ROUND ROCK, Texas – Though it was hardly obvious at the time, a deal
reached a decade ago that resulted in Dell Inc.'s expansion into this
northern suburb of Austin represents one of the greatest economic
development plums in recent Texas history.
The computer juggernaut has brought roughly 9,400 jobs to Round Rock,
more than triple what was expected back in April 1993. The number of
hotel beds in the city has increased tenfold during the period to nearly
2,000. Overall, Round Rock's population nearly doubled between 1990 and
2000 to 61,000.
Then there's all that money. Round Rock officials say 58 percent of the
city's general revenue fund comes from sales tax, and 48 percent of that
figure is derived from taxes paid when Dell's customers in Texas buy
computer equipment.
The city is flush enough with funds that it's building a sprawling
Southwest-style civic complex; the first building opened earlier this
year.
But the continuing downturn in the technology industry hasn't gone
unnoticed by city officials, who have been scrambling to diversify the
economy so they can reduce their dependence on the fortunes of one
company.
"We've woken up to the fact that this is a concern and a challenge,"
said Round Rock Mayor Nyle Maxwell.
Dell has fared far better than most tech companies, because it has
generally been able to increase its market share at the expense of
rivals.
The direct sales model that Michael Dell launched in 1983 from his dorm
room at the University of Texas at Austin has proved to be a secret
recipe that others have been unable to duplicate.
And Round Rock, named in 1854 for a stone that marks a low water
crossing in Brushy Creek, still bears all the signs of a boomtown.
The kinds of big, new houses more familiar in Dallas' northern suburbs
are popping up all over town.
New retail complexes, including giant La Frontera, are sprouting up on
the west side of Interstate 35, opposite all the gleaming blue glass of
Dell's headquarters campus east of the highway.
But Dell still was forced to cut 1,700 jobs in central Texas in February
2001, as expected growth failed to materialize.
What's more, Dell has been expanding its business beyond personal
computers into other electronic devices that are generally manufactured
in the Far East.
And like big companies in the banking and telecommunications industries,
Dell has sent some of its customer service jobs to India.
For Mr. Maxwell, identifying his problem was an important step, but no
obvious solution has emerged.
Despite the boom fever, the city has to keep a careful eye on spending.
"A sales tax revenue stream is more volatile than one from property tax,
so it has forced us to be fiscally conservative and responsible," Mr.
Maxwell said.
So what's the next Dell for Round Rock?
Although he's excited about the prospects of attracting nascent
biotechnology or nanotechnology firms, Mr. Maxwell also said he
recognizes that lots of other cities are competing for the same prizes.
He also wants to bring in suppliers for the San Antonio auto plant that
Toyota Motor Corp. announced in February. But with Austin-area traffic
so bad, the city could be on the wrong side of Austin for that.
There's been some progress on the education front. Mr. Maxwell said
Round Rock scored a victory in July when the state approved financing to
construct a college campus.
Built on what's now hilly vacant land in the northeast part of the city,
the Round Rock Higher Education Center is expected to open in 2005.
"Over the long run, that may have a bigger impact than Dell," said Jon
E. Sloan, president and chief executive of First Texas Bank.
Mr. Sloan has been with the bank since 1975, when there was only a
single traffic light in Round Rock.
City leaders recognized then that Round Rock needed to be more than a
bedroom community, Mr. Sloan said, and Dell vastly accelerated their
plans.
"You never eliminate the susceptibility to a downturn," said Mr. Sloan,
recalling how devastated the state was by the 1980s oil and real estate
bust.
Credit problems popped up at the bank after Dell's layoffs in 2001,
prompting business people to seek plans to diversify the economy.
For Dell's part, the company likes the local schools in Round Rock, and
officials are pleased to see plans for road improvements that will help
employees commute to work faster and keep component parts and finished
goods moving quickly.
"We've been great neighbors for each other," said Michele Glaze, a Dell
spokeswoman.
E-mail agoldstein@dallasnews.com
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