Governor seeking to refill job fund

Perry to ask Legislature for more money to attract companies

By: Kirk Ladendorf, Mike Ward
Austin American-Statesman
September 24, 2004 Friday

Gov. Rick Perry will ask the Legislature for a second round of financial backing for the Texas Enterprise Fund as he lays plans to bolster the state's economy and build jobs through investments in advanced technology programs, officials said Thursday.

Perry's staff, with input from Austin's Sematech research consortium and others, is formulating a plan that links state-backed research investment to long-term job growth in sectors ranging from auto manufacturing to health sciences to advanced technology.

Lt. Gov. David Dewhurst and Speaker Tom Craddick also are involved in the planning.

The state's game plan is set to be unveiled at an Oct. 20 economic development conference.

Perry's plan is tied to the success of early investments from the first Texas Enterprise Fund, $295 million approved by the Legislature in 2003 to use as incentives to lure companies.

So far, $171.8 million has been allocated from the fund to secure 12 major projects that will create nearly 15,000 jobs over the next three to five years.

More than two dozen other prospects are in the pipeline and under review, officials said, adding that the balance of the fund will be allocated before it expires in August 2005.

"The Enterprise Fund has been a tremendous success," Phil Wilson, Perry's deputy chief of staff, told a Thursday gathering of research scientists from the University of Texas and Sematech at UT's J.J. Pickle Research Center.

"We have created almost 16,000 direct jobs and almost $6 billion in capital investment. It is an extraordinary return. . . .

"So we would like to come back in the future and have that investment be made again by the state through the Enterprise Fund."

State officials aren't saying how much they want for the new fund or where they think the money should come from. But with additional money, they think the state could win more big job-creating projects.

For example, they said Texas could compete for six of the 10 auto plants expected to be built in the United States in coming years.

A new fund would also help Texas fend off its toughest rivals for high-tech and biotech jobs, including New York, California and North Carolina.

Wilson said the governor's office wants to build on Texas' assets for economic development.

One model for future investment will be the collaboration between Sematech and the University of Texas at Austin. That program, called the Advanced Materials Research Center, received $40 million in Enterprise Fund money this spring to support projects related to advanced chip manufacturing and emerging technologies, including bioscience and nanotechnology.

This "is a model hopefully that we will replicate across the state," Wilson said.

"We have outstanding universities, outstanding medical schools, great intellectual property and a great manufacturing base that is tied to high tech," he said. "Our challenge is to be strategic and smart and organized."

Perry's staff is talking with trade groups and other groups to gather ideas and build support for the new effort.

"We are in the drafting and planning stage," said Austin lawyer Pike Powers, who is involved in the effort. "We are trying to come up with a set of things that will work to satisfy the research and development needs of the state and to be practical in terms of politics."

The plan, Powers said, involves integrating a series of state investments in technology as a way to bolster job and business development over the next two decades.

"We are banging on it and trying to fine-tune it and get it focused to where we can go public with it and solicit votes from legislators," Powers said.

Jeff Moseley, executive director of Perry's economic development office, said the plan will focus on growing business sectors, or clusters, including automotive, aerospace, technology, defense, health sciences, biotech and pharmaceuticals, insurance and banking, energy and agriculture.

"An example would be an auto manufacturing plant that would attract suppliers to an area and other auto plants, whose costs would be held down if they located there," Moseley said. "This will be one of those studies that starts to build a foundation for the future."

In addition to more money for the Enterprise Fund, officials said, the Legislature may be asked to approve other tools to bring jobs to Texas, including a revamped industrial bond program.

"The more tools we have, the more successful we can be," he said.

Until last year, Texas had no state-level incentive program, meaning the burden of recruiting companies was left to cities, chambers of commerce and regional economic development organizations. But Perry lobbied the Legislature to divert money from the so-called rainy day fund to create the Enterprise Fund.

The state was losing out in the fight for jobs to other states with more weapons in their arsenal.

The two biggest projects the fund has supported so far are a $3 billion chip factory that Texas Instruments plans to build in Richardson and a $598 million aviation plant that Vought Aircraft plans to build in Dallas.

In Central Texas, Enterprise Fund money helped land a Home Depot data center in Austin and a customer service center in New Braunfels, bringing 843 jobs and $809 million in investment.

The money has been used for both direct incentives to companies and research investments, such as $50 million to the University of Texas at Dallas to help lure the Texas Instruments plant. The money will help pay for a new research center.

Wilson, Moseley and other officials said selections are made based on the number and quality of jobs that will created, the amount of capital to be invested in Texas, community participation, financing plans and other factors.

Officials said that after a detailed screening and negotiation process, companies that qualify for Enterprise Fund money must sign a contract with the state to ensure that the proposal plays out as expected.

Companies already located in Texas have not rushed for money to stay in Texas, as they have in some other states, because they see the value that the creation of thousands of new jobs has for everyone, according to officials.

The theory: The more businesses that locate in Texas, the more state revenues will grow and the more likely it will be that business taxes will not be raised.

Robert Black, Perry's deputy press secretary, said the past year's experience has shown that the Enterprise Fund is "a great tool for economic development."

"The governor believes that if you create jobs, you create wealth, you can pay for school finance, you can do the things you need to do as a state," he said.

Other states have created similar funds with less money and have had less success than Texas in attracting new business and creating new jobs.

According to trade magazines, nine of the 20 largest capital investment announcements by businesses in the United States during the past year have occurred in Texas.

"Texas is the talk of the town," Moseley said.

kladendorf@statesman.com, 445-3622; mward@statesman.com, 445-1712

(from box)

Texas Enterprise Fund: How the money has been spent

$171.7 million of the $295 million allocated by the Legislature in 2003 has been spent on the following initiatives, leaving $123.3 million available in the fund.

Company Location Business Corporate investment Enterprise Fund amount spent Direct jobs created Amount per job from Enterprise Fund Average wage of new jobs

Baylor College of Medicine Houston agriculture (bovine genome sequencing) $51 million $2 million n/a n/a n/a

Texas Instruments Richardson semiconductor $3 billion $50 million 1,000 Indirect $55,000

Vought Aircraft Dallas aviation $598 million $35 million 3,000 $11,667 $53,000

Sematech Austin high-tech consortium $190 million $40 million 4,000 Indirect $50,000

Texas Energy Center Sugar Land energy cluster $20 million $3.6 million 1,500 Indirect $70,000

The Home Depot Austin, New Braunfels; data processing and distribution $809.2 million $8.5 million 843 $10,083 $43,000

UT Health Sciences Center, M.D. Anderson Center, GEMS Houston biomedical $55 million $25 million 2,252 Indirect $70,000

Maxim Integrated Products San Antonio semiconductor $90 million $1.5 million 500 $3,000 $40,000

Citgo Petroleum Houston, Corpus Christi; relocation of corporate headquarters, refinery and expansion $828 million $5 million 820 $6,098 $72,000

Cabela's Buda, Fort Worth; tourist destination $70 million $600,000 600 $1,000 $27,500

Koyo Steering Ennis Automotive parts $30 million $333,000 200 $1,665 $30,000

Essex Communication Brownwood Telecommunications $7.6 million $250,000 50 $5,000 $35,000

Totals $5.8 billion $171.8 million 14,765 SCOTT'S VERSION

Company location, business Corporate investment Enterprise Fund amount Direct jobs created Amount per job from fund Average wage of new jobs

Baylor College of Medicine $51 million $2 million n/a n/a n/a

Houston, agriculture (bovine genome sequencing)

Texas Instruments $3 billion $50 million 1,000 Indirect $55,000

Richardson, semiconductor

Vought Aircraft $598 million $35 million 3,000 $11,667 $53,000

Dallas, aviation

Sematech $190 million $40 million 4,000 Indirect $50,000

Austin, high-tech consortium

Texas Energy Center $20 million $3.6 million 1,500 Indirect $70,000

Sugar Land, energy cluster

The Home Depot $809.2 million $8.5 million 843 $10,083 $43,000

Austin, New Braunfels; data processing call center

UT Health Sciences Center, M.D. Anderson Center, GEMS $55 million $25 million 2,252 Indirect $70,000

Houston, biomedical

Maxim Integrated Products $90 million $1.5 million 500 $3,000 $40,000

San Antonio, semiconductor

Citgo Petroleum $828 million $5 million 820 $6,098 $72,000

Houston, Corpus Christi, relocation of corporate headquarters, refinery and expansion

Cabela's $70 million $600,000 600 $1,000 $27,500

Buda, Fort Worth; outdoors retailer, tourist destination

Koyo Steering $30 million $333,000 200 $1,665 $30,000

Ennis, automotive parts

Essex Communication $7.6 million $250,000 50 $5,000 $35,000

Brownwood, telecommunications

Totals $5.7 billion $171.8 million 14,765

Source: economic development and tourism, office of the governor

Texas Enterprise Fund: how the money has been spent

$171.8 million of the $295 million allocated by the Legislature in 2003 has been spent on the following initiatives, leaving $123.2 million available in the fund.