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By Jack Rogers
From the September/October 2013 issue
When we scheduled a chat with Gov. Rick Perry of Texas for the September/October 2013 issue of Business Facilities, we assumed our encounter would be similar to the informal yet highly informative session we had with him in May at the State Capital in Austin. Perry ambled out of his office to accept our 2012 State of the Year Award last spring and then spent nearly an hour explaining his economic development strategy to us, face-to-face.
This time, the governor’s been mostly off the premises: Perry has been popping up all over the country telling businesses in the other 49 states why they’d be better off in Texas. We managed to get him to put the tour on pause for a few minutes and give us an update on the huge success story in Texas, the most dynamic state economy in the U.S.
Gov. Perry identified the key factors that made Texas a consensus choice among national business publications this year as the state with the best business climate in the nation.
“Our recipe for success in Texas is simple,” he said. “We’ve created an economic environment that keeps taxes low, has smart regulations, doesn’t allow for over-litigation and promotes a world-class workforce This combination lets families and employers keep more of what they earn and provides certainty for businesses to grow.”
The results from Business Facilities’ 2013 State Rankings Report tempted us to briefly consider a new configuration for our annual rankings: Texas and everybody else. For the second year in a row, the Lone Star State imposed its dominance across the board. Texas repeated as our top-ranked state for Best Business Climate; it also snared no. 1 rankings for Best Infrastructure, Natural Gas Production Leaders, Most FTZ Activity and Installed Wind Power Capacity Leaders. Top 10 finishes for Texas included: no. 2 in Data Center Leaders, no. 3 in Aerospace/Defense Industry Leaders, no. 5 in Biotechnology Strength Employment Leaders, no. 5 in Nuclear Power Generation Leaders, no. 4 in Credit Quality and no. 4 in Renewable Energy Leaders (Capacity).
Not surprisingly, Gov. Perry told us he has no intention of slowing down and giving the other states a chance to catch up to Texas.
“Not a chance!” he declared. “Our state’s success comes from hard work and [a] commitment to freedom where businesses are rewarded for their success, not punished. It’s great to see so many other states doing the things we’re doing in Texas. But, as governor, I feel I owe it to the people of Texas to continue doing all I can to create as many jobs for them as possible, and I don’t plan on slowing down anytime soon.”
TEF: MEGA “DEAL-CLOSING” FUND
Perry is not just the biggest cheerleader for economic development in Texas. His approval is required for every incentive grant handed out by the Texas Enterprise Fund,. The governor likes to call the TEF his “deal-closing” program, enabling Texas to compete with incentives offered by other states, on a project-by-project basis. TEF has spurred numerous business expansions in Texas, including Dow Chemicals’ recent decision to invest $2.5 billion in plastics manufacturing in the state.
“This fund is an important tool in our economic development effort and a key component of our state’s status as a national economic leader, bringing tens of thousands of jobs and billions of dollars in economic investment,” Perry says. “Each proposed project is reviewed individually and evaluated on many factors, including the jobs it will create and the investment it will make in Texas.”
He adds, “We work with the local communities to tailor incentives to a specific project. Texas’ competitive advantage over other states is found in our local governments’ ability to customize offers and incentives.”
Another successful program giving Gov. Perry bragging rights is the Texas Emerging Technology Fund (TETF), a $200-million initiative created by the TX Legislature in 2005 (it has been reauthorized every year since). To date, TETF has allocated more than $203 million in funds to 142 early-stage companies, and over $216 million in grant matching and research superiority funds to Texas universities. Additionally, since the inception of the TETF, more than $1.67 billion in additional investment from federal grants, private investors and industry has followed the TETF commitments, more than quadrupling the amount invested by the TETF.
While Texas has a generous menu of incentives, Gov. Perry stresses that there are consequences for failing to meet job-creation targets. “Every TEF contract includes a clawback provision requiring a company to return incentive funds to the state if job-creation performance requirements are not met,” he notes. “This is a win-win for the state. Either the jobs are created or the state gets its money back.”
Under Gov. Perry’s leadership, Texas universities and community/technical colleges are playing a major role in preparing a skilled workforce to meet the needs of high-tech industries.
“We’ve brought industries together with our technical and community colleges to create a state model that will enable students to attain specific certifications in high-demand industries,” Perry says. “This legislative session, we established the Texas Fast Start Program, a collaboration between the Texas Workforce Commission and the Texas Higher Education Coordinating Board, to help students, especially those who are veterans, earn postsecondary certifications and degrees, and quickly enter the workforce.”
Gov. Perry signed the first measure in the nation requiring oil and gas companies to disclose chemicals used in hydraulic fracturing. He expressed confidence that the Lone Star State can expand fracking while protecting its environment.
“Our oil and gas regulatory body, the Texas Railroad Commission, is renowned globally as an oil and gas regulator, routinely hosting regulators from around the world who come to Texas to learn how to strike the perfect balance between protecting public safety and the environment—without strangling the industry with unnecessary regulation,” Perry says.
“I signed a bill in 2011 that provided a common-sense approach to regulating the hydraulic fracturing process. It was a bipartisan solution created with the input of industry and environmental groups.”
Gov. Perry also has been a trailblazer in pushing through tort reform in Texas.
“Our tort reform efforts have freed our businesses from the burdens of over-litigation,” he says. “I think that companies understand the benefits of being able to keep more of the money they earn so that they can reinvest it in their businesses by hiring more workers, buying equipment or conducting research.”
SMART GRIDS, DESALINIZATION
Texas is undertaking a $6.8-billion project to connect West Texas wind farms with the power grid serving Dallas and Houston. Gov. Perry told us all of the CREZ (Competitive Renewable Energy Zones) lines are scheduled to become operational by the end of this year. Currently, about 75 percent of the total project is energized (or activated).
Voters in Texas will be deciding in November whether to approve the State Water Implementation Fund, which will finance low-interest loans for regional water projects. Perry says this expansion of water resources is critical to future economic development in Texas, which has suffered catastrophic droughts in recent years.
“With 1,000 people a day moving to Texas and our expanding economy, a safe, reliable water supply and the infrastructure to deliver it to our homes and businesses are vital to maintaining a high quality of life and a strong economy,” the governor says. “Passage of this constitutional amendment will help Texas secure a sustainable and reliable water supply.”
Perry has supported pilot projects to assess the feasibility of large-scale seawater desalination plants on the Texas Gulf Coast. The State Water Plan envisions Texas getting 3.4 percent of its water supply from desalination in 2060. The plan projects that 1.4 percent will come from seawater desalination and 2 percent will be produced from brackish groundwater desalination.