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Hold Your Horses, Gov. Rick Scott

Gov. Rick Scott
[Photo: Jon M. Fletcher]
Before 1989, driving due north 20 miles out of Fort Worth, Texas, would find you amid wheat fields and herds of the longhorns that gave the city its first nickname — "Cowtown." Today, the same drive steers you into a booming industrial-development project, larger than Manhattan, that has helped the Dallas-Fort Worth region live up to its self-chosen identity as the "Metroplex."

AllianceTexas is a 17,000-acre mixed-use development anchored by the first industrial airport in the U.S. and one of the largest inland ports. Master-planned by Dallas billionaire Ross Perot Jr.'s Hillwood Development Co. over the past 20 years, it has transformed the prairie land north of Fort Worth into an employment hub with 30,000 jobs and counting. Alliance helped make Dallas-Fort Worth the fastest-growing metro in the United States between 2000 and 2010.

More than 260 companies have been drawn to the dry, flat landscape, including a tenth of the Fortune 500. The FedEx hub here is the third-largest in the U.S. At American Airlines' supersized engineering center, 767s are lined up wing to wing for maintenance. Earlier this year, GE Transportation chose the site for its $96-million locomotive manufacturing facility, expected to add another 750 jobs, further establishing AllianceTexas as an icon of Texas' economic surge.

AllianceTexas
The 17,000-acre mixed-use development AllianceTexas turned an area north of Fort Worth from "Cowtown" to "Metroplex," but it relied heavily on government funding and involvement. [Photo: AllianceTexas]

Florida Gov. Rick Scott knows Texas well. He lived there during law school at Southern Methodist University, then as he began his legal career and while founding and leading the company that became hospital giant HCA. All told, Scott lived in the Lone Star State for 10 years more than the eight he's spent in Florida.

Scott says his choice to settle in Florida reflects his belief in its advantages over most other places, including Texas. Still, his regard for all things Texas finds expression in his black cowboy boots, hand-stitched by Houston's Rocky Carroll with Florida's state seal and the words "45th Governor." And there's one thing beyond footwear he covets particularly: The Lone Star State's job growth.

GE Transportation
GE Transportation is building a $96-million locomotive-manufacturing facility that's expected to add 750 jobs. All told, more than 260 companies have a presence at the AllianceTexas site. [Photo: AllianceTexas]

In the wake of the mid-1980s oil bust, Texas re-engineered its economy into a diversified engine that has retained a strong energy sector but no longer rises and falls with it — witness the growth of Alliance and emergence of Austin as one of the top high-tech centers in the world.

Gov. Scott's Boots

[Photo: Jon M. Fletcher]

In the past decade, Texas added more private-sector jobs than any other state in the nation. That included 30% growth in the energy sector, but the state's business/finance and biomedical/biotech clusters also grew 30%. While Texas manufacturing saw a net loss of jobs, the sector still outperformed the national manufacturing economy by a significant margin. A Brookings report on the recession and recovery found four Texas cities — Austin, El Paso, Dallas and McAllen — among the 20 top-performing metro areas in the first quarter of 2011, measured by a combination of economic factors including home prices, employment and economic output.

Scott attributes the Lone Star State's good fortune to policies and laws that keep taxes, regulation and legal liability for businesses relatively low — and a hands-off style of government. And he's already tried to bring a taste of Texas to the Sunshine State. Scott, for example, has moved to dismantle Florida's growth-management bureaucracy in an effort to replicate Texas-style, local-controlled approval for development. Next year, he wants to work on "serious" tort reform for Florida. Texas has spent more than a decade making it harder to sue business, including a "loser pays" provision passed this year that requires plaintiffs to cover defendants' attorney fees if a judge finds a suit unwarranted.

But a closer look at the dynamics of growth in Texas reveals a much more complicated set of factors behind the state's economic surge. Not all can transfer east to the Florida peninsula. Of those that could, not all should. Following are key points of comparison.

Population
Florida: The fourth-largest state, with 18.8 million residents
Texas: The second-largest state, with 25.1 million residents
Source: U.S. Census

Poverty
Residents living below poverty level
Florida - 15.0%
Texas - 17.1%
National - 14.3%
Source: U.S. Census
Median Age
Florida - 38.7
Texas - 32.3
National - 35.3
Source: U.S. Census

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Geography and History

AllianceFlorida project rendering
Rendering: AllianceFlorida project in Jacksonville. The development is modeled after AllianceTexas. [Photo: AllianceFlorida]

Lone Star State
Alliance's intermodal transportation hub began as a vision of H. Ross Perot Jr., son of the former presidential candidate. But it could not have happened just anywhere. Fort Worth has been a transportation and distribution hub since the 1870s, when the Texas and Pacific Railway's tracks reached town.

North Texas' location smack in the middle of the country — rail and highways link Midwestern markets with ports not only on the Gulf, but on the Pacific and Atlantic oceans — has been a key factor for major corporations deciding to locate here, says Michael K. Berry, president of the Perot family's Hillwood Development, which manages the project. Even without taking into account nearby metros such as Oklahoma City, Texas as a market unto itself has nearly 40% more people than the Sunshine State.

H. Ross Perot Jr.
H. Ross Perot Jr. is the visionary behind AllianceTexas. The project took off after former U.S. House Speaker Jim Wright bought into the idea and funneled government money to make the project possible. [Photo: AllianceTexas]
Florida developers have latched onto the intermodal hub idea with a half-dozen inland port projects, hoping to capitalize on the state's proximity to markets as diverse as Latin America, the Caribbean and Atlanta. Hillwood executives see "a lot of growth in the East Coast play," says Berry. But with Florida unable to reinvent its geography or history, it's unlikely that any of the inland ports can develop on the scale of an AllianceTexas. The best Florida prospect may be another Hillwood project — a partnership with the city of Jacksonville to develop a 4,474-acre, multimodal business park/inland port on the city's west side at the former Naval Air Station Cecil Field off Interstate 10. Hillwood has opened an office on site, landed Foreign Trade Zone status for the park and filed site development applications and begun clearing land for its first building.




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Cultural Identity

Cultural Identity

Texas' reputation for being business friendly and low tax dates to the late 19th century. Democrats and Republicans alike have "always talked about the good 'bid-ness' climate," says Paul Burka, senior executive editor at Texas Monthly and the dean of Texas political writers for four decades. "I don't think it's ever been any different."

The pro-business character threads through a tightly woven Texas monoculture. From Waco in west Texas to metropolitan Dallas in the north or the touristy Alamo down south in San Antonio, the Lone Star image is ubiquitous — mounted on highway overpasses and displayed on many businesses. Newcomers to the state immediately have a sense of what it means to be Texan.

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Florida's diversity makes it unlikely to develop a true statewide identity outside of tourism. On the plus side, the state's regions each have their own cultures and virtues: Southern cities like Jacksonville; midwestern like St. Petersburg; northeastern like Broward and Palm Beach counties; international like Miami. The disadvantage to Florida's city-state system, however, is that the regions don't often speak with a statewide voice, competing with each another on everything from new colleges for universities to deepening channels for ports.

Education

Education
[Photo: Ray Carson/University of Florida]

"Any community that expects significant outward investment has to invest in itself," says Dean Barber, a site-selection consultant in Dallas-Fort Worth. "You can't expect a company to come in and build a plant if you haven't been investing in excellent schools" for the children of executives and workers.

Education
Graduation Rate
High school students who graduate in four years:
Florida - 66.9%
Texas - 73.1%
National - 74.7%

Bachelor's Degrees
Adults with a bachelor's degree:
Florida - 25.6%
Texas - 25.4%
National - 27.5%
Source: U.S. Census

Education
SAT
High schoolers who take the SAT:
Florida - 54%
Texas - 50%
National - 45%

SAT Math
Average score:
Florida - 497
Texas - 505
National - 515
Source: U.S. Department of Education, National Center for Education Statistics, 2007/08 academic year
Florida devotes less of its overall budget to education: 30% compared with Texas' 40%, according to the U.S. Census. Fewer Florida high schoolers graduate in four years, compared to Texas. More Florida students take the SAT, but their average math scores on those SATs are lower than their counterparts in Texas.

In one area, Florida may have a competitive advantage: Companies with blue-collar training needs increasingly seek programs like those offered through the Florida College System that provide industry-specific training, including the advanced manufacturing program at Polk State College and life sciences training at Palm Beach State College. The U.S. Chamber of Commerce recently ranked Florida No. 1 in the nation in such programs.

But when it comes to universities as generators of private companies and high-paying jobs, Texas has a big head start. The University of Texas at Austin has been spinning off and recruiting major technology companies since the late 1950s and early '60s, when Gainesville and Tallahassee were still sleepy college towns.

Today, Austin is the headquarters of Whole Foods and Dell. Other Fortune 500 companies with a local presence include Apple, IBM, 3M, Hewlett-Packard, Google, AMD, Applied Materials, Cirrus Logic, Cisco Systems, eBay, PayPal and Florida-based Office Depot, which just relocated its new inside-sales organization there — with 200 new jobs — after a $300,000 award from the Texas Enterprise Fund.

John Doggett, who studies global competition at the UT Austin business school, attributes the city's success to "stealing brains" from the rest of the world — and rewarding professors for commercializing research that creates jobs and wealth.

At this point, both Texas Gov. Rick Perry and Florida Gov. Rick Scott seem more focused on higher-ed costs and efficiencies than larger missions. Among other moves, both have drawn beads on tenure for university professors, a step that campus administrators say would make it nearly impossible to lure and retain the faculty most likely to spin off companies.

Top Universities

Top Universities

With the caveat that higher-education rankings can be capricious, only two Florida universities this year made the top 100 in U.S. News & World Report's rankings of the best in the nation: Private University of Miami (No. 47) and public University of Florida (No. 53). A half-dozen Texas campuses made the list, starting with consistently top-ranked private Rice University in Houston (No. 17); the University of Texas at Austin (No. 45); Southern Methodist University (No. 56), Gov. Scott's law school alma mater in Dallas; Texas A&M (No. 63), which is Gov. Perry's alma mater in College Station; private Baylor in Waco (No. 79); and private Texas Christian in Fort Worth (No. 99).


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Workforce

Dell manufacturing facility
Dell manufacturing facility in Austin [Photo: Dell Inc.]
Aside from basic location and infrastructure needs, most companies' top priority is workforce. Compared with Florida, Texas cities have larger shares of the workforce in engineering, a spinoff from the oil industry, says David Denslow, a distinguished service professor in the University of Florida's economics department. The only MSA in Florida with as significant a concentration of engineers is Palm Bay-Melbourne-Titusville. However, the skilled numbers are on the increase in Florida, for example, with a growing training and simulation sector in Orlando and stepped up biotech expertise in the Gainesville and Palm Beach areas.

Florida also may be better positioned to outcompete Texas and other states on the types of high-wage, new economy jobs that require a highly educated bilingual population. Florida metros tend to have higher numbers of educated immigrants or a good balance of high skill and low skill, according to the Brookings Institution. Texas metro areas tend to have larger percentages of low-skilled immigrant workers — in some cases nearly half the labor force.

Fewer retirees, more working-age residents and a surging population mean more organic job growth for Texas. But not all is the sort Florida should covet: 9.5% of the Texas hourly workforce is paid at or below minimum wage, tying it with Mississippi for the largest share of minimum-wage workers in the nation. In Florida, the share is 6.7%, closer to the national average of 6%.

Jobs Gained
(Jan. 1 through June 30, 2011)
Texas: 117,600 (highest jobs growth in the U.S.)
Florida: 85,500 (third-highest jobs growth behind Texas and California)
Source: U.S. Bureau of Labor

Unemployment Rate
Florida - 10.7%
Texas - 8.4%
National - 9.1%
Source: U.S. Bureau of Labor, July 2011


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Government Investment

Texas Capitol
The Texas Capitol in Austin
Hillwood's Michael K. Berry attributes much of the AllianceTexas success to vigorous federal, state and local involvement, including public-private partnerships and plenty of political muscle. The fact that U.S. Congressman Jim Wright of Fort Worth was the U.S. House Speaker in 1987 and bought into Perot's vision for an air-rail transportation hub cannot be overstated, says Berry. A 10-year House Majority Leader who became Speaker in January that year, Wright helped convince the FAA to spend more than $30 million — 90% of the cost — to build the Fort Worth Alliance airport on land donated by the Perot family. The airport is owned by the city of Fort Worth and managed by Alliance Air/Aviation Services, another Hillwood company.

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Given the federal budget squeeze, the lack of a comparable Floridian in such a powerful position, and Scott's well-established bias against federal spending and involvement, it's hard to image conditions favoring that sort of push here.

Growth and Development Regulations

Houston Metro
Houston is the largest metro area in the nation with no zoning.

Texas' metro areas share "an unparalleled openness to growth and development," according to a Brookings Institution analysis of growth regulation in all 50 states. Planning is weak. Texas counties are not allowed to adopt zoning — or even binding comprehensive plans. The largest cities can zone unincorporated land up to five miles out. Houston is notorious for being the largest metro area in the nation with no zoning at all. Among the cities with zoning, "it is relatively easy to find someone in city government to help a project," says Hillwood's Michael K. Berry. Land-development review and securing roads and infrastructure also tend to be speedy, he says.

Scott has already tried to mimic the Texas approach by reorganizing the state's Department of Community Affairs, the agency many viewed as the chief custodian of the state's strong growth management laws. Scott saw the old DCA as a roadblock to business growth. "It's not that you don't get the permit," he says. "It's that it takes forever, and you don't know the whole process. If you're going to put your dollars at risk, you're going to eliminate as many variables as you can. If something costs you a lot to get there, you're going to say 'I'll go someplace else.'"

It remains to be seen whether Florida's already congested metro areas will choose to become even more like their Texas counterparts. Well-established costs of sprawl are much in evidence in the Lone Star State — most obviously, a lack of green space and traffic. The nation's Urban Mobility Report cites Houston and Dallas-Fort Worth as two of the top 10 worst congested metros in the U.S. Florida's most congested city, Miami, is No. 11.

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Major Incentives

Both Florida and Texas have two major incentive funds to help relocating businesses. Florida's Quick Action Closing Fund is a meant to be a deal-closer when it can give the state a "clear competitive edge" against another state. Projects must be in a targeted industry, have a positive payback ratio and create at least 10 new jobs with annual wages at least 115% of average. Florida created the fund in 1999 and has invested more than $237 million for a reported return of $5.8 billion in capital investment, 31,700 new jobs and 13,200 retained jobs.

The Texas Enterprise Fund is a similar deal-closing fund used as a final incentive in cases where a single Texas site is competing with an out-of-state option. Projects must have significant local support and create jobs with pay that exceeds average county wages. The award is tied to the number of jobs created. Established in 2003, the fund has invested nearly twice as much as Florida's — more than $435.3 million, reporting a return of $14.6 billion in capital investment and more than 58,000 new jobs. Texas has allocated $150 million to the fund for the next two-year period.

Florida's Innovation Incentive Program was created in 2006 so Florida could compete for high-value R&D or innovation-economy jobs. An R&D project must involve higher-education collaboration, be a catalyst for an emerging technology cluster and carry a local one-to-one match. An innovation project must create 1,000 jobs with a capital investment of $500 million and a local one-to-one match. The state has spent $450 million from the fund on seven projects, including Sanford-Burnham Medical Research Institute in Orlando, Max Planck in Jupiter and Torrey Pines in Port St. Lucie. Unsure of its impact, the Florida Legislature didn't fund it in 2009 or 2010, but devoted $75 million to it in 2011 and $15 million in 2012.

Michael K. Berry
Michael K. Berry

The Texas Emerging Technology Fund is a $200-million initiative created in 2005.

A 17-member advisory group of high-tech leaders, entrepreneurs and research experts reviews projects and recommends funding allocations to the governor, lieutenant governor and Speaker of the House. Since it was created in 2005, the fund has allocated more than $197.2 million to 133 early-stage companies and $173 million in grant matching and research superiority funds to Texas universities. Texas has allocated $140 million to the fund for the next two-year period.

In addition, local communities in Texas can vote for up to a penny of additional sales tax to fund them. "We never give the most away" when competing with other states," says Michael K. Berry of Hillwood Development. "We feel we don't have to."

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State Budget and Legislative Process

Texas/Florida Flags

A little more than a third of the state budgets of both Florida and Texas come from the federal government. Both states' constitutions require a balanced budget, and both cut billions from their budgets in the face of revenue shortfalls — in Texas' case, some $27 billion in cuts for the state's 2012-13 biennial budget cycle.

Some believe Texas has an advantage because the Texas Legislature, by constitution, only meets once every other year.

Florida's unlikely to copy that provision. In addition to shifting the balance of power more toward the governor's office, the measure means that "we have legislators who really have to make a living doing something else," says John Doggett at UT Austin. "It creates restraint that you don't see in other states."

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Taxes

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Taxes

Texas tax policy is not all that different from Florida's. Florida has a corporate tax, 5.5% of net income, which Scott wants to eliminate. Economic developers say it's not a significant departure from Texas' gross margins tax.

This year, the Florida Legislature declined to pass Scott's plan to cut the corporate tax rate to 3% as a first step toward phasing it out over seven years. Senate President Mike Haridopolos says business leaders told him Florida's "stability is more important than reducing a 5.5% corporate tax rate."

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Neither state has an income tax. Texas' sales tax is 6¼%. Cities, counties, transit authorities and special-purpose districts can impose an additional 2 cents for a total of 8¼%. Florida sales tax is 6%. The law allows some counties to levy additional taxes to take the total to 10%, but none currently charges more than 7 ½%.

Florida is particularly unlikely to copy one feature of taxes in Texas: Property tax rates there are, on average, twice as high as they are in Florida.

Quality of Life

Florida's beaches
Florida's beaches and natural areas are competitive advantages for the state in attracting companies that value quality of life.

Talk to Gov. Scott about Florida's quality of life, and he backpedals on his anti-growth-management rhetoric. "We want to take care of our environment," he says. "You look at places in Florida and how well they developed — look at Naples — you see that they did a great job. You really have to admire it."

On the wall of his office in the state Capitol hangs an oil painting of the Naples beach by artist Jerry Vallez. The sugary sand, natural vegetation and serene waves have a lot to do with why Scott and his family relocated from Connecticut to southwest Florida in 2003. "Texas has great cities, but I've lived in Dallas; I've lived in Fort Worth," says Scott. "They have ice storms."

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Florida's beaches and weather are some of the state's prime selling points for companies that put a premium on quality of life. According to analysts in both Texas and Florida, those are often the firms with higher-paying jobs and longer-lasting impact on the economy. On this count, Scott says, Florida already has Texas beat.

Attitude

Rick Scott is an admirer of the other Rick — fellow Republican governor and now presidential candidate Rick Perry. Perry is an aggressive corporate recruiter who personifies a less-tangible Lone Star business asset, articulated by observers both here and there as simply, "attitude." Perry actively recruits employers from other states to move to Texas — whether or not they are looking. He has honed in on California companies particularly, urging them to consider relocating from a state that causes "undue burden and taxation on companies" to "America's new land of opportunity: The state of Texas."

Scott thinks Florida can do some poaching too. "We've got many inherent economic advantages over almost every other state, and we've got a lot of inherent advantages over Texas," says Scott. "But we really need to sell ourselves as well as Texas sells itself. I think it starts with just our attitude."

Rick Scott & Rick Perry
Texas swagger as a business asset: Gov. Rick Perry is an aggressive corporate recruiter, urging California companies to bail out of a state that causes "undue burden and taxation" and move to "America's new land of opportunity." [Photo: Jon M. Fletcther, left; Office of Gov. Rick Perry, right]