of the Greater Capital Region. "If consequences of a boom period are not positive for all residents, it would be non-profits who are the most likely to notice it and call others to it and suggest ways to mitigate it."

Austin’s contours

The roundtable chose Austin for the study largely because, Saidel said, "The kind of contours of Austin’s economy before the boom were similar to ours." Tech Valley leaders have often cited the city as an example of what Albany could become.

Austin, in central Texas, grew rapidly in the 1990’s. In 10 years, the metropolitan area’s population went from 781,572 to 1,249,763. During the same period, the Albany-Schenectady-Troy area’s population grew by only about 1,000.

Home to the giant computer company, Dell, and major offices of IBM, Motorola, and Applied Materials, Austin rode the wave of the late-last-century tech boom. According to the roundtable’s study, growth in Austin was guided by the "technopolis wheel" envisioned by the late Dr. George Kozmetsky, the former dean of the University of Texas, Austin’s College of Business Administration.

The spokes of Kozmetsky’s wheel are made up of academic, business, and government organizations. Notably absent is the non-profit sector.

"It was apparent from our interviews that the nonprofit sector was not involved in planning for community consequences of the technology-based economic surge," the report says.

While the per-capita income in the Austin area shot up 29 percent—the highest in the United States during the 1990’s—low-skilled and under-educated workers, unemployable in tech jobs, benefited little. Making things worse, the report says, the constant stream of new people to the area caused the cost of living to rise exponentially, making Austin one of the most expensive cities in Texas.

Austin’s deteriorating minority neighborhoods, black and Hispanic, "remained largely unchanged," the report says. Between 1996 and ’98, while the total number of home loans increased by 12 percent, more than 40 percent of black and Hispanic loan applications were denied each year, "a number twice as high as whites," the report says.

Notes a European Union study cited in the report, "Austin has the highest racial income inequality of all comparable regions in the U.S."

According to the report, some employers were unaware of the untapped labor force in Austin, instead hiring from outside the area. On Austin’s impoverished east side, the unemployment rate reached 14 percent.

"My profits were being limited because we hadn’t focused on a sustainable community," said one chief financial officer interviewed by the roundtable. "There was a lot more labor, it just wasn’t properly educated or prepared."

The non-profit sector is not completely blameless, according to Saidel; it suffered from a lack of organization.

"They didn’t even think of themselves as a sector," she said.

Philanthropic opportunities were missed, Saidel said. According to the report, when the Austin boom was at its peak, non-profit groups focused on attracting the newly wealthy multi-million dollar donors over the steadier pool of smaller level donors. When the tech bubble burst nationwide in the earlier years of this decade, the flow of money from the millionaires dried up and, Saidel said, "The traditional donor base had drifted."

"Ahead of the curve"

While Tech Valley has many similarities to pre-boom Austin, Saidel said, it’s "ahead of the curve" on some of the issues the report identified.

Groups like the roundtable itself and the Tech Valley Nonprofit Business Council, a joint venture of the Schenectady Chamber of Commerce and the Albany-Colonie Regional Chamber of Commerce, have helped include non-profit organizations in the planning process. Austin had no such thing, Saidel said.

"These two things are really promising," she said.

Also, Saidel said, "There already has been interest in the region in workforce development. For example, we have Tech Valley High School."

The purpose of the case study of Austin, Saidel said, is to keep Tech Valley ahead of the curve. She’s encouraged that it has met with interest from local leaders in business and politics.

Some Austin residents, reflecting on how they handled the boom, feel the same way.

"What is [going to] happen in Albany is unique to Albany, has to be planned by people in Albany, and it comes from people in Albany getting out, learning and studying and talking about that," one Austin civic activist is quoted as saying in the report. "You’re on the right track."

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