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Industry Incentives and Community Benefits


Industry is moving to Texas.  The regulatory environment, lack of a state income tax, the logistics of our transportation infrastructure, the affordability of real estate, energy, and construction, and the availability of a suitable workforce are some of the attractions. 

And then there are the business (tax) incentives—by some estimates worth close to $20 billion each year statewide. Although the State of Texas government has a role with some incentives, the process of laying out and negotiating incentives never starts at the state level.  Local authorities are the first to engage with businesses looking to move into their area.

And some local citizens may wonder if the incentives and tax breaks that businesses receive are needed or fair.  Are residents benefitting in tangible ways when new industry comes to their town?

Quote reads: "In Texas, incentive projects start at the local level, and school districts can play a major role.  What should they be asking for in return?"

The good news for Texans is that the complex process of developing potential deals with new or expanding businesses begins with local professionals and officials looking at their needs and values in mind.  Unlike many other states where industry can bypass local authorities and begin negotiating at the top with state government, in Texas, we have a bottom-up approach.  Local jurisdictions—cities, counties, and school districts—determine their “asks” or terms in return for incentives and play a major role in influencing the way companies become their new neighbors.

Here are some of the things local authorities may discuss with companies considering a move to town:

  • Jobs typically top the list.  New businesses mean new jobs, but will the hires be local?  And will they number in the hundreds or thousands, or just a few?  Will local hires go into well-paid positions?  Will companies be willing to make exceptions to stringent hiring requirements in order to provide employment opportunities for the people who already live in the community?
  • Are we building a future workforce and future opportunities?  Will companies work with schools to provide vocational training and career counseling?  Scholarship and internship programs?  What else can they provide to local schools?
  • How will existing small businesses and potential new small businesses in the area benefit?  Can companies commit to using local vendors, suppliers, and contractors for their outsourcing needs and at what level?  If major specialized equipment must come from outside the area, have companies committed to using local vendors and suppliers for other more easily sourced things like catering, uniforms, office supplies, and training? Will they assist local companies to navigate their vendor approval process?
  • Will new companies be responsive to the environmental and health concerns of the community?

How does a local entity pull that off?  Sophisticated discussions that may occur at multiple levels of local government require people be experienced and informed about economic development issues so they can effectively negotiate with major industry representatives.  In Southeast Texas, we have addressed this need for experience and information by forming a regional and collaborative organization we call REDI under the auspices of the Southeast Texas Economic Development Foundation.  This organization works across three counties to engage and prepare stakeholders, share information, and work together for the economic benefits to all communities in the region.

Our combined expertise and experience have resulted in us getting more competent at handling things that need to happen in the recruitment and vetting process—things like introducing industry to local vendors and suppliers, advocating for local job-training and employment, and discussing corporate social responsibility programs.  Our organization of associated professionals allows us to assist local authorities and it also makes the discovery and negotiation process more seamless for potential incoming companies, discouraging them from going across the state border to seek deals that could be sanctioned in meetings at the state capitol.  We have also developed a reputation over the past decade with interested companies so that they are aware in advance of what to expect.

Location and the availability of natural resources, a business-friendly culture, and proximity to customers will always be important to the process, but so are impressions about local professionals and authorities. Over $54 billion in projects in Southeast Texas slated prior to the pandemic is a testament to the Texas way of doing economic development.