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Creating Synergy

Kilgore forms innovative public-private partnership to lure new industry

by Karen Hudgins

Editor’s Note: The following article appeared in the November/December 2007 issue of Texas Rising.

Kilgore, population 12,000, has long flourished from its rich oil fields. But after the oil industry and city took an economic hit in the early 1990s, economic development leaders sought to decrease the town’s dependence on the oil and gas sector, diversify Kilgore’s economy and attract new jobs.

To do that, Kilgore needed a place for new business to go, says Amanda Nobles, director of economic development for the Kilgore Economic Development Corp. (KEDC).

“No longer are companies willing to go look at a flat piece of farm or ranch land and say ‘this is a good site,’” Nobles says. “They want to see roads, water and sewer and all the other utilities ready and in place.”

In 1998 KEDC bought land for Synergy Park at Elder Lake, a 512-acre business park. Still, the city needed a shell building to help entice industry. In 2004, Kilgore’s EDC joined with private investor the Gault Company of Dallas to form Kilgore Synergy Partners LP. The public-private partnership developed Synergy Center, an 80,000-square-foot speculative shell building in Synergy Park. Total investment in the shell building was $2 million, with KEDC contributing $1 million in land, dollars and expertise and the partners contributing $1 million in financing, marketing and management of leases.

Kilgore’s innovative approach to developing its business park and shell building has paid off. In 2007, five projects in Synergy Park broke ground, creating 430 jobs and $74.7 million in new investment. Focusing on Strengths

Nobles says that KEDC’s joining with a private-sector partner brought a different set of expertise to the table.

“The partners have a different viewpoint. They are in it for profit,” she says. “The EDC is typically in a deal for additional value on the tax rolls and jobs for its citizens. We get our project and our partner gets his project and we both benefit.”

Gault Company President Roger Gault says his company found the business park and its location attractive.

“We were betting that we could capture a regional or national tenant who wanted to locate there because of available labor, proximity to Interstate 20, lower rental rates than a major market building and quality of life for their employees,” he says. “We didn’t expect the first spec building to be very profitable. But the thinking was even if it was marginally successful, the template of the partnership would be established and then we could continue to replicate the program with additional buildings.”

Synergy Site Plan

The partnership also allowed his company to spread its risk, Gault says.

While KEDC purchased the land for Synergy Park, it created a property owners’ association to manage the park. The park includes a 10-acre lake and a one-mile walking trail that is open to the public during the day and available to park tenants. Model for Other Cities

The partnership concept makes sense to use in a variety of communities, says Nobles. With Synergy Center and its limited partnership agreement, Kilgore has provided a pattern and a successful model to encourage developers to enter markets of small or rural communities and mitigate risks for both parties.

“One of the positives of this kind of arrangement is you don’t have to have a huge development,” says Nobles. “If you are a smaller city and need a strip center developed, you could do a smaller development under the same scenario.”

Gault says the project was successful for his company.

Kilgore's Synergy Park

“The goal of the partnership, and we achieved our goal in this case, is for us to make money on our side of the partnership and for them to both recapture some or all of their incentive money while also creating new jobs in their community.”

KEDC also sought counsel from an attorney on the legality of a partnership with a 4A corporation. The agreement is public and provides a template for other communities.

In 2007, Kilgore received an award from the Texas Economic Development Council for the development of Synergy Park.

For resources on how to recruit businesses and information on local economic development programs, contact the Comptroller’s Local Government Assistance and Economic Development Division at (800) 531-5441, ext. 3-4679.