BUSINESS REPORT: Texas – A Decade Of Prosperity

By Donna Clapp
From the March/April 2012 issue

“Jobs are the fundamental building blocks of any community, and over the last two years, 40% of the net new jobs created in the United States were created in Texas,” says Gov. Rick Perry.

For the past decade, Texas leads the nation in job growth by no small amount. In fact, according to an article in the Austin Business Journal using federal employment data in May 2011, Texas added 732,800 jobs in the last ten years, while no other state increased private-sector jobs of more than 100,000. In the past year alone Texas created 251,700 new jobs and it is the only state that has more jobs today than it did three years ago, with a large number of those jobs in the manufacturing sector. Texas added more manufacturing jobs than every other state (with the exception of Michigan) over the past year.

Gov. Perry credits Texas’ economic strength to the state’s low taxes, reasonable and predictable regulatory climate, fair legal system and skilled workforce.

“Employers fleeing the over-taxing, over-regulating and over-litigating atmosphere that has taken hold in so many other states come to Texas because we’ve cultivated a culture that rewards innovation without all the red tape,” says Gov. Perry.

Not surprisingly, the Texas GDP also increased, which positioned the state as the nation’s second-largest economy, surpassed only by California. According to the Bureau of Economic Analysis, Texas’ $1.2 trillion 2010 GDP represented a 26.8% increase since 2000, and the state had one of the biggest increases in size of GDP in a half-century.

When the Milken Institute released its list of Best-Performing Cities in December of 2011, Texas cities dominated the list. Nine cities landed in the top 25 of the largest 200 metropolitan areas, including four of the top five positions, and five cities in the top 25 among the 179 smallest metropolitan areas. To determine the Best-Performing Cities, the Milken Institute measured job, wage and technology performance over a five-year period. The study found that Texas employers were responsible for one of every five jobs created in the nation from June 2010 to June 2011. San Antonio was the top performer among the nation’s 200 Best-Performing large metros, and Houston-Sugar Land-Baytown ranked number one among the 10 largest metros. The study attributes Texas’ success to having a favorable business climate, low business costs, renewed trade with Mexico and South America, and ongoing energy exploration and alternative fuels research.

“I’m proud of the environment we’ve created in Texas that allows employers to risk their capital, receive a return on their investment and create jobs, thanks to our low taxes, reasonable and predictable regulatory environment, fair legal system and skilled workforce,” says Gov. Perry. “Each of these cities highlights the reasons Texas is the best place to live, work and raise a family, and I congratulate them on this recognition.”

In that same month, The Brookings Institute’s MetroMontitor quarterly report named three Texas cities, Dallas, Houston, and McAllen, as part of their top 20 Overall Strongest-Performing Metro Areas.

For the seventh year in a row CEO’s recognize the state as the country’s economic engine in a survey by Chief Executive Magazine. The survey asked 550 CEOs to consider a wide range of criteria, from taxation and regulation to workforce quality and living environment, in the magazine’s annual ranking of the best states for business. In the study, Texas received strong marks in all areas important for business creation, while highlighting the state’s low tax burden and robust job creation compared to other states. Additionally, the study credited the state’s predictable policies and regulations, positive attitude toward business and Texans’ strong work ethic with helping the state hold the top ranking since 2005.

“Texas’ top ranking as the best state for business for seven years running by CEOs across the nation is a testament to our successful model for job creation and economic prosperity,” Gov. Perry said. “I am proud of our state’s accomplishments and remain committed to upholding principles like low taxes, restrained spending, reasonable regulations and a fair legal system, which have made Texas the best state in the nation to live, work, raise a family and start a business.”

Top Exporting State for 10 Years Running

In February of 2012 the U.S. Department of Commerce released data that ranked Texas as the top exporting state for the 10th year in a row, highlighting the state’s continued role as a global leader, as well as a national one.

“For a full decade now, Texas has been the nation’s epicenter for international trade thanks to the continued strength of our state economy and the opportunities created by our business climate,” says Gov. Perry.

Texas’ exports in 2011 totaled more than $249.8 billion, up 20.7% from $206.9 billion in 2010, outperforming growth in overall U.S. exports, which grew by 15.8% in 2011. On a percentage basis, Texas exported more of its home-produced goods than the United States as a whole. Nearly 19% of Texas’ economic output was exported in 2011, while the United States exported just 9.8% of its total output.

The state’s top export recipients were Mexico, Canada, China, Brazil and the Netherlands, which respectively imported $86.6 billion, $21.9 billion, $10.9 billion, $9.9 billion and $9.0 billion in Texas-manufactured goods. Texas’ top exporting industries in 2011 were petroleum and coal products, chemicals, computer and electronic products, non-electrical machinery, and transportation equipment.

Innovation Fuels Growth

While clearly Texas has a large abundance of traditional industrial and manufacturing companies to add growth to the state’s private sector jobs, it is the state’s commitment to innovation and technology that continues to ensure future growth.

“In Texas, we have cultivated a culture where innovation is rewarded, where entrepreneurs enjoy more freedom to do things the way they need to, where employers are freed from oppressive government red tape and can maintain the sort of flexibility you need to do business on the cutting edge. It’s why we’ve attracted world-class, high-tech firms including Facebook, eBay and Samsung,” says Gov. Perry.

In 2003, the state’s legislature created the Texas Enterprise Fund (TEF) to help ensure the growth of Texas businesses and create more jobs throughout the state. The fund has since become one of the state’s most competitive tools to recruit and bolster business. To date, the TEF has invested more than $441.7 million and closed the deal on projects generating more than 60,500 new jobs and more than $15 billion in capital investment in the state.

The Texas Enterprise Fund is one of the most successful deal closing funds in the country, helping Texas compete against other states for companies seeking to relocate or expand their operations. Investments, subject to approval of the Governor, Lt. Governor and Speaker of the House, are tied to job creation targets, so, if the job targets aren’t met, the state has the option to reclaim the money.

In February 2012, the state used a TEF investment to entice one of the world’s largest automotive industry suppliers into relocating to Seguin, TX. Gov. Perry announced that the state is investing $1.2 million TEF funds in Continental Automotive Systems Inc., to relocate production of its sensors and actuators from Europe and Asia to its plant in Seguin, creating 300 new jobs and $113 million in capital investment.

“Employers from around the nation and all over the world continue to look to Texas as the premier location for business expansion, relocation and job growth thanks to our low taxes, reasonable and predictable regulations, fair legal system and skilled workforce,” Gov. Perry says. “This TEF investment in Continental will create hundreds of jobs, pump millions of dollars in capital investment into the area, and further strengthen Seguin’s diverse economy.”

Continental is one of the world’s largest automotive industry suppliers. The company manufactures engine, transmission and hybrid control units at its plant in Seguin, and will begin producing sensors and actuators. Continental AG, the parent company, also has facilities in Houston and Uvalde.

“Today’s announcement would not have been possible without the strong support of and collaboration with the state of Texas and Texas Enterprise Fund, Seguin Economic Development Corporation, City of Seguin and Guadalupe County officials,” Kregg Wiggins, senior vice president, NAFTA Powertrain Division for Continental said, at the announcement. “We truly appreciate their support and look forward to expanding our business in this region.”

In 2005, the state also created the Texas Emerging Technology Fund (TETF) to provide grants for emerging technologies. Seven regions of the state were established to administer the program through a “Regional Center of Innovation and Commercialization” designation. In addition, a statewide Life Science Regional Center of Innovation and Commercialization was also formed.

“In Texas, we understand that high-tech companies don’t just happen overnight but are a product of forethought, sound vision and planning, and strategic investments by both the public and private sectors. Through our Texas Emerging Technology Fund, we are bringing the best scientists and researchers to Texas, attracting high-tech jobs and helping start-up companies get off the ground faster,” says Gov. Perry.

TETF grants are awarded in the following three areas:

  • Commercialization Awards: funds to help companies take ideas from concept to development to ready for the marketplace. The goal of the TETF Commercialization Awards is to grow new small businesses and existing businesses to accelerate new products and services to the marketplace. Through these investments, the goal is to ensure a vibrant economy for Texas and a global leadership position. Commercialization awards provide selected, early-stage investments in new, technology-based, private entrepreneurial entities that collaborate with public or private institutions of higher education in Texas, and which, if successful, may provide significant economic benefit to the state.
  • Matching Awards: funds that create public-private partnerships, which leverage the unique strengths of universities, federal government grant programs, and industry.
  • Research Superiority Acquisition: funds for Texas higher education institutions to recruit the best research talent in the world. The TETF Research Superiority Acquisition goal is to bring the best and brightest researchers in the world to Texas. This enables Texas academic institutions to continue to build expertise in key research areas, attract and encourage students to pursue advanced degrees in math, sciences, and engineering, and provide an invaluable resource to the community, especially fostering innovation and commercialization in Texas companies.

“Since its inception, the TETF has allocated more than $196.2 million in funds to 132 companies and nearly $173 million in grant matching and research superiority funds to Texas universities,” said Gov. Perry in a 2011 Governor’s Technology and economic Development Forum. “These strategic investments are helping keep ground-breaking innovations right here in Texas instead of heading to the coasts. They’re also attracting world-class researchers to schools across our state including UT-Austin, Texas A&M and Rice.”

Here’s a great example of how this fund is used to help grow new businesses in the state. In June 2011, the TETF awarded $1 million to Vital Art and Science Inc. (VAS) for the development of a handheld application capable of diagnosing and monitoring age-related macular degeneration and diabetic retinopathy. This technology was developed at the Retina Foundation of the Southwest in Dallas, which along with the University of Texas Southwestern Medical Center, will support clinical trials of the technology.

“The Texas Emerging Technology Fund continues to be a critical tool to help develop and bring to market innovative technologies with the potential to change lives not just here in Texas, but across the U.S. and abroad,” says Gov. Perry. “VAS’s technology will provide an accurate and cost-effective monitoring solution for the millions around the world who suffer from macular degeneration and diabetic retinopathy, and will help physicians treat these age and vision-related diseases.”

VAS is developing myVisionTrack, which allows patients with age-related macular degeneration and diabetic retinopathy to easily and accurately test and monitor their retinal function at home. This technology provides a lower cost alternative to doctor’s office-based testing, and a more accurate alternative to current home testing methods.

Expansions, Relocations Add To Job Growth

Over the past year, and in 2012 there were a number of large corporate expansions and relocations, which added to the tremendous Texas job growth numbers. Here’s a highlight of a few of them.

In March 2012 Apple announced that it will expand its presence in Texas with a $304 million investment in a new campus in Austin that will create more than 3,600 new jobs. The new campus will more than double the size of Apple’s workforce in Texas over the next decade, supporting the company’s growing operations in the Americas with expanded customer support, sales and accounting functions for the region. In exchange for Apple’s commitment to create these new jobs in Texas, the state has offered Apple an investment of $21 million over ten years through the TEF program. When completed, it will be one of the largest job creation projects in TEF history, and one of the largest capital investments by a TEF recipient. The agreement is contingent upon the finalization of contracts and a local incentive agreement with the City of Austin and Travis County.

Austin is home to a number of new expansions and relocations. In January 2012, The Advisory Board Company announced it will be expanding it’s operations, which will create more than 200 jobs with an average salary of $90,000, and invest $8.1 million in capital expenditures to expand services provided by its Austin-based Crimson division.

The Advisory Board Company is a global research, technology and consulting firm partnering with 125,000 leaders in 3,200 organizations across health care and higher education. Its Crimson division in Austin currently supports more than 500 individual hospitals and 300,000 physicians. State and local grant funds, including $500,000 through the TEF program, will be used to expand the Crimson division to include software development and technical support services infrastructure in Austin.

“The exceptional depth of technical talent in Austin has driven our development of technologies that solve hospitals’ most pressing challenges: strengthening hospital-physician alignment and clinical performance,” Crimson division CEO Paul Roscoe said at the announcement. “We are continuing to invest in our Austin office as we enhance our portfolio of technology services that help hospitals and health systems shift toward value-based and risk-oriented care.”

March 2012 also saw the announcement of expansions at the Formosa Plastics Corporation, U.S.A. plant in Point Comfort, TX. Formosa will be investing more than $1.7 billion in capital equipment and construction to expand the capacity of its petrochemical complex. This investment will create an estimated 1,800 construction jobs and, once completed, an additional 225 long-term operating and maintenance jobs.

“This will be the third major expansion at the Point Comfort site; it sends a clear signal of our dedication to substantial investment and job creation in the U.S.,” noted company Executive Vice President Mr. C. L. Tseng.

“We anticipate construction completion and start-up in 2016,” added site Vice President/General Manager Randy Smith. “This is a tremendous vote of confidence in the U.S. economy, the State of Texas and the Gulf Coast region’s workforce.”

In October 2011 CGI Group Inc. announced that it will be creating a new U.S. onshore delivery center in Belton, TX. The state is investing $1.8 million in the expansion through the TEF program and the expansion will create 350 new jobs and $7 million in capital investment.

“For more than 25 years in the State of Texas, CGI has been a trusted IT partner to public sector clients and some of the world’s largest corporations. We are proud to extend this partnership now with the City of Belton as the site of our newest IT Center of Excellence thanks to this TEF investment,” CGI U.S. President George Schindler said during the announcement. “With a focus on recruiting veterans and military family members, this center will offer high-quality, onshore IT talent to our clients while providing good jobs to those who have served our nation so proudly.”

The new state-of-the-art center in Belton will support CGI clients’ needs for software development, maintenance, and testing as well as network engineering, design, and data management support.

In November 2011, Gov. Perry announced the state was investing $650,000 through the TEF program in Flexsteel Pipeline Technologies Inc., which will invest $94.8 million in capital expenditures in a new manufacturing facility in Baytown, creating 130 new jobs.

“We at FlexSteel Pipeline Technologies are excited about expanding our manufacturing facilities into the great state of Texas,” CEO Jeff Shorter said. “The economic development grants from the Texas Enterprise Fund were instrumental in our selection of Baytown as the destination for our new 280,000 square foot facility. The Ameriport Industrial Park location is ideal for FlexSteel Pipeline Technologies.”