This past week, Toyota made it official that it was locating a new truck plant in San Antonio. Although I was already in Washington and several projects down the road by the time the press conference was held, it was a great privilege to play a small role in the process. The effort involved state and community leaders working together, solving problems, and making the deal work. The final incentive package totaled about $133 million in state and local incentives, less than one-third of the average Mississippi and Alabama have used in luring three past automobile facilities. The “payback” period is only a couple of years.
This location was a huge win for Texas on several fronts. My firm estimated the statewide economic impact of Phase One operations to be $1.612 billion in annual spending, $560.1 million in gross product, $367.9 million in personal income, and almost 8,900 permanent jobs. That’s besides a $1.065 billion construction impact, and Phase II more than doubles these numbers. While certainly impressive, these facts and figures don’t begin to tell the whole story.
The project was the first big new plant location for Texas since the mid-1990s, and it was long overdue. We fell behind many states in our development programs in recent years, and the cost in terms of new activity has been enormous. The learning curve that took place during the negotiations also helped to inform state leaders about what it takes to capture a gorilla these days. The result is likely to be greater momentum toward revamping our economic development efforts in productive ways. The combination of a high profile site selection and a competitive program moving forward will once again put Texas on the radar screen for future locations. There is a lot of reason for optimism.
The impact on San Antonio is also quite substantial. The Alamo City along the river has long been known for tourism, military operations, and an excellent healthcare complex. Now, it has a notable foothold in manufacturing with thousands of well-compensated jobs redefining local opportunities. With the expectation of dozens of smaller facilities to serve Toyota and a nascent biotechnology sector, the area is poised to write a new chapter in its long, colorful, and generally prosperous economic saga. The future is bright indeed.
Perhaps most important of all, the Toyota facility validates an important concept. For many years, we have been touting the advantages of linking production facilities in Texas and Mexico to create meaningful synergies. As it turns out, what was most attractive to Toyota from the outset was the prospect of working closely with suppliers in Mexico. That desire for proximity is what allowed us to effectively compete against several states offering several times the incentive packages that we provided.
Thus, we now have a much needed “real world” verification of the notion of the benefits of the Texas-Mexico linkage and the value it can create. Properly marketed, this initial success can be a springboard to many more. It took longer than we hoped, but the idea is finally catching on. Once again, a notable fire of optimism is ignited.
In short, this location doesn’t make us competitive; it doesn’t revive the sagging electronics and telecommunications sectors; it doesn’t make up for all the recent job losses; and it doesn’t balance the state budget. Nonetheless, it is a cause for celebration, a bold exclamation point on our economic future. Let’s revel in the moment, and show our friends from the Orient what Texas hospitality is all about.