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Toyota says $40 million incentive not factor in move

By Lauren McGaughy Houston Chronicle
May 3, 2014 at 10 p.m.

The $40 million incentive Gov. Rick Perry offered Toyota to relocate its headquarters to Texas was not a deciding factor in the automaker's move, company representatives said, raising questions anew over the need and appropriateness of the taxpayer-funded grants awarded to major, established companies, including some multibillion-dollar corporations.

Toyota is poised to announce a record profit of more than $23 billion for fiscal 2013.

The world's top-selling automaker announced this past week its intention to consolidate three North American headquarters - in California, Kentucky and New York - into a "single, state-of-the-art campus" in the Dallas suburb of Plano, and move as many as 4,000 employees to the Lone Star State.

The $40 million Texas Enterprise Fund, or TEF, grant did not factor heavily into the move, company spokespeople said.

"That wasn't one of the major reasons (in) deciding to go to Texas," Toyota Motor Sales U.S.A. Business Communications Specialist Amanda Rice told the Houston Chronicle. Instead, company representatives referenced a host of other factors, including geography, time zone and quality of life.

"We needed a site that was closer to our manufacturing operations, in a neutral location, one without an existing Toyota presence. When considering whether to make an investment decision of this magnitude, economic incentives are one of many factors we consider," said Steven Curtis of Toyota Corporate Communications.

The acknowledgment dredges up concerns raised by lawmakers and government watchdogs after the announcement of similar economic development grants, including a $12 million incentive package offered to Chevron last year to build a Houston office tower, and $21 million handed to Apple in 2012 to expand its footprint in Austin.

The $40 million offered to Toyota marks the largest award handed out by Perry's office in nearly a decade.

The governor's office long has defended the Texas Enterprise Fund and other incentives as part of Texas' business-friendly atmosphere, calling it a "deal-closing" mechanism to help lure businesses to the state.

'$10,000 per job'

"Why does Toyota need it? Ten thousand dollars per job is chump change for this company," said Craig McDonald, director of Texans for Public Justice. "It's a PR fund for the governor. If this fund wasn't there, Perry couldn't say, 'I did this.' "

Greg LeRoy, executive director of Washington, D.C.-based Good Jobs First and noted opponent of corporate subsidies, agreed: "You're taking credit for something that would have happened otherwise. This is a $40 million photo-op, grip-and-grin press release for Rick Perry, at the taxpayers' expense."

Perry regularly travels the country, touting the state's low-tax, low-regulation business-friendly environment in hopes of luring companies to Texas. The state's economy was a focal point of his failed presidential campaign in 2012, and is expected to be again, should he decide to run in 2016.

Texas' myriad economic development packages have been under increased scrutiny in recent years, amid reports of mixed results and missed targets by companies that received the incentives.

Fort Worth Sen. Wendy Davis, the Democratic nominee for governor, spearheaded legislation with state Rep. John Davis, R-Houston, during the 2013 legislative session to require regular audits of the Texas Enterprise Fund, which is controlled by the governor's office. The gubernatorial candidate since has doubled-down on those concerns, indicating she would make changes to the fund if elected.

Rep. John Davis' House Economic and Small Business Committee is at work on a report looking at the TEF and other incentive programs, and held a hearing last week to look at the viability of these funds.

Fighting competition

Perry spokeswoman Lucy Nashed insisted on the continued necessity of the fund, noting more and more states vying for such large-scale projects are offering similar incentives packages.

"The enterprise fund is a competitive tool. So, they are looking to close on a project that would have otherwise gone elsewhere," Nashed said. "There was competition for it, and we wanted to bring these 4,000 jobs to Texas."

Toyota also will receive a local economic incentive package of property tax abatements, grants, and inspection and building fee waivers, Plano Mayor Harry Larosiliere said.

Most grants from the Texas Enterprise Fund require matching incentives from local governments that are home to the expanding or relocating businesses.

Nashed and Larosiliere cited the potential multiplier effects on the community from Toyota's move, including additional tourism, sales tax collections and 4,000 additional workers that would spend up to $225 million per year on taxable goods and services, according to Austin-based consulting firm Impact DataSource.

Playing favorites

State Rep. Lyle Larson, R-San Antonio, said he saw the positive impact Toyota had in his community after the automaker decided to move its pickup manufacturing plant there more than a decade ago. Though a general supporter of the Texas Enterprise Fund, Larson said he has heard concerns from local businesses that do not benefit from either state or local incentives.

"At times, the package has been to the detriment to businesses that have already been in the community," he said. "We've heard from a number of companies that the state is so enamored of attracting new companies that we don't focus on retaining the jobs that are already here. There needs to be a fresh look at what we're participating in, why we're participating and is it needed."



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