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Austin City Council approves $1M incentive deal with semiconductor giant NXP

Daniel Nenni

Staff member

The Austin City Council voted unanimously Thursday to approve an incentive deal worth just over a million dollars with semiconductor giant NXP.

NXP, which has 2,600 employees in Austin, said in city documents that it would use the Chapter 380 incentive agreement to help fund a $290.8 million effort dubbed Project Live Oak, which was outlined in documents posted on a city webpage,

The company plans to use the funding to modernize the manufacturing lines at the company's two Central Texas locations, an Oak Hill property on West William Cannon Drive that employs 1,600 people and a facility on Ed Bluestein Boulevard in East Austin that employs 1,062. NXP said in the documents filed with the city that it would retain 53 jobs between the two facilities that would otherwise be cut if upgrades were not made to its semiconductor manufacturing equipment.

Under the deal, NXP is eligible for as much as $1.026 million in tax reimbursements over a five-year period, contingent on the company meeting certain requirements, according to city documents.

This reimbursement includes a base award of a 35% reimbursement, worth an estimated $552,640. The company could see up to a 65% reimbursement in total if it meets certain criteria, including sustainable business practices, hiring economically disadvantaged employees, workforce training and needs-based child care funding.

NXP Semiconductor says it will use a little over $1 million in an incentive deal to modernize the manufacturing lines at the company's two existing Austin locations.

Last week, the City Council also held a public hearing on the incentive deal. During that meeting, Mayor Kirk Watson mentioned that the deal had been revised to include child care funding after negotiations between the company and the council. Both the original deal and the revised deal were eligible for the same percentage of reimbursements.

As part of the agreement, NXP will pay into a citywide child care assistance fund. During the meeting, City Council members confirmed the fund would be focused on the areas around NXP’s plant. The agreement also dictates that half of the fund each year will be dedicated to child care by qualified service providers for NXP employees specifically.

Both before and after the vote, Watson praised NXP for "making child care a priority" and said it was valued in the community. He also said the company is setting a good example for Chapter 380 agreements, which have not been used by the city in several years.

Council Member Paige Ellis praised the company before the vote, saying she has toured the NXP facility in her district and said the company is professional, a team player and a partner to the community.

"They've been a good community partner for a long time, and I look forward to continued partnerships," Ellis said. "I'm glad that this particular proposal is not just about District 8; it's about District 1 too and really hiring our local talent and making sure that we're giving people good opportunities to build a life here."

As semiconductor giant NXP pursued an incentive package through the city of Austin, the city and NXP revised the deal to include incentives related to child care.

NXP is also pursuing funding through federal legislation, known as the CHIPS and Science Act, which was passed last year. The legislation set aside billions of dollars to encourage investment in the U.S. semiconductor industry. To qualify for funding through the CHIPS Act, companies are required to have local or state-level funding matches, such as a 380 agreement.

City documents estimated NXP could see as much as $14.54 million in CHIPS money, for a total of $15.57 million in city and federal funding.

NXP has said local and state deals will play an important role in the company's decision on whether to expand in Austin or elsewhere.

The Chapter 380 deal also comes after NXP last year pursued a separate type of incentive agreement under the now-expired Chapter 313program, which the Austin Independent School District rejected. Under that proposal, NXP sought a deal that would have saved the company $140.5 million in school taxes over 10 years. The company also proposed a larger project that would have added a new semiconductor wafer plant, more buildings and 350 jobs at its Ed Bluestein facility.

Vote followed multiple public hearings

The vote follows a lengthy public comment period that included both online and in-person comments.

On Thursday, during a public hearing before the vote, the company saw support from economic development organizations, the Austin Regional Manufacturing Association and Opportunity Austin, as well as community groups the company has partnered with, the Girl Scouts of Central Texas, and Keep Austin Beautiful, a nonprofit focused on caring for the local environment.

Brian Cassidy, an Opportunity Austin board member, said during the meeting that without incentive support the project will not be a reality, and he said the project brings the opportunity to keep and expand well-paying jobs and community benefits.

"That's an opportunity we should not pass on," Cassidy said. "An investment like this will help Austin and Central Texas continue to drive the global technology hub and will help the United States regain its leadership in global semiconductor manufacturing while expanding available jobs to Austin and Central Texas residents."

About a dozen NXP employees also spoke in support of the deal at Thursday's hearing.

Council Member Natasha Harper Madison said she was glad to see child care incorporated into the deal and to hear from so many NXP employees.

"It says something how many people walked up here and said their lives were changed by employment with this organization, and how long they've been working with this organization and indicate something," she said.

Two community groups had raised questions about the deal at last week's meeting. One of the groups, Central Texas Interfaith, sent the mayor and City Council a letter raising questions related to wages, benefits, local hiring, number of jobs, compliance and career advancement.

At least five members of the group testified at this week's meeting and called for the vote to be postponed until questions could be answered. During Thursday's meeting, council members did ask NXP representatives some of the group's questions before the vote.

Outside of the two City Council public hearings, the incentive deal also had an online public comment period that drew 35 people who wrote in support, including many comments that used a template provided by the Austin Chamber of Commerce and Opportunity Austin. Both groups supported the project and had encouraged stakeholders to comment in support.

Ten people also commented against the project during the online comment period, citing a variety of concerns that included potential strain on the electrical grid, water usage and opposition to incentive deals.

Questions about water quality were also raised last week by Bill Bunch, a member of the Austin-based environmental group Save Our Springs Alliance, who said the group would like to see upgrades to water quality runoff controls at NXP's Oak Hill facility, which is older than current water quality standards. This week, Bunch spoke again, saying the company is planning to reduce water usage.

I believe this type of financial support has been going on for a while but now it is front page news?
At least the article made me laugh. I was so incredulous I even checked the article's facts, thinking they couldn't be discussing only a million dollars. But it's apparently true, corroborated by multiple sources. Unbelievable that this was worth a press announcement. I suspect NXP spent some significant fraction of that tax break on paperwork, finance time, and legal counsel time.
The point is probably to confirm good will from the city council. From the article, it gave a whole bunch of people, even the Girl Guides, a chance to say nice things about NXP.

There were probably other incentives to NXP in the past, maybe even continuing as elements in this years budget.
"NXP, which has 2,600 employees in Austin, said in city documents that it would use the Chapter 380 incentive agreement to help fund a $290.8 million effort dubbed Project Live Oak, which was outlined in documents posted on a city webpage,"

$1,026,332 (Austin City Subsidy) / $290.8 million
= 0.3529%

I'm wondering what are those NXP executives thinking about.
If I were an Austin taxpayer I'd be very annoyed at the waste of a million dollars, even if I was an NXP employee. If the city council wants to tell NXP they love them, throw their execs a nice dinner and make flowery speeches, and save over $950K.