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Updated Sep 10, 2014 - 5:53 pm

How they compare: Austin, Phoenix two of the fastest-growing cities in the US

A woman walk across the street from a mural that says, "Keep Austin Fresh," in Austin, Texas. (KTAR photo/Mark Remillard)

AUSTIN -- When many people think of Austin, Texas, they might think of any one of the city's various Super Bowl-sized festivals such as Austin City Limits or South by Southwest.

However, the city is also becoming well-known for being one of the country's fastest-growing economic engines because for the fourth year in a row. Earlier this year, Forbes Magazine named the Texas capital the fastest-growing city of 2014.

According to Forbes, the city's low unemployment rate (4.89 percent), high median pay of $64,000, and population growth rate of 2.5 percent last year are once again reasons to make it the top city in the U.S.

Austin has not always been the model of economic growth that it is now, and it took a conscious effort to make the city what it is today.

According to Austin Mayor Lee Leffingwell, the city's original prosperity hinged on the tech industry.

"For many, many years we were kind of a sleepy college town -- capital of the state of Texas," Leffingwell said. "And then about 30 years ago, we began to build our technology economy and that's when things really took off."

The city's tech boom saw the startup of Dell computers in the Austin suburb of Round Rock in 1984, as well as Austin itself becoming a manufacturing hub of computer parts, said Carlton Schwab, president of the Texas Economic Development Council.

"For a long time, like we are now in the Internet space, we were the downstream recipient of Silicon Valley in wafer manufacturing," Schwab said.

"We learned some tough lessons in the first few years of that tech economy, in that we had all of our eggs in one basket and we had this kind of bust," Leffingwell said.

While the city grew quickly from technology and the parts it produced, Leffingwell said the city also learned why it could be dangerous for a market to be heavily dependent on one sector.

That lesson came in the late 1990s and early 2000s, when the dot-com bubble popped and stock in many web companies plummeted.

"We learned some tough lessons in the first few years of that tech economy, in that we had all of our eggs in one basket and we had this kind of bust," Leffingwell said.

That bust brought the city's growth rate to a screeching halt. In 2000 Austin's population growth was 4.3 percent, but by 2004 it dipped to just about 0.5 percent.

Righting the ship

So to pick up the pieces and move forward, Leffingwell said it was time for the city to diversify and get competitive.

To do so, he said the city needed to continue to invest in its technology industry, but also take advantage of Texas' business-friendly tax structure and offer companies economic incentives to come to the capital.

"I know [tax benefits and economic incentives] are always controversial and nobody likes them," he said, "but if you want to play in this game you have to realize that other people are doing the same thing."

In February alone, the city made deals with companies such as Athena Health and the cloud-storage company Dropbox to locate in Austin, and in the past it has brought businesses such as Apple and Facebook to town.

Leffingwell said it's not just a focus on large companies that has helped drive Austin's economy. He said cultivating small business is also vital to Austin's growth.

"Well over 80 percent of the companies in Austin have fewer than 10 employees," Leffingwell said.

Forging those competitive economic incentives for businesses along with a growing population and little-to- no income tax has been a recipe for success in Austin and helped the city change its course in a matter of years, according to Leffingwell.

Austin vs. Phoenix

Looking back to the Valley, Forbes Magazine also had high regard for Phoenix on its list of fastest growing cities, putting it third behind Austin and Raleigh, North Carolina.

The downtown Phoenix skyline is shown at night. (AP Photo)

When comparing Austin with Phoenix, it can be difficult to see how the two cities differ.

Both cities, and their metropolitan areas, have strong technology sectors. Also, both have two of the largest public universities in the country, both are capital cities and both are home to large international airports.

At a glance, the two cities appear quite similar, but where Phoenix differs from Austin might be in the areas that have helped Austin consistently top Forbes list.

According to Forbes, Phoenix's growth numbers are close to Austin, with the city even eclipsing its Texas counterpart's median pay. But Phoenix's 1.67 percent population growth last year and a higher unemployment rate at 6.4 percent are reasons to put Phoenix lower on the list.

There are other ways the two cities differ -- ones which are keeping Arizona's capital a few steps behind Austin.

"And if job growth and income growth are not there, then the consumer is not going to be spending," McPheters said.

According to Lee McPheters, research professor at Arizona State University's W. P. Carey School of Business, Phoenix's strength industries of retail and tourism make its growth dependent on the overall strength of the U.S. economy, and if that has been growing slowly so then will Phoenix.

"Retailing (is) just now kind of picking up, and this is due to weaker income growth (and) weaker job growth," McPheters said. "And if job growth and income growth are not there, then the consumer is not going to be spending."

Infrastructure is also vital to a city's future, and Phoenix's congestion might also be an issue, or lack there of. The metro Phoenix area has seen its growth continue to spread outward, while Austin has constructed a dense urban core upward.

Density in Austin's downtown has created heavy congestion around the city, and while it remains a common complaint for commuters, congestion might not always be a detractor for growing cities.

Kurt Upton of Phoenix's Planning and Development Department said the city's downtown core needs more congestion.

"From a traffic-engineering perspective, that may be thought of as negative; (however) it can actually help with the economic vitality of your downtown," said Upton.

With less in-and-out flow in a city's downtown, Upton said people tend to spend more time within the city's economic hub, which in turn helps drive industries such as retail.

"Somewhat smaller metros like Austin and San Jose, their growth rates are going to better," McPheters said.

But more than anything, the reason Austin consistently grows faster than Phoenix is size, according to McPheters.

Phoenix boasts about 1.4 million residents while Austin has roughly 840,000, and that hampers Phoenix's ability to grow at a breakneck speed.

"Somewhat smaller metros likes Austin and San Jose (California), their growth rates are going to better," McPheters said. "It's a whole lot harder for the New York metro to show a 4 percent growth rate. It's just not going to happen."

McPheters said both Arizona and Phoenix have been consistent in their growth, and with the U.S. economy eclipsing a 4 percent growth rate in the second quarter of 2014, the Valley could see even more improvement economically.

"In rate of job growth (for) the whole state is in the top 10, and Phoenix is No. 7," he said. "So basically all we can do is be optimistic."

About the Author

A southern California native, Mark Remillard began working in radio in 2010 while in community college as a host of late night and weekend programming for publicly supported 88.5 FM KSBR. While working through college, Mark also interned for the Bill Handel Radio Program at Los Angeles' KFI AM640, where he began his work in journalism. Mark moved to Arizona in August 2012 to finish his bachelor's degree at Arizona State University's Walter Cronkite School of Journalism and Mass Communication and graduated in August 2014. Mark began working as a reporter for KTAR in November 2012.


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