Enterprise Fund FAQ
Q: Why does Texas need an Enterprise Fund?
A: Prior to the 2003 legislative session, Governor Perry and other leaders recognized that Texas was at a serious disadvantage in terms of attracting new jobs to our state. Texas simply didn’t have enough tools to compete in the global marketplace. It was obvious that Texas could no longer rely solely on its reputation as a pro-business, growing state with low regulations and an educated workforce. We need more tools.
To date, more than 14,000 new jobs are being created with the help of the TEF. Of the contracts already completed, the average rate of return on the TEF investment is 335%. The TEF has allocated $181 million so far that will have an estimated annual gross state impact of over $2.2 billion. By any measure, this is a tremendous success that will have great benefits for the State of Texas for years to come.
Q: It seems that each contract is different. Why doesn’t the TEF treat every company the same?
A: The central most important ingredient for the effectiveness of the TEF is its flexibility. The legislative leadership recognized that in creating a new tool for economic development they had to allow for the changing dynamics that different situations would pose. Therefore the TEF is not over-burdened with bureaucratic red tape and over-regulation. In creating the TEF, the one-size-fits-all mentality was rejected outright. The result has been a customized economic development tool that has the flexibility to change to fit each unique opportunity.
Some want to believe that TEF contracts should be exactly the same, and they should all be absolutely strict and unforgiving on the recipient company. In the real world of business, however, deals differ and thus so do contracts. We could insist that all recipients simply sign a single, strict form agreement but then we would probably not get many of them to come to Texas. The truth of the matter is that Texas is in a highly competitive situation with other states and our strategy must be flexible enough to meet that challenge.
It important to remember that we are not giving companies permission to come to Texas. We are trying to encourage them to come to Texas.
Q: How is Texas different from other states?
A: Texas has the largest fund of this kind in the nation. Though Florida and Louisiana have similar funds, the TEF is easily the most responsive and flexible fund for economic development in the United States and the results speak for themselves.
Q: Do small market areas have an opportunity to access TEF?
A: Absolutely. All markets will have access to the TEF. In fact, smaller communities like Ennis, Brownwood and New Braunfels have already benefited from companies making the decision to move or expand in their communities as a result of TEF participation.
Q: Why fund this instead of CHIP or other priorities?
A: The return on investment and the increased tax revenues from these opportunities will generate more revenue for important state priorities like CHIP. Again, if a goal is to create more dollars for state coffers in order to fund needed human services like CHIP, then you need to create the jobs that create the wealth that generate the tax revenue that fund those programs.
Q: Isn’t this corporate welfare?
A: No. In an ideal world we would have no need for an Enterprise Fund. Texas could rely solely on its pro-business reputation, great schools, low taxes and reasonable regulation to attract new employers. But with the fierce, global competition for employers and jobs, there are instances where Texas needs to do more to attract economic development opportunities that will greatly benefit our state. Governor Perry believes that we must be aggressive in recruiting new jobs to Texas. It is a core philosophy of his administration that, through job growth and economic prosperity, we can put additional resources into education and the human resources that the state should provide.
Texas is currently a top destination in the country for companies looking to expand or relocate. The success of the TEF is being talked about across the nation. In fact, the City of Houston recently said that it is looking to create a fund modeled after the TEF for its future economic development needs.
The growing book of evidence suggests that if Texas were to decide to relinquish its competitive advantage and disregard the TEF, our ability to attract and compete for new jobs would be greatly diminished.
Q: What is the relationship between higher education and TEF?
A: Research and innovation in technology is an incredible economic driver which creates new companies and jobs. Higher Education must be a crucial part of any state’s economic development game plan. The TEF recognizes this relationship and is capitalizing on the willingness of the private sector to pin its future success on the education system of Texas. To date, TEF has partnered with the University of Texas at Dallas to secure a new $3 billion Texas Instrument plant in Dallas, Baylor College of Medicine to explore the bovine genome and with the UT Health Science Center to establish the new Center for Advanced Diagnostic Imaging. The partnerships between corporations and universities which have received TEF funds are excellent examples of sustainable economic development that will keep Texas on the cutting edge of technological discovery and evolution.
Q: Why fund retail?
A: The TEF is not funding retail efforts. The two new Cabelas facilities were awarded TEF funding as tourism projects, based on the experiences in Michigan and Kansas, where the Cabala’s stores draw 6 million and 4.5 million tourists each year. The two Texas locations are expected to attract more than 10 million visitors in the first year of operation. Almost half of the visitors are expected to come from outside of Texas and will spend more than $1 billion on goods and services in the first year alone. Additional economic growth in surrounding areas is expected in the form of new hotels, entertainment parks, restaurants and complimentary retail stores that are expected to produce more than $250 million in investment and an additional 2,000 jobs. Here are some interesting facts about Cabela’s:
Cabela’s mails out nearly 100 million catalogs each year.
In 2004, Cabela’s will experience almost 50 million visitors.
The Cabela’s in Michigan and Kansas rank as the largest tourist attraction in the state drawing 6 million and 4.5 million visitors, respectfully, every year.
In Minnesota, it’s the second largest tourist attraction behind the Mall of America.
Cabela’s in Pennsylvania will draw 7 million visitors each year; more than Gettysburg and the Liberty Bell combined.
With regards to Home Depot, they will build a new network operations center in Austin and its subsidiary, Home Depot Supply, will build a new customer support center in New Braunfels. These expansions will invest $800 million in the Texas economy and create 500 and 343 new jobs, respectively. Home Depot will pay over $36 million in salaries to the 843 employees working at these two locations.