When Fortune magazine named Austin the best city in the nation for business last November, it was something of a shocker. Isn’t the Texas capital the very antithesis of a business-friendly city? Don’t environmentalists have the upper hand over developers, stymieing growth at every turn? Haven’t corporate executives clashed repeatedly with city officials, leading one frequent combatant, Freeport-McMoRan CEO Jim Bob Moffett, to predict that no company on the Fortune 500 would ever want to do business there? Yet here was the creator of that venerable list giving Austin a thumbs-up. And it wasn’t just Fortune: Around the same time, Newsweek and P.O.V. magazines both put Austin near the top of their lists of the year’s boomtowns.

What happened? Two words: Kirk Watson. Since his election as mayor of Austin two years ago,

the 41-year-old—who had never before held office—has radically changed the relationship between the business and political communities. He’s done this not with the firebrand approach of a revolutionary but with the deftness of a skilled negotiator (which, as a civil litigator for seventeen years, he is). “He’s turned environmentalists into developers and developers into environmentalists,” says Bill Bunch, the attorney for Austin’s pro-environment Save Our Springs Alliance.

In recognition of that not-inconsiderable achievement, Watson is Texas Monthly Biz’s first annual Best Mayor for Business. It’s an honor we don’t bestow lightly—or unrealistically. In all likelihood, mayors Ron Kirk and Lee Brown are responsible for generating more business in Dallas and Houston, respectively, but that’s not unexpected—whereas no one expects the mayor of Austin to be an effective champion of business. Watson’s victory is one over perception, and in both politics and business, that’s a victory that counts.

As a former member of the Austin City Council, a past mayoral candidate, and a real estate developer now doing business in the city, I know the extent of what Watson has accomplished. For the first time in recent memory, Austin’s top official has a coordinated vision of where the city should go and is shaping public policy to get there. “We’ve gone from being a college town to a key player in the global economy,” he told me with a grin as we sat in his office late last summer. “If we were reluctant to talk before about how to grow as a city, we aren’t now.” And yet he knows what’s driving the boom: People want to live in Austin, which is really the lifestyle capital of Texas. Fittingly, Watson’s mantra is “Protect Austin’s quality of life.”

Until two years ago it was hard to imagine any mayor sidestepping Austin’s protracted battles over growth and development; this is, after all, a place whose politics have traditionally resembled Beirut’s. Most business types looked at Austin with only cynicism, and why not? It was a city that always got it wrong—like the time in 1989 when the council voted to pay an energy company $3.5 million not to build a power plant that was supposed to burn cow manure for fuel. Its regulations for developers were notorious, giving rise to a bumper sticker that read “It should be easier to get a building permit than a welfare check.” Yet environmentalists griped too, angry that the council was facilitating growth by subsidizing utilities, roads, and the like in the very areas it wanted to protect. Austin residents, meanwhile, were left with water rates that were among the highest in the state. In those days, cracking a joke about how poorly the city was run, in particular about council incompetence, was a guaranteed crowd pleaser at any business luncheon. “Austin,” I’d say, “has several enterprises—a hospital, an electric utility, and an airport—big enough to be companies listed on Wall Street, only they’re run by people who would have a difficult time getting jobs with those companies.” The line always got a laugh.

But the danger for Austin was greater than a little ribbing. Extending the Wall Street analogy, if Austin had been a publicly traded company, it would have been ripe for a hostile takeover. In the mid-nineties several investor-owned utilities were vying to acquire its public electric company, and the state was racing to pass laws designed to strip the city of its powers to regulate development and to annex and grow as other Texas cities do. In the last legislative session bills were passed weakening the council’s ability to make appointments to the area’s transit authority. It was not inconceivable that Austin would end up like Washington, D.C.: in the hands of a financial control board.

But that was then. Since Watson—an Oklahoma City native and a Baylor University graduate—took office in June 1997, the courts have thrown out as unconstitutional much of the legislation that restricted Austin’s regulatory powers. The mayor played a role not only in selecting lawyers to defend the city but also in helping craft the legal arguments. With his prodding, the city-owned electric utility has taken steps to reform itself to be more competitive with its private brethren; takeover no longer looms. And his activist agenda, and that of the “green” council, has made development a priority in desired areas, particularly downtown. Watson calls this initiative Smart Growth, and several political leaders around the country have embraced the concept. The mayor explains it simply: Build your roads and sewers where you want the growth and not where you don’t. In fact, he regularly lectures about the importance of roads—their location and design—as a planning tool. Dell Computer, for example, wanted to build a new plant in Northeast Austin, and it wanted to do so quickly. After speeding up the approval of the construction permit, the mayor put in a new road that made the whole project possible.

Then there is Triangle Park, a sizable retail project proposed by a shopping center developer that was to be created on land leased from the state just north of the University of Texas campus. When plans were first drawn up a couple of years ago, the surrounding neighborhoods balked. At Watson’s urging, the plans were redrawn to include a significant residential component. The result is a project that has the blessing of the neighborhoods—and is twice as large as what was originally proposed. “The mayor’s leadership is responsible for getting both sides together,” says Tom Terkel, who heads the development company that is building Triangle Park. In the old days such a project would have died on the vine. Today the watchword is “compromise,” not “controversy.” “The days of ‘my way or no way’ are over,” Watson says.

What else has the mayor done? He appointed a panel of community leaders, environmentalists, and developers to reform the city’s almost incomprehensible regulations on land-use issues. To stimulate downtown residential development, he got the council to make two choice parcels of city-owned land available at attractive terms for the building of high-density apartments. Carrots for “good” development have been extended to another downtown entity, MarketPlace, which received $2.2 million in fee waivers and accelerated infrastructure; this massive retail project, which was designed by the same architects who did the highly successful Horton Plaza in San Diego, is seen as a major opportunity to reestablish the center of Austin as a retail destination.

His latest effort is another downtown project. In fact, the project is downtown, or at least the parts of it he hasn’t already touched. He sees in Austin’s coming of age as a high-tech mecca an opportunity to spur further development in the inner city. Although many software and hardware companies are located north of town, a few renegades have set up shop on Congress Avenue just down from the Capitol. The mayor envisions “a downtown digital district,” and he’s doing what he can to make it happen. One example is his push for the creation of a high-tech incubator, to be located someplace downtown, with “port of entry” jobs going to unskilled people to ensure that everyone participates in the boom. But perhaps the best example is his all-out effort to persuade CSC, a California software company, to build three buildings on choice city-owned lakefront land downtown. That deal, along with plans for a new city hall and a new performing arts center, has given the Austin business community much to be thankful for.

Watson is, of course, not without his critics. Some environmentalists complain that the mayor has not done enough to get Austin’s entrenched bureaucracy in line and on board with Smart Growth. Yet that’s like liberals getting angry at Bill Clinton—it’s a sign he’s doing his job well, not poorly. And some plant managers grumble that the streamlining of the permit pro-cess still has a long way to go. But Larry McGinnis, a lobbyist who does business with Austin’s major employers, says CEOs all over the city are generally happy with Watson’s performance.

CEOs happy with an Austin mayor? It doesn’t seem possible, and I told Watson as much when we met in his office. I reminded him that I’d pushed many of the same programs when I was on the council, but the timing wasn’t right. “I’m so jealous,” I said. He laughed and insisted that a lot of the credit goes to council members who’ve supported him and also to good luck: What mayor wouldn’t want to serve during good economic times?

Perhaps. But as Harry S Truman said, “Men make history and not the other way around.” Austin has in Kirk Watson a man with a vision of what the community wants—and the moxie to carry it out.