MERCEDES, RGV – An absorbing discussion took place this week among Rio Grande Valley economic development leaders on how to lure state incentive dollars from The Triangle to regions such as East, West, and South Texas.

The three points of The Triangle are Houston, Dallas-Fort Worth, and San Antonio. Valley leaders believe too much of the money in the Governor’s Texas Enterprise Fund (TEF) and Texas Emerging Technology Fund (TEFT) goes toward attracting companies to the big Texas cities and not enough to other parts of the state, such as the Valley.

Keith Patridge, president and CEO of McAllen Economic Development Corporation, proposed a rule change for use of money set aside by the State of Texas to lure companies to the Lone Star State. If additional infrastructure is needed in order to land the big projects, no state incentive funds should be allowed, Patridge said. He made this point because the Valley has the capacity for such projects without additional infrastructure being added.

“Maybe it is time for Texas to step out of the box and start looking at it from more of a business standpoint. I think a reason a lot of the legislators are not really high on the legislation (to increase funding for TEF or TETF), is not because it is a Perry slush fund. It is because they were not seeing anything. All the projects were in that little Triangle. The rest of the state was not seeing it,” Patridge said.

“Why do we want to fund that? Maybe what we ought to do in the next legislative session is say, guys, if that company needs any infrastructure added to it, wherever they are considering now, no incentive. But we will incentivize them if they go in an area that does not need to put any infrastructure in place.”

Rio Grande Valley economic development leaders met in Mercedes this week. Carlton Schwab of the Texas Economic Development Council was the keynote speaker.
Rio Grande Valley economic development leaders met in Mercedes this week. Carlton Schwab of the Texas Economic Development Council was the keynote speaker.

Patridge made his remarks at a meeting of Valley economic development leaders held at the offices of the Development Corporation of Mercedes. Hernan Gonzalez, president and CEO of the Development Corporation of Mercedes was the host. The keynote speaker was Carlton Schwab, president and CEO of the Texas Economic Development Council. Schwab was asked to preview the next legislative session. He said there is not a lot of enthusiasm among legislators for the TEF and the TEFT, which are administered through Gov. Rick Perry’s Office. Schwab said some of the candidates running for statewide office this year are saying they back the TEF and the TEFT but want the programs restructured.

The reason Patridge proposed a change to how state incentive funds are awarded is that the Valley is losing its best and brightest talents. He said the only way to reverse this is to lure some major companies that pay good salaries. He said this could happen if the State of Texas would use more of tis incentive funds on locations outside of The Triangle.

Patridge praised Valley universities, community colleges and high schools. He said they are doing a much better job of training students for the modern economy. However, he said there is a skills shortage nationally and that this would, going forward, negatively impact the Valley.

“As we get better at training our students, the more demand we are going to have from Dallas, Houston, San Antonio, Austin, Chicago. We are going to start losing our best and brightest one at a time and 20 years from now, 30 years from now, we are going to be in the same place we are now,” Patridge said.

Patridge pointed out that it costs about $350,000 to $500,000 to educate a student from Pre-K to 12th Grade. He said when one adds the cost of community college, it is clearly over half a million dollars. He said a machinist educated in a community college in the Valley could easily be lost to San Antonio if there are no good jobs waiting for that student.

“It is like giving someone a half million piece of equipment. We just give them (our students) away. And then we go produce another one and we give them away. What does that do to our economy? We are losing our resources really quick because our capital is leaving at a half million dollar clip,” Patridge said.

Patridge said one answer is for the Valley to think and act regionally from an economic development standpoint. Another, he said, is to focus on bringing good paying jobs to the region so the Valley’s best and brightest will not leave. “They are going to leave if we don’t. There is a placement agency out of Houston that just leased 9,000 square feet in McAllen for an outplacement center to interview people to take to Houston. This is very real,” Patridge said. Some in the room were taken aback by this piece of news.

Patridge said the same thing is happening in East and West Texas – their best students are leaving for work in The Triangle.

“The Triangle does not have enough infrastructure so they want to take our tax dollars to go build more roads, more water lines, more sewer lines, more pollution abatement so that we can locate everyone in that Triangle. I really think the State needs to sit down and look at the State of Texas just like a company does. A company sits down and says these are our assets. A company will not go and build a brand new plant if they are sitting at 50 percent capacity at their others. They are going to figure out how they use that capacity. We are sitting here in the State of Texas with lots of big nice roads, with capacities in West Texas and East Texas and South Texas that we aren’t using. Maybe we need to start directing some of that investment into other areas rather than trying to jam everything into that Triangle? What is magical about that Triangle? They are going to take our talent to move them up there to work in the plants up there.”

Salomon Torres, who heads San Benito’s economic development efforts, said it is not just The Triangle that is “sucking” the best and brightest away from the Valley. He said Eagle Ford Shale is having an impact. He said workers in the oil and gas industry can earn three times as much in Eagle Ford Shale work than they can in the Valley.

Schwab was asked to comment on Patridge’s analysis. He said it would be hard to change the rules on how the TEF and TEFT funds are spent when a large number of legislators represent districts within The Triangle. He said about 40 members of the Texas House of Representative come from the Houston area and 30 more from the Dallas area. There are 150 House members.

Schwab offered some comfort to the Valley economic developers when he said site selectors do not base their decisions solely on state incentives. “From a site location perspective, which I used to do, the site location world doesn’t care about that (incentives). They are going to be where they need to be to make money. What you all have to do, I think, is demonstrate that you have economic might here. The average person that looks at a map (of the Valley) and looks individually at the towns and cities, they might not be all that impressed. If they look at the Valley in aggregate it will shock them. Look at the economic might that is here. Regionally, that is how you catch the attention of the site selection world. You are a much bigger market than you appear to be. Then you have all these natural advantages that people don’t think about,” Schwab said.

Torres agreed and said the Valley has to forge its own future without expecting much help from state government. “Destiny is in our hands. We are not going to count on the rest of the state to come and see the righteousness of our region,” he said.

Torres told a story about a Texas Economic Development Council meeting he attended in San Antonio last November. He said there was a young economist speaking who was looking at big picture. “He showed wonderful slides. It was all about The Triangle, how The Triangle is going to beat California. The slides showed that the reason for the success was not down to the corporations but to public investment.”

Torres said that during a Q&A he politely asked the economist about equality for other parts of Texas. He said there was total silence. “I could hear crickets in the room. The presenter said they could look into it. In effect, they ridiculed me with their silence. That was a big sign to me that we (the Valley) are on our own.”

<I>Editor’s Note: This is the first in a two-part series on the meeting held by Rio Grande Valley economic development leaders in Mercedes.</I>