What do you do when the state you’ve been running for just eight months is already tops in the nation by the measures most significant to capital investors? You make it even better. That’s Texas Governor Greg Abbott’s plan, he told Site Selection Editor in Chief Mark Arend, in a mid-August interview.
Governor Greg Abbott ceremonially signed into law HB 32 on June 15th, at Advanced Micro Devices (AMD) in Austin. The bill will permanently reduce the business franchise tax by 25 percent. Governor Abbott also highlighted several bills that he signed into law to reduce the property tax burden on homeowners, eliminate occupational licensing fees for more than 600,000 Texas professionals, and increase transparency to hold local taxing districts more accountable to voters. AMD designs and integrates technology that powers millions of intelligent devices. In addition to being one of the largest private employers in Austin, AMD also is one of the top ten franchise taxpayers in the city.
“Hardworking Texans have forged a strong and diversified economy, growing more jobs last year than any year in the history of Texas,” said Gov. Abbott. “But we cannot be complacent. The best job creation program is tax reduction. While other states are increasing taxes and driving out businesses, the State of Texas is cutting more than $4 billion in taxes and fees.”
Earlier in 2015, Arend presented Gov. Abbott with a Governor’s Cup for Texas’ success in attracting the most projects in 2014 — prior to his taking over as the state’s chief executive from Gov. Rick Perry in January. Gov. Abbott vowed then to build on Texas’ strong track record and to continue to deliver to companies the location attributes they require today and will require in the future. Here’s where things stand eight months into Greg Abbott’s governorship.
Site Selection: You inherited a state economy and business climate that is the envy of the nation. Is your plan to maintain that momentum or to try new economic development approaches?
Gov. Abbott: My plan is to make the business and economic climate in Texas even better and to expand it even more. In quintessential Texas fashion, we believe that being number one is not good enough. We need to be even better. After this last legislative session I can tell you that the business environment in Texas is better than it was before this last session.
SS: Business franchise and property taxes are being cut as we speak. Are you referring to those recent legislative measures?
Gov. Abbott: Yes. One of the things that makes Texas attractive to so many businesses across the country, and one reason we are seeing an acceleration of business relocations to Texas is because of the low tax environment. We have no corporate income tax, and now the business franchise tax was slashed by 25 percent. And to continue to make Texas a more livable state, we also reduced the property tax burden for homeowners. All together there was a $4-billion reduction in taxes and fees in Texas. So while other states were fighting with each other about raising taxes, Texas was making our state even more tax friendly and profitable for businesses large and small.
And we did something else that is very important. We passed laws that sped up the permitting process. We understand that part of business expansion is being able to make it through the thicket of the permit and regulatory system. We are easing and accelerating that process knowing that for many firms, time is money. Specifically, we accelerated the permitting process under the state hearings regulatory regime so that instead of waiting until the entire process was over, you can get your permit in advance while you’re going through the contested case hearing. That was a big request from businesses, with the state’s understanding how the permitting process had been slowed. And there are other ways we are working with various agencies in the state to make sure the permitting process is accelerated.
SS: What is the main message you are hearing so far from the private sector in Texas about how the state could be better yet?
Gov. Abbott: I’m hearing immense gratitude for the reforms we have put in place during this last session. There was great praise for the focus on the bottom line, and that is to reduce the tax burden, ensure the predictability of the regulatory system. But we did some things that are important to businesses that are here and to businesses we are trying to attract here. One is to ensure that our infrastructure keeps up with the growing population we have in the state. We did that by making an unprecedented investment in transportation infrastructure, where we will be investing about $4 billion a year or more for a decade, so roughly $50 billion over the coming 10 to 12 years. And we’re doing that without raising a penny in taxes, fees or tolls.
“LiveOps is entering the next phase of its growth — one that depends on ready access to a rich and diverse talent pool,” said Vasili Triant, CEO of LiveOps, on July 30th, announcing the company’s move from California to Texas. “Texas has become a respected international technology hub and maintains a vibrant community of technology talent in the Cedar Park area. We believe that this new location not only supports our organizational plans, but that it also affords our valued staff a family-oriented environment with a greatly reduced cost of living. We’re looking forward to making Texas our new corporate home.”
A new, 25,000 square foot facility for LiveOps will be built in Cedar Park, Texas. All of the company’s 80 Redwood City, Calif.-based employees have been offered positions at this new Texas location or at the new Silicon Valley satellite facility. LiveOps plans to hire 155 new employees in Texas over the next three years.
Something else we’re getting praise for, and it’s an essential component of what businesses are looking for, is a qualified work force. I was at a ribbon-cutting ceremony with executives from Amazon and asked them why they’re opening so many facilities in Texas, thinking the answer was going to be our low taxes and reasonable regulations. But their answer was because of our top quality work force. I hear that more and more as I travel the state, that people are satisfied with the work force. Another example is [cloud-based customer contact and customer service provider] LiveOps, which is relocating its headquarters from California to Texas, which they tell us is due to the lower cost of doing business and the high quality of our workforce.
Just as important, we are working at building out that pipeline across the board, meaning across the spectrum of job requirements, qualifications and skill sets. Some require a high school diploma, and we’re doing an even better job with regard to graduation rates – in fact, Texas is number two in the nation for that, with students doing exceptionally well on standardized tests like advanced placement exams. We have developed substantial, high quality skilled workforce training two-year programs at colleges across the state. But it’s the four-year and above programs where we have made the largest investment, where we are turning the State of Texas into the broadest research-based state in the country. While other states, such as California and New York and others are cutting their research funding for colleges and universities, in this session, we expanded that research funding in an unprecedented fashion, making sure we would be bringing the best and brightest researchers and their projects to Texas, where they will be cultivating the next generation of workers to fill the next generation jobs we have in Texas.
SS: It looks like you’re already actively recruiting businesses from other states, such as New York and New Hampshire. What are your specific plans in that area?
Gov. Abbott: I intend to continue the process of traveling across the country recruiting businesses, with the improved business climate in Texas after the session in juxtaposition to the economic challenges seen in some other states. Other states are particularly ripe at this time for business to relocate from and come to Texas, and I’m quickly working to capitalize on that by pointing out how the Texas model for business is even better now than it was over the past decade. We’re seeing good results already, ranging from New York to California.
According to a recent Forbes study, San Antonio now tops the list of preferred cities by millennials — young adults born between 1980 and 2000. The study surveyed nearly 1,000 people between the ages of 18 and 34 in Arizona, California, New Mexico and Texas — an area referred to as the "new capitals of influence."
The report showed that San Antonio's "dynamic economy, employment opportunities and affordable living," are its three most attractive attributes for these young professionals. San Antonio is also perceived as a safe place to raise a family with plenty of opportunities to participate in local activities and entertainment.
"This generation recognizes the many assets our community has to offer. San Antonio is a choice city for business, attracting diverse industries, projects and a talented workforce that see the great benefits and opportunities that exist here," said Mario Hernandez, San Antonio Economic Development Foundation (SAEDF) president. "In addition to employment opportunities and affordable living, San Antonio offers a unique culture and growing urban core which keeps people of all ages and aspirations interested in living here."
In a more expanded way, our target is not limited to the US. We are expanding this internationally. My first international trip will be in a few weeks to Mexico City to meet with the President of Mexico and other leaders to work on economic development. Other international trips are planned for the fall and winter so we can bring more foreign direct investment into Texas. At the same time, I’ve had leaders and representatives from countries across the globe who are meeting with me and my team on an ongoing basis to participate in Texas’ soon-to-be export process for natural gas, which will be a game changer for the state and for the country. Globally also, because you can see these companies that are paying three, sometimes four times what natural gas costs in the US. Our ability beginning next year to start shipping that will be a dynamic time for Texas to continue its natural leadership in exports.
SS: Texas metros are magnets for job growth, which is great. But with that come infrastructure challenges, additional traffic and so forth. Is it possible to manage this growth so as to maintain cities’ quality of life?
Gov. Abbott: Our cities are very dynamic and are growing a lot. Forbes just had a story saying that San Antonio is the top city in the nation for attracting millennials. It’s one of several recent stories we’ve seen saying Texas is a national leader in attracting the next generation. And this gets to your question. We showed during the legislative session that we are prepared to maintain and improve the infrastructure challenges that arise from the massive influx of new companies, new businesses and millennials. We’ve dedicated more resources at the state level to invest in transportation infrastructure than Texas ever has. At the same time in this last budget, we dedicated billions of dollars to ensure funding for growth in higher education around Texas. So we are prepared to deal with the byproduct of increased population growth.
SS: How can Texas provide businesses the predictability they require in order to invest for the long term?
Gov. Abbott: We understand that businesses are filled with leaders who know how to make a profit if they know the rules will be predictable. As a result, Texas is keenly focused on achieving that level of predictability. As it concerns legal and tort reform or regulatory reform, the permitting process, the cost of doing business, Texas is leading the way in ensuring and maintaining that level of predictability. The only changes that we see are those that lower the cost of doing business. The way we have the transportation funding structured, it will be done by constitutional provisions. That means that to undo any of the changes we have made that improve Texas would likely require a constitutional amendment. One reason we structured it that way was so that business would have the level of predictability so they can plan 10 and 20 years out when they make the decision to come to Texas.