HOW INCENTIVES AND STATEWIDE BUSINESS FRIENDLINESS DREW THIS EXPORTER AND MANY OTHERS TO TEXAS

For Bell Helicopter, incentives played a key role in its decision to locate a factory in Amarillo, Texas. The rotocraft manufacturer received more than 1,200 proposals as part of a nationwide search in 1999. The Amarillo plant, originally opened to manufacture Bell’s line of military helicopters, including the V-22 Osprey tilt-rotor aircraft, has since relied on more incentives when expanding to accommodate the assembly of commercial aircraft.

“Bell Helicopter’s presence in Amarillo is entirely the result of a competitive incentives package not only in its initial construction, but also through many phases of growth,” says Chris Stone, general manager of Bell’s Amarillo Assembly Center. “The city and the Amarillo Economic Development Corporation presented a compelling proposal that included 214 acres of land right off the airport, buildings built to our specifications, assistance with infrastructure, and relocation assistance for the first 30 employees transferring from Fort Worth.”

Bell’s original presence in Fort Worth was not the result of state or local incentives, Stone notes, though incentive packages put forward since then have helped the company choose Fort Worth as its global headquarters. The company opened its new global headquarters there in April.

To date, Amarillo and its economic development corporation (AEDC) have invested more than $120 million through seven Bell expansions. “Our obligation is achieved through employment and local spend,” says Stone. “We pay back 110 percent of their investment each year for 20 years.”

The incentives offered to Bell Helicopter included an abatement on lease payments for the buildings provided by Amarillo, notes Buzz David, CEO of the AEDC. “They haven’t made a lease payment in the last 15 years,” he says. The incentives are contingent upon Bell maintaining or expanding its payroll in Amarillo and in generating a sufficient level of sales from outside the Amarillo area.
Those are the two criteria Amarillo looks for when doling out incentives: the creation of above-average wage jobs and sales outside of the region. While exporting is not a specific criteria that Amarillo, the state of Texas or other localities look for when awarding incentives, “Most of the companies in the primary industries that we look at are by definition exporters,” says David.

Sugar Land, a city located 20 miles southwest of downtown Houston, takes a somewhat different approach. “Our incentives are not directly related to exporting but one of our targeted industries is major exporters,” says Jennifer May, acting director of the Sugar Land Economic Development Corporation.

Bell Helicopter produces a full line of military products in Amarillo, such as V-22 Ospreys, UH-1 Huey transport helicopters and AH-1Z attack helicopters. “All of these are being marketed throughout the world to allies through the U.S. government,” says Stone. “In June 2013, we also began work on a commercial product, the Bell 525 Relentless, at our recently opened, 249,000-square-foot facility on the same site. We are preparing for first flight in late 2014, followed by certification and production for sales around the world as quickly as possible thereafter.”

Despite the generous incentives offered by the state of Texas and its many localities for manufacturers looking to expand there, not every company finds it necessary to take advantage of them.
Goya Foods built new manufacturing and distribution facilities for its canned beans and sauces on a 130-acre site in Brookshire, 35 miles west of Houston.

“Basically, we were looking for land and water and we were able to find them in Brookshire,” says Bob Unanue, Goya’s CEO. “Texas has a business-friendly environment and no state income tax, and those were incentive enough for us.” The Brookshire distribution facility went operational in September 2013 and the factory opened in October. Goya has operated other facilities in Texas for years.

The company is using its Houston facility as a platform for exporting to several continents. “Our products are sold all over the world,” says Unanue. “We’re exporting from Houston to Central and South America, Europe and Asia. Around 15 to 20 percent of the product produced in Houston is exported.”

Most of those exports are loaded in the nearby Port of Houston, the nation’s biggest export gateway. But the area’s excellent rail links allow Goya to ship export products to West Coast or East Coast ports as well. “We brought a rail spur right to the front of our property,” says Unanue. “It’s easy to ship product from there to Canada and Mexico, to all over the country, and from there around the world.”

“The Houston area has recovered 2.4 jobs for every job lost during the Great Recession,” says Bob Pertierra, chief economic development officer at the Greater Houston Partnership. “We lead the nation in exporting and Texas has the country’s highest concentration of manufacturing. Our airports are offering new services to places like Turkey, Korea and China. Mexico is our largest trading partner and our proximity provides significant opportunities for companies.”

A Turkish pipe manufacturer, Borusan Mannesmann Pipe U.S., Inc., announced last year a capital investment of $148 million to create 900 direct and indirect jobs in the region. “Borusan will be importing and exporting out of the Port of Houston,” says Pertierra.

The Houston area—the city, as well as some of the surrounding communities—offers tax exemptions on inventory detained in the state for less than 175 days for the purpose of assembly, storage, manufacturing, processing or fabricating. The City of Houston and some nearby localities also exempt eligible inventory from the ad valorem property tax. Ten-year property tax abatements are also available from some cities and counties in the region. A minimum real-property investment of $1 million and the creation of 25 new jobs are required to be eligible for a tax abatement by the City of Houston and Harris County. Houston also has Foreign Trade Zone No. 84 that allows companies dealing in foreign trade to delay payment of U.S. Customs’ import duties until their goods and merchandise enter U.S. commerce.

Sugar Land has an active program of attracting companies through incentives. So much so that the city, with an occupancy rate of more than 90 percent, is rapidly running out of office space. “We are still looking to expand through new construction or redevelopment,” says May, the EDC director.

Sugar Land recently provided an incentive package to Texas Instruments to move into a new facility based on job creation and capital investment numbers. The company will be creating 375 jobs with average salaries of $100,000. The city will be paying the company $2.5 million over 10 years.

“We focus on return on investment,” says May. “The company has to maintain its jobs and investment levels in order to receive the annual payment.”

One of Sugar Land’s unique logistics features is its regional general aviation airport. The airport boasts an 8,000-foot runway, a state-of-the-art air traffic control tower and radar system, and the presence of U.S. Customs and Border Protection.
“That way, someone can fly into Sugar Land and clear customs without having to go through Houston or some other international airport,” says May. Several Sugar Land-based companies maintain hangars at the facility.

Companies that have chosen to locate in Texas are happy with their choices. “We believe we have a strong future in both Amarillo and Texas,” says Bell Helicopter’s Stone. “The production of the new Bell 525 Relentless in Amarillo will help us balance our commercial and military business.”

Goya has the possibility of quadrupling the size of its facility in Brookshire and CEO Bob Unanue is enthusiastic about future expansion possibilities. “We currently employ 250 people in Brookshire,” he says. “Hopefully, the facility will double in size over the next six to 10 years and we can easily double employment.”

Among other things, the company plans on expanding the plant’s output from beans and sauces to meats, cheeses and frozen prepared foods. “The sky’s the limit,” says Unanue.