Ready Set Grow!

It doesn’t take much to notice all the new businesses cropping up in the East Texas area. But why? Tom Mullins, President and CEO of the Tyler Economic Development Council, and other east texas experts explain that the recent growth is not a coincidence and why we are on the grow.

It doesn’t take much to notice all the new businesses cropping up the East Texas area. New roads, state-of-the-art schools, cutting-edge medical facilities, top-of-the-line retailers and imaginative new restaurants – area businesses are becoming much more diverse. Just a trip on Broadway in Tyler, around Loop 281 in Longview or down North Street in Nacogdoches will reveal a host of new construction, amendments to older structures … even signs proclaiming sites for future businesses moving into the area. Emerging from the shadow of the United States’ recent economic dip, there appears to be a business boom in the region. New businesses are prevalent and seem to be thriving from the largest commercial endeavors, to the mom-and-pop shops on the corner.

But why are so many new businesses springing up across East Texas? Is there a connection to how we fared in 2011? What might we look forward to in 2012? Tom Mullins, President and CEO of the Tyler Economic Development Council, explained that the recent growth is not a coincidence. Bill King, President of the Nacogdoches Economic Development Council isn’t wearing rose-colored glasses, but still sees a bright future ahead for East Texas. From Longview, Executive Director of the Longview Economic Development Corporation Susan Gill was able to offer insight into what industries should be helping East Texas continue to expand commercially in the coming year. While all the experts agree that while we are certainly not out of the (Piney)woods yet, there is a renewed sense of hope and a desire for prosperity and success on every level of the business world.

Perhaps the most immediate query would be, "What is the explanation for the business boom we’re seeing?" Mullins said there are a couple of ways to answer that question, with regard to Tyler: “Generally speaking, Texas has done better economically than other parts of the country, and there are two factors that get identified for the strength in the Texas Economy. One is energy. We have had a lot of activity in the oil and gas sector, particularly in the exploration of natural gas. Other Tyler communications companies like SuddenLink are also adding employment. We are are seeing a lot of small Internet and software companies growing and getting started! So, the energy and technology sectors are doing well in Tyler.

“The other thing that people look to: Texas didn’t experience the housing bubble that other areas of the country did. We didn’t overbuild housing. The lenders were, for the most part, prudent in their underwriting requirements. Even though in larger, urban areas some people were given mortgages that should not have been approved, and they ended up being foreclosed on, it wasn’t as bad in Texas as other areas.”

In Nacogdoches, King cited the expansion of pre-existing businesses contributing to what could already be deemed a successful business year in 2011. “We’ve had two significant expansions to business already located in our area,” Kind recounted. “Cooper Power Systems added a production line to their facility in Nacogdoches (after considering moving it to one of their other plants in Wisonsin and even Mexico) resulting in dozens of new jobs with a salary averaging $54,000, plus benefits. That’s great, especially when compared to the East Texas average.” King also mentioned the expansion of Mass Motorsports. Previously specializing in designing high-performance, fuel-efficient engines, Mass has chosen the Nacogdoches area to develop their mass production business – and have started things off with a decade-long contract for the U.S. Postal Service. King added, “That’s not an industry in abundance here. So, in addition to jobs and salaries, it creates a new industry for this area.”

Gill described described a similar situation: commercial and industrial firms seeking to expand production, through relocation or origination of commercial facilities in the area. “Two of the larger companies who’ve decided to open locations in the Longview area are American Home Patient and Dallas Plastics,” Gill said. “And when set up, together they will bring almost 350 new jobs to our area. When combined with the expansion of several existing companies, there has been growth for almost everyone.”

Though geographically Longview and Tyler stand at a bit of an advantage – and an advantage over almost every other place in the country, in fact – the energy sector has been thriving all across East Texas, “We have a couple of energy companies that started expansion projects (recently),” recounted Mullins. “ XTO, a petroleum engineering group, started a 20,000 square-foot expansion in Tyler. They hope to double their 100 employees in the next two or three years. Reef Services (a manufacturer of oilfield chemicals) opened a 130,000 square-foot facility near Highway 155 North and Interstate 20, with plans to hire 100 employees. Then, another company (Omega West, located near the Tyler State Park) has expanded and added 14,000 square-feet and has grown from 40 employees to 65 employees in the past several months.”

The story is much the same in Nacogdoches, King said, with several companies opening new facilities in the area within the oil and gas industry. “Exco Operating Company moved their Shelby field headquarters to Nacogdoches County (specifically Chireno). Upon relocation they added about 60 employees, plus 30 contractors, in addition to other operations staff and people working out in the field. Another, Select Energy Services, opened up an oil field services facility on 40 acres of land due east of Nacogdoches just about a month ago.” King mentioned that, at the time of the grand opening, they were up to 180 employees. “But the expectation, according to their CEO, is to double the number by late summer of 2012, then eventually top out around 450 employees – and that’s with an average salary of $64,000 a year.”

That fact is a perfect example of why the continued expansion of the oil and gas industry in 2012 in East Texas is a great indicator for the economies here. As common sense might dictate, higher paying jobs offer consumers – and by extension, the businesses here – more opportunities to spend that money. There will be people moving into the area living, working, eating and shopping; in addition to the companies, staff and infrastructure behind them doing the same things.

Since the oil boom in Kilgore near the turn of the century, the energy business has always taken a prominent place in the East Texas business world. However, while East Texans are seeking to capitalize on the natural resources that make this area valuable, there are those with eyes on what might also offer value in the future. Exciting, emerging advances are also taking root here in the form of cutting-edge technology and communications as companies like The Genesis Group, in Tyler, seek to push East Texas into the next century in 2012, and beyond.

“They write software for Motorola internationally, and they’ve added employees for the last year,” Mullins said. “We have another called SPEA America. They test circuit boards and semi-conductors for a national market and build test equipment they sell to companies all over the world. The company is based in Italy, but the U.S. operations are located here in Tyler. They currently have about 20-something employees, but plan to add more high-paying jobs over the next two years.”

Mullins also revealed that The University of Texas at Tyler School of Engineering and Computer Science has also been very involved with a lot of small tech companies; helping them with product development, problem solving and growth issues. “That’s an important part of our economy because it’s knowledge-based and is something that will carry us into the future.”

In the Nacogdoches region, at least one company is merging the concepts of old and new to push forward. “The Southern Power company is building and opening a biomass plant,” King remarked. “That’s a nearly $500 million facility. They’ve finished the major construction already, and are currently engaged in pre-operational testing and certification of the plant itself.” King said Southern Power expects it to be in operation by mid-2012. “This is a 100-megawatt power plant fueled by wood waste biomass (of which East Texas certainly has plenty).” The plant has signed a 20-year contract to provide power to the city of Austin. So, beginning with the roughly 1,000 workers who’ve been onsite for over a year, the new facility will house a minimum of 35 advanced-level staff, in addition to the support staff, service providers, contractors and more – all at a high rate of education and pay.

While the impact of these types of new businesses will certainly be felt and measured in 2012. A large power plant several miles outside the city limits is not the most obvious signal of economic growth. However, there are several sectors where the average person driving down the street can see the progress first hand. Exhibit A: the medical field. East Texas has, per capita, one of the finest medical communities found anywhere in the country. Hospitals like East Texas Medical Center, Good Shepherd Medical Center, Longview Regional Hospital, Trinity Mother Frances Health System and the University of Texas Health Science Center at Tyler have all either undergone or are currently entrenched in large-scale expansions of any or all of their services, staff or facilities.

“Last year, ETMC completed a $28 million investment in facilities and equipment,” said Mullins. “Trinity Mother Frances started construction on the $54 million Louis and Peaches Owen Heart Hospital. Texas Spine and Joint Hospital also recently broke ground on a $22 million expansion of their Bergfeld facility – not to mention a new location in Longview. In November, UTHSCT officially cut the ribbon for their $62 million academic center and cancer treatment center. And earlier in November, the ribbon was cut for the $18 million Veterans nursing home … Combined it is about $180 million worth of expansion just in the medical sector! That sector also has a large regional presence that serves a population well outside the boundaries of Tyler and Smith County.”

As has been well documented, a high-functioning medical community cannot exist with out a strong educational base. Though some might not have noticed, East Texas is growing into a powerhouse for higher education. All indicators point to 2012 being another record-setting year for application and enrollment across East Texas. From Stephen F. Austin’s 13,000 students in Nacogdoches, and the almost 20,000 students in Tyler to the 6,000-plus students calling the Longview area home ( as well as the many satellite campuses across East Texas), our area is producing a great number of highly skilled employees to fill all the gaps.

However, when most of us think of the economy and its current strength, images of the retail sector come to mind. Christmas shopping, back-to-school clothes, graduation gifts and the endless other reasons for purchasing goods and services are the most upfront way of seeing money go into the local economy. From sales tax revenue for the city, to the dollars spent at the locally-owned corner store, retail business can be the lifeblood of your economy. Over the last several months, tax revenue has been up across the board, with experts expecting the trend to continue after a strong holiday season. “[Sales tax revenue being up] means people are starting to shop again!” Mullins said, excitedly.

“You know when the economy went down in '08 there was a little bit of delay in terms of feeling the economic impact. [East Texas] was buffered by the energy sector, but when that slowed down a little bit and there were job losses ... people started spending less. Sales tax revenue went down for a couple of years.”

NEDCO’s King confirms: “We’re looking to see the trend continue. In retail, we’re looking to see at least as strong [of a] retail sector in the coming year as in the past. Nationally, I don’t expect it to do much more than muddle along for awhile. But, I think there are places in East Texas, like Nacogdoches, that have faired pretty well during this recession and I expect that to continue. I don’t see any super growth [in our region], but the growth we’ve had in the last few years is – by historical standards, good economic times – is pretty good.”

Another plan being put into place in Tyler, and subsequently towns across East Texas, is to draw on consumers’ sense of history and loyalty – an almost emotional appeal to help support your local economy. Nowhere is that more evident than in the multiple downtown revitalization projects either underway or planned. During 2011, Longview added new businesses such as boutiques, restaurants, bars and art/entertainment venues, while also changing the face of downtown through street, commercial and aesthetic improvements.

"We see that trend continuing through the next year, as well,” said Main Street Tyler Director Beverly Abell. “Not just in Tyler, but across East Texas. We all operate on the same four-point approach of organization, promotion, economic restructuring and design (architecture, etc.), because it’s about building on a base. Every downtown is unique and has its own history, and we want to build on that for the future. In 2012, [downtowns] will be doing more of what was successful over the last year: arts activities, festivals, shows, and so forth. And, we’re also adding several new things – the film festival through The Liberty, gallery shows and more. Plus, there are several large developments and projects slated to begin next year (both through the Main Street programs and private businesses).”

Downtown Tyler is also seeking to encourage others to join them in their cause. Recently, Abell announced a pool of $80,000 in forgivable loans (effectively grants) to be handed out over the next five years to people seeking to revitalize the area. “In 2011, we – like many downtowns across East Texas – were able to make great strides,” Abell said. “Instead of trying to convince people to come downtown for things, they began actively seeking out what was going on. That’s what we want, and it’s what the cities should want – for an active (and economically viable) downtown to be something that’s expected, rather than feeling like you’re paying a price to make the trip.”

As people get back out there and start spending, the cycle should continue. “Economist Ray Perryman often says, ‘The economy will do exactly what people perceive it will do,’” said Mullins. “Which is another way of saying that if people think the economy is going to be strong, and they have confidence they will keep their jobs, they’ll spend money ... 70 percent of the economy is driven by consumers and the is rest by business. So, if consumers aren’t spending, it’s going to have a ripple effect and [the economy] will slow down across the board... And it looks like even though the recovery is happening, it’s still at a painfully slow pace. Those are the big picture things and Tyler benefits from the strength of what’s going on in Texas – East Texas in particular. The last several years Texas has averaged a thousand new people coming into the state every single day.”

And it’s not just in the existing stores and shops that people will be spending money in 2012. Retail, food and beverage industries will also grow in the the future. As the population increases and the economy recovers, the need will only increase for businesses in the food, drink, clothing and retail industries. Across every area of East Texas, new restaurants and shops will continue to open their doors. The proof is in some of the businesses opening their doors just recently – like Panera Bread Co. and Corner Bakery.

“That’s due to strength and diversity in our economy and the growth in our population,” explained Mullins. “The census numbers show that our MSA (Tyler and Smith county combined) is over 200,000... when you start getting population levels in a city of 100,000 or a MSA of a couple hundred thousand plus, then some of these national chains start looking at you. They usually have some kind of formula they follow that says they only go into a market of at least 100,000 or 200,000. If they find that the numbers are favorable to their particular formula, they’ll make an investment. That’s what’s happening in Tyler. We are seeing growth from local restauranteurs and retailers from national groups.”

Gill sees the same on the horizon for Longview: “We’re definitely focusing on the food and beverage industry here, as well. From restaurants and destinations opening, to the manufacturing of those products (things like energy drinks), it’s a growth industry.”

Down south, Nacogdoches has seen a number of new spots open in the last 12-18 months. “Some are chains like Dickie’s BBQ, Bullritos, Fuzzy’s Taco Shop and more,” said King. “But we’ve also had several startups as well – a yogurt place, a bakery, etc. There are other retail locations too: Hibbett Sports opened up a second store ... For the last year-and-a-half, sales have been up over the previous time period. The 2010 to 2011 Fiscal Year retail sales receipts were up 8 precent over the previous year.” King believes firmly that 2012 will be another year of increase, as new projects and buildings are applied for and discussed daily.

However, if all that happens is a standard amount of growth over the next year – without planning for the future – what has East Texas really gained? No sustainable amount of new boutiques or fast-food restaurants can be constructed every single year, infinitely into the future, regardless of the great deals on accessories or the deliciousness of the burgers. There must be a reliable and repeatable process for drawing new businesses and consumers to our area, so that growth can be sustainable. Luckily, the Economic Development Corporations and Councils of East Texas work closely with local governments and business leaders to ensure that will be the case for many years to come. One main way this is done is offering incentives to businesses looking to potentially call East Texas home.

“Companies with a product or service that is traded outside of East Texas, or ‘primary’ businesses, are the kinds we will help with some incentives,” explained Mullins. “Whether it’s tax incentives, low-interest financing or land – right down to training dollars and utility incentives. We are very aggressive in trying to track those companies because they’re the ones who bring the new dollar, the new wealth, into the economy.”

Gill said Longview also aggressively seeks to attract primary companies to help bolster the Longview area economy. “It is mostly manufacturing and distribution [we work with],” she said, expounding on the draw of primary companies. “Actually, they manufacture a product and ship it out and invoice outside the area. So, the money that comes in is 'new money'. As opposed to retail, which is money circulating within the [same areas]. These businesses infuse us with new money. It’s definitely a longterm strategy, and it’s why we’ve been so successful over the past 20 years.” These are the companies that are offered incentives. “Companies must perform and meet their stated goals to get those incentives. They are responsible for operating that way: Investing the amount of money they said they would, and hiring the amount of people they said they would; that’s how we write our contracts. Investment and jobs is how we build our tax base and increase quality of life in the area.” Part of that plan is pursuing aviation-related manufacturing and helping the East Texas Regional Airport grow. “We haver a lot of land out there for expansion … there are also roughly 700 acres available in the North Business Park, and we would certainly like to get companies located out there, as well.”

NEDCO’s King took a broader view of the subject: “As other regions suffer economically, decisions are made to close down non-productive plants and relocate to productive areas. Nacogdoches (and East Texas) is in a position to reap the benefits of that. I see it continuing to go for next year, but it’s a basic advantage that the state of Texas has over the rest of the U.S. It’s a great [state] to do business. The cost of operating business in Texas is lower than in just about any place in the country. We’re not overly burdened with regulations, and land and labor are relatively inexpensive. We have a lot of things going for us, and East Texas is well-situated to take advantage of the climate. ... There are some exciting things on the horizon, and we’ll continue to have discussions with any companies willing to relocate here.”

Mullins continued, “Our cities and counties have a very pro-business attitude. We want to grow. We want to attract companies who might retain and attract jobs to this area. When you have that kind of pro-business mindset, people will respond.”

Gill echoed those sentiments, and sees East Texas as poised for a very bright 2012. “We are very fortunate to have healthy, growing businesses and and a wonderful population in the business community. We’re very fortunate. There has been lots of expansion and addition, with more to come.”

by Holly Head, [email protected] and
William Knous, [email protected]