My friends from California say the problem with Austin is “it’s surrounded by Texas.” While we all chuckle a bit at this jab at Texas, it is becoming more and more clear that it isn’t Austin’s only problem. We have a City Council that has taken up arms against businesses.

Austin has become the battleground for activist City Council members who are flexing their local oversight to an extreme. These extremists are causing harm to our city and our city’s reputation as the “place to be.”

Battle #1: The Simple Grocery Bag

For those that can remember shopping at a grocery store in the late 1970’s, there was only one type of grocery bag: paper. These bags were used by us school children all over the country to wrap textbooks so we could draw on them since our Pee Chee folders were already well-adorned.

Then one day we were told that too many paper bags were being used and they were killing the tree population. It seemed like it happened in an instant, but American grocers switched to the simple single-use plastic bag. Just like the paper bags of yesteryear, many of us reused them for other things as we stored these plastic bags in tubes in our kitchen for such purposes as bathroom trash can liners and post-Barton Springs swim bags to keep our wet swimsuits away from our dry clothing.

These bags were in use for many years until the Austin City Council banned single-use bags in 2013. Their reasoning sounded good at first. Fewer thin plastic bags = fewer problems in our city’s landfills. They instead required grocers to switch to thicker (4mil) multi-use plastic bags. The 4mil bags are tough and recommended to be reused 99 times before throwing them away.

At 25¢ per bag, we are paying for them in more than one way. One way is that we are paying about $1 more per grocery store run which increases our costs about 1% in “carrying fees.” Secondly, we are throwing away these thicker bags after one use at an unexpected and unprecedented rate.

A recent study shows just how bad the consequences are. Guess who is the prime culprit to the problem? The simple HEB bag.

The study’s conclusion is simple:

The Single Use Bag Ordinance has been successful in reducing the amount of single use plastic bags in the City of Austin. However, there have been unintended consequences such as an increase on reusable plastic bags in the recycling stream, increased cost to the consumer, and unforeseen costs to certain retailers.

If we only judge whether or not we got rid of the single-use bag — we did it! But lest we overlook the overall problems that it has created and the unintended consequences of thicker bags clogging up our landfills.

Adding insult to injury, the country’s largest hippie grocery store (Whole Foods Market based here in Austin) sends customers home with… paper bags.

Battle #2: Lyft and Uber

A couple years after the single-use bag issue, Austin City Council members set their sights on the Transportation Network Companies Lyft and Uber. The battleground: fingerprints used in TNC driver background checks.

The City Council asked Lyft and Uber to enhance the processes for on-boarding new drivers by requiring them to collect and review each driver’s fingerprints during the background check. Lyft and Uber said in statements their current processes did a great job. Lyft’s website reads:

Every driver is screened before they’re permitted to drive on our platform, starting with professional third-party background and DMV checks. The criminal background check includes national and county-level databases and records stretching back a minimum of 7 years for review of convictions in California, and longer in some other jurisdictions. Among other things, Lyft disqualifies driver applicants for violent crime, felony, sexual offense, or drug-related convictions that appear on a background check.

During the time from Lyft and Uber being in Austin, Travis County Sheriff Greg Hamilton equated a 23% drop in DWI-related crashes. Sheriff Hamilton wrote:

The number of DWI arrest fell 16-percent in 2014, DWI-related crashes fell even more citywide, decreasing by 23-percent last year [2015].

Note: [2015] was added by me to indicate the year to which he was referring.

The City Council kept fighting Lyft and Uber even after reading statements like the one above. One unintended consequence is that Lyft and Uber decided to leave Austin and that put the Austin City Council in direct fire from Austin TNC advocates. The second unintended consequence may be that Austin’s DWI-related crashes (and deaths) go back up. We all know it is too common. Here are the first few results from a quick Google search.

There are many unintended consequences with regards to the City Council’s actions against the TNCs and the on-demand companies as a whole. Investor Mike Maples said that Floodgate will no longer invest in on-demand companies in Austin. Mike went on to say:

It’s such a tragedy, especially in light of the efforts of so many well-meaning people in the City who do everything they can to advance the cause of startups. Investors hate uncertainty that is created by capricious government actions and it absolutely harms the ecosystem for new ideas and investment without a doubt.

Battleground #3: Short Term Rentals

In February 2016, Austin City Council went after AirBnB and HomeAway.com by banning type 2 short term rentals (STRs). These are homes that are not owner-occupied and host guests coming into Austin for 29 days or less. The City Council’s reaction was quite severe — they banned type 2 STRs. The measure was approved 9–2. This was seen outside of Austin as a sign that “we don’t want these here” displayed by the Austin City Council.

The number of STR-2's that were problematic for Austin’s 2MM residents were 4. Yes, you read that right: 4 out of more than 400 STR-2's. The problem occurs with less than 1% of the homes used as type 2 STRs.

Compare this with the estimated $234,000,000 these rentals have contributed to the local economy just in 2014 and the potential cost of the regulations for these 4 homes is $585,000 per home (based on averaging $234MM across 400 homes). The Austin City Council could have asked the Austin Police Department to visit these 4 homes when there are noise issues, but instead they opted to go after HomeAway.com and AirBnB.

HomeAway’s CEO Brian Sharples said:

You might ask what unintended consequence this move by the City Council may create? HomeAway may consider moving their 1,100+ Austin jobs out of the city to one that recognizes their business as an asset.

Battleground #4: Small Businesses

The City Council announced recently they will require Austin companies to eliminate the criminal background checks until after they make an offer to hire the person. It sparked a lot of controversy and chatter on Facebook and social media.

Mike Maples, Jr. in California summed up many a shared concern posting on Facebook:

The problem I have with stuff like this is that it seems like the knee-jerk reflex is to assume that small businesses (who I think will be impacted most) should endure the extra costs of administering and implementing these programs.

A business owner qualifies for this new regulation if they have fifteen or more employees. This sets a very low entry level for those companies just getting started and those that are smaller “mom-and-pop” businesses like local coffee shops.

While it may not initially appear very painful to small businesses, consider the number of available job candidates in Austin is at an all-time low. Consider it from a company looking at two candidates for the same position. The company must choose one candidate to provide an offer as they cannot hire both. It is reasonable to think that the company will decide to go with one candidate and notify the other of their decision. This is standard practice.

With the new regulations, it is only after they provide the offer that they are allowed to run a background check on the person. The background check takes 3 days to a week to come back. During that time the other candidate may accept a position with another company. It is only after that week of waiting for results that the company can learn of a felony or other criminal background information that may disqualify the candidate. When the other candidate is no longer available, the company must start over again with their search. This quickly gets expensive.

The Institute for Research on Labor and Employment at the University of California at Berkeley reports:

The average cost to replace an employee for all categories of workers is about $4,000. The IRLE notes that blue collar and manual workers can be replaced for an average cost of $2,000, while the average cost for managerial and professional employees may be as high as $7,000.

The unintended consequence here is that companies may decide it is too costly to hire people in Austin and look to other cities to bring up new offices. Some business owners have said to me in private that they may look to move their company outside of the Austin city limits so as not to draw the ire of the Austin City Council.

Conclusion

Austin has grown up from the sleepy little town it was when I first arrived almost twenty years ago into a vibrant and well-populated town filled with exciting businesses. People outside of Austin have been looking here to relocate staff to enjoy our way of life.

With the new battleground that is local regulation, Austin City Council may be signalling that we may indeed have reached full capacity and if companies want to innovate they may want to look elsewhere. While I agree we need to protect Austin, I believe we cannot look at the city that it once was to determine the city that it is or the city it will become.

The combined unintended consequences of these measures may be that innovative companies move to other cities outside of Austin or decide to not move here at all.

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