Like the mythological Phoenix rising from the ashes to begin a new cycle of life, the Texas Enterprise Fund was reborn over the past year or so, despite efforts to shut it down. Fortunately for Texas’ ongoing economic development efforts, it survived.
Prior to the initial adoption of the fund in 2003, economic incentives used in Texas to recruit major companies to the state were focused at the community level, with real and business personal property tax abatements or rebates being the most common practice. The primary driver responsible for the push for a state deal closing fund was the high profile pursuit of the Boeing Co. headquarters relocation out of Seattle during 2001. As many of you will remember, the company considered Chicago, Dallas, and Denver. Chicago touted cosmopolitan living on Lake Michigan and state-level incentives support. Dallas boasted of no state corporate or personal income tax and competitive real estate costs. Denver advocated for its breathtaking mountain vistas and highly educated workforce.
The lure of recruiting the headquarters of the largest airplane manufacturer in the world made for a very competitive situation. In pursuit of its new location, Boeing considered access to air and ground travel, business climate, other economic considerations (including incentives), and quality of life—all points our region still advocates in corporate recruitment. At the time, the legislation was not in place to utilize Texas funds to lure them to the state. There was much scurrying around to try to structure a competitive incentive package at the state and local levels. As a regional economic developer at the time, I was actively involved in the Dallas effort. Following the loss of Boeing’s headquarters to Chicago, there was a grassroots economic development effort to increase the incentive offerings at the state level, eventually giving rise to the Texas Enterprise Fund.
Under the leadership of then Gov. Rick Perry, the 78th Texas Legislature established the Texas Enterprise Fund (TEF) in 2003 with an initial $295 million to help attract new jobs and investment to the state. The fund was subsequently re-appropriated in 2005, 2007, 2009, 2011, and 2013. The largest deal-closing fund of its kind in the U.S., it applies only where a single Texas site is competing with another viable out-of-state option.
There have been some drawbacks with the program in terms of project timing. Because there must also be significant local support for the project from the proposed city, it means you have to hold off submitting the formal application until you are down to one Texas city in the site search. It could then take up to 90 additional days for the state’s due diligence and the required unanimous vote of the Governor, Speaker and Lieutenant Governor, versus the ability to obtain incentive offers from some competitor states within two weeks or even less. That being said, the adoption of the TEF gave Texas a much-needed negotiating tool to use in recruitment.
A controversial topic of the 2014 Texas state elections, the program underwent a required audit covering the 10 years of its existence and a revamp of the application process under now Gov. Greg Abbott’s leadership. Having worked through the earlier application process with corporate clients, the revised program procedures are more streamlined. The professionalism and responsiveness of the staff of the Governor’s Office of Economic Development, the Speaker, and the Lieutenant Governor should also be noted.
The program’s policy still requires there be out-of-state competition and the site search down to one Texas city, but the due diligence and approval timeframes have been significantly reduced. The application review time has been cut, but, more important, the amount of time for leadership to consider and vote reduced from 90 days to 30 days with the option of a 14-day extension. The other major change is that the program is no longer giving upfront disbursements. The grants are performance-based and tied to job creation.
Having recently represented three corporate clients in their pursuit of support through the Texas Enterprise Fund program, I experienced first-hand the very positive program improvements under the new leadership team and its staff. Like the Phoenix, there’s a new cycle of life for the program that has a proven track record in helping Texas to maintain its competitive edge.
Linda Burns of BDG and Wadley Donovan Gutshaw Consulting is a national site consultant based in the Dallas area who specializes in incentive negotiations and economic development site location strategies. Contact her at [email protected] or[email protected].
