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INC.'s annual ranking of America's cities

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IT WAS THE BIG CONTEST THIS SEASON IN THE ONGOING economic-development sweepstakes. The prize: Sematech, the nation's most advanced computer-chip research facility, operated by a consortium of 14 of the nation's leading chip manufacturers. The stakes: 800 mostly high-paying jobs, the potential for dozens of high-technology spin-offs, and a $250-million annual operating budget. The contestants: 34 states representing more than 100 local communities. The winner: Austin.

Austin these days has as much going for it as an armadillo in a cactus patch. A state capital. A world-class university. The nation's top microcomputer research facility. Culture. Beauty. And plenty of affordable housing. It all adds up to a penchant for starting and growing companies that puts it on top of INC.'s annual metropolitan ranking for the second year in a row.

Austin today is not quite the boomtown it was before the price of oil dropped and a shakeout rocked Texas high tech -- and before overdevelopment put Austin real estate into its current slump. But in spite of these challenges -- or as David L. Birch points out on page 80, maybe because of them -- Austin has posted a four-year record of economic growth that is still unmatched anywhere in the country.

Not all of urban Texas has fared so well. The cities taken down more than 30 places this year on the INC. metropolitan rankings read like an oil-field Baedeker: Tyler, Amarillo, Houston, Odessa-Midland, and Waco, Tex., with nearby Baton Rouge and Lafayette, La., thrown in for good measure. All of which makes it more impressive still that, in terms of business birthrates, the three top cities in the country are Austin, El Paso, and Dallas-Fort Worth.

Business birthrate is one of the three historical criteria used in the annual INC. metro rankings. The other two are the percentage growth in private employment and the percentage of young companies experiencing high growth. For each city, a relative score for each factor was calculated based on a four-year period, then the three numbers were added together for an overall score. A complete list of the metropolitan areas with this year's and last year's rankings appears on the opposite page.

The 1988 metro rankings show a healthier urban economy than a year ago in all three categories, with a median birthrate of 2.7% and 2.9% of small, young companies experiencing rapid growth. The median percentage of job growth over a four-year period was 15%.

Aside from the oil-patch metropolises, the big losers over the past year include Syracuse, N.Y., New London, Conn., and the small Georgia cities of Columbus and Augusta. Wisconsin's Madison and Green Bay both dropped more than 30 places, even as Milwaukee made gains. Melbourne-Titusville, Fla., heavily dependent on the nation's space-shuttle program, slipped badly, although Huntsville, Ala., headquarters of NASA's George C. Marshall Space Flight Center, climbed from #10 to #7. Colorado Springs, Colo., feeling the shakeout in the oil, mining, and computer industries, dropped from #27 to #63.

Last October, in our annual Report on the States, INC. lavished high praise on the economic-development initiatives of Pennsylvania and Michigan, and this year's Metro Report confirms that positive assessment. Moving up dramatically in the rankings this year were the Michigan cities of Lansing, Flint, and Saginaw-Bay City along with Pennsylvania's Lancaster, York, Harrisburg, Philadelphia, and Johnstown-Altoona. To be sure, none of these industrial outposts has made it yet into the top tier of growing cities, but their movement upward is the latest proof that a Rustbelt revival is underway. So, too, is the continued presence of South Bend and Fort Wayne among the top 50 cities, with the addition this year of Indianapolis, moving up impressively from #71 to #35. Noticeably left out of this positive trend is industrial Illinois, which continues to claim no city in the top half of this year's metro class. David Moberg's examination of Chicago's distinctly unentrepreneurial economy begins on page 84.

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