Location Texas: Wide Open For Business
Steve Stackhouse-Kaelble (Jun/Jul 07)

As Toyota was searching for a place to build a new truck plant, San Antonio was bubbling to the top of the list. The city - and the whole state, really - had everything the automaker was seeking, including a prime location, excellent infrastructure of all kinds, a can-do attitude, a business-friendly environment, and a lucrative market of its own.

But there was a bit of a hiccup, acknowledges Aaron Demerson, executive director for economic development and tourism in the Texas governor's office. "We had a logistics issue with Toyota, and discovered they were $15 million to $18 million short on a need that they had," he says. "We were able to find that money, but it wasn't easy."

One could say that all's well that ends well, but the state didn't stop there. Texas leaders' can-do attitude led to a solution designed to prevent such last-minute scrambles in the future. "The Texas Enterprise Fund is our deal-closing fund," says Demerson. "It was created about four years ago. If there is a gap identified after you have the incentives at the local level and training dollars and the enterprise zone program, this allows us to really seal the deal."

It was a smashing success, so much so that the state continues to replenish the funds, and other states have tried to follow suit with deal-closing funds of their own. The money spent is a tremendous deal when one considers the investments that the fund has catalyzed, says Demerson: $15 billion in capital investment creating 45,000-plus jobs, with some $330 million in Enterprise Fund dollars helping to pave the way.

For example, he says, Countrywide Financial's decision to move some operations to Texas translates into 7,500 jobs and a $200 million investment. Roughly $50 million from the fund helped Texas Instruments decide to create 1,000 jobs in Richardson and spend some $3 billion in capital investment. Another $2.5 billion investment from Samsung means more jobs in Austin, he says.

Among other recent Texas Enterprise Fund victories, Fidelity Investments will expand its Westlake facility and Comerica, Inc. will come to Dallas. Thanks to an $8.5 million Enterprise Fund grant, Fidelity will build a new state-of-the-art, 600,000-square-foot building and add 1,535 new jobs. Comerica will be relocating its corporate headquarters from Michigan to Dallas, creating more than 200 jobs with the help of a $3.5 million Enterprise Fund grant.

Feeding Emerging Technology
"If you have a product and are trying to commercialize it, we can help," says Demerson. The state's Emerging Technology Fund is an increasingly active vehicle to do just that. "We're trying to make sure that businesses that are growing here, stay here. It's a program that allows us to really home-grow business."

Says Texas Governor Rick Perry, "Technological innovation is the lifeblood of today's economy. These funds allow Texas to invest in technologically innovative companies which are key to driving competition and advancement."

The fund was created about two years ago, according to Demerson, and seeded with about $200 million. For the most part, the fund supports technology companies in their early stages, but it's also intended to help attract leading research teams to Texas universities to help create even more innovations that in turn can support more business growth.

For example, a $3.5 million grant to the University of Texas at San Antonio was used to recruit Ravi Sandhu, Ph.D., a nationally recognized leader in cyber security. Dr. Sandhu is now the executive director and chief scientist at the university's Institute for Cyber Security Research.

"Opportunities such as this help move UTSA to the forefront of research and innovation," says Ricardo Romo, the university's president. "UTSA will be able to expand critical research in cyber security and build a multidimensional institute to meet the challenges that face our country's technology infrastructure."

Demerson says attracting researchers of this caliber will pay handsome dividends, so it's worth making a healthy investment to do so. "It's the George Steinbrenner model," he says, referring to the legendary New York Yankees owner with the fat wallet. "We're going to pay for that talent."

Other recent uses of the Emerging Technology Fund include:

• A $2 million grant that will help Xtreme Power, Inc. of Kyle develop a large-scale energy load-leveling system. It'll help make the process of storing and delivering large quantities of electric power more efficient.

• A $600,000 grant to Lynntech, Inc. of College Station for ongoing development of its hydrogen fuel cell technology. The technology will be used for electrical power generation in machines such as wheelchairs, forklifts, and pallet jacks, as well as military and commercial aircraft support vehicles.

• A grant of $950,000 to Global Contours Ltd. of Rockwell, which is working on a patented Smart Concrete, capable of sensing infrastructure conditions in buildings, bridges, highways, dams, levees, and tunnels. It can detect infrastructure breaches and even be used to gauge the weight of trucks.

• An award of $749,829 to Photodigm, Inc. of Richardson to move along the development of its advanced laser technology used in communications, digital imaging, defense and medical devices. Among the defense uses of the technology are ultra-high-performance sensors for airborne detection of submarines.

Growing in Texas
The Texas Enterprise Fund and Emerging Technologies Fund are just a couple examples of the attitude that has lured countless businesses to the Lone Star State. If that's not enough, there are plenty of other reasons. And there are lots of success stories to share:

• The Toyota plant in San Antonio is one of the state's most prized catches of recent years. Lured in early 2003, the plant grew from an $800 million project to a $1.3 billion investment before the first Tundra pickup rolled off the line in November of last year. The Toyota deal is creating some 4,000 jobs, and lots more among the ripples. For example, some two dozen suppliers have followed Toyota to Texas, adding at least $100 million in investments. Toyota is building to an annual plant capacity of up to 200,000 Tundras.

• Maxim Integrated Products will be expanding to a new facility in Irving. The project is expected to generate $200 million in capital investments and create about 1,000 new jobs over the next seven years. Back in 2003, a $1.5 million Texas Enterprise Fund grant helped persuade Maxim to secure a semiconductor facility in San Antonio.

• The economy is hot and getting hotter in Houston. In just the first quarter of 2007, economic impact of development announcements there had hit half of the already impressive total achieved in 2006. The city recorded announcements with an economic impact totaling $1.5 billion in the first quarter of this year, creating about 600 new jobs and retaining 1,200. Last year, development carried a $2.7 billion impact in Houston, led by a 2,000-job expansion by BP and an 1,100-job expansion by Lockheed Martin.

• Wayport, Inc., which designs and integrates applications and software over wired and wireless networks, recently announced the expansion of its corporate presence in the Dallas-Fort Worth metroplex. The company's engineering takes place in Austin. "With Dallas being one of the nation's largest cities and travel hubs, it will provide easy access for our customers and investors," says CEO Dave Vucina, "and give us two great Texas facilities to strengthen our position for acquisitions and recruiting."

• IMSafer, a Houston-based startup, has been adding new customers at a rate of about 100 percent a month since its launch last fall. The company's product monitors children's instant messages and MySpace accounts for disturbing or inappropriate conversations.

Business Climate: Hot and Friendly
Texas is known for doing things in a big way, and that goes for matters economic, too. If it were a separate country, its economy would be the world's eighth-largest, and it recently was crowned the nation's top exporting state. Those exports are destined for markets around the world, and a lot of them head south to Latin America - indeed, three-quarters of the nation's trade with Mexico flows through Texas.

The economic base in Texas is large and diverse, including 1.6 million small businesses. According to Demerson, the state welcomes all kinds of new businesses, but six key areas are especially in the crosshairs:

• Advanced technology and manufacturing: "That includes our automotive sector," he says. Needless to say, "we were fortunate to have Toyota move here."

• Energy: "Texas is very well known for energy, and we're probably No. 1 in terms of wind right now," says Demerson.

• Aerospace and defense: "We continue to build on that, with NASA located here and a number of large companies here," he says.

• Biotechnology and life sciences: The state ranks second in biomedical and pharmaceutical startups, and Houston boasts the world's largest medical complex and group of health-related headquarters.

• Information and computer technology: Dell, Texas Instruments, EDS, Samsung.need anyone say more? Still, there are plenty of other players in this field located in Texas, and the state is ready for more.

• Petroleum and chemical products: Texas has always been known as an oil state, and is a key producer of other chemical products.

"We've won several awards for having the best business climate in the nation," says Demerson. "It's a very business-friendly community. You'll find a can-do attitude in the state and in local communities. The state is a willing partner, and the attitude is contagious and catching."

As an example of the business-friendly climate, he cites the tort reform passed in 2003 that has become a model for other states to follow. Reforms include the ability to limit non-economic damages, product-liability protections including a 15-year statute of limitations, reforms in punitive damages and mechanisms to encourage settlements outside the courtroom.

"We want to be sure companies are good corporate citizens," says Demerson. But in Texas, "a CEO knows that the company is not going to be sued out of business."

Then there's the issue of taxes. If you're fond of them, you might want to look elsewhere. Texas is the place for companies and people preferring to pay lower taxes.

Start with the personal income tax. There's really not much to say, because Texas doesn't have one. And there won't be one unless the people of Texas vote to create one - the state constitution does not allow the legislature to take such an action.

As for business taxes, lots of "no" also. No state tax on equipment or machinery that is used in manufacture of goods. No state tax on electricity when it's used in manufacturing, processing, or fabricating. No state tax on property that is used for pollution control, nor on goods while they're in transit. Add it all up and the state tax burden is 32 percent lower than the national average.

Honing the Work Force
The work force in Texas is, like everything else there, growing in a big way. Some 2.2 million people have joined the work force in the past decade, building Texas up to the nation's second-largest work force with 10.8 million workers.

But sheer numbers aren't really the most important measure - it's quality that businesses are seeking. The state has been working hard to deliver in that regard as well. It begins with education. Texas has increased spending on public education and higher education by $9 billion in less than a decade.

Texas is continually looking for ways to improve its system of public education, and among other things has created a testing system regarded as one of the best in the country. By 2002, 85 percent of students between the third and eighth grades had passed all components in their end-of-year assessment, an amazing statistic when one considers that the percentage was just 56 back in 1994.

Compare Texas students to their peers elsewhere and the results are equally impressive. The state's fourth-graders, for example, typically score among the top 10 states nationally in assessments of reading and math, and more than 350 public schools have been honored with the U.S. Department of Education's Blue Ribbon School award.

Meanwhile, more than a million Texans are now enrolled in institutions of higher learning. The state has 35 public universities, 37 private colleges and 50 public community college districts. Four technical college campuses can be found in Texas, too, as well as eight medical schools and health science centers. Together, these institutions have helped create the nation's third-largest pool of graduate scientists and the second-largest collection of graduate engineers.

Among the latest ideas for improving education is the state's Commission for a College Ready Texas. The group, to which the governor recently appointed 21 members, will provide guidance to the State Board of Education as it strives to improve college-readiness programs by aligning high-school curriculum with college standards. Says the governor, "Every student deserves to receive the necessary groundwork to be academically equipped for college."

The Future
Demerson in the governor's office is certain that businesses won't be disappointed: "Our goal is to create jobs in this state."

He believes the state compares favorably with competitors and invites businesses to see if he's right. "When you get a taste of Texas and compare it to another state, that's what we want," he says. And he's well aware of how confident he sounds. "As the governor says, `It ain't bragging if it's true!'"

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