San Marcos Mercury | Local News from San Marcos and Hays County, Texas

August 10th, 2009
Editorial: Grifols deal a good sign for city

Left to right, Economic Development San Marcos Executive Director Amy Madison, San Marcos City Manager Rick Menchaca and San Marcos Mayor Susan Narvaiz.

By the Newstreamz editorial board 

We commend and congratulate the city government in San Marcos for its recent deal to bring the Spain-based biomedical company Grifols, Inc., into the city. We are heartened that such an uncontestable win should emanate from City Hall, which has been known to advance some odd schemes in the name of economic development. We believe this is a very good sign.

We won’t go so far as to say that the Grifols deal instantiates city government at its very best, but it’s getting close. Biomed is sort of the holy grail of economic development. Economists have been giving $30-per-plate speeches for years in Hays County touting biomed as the can’t-miss basis for economic development in burgeoning locations such as our little bend of the NAFTA trail.

Thus, the competition for biomed is no less than an article of faith among economic planners. On the day the city introduced Rick Menchaca as the new city manager in San Marcos, he began his response to a question about his preferences for economic development with, “Everyone says biomed,” as if to just get that out of the way. Menchaca went on to add, of course, that he would need to hang around for a while before truly understanding how the city could leverage economic development.

So, here we sit a year and a half later, and we have biomed. Not only that, but we obtained biomed in the teeth of a fierce recession that has done enormous damage to personal fortunes when it hasn’t driven millions into bankruptcy. It’s not like the good times are rolling. You won’t find a lot of towns on the globe that can brag about adding this kind of jewel to their portfolios during a very difficult 2009.

At full buildout within four years, we’ll have another 190 jobs at average salaries of $38,571, well above the average in San Marcos. We suppose that other biomed-related companies will appear in San Marcos, noting that it’s advantageous to locate near Grifols. Perhaps the College of Health Professions and the College of Sciences at Texas State can leverage Grifols, and Grifols can leverage them, into bigger and better developments.

And the incentives are extremely reasonable. The city will refund to Grifols about $1.8 million in personal property taxes over 15 years. The county will make the same kind of refund, adding another $2.1 million. Bear in mind, these are refunds of personal property taxes, which means machinery and equipment. The property taxes for land and buildings will not be refunded.

Best of all, though, the Grifols deal gives us hope that the city has people in place who can play economic development at the level this city needs. We look forward to more good work from the likes of Menchaca and Amy Madison, Executive Director of Economic Development San Marcos, both of whom started in April 2008.

Given all the strife about the controversial Springtown Center incentive proposals, we might sound as if we’re shifting with the wind. But we cut Menchaca and Madison a fair amount of slack on Springtown. They both walked into the middle of that movie, which goes all the way back to StoneCreek development that’s inexorably linked to the Springtown issue. We’re realists who don’t believe it’s reasonable to think newcomers could diffuse such a political hornets nest.

Maybe if Madison and Menchaca had their feet a little firmer on the ground last fall, they could have done something smart about StoneCreek, like insisting that Target give up its non-compete easement on its old Springtown property before the city gave away another $4 million. But they were just getting started, and the motives behind that boondoggle well preceded them.

We also commend Mayor Susan Narvaiz, whose political gifts approach the stuff of legend on the scale of San Marcos. When you’re trying to herd cats like the state government, the county, and the city while courting an attractive biomedical company with options, you need political muscle to bring it all together. Even if Narvaiz didn’t do all the lifting, there’s a pretty good chance the Grifols deal wouldn’t have happened without her.

Obviously, we sometimes disagree with the mayor, but she is undeniably a power hitter, and it’s good to have her on our side when we agree. That said, it’s pretty easy to agree about biomed.

The county also deserves credit, though reasonable county officials will tell you that the personal property tax refund for Grifols is a no-brainer, just like the county property tax abatements for the retail portion of the Seton Hospital development in Kyle. When economic development is at stake, the county isn’t necessarily proactive all the time, but the commissioners are always willing to make a reasonable deal.

Perhaps the Grifols deal marks another important economic development shift. For the last 5-7 years or so, all of the action on the Hays County corridor has been in Kyle and Buda. While San Marcos was notoriously gridlocked, despite being most ideally positioned between Austin and San Antonio, Buda and Kyle were on the move.

Under John Trube’s strong mayoral leadership, Buda brought in Cabela’s, then leveraged that victory into a nice sales tax base led by the Wal-Mart that followed. Kyle, crushed by surging residential development, took the initiative to build Kyle Parkway, and now the intersection of that road with Interstate-35 is about to be flush with two million square feet of retail and a 210-bed Seton Hospital. Meanwhile, San Marcos accomplished litle for ten years.

Now, San Marcos is back in the game. We certainly wish Buda and Kyle the very best, because it benefits all of us. But Buda, resorting to its podunk ways since Trube left town, is mangling a nice opportunity to bring in US Foodservice. And Kyle, because the down economy has slowed commercial development on Kyle Parkway, is so challenged by debt that the city staff is worried about a tax rate of 70 cents per $100 of taxable property value within two years.

Meanwhile, San Marcos has solvency, the nearest midpoint between Austin and San Antonio, a university that’s growing in so many respectable ways, and a true sense of place that Buda and Kyle both lack. San Marcos is neither heavily leveraged, nor is it encumbered by old ways that blind it to the future.

So, we pass along our compliments to San Marcos and its city officials. And we do hope, going forward, that Grifols victory, and not the recent Springtown fiasco, is the face of economic development as we strive for this great little city to become ever greater. At the very least, we’re beginning to believe, we have the people to make that happen.

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13 thoughts on “Editorial: Grifols deal a good sign for city

  1. So you chastise the City of San Marcos for attempting to do the Springtown deal, then laud the Cities of Kyle and Buda in the next paragraph for landing….Wal-Mart and Cabela’s????? That sounds – inconsistent, to say the least.

    You also say that “San Marcos has accomplished little in ten years”….by what standard? When I moved here ten years ago, the south edge of town was still around Hwy 123. Everything south of there has been built in that time. Or would the Sam’s club and the center around it only count if they had gone to Kyle or Buda?

  2. If biomed is the path we have chosen, it would be interesting to see collaboration between the city and the university. In addition to the schools you mentioned, there could be smaller opportunities throughout the university.

    Every vertical (like biomed) has its own needs from a business management standpoint, an IT standpoint, a sales and marketing standpoint, etc, the university could easily offer courses across all sorts of departments, which would give their graduates a leg up in the industry.

    All in all, I think this is a positive move and I hope to see more of the same.

  3. Once again, Dano, you prove that a foolish consistency is the hobgoblin of little minds. Buda had nothing, zero, not even a place to buy underwear before Wal-Mart. They needed retail. And, you might note, these guys are saying Buda needs to get with the US Foods deal. I don’t know why you say “Buda and Kyle” got “Wal-Mart and Cabela’s.” That’s not what this piece says. Buda got Wal-Mart and Cabela’s. Kyle got a hospital and retail, which a town of 30,000 ought to have. Heck, Kyle didn’t even have a grocery story three years ago. A grocery story was a big adition for them.

    San Marcos is plenty full of retail. There’s no reason for San Marcos to give incentives for it. Different towns have different needs at different times. San Marcos is way beyond the stages where Buda and Kyle. San Marcos needs more advanced development.

  4. If you disagree, fine. I don’t understand why you feel the need to make personal attacks, though. Dispute my presentation of the argument if you like, but there’s no need to call anyone “small minded” simply because they don’t agree with you.

    A valid argument can be made that San Marcos needs the Springtown development. There is also room to dispute your assertion that SM is “plenty full of retail.” It might be one that you disagree with, but that doesn’t mean it’s from “little minds”.

    Set aside the intellectual snobbery for a second and maybe some real discourse can be achieved…..

  5. It remains to be seen what kind of jobs will brought to San Marcos. Hopfully it’s not like Goodrich where local citizens get the low-paying jobs and they bring in outsiders for the professional positions.

  6. That’s been my argument too, bdfkka. Most of the major employers in San Marcos (Goodrich, CFAN, the University) “import” their highly-paid employees from Austin, leaving the “rank and file” jobs for the locals.

    Hopefully Grifols will be different, but unless we can do something to make San Marcos a more attractive place for these higher-earning employees to live I don’t know that it will. There is a dearth of high-end housing and neighborhoods in San Marcos, and there are very few high-end retail outlets or restaurants in town.

    Unfortunately, San Marcos is geared toward being just what it is….a college town with a poor local base. It’s a “chicken or the egg” argument. If you build it, will they come? But as we see with the Springtown fiasco, no one wants to build it because they aren’t here.

  7. I keep wondering what specifically the encyclopedic term “biomedical” means in this context, and therefore what and how many jobs will be opened, and at what levels–the specifics needed to make a rational incentive to fit appropriately the nature of the business and its investment. Is a building or capital plant to be built? How big, and what kind? Will there be machinery, holding devices, tools, etc, employed? What is the base activity to be–“electronic diagnostics,” manufacture/sales of equipment, manufacturing, assembly, warehousing, testing, distribution, sales, specific medical services, laboratory work?

    These issues are tied directly to the number and type of jobs, qualification of employees, amount of housing or other amenities, etc. Will the workforce live here, or commute,and from where? Are there transit/shipping/public safety considerations (spills, for example?), or toxic chemicals/flammables? Is this a regulated concern?

    Will biohazardous material be involved, either as a product or byproduct? Are there likely to be environmental or natural resource (water) issues?

    Are most workers to have highly specialized skills and
    education/specialized training? Will local docs, clinics, hospitals, etc. be involved? How wide is the service area? (And please, no phony “average” salary!)

    Such questions are by no means hostile, but are the type of things the City needs to know about every new business,
    even without the need to target and calculate the terms of an incentive package.

    Another ESSENTIAL question is what occurs if the business reaches a package agreement specifying X jobs over y timeframe, with z of company investment, and then for whatever reason, cannot live up to those terms? It is normal and expected that a contract will contain “clawback” provisions to insure the public investment is
    appropriately recouped for the taxpayer/lenders if performmance goals don’t work out in a timely. Incentive contracts, in other words, must be monitored and managed for their life.

    Several years ago, the City landed a company which collected biowaste from hospitals, etc., and trucked it here to be incinerated according to strict regulatory standards. While some citizens became rather alarmed at the thought of such materials being transported and pyrolyzed, their reservations were soon calmed, and the “biomedical” deal was done in a normal way.

    One would hope that all the i’s dot and the “t’s” cross in this instance as well, and that Grifols becomes our new and valued corporate partner. But NONE of this can be presumed from a mere “feather-in-the-cap” PR ad and
    announcement.

    And after all, when a prospect is confirmed and funded, each citizen does become in a real sense a party and minority owner of the deal, having put up City resources.
    Thus those who put the deal together–Council, Attorney, City Manager, and staff–bear community responsibility for diligence in managing the agreement, as well as making the new citizen feel welcome and supported.

  8. I apologize for my verbosity in examining matters related to growth, land and resource use, service implications, etc. However, these are the necessary constants in any particular deal, determining whether the agreement is really either “economic” or “development” in the real sense.

    A couple of simple “indicator” questions stand out starkly in the recruitment of new activity into a community. Does the proposal bring in a new market or supplier, which mesnes well with what we have, or are we recruiting a misfit–for example, a competitor for existing concerns? We have a world of retail, especially for “dry goods” and clothing, and could eventually reach retail saturation in that market–the point at which the “new guys” begin to take market share from settled outlets. This is especially tricky when it involves national, or “big box” operations with wide markets. Lo, the poor gunsmith or hunting supply in a “mom and “pop” when Cabela’s comes to town! Another alternative would be Bass Pro or a similar operation within the market area.

    From the public’s point of view, perhaps the most useful gauge of an incentive package would be infrastructure expansion costs just to serve one center or tenant. A gut-level question is, when all is said and done, what is the cost per job to do the deal, which is easily calculated, including cost over time.

    How many typical jobs related to the “tourism industry” would the sum of permits, tax incentives, infrastructure, water, traffic, increased school taxes, home residences bring in? Big investments into low-wage jobs, or part-time, or jobs without benefits, or seasonal employment, are tricky to justify. And these jobs don’t create the need for others in support roles.

    In heavy manufacture, each position “on the line” creates 3-5 jobs in supply, distribution, and all kinds of community support–clothing, restaurants, entertainment, parts, energy, realty services, banking–thus keeping payroll, anyway, in the area, along with company “hard costs” as simple as accounting, tools and equipment, raw materials, component sub-assembly, and fleet service. Thus both the higher skill level and salary figure into cost per job.

    A dodge often taken in this regard is that “we’ll be bringing in “100 jobs with an AVERAGE salary of $30K. Does the picture change if seven top managers earn between $65K and $125K, ten middle managers and foremen, etc. at $50-$60K, along with 20 local lower-level new hires? Again, what if management prefers Onion Creek or West Austin to our town?

    These things need to be probed and understood by candidates and new officials who may at first just see stardust in the term “economic development.” Top be a “win-win” (that over-used term again, the deal must pass the tests of conservatism, fairness, cost-to-benefit, fittingness to the market/community, and sustainability.

  9. Mr. Moore, while anything is possible, I would question the likelihood of a company creating jobs with an average salary of $30-60k (the numbers thrown around for some recent deals), where the majority of the employees were in low-paying positions comparable to what people currently earn in San Marcos (minimum wage).

    While anything is possible and it is certainly worthwhile to dig and get a sense of what those jobs will look like, I see no indication of much of anything in the way of minimum-wage employment at Grifols.

    The type of spread that people talk about, with a handful of people making six figures as they oversee the work of a warehouse full of minimum-wage labor, is not like anything I see at any of the companies I have worked for, or with. There is generally a very broad range of salaries. Yes, some are low and some are high. Most are in the middle somewhere.

    Your point about management preferring to live elsewhere is a valid one and one that needs to be dealt with. I have still not seen anything in the way of a survey of people who commute here to work (like professors), to see why they do not want to live here.

    One could surmise that the reasons are similar to the concerns raised in the 2008 community survey, but it would be nice to get actual answers, from actual commuters.

    That survey did not cover anything related to our schools. It also did not really talk about jobs. There was a line-item for economic development, which scored lower than all but 8 of the 34 items listed (Lower scores were given to downtown parking, downtown redevelopment, P&Z services, development permitting, traffic control, bike lanes/routes, sidewalks and street maintenance. The bus system tied with economic development.)

  10. My guess would be the biggest reason managment does not want to live here is the state of our schools, especially when there are school districts that are perceived to be better surrounding us.

  11. They aren’t perceived to be better; they are better. Just about every metric available shows this to be true.

    Still, it would be far better to find out from those who already commute to San Marcos. It could be that there is no critical mass of jobs here.

    If you live in Austin, where there are plenty of jobs and your spouse works in Austin, do you relocate to San Marcos for a job here (forcing your spouse to commute), knowing that if you leave that job, you probably have to go back to Austin to find another?

    I only know that it is a problem we should be looking into and not guessing at.

  12. Last time I saw the university’s official Planning numbers (which are readily enough available, the percentage of commuting faculty was right at 40%, near the same as for students, 42%(?!). According, back then, to the Rural Capital Area Work Force (h.q. in Round Rock) and the Capital Area Planning Council of Governments (Austin), 40% of the workforce in the ten-county Region crossed 2 or more county lines to get to work. Seguin and New Braunfels are in the Alamo Region, and therefore are not counted.

    Wonder how these figures jibe with the planning numbers currently used by TxState, the SMCISD, and the City.

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