Corporate Welfare
Gosh, after reading David Hendrick’s column on the Texas Enterprise fund, one would wonder how Texas has managed to attract any businesses at all to the state over the past 30 years.
The survey question could be rephrased. “Would you be in favor of hanging a gigantic sign on the state Capitol building reading:’Texas is closed for business’?”
According to Hendrick, the Enterprise Fund will help Texas attract more businesses like Toyota to Texas.
Voters ought to be aware why Texas started the Enterprise Fund.The reason sits in South Bexar County and begins producing Toyota Tundra pickups next month at the rate of one every 58 seconds.
All the state government had were some job training funds that every other state has. The only reason Toyota officials even glanced at Texas that year was the state’s huge pickup market.Texas couldn’t even offer any tax breaks because few companies paid a business tax anyway. Economic development was not a state program. Only cities and counties competed for projects.
Meanwhile, a handful of other Southern states were desperate to throw hundreds of millions of dollars in incentives each at a chance for the Toyota assembly plant.
As the Toyota opportunity dawned on Texas state leaders, Gov. Rick Perry’s administration pulled together what it could for a Toyota offer: a decade’s worth of federally funded job training funds, worth $54 million, and some state highway money for road upgrades around the plant site.
We’re so lucky that Toyota even considered us because the only thing we had to offer is probably the country’s largest pickup market and easy access to Mexico. And the fact that they don’t have to pay a business tax here is only a detriment to Texas’s ability to bargain since we don’t have a tax to offer them a break on. I mean, without Perry scraping together those funds, Toyota would have been off to Alabama or Tennessee.
The $15 million pledge — Perry still had to win the allocation from the Texas Legislature in its 2003 session — overcame the last obstacle to the Bexar County site, and the day was won for Texas and Toyota.Eventually, Union Pacific decided to share its South Bexar County rail line with competitors so the rail spur no longer was need. The $15 million was diverted to Toyota plant site improvements.
Obviously rail access was important in Toyota’s decision. However, I would like to point out, as Hendricks himself has, Union Pacific decided to cooperate anyway! Out of the pure goodness of it’s heart? Give me a break. Does anyone think that Union Pacific isn’t going to benefit from the increased traffic?
Given this is a business column, it would have been nice for Hendricks to provide evidence showing that local incentives significantly affect a business’ relocation decision. Maybe there’s a reason for that, maybe it’s because he can’t.
When deciding where to locate a project today, companies often look for an educated work force, low utility costs, an attractive quality of life, good infrastructure and education. Tax abatements provide an extra incentive. “In times of fiscal austerity, you can’t go spending all of your money on tax abatements,” Weber said.Abatements are important, Cavazos said, but they aren’t the only means of attracting companies. In fact, 127 companies have moved to San Antonio since 1991 and only 21 of those, or 16 percent, used the city’s tax abatement program, he said.
Economic incentives don’t break deals, said Hernandez, with the San Antonio Economic Development Foundation.
“It’s proximity to market. Proximity to the best-prepared labor force.”
To illustrate the point, San Antonio and Texas offered the lowest incentive package out of all the states vying for Toyota’s truck plant with 2,000 jobs, but it still landed the project.
Maybe Perry should have invested some of the money into education.
Perry ad touts record on bringing in business:
In addition to the Inc. piece, Texas received bad publicity in auto industry circles this summer when Toyota couldn’t fill 200 skilled positions among the 2,000 jobs at its new San Antonio plant from an applicant pool of 100,000 people. A group of supplier plants adjacent to the factory also were having trouble filling 2,100 manufacturing jobs they had available because they did not receive enough applications.”Toyota executives were disappointed by the relatively few applicants for jobs at Toyota’s new supplier plants,” reported Crain’s Automotive News.
Apparently there was some sort of economic development department before.
The 2003 session approved the first Texas Enterprise Fund and enabled Perry to abolish the old economic development department and fold its functions into the governor’s office.
So what is the benefit of moving it to the governor’s office? Let me guess, Perry would be able to respond to business opportunities with more flexibility than what would have happened under the old system. I’m sure the old system was bogged down with too many accountability issues. Now why doesn’t this count as corporate welfare?
Filed under: Buseinss Incentives, Corporate Welfare, David Hendricks, Rick Perry, San Antonio Economic Development Foundation, San Antonio Express News, Tax Abatements, Texas enterprise fund, Toyota, Union Pacific, texas, texas politics
