By Mitchell Schnurman
mschnurman@star-telegram.com
It's a lot easier to make a great deal when they want you as much as you want them.
That's what happened this month with GE Transportation. The General Electric unit agreed to build a $96 million facility to make locomotives in far north Fort Worth, just west of Texas Motor Speedway.
This is one of the top economic plums in decades, made all the better by the fact that the public dollars are modest. Fort Worth and the state are kicking in $7.5 million in incentives, maybe a quarter of what GE could have extracted from other suitors.
This deal came together in less than two months, which is unusually fast and a good indicator that Fort Worth was GE's top choice all along.
The headlines rightly touted the jobs -- up to 775 slots for welders, assemblers, painters and other skilled laborers that are tailor-made for our blue-collar workforce. Pay will average more than $40,150 annually, with hiring scheduled to begin this year. By the end of 2012, GE projects to have at least 425 workers on-site.
It's also a safe assumption that GE will attract a stream of suppliers and service companies. At its headquarters in Erie, Pa., GE Transportation employs 4,700, plus 800 in Grove City, about 80 miles away. Those jobs support 17,000 workers statewide, according to a recent economic impact study. That's a ripple effect of 3-to-1.
This won't be a temporary bump, either. GE has been building locomotives in Erie for 100 years, and the railroad industry is the definition of a mature business. GE's modern locomotives cost a couple of million dollars each and can run for 20 years or longer.
GE is also one of the most admired companies in the world, renowned for its strategic thinking. When it selects your city for a major expansion, there is no greater endorsement, period.
The prestige alone will keep the Fort Worth Chamber of Commerce buzzing for months. It validates the notion that our domestic manufacturing can compete with facilities anywhere.
North Fort Worth got a big lift from Nokia in the 1990s, when the Finnish company was building cellphones in the Alliance area. It once had 3,800 employees, but cutthroat competition eventually prompted Nokia to move those jobs to Mexico and sell its buildings.
The GE deal is more likely to play out like the bomber plant that's been making planes in Fort Worth since World War II. Lockheed Martin is now developing the next-generation fighter here, building on those same roots.
The GM factory in Arlington is another potential role model. It has been churning out vehicles since 1954 and has often been recognized for its high productivity. Today, it's GM's only remaining producer of large SUVs in the United States.
For generations, these two manufacturers have been among the most important employers in Tarrant County. They bring huge dollars into the region and support tens of thousands of jobs. GE Transportation, which holds an option to expand on adjacent land, could prove to be that important and enduring.
How rare is such an employer? Fort Worth-Arlington, despite its robust economy, has lost 20,000 manufacturing jobs in the past decade alone.
That's why some communities would have paid up to $50,000 in incentives for each of the GE jobs, said relocation expert Dennis Donovan of Wadley-Donovan-Gutshaw Consulting in New Jersey. The tab could have topped $38 million in public aid, except that GE never held a bidding war.
It did all its work upfront, calling Fort Worth officials in mid-March and declaring that it had selected one site in Texas -- an empty spec warehouse built before the financial bust. The distribution center at the northeast corner of Texas 114 and Farm Road 156 was large enough to accommodate the cranes in GE's manufacturing process, and it could be expanded quickly from 673,000 square feet to more than 900,000.
It also had a short railroad spur that could be used to test-drive the vehicles, and it could connect with the area's larger rail network so locomotives could be delivered easily. Eventually, Hillwood, BNSF Railway and others will sign a formal agreement to cooperate on the project.
Throw in a trained workforce, a growing population and a business-friendly environment -- meaning limited regulation, a right-to-work state and a quick response on incentives -- and it was an ideal fit.
GE had other locations under consideration. Sites in North Carolina, Massachusetts, Mexico and a potential expansion in Erie were options.
But Fort Worth didn't have to overreach because it had what GE wanted most. The city agreed to an 85 percent tax abatement for 10 years, which will be worth $3.3 million if GE hits every threshold. Gov. Rick Perry quickly threw in $4.2 million more -- the first time the Texas Enterprise Fund has played a pivotal role in closing a deal in Fort Worth.
In economic development terms, this is beyond a bargain. As a rule of thumb, Fort Worth tries to limit incentives to no more than 10 percent of the private investment; in this case, Fort Worth's contribution is capped at 3.5 percent. Throw in the state's offer and $750,000 from Denton County, and the total is still shy of that benchmark.
For comparison, consider that Fort Worth gave RadioShack a $10.7 million incentive last year for simply signing a five-year lease, after approving up to $96 million in 2002 to help build a headquarters. In 2005, when Cabela's built a giant retail center in Alliance, the city agreed to rebate up to $42 million in taxes over the following 20 years. Both RadioShack and Cabela's have been disappointments.
GE Transportation has had some tough times in recent years and cut jobs in 2009. Sales dropped from $5 billion in 2008 to $3.4 billion last year, and profits in the segment declined by two-thirds over the same period. But on May 12, when GE announced the new plant in Texas, it also unveiled plans to hire 250 new production workers in Erie, where it has been recalling workers.
If the home base felt slighted, GE reminded everyone that it takes care of its own.
Mitchell Schnurman's column appears Sundays and Wednesdays. 817-390-7821
Looking for comments?
