Personal Net Worth (PNW) Presentation — original pdf

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City of Austin Small and Minority Business Resources Personal Net Worth Update - 2024 Edward Campos, Director Small and Minority Business Resources Personal Net Worth (PNW) History • PNW Ordinance was adopted on June 8, 2006 • Began as a certification requirement on January 1, 2007 The amount was indexed annually based on the South Region Consumer Price Index published by the US Department of Labor, Bureau of Labor Standards Initial language included for Austin Metro Area Consumer Price Index • • • The PNW limit has increased each year • Initial PNW $900K • Current PNW $2.2M City of Austin | SMBR 2 Who is considered Economically Disadvantaged? An economically disadvantaged individual is a business owner whose Personal Net Worth (PNW) does not exceed: • $2,218,934 for the MBE/WBE program  May change annually • $1.32 million for the DBE/ACDBE program • An individual’s personal net worth includes only his or her share of assets and liabilities held separately AND/OR jointly City of Austin | SMBR 3 Exclusions from the PNW An individual’s PNW includes only the applicant’s share of all assets held separately and/or jointly as community property. The following may be excluded: Individual’s ownership interest in the applicant firm and/or assets titled to the firm. Individual’s equity in his or her primary residence. Tax and interest penalties that would accrue if retirement savings or investments (e.g., pension plans, individual retirement accounts, 401(k)k accounts, etc.) were distributed at present. The value of an asset or liability not shared/co-owned by the applicant. The asset value of a vehicle you are leasing. • • • • • City of Austin | SMBR 4 IPWG - PNW Recommendations IPWG’s three of their 20 recommendations related to PNW: • Recommendations 3 and 5: Keep Personal Net Worth (PNW) but modify/revisit the structure. • Recommendation 4: The City should review its use of the South Region Consumer Price Index (CPI) in establishing its PNW to determine if this index accurately reflects the unique Austin economic marketplace. In response to the recommendations, SMBR engaged local economist John Hockenyos, President of TXP, Inc. (TXP), to review SMBR’s current PNW methodology, perform a review and assessment of the PNW process, and to update and refine the methodology used to calculate the personal wealth definition of economically disadvantaged. In addition, TXP was asked to determine if the South Region CPI accurately reflects the Austin economic marketplace and conditions, and, if not, what index(es) the City should use to assist in establishing an annual PNW threshold. City of Austin | SMBR 5 TPX Review and Determinations • TXP determined that the CPI, which reflects the rising cost of goods and services, is representative of the cost side of the equation, but does not include a measure of current capacity to pay. In addition, no measure corresponds to wealth, which in turn is typically driven by asset values, for which the performance of equity markets is a useful overall proxy. • There is not a comprehensive local measure of wealth, although home values do provide some • • indication. SMBR should introduce variables into the PNW calculations that reflect capacity to pay (either reflecting income or assets) which has the effect of slightly increasing the PNW Limit. City of Austin | SMBR 6 Memo to Council and City Manager • January 17, 2024: Memo to Mayor and Council regarding the Personal Net Worth Update to close out the remaining open items related to Resolution No. 20200326-053, specifically the newly adopted and revised MBE/WBE Procurement Program Ordinance, Administrative Rules process, and an update regarding the indexes used to calculate the PNW threshold. City of Austin | SMBR 7 City of Austin Small and Minority Business Resources Questions? City of Austin | SMBR 8