Only $600,000 in incentives were tapped before the fusion project shut down, Bill Shelton, managing director of Ft. Worth-based Cornerstone Group, tells GlobeSt.com. Shelton also is an instructor at Texas A&M's Real Estate Center. He's also planning to roll the deals into a book on incentive practices across the US.
"It used to be location, location, location. It's incentive, incentive, incentive today," Shelton says. But, he stresses, it often takes more than incentive to lure corporate chiefs to the Lone Star state. "It's not the driving force in many cases," he says, citing the region's centralized positioning and union option as being equally important when the cards are laid on the table.
Doing business these days means "playing by monopoly rules," Shelton says. The game-playing strategy in recent months proved successful in Amarillo where a $45-million, 10-year deal sewed up Bell Helicopter Textron as a newcomer to the town with a population of 120,000.
Terms aren't always available, but Shelton has the inside track to know the facts. The $45-million package had Amarillo Economic Development Corp. buying 185 acres at the city's airport, kicking in $1 million in start-up funding for training, a 10-year property tax abatement and bond coffers. A $32-million non-taxable sales tax-generated bond fund pays Bell $2,500 per job while $8 million of taxable revenue bonds provide additional money for 1,475 jobs. It means rent is free if Bell delivers on the head count. And at the end of 10 years, Bell Helicopter Textron gets the real estate free and clear. The Amarillo EDC also kicked in money to help with employees' relocation expenses.
The size of the deals are all across the board. In Big Spring, TX, with a population of 23,000, Star-Tex got a $2.3-million interest-free loan, amortized over 14 years, to rehab a building for a call center, Shelton relates. For every $10 of the payroll, the firm can "retire" $1 of its annual building payment. The EDC and Star-Tex each will kick in $2,000 per month for five years to lay some 60 miles of high-quality, fiber-optic lines from Midland to Big Spring for the 450 jobs that the company plans to create.
The Texas tact is, says Shelton, "modest when compared to Oklahoma." A company can get up to 5% of its wages rebated for 10 years in Oklahoma. The recent passage of "right to work" legislation will give the neighbor to the north some of the same dynamics keeping Texas a stronghold for job growth.
The Texas legislature, through the years, gets the pat on the back for bundling the incentive programs now at work in all 254 counties. where many cities partake of 4a and 4b programs that use sales taxes as a business stimulant. The designations allow a 0.5% sales tax, with voters' approval, to be imposed and deposited into an economic development coffer. There is a 2% window of opportunity above the 6.25% state sales tax that municipalities can and do use to set up the account.
It's not a gift and there is a catch, says Gene Richards, director of Marketing Texas Business in Austin. The takers must produce all the jobs in order to get all the rebates cut in the deal-making process. The program will come up for review in the next legislative session just to find out if the accounts are being used properly, says Richards. The incentive program was set up in 1989 and nearly 480 communities out of 1,700 to 1,800 actively participate in the program.
Another big contributor to the cause is a sales tax exemption on manufacturing equipment, utilities, agricultural equipment and select deals. It boils down to tax forgiveness for newcomers and veteran businesses not just in the initial equipment phase, but forever, says Richards. The program started in 1989 at a 25% forgiveness and has been operating at 100% for the past eight years. Texas is only one of a handful of states offering the program.
Jeff Moseley, director of Texas Economic Development, tells GlobeSt.com it's the full gamut of programs that is responsible for the state's glowing record. From the disadvantaged to the wealthiest areas, there's something in place for everyone: enterprise zones, NAFTA, the Foreign Trade Zone, Freeport exemptions, the sales tax leverage, no state income taxes and the freedom of choice between union and non-union operations.
"It's probably just a real nice combination of programs and circumstances," says Moseley. Chicago and New York City, he asserts, are "coming back to the Texas model" to work up incentives for inner city projects. For the Texas team, Moseley says it simply "rolls up its sleeves, sharpens its pencils and studies the programs that make sense for our taxpayers."
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.