For Austin, Chips Mean Job Growth, Not Guacamole

DRIVE through the cedar-covered hills here, and you'll see the unmistakable signs of a silicon renaissance.

A decade ago, like many other college towns, Austin, Texas, had modest success fashioning itself as another high-tech Silicon Valley. But now, software and computer chipmakers are arriving in numbers that are transforming the economic and cultural face of the city - but bringing new social problems as well.

Austin is projected to have the second-fasted growing job market in the nation by 2000 - and perhaps the traffic congestion to match. Though the city has long hosted companies like IBM and Motorola, the high-tech growth has mushroomed in recent years, aided by the area's quality of life and relaxed regulatory environment.

For T.J. Rodgers, the CEO of Cypress Semiconductor, the decision to build a $700 million chip factory in nearby Round Rock instead of California was easy: "It would take me longer to get a building permit [in California] than it will take me in Round Rock to build the building."

His is a common sentiment.

Last year, Advanced Micro Devices and Motorola finished computer chip-making facilities worth a total of $2.3 billion. Samsung and Cypress Semiconductor will also be setting up wafer fabrication plants, and Motorola is adding a $300 million research lab. Toss in expansions by computer makers like Austin-based Dell and Houston-based Compaq and you have a high-tech boom town.

In 1995, job growth in Austin exceeded 6 percent for the third year in a row. "I don't see how 1996 can be any less than that," says Glenn West, president of the Greater Austin Chamber of Commerce.

Boom town

Mr. West may be right. A study released last month by DRI/McGraw-Hill said that Austin is second only to Las Vegas in projected job growth for the next few years. Austin will likely add more than 100,000 jobs by the year 2000.

But all this commerce is putting a strain on the city's infrastructure.

"It's the No. 1 issue facing the Austin economy for the next five years," says Jon Hockenyos, an economist with the firm Texas Perspectives. Interstate 35, which connects Austin with Dallas to the north and San Antonio and Laredo to the south, is overloaded. Once the Mexican economy picks up, he says, the problem will only get worse.

With traffic congestion comes air pollution, and Austin officials worry they may have to deal with costly federal clean-air mandates. To alleviate the I-35's load, city planners in Austin and San Antonio are talking about building commuter-rail lines between the two cities.

Also on the agenda is replacing Austin's Robert Mueller Airport, which is bursting at the seams. A new airport is planned at the site of the former Bergstrom Air Force Base, a project estimated to cost more than $600 million. But while the project is supposed to be completed by early 1999, the city has yet to hire a main contractor.

No Waterworld

Perhaps the biggest obstacle for developers to hurdle is the environment. The San Antonio-Austin region contains more than a dozen federally protected endangered species, all of which are threatened by development. More critical is the issue of water. Both cities rely on aquifers and springs for their water supply, and every time a new housing development and industrial park is planned, a heated debate ensues.

With the arrival of each new company and its employees, the issue is growing even more critical. Round Rock, which hosts several software makers and will be hosting Cypress Semiconductor as well, and other towns north of the city are beginning to bear the brunt of the growth and have put in requests to buy more from Austin.

The hardware makers also compete with the software industry for the best and the brightest. Austin's software makers are developing closer links to the city's music, film, and video game producers.

While many are excited about the city's rollicking economy, some longtime Austinites are recalling the mid-1980s when bankruptcies and foreclosures were more common than ants at a picnic. Many companies then had built up counting on a continued oil boom.

Eddie Wilson, owner of Threadgill's Restaurant, a local landmark, compares the new chip factories to the auto plants built in the Midwest in the 1940s. "The boom is always followed by a bust," he said.