Four years ago the Circle C Ranch community just southwest of this city was a failed dream: 4,000 acres of mostly empty land saddled with more than $115 million in debt.
The few residents who had purchased homes in Circle C were terrified no one else would move in, leaving them to repay more than $35 million in municipal bonds sold to finance the bankrupt development’s sewer and water system.
Susan Hoover, spokeswoman for the Organization of Unified Circle C Homeowners, or OUCCH, told local and national news media about the residents’ plight.
Fast-forward to 1995. Hoover’s still a spokeswoman-but now she works for Circle C, Austin’s top-selling subdivision with more than 300 home starts last year.
How’s business?
“Fabulous,” Hoover says, noting that the development enjoyed 14 sales in one recent weekend.
A similar turnaround has swept the entire Austin area, once the symbol of the Southwest’s real estate bust.
High-tech companies from California’s Silicon Valley such as Apple Computer Co. and Advanced Micro Devices Inc. have moved in, helping create 27,600 jobs in the past year, a 6 percent increase in payrolls.
The new jobs not only are helping filling developments such as Circle C but moving the Austin economy well beyond its traditional employment base of state government and the University of Texas.
The magnitude of Austin’s comeback can be seen in its assessed property value, which plunged 28 percent to $16.9 billion in 1992 from a peak of $23.5 billion in 1987. That led Moody’s Investors Service to cut Austin’s debt rating to A1 from AA1.
Since then, Austin’s tax base has recovered 24 percent to $21 billion. Moody’s restored its AA1 debt rating in September 1993.
More important, experts say, property values have a foundation in reality this time, compared with the pumped-up numbers reported by real estate developers in the 1980s.
“Austin is a strong economy, basically because of the diversity,” said Anita Russell, who analyzes Texas municipal bonds for Moody’s. “I don’t see at this point any negatives.”
Downtown Austin, once a sea of empty skyscrapers with an occupancy rate as low as 65 percent, has recovered to 81 percent occupancy. Apartment hunters, meanwhile, confront a 97 percent occupancy rate even though more than 14,000 units have been added to the market since 1992.
“In the year 2000 we’re going to look back and say, `Wow, did we ever sprawl,’ ” said Ryan Robinson, a senior planner and demographer with the city of Austin. “We’re going to see 3 to 4 percent population growth a year for the next seven to eight years.”
Austin’s resurgence is putting pressure on its political establishment. Long seen as a haven for left-leaning environmentalists-one of the city’s swankiest boulevards is named after farm-labor activist Cesar Chavez-Austin’s government is fighting intense demands to loosen its building restrictions to foster even faster growth.
Not everyone welcomes the changes coming to the Austin area. Commissioners in neighboring Williamson County, for example, last year voted to deny tax breaks to Apple Computer for an $80 million customer service center after they discovered the company provided health benefits to same-sex partners. The commissioners relented after then-Gov. Ann Richards intervened.
Officials in Round Rock, 15 miles north of Austin, are considering a 21 percent property tax increase to pay off $105 million in school construction bonds.
School enrollment has jumped 34 percent since 1991 due to new employers such as a 1,500-employee Dell Computer Corp. telemarketing center that opened last year.
Critics also wonder whether Austin is entering a self-destructive bidding war to get and retain high-tech employers. One proposal aimed at semiconductor manufacturers would give companies that invest in new plant and equipment a 40 percent tax break for 10 years. The proposal would require an investment of at least $250,000 for each job created.
Some observers see signs Austin may be getting ahead of itself the way it did a decade ago.
City development officials reported at least 17 apartment complexes with more than 4,500 units under construction at the end of 1994, most in northwest Austin, where Dell Computer and a cluster of other high-tech manufacturers are located.
“We’re not overbuilt with 4,500 to 5,000 units, but if we built 7,000 units, then next year we would have overbuilt,” said Charles Heimsath of Capitol Market Research, a real estate research firm.
“Rents are starting to level off because of all the new product coming on line,” added Robert Suggs, a Capitol Markets researcher.
Real estate investment trusts, a major source of capital in the past, have been buying fewer apartment complexes lately, said Pepper Jones, president of Jones and Jones Co., an Austin commercial real estate brokerage.
“REITs were fueling the construction market, but now their capital supply is drying up so we might see some slowing down in multi-family construction,” Jones said.
Still, Pepper said, eight to 10 REITs are active in the Austin market, including Security Capital Pacific Trust, an El Paso, Texas, company building a 500-unit complex on the southwest side, where Motorola Inc. is rapidly expanding.
Fueling Robinson’s confidence is the continuing boom in semiconductor demand, which has led Motorola, Advanced Micro Devices, International Business Machines Corp. and others to build plants and research centers in Austin.
Schaumburg, Ill.-based Motorola was one of the first to establish a presence in Austin.
The company moved there in the mid-1970s to take advantage of cheap real estate and the pool of computer scientists graduating from the University of Texas.
Motorola now is the city’s largest private employer, with more than 9,500 employees and a projected payroll of more than 12,000 by the turn of the century.
“Our biggest problem is keeping up with demand,” said Gary Daniels, general manager of Motorola’s microcontroller division, which added 779 assembly line workers last year.
