January 11, 2013
Message from the Chief Executive Officer
I hope everyone enjoyed last week’s newsletter. The part written by our special ghost writer was really insightful.
Just kidding! We took the week off from writing.
All kidding aside, I hope you had a great holiday season. I don’t know about you, but I’m very optimistic about the coming year. I see lots of good things about to converge on our growing community.
A few weeks ago, I wrote about Fernie, the Elf on the Shelf at our house, and how we had hoped it would influence our small kids to behave. Of course, the metaphor was related to how companies behave once incentives have run their course. The way incentives are determined in the first place can be a difficult task to undertake.
Budgetary constraints, targeted industries, community and board goals, competition among different states, regions, and cities, and many other factors contribute to the size and type of incentive package offered to a particular company. Recently, many communities across the nation have been criticized for the size of the incentive packages offered to some companies. The dilemma that we deal with is that our competition may be willing to do more than we are to gain a company’s favor. So, how much is enough? I can’t answer that with any certainty in general terms. Each case is different.
However, we can establish guidelines or strategies that help us in determining what the size of an incentive package out to be, provided, of course, that we have already determined that giving an incentive to a particular company or industry is our desire.
For example, if we wanted to attract 500 new hotel rooms and decided to budget $500,000 towards that effort; we could set up a program whereby a hotel developer meeting certain criteria established by the EDC would be eligible to earn $1,000 per room built. The program would have already been evaluated in terms of return on investment to the community. What do 500 new rooms mean to Harlingen? Does it mean X amount of new property taxes and Y amount of new hotel occupancy taxes? What about sales taxes generated by the visitors eating at local establishments? What about the other taxes generated by the employees at these new hotels? In other words, the size of the payroll created by the new businesses can also help determine the impact that the new business has on the community. All of these can be measured and thus guidelines established. More importantly, the costs and benefits of each program and incentive package should be measured and evaluated.
The way that the programs or incentive packages are measured and evaluated and how the benefits are determined is subjective. However, consistency is the key. If we try to maintain some level of consistency in how cost/benefit analysis are conducted then we are on the right track.
I can’t tell anyone that this is the best way to do economic development, but I can say that it has worked in other communities in the past. Conducting a cost/benefit analysis prior to finalizing a deal allows us to see our return on the community investment. Our plan is simple: make decisions based on sound business practices, and also based on meeting the needs of the community.
Every deal, project, or opportunity we look at goes through some type of cost/benefit analysis. Those that seem to have a strong return on investment are going to be the ones that get a closer look. This may seem obvious to many of us, but there are some people out there that don’t realize this actually occurs.
It’s good practice to do the analysis, but in a time of tight budgets, it’s a necessity. EDC’s would love to help everyone who has a new business idea, or wants to expand, but we can’t. So, we try to pick those with the biggest impact on the community.
Sales tax reports came out earlier this week, and we had another month of positive growth over last year. In October, I mentioned that we had exceeded $1 BILLION in net taxable sales in Harlingen for the fiscal year. The figures released this month show that the $1 billion in net taxable sales was also exceeded in the calendar year. As a quick reminder, only McAllen and Brownsville do better than that here in South Texas. Hold on to that bragging point. It means a lot in terms of retail attraction.
2013 is off to a good start. We’ve had on prospect visit this week and several inquiries. We met with some of our neighbors (San Benito and Primera) regarding common economic development goals and issues. We met with our hosts (TSTC) regarding some training programs for companies and some other interesting potential projects. We worked on marketing plans, new website material, updating databases, and much more. In addition, we are doing what we can to help promote the establishment of a medical school here in Harlingen. Yes, we have the RAHC, but South Texas has been given a golden opportunity to turn those assets into much more. We are also gearing up for a new entrepreneurship training program in February. More information on some of these items will be forthcoming next week.
Have a great weekend, and see you next time!
News from around the Harlingen area and beyond
Manufacturing Building Available for Lease or Sale
710 N. Commerce Street
+/- 31,000 SF space with offices, air-conditioned warehouse/mftg space, near rail and highways. Call the Harlingen EDC office for more information at 216-5081.