In Texas, Success Leads to Bigger Success
01 Aug, 2012
By Rachel Duran
Texas is such a large state, both in terms of land mass and population (25.6 million), it is a challenge to create a one-size-fits-all industry cluster strategy. Consider that there are 10 site selection regions in the state. Among those areas are Houston, which is an energy industry leader; Austin, which is a leader in high-tech activities; San Antonio, which features a leading military and defense sector; and Dallas, which has a large IT cluster.
Nevertheless, the state’s lead economic development organization concentrates on six industry clusters at the state level: advanced technology and manufacturing; aerospace and defense; biotechnology; energy; information and computer technology, and petroleum refining. “At the governor’s office, we focus on job creation,” says Aaron Demerson, director, Texas Governor’s Office of Economic Development and Tourism.
“Our industry diversity has helped us where we have seen other states struggling,” says Lucy Nashed, spokesperson, Texas Governor’s Office. “People often think of Texas as just oil and gas, which is an important industry, but we are so much more.”
What’s more, because Texas Gov. Rick Perry has made economic development the cornerstone of his administration, economic developers have the flexibility to meet companies’ needs. Demerson says this flows down to state agencies and the Legislature, creating consistency in the business environment. Nashed notes that the state continues to lead the nation in job creation and the way to keep the momentum is to recommitment to principles such as a constitutional spending cap, and making the small business tax exemption permanent.
In regard to the next legislative session, Gov. Perry has offered up for consideration the Texas Budget Compact, which has five points. The points focus on truth in budgeting; spending limits; no tax hikes; preserving a rainy day fund; and cutting wasteful spending. To that end, in June, the governor asked state agencies to develop their appropriation requests for the 2014-2015 biennial budget by identifying a 10 percent savings (in 5 percent increments) in general revenue-related funding.
Industries And Innovations
For many of the communities in Texas, expansions of existing industry are playing a vital role in economic development activities, including in Sherman, Abilene and Round Rock. “Most of what we are seeing is the addition of equipment and capacity building,” says Scott Connell, president, Sherman Economic Development Corp. “We have been assisting with incentives.”
In Abilene, a diverse economic development program supports local industry expansion activity. “Keeping what we have and growing it is very important,” says Bill Ehrie, president, Abilene Industrial Foundation. “One of our initiatives is to visit businesses to learn what we can do to keep them moving forward.”
In Round Rock, which is one part of the Austin/Round Rock MSA, three hospitals have conducted expansions in the last year. Economic developers are also busily spreading the word about Round Rock’s business advantages, aimed at those involved with computer systems development; health care and biotech; supply chain development and management; corporate offices; clean energy; retail, and higher education.
Back at the state level, important incentives in supporting industry investment in Texas are the Texas Enterprise Fund (TEF) and the Emerging Technology Fund. The first is known as a deal closing fund in order to compete directly with other states in regard to incentive packaging. The Emerging Technology Fund assists early-stage companies in the commercialization of research and technologies, with the idea of keeping Texas on the forefront of new technologies.
Recent industry expansion and relocation activities in Texas range from headquarters to medical device to IT and so on. In April, CGI Group Inc. broke ground for a U.S. onshore delivery center in Belton. The company expects to create 350 new jobs and make a $7 million capital investment, with an emphasis on recruiting veterans and military family members. CGI was awarded $1.8 million from the TEF.
In March, Apple Inc. announced it would expand its presence in Texas with a $304 million investment in a new campus in Austin, expecting to create 3,600 new jobs. The campus will conduct customer support, sales and accounting functions. In support of Apple’s commitment, Texas awarded the company $21 million during 10 years through the TEF.
In February, Continental Automotive Systems Inc. announced a relocation of its sensor and actuator production from Europe and Asia to its plant in Seguin, creating 300 new jobs and investing $113 million. From Seguin, the company currently manufactures engine, transmission and hybrid control units, and employs 1,300 people. It will receive $1.2 million through the TEF to support its expansion.
What’s more, Greatbatch Inc. has announced it will establish its global headquarters in Frisco. The medical device company believes locating the company’s headquarters to a vibrant medical device community, as well as to a region with an international airport, will allow it to connect to customers and its global operations.
Talent And Education
Texas is home to 104 public higher education institutions, and 148 independent institutions, which develop a pool of creative and educated employees, entrepreneurs and researchers.
In June, officials from the Texas A&M University System announced it has been awarded a contract to develop one of three U.S. Department of Health and Human Services Centers of Innovation in Advanced Development and Manufacturing. The $285.6 million contract includes an initial investment of $176.6 million from the government, with the remainder to be cost shared by commercial and academic partners.
Among its activities, the center will play a role in securing and protecting the country’s citizens from bioterrorism and global pandemics through the rapid development and manufacturing of vaccines and therapies.
As a state, according to the National Science Foundation’s Science and Engineering State Profiles, in 2009, Texas ranked No. 3 for academic R&D expenditures with $3.9 billion spent.
Texas’ communities are prepared and are preparing for expansion projects. In Round Rock, officials are identifying properties for the future, some of which may be located in the community’s extraterritorial jurisdiction, where they can voluntarily annex the land and install sewer and roads to spur development, says Ben White, vice president of economic development, Round Rock Chamber of Commerce and Economic Development Partnership.
White says the city’s pro-business community has created a simplified and easy permitting process so that everyone has success. The relocation of Emerson Process Management to the area is an example of the process at work. The company selected two existing facilities in Round Rock, which required retrofits, and working within a tight move-in schedule. The company completed the move in two months. Round Rock officials assigned an inspector to the project 24 hours a day. Emerson Process Management will move 750 jobs to the city, and add 125 jobs at the new offices within two years.
In other announcements in Round Rock, office space at one of the higher education campuses located on University Boulevard will support the statewide headquarters for the newly formed Texas Bio Corridor Alliance. “We hope it will bring attention to our community and the Texas A&M Health Science Center, which is the only medical school in the Austin metro, for the development of pharmaceutical and biotechnology projects,” White says. The community is also home to four hospitals. There are properties located on the northeast side of the city, which is where the hospital and higher education assets are based.
In Abilene, officials are growing their own workforce to support the health care sector in the area. That includes activities at the high school level; schools of pharmacy and nursing, as well as a new biotech center at Texas Tech; and instruction at the Abilene Intercollegiate School of Nursing.
Abilene is also home to an emerging biotech cluster; a fabrication sector; an energy cluster highlighted by wind, oil and gas; a beverage sector; and Dyess Air Force Base, which is home to 20 new C-130 J aircraft.
Abilene’s wind energy cluster has long been established and activities focus on servicing wind farms and building transmission lines to connect the energy to metro areas. A transmission line to San Antonio is complete; transmission lines to Dallas are being built. The needs of a mature wind energy industry have played a role in the expansion activities of the fabrication sector in Abilene. What’s more, “The support system for the oil industry is a big issue for us and we continue to see machine shop operations and service operations continue to grow and expand,” Ehrie says.
In other projects, Abilene’s officials continue to develop the Five Points Business Park, which just added and occupied two new buildings. “We are also looking to what area of the city we want to develop next,” Ehrie says.
In Allen, north of the Dallas metro, the community has brought online some 250,000-to-300,000 square feet of office space in the last five years. Dan Bowman, assistant director, Allen Economic Development Corp. (AEDC), says companies are creating efficiencies in these spaces. Frontier Communications Corp. has consolidated network, back office and call center operations to a facility in Allen, making use of open floor plates. PFSweb Inc., which builds the back end of Web sites for processing online transactions, has located its headquarters to a facility that sat vacant for eight years. Bowman says the facility features cubicles, a few private offices, but mainly focuses on collaboration spaces for employees to interact in creative ways.
Moving north to Sherman, Connell says the Progress Industrial Park features 500 available acres at this 1,000-acre site. The park provides both office space and industrial sites requiring rail service “We have it spread out so that it is compatible in terms of buffering and landscaping,” Connell says. The park is served by U.S. Highway 75.
Sherman, which is 60 miles from Dallas, is making plans to support the northward growth of the metroplex, which Connell says will continue up to the Red River and perhaps beyond. The addition of Panda Power’s natural gas fired electric generation power plant in Sherman, which will be complete in 2014, is a great infrastructure asset.
Industries that do well in Sherman include technology companies, food processors, and equipment manufacturers. Industries are supported in expansion plans through a local economic development fund, which is a voter approved three-eighths of a cent sales tax that generates $3 million to assist with supporting industry.
When making expansion decisions, “for a company it is about the bottom line and how to maximize profit; however, you have to make sure employees are happy,” Nashed says. “There is something for everyone; the mountains, beaches, big cities and small towns. In Dallas the arts district has really built up; and Austin is the live music capital of the world.”
Allen has been a hotbed of retail development the last five years, adding 2 million square feet of new retail space, including 150 new restaurants. Other developments include mixed-use projects, such as Watters Creek, and the Village at Allen.
Harry Whalen, executive director of the AEDC, says CEOs and their talent will find living in Allen, a planned community, lacks the congestion you might find in other Dallas area locations. Additionally, “in this region of north Dallas you will find a highly educated and motivated workforce,” Whalen says. “There is a lot of engineering talent, and the fact that there are so many data centers points to the talent of this area.”
The talent base, among other factors, attracted a $1 billion data center project to Allen for Cisco Systems Inc. Recent expansion activity in the city includes Zynga Inc., Billings Productions Inc., Experian Information Solutions Inc., and Jack Henry & Associates Inc.
Demerson from the governor’s office says the state’s business climate allows companies to succeed. “The CEOs and CFOs look at the tort reforms and they look at the predictable regulatory climate. If you know the factors in play you are in a better position to run your company.”