PART II: A Conversation With Adriana Cruz, President of Greater San Marcos Partnership

Publisher Corner

by, Melissa Jewett

Note: If you missed PART I you can read it here.

Melissa: How did Hays and San Marcos get into this position of growth? Do you think it’s  because the proximity to Austin and San Antonio?

Adriana: Austin and San Antonio, the number seven and number eleven largest cities in the country, are growing quickly. San Antonio is growing to the north and Austin is growing to the south. Then you have a city that has its own center of gravity, San Marcos. We are far enough away from Austin and San Antonio that we will not a bedroom community. We are not a suburb; we’re sort of our own thing.

Texas, as a whole, is seen as a location for jobs. It’s an economic engine. Austin has been at the forefront of that and is seen as a generator for jobs.

People are coming to Austin all of the time, looking for work or looking to start their own business or looking to relocate or expand their business into and hire existing, local people. I think that they are now putting their attention on the communities on the periphery of Austin – not necessarily wanting to put their company in Austin proper, but along the outskirts.

What we are saying is that the corridor is the perfect place for those jobs and for that opportunity. We go to California, Chicago, New York because these are places where we have an already distinct cost of doing business advantage. Those are high-tax, high-regulation states, and we don’t have those taxes.

When you’re in Silicon Valley, you have San Francisco and San Jose, an hour apart from each other. Then you have all of these communities along the highway in between Redwood City, Mountain View, and Palo Alto. Google is not in San Francisco nor in San Jose. They’re in Mountain View and before Google nobody really knew where Mountain View was. Now, everyone knows it’s the home of Google, and they will likely never leave Mountain View. Palo Alto has Stanford and has all of these tech companies. When we’re talking to these companies, we tell them it’s no different than Mountain View to San Francisco.

We try to put it in terms of their world and their understanding. When we do, they say “Oh, yeah. I see that.” You’re driving south of Austin and you pass Buda, and then you pass Kyle. You’re getting through these other communities with their own charm and their own strengths and their own assets.

Then you have San Marcos. With the presence of the university, with the growing population, we’re sort of the center of gravity for Hays and Caldwell County.

If the company says, “You know what? This site in Caldwell County is really working better for us,” by all means we are fine with them locating in Caldwell County. Even if they go to Caldwell County, they’re still going to come shop here, they’re still going to come eat here, and they’re going to employ people from here.

Melissa: I know you cannot tell me who is looking and who’s hunting. Can you at least  give a little explanation on some of the companies that might be currently looking here or  maybe at least give some idea on how many that you have currently and actively looking?

Adriana: We did an analysis recently on our projects from last fiscal year and this fiscal year. We have 87 active requests for proposals that we’ve responded to or companies that have contacted us, asking for information this year. Sixteen of those are what we call hot, which means that they are actively pursuing more information, or they’ve made a site visit.

Once they tell us they’re coming, buy a plane ticket to come here, ask us to set up a tour, ask us to meet with the university, and then we drive them around, take them to Gary Job Corps and the airport and downtown, and we take them to the river, that’s what we call a hot project. We have 16 of those.

We actually had a site visit yesterday and we had a different site visit on Monday. We’re currently working with a German manufacturer. But this is a long process.

Melissa: I don’t think most people understand the length of this process, and most think it  only takes a couple of months, can you explain this process?

Adriana: It’s a very long sales cycle. It’s not a general market product, where you see the advertisement for a Coke, and you decide to go buy it. These decisions will cost a company millions of dollars, they take a very long time, and are very risky.

There is generally a business reason for the relocation or the expansion, and justification has to be provided, along with it making great business sense. They have to analyze a lot of data.

Sometimes the company will do a request for proposal, which is very extensive. “Give us your demographic information, give us your wage information, give us your university information, give us your assets. What are your available real estate sites of X acreage or X size building.”

We provide them all this information and they plug it into a type of matrix, then it is narrowed down. Sometimes they’re starting with 200 cities, sometimes they’re starting with 30 cities, or sometimes they’re starting a global search.

The project that we’re currently a finalist on, we’re competing with Mexico…. Mexico, us, and a couple of southeastern states. Sometimes it’s a global operation that is looking to either stay where they are or come to the United States. Where in the United States are they going to go?

Some of these companies do it themselves or they hire a consultant called a site selector to do the analysis for them. The consultant works on their behalf, gives them the study or theanalysis, handles the negotiation for them. These consultants are a target audience of ours, from a marketing perspective, because they work multiple clients. So rather than identify 400 companies, you can identify 10 consultants that work with 40 different clients.

Our resources are limited, so we’re trying to get a good bang for our buck and it takes a long time. Sometimes you’re just planting a seed. I mean, we’ve had meetings with companies who say, “This is three years down the road but we’re just kind of getting a feel for your city so that once we get ready to make this decision, we know where we would want to go.”

Sometimes they come in and say, “We already know Texas is a hot bed of activity. Where in Texas do we locate?” So we do compete on a very preliminary data level with Dallas, with some of the Austin regional communities, Round Rock, Bastrop. It really depends on the industry sector and the type of project it is.

Sometimes they say, “There’s nobody else in Texas. It’s you guys and Raleigh, or you guys and North Virginia.” As we go through the process, we keep getting closer and closer to the finish line.

At this site visit on Monday, we were told that we’re one of the finalist sites. We had a site visit with a Canadian company yesterday. We’ve had a site visit from a French company. We have California companies that we’re working with, companies from Virginia.

Some of these are corporate headquarter relocations, where the whole company would just up and relocate, which is one reason why it stays confidential. Because if word got back to the hometown, that company XYZ is getting ready to relocate out, it creates chaos. And that’s one of the reasons why they’re very, very worried and nervous about that.

If it’s an expansion, a company says, “We’re growing so fast, we’re not going to grow where we are.” That’s a common story from California companies. “Headquarters is going to stay here, but we’re not going to keep our manufacturing here, or we’re not going to keep growing here.

We need to grow somewhere else. Where does it make sense for us to grow?” So we become an alternative second site.

These businesses look at this process and say, “When am I going to be able to get my ROI, their return on investment out of this decision?”

Melissa: Another thing that many people do not understand is the role that incentives  play. Can you explain about the incentives?

Adriana: Incentives play a significant role in job creation. Again, these decisions are risky for the company because they’re not familiar with the area, they don’t know how their business will do here. Once all of their desired data points have been met, they will strongly consider a location.

The workforce is here. The quality of life is here. The housing is here. The education is here. The university is here. But, this other city, outside of Texas, also has all of those things. They have a river. They have a university. They have a wonderful quality of life. They have the workforce. What becomes the differentiator? That is the incentive.

One thing that we try to manage is a company’s expectation. Texas does not function like any other state in the nation, which is a good thing. Texas’ economic development strategy begins at the local level with a city and/or county, and then the State comes in as a partner. Texas incentive package is not going to be the biggest on the table, ever.

Texas focuses its attention on the business climate, on the regulatory climate. So all of those things are important also. What we tell companies is, “You can go to New York, and they’re going to give you a lot of money. They’re going to write a big check, but then you have to live there, and you have to live in that tax environment after 10 years, after the incentive runs out.”

Generally what we do in Texas at the State and Local level is a rebate on property taxes that would not have existed, but not for the company locating here.

So it is not taxpayer dollars or general revenue funds. It is the property taxes that they pay once they’ve performed and once they’ve created the jobs and the investment that they said they were going to, which is normally a certain amount of years later . States, cities and counties don’t just hand incentives out. They must meet the conditions they agree to meet. Once they are here, and they performed according to the terms of the agreement and create the jobs and investment in the terms, then they can receive their incentive.

If you would like to contact Ms. Adriana Cruz she can be reached at the GSMP Office at: 512-393-3400