The industry wars

Louisiana gains recruiting victories over rival Texas with incentives and a 'personal touch.'

Published Jul 9, 2012 at 9:00 pm (Updated Jul 9, 2012)

DMC Carter Chambers was looking for a property in Houston for an additional location when Texas-based officials began trying to lure the company's headquarters away from Baton Rouge.

Joey Jobe, CEO of the industrial products and services company, says that, all things being equal, he preferred not to uproot the company. But he knew Houston—America's “industrial Mecca”—could present a compelling case.

“It was a storm brewing,” Jobe says. “I needed something to counter it.”

Economic development officials came up with that “something.” Once BRAC got word of the possible move, it made retaining DMC Carter Chambers a top priority. Before long, LED Secretary Stephen Moret was sitting in Jobe's office, explaining what Louisiana could do for his company.

The value of the financial incentives from Texas and Louisiana was comparable, but Louisiana's package was more “creative,” Jobe says, and better tailored to his specific needs. In the end, the company decided to stay put.

“We were able to build a compelling case with our parent company as to why it was important for us to stay where our roots were, and they endorsed that,” Jobe says. “And therefore, the headquarters stay in Louisiana.” In fact, DMC now plans to expand in Baton Rouge, keeping 128 jobs here and adding 80 new ones.

While there may have been a time when Louisiana couldn't really compete with Texas for industrial firms like DMC Carter Chambers, that's no longer true. Thanks to tax incentive programs and aggressive economic development efforts, including a faster permitting process, Louisiana is in a better position than ever to attract and retain big industry.

Texas has a population of nearly 26 million. The 10-county Houston area alone is home to nearly 6 million people, according to the 2010 census, or almost 1.5 million more than the entire state of Louisiana.

The critical mass of population and infrastructure, and the business-friendly reputation, have long tempted Louisiana companies to move to Texas. BRAC faces competition with the Houston-Port??Arthur-Beaumont area for almost all of its multistate chemical and petrochemical company deals, theSNFchamber says.

Texas has no individual or corporate income tax, and broadly speaking, the state has the ninth-best business tax climate, according to the Tax Foundation, while Louisiana ranks 32nd.

But a recent foundation study found that, for new firms in general, Louisiana has the second-lowest tax burden, and the 10th-lowest for mature firms. Texas, by comparison, ranked 42nd and 12th, respectively. For new manufacturing firms, Louisiana has the lowest effective tax rate in the nation, the report says, while Texas is one of the highest-cost states.

Moret says Louisiana also has a faster environmental permitting process, and says FastStart, the state's highly regarded worker recruitment and training program, can help to overcome the disadvantage Louisiana has in terms of the sheer number of workers.

“Texas developed its pro-business brand decades ago,” Moret says. “Louisiana is at a different phase of its development. We're trying to position ourselves as an economic powerhouse.”

C.R. “Buzz” Canup, a South Carolina-based economic development consultant, says former Louisiana Gov. Kathleen Blanco's administration “got the ball rolling,” in terms of changing the state's image to a business-friendly state, and credits Moret and Gov. Bobby Jindal for “being very aggressive from a business perspective.”

“It's just totally different from when I worked in Louisiana prior to [Blanco's administration],” Canup says.

At the state level, Texas generally is considered less aggressive than Louisiana, although the local and regional economic development bodies in Texas are more proactive than the state. Houston can probably throw more money at a prospect than Louisiana, Canup says, but incentives are rarely the deciding factor in a location decision.

He says Louisiana's FastStart can be especially useful for companies that need workers with task- or equipment-specific training.

“Texas doesn't have that,” Canup says. “Texas has the community colleges, and the community colleges will tell you they can do the same thing, but they don't do it every day, and FastStart does.”

When Baton Rouge's Orion Instruments wanted to move to a bigger facility, they considered Houston (among other locations) before deciding to expand here instead. Liz Sanders, Orion's human resources director, says recruiting talent to Louisiana from other states can be a challenge. The bigger talent pool in Houston, and the fact that the city is such a hub for industry, are advantages, she says.

But Orion has been able to counter those advantages with state grants for worker training, among other benefits. And the fact that Jindal met personally with officials at Orion's parent company in Chicago didn't hurt Louisiana's case.

That kind of personal touch can make a difference. Jobe says he was impressed with how well BRAC and LED worked together. When the conversation about a new headquarters for DMC Carter Chambers first started, he assumed Houston would have the upper hand. Now, he says, he'd put Louisiana up against anybody.

“You want to see that you're wanted,” he says. “'We want you in Louisiana. We're not going to just give you lip service. We're going to show you.'”