Texas Rising March/April 2010

Enterprise Programs, Grants Help Seal the Deals

Communities combine state, local incentives to attract manufacturing investment

By Tracey Lamphere

When it comes to manufacturing jobs, state programs have helped Texas cities offer valuable incentive packages that many companies find hard to refuse.

Sanderson Farms, which received a $500,000 Texas Enterprise Fund grant, promised to create more than 1,300 jobs as part of its investment.

“When choosing a site, we look at a list of about 60 different factors including utilities and labor, but there are also soft factors like the business environment and a welcoming community.”

– Mike Cockrell, CFO for Sanderson Farms

Cultivating Business

With incentives, companies are obligated to meet certain criteria, typically capital investment or job creation. When Mississippi-based Sanderson Farms expanded its Texas operations in 2006, it received a $500,000 Texas Enterprise Fund (TEF) grant and promised to create 1,312 jobs and make a $73 million capital investment within 10 years. So far, the poultry producer has built a new $50.5 million processing plant and an $11.5 million hatchery in McLennan County. The plant currently employs more than 1,100 workers.

“We don’t ask for a lot,” when it comes to state and local incentives, says Mike Cockrell, Sanderson Farms treasurer and chief financial officer.

“When choosing a site, we look at a list of about 60 different factors including utilities and labor, but there are also soft factors like the business environment and a welcoming community,” Cockrell says. “It’s not something that happens overnight.”

A $75 million TEF grant sealed the deal for the Panhandle city of Dalhart when it wooed the Hilmar Cheese Company.

The Hilmar Cheese plant in Dalhart is being expanded.

“We’re glad to be operating in Texas. It’s worked well for us.”

– David Ahlem, Hilmar site manager

While the TEF grant certainly didn’t hurt Sanderson Farms’ interest in Texas, it really tipped the scales for Hilmar Cheese Company.

California-based Hilmar received a $7.5 million TEF grant in 2005 in exchange for creating 1,962 direct and indirect jobs over 10 years. The company recently broke ground on a factory expansion in Dalhart that would allow the company to double its current production in Texas.

“We’re glad to be operating in Texas. It’s worked well for us,” says David Ahlem, site manager for Hilmar.

Closing the Deal

TEF grants have helped bring in manufacturing jobs since 2003, but they must be combined with other state and local incentives. Projects considered for TEF grants must generate a certain number of jobs during a specific timeframe and provide a high rate of return on the state’s investment.

So far, the program has disbursed more than $344 million to companies that have contracted to create 52,867 jobs. Of that, about $85.6 million has been allocated to manufacturing companies that have agreed to create 16,521 jobs and provide $8.9 billion in capital investment.

Texas Enterprise Fund recipients haven’t been immune to economic challenges. Earlier this year, 11 companies that were in compliance with their existing contracts requested amendments that extended deadlines or lowered job creation requirements.

“Because the goal of the TEF is to create jobs, the state is willing to consider an amended contract that may provide fewer jobs or an extended job creation deadline, rather than ending the contract and losing future jobs for Texans,” says Lucy Nashed, a spokeswoman with the Governor’s office.

THE EUREKA! AWARD
Taking Energy Innovation Higher

Encouraging innovation and rewarding pioneers was Comptroller Susan Combs’ goal when Texas Monthly invited her to contribute to their May 2009 “ideas issue.”

Her idea? The Eureka! Award, a new partnership between the Texas Comptroller’s office, Texas universities and nonprofit organizations that will help bring energy conservation and efficiency products and technologies to market. At least five awards of up to $50,000 will be given to eligible Texas-based small businesses to promote their market-ready products.

Two rounds of awards totaling $250,000 each will be issued in fall 2010 and 2011 and are funded with federal stimulus revenue earmarked for the Texas State Energy Program, which is administered by the Comptroller’s State Energy Conservation Office.

“The Eureka! Program’s key benefit is the support it provides when a product is market-ready and needs to be promoted to consumers,” says Delane Caesar, the Comptroller’s Public Outreach and Strategies director. “Our research found that most funding dries up at the time new technology needs to be marketed. The Eureka! Program will specifically support innovators by providing small grants to promote awareness of their new energy-related product or technology.”

The Eureka! Award Program is scheduled to begin accepting applications this fall.

Tools for Trade

It’s not just large companies benefiting from TEF grants. In February, the Governor’s office announced that SIPCO would get $300,000 when it opened a manufacturing facility in Cuero, a rural city southeast of San Antonio. The investment will create more than 100 jobs and provide more than $6 million in capital investment.

Cuero also works with the Texas Enterprise Zone Program and the Texas Capital Fund to recruit business.

“We are competing with the rest of the world for business expansions,” says Shelley South Pennell, executive director for the Cuero Development Corporation. “Every program that is designed to help businesses be successful is important to us.”

Other Texas state agencies administer programs that help companies retain workers and expand their operations.

  • The state’s Enterprise Zone Program was created to retain jobs rather than recruit them. It allows eligible growing companies to apply for a state sales tax refund. The Comptroller’s office administers state sales and use tax refunds.
  • The Texas Product/Business Fund, administered by the Office of the Governor and Texas Economic Development Bank, provides financing to companies that already manufacture or operate in the state.
  • The Skills Development Fund, administered by the Texas Workforce Commission, provides job training for Texas businesses and workers in conjunction with public higher education institutions. TR

For information on how your community can benefit from state financial incentive programs, visit the Governor’s Office of Economic Development and Tourism.

Required Plug-ins