Fairness issues and the Texas Enterprise Fund

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Recently, there have been questions raised regarding the fairness of the use of the Texas Enterprise Fund, a key aspect of the state’s economic development incentives.

At issue is whether the Dallas-Fort Worth Metroplex gets a disproportionate share of awards. The TEF is an important “deal closing” fund which has been effectively used to enhance Texas’ ability to attract desirable corporate locations and expansions.

To be eligible for TEF awards, companies must be planning a project with significant projected job creation and capital investment. Moreover, they must be looking at a single (yes, single) site in Texas which is actively competing with at least one viable out-of-state option.

Projects have to be supported by the city, county and/or school district in which the project would be located, including local incentives. Applicants go through an 11-step due diligence process, and, if all criteria are successfully met, the Governor, Lieutenant Governor, and Speaker of the House then review applications and must unanimously agree to support the award.

While economic development incentives are absolutely essential, they are certainly not the only (or even the most important) criteria.

Decision locations are driven by the ability to meet the needs of the company. Workforce, infrastructure, geographic location, proximity to customers and suppliers, access to raw materials, and many other fundamental characteristics of each potential location are examined.

The best combination of attributes, including incentives, generally prevails.

The Dallas-Fort Worth area is not only one of the most dynamic in the nation, but also offers advantages such as a major airline hub, a long history as a business and financial center, other transportation advantages including highway and rail access and a cargo-oriented airport, a large and growing population, and proximity to many Fortune 500 corporate headquarters.

I could go on, but it’s no surprise that the area is drawing in new projects. Recent years have also seen multiple TEF-supported technology-oriented projects in the Austin area, a wind tower manufacturer in Amarillo, and chemical manufacturing facilities along the Gulf Coast.

These locations make sense for the businesses selecting them, and the cities chosen were not interchangeable. The geographic distribution of awards has also varied over time.

Incentives for economic development are becoming more critical for myriad reasons, and the TEF has been and will remain crucial to Texas growth. However, the basic needs of a company considering a location are paramount. Each area is different, with its own set of characteristics.

Companies look for the best fit based on their own criteria, and any attempt to use the TEF or any other statewide tool to force them toward a particular metropolitan area would be counterproductive and, under current rules, impossible.

Dr. M. Ray Perryman of Lindale is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.

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