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Would Samsung really pick tiny Taylor over Austin for new $17 billion factory?

Bob Sechler
Austin American-Statesman
A mural in downtown Taylor touts the small town's charms. Samsung has said it's considering Taylor as a site for a planned $17 billion computer chip factory.

Samsung has had a big presence in Austin for nearly 25 years, bought 258 undeveloped acres next to its corporate campus less than 12 months ago and obtained regulatory approval in January to reroute a nearby road — called Samsung Boulevard — that positions it to accommodate a possible major expansion in the city.

All of that begs the question: If the South Korea-based maker of computer chips opts to build a new $17 billion factory in Texas, would it really locate it in Taylor, a small town about 25 miles away, instead of in Austin?

Samsung has raised that possibility in applications to taxing entities in both locations that seek hundreds of millions of dollars in tax breaks over the next decade, saying a willingness to provide publicly funded incentives will be key to its deliberations over where to put the new state-of-the-art chip fabrication plant.

But not everyone is sold on the notion that a potential choice of Taylor — a community of about 18,000 in eastern Williamson County — is more than just a negotiating ploy by Samsung to try to obtain the most advantageous incentive deal possible for a desired expansion in Austin, where the company currently has its largest operation outside South Korea. 

More:Experts say Central Texas still a strong option for potential $17 B Samsung factory

More:Austin tax breaks sought by Samsung among biggest ever

Austin is home to Samsung's only U.S. manufacturing facility, and the company also has a research and development center in the city. About 10,000 people work at its main Austin operations, according to the company, of which about 3,000 are direct Samsung employees.

The company has said sites in Arizona and New York also are under consideration for the new factory.

“The idea that Samsung is even raising (Taylor as a possibility) I think is kind of to squeeze a tiny bit more” in incentives out of the various taxing entities where its current Austin campus is located, said Roger Kay, president of Endpoint Technologies Associates, which is based near Boston and follows Samsung.

Samsung "is trying to get the last ounce of negotiating leverage by raising Taylor as sort of a straw location," Kay said.

Taylor, a town of about 18,000 in eastern Williamson County, is in the running to land a planned state-of-the-art Samsung chip factory. Some observers view Taylor as ripe for growth, given its location on the edge of the Austin metro area.

The new Samsung factory and its estimated 1,800 high-tech jobs clearly would be transformational for Taylor — in addition to marking a huge upset win for it over Austin.

But discounting Taylor's chances entirely might be a mistake.

City of Taylor's appeal compared to Austin

The community boasts a number of attributes that potentially make it ripe for growth, including an address within the trendy Austin metro area but with lower land costs and the lighter traffic that come with being on the outskirts of the sprawl, as well as proximity to Round Rock, Pflugerville and other fast-growing suburbs.

Taylor — which counts the operations center of the Electric Reliability Council of Texas, the manager of the state's power grid, as a top employer — has been increasing in population, albeit at a pace well below the boomtown levels of Austin and some other surrounding communities.

"It does not surprise me (that Samsung has named Taylor as a possible site for its factory), because there is some very nice land around" for development, said Floyd Zuehlke Jr., president of Floyd's Glass Co., a long-time Taylor business. “And I don’t think they will have a hard time drawing people from Round Rock, Hutto and Pflugerville to work there."

Zuehlke, who employs about 160 people, said he likes Taylor's relatively central location between Austin, Waco and College Station, which are all places where his company does business in the construction sector.

Floyd Zuehlke Jr., president of Floyd's Glass Co. in Taylor, isn't surprised that Samsung is considering building a big semiconductor fabrication plant in the area, given the availability of land there and Taylor's proximity to fast-growing Austin suburbs such as Round Rock and Pflugerville.

As the Austin metro area continues to expand, he said it's inevitable that more development is on the way for Taylor — even though he is among those who consider it possible in the case of Samsung that the city is merely a bargaining chip.

"Big companies negotiate and play hardball. It could just be (that Samsung is saying to Austin), 'Hey, we have got options, and if we don’t get what we want we will go over here,'" Zuehlke said. "I would think there's a great chance of that."

Potential tax breaks for Samsung in Texas

According to documents that Samsung filed with the Texas comptroller's office in January, the company is seeking taxpayer-funded incentives — valued at an estimated $1 billion to $1.8 billion combined — from the Manor Independent School District, Travis County and the city of Austin to build its new chip fabrication plant near its existing Austin campus.

If it gets those tax breaks, the overall incentive package would rank among the 20 most expensive nationwide in at least 45 years, according to Good Jobs First, a Washington-based nonprofit that tracks government incentives to corporations.

The tax breaks haven't been approved by any of the local taxing entities. The Manor school district and Travis County are considering applications from Samsung but haven't held public hearings regarding them yet, while Austin city officials have declined to say whether they've received a request for tax breaks from the company.

In Taylor, Samsung is seeking a tax break valued at $314 million from the Taylor Independent School District, according to documents submitted to the comptroller's office last month. The company also indicated in the filing that it intends to seek incentives for the project from Williamson County and the city of Taylor, although it provided no estimate of their value.

In addition, the company has said it would want incentives from the state should it choose either Texas location.

"This regional public support will lower the operational and financial costs for a given site and make it possible for Samsung Austin Semiconductor to meet its operational and financial targets for the new manufacturing facility," the company said in its applications to both the Taylor and the Manor school districts.

A Samsung spokeswoman declined to comment on the chances that Samsung might chose Taylor over Austin. Williamson County and the city of Taylor declined to confirm that they've received requests for tax breaks from the company.

Devin Padavil, superintendent of the Taylor school district, wouldn't discuss the Samsung factory specifically, but he told the American-Statesman that he considers Taylor well-equipped to compete for and win major economic development projects in the region.

"I have no concerns" about Taylor's ability to compete, Padavil said. "I think the community of Taylor is a gold mine for potential business — even neighborhood home development. It is a great community that's steeped in tradition and is for (economic) growth."

The city is "becoming highly desirable for families and businesses" as the Austin metro area continues to sprawl, he said, so "any economic development that comes out here" would be making a good decision.

The taxpayer-funded incentives offered in the small Williamson County town of Taylor would probably have to be huge — and eclipse those offered in Austin — to offset the efficiency and convenience of simply building and operating its new plant on land Samsung already owns next to its existing campus in Northeast Austin, according to one analyst.

Is Taylor still a longshot for Samsung factory?

Still, if Samsung opts to build the new factory in Texas but picks Taylor instead of Austin, the company would be disregarding its local infrastructure built up over more than two decades in favor of starting from scratch in a small town. Some observers don't think that's likely.

"My honest opinion is that this is a shameless gaming of local governments" to try to wrest more concessions to expand in Austin, said Nathan Jensen, a University of Texas professor who studies taxpayer-funded incentives to corporations.

Kay, of Endpoint Technologies, said the taxpayer-funded incentives offered in the Taylor area would probably have to be huge — and eclipse those offered in Austin — to offset the efficiency and convenience of simply building and operating the new plant on the land Samsung already owns next to its existing campus.

As of last month, Samsung hadn't bought land for the factory in Taylor, according to its application for tax breaks from the Taylor school district.

“At this point, it makes more sense for a whole lot of different reasons” for Samsung to build the new chip plant in Austin, said Kay, who considers Austin the front-runner for the project, with the Phoenix area the likeliest alternative.

Only Samsung officials know for certain how the company is leaning, however.

When it comes to Taylor's chances, Zuehlke has reservations about the publicly funded incentives that might be needed for the small city to come out on top. But he said they probably would be worth it.

"That always is a hurtful thing toward the businesses that are already there, when they see other businesses coming in that get tax breaks — it is kind of bitter to swallow," Zuehlke said. “It sometimes doesn’t seem fair, but it happens all the time"

In the case of Samsung, he said, "I think there will be more benefits than not," even with the tax breaks.

Lidia Cruz, Diana Cruz, 10 and Erick Cruz, 7, walk down Main Street in Taylor last week. Samsung is seeking a tax break valued at $314 million from the Taylor Independent School District if it builds its new semiconductor plant in the small town.