Re: The recent Rio Grande Guardian news story, "TBB: McAllen EDC close to landing two big technology companies."
My opinion is that economic development organizations do need incentive packages as a part of their “toolbox” to recruit companies to locate new manufacturing and technology companies to locate in their region.
Like it or not, other countries, other states, and other communities do offer incentives to recruit new companies and to encourage existing companies to expand.
As long as there are rules defined for ensuring appropriate use of tax incentives, including verification of agreed-upon wage rates, jobs created, CAPEX amounts, and other deliverables, I think these incentives are appropriate. Tax Incentives should not be used to encourage companies to move from one city to another in Texas, of course. That is a zero sum game in most cases.
Property tax not paid by the new company can be offset by the new jobs created, as new employees pay property taxes and support a growing sales tax base when they move here. Even when employed people quit another job to work for the new company, they can increase their local economic activity when they secure a higher-paying job and improve their standard of living.
Manufacturing has one of the highest multipliers as far as secondary job creation is concerned - suppliers, trucking, logistics, healthcare, retail, finance, and housing/construction jobs are also created when newmanufacturing jobs are created. The children of people employed by new companies also attend schools and positively impact school revenues.
I believe our state tax system still, in effect, offsets any lost school taxes when they redistribute state education funds beginning the following year in order to equalize funding between districts (in other words, the “Robin Hood” system).
The argument that these companies will come even without offering them incentives is difficult to prove, and it is impossible to know that until after a site decision is made. I think we need to let the professionals who do this for a living have the option to offer incentives to high-quality relocation/expansion prospects. I know incentives have been an important part of the consideration in most major relocation decisions I have been involved with over the years.
Editor's Note: The above guest column was penned by Mike Willis, executive director of the South Texas Manufacturers Association. The column appears in The Rio Grande Guardian International News Service with the approval of the author. Willis can be reached by email via: mike@stma-tx.org.
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