EDj Economic Development Journal
The IEDC
734 15th Street, NW Suite 900 • Washington, DC 20005
Volume 11 / Number 2 / Spring 2012
Economic Outlook
A Case Study of Houston and Texas
The Wrong Side of Main Street
Revitalizing the East Side of Downtown Houston
Opportunities Abound in Aerospace Industry
Transition
NASA’s Expertise to Be Incorporated into Industry Sectors
beyond that of Aerospace
Galveston’s Business Recovery Plan
Disaster Recovery – from Theory to Practice
Panama Canal “Game Change” Depends on
Who Provides the Best “Playing Fields”
Port of Houston Prepares for the Challenge
Synergies between Economic Development
and Public Policy
Energy Collaborative Committee’s Strategy
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
1
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Economic Development Journal
International Economic Development Council
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Chair: Jay C. Moon, CEcD, FM
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Editorial Board: Ronnie Bryant, CEcD, FM, HLM, chairman; William Beyers, Ph.D.; Janet Cypra; Donald Haider, Ph.D.;
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OFFICERs AND BOARD OF
DIRECTORS
Officers
Jay C. Moon, CEcD, FM
Chair
Paul Krutko, FM
Vice Chair
JoAnn Crary, CEcD
Lynn Martin Haskin, Ph.D.
Barry Matherly, CEcD
William C. Sproull, FM
Secretary/Treasurer
Dennis G. Coleman, CEcD, FM
Immediate Past Chair
Jeffrey A. Finkle, CEcD
President & CEO
Board of Directors
Scott D. Adams, CEcD
William Allen
Charles S. Alvey, CEcD
Ivan Baker, CEcD
Mark Barbash, FM
Howard C. Benson
David Berzina, CEcD
Dyan Lingle Brasington, CEcD,
FM
Robert J. Camoin, CEcD
Tim Chase, CEcD, FM
Tedra Cheatham, CEcD
Christopher M. Chung
J. Vann Cunningham
2
Neil Everson, EcD
Jacques Evrard
Maurice D. Ewing, CEcD
Robert Fine
Kristen Fish, CEcD
Thomas M. Flynn, CEcD
Raymond Gilley
Gerald L. Gordon, Ph.D., FM,
HLM
Todd Greene, CEcD
Daniel C. Gundersen
Don A. Holbrook, CEcD, FM
Clarence L. Hulse
Donald E. Jakeway
Barbara K. Johnson
James R. Kinnett II, CEcD, FM
Thomas A. Kucharski, CEcD
F. Michael Langley
Andrew T. Levine
Gail Lewis
Diane C. Lupke, CEcD, FM
Tracye McDaniel
Brian McGowan
Janet M. Miller, CEcD, FM
Fred Morley
Phillip D. Phillips, Ph.D., CEcD
Craig J. Richard, CEcD
Gurbax Sahota
Mike Schwenk
Klaus Thiessen
Allison J.H. Thompson, CEcD,
EDFP
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
Anatalio Ubalde, FM
Steve Weathers, CEcD
Holly Wiedman
Joy S. Wilkins, CEcD
Roy H. Williams
PAST CHAIRS
William E. Best, FM
Thomas D. Blanchard, Jr., HLM
M. Ross Boyle, CEcD, FM, HLM
Ian Bromley, MA, MBA, FM,
FRSA
Ronnie L. Bryant, CEcD, FM, HLM
Steven J. Budd, FM
Robert B. Cassell, CED, FM, HLM
Kurt Chilcott, CEcD, FM, HLM
John P. Claypool, HLM
Dennis G. Coleman, CEcD, FM
Gary Conley, HLM
James A. Covell, CEcD, FM, HLM
Walter D’Alessio, HLM
James A. Devine, CEcD, FM, HLM
Donald G. Dunshee, CED, FM,
HLM
Murray A. Elder, HLM
Harry G. Foden, CEcD, FM, HLM
Jay A. Garner, CEcD, CCE, FM
HLM
James A. Garver, CEcD, FM, HLM
Victor S. Grgas, HLM
James W. Griffin, CEcD, FM, HLM
James H. Gullyes, HLM
James C. Hankla, HLM
Robin Roberts Krieger, FM
Ronald C. Kysiak, HLM
Robert E. Leak, Sr., CEcD, HLM
Marilyn Swartz Lloyd, HLM
Joseph A. Marinucci, FM
William J. McDermott, CEcD,
FM, HLM
John D. Morand, CEcD, FM, HLM
Ioanna T. Morfessis, Ph.D., HLM
Edward A. Nelson, Jr., CEcD,
FM, HLM
D. Kenneth Patton, HLM
James O. Roberson, CEcD, FM, HLM
Judie A. Scalise, CEcD, FM, HLM
Bill R. Shelton, CEcD, FM, HLM
Wayne Sterling, CEcD, FM, HLM
David C. Sweet, Ph.D., FM, HLM
Rick Thrasher, CEcD, FM, HLM
Mark D. Waterhouse, CEcD, FM,
HLM
Rick L. Weddle, FM
April Young, Ph.D., HLM
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
3
letter from the Governor
Rick Perry
Governor of Texas
welcome to
texas
Welcome to Texas – the country’s job creation leader and home of the best business climate in the nation. I am proud that Houston has been chosen to host the 2012 Annual International Economic Development Council Conference. There is no better place to address
the challenges of growing jobs and investment in our global economy than in the city named
by Site Selection magazine as the top large metro in the United States.
In Texas, we like to say that we’re “Wide Open for Business.” This is more than just a
slogan; it’s a commitment to creating and sustaining an environment that fosters business
development and job growth. We are proud to offer companies an unparalleled competitive edge with our superior infrastructure, proximity to strategic markets, reasonable and
predictable regulatory climate, and skilled workforce. Texas is committed to investing in our
state’s success by providing businesses with the tools they need to grow and prosper – tools
like our innovative Texas Enterprise Fund, which has been instrumental in bringing thousands of jobs and significant capital investment to the Lone Star State. Our commitment has
resulted in Texas leading the nation in job creation over the last l0 years.
In addition to our exceptional quality of life and robust economic climate, Texas has one
of the lowest business tax burdens in the United States, ranking as a top 10 state in the Tax
Foundation’s 2012 State Business Tax Index. Texas levies no corporate income tax and no
personal income tax, allowing businesses to pass on more value to their employees.
Texas remains in the spotlight for attracting companies and jobs from around the globe.
Month after month, the Lone Star State tops business rankings for business climate, job
growth and growing communities. Texas is a leading state for Fortune 500 and 1000 companies, and grew its exports by 2l percent in 2011 to remain the No. 1 exporting state in the
country for the 10th year in a row. It’s no wonder Texas was named by Forbes as the best state
for jobs and is also ranked the No. I state on Forbes’ list for growth prospects and economic
climate.
I invite you to take advantage of your stay in Texas and discover how thousands of companies have utilized our commitment to promote their growth and prosperity. Each and
every day, Texas is proving that, no matter the industry, we are dedicated to keeping Texas
Wide Open for Business, and we are committed to your success.
Sincerely,
Rick Perry
Governor of Texas
4
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
Letter from the Mayor
Annise D. Parker
Mayor of Houston
welcome to
houston
Greetings!
It is my pleasure to welcome you to Houston for the 2012 Annual Conference of the
International Economic Development Council (IEDC), the world’s largest organization of
economic development professionals. I applaud the organizers of this event for again bringing together some of the best minds and most dynamic thought leaders dedicated to economic development, and thank you for making Houston your destination of choice. I am
confident that the dialogue this event inspires will enhance all attendees’ understanding of
and commitment to this important professional calling.
The theme of this year’s meeting is “Energizing Today to Empower Tomorrow: Creating
Success in a Global Economy,” and I can think of no more appropriate location to discuss
this topic than Houston. Our moniker is “Energy Capital of the World,” but the real story
is what we did with all this “energy.” By taking existing strengths with our port and railroad
infrastructure, we first transformed significant hydrocarbon resources into a permanent
base of technical expertise, technological know-how and thought leadership. Our success
in this area attracted the newly formed National Aeronautics and Space Administration,
which promptly set up its headquarters here. In the 50’s and 60’s, Houstonians with backgrounds in both industries helped begin the Texas Medical Center, utilizing many of the
same engineering principles used in oil and gas and space flight.
This basic pattern of learning from the experiences and knowledge of others has not
been a closed-loop system; since our founding 175 years ago, Houstonians have sought
out the best minds, the best ideas and the best practices, and routinely brought them to
Houston. Today the Houston region is recognized as the most ethnically diverse region in
the United States. We are home to 93 Consulates, two leading airports, one of which is the
largest hub of the world’s largest airlines, and are the first ranked port of entry for economic
powerhouses like Mexico, Brazil and Russia.
During your stay here, I urge you to take the time to explore our beautiful city. You will
quickly see why Houston is the top metropolitan area for corporate facility expansions and
relocations in 2011, as well as the city that has added more private sector jobs between
2006 and 2011. Houston is open for your business and leisure, and we look forward to
introducing you to all the opportunities we have here.
Best wishes for a successful conference and please enjoy your time in Houston. Come
back any time!
Regards,
Annise D. Parker
Mayor of Houston
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
5
The IEDC
Economic Development Journal
Table of Contents
Economic Outlook................................................................................. 7
A Case Study of Houston and Texas
by Kimberley R. Baker
The economic outlook for Houston and Texas is projected to continue its robust growth for at least the next
three to five years. It is not by accident that the nation’s fourth largest city and the second most populous state
in the U.S. have seen their economic growth trajectory continue to rise.
The Wrong Side of Main Street............................................................ 14
Revitalizing the East Side of Downtown Houston
Page 7
by Laura Van Ness
Since Houston’s founding in 1836, downtown Houston’s development has been skewed to the area west of
Main Street, through sheer momentum. This article discusses the evolution of the east side of downtown
Houston from an industrial area to a bustling, attractive area for employers, residents, and visitors.
Opportunities Abound in Aerospace Industry Transition.................... 24
NASA’s Expertise to Be Incorporated into Industry Sectors beyond that of
Aerospace
Page 24
by Bob Mitchell
The cancellation of the Constellation and Space Shuttle programs has dramatically affected Houston’s NASA
Johnson Space Center – arguably more so than any other change in the 50-year history of NASA’s space program.
However, no one knows how to turn lemons into lemonade better than the scientists and engineers of NASA JSC.
Galveston’s Business Recovery Plan..................................................... 34
Disaster Recovery – from Theory to Practice
by Jeffrey Sjostrom
Business recovery following a natural disaster remains an under-developed practice for communities. This
article focuses on the efforts made by a local economic development group, Galveston Economic Development
Partnership, in preparing for and responding to a catastrophic event.
Panama Canal “Game Change” Depends on Who Provides
the Best “Playing Fields”...................................................................... 42
Port of Houston Prepares for the Challenge
Page 42
by James T. Edmonds
This article takes a look at the pre- present-day and post-completion dynamics surrounding the Panama Canal
expansion project with the goal of putting into perspective, the effects the wider canal will have – particularly
on Gulf Coast ports such as the Port of Houston.
Synergies between Economic Development and Public Policy............ 49
Energy Collaborative Committee’s Strategy
by Lane Everett Sloan
The Greater Houston Partnership’s Energy Collaborative provides a vehicle for the Houston region to leverage
economic development activities and policy initiatives. The cohesive strategy also integrates the other necessary
components of workforce development and proactive market development.
IEDC Calendar of Events..................................................................... 32
IEDC News........................................................................................... 33
6
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
economic outlook
By Kimberley R. Baker
d
ubbed “The Best State for Jobs” by
Forbes and other third party endorsers, the Lone Star State is projected
to continue its robust pace for at
least the next three to five years.
Forbes, which compared the forecasted five-year
annual growth rate for jobs, total employment rate,
and unemployment rate for each state based upon
data provided by Moody’s Analytics, noted Texas’
tax climate, pro-business climate, and economic development incentives as primary reasons for companies and corporations to relocate or expand a business in the Lone Star State.
Throughout 2011, the state garnered many accolades including best business climate from respected
trade publications and economic development entities
like Site Selection magazine, DCI, and Area Development
magazine.
Site Selection also lauded the state as the winner of
the 2010 Governor’s Cup and 2011 runner up for the
most new and expanded corporate facilities announced
over the year. In February of this year, the magazine
named Houston as the No. 1 metro in the U.S. for new
and expanded corporate facilities.
In 2011, USA Today wrote that Texas had moved
past New York as the nation’s second largest economy,
and the Wall Street Journal credited the state’s low taxes and
employer-friendly environment
with helping make Texas the job
creation capital of the nation.
“Much of the success of
Texas has been its ability to
bypass a slowly growing U.S.
economy and take advantage of
much faster growth in developBill Gilmer, Senior
ing
countries,” said Bill Gilmer,
Economist – Federal
senior economist at the Federal
Reserve Bank of Dallas
Downtown Houston skyline
Reserve Bank of Dallas. “Texas exports today are about
14 percent higher than before the crisis, and Texas is
the nation’s number one exporting state – passing California a decade ago. Besides direct sales into a strong
global economy, these countries have driven high commodity prices for agricultural products, food, metal,
and oil.”
The state’s long held moniker as the “Energy Capital
of the World” has buffered it from many of the national
and international economic upheavals. For instance,
historically, Texas has benefitted greatly from rising oil
prices. Texas is the nation’s number one producer, and
the exploration affects many corners of the state.
“New technology in horizontal drilling and hydraulic fracturing are adding to the success of current drill-
Kimberley R. Baker is
the director of marketing
and media relations for
the Greater Houston
Partnership. (kbaker@
houston.org).
A Case STudy of Houston and Texas
The economic outlook for Houston and Texas is projected to continue its robust growth for at least the next three to five
years. It is not by accident that the nation’s fourth largest city and the second most populous state in the U.S. have seen
their economic growth trajectory continue to rise. Both Houston and the Lone Star State looked at the hard times of the
1980s economic downturn – most notably associated with the oil and gas industry – and turned those lessons into strategic
moves to shore up their core strengths. Both also charted a new course by looking at complementary industries like aerospace and aviation, technology, manufacturing, health care, and others to diversify their economy.
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
7
ing efforts, especially as the new technology is applied
to oil as well as natural gas production,” Gilmer added.
“The presence of tech – especially in Austin and Dallas
– was important to Texas early in its recovery.”
Gilmer points to energy; other commodity-driven
businesses; technology; and perhaps, housing as key
drivers of the Texas economy this year. “Housing in Texas never suffered the price bubble,
the Texas consumer is in less debt, and we have solid
job growth,” he said. “We do have a backlog of foreclosures to work through – but much less than the
U.S. Texas housing recovery will come before the rest
of the nation.”
Gilmer predicts hiring in state and local government
will lag behind in growth because of local and state fiscal pressure.
when oil price was rising from $25 to $125 per barrel,”
Gilmer added. “The Eagle Ford area is booming. Energy should lead. The Texas border cities are making
a big comeback based on cross-border trade, especially
auto-related production in Northern Mexico. Mexico
is now the second largest assembler of autos in North
America, and the biggest supplier of parts to the U.S. El
Paso has done even better on the basis of the $5 billion
expansion of Ft Bliss, and thousands of new military
families.”
The Eagle Ford Formation (also called the Eagle
Ford Shale) is a sedimentary rock formation from the
Late Cretaceous age underlying much of South and East
Texas, consisting of organic matter-rich fossiliferous
marine shale. The Eagle Ford Shale remains one of the
most actively drilled targets for oil and gas in the U.S.
In 2011, the 10-county Houston region experienced
unprecedented growth in job creation, capital investWhy Texas?
ment, trade, and a number of different key indicators.
“Texas has a friendly business climate – relatively low
By mid-October 2011, the region had regained more
taxes, low regulation, tort reform, right-to-work laws,
than 100 percent of its
and no minimum wage,”
pre-recession job lossGilmer said. “It is attracHouston is one of only four regions that es – making it the first
tive to migrate to Texas beenjoyed net job growth in manufacturing major metro in the nacause of availability of jobs,
lifestyle, and low housing
in the past 10 years. In 2011, its heavy tion to accomplish this
feat. Largely driven by
costs. Texas has outgrown
manufacturing
sector
expanded
by
almost
a diversified economic
the nation since the 1960s –
five percent. Houston’s industrial growth strategy that continand continues to do so.”
ued to capitalize on its
is no fluke; over the well-earned reputation
past year its overall job as the “Energy Capital
growth has been among of the World,” the region also embraced core
the best of all the strengths in aerospace/
nation’s major metros. aviation, life sciences,
advanced manufacturing, distribution and
logistics, and other
growth sectors.
Houston is one of only four regions that enjoyed
net job growth in manufacturing in the past 10 years.
In 2011, its heavy manufacturing sector expanded by
almost five percent. Houston’s industrial growth is no
fluke; over the past year its overall job growth has been
among the best of all the nation’s major metros.
“Houston’s industrial success owes much to the city’s
massive port and booming energy sector,” said the Federal Reserve’s Bill Gilmer.
Energy Capital of the World – biofuels in Houston
“Houston is about energy – it’s about fabricated
metals and machinery. It’s oil service supply and petrochemicals. It’s all paced by a high price of oil and new
Houston: A Locomotive that Will Help
technology that makes it more accessible.”
the U.S. Economy to Power Forward
Traditionally, three factors drive Houston’s economy
If Texas is the engine that continues to power a na– energy prices, the strength of the dollar, and growth
tional economy that is slowly gathering steam, then
of the U.S. economy. In 2011, high energy prices alone
Houston is the locomotive that will help the state and
were enough. Houston added 76,700 jobs between Denation outpace growth in the global marketplace.
cember 2010 and December 2011, one in seven com “We see Houston separating itself from the rest of
ing from the energy industry (upstream, downstream,
the U.S., just as it did from 2003-2008, the time period
equipment manufacturing).
8
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
corporations that directly account for one in every 10 of
The oil and gas industry is usually divided into three
the Houston metropolitan area’s more than 2.6 million
major components: Upstream, midstream and downjobs.
stream, though midstream operations are usually included in the downstream category.
GHP facilitates relocations and expansions in the
Houston area; international outreach initiatives such
The upstream oil sector is a term commonly used
as business development missions outside the U.S. and
to refer to the searching for and the recovery and proreceiving foreign trade delegations; and strategic planduction of crude oil and natural gas. The upstream oil
ning. IEDC certified GHP as an AEDO organization.
sector is also known as the exploration and production
(E&P) sector.
Exports through the
The upstream sector includes the
Houston-Galveston Cussearching for potential underground or
toms District are on pace
underwater oil and gas fields, drilling
to exceed $128.9 bilof exploratory wells, and subsequently
lion this year, posting a
drilling and operating the wells that
$53.2-billion increase over
recover and bring the crude oil and/or
the recession low of $75.2
raw natural gas to the surface.
billion in 2009.
The downstream oil sector is a term
commonly used to refer to the refining
What’s Driving
Growth?
of crude oil and the selling and distribu While data for the
tion of natural gas and products derived
export of services are
from crude oil. Such products include
not available at the local
liquefied petroleum gas (LPG), gasoline
level, this data is available
or petrol, jet fuel, diesel oil, other fuel
at the national level. Seroils, asphalt and petroleum coke.
vices account for about
The downstream sector includes oil
one-fifth of all U.S. exrefineries, petrochemical plants, petroports, according to the
leum product distribution, retail outlets
U.S. Bureau of the Cenand natural gas distribution
sus. That suggests Houscompanies.
ton’s service exports such
Houston is the focal point
as engineering, construcfor the oil field equipment
tion management and oil
Above: Johnson Space Center – NASA
and services industry.
field
services will exceed
Orion Spacecraft Project
“With each job in energy
$20 billion this year.
Left: Patrick Jankowski, Vice President of
supporting an additional
Undoubtedly, Houston’s
Research – Greater Houston Partnership
two to five jobs elsewhere in
service industries benefit
the economy, Houston owes
from the weaker dollar as
much of its prosperity to the
well.
current drilling boom,” said
Annually, key growth drivers in the Houston region
Patrick Jankowski, vice president of research for the
include: foreign trade, oil exploration activity, industrial
Greater Houston Partnership (GHP) and president of
production, home sales, auto sales, and activity through
the Houston Economic Club.
the region’s bustling Houston Airport System.
Jankowski added: “But one shouldn’t discount the
Foreign Trade: The combined value of imports and
role of the weak dollar in Houston’s good fortune. Since
exports through the Houston-Gal­veston Customs Dismid-2009, its value has declined more than 17.1 pertrict totaled $268.1 billion in 2011, a 26.8 percent incent against major world currencies. Over the past decrease over the $211.4 billion handled in 2010. Trade
cade, it has fallen 33.6 percent, making the goods and
is up in 24 of the top 25 commodities shipped through
services that Houston produces relatively more affordHouston. The Houston district should set a trade record
able in overseas markets.”
this year.
The Greater Houston Partnership, through its more
Oil Exploration Activity: The Baker Hughes count
than 2,100 Members, represents the 10-county Housof active rigs in North America averaged 1,869 in 2011,
ton region’s business interests to promote the growth
up 21.5 percent from 1,546 in 2010. That’s significantly
of high-paying jobs, international trade, and capioff the recession bottom, when the count fell to 876 rigs
tal investment. It’s a private, non-profit organization
in mid-June of ’09.
whose members include representatives of small and
Industrial Production: As of this writing, the Housmid-sized businesses and Fortune 500 companies. In
ton Purchasing Managers Index (PMI) has remained
addition, Partnership Members employ 544,198 or apabove 50 for 30 consecutive months and averaged
proximately one-fifth of Houston Metropolitan Statistiabove 60 for the past 12 months according to the Instical Area (MSA) jobs. GHP’s Board of Directors oversees
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
9
tute for Supply Management-Houston. Readings above
50 indicate growth in production over the next three to
four months; readings below 50 suggest contraction.
Home Sales: The Houston Association of Realtors®’
Multiple Listing Service reports that the metro area has
a 5.6 month inventory of single-family homes. That
means it would take 5.6 months to sell all the singlefamily homes on the market based on sales activity over
the past year. That’s an improvement from 8.0 months
during the worst part of the housing downturn. A sixmonth supply is considered a balanced market.
Auto Sales: The quarter ending March ’12 recorded
the highest vehicle sales of any quarter since the quarter ending June ’08, according to TexAuto Facts Report,
published by InfoNation, Inc. of Sugar Land. Local
auto dealers are on pace to sell more than 275,000 vehicles this year, which would be a 26.1 percent increase
from the 218,000 sold in ’09, the depth of the recession
Airport Traffic: The Houston Airport System handled 49.9 million passengers in the 12 months ending
in October 2011 and is on pace to handle more than
51.0 million this year. Annualized passenger traffic has
trended upward from the recession low of 47.7 million
in August 2009.
The Houston region is not immune to economic
fluctuations.
“Only a handful of indicators hint at weakness in
the economy,” according to GHP’s Jankowski. “Foreclosures are up slightly for the year but down significantly
from the peak. This may actually be a good thing. The
sooner all at-risk properties work their way through
the system, the sooner real estate markets will return to
normal.”
Texas Medical Center of Houston – world’s largest medical center
10
Overall construction remains weak and finished
2011 down for the fifth year in a row, Jankowski said.
With the availability of office and industrial space continuing to shrink, it’s only a matter of time before construction picks up, he projected.
Houston Region Charts a Plan for
Future Prosperity
In 2005, with memories of the over building and
business missteps of the 1980s, the GHP laid the foundation for future growth for the 10-county Houston
region by introducing an aggressive 10-year Strategic
Plan. Although the plan was crafted by the leadership
of GHP, what resulted was an embrace of regionalism
in creating jobs, attracting capital investment, and increasing foreign trade.
With regional prosperity in mind, the core principles of the plan seek to position the area as a gateway
to global markets; drive business development; publicly advocate for infrastructure and policies to create a
business-friendly environment; and retain and recruit a
Diaspora of the corporate community. From this Strategic Plan, a program called Opportunity HoustonSM was
born to help create 600,000 regional jobs; attract $60
billion in capital investment; and expand trade by $120
billion for the greater Houston area by the end of 2015.
GHP’s portion – through Opportunity HoustonSM – of the
jobs and capital investment regional goals is: 143,382
jobs and $4.64 billion capital investment.
Opportunity HoustonSM is a privately funded lead generation and marketing program launched by GHP as a
capital campaign to raise up to $40 million. The GHP
program is chaired by former Houston Astros owner
Drayton McLane, Jr. and has 164 investors ranging
from Fortune 500 companies to area economic development organizations.
Opportunity HoustonSM targets growth sectors like
aerospace/aviation, IT, energy, biotechnology/life sciences, nanotechnology, advanced manufacturing, distribution and logistics, and corporate headquarters.
As of January 31, 2012, Opportunity HoustonSM had
reached 75 percent of its jobs goal at 106,960 and 84
percent of its capital investment goal at $3.9 billion. By
the close of 2011, the program’s efforts had garnered
the addition of more than 25,000 jobs and attracted
$750 million in capital investment to the Houston
economy. During the same period, the program also facilitated the relocation/expansion of 34 companies.
“Houston was the last city to enter the recession and
first one out of the recession,” said GHP President &
CEO Jeff Moseley. “Indeed, the Houston region added
nearly 80,000 jobs in the 12-month period ending in
October – marking its sixth-highest annual job growth
figure in the last two decades.”
Perhaps more significantly, local employment passed
pre-recession levels by mid-October, meaning the
Houston economy is no longer simply playing catch-up
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
but is once again expanding, explained Moseley. In fact,
Houston is the first – and so far – the only major metro
to gain more than 100 percent of its pre-recession job
losses.
“This news confirms why the Houston region is
growing so rapidly,” according to Moseley. “People
are voting with their feet and moving here to get
ahead. Just in the last few years, more than 360,000
Californians have moved to Texas and Houston for job
opportunity.”
It is not by accident that the Houston region is experiencing this growth.
Today, the region’s business and economic development communities have joined together to develop a
strategy for job creation, attracting investment, and increasing trade. This strategy has allowed the area to
continue to be a prominent and viable business location
for corporations and corporate decision makers in the
Port of Houston Authority
U.S. and abroad.
There are more than 100
Jankowski stated. “The longToday, the region’s business and
economic development proterm outlook for the Houston
fessionals in the region. The
economic development communities
metro area is positive, and
Greater Houston Partnerhave
joined
together
to
develop
a
steady, healthy growth will be
ship and a strong network of
the norm for Houston for the
36 regional economic destrategy for job creation, attracting
foreseeable future.”
velopment organizations as
investment, and increasing trade.
well as strategic allies like
While the Houston econThis strategy has allowed the area
IEDC AEDO-accredited Cenomy is strengthened by roterPoint Energy work coopbust industries like energy
to continue to be a prominent and
eratively to ensure job creand healthcare as well as its
ation, capital investment, and viable business location for corporations strong appeal to global martrade for the area. Centerkets, it is impacted by what
and corporate decision makers in the
Point Energy is a domestic
happens with the national
U.S. and abroad.
energy delivery company that
and global economies.
includes electric transmission
and distribution, natural gas distribution and competiNational Perspective: If We’re Doing So
tive natural gas sales. There are three IEDC Accredited
Well, Why’s Everyone So Glum?
Economic Development Organizations in the Houston
Though Houston’s doing well, the nation as a whole
region and seven in Texas, which leads the nation.
continues to struggle.
The region is home to 6.1 million people, covers
The nation’s gross domestic product, the value of all
more than 10,000 square miles, and has a gross product
final goods and services produced within the U.S., grew
of $403.8 billion. Economic development is part of the
at an annual rate of 2.2 percent in the first quarter. Anlegacy and DNA of the region.
nual growth needs to exceed 3.5 percent to stimulate
significant U.S. job growth.
As a united voice, the Houston region positively impacts job creation, business attraction, capital invest The nation created only 1.8 million jobs over the 12
ment, and business retention.
months ending April ’12 (the latest data available as of
this writing), and nearly 12.5 million Americans remain
unemployed. The national debt has escalated to $15.5
Houston’s Long-Term Outlook
trillion, up from $10.0 trillion four years ago. Congress
Though Houston faces some challenges in the near
has yet to come up with a comprehensive plan to reterm, the long-term outlook is bright. The challenges
duce the debt.
are those of managing growth rather than economic
stagnation.
After several months of slow, sustained growth dating back to the third and fourth quarters of 2011, U.S.
“From 2010 to 2035, The Perryman Group sees
economic growth cooled in the first quarter of 2012
Houston leading the state in population growth, addas businesses cut back on investment and restocked
ing 3.37 million residents and 1.43 million jobs, and
shelves at a moderate pace, but stronger demand for
accounting for almost one-fourth of Texas’ job growth,”
automobiles softened the blow.
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
11
As of April 27, 2012 according to the U.S. Commerce
Department, the Gross Domestic Product expanded at a
2.2 percent annual rate, down from the fourth quarter’s
3 percent rate.
While that was below economists’ expectations for
a 2.5 percent pace, a surge in consumer spending took
some of the sting from the report. However, growth
was still stronger than analysts’ predictions early in the
quarter for an expansion below 1.5 percent.
Economic analysts point to encouraging signs such
as a renaissance in manufacturing, increasing consumer
confidence and spending, a predicted increase in defense spending, and the
country’s largest employers
are expected to continue to
do well.
The U.S. economy will
stay on a path of moderate
prosperity in 2012, with
low inflation and steady
job growth, according to
The Economic Advisory
Committee of the American
Bankers Association. The
committee is comprised of
a group of economists from
the largest U.S. banks, including two with a major
Houston presence. Economists predict the economy
needs to sustain the current
pace of job creation to signal a robust recovery is finally under way.
“The financial crisis of
2008-2009 left a wide path
of destruction in the U.S.
economy – home construction that is 30 percent of
what it was at the peak, a
consumer still struggling
with an overload of debt,
a loss of trillions of dollars Downtown Houston
in wealth, and continued
high unemployment,” according to Bill Gilmer. “One
of the lessons from financial crises around the world is
that they often leave the country that suffers the crisis
on a course of sub-par growth for some time. In fact,
compared to other countries that have suffered a major
crisis – our first since the Great Depression – we are
more or less on the expected growth path.”
History also tells us that once we work through the
aftermath of a major crisis, growth resumes at a historic
rate – around 3 percent for the U.S., Gilmer added.
“It sounds like a simplification to just say we need
time to work through the current problems – but there
is a strong element of truth,” he said. “I don’t know
the timing, but we can look forward to a likely return
12
of historical growth at some point in the not distant
future. A lot has been done to reform the financial system, strengthen and protect banks, and improve regulation. The recession was bad, but the financial crisis did
unprecedented damage. We need to guard against it
happening again.”
Gilmer advises the U.S. to get its fiscal house in order. The federal government is collecting in tax revenue only 60 cents of every dollar it spends, he added.
“We must put together a credible plan to rein in
the current deficit, and to reduce the national debt,”
he said. “It is not a problem that can be solved tomorrow, but a believable plan
to bring the problem under control must come together soon. Or else – like
Greece or Spain – we will
have very painful choices
simply forced on us.”
The Federal Reserve
economist points to slow
growth as the major factor
impeding job growth in the
U.S. This slowdown in the
recovery has been partly
a natural aftermath of the
recession. “The slow growth in
output or production is
probably the number one
factor keeping job growth
slow,” Gilmer explained.
“The other factor is easier
to fix: make things a little
more certain for business.
Things like tax rates, tax
structure, healthcare costs,
energy costs, etc. Congress
has just left too many loose
ends for business to feel
confident about the future,
to invest or to hire.”
Lessons for Economic Development
Practitioners
A national and global recession, a shortened business cycle, a shrinking manufacturing base, and outsourcing and other new business models have greatly
challenged communities to seek innovative, most effective solutions to job growth.
The Houston region offers economic development
practitioners an opportunity to further develop their
portfolio of skills and to examine a strong regional
economy that has weathered both the national and international economic storms.
A solution to sustained job growth and continued
capital investment is for a community to effectively
compete in the global economy and form strategic al-
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
liances with both traditional and non-traditional economic development partners. Cities
A solution to sustained job growth and continued
and towns must first inventory their strengths
capital investment is for a community to effectively
and weaknesses in attracting and retaining
compete in the global economy and form strategic
businesses while simultaneously tapping into
industry clusters and sectors that already
alliances with both traditional and non-traditional
have a presence in their community.
economic development partners.
For example, smaller communities are
uniting with neighboring cities and even local businesses to brand themselves from a re The Houston region and Texas are positive case studgional perspective in order to attract companies from
ies in overcoming obstacles to build a stronger future.
across the U.S. and around the globe.
All communities can use the Houston and Texas stories
as one model to build upon their core strengths while
Through technology, a more efficient workforce, and
seeking new but complementary means of creating jobs
streamlined processes, rural communities and urban
and capital investment for the future.
cities alike are now able to compete on both a national
and global scale in ways that are cost effective, relevant,
and complementary to their strengths.
By energizing and empowering their local base
through shared messaging, resources and best practices, communities can greatly benefit while remaining
competitive in the global marketplace.
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Development Professionals
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Economic Development Journal / Spring 2012 / Volume 11 / Number 2
13
the wrong side of
main street
By Laura Van Ness
Laura Van Ness is
business development director of
Central Houston,
Inc., a non-profit
economic development organization
focused on the continued development
and redevelopment
of downtown
Houston. (laura@
centralhouston.org)
s
ince Houston’s founding in 1836, downtown
Houston’s development
has been skewed to
the area west of Main Street,
through sheer momentum. For
years, the area east of Main Street
in downtown was the “wrong” side
of Main, with many office tenants
viscerally stating they would never
consider locating on the east side
of Main Street. Main Street became
so undesirable a location that in the
1990s one office building owner
changed the building’s address from
Main Street to Travis Street, the street
on the opposite side of the block to
remove the stigma of being on Main Substantial growth begins on the east side of Main Street. By 1987, the Four Seasons Hotel
(at left) was open, as well as 4 Houston Center/Park Shops (center), and Chevron Tower
Street.
(right), 1 Houston Center, 2 Houston Center, and First City Tower.
My, how times have changed! Since
The Early Days
1995, 60 percent of the investment in
Two real estate entrepreneurs from New York seekdowntown’s new and renovated projects, or $3.2 biling fortune, brothers Augustus and John Allen, founded
lion, has occurred on the east side, including three new
Houston in 1836, in the heart of what is now downoffice towers, a new residential tower, three hotels, a
town’s Historic District. Advertising touting the city’s
professional baseball stadium, a professional basketball/
growth potential, moderate land prices, leadership by
hockey/concert arena, an expanded convention center,
merchants, and business opportunity brought people
a 12-acre highly programmed park, and more. And
to the region. With the growth that seemed to run in
the building which turned its back on Main Street has
Houstonians’ veins, more and more building occurred.
changed its address back to 1300 Main, because Main
Urban Frontier observed that “Houston exhibited many
Street is once again a prestigious address.
frontier qualities, such as rapid growth, leadership by
This article discusses the evolution of the east side
merchants, and emphasis on commerce.” In the late
of downtown Houston from an industrial area to a bus1850s, the Telegraph and Texas Register commented that
tling, attractive area for employers, residents, and visi“The mania for building seems still [to] possess our
tors. Discussed are the challenges and how these were
people.”
overcome – sometimes with civic interests, business
Downtown was the center of activity, but the west
interests, subsidies, or a combination thereof – with an
side of Main was dominant. There was nothing magieye to transferability to other communities.
Revitalizing the East Side of Downtown Houston
Many communities are faced with physical barriers to overcome as they expand, whether a freeway, derelict set of buildings,
or unwilling property owners. In downtown Houston’s case, it was Main Street, and to be located on the east side of Main
Street, a business was on the “other” side of Main Street. This article describes the many and varied efforts and developments that changed this long-held mindset, expanded downtown’s effective footprint, and transformed downtown’s image.
14
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
cal about the west side – its office and retail components just grew and grew over the years, while the east
side was more industrial and residential. As Houston
expanded, residential transitioned outwards, and the
east side became even more industrial, with rail terminals, gas stations, etc. Many buildings just a few blocks
beyond Main Street became dilapidated, having not
been built to stand the test of time, and having been
neglected. As time passed, many called the east side
of Main Street the “other side,” or the “wrong side” of
downtown. It was not the type of area that attracted
businesses that wanted a distinguished environment.
Around 1889, Central High School was built. This
imposing Gothic building held 1,200 students, and it
graced a full block four blocks east of Main Street. It
burned down in 1919, was rebuilt, and in 1974, like
so many other aging structures, was torn down. The
block – still owned by the public school district – is
currently used as a parking lot. But its days as a parking lot may be numbered, as the city’s performing arts
school looks to make a new home downtown.
A few buildings were built to stand the test of time,
were treated well, and remain. Annunciation Catholic
Church, built in 1872, is the oldest Roman Catholic
parish in Houston and sits across from Minute Maid
Park, Houston’s Major League Baseball stadium. Adjacent to the church is a Catholic girls’ prep school, Incarnate Word Academy, which opened in 1873.
After the Great Depression and World War II, American downtowns such as Houston’s bore the look of neglect with the mass exodus to the suburbs. Their new
streets, new malls, and abundant space for families to
live and grow were compelling. Mid-century, most department stores closed their downtown locations. And
many building facades we would now consider as beautiful and historic were considered old fashioned and
out of date, so they were “revitalized,” often by adding
metal slip covers.
In the 1960s and 1970s, downtown Houston primarily served as the region’s business center and the
home of major performing-arts venues. New office
buildings and new performance venues were developed
– or redeveloped – but the public’s enthusiasm for a
downtown beyond those uses had waned. Despite the
disappearance of retail, the emergence of other business
districts, and the continually spreading city, there was
vision and determination to bring downtown back to
prominence.
Eastward Expansion
U.S. Highway 59 near downtown had been built in
1953, creating a solid, elevated, artificial and unsightly
barrier on the east side. That barrier later was used as
a functional boundary by civic visionaries – two Texas
Eastern executives who created a plan to bring development to the east side, with four office towers, one shopping mall, and one hotel including apartments.
The headquarters of Texas Eastern Corporation, a
publicly traded natural gas company, was located in a
building on Main Street – the east, or “wrong” side of
Main Street. In the 1960s, Texas Eastern President Baxter Goodrich and Chairman George R. Brown were sitting in their office looking east out the window. Their
company’s garage, where their senior executives’ company cars were sent daily to be cleaned, topped off, and
repaired if necessary, was there. Also in the area were
two- and three-story apartment buildings, flop houses,
a church, a bus station, a car dealership, and several
single-family residential properties. Many properties
had been abandoned, and it wasn’t necessarily a safe
place.
Texas Eastern had become a cash cow, generating a
great deal of cash. To help prevent a takeover, it needed to invest some of its cash. With this financial need
combined with intense civic interests, vision, extensive
business contacts, unrelenting entrepreneurial spirit,
and engineering and construction expertise, the executives developed a plan for what the east side of Main
Street could later become: a new city within a city.
“We secretly purchased land they had identified,
which encompassed 32 contiguous blocks, or the
equivalent of 74 acres,” says Dennis Greer, an engineer
who was with Texas Eastern at the time and who later
was asset manager for the development. There were
127 separate transactions, 24 brokers, eight title company representatives, seven people who worked on abstracts, and a number of attorneys. Despite the number
of transactions, the amount of land, and the number of
people involved, “we were successful in purchasing 95
percent of the land we sought. The price of the land
was between $15 and $25 per square foot, or $50 million total,” says Greer. Existing properties were then
largely demolished to the foundation.
The result was what would be the early crown jewel
in downtown’s revitalization: Houston Center. Announced in 1970, the $1.5 billion development was
to include 12 high-rise offices, four hotels, apartment
Texas Eastern’s plans for Houston Center covered 32 contiguous blocks between the core
of downtown Houston and U.S. 59. With 127 separate transactions, 24 brokers, eight title
company representatives and a number of attorneys, the land was purchased, and development
commenced.
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
15
Meanwhile, Houston Center’s construction began.
In 1974, 2 Houston Center, a 1,024,945-square-foot
(net rentable), 40-story building opened. In 1977, 1
Houston Center, a 1,061,351-square-foot, 46-story
building opened, and Texas Eastern moved its headquarters to the building. In 1982, Chevron Tower, a
1,247,061-square-foot, 52-story building opened, as
well as the 400-room Four Seasons Hotel and 114-unit
Four Seasons Place Apartment Tower. In 1983, the area
welcomed 4 Houston Center, which included 674,246
square feet of office space and a 190,000-square-foot
retail mall called the Park Shops.
Announced in 1970, the $1.5 billion Houston Center development
was to include 12 high-rise offices, four hotels, apartment buildings,
shopping and entertainment facilities, parking, and plazas.
buildings, shopping and entertainment facilities, parking, plazas that
would allow pedestrians to avoid the
street, and some sort of to-be-determined “people mover” to transport
people around the complex. When
it was all said and done, the people
movers never came to fruition, nor
did many of the buildings, but this
grandiose vision did become the
The far east side of downtown in 1985… land had been purchased by Texas Eastern, most
cornerstone of redevelopment of the buildings removed, and street and utility infrastructure added. One Park Place residential
east side.
tower now sits atop the parking lot in the foreground. The trees in the center of the photo
After plans for Houston Center remain and were incorporated into Discovery Green Park.
were announced, the executives,
public sector and other civic leaders
pondered how the land that abutted the freeway (U.S.
In 1987, the 1,150,000-square-foot George R.
Highway 59) could be used. The site needed to be a
Brown Convention Center opened with much fanfare,
bookend to the development but used for a purpose
anchoring the far east side of downtown as a recognizthat could succeed despite adjacency to the freeway.
able landmark. U.S. Highway 59 – the “artificial barThe conclusion: Build a convention center to replace
rier” to downtown – was successfully dwarfed by this
the Albert Thomas Convention and Exhibit Center,
latest addition to the east side.
which had been built in 1967 but with only 127,500
Because leasing the first two office properties proved
square feet of exhibit space and 40,000 square feet of
to be more difficult than expected – due to the oil bust
meeting rooms, it was now too small and obsolete.
of the early 1980s and changes within Texas Eastern’s
In conjunction with Texas Eastern’s plans, in the
leadership – the company proceeded with development
early 1970s, a committee appointed by Houston Mayor
more cautiously and slowly, even selling a city block
Jim McConn was developed to study the creation of a
to First City, a large bank with which it had close ties,
new convention center. A referendum put before the
on which First City built an office tower. Despite the
voters in 1983 was highly contentious. Some civic inslowdown and redirect, the entire project never yieldterests felt that in addition to moving events from the
ed the financial goals needed to make it a success. In
Albert Thomas, a new convention center would also
1989, Panhandle Eastern purchased Texas Eastern, and
take convention and meeting business away from the
it proceeded to sell the real estate holdings to reduce acworld’s first domed sports venue, the Astrodome, which
quisition debt. By the end of 1989, Panhandle Eastern
it initially did. The referendum passed. Part of the plan
had sold Houston Center’s developed and undeveloped
included exchanging some land between Texas Eastern
properties to JMB Properties for $400 million. The viand the city, with the majority of the transaction being
sion of Texas Eastern’s leaders had sputtered, but just
a donation by Texas Eastern of 4.5 blocks to the city for
for the time being, as the public and private sectors
the project – ultimately to be known as the George R.
would soon identify the east side for key projects that
Brown Convention Center (GRBCC).
would entice additional development.
16
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
Modern Revitalization
Downtown revitalization efforts beDowntown revitalization efforts began to take hold in downtowns across
gan to take hold in downtowns across
the country in the mid-1990s. In
the country in the mid-1990s. In downtown Houston this happened in
downtown Houston this happened in
a big way: between 1995 and 2011, $5.3 billion in private, public, and
a big way: between 1995 and 2011,
public/private development was completed in downtown. Developments
$5.3 billion in private, public, and
public/private development was comincluded new office towers, an expansion of downtown’s hospital,
pleted in downtown. Developments
creation of the 10.4-acre Sesquicentennial Park, and the conversion of
included new office towers, an expansion of downtown’s hospital, creation
several historic properties to residential use, most notably conversion of
of the 10.4-acre Sesquicentennial Park,
the Rice Hotel to loft apartments.
and the conversion of several historic
properties to residential use, most notably conversion of the Rice Hotel to
as offices for the Houston Astros and a delightful event
loft apartments.
venue. Several aspects of the site made it particularly
attractive: It was in a growing, revitalized downtown;
City leaders envisioned downtown as more than a
had easy freeway access; could utilize the historic office
central business district: It should be a neighborhood
building; and the land cost averaged a mere $11.86 per
with a live/work/play environment of which all Houstosquare foot, compared to land prices in other parts of
nians would be proud. They knew major steps would
downtown as high as $200 per square foot.
need to be taken, and that it would require substantial
private investment, public improvements, public sup Financing arrangements included a $35 million inport, and public/private partnerships.
terest-free loan from the Houston Sports Facility Partnership, a group of 14 leading Houston companies,
It was largely the redevelopment of the Rice which
with repayment delayed until ten years after baseball
caught the public’s attention to considerable changes
operations commenced. With the partnership’s initial
happening downtown. The Rice, built in 1913, was
commitment, the city of Houston and Harris County
a formerly grand hotel and a mecca for Houston social
presented a ballpark proposal to the public, which was
life. It had fallen into disrepair, been boarded up, and
approved by Houston voters in November 1996. The
had people camping outside under the building’s grand
total cost of the retractable-roof stadium, now known
balcony. The Rice opened in 1998, with great exciteas Minute Maid Park, was $286 million.
ment. The turning of the tide became even more obvious two years later when the Houston Astros walked
5 Houston Center (2002)
into their new home on the east side of downtown.
This was the first of three professional sports clubs –
Downtown’s office market was now flourishing,
baseball, basketball, and hockey – to relocate to the
and more tenants were willing to consider locating on
area.
the east side because of the success of the George R.
Brown Convention Center and Minute Maid Park. In
This renewed interest in downtown was no longer
2002, Crescent Real Estate Equities, the then-owner of
concentrated in the western half of downtown: much
Houston Center’s four office buildings, chose to condevelopment occurred on the east side of downtown.
tinue the expansion of downtown’s office footprint
Minute Maid Park (2000)
In 1996, downtown and other community leaders approached Drayton McLane Jr., then-owner of
the Houston Astros, operating out of the 30-year-old
Astrodome complex. McLane was threatening to take
the Houston Astros to another city if a new team venue
wasn’t provided. McLane was approached by downtown leaders and asked if he might consider a downtown stadium. With his encouragement, land was
identified, planning conducted, and later, HOK Sports
Facilities Group was hired. Enabling legislation was
passed at the state level, the land was purchased, and
the modern baseball venue which would seat 40,950
fans opened in 2000.
The site chosen was a former railroad passenger staMinute Maid Park opened in 2000 and continues to attract fans to Houston
tion on the east side of downtown, which had been
Astros games and attendees to many other events. Land purchased for the
built in 1911 and closed in 1974. The railroad termi41,000-seat venue cost only $11.86 per square foot compared to up to $200 per
nal’s office building, however, was preserved and serves
square foot in the core of downtown at the time.
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
17
The $285 million hotel was built using a complex
financing arrangement including bonds to be paid off
by hotel occupancy tax rebates, sales tax rebates, and
parking revenues. Funds raised by the bonds were used
for the hotel, its 1,600-space parking garage, and the
expansion to the George R. Brown Convention Center.
The result is the Hilton Americas-Houston, a 1,200room convention center hotel connected to the convention center by a dual-level pedestrian sky bridge and
containing a 40,000-square-foot ballroom, named the
Bob Lanier Ballroom.
The George R. Brown Convention Center Phase I was
completed in 2003. Landscaping was added to “connect”
Houston Center and other development to the convention
center.
The George R. Brown
Convention Center, which
opened in 1987, had been
an unqualified success,
but there was demand
for more space. So
in 2003 the facility was
expanded by 400,000 square feet of exhibit
space and meeting rooms, at a cost of
$165 million. At completion, the facility had
1.2 million square feet of space, 853,500
square feet of which is exhibit space.
east by developing 5 Houston
Center. The vision of Goodrich
and Brown (the Texas Eastern
executives) was continuing.
Crescent quickly leased the
577,000-square-foot, 28-story office building and sold
it in 2005 for $166 million, or $286 per square foot, the
highest price – at the time – for an office tower sale in
Houston’s history.
George R. Brown Convention Center Expansion and
Hilton Americas-Houston (2003)
The George R. Brown Convention Center, which
opened in 1987, had been an unqualified success, but
there was demand for more space. So in 2003 the facility was expanded by 400,000 square feet of exhibit
space and meeting rooms, at a cost of $165 million. At
completion, the facility had 1.2 million square feet of
space, 853,500 square feet of which is exhibit space.
During the planning stages, city leaders were well
aware that a large convention center hotel was also
needed. Houston’s mayor at the time, Bob Lanier, insisted on finding a developer who could fund and operate the hotel without tax dollars.
In 2000 – after Mayor Lanier left office – the city
decided to go forward with a public subsidy for the hotel. Senior city elected officials supported it, and by this
time, so did former Mayor Lanier, who was appointed
head of the Houston Convention Center Hotel Corporation, the public entity which paid for and owned
the hotel. Without subsidies, “the numbers just didn’t
work,” for a private entity, he told the Houston Chronicle
in 2001.
18
Toyota Center
(2003)
When the Houston
Rockets went looking for a new basketball arena, downtown leaders sought
to make downtown
the
location
of
choice, and they had
an idea of where the
site should be: the
east side of downtown, eight blocks
south of Minute
Maid Park, and one
block away from the
convention center.
City of Houston voters rejected a 1999 referendum
for the arena but approved a second one in 2000 to fund
and construct the facility, which is owned by the Harris
County-Houston Sports Authority. The city of Houston
funded most of the arena’s land cost. Construction was
paid by the Harris County Houston Sports Authority.
Under a 30-year lease agreement, the Houston Rockets
operate the facilities, which include handling the building’s administration, booking events, marketing, and
running the box office – all of which generate revenue
for the Rockets.
The result was Toyota Center, designed to hold
18,500 spectators for basketball, while also catering
to hockey and special events such as concerts, which
opened in 2003. Included is a seven-story, 2,500-space
parking garage. The $232 million arena is a block away
from the George R. Brown Convention Center and the
Hilton Americas-Houston.
Toyota Center was the impetus to redevelop the decaying green space outside Toyota Center’s entrance,
Root Memorial Square Park, built in 1937. About a
dozen people slept in the unkempt park nightly, with
others joining them during the day. The park was redesigned for an estimated cost of $1.5 million. A basketball court, attendant booth, and improved landscaping
were added, and the park is enjoyed today by people of
all ages and backgrounds.
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
With the increased foot traffic around Toyota Center, there was another glaring need: a better pedestrian
experience. Previously, very few people walked in the
area, so sidewalks had not been improved in years.
Sidewalks were upgraded, street lights were added,
and landscaping was installed. The $8 million in improvements were funded by the city of Houston and
the Houston Downtown Management District, whose
primary focus is to leverage public funds with private
resources to improve the downtown area.
Main Street Improvements (2004)
Yet even as this development described here occurred east and west of Main, Main Street itself remained a dirty, dusty street, heavily used by the region’s
bus system, and avoided by ordinary traffic partly because of its condition and partly because left turns were
not allowed. Like a freeway cutting through and dividing a neighborhood, Main Street had been the dividing line between west and east downtown Houston for
years.
Main Street remained a substantial barrier until
2004, when it was finally rejuvenated after numerous
previous attempts. Buses no longer clogged it, and a
three-block, $8.9 million pedestrian plaza called Main
Street Square was completed. The plaza includes a
250-foot reflecting pool, water jets, trees, public art,
banners, and upgraded sidewalks.
The Houston Metropolitan Transit Authority built
the first segment of light rail in Houston along Main
Street in downtown and points south of town. The 7.5mile line connects the University of Houston-Downtown to the north, through downtown, Midtown, the
Museum District, Hermann Park, Texas Medical Center,
and Reliant Park – the home of the Texans, Houston’s
NFL franchise.
In addition to the new light rail service, the Main
Street Market Square Redevelopment Authority and
Houston Downtown Management District made $10
million in enhancements to Main Street including upgraded sidewalks, brick pavers, special streetlights,
drinking fountains, additional landscaping, and a street
clock.
Improvements on Main Street acted like a zipper
that brought both sides of downtown into a seamless,
modernized development. Pedestrians were now more
likely to walk to, along or cross Main Street for shopping, entertainment, employment and transit, and employers were more likely to consider choosing an office
location on the “other” side of Main.
Inn at the Ballpark (2004)
Seizing opportunity in the developing area, hospitality heavyweight Landry’s purchased a vacant building across the street from Minute Maid Park. Formerly
known as the World Trade Center, the 1962-vintage
building was gutted to its concrete and structural steel.
It was transformed into a $37 million, 202-room,
12-story, baseball-theme boutique hotel, with an adja-
cent high-end, highly successful steak restaurant called
Vic & Anthony’s.
As with most other new downtown hotels in close
proximity to the convention center, property tax abatement and hotel occupancy tax rebates were negotiated
to encourage the hotel’s development.
Discovery Green (2008)
Just steps outside the front doors of the convention
center is Discovery Green, an 11.78-acre, $122 million
park. It has proven to be a major catalyst to property
values and development in its immediate proximity. A
park had been discussed for the property for years, but
in 2004 a key block of land was put on the market.
The block had been identified for future Houston Center development and in the meantime had been landscaped to enhance Houston Center’s environment.
A group of philanthropists approached then-Mayor
Bill White with the idea to acquire the block, add it to
property already owned by the city, and create a permanent downtown green space and public park. Land was
purchased for $56 million – a portion of the deal included property owned by the city and a donative sale
(part gift and part sale) by Crescent Real Estate Equities.
The city also closed a section of street that ran through
the site, adding an acre of land. The land acquisition
was completed in mid-December 2004.
The Discovery Green Conservancy was created to
oversee fundraising, operations, and maintenance of
the park. Funds were raised from major foundations,
corporations, and individuals. The park was designed
with a great amount of public input, was built, and
opened in 2008.
Operations cost about $3.2 million annually, with
the Conservancy raising about $1.5 million each year
from donations, galas, space rentals, and revenue sharing from two on-site restaurants.
Visitors to Discovery Green can take advantage of the children’s play area,
fountains, putting green, remote-controlled sailboats, bocce ball court, dog runs,
Grove Restaurant (shown here at back), or just walk, picnic, or even practice
their guitars in the shade and breeze.
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
19
apartment development icon always searching for opportunity, was taking in the view from a balcony at the
Shops at Houston Center overlooking the area where
Discovery Green was to be built. It was 2005 and plans
for the park had been announced, but construction had
not started. The vision for the park was conveyed to
Finger, and immediately he pointed to the block between the Shops and the future park and saw opportunity. “Who owns that site?” he asked.
Without public subsidy and in the midst of the recent national economic downturn, he secured the site
Houston Pavilions (2008)
and developed One Park Place, a 346-unit, 37-story
With downtown’s rebirth, developers saw opporapartment building. Posted prices range from $2.30
tunity for a three-block mixed-use center on the east
to $3.09 per square foot, excluding penthouse units.
side of Main Street, cattyUnits range from 808 to
corner from Macy’s. Hous- Photo Credit: Katya Horner
2,520 square feet, and the
ton Pavilions, a $170 milproperty is more than 90
lion retail, entertainment,
percent leased.
and office development,
A ground-up residenopened in 2008 on what
tial high-rise hadn’t been
was previously three parkbuilt in downtown in 40
ing lots.
years. But “There was no
The property includes
doubt in my mind that it
305,000 square feet of
was going to be successful
multi-level retail space and
– I wouldn’t have engaged
a
200,000-square-foot,
in it otherwise,” Finger em10-story office building.
phasizes. “There had to be a
The office building is 100
start, and there was a lot of
percent leased to NRG/Remomentum going into that
liant Energy, and the retail/
part of downtown.” Finger
restaurant/entertainment
says he is pleased with the
space is more than 60 persuccess of One Park Place
cent leased.
tower but not surprised by
it. He points to Discovery
Tenants include House
Green Park and nearby ofof Blues, Lucky Strike,
fice building Hess Tower as
Forever XXI, BCBG, Books
the catalysts for the quick
A Million, Guadalajara Del
lease-up of One Park Place.
Centro Mexican restaurant, Mia Bella Trattoria,
Value of this block
Andalucia Tapas Restau- Discovery Green freezes part of its pond for an outdoor skating rink
skyrocketed. The Harris
rant and Bar, Yao Ming’s, each winter. Residents of One Park Place (left) have a 12-acre park
County Appraisal District
McCormick & Schmick’s, outside their front door. At middle and right are two of downtown’s
valued the block on which
III Forks Steakhouse, and newest office towers, 5 Houston Center and Hess Tower.
One Park Place sits, which
others.
had formerly been used as
simple green space, at $7.5 million in 2007 and $67.2
To encourage downtown retail development, several
million for 2011. Success of the project, and no doubt
incentives were utilized for this project. The Houston
the value of the property, will further increase with the
Downtown Management District provided a $600,000
2011 opening and success of Phoenicia Specialty Foods,
retail grant toward the two major retail stores on the
a 28,000-square-foot international gourmet food marMain Street side of the property; it also provided
ket on the property’s ground floor.
$400,000 to encourage improvements in the pedestrian
experience along the north side of the property, and the
Hess Tower (2011)
Downtown Redevelopment Authority’s Tax Increment
Much like Marvy Finger, developer Trammell Crow
Reinvestment Zone provided $14.3 million in funding.
Company saw immense potential for a development
facing Discovery Green with easy pedestrian access
One Park Place (2008)
to surrounding amenities such as Minute Maid Park,
If Houston Center and the George R. Brown ConToyota Center, the Shops at Houston Center, George
vention Center were the kindling that started the fire of
R. Brown Convention Center, and Hilton Americasdevelopment on the east side of downtown, Discovery
Houston hotel.
Green helped fan the flames. Marvy Finger, a Houston
“As a fourth generation Houstonian, I never had
a feeling about downtown,” said Barry Mandel, the
park’s executive director. “As kids, we were encouraged
never to go downtown. Discovery Green changed all
misperceptions ranging from difficult parking to the
homeless problem. The park creates a sense of place
and has become a space to meet, greet and interact. Unlike the great international cities and the American
North, the Southwest U.S. was built around the automobile and sprawl. But that’s all starting to change.”
20
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
Placing a facility away from the core can create a
In March 2007, Trammell Crow announced it would
destination point and a gap that is inviting to fill. Bebuild an office building on a speculative basis. Concause the GRBCC’s placement in the 1980’s was blocks
struction began a year later, and in January 2009 Hess
away from existing developCorporation signed a lease to
ment, each incremental deoccupy the entire building
velopment going east didn’t
through 2026, moving from
Much has been learned through the
have to struggle by being
500,000 square feet on the
west side of downtown to the redevelopment and growth of downtown on the “edge” of downtown
– each was filling underuti29-story,
844,763-squareHouston – lessons that downtown and
lized blocks between Housfoot building. The building
was completed in 2010, and
Houston’s leaders have put to work and ton Center and the GRBCC.
Hess relocated in 2011 with
from which other economic development The gap has not yet been
filled but is well on its way.
its more than 1,750 employorganizations can learn.
ees and contractors.
An unattained goal doesn’t
mean failure. Texas East Trammell Crow put the
ern’s long-range vision for
office building and adjacent
Houston Center was not achieved in the envisioned
garage up for sale in mid 2011. The building sold in
time frame. The company’s returns on investment for
December 2011 for $442 million, or $524 per square
the project were taking longer than expected, couldn’t
foot, setting two records in Houston: the total price of
match the company’s core investments, and the coman office building and per-square-foot price for an office
pany that acquired Texas Eastern wanted nothing to
building.
do with real estate. Yet five office towers and a Four
Seasons hotel were built, a convention center was deEmbassy Suites (2011)
veloped, and the perception of the east side of Main
Discovery Green continued to act as a magnet, this
Street began to change. Thus, while Houston Center’s
time for development of a new hotel. In 2007, develend goal was not reached, significant investment and
oper Nick Massad saw potential for a hotel facing Disprogress was made.
covery Green, adjacent to the Hilton Americas-Houston, and practically across the street from the George
Land abutting a freeway can be used for needed
R. Brown Convention Center, even though the land he
public uses. The five-block-long GRBCC sits aside the
could assemble amounted to only 17,500 square feet.
above-grade U.S. 59, but its placement did not hinder
its success – it actually made it more visible and top-of Massad pursued city of Houston incentives designed
mind to the public driving by on the freeway. And beto encourage hotel development near the George R.
cause the facility’s loading dock backs up to below the
Brown Convention Center. Additional conventions
freeway, it doesn’t interfere with other traffic or comcould be attracted if more hotel rooms were closer, but
merce.
one hindrance was that some of the land nearby listed
for upwards of $200 per square foot.
Likewise, Minute Maid Park and Toyota Center, just
1.5 and 2.5 blocks (respectively) from U.S. 59, both
In April 2009, the city entered into a seven-year
face the center of downtown, with their backs to the
agreement with Massad. For the first seven years of
freeway. Another large project, the three-block Housoperation, the developer will receive payments equal to
ton
Pavilions, needed a “back door,” but it is located
the amount of municipal hotel tax it collects. In return,
almost
in the middle of downtown. To encourage betthe hotel agreed to provide the city and Greater Houster
pedestrian-oriented
development than might have
ton Convention & Visitors Bureau a room block equal
otherwise been built, subsidies were offered by the
to 70 percent of the hotel’s rooms for conventions, corHouston Downtown Management District, preventing
porate meetings, and trade shows. The subsidy could
the feeling of a three-block-long cold wall along a key
add up to $9.6 million over the seven-year agreement
pedestrian corridor.
period.
People need to see people. Houston Center was
The Embassy Suites Houston-Downtown Hotel
designed and built to separate people from the street
opened in 2011 with 262 rooms, after an investment of
and sidewalks. It wasn’t unintended – it was actually
about $55 million. The appraised value for the hotel’s
on purpose. Workers and visitors could pull into their
partial block rose from $453,899 in 2007 when the site
parking garage and go to work, lunch and shop above
was a parking lot to $34.3 million for the 2011 tax year
street level and never walk on a sidewalk. The initial
with its improvements.
design concept was antithetical to today’s thinking
about creating great streets filled with pedestrians and
Lessons Learned
was changed somewhat after development of the initial
Much has been learned through the redevelopment
two office buildings. This skybridge system and the
and growth of downtown Houston – lessons that downpre-existing pedestrian tunnel system between other
town and Houston’s leaders have put to work and from
downtown buildings is one reason why we’re somewhich other economic development organizations can
times asked, “Where is everyone?” They’re above and
learn. The following are a few key lessons.
below.
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
21
Major developments have transformed the east side of downtown.
Large-scale developments can take longer than
planned. While one-off projects such as an office or
residential tower can be timed with the economic cycle,
larger-scale planned developments can be more affected
by economic cycles. Texas Eastern found that selling
tenants on leasing office space east of Main Street was
more difficult than expected, and the oil bust in the mid
1980s that hit Texas only exacerbated the situation, and
thus the development of Houston Center was slowed,
reducing financial returns.
Minute Maid Park spurred the development of the
202-room Inn at the Ballpark hotel, upscale restaurant
Vic & Anthony’s, and the 375-unit Lofts at the Ballpark
apartment complex several blocks away. But with surrounding property owners’ unrealistic expectations for
land prices, and two economic downturns since the
ballpark opening in 2000, numerous blocks still surround the ballpark being used only as parking lots.
This year, a new residential property is being proposed adjacent to the ballpark, but even if that project
comes to fruition, the ballpark still won’t be completely
surrounded by development.
Demonstrating how quickly development can happen is the case study of Discovery Green Park and its
surroundings. The highly programmed and very successful park provided the impetus for One Park Place
22
residential tower (before the park’s groundbreaking),
Hess Tower (after groundbreaking), and additional
hotel and residential development (currently in the
planning stages), and thus has attracted a great deal of
development.
Beware of carrying costs. Texas Eastern had very
high carrying costs after purchasing 74 acres of property, especially because the development period was longer than expected. The carrying costs became a burden
to the project’s return on investment.
Controlling another owner’s property can’t always
be accomplished. Downtown civic interests wanted
land around Discovery Green to be largely residential.
While Houston does have development ordinances,
it does not have zoning. A block facing the park was
purchased, and an office tower developed, 100 percent
leased, and sold for the highest price ever in Houston.
Clearly this was the financial highest and best use for
the property, but for the long-range health of downtown, additional residential development is needed,
and that spot was perfect for residential. The GRBCC
needs at least another 1,000-room hotel adjacent to it
to accommodate conventions. There is one last large
block adjacent to the park and the GRBCC, and to protect it, a private philanthropic foundation purchased it
so that it could be used for a convention center hotel
and/or residential.
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
What’s Next
Major developments such as Houston Center, Minute Maid Park, Toyota
Center, Discovery Green, and One Park
Major developments such as Houston Center, Minute Maid Park,
Place have completely transformed the
Toyota Center, Discovery Green, and One Park Place have
east side of downtown.
completely transformed the east side of downtown.
Much more is planned. Three major planning efforts were completed in
2011: a downtown mixed-use retail
core study; a convention center 2025
sits on a full block, into a 360-unit residential developmaster plan; and a Livable Centers Study which focused
ment, and relocating the High School for the Performon 170 city blocks in close proximity to the George R.
ing and Visual Arts to the site that once was Central
Brown Convention Center, on the east side of downHigh School – still owned by the public school district.
town and just beyond. These have led to recommendaOffice and residential developers are in preliminary distions for public policy as well as suggesting potential
cussions for new developments.
developments for private investment.
It is thanks to the vision of government, corporate,
Armed with information from the convention center
and nonprofit leaders that a vibrant, sustainable, balmaster plan, Houston First – the entity which owns the
anced downtown has been created. The momentum
Hilton Americas-Houston Hotel and operates the conis generating yet more development, infill, and excitevention center and other facilities – issued a request for
ment for the future of downtown.
qualifications in March 2012 for developer proposals
for a second convention center hotel and amenities that
appeal to convention-goers.
Additional projects currently being pursued or seriously considered for the east side of downtown include
the redevelopment of the old Texaco Building, which
What’s On Your Reading LIST?
Visit IEDC’s Online Bookstore for the very best offerings of
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Economic Development Journal / Spring 2012 / Volume 11 / Number 2
23
opportunities abound in
aerospace industry transition
By Bob Mitchell
for a quality workforce and available facilities
in which to employ them, and Houston, Texas, has
both! Recent transitioning activities within Houston’s aerospace industry sector may well create, in
the words of Texas Workforce Commission Director
Doug Ridge, “one of the most important and promising economic development opportunities in the state
today!” Allow us to explain this bold statement.
For the past 50 years, NASA’s Lyndon B. Johnson
Space Center (JSC) in Houston has led the U.S. and
the world making giant leaps for mankind and literally taking us where no man has gone before. JSC was
Bay Area Houston Economic Partnership
The saying goes that an ounce of prevention is worth
a pound of cure. Economic developers transform this
saying into action by working to shore up their existing
businesses and industry sectors and keeping them as
healthy as possible.
The Houston region recognized the vulnerability of
its aerospace sector many years ago, especially with its
primary employer’s funding tied to the vagaries of congressional funding. Therefore, the Bay Area Houston
Economic Partnership (BAHEP), a regional economic
development organization, was founded in December
1976 not only to advocate for the interests of JSC but
Photo Credit: NASA/Bill Ingalls
he poet John Masefield sighed, “All
I ask is a tall ship and a star to steer
her by.” As economic developers, we wish
established in 1961 as the Manned Spaceflight Center
and home of the Mission Control Center for the U.S.
spaceflight program. In 1973 it was renamed in honor
of the late president and Texas native, Lyndon B. Johnson. JSC led the Gemini program in the early 60’s and
later Apollo, Skylab and, most recently, the Space Shuttle program.
Changes began for JSC in February 2010 when
President Obama announced the cancellation of NASA’s
next human spaceflight program, Constellation, and
later, on July 21, 2011, when the Shuttle orbiter Atlantis’ wheels rolled to a stop after mission STS 135, marking the end of the Space Shuttle era. As a result of these
changes, JSC and its more than 50 aerospace contractors reduced their ranks from 18,000 civil service and
contract workers to 14,500 workers, cutting 3,500 jobs
and presenting an urgent, new mission for the region.
Approximately 800 of the workers who were laid off
were retirement eligible, and they did so. Almost half
of the remaining 3,000 found new jobs, many in the
chemical and energy sectors in Houston. This article is
the story of what the Houston region did to prepare for
these reductions and, more importantly, what steps are
being taken now to surmount the challenges associated
with the NASA JSC transition.
Workers at Kennedy Space Center in Florida accompany shuttle Atlantis as it is towed back
to its processing hangar after landing at Kennedy’s Shuttle Landing Facility, completing its
13-day mission to the International Space Station and the final flight of the Space Shuttle
Program.
Bob Mitchell is
president of the
Bay Area Houston
Economic
Partnership (bob@
bayareahouston.
com).
t
NASA’s expertise to be incorporated into industry sectors beyond
that of aerospace
The cancellation of both the Constellation and Space Shuttle programs has dramatically affected Houston’s NASA Johnson
Space Center – arguably more so than any other change in the 50-year history of NASA’s space program. However, no one
knows how to turn lemons into lemonade better than the scientists and engineers of NASA JSC. Working in partnership
with the private and public sectors, they are using their expertise to go where NASA has not gone before.
24
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
Citizens for Space Exploration members Douglas Trent,
Victor Hurst, Jessica Rasmussen, and Nick Gardner
(l to r) pose in front of the U.S. Capitol during the
group’s 2011 trip. In June 2012, CSE will mark its
21st consecutive year to travel to Washington, D.C.,
in support of NASA and human space exploration.
Following the announcement cancelling the Constellation program, BAHEP kicked its advocacy efforts
into high gear. The organization developed major initiatives to encourage Congress to save key elements of the
Constellation program. BAHEP coordinated four trips
to Washington in 2010. The organization appeared in
95 articles in print and electronic media, and its staff
conducted 48 interviews on broadcast media.
The formation of the Young Professionals for Space
Exploration Committee was another huge organization
effort. Committee members, mostly under the age of
30, launched the GoBoldly NASA campaign. This campaign resulted in more than 61,000 electronic letters
from all 50 states sent to congressmen, senators, and to
the president.
Working closely with representatives and senators
for nearly a year, BAHEP, along with human spaceflight supporters across the nation, proved successful when the
president signed the 2010 NASA
Authorization Act into law on Oct.
11, 2010. This act reinstated several key components of the Constellation program and greatly
reduced the number of aerospace
employees who would have been
laid off in Texas and other states.
In early summer 2011, the
The formation of the Young Profesorganization led its 20th annual
sionals for Space Exploration ComCSE trip to Washington, D.C., in
mittee was another huge BAHEP
support of NASA. Collaborating
effort. Committee members, mostly
with four other NASA centers,
under the age of 30, launched the
Kennedy in Florida, Marshall in AlGoBoldly NASA campaign. This
abama, Stennis in Mississippi, and
campaign resulted in more than
61,000 electronic letters from all 50
Glenn in Ohio, travelers from 24
states sent to congressmen, senators,
states once again sought congresand to the president to encourage
sional support for a robust, human
them to save key elements of the
space exploration program. Over
Constellation program.
the course of two days, the travel-
also to retain, grow, and diversify the local
economic base.
Throughout the years, BAHEP has
evolved and now serves 13 municipalities
in the Bay Area Houston region as well as
Galveston and Harris counties in southeast
Texas. Working with its members, BAHEP
has been successful in strategically diversifying the employment sectors of the region.
The organization has more than 270 member companies, representing several of the
major industry clusters in the region including aerospace, specialty chemical, maritime,
education, and healthcare.
BAHEP, a 501(c)(6) non-profit organization, is funded through member investment,
including that of Harris and Galveston counties, the
city of Houston, and the Port of Houston Authority. It is
guided by an Executive Committee and Board of Directors comprised of leaders from the region’s primary industry clusters, as well as other businesses throughout
Bay Area Houston.
Twenty years ago, BAHEP recognized that a strong
initiative in support of the U.S. human spaceflight
program was necessary. To fulfill this need, it formed
Citizens for Space Exploration (CSE). CSE is comprised of a diverse group of small and large business
representatives, “Gen Y” students and teachers, and
county/municipal officials and employees who support
America’s investment in NASA and human spaceflight
exploration. Citizens for Space Exploration is a subset
of BAHEP’s Aerospace Advisory Committee (AAC) from
which it receives its funding. The AAC is made up of
approximately 60 member companies that annually determine the initiatives they want to support.
Acronyms
AAC
Aerospace Advisory Committee
ATC
Aerospace Transition Center
BAHEP
Bay Area Houston Economic Partnership
BayTech
Bay Area Houston Advanced Technology Consortium
CCISD
Clear Creek Independent School District
CSE
Citizens for Space Exploration
HGAC
Houston Galveston Area Council
HTC
Houston Technology Center
NASA JSC
NASA Johnson Space Center
NASA SOPD
NASA Strategic Opportunities Partnership Development Office
NEG
National Emergency Grant
PAT
Preserving Aerospace Talent
RCIC
Regional Center of Innovation and Commercialization
SSTLO
Space Shuttle Transition Liaison Office
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
25
ers conducted 330 meetings
with members of Congress
or their staff. This was in
addition to 94 office visits
made in March 2011 when
the group went to Washington to meet with freshman
congressional members. The
CSE trip has grown to be the
nation’s largest pro-NASA,
pro-space exploration grassroots annual trip to Washington in terms of the most
congressional offices visited.
One of CSE’s priorities is to
inform elected officials of
the importance their constituents place on the space
program. Among those constituent travelers in 2011
were 24 undergraduate and
graduate students, from colleges and universities across
Shown here is the first Orion/Multi-Purpose Crew
Vehicle (MPCV) being hoisted into position in the
the nation, who traveled as
Reverberant Acoustic Lab at Lockheed Martin’s
part of the CSE group. The
Waterton Facility near Denver, Colo. The Orion/
future of the space program
MPCV was one of the key elements saved from
and its many initiatives reNASA’s Constellation Program. Photo courtesy of
late directly to their future
Lockheed Martin.
careers. The students wanted to ensure that their representatives were aware not only of their support of NASA
but also of the electoral influence that they and their
fellow students and faculty carry.
Shuttle Transition
It had been known for several years that the Space
Shuttle program would conclude with the build out of
the International Space Station, which serves as a scientific research platform for the world. NASA’s new program, Constellation, was to have replaced the Shuttle
program and allow humans to explore deep space once
again. It was believed that the Constellation program
would absorb many of the jobs that would be lost with
the retirement of the Shuttle program.
Due to the funding levels that NASA received following the announcement of Constellation, it became obvious that there would be a gap between the conclusion
of the Shuttle program and the gearing up of Constellation. BAHEP joined forces with NASA and the contractor community early in 2009 to form a committee
called PAT, Preserving Aerospace Talent, as a resource
to preserve the valuable and talented workers in the
region. Displaced employees laid off from the Shuttle
program could be accessed when Constellation began
hiring.
The Houston Galveston Area Council (HGAC), a
regional, voluntary association of local governments,
entered the process, and it, in turn, brought in Texas
Workforce Solutions’ Gulf Coast Workforce Board to
assist in building this database. Texas Workforce Solutions is a statewide network comprised of the Texas
Workforce Commission, 28 workforce development
boards, and their contracted service providers and community partners. It was anticipated that there would be
as many as 2,000 employees impacted with the transition of programs, but the hope was that most of these
people would eventually be reemployed in the industry.
Success Story
From: Paul M.
Sent: March 7, 2011
I would like to send my appreciation to Workforce Solutions for the great staff you have at the Aerospace Transition Center on El Camino
Real in Houston. I was laid off from an aerospace contractor last July as a staff electrical engineer in support of the NASA Johnson Space
Center. My company’s HR representative informed me about the transition center and its availability to me, as a former NASA contractor employee, to use as I determined my future. From my first visit, I sensed the support that was available to me, and I returned frequently to look
for work, discuss job matters with the ATC recruiters, and to seek guidance and advice from them on my search for new employment. I credit
the support I received at the center for the two job offers I received in February of this year.
I fully recognize the center for its professionalism, kindness, and just being there for me day to day when I needed help.
With manager Veronica Reyes’ approval and support, I was permitted to lead a group discussion and present my job success slides last
week to a large group of unemployed workers from the area. In this presentation, I focused on my work history, being laid off, and the assistance and support I experienced at ATC. I described the assistance I received that helped me with job search techniques, what I learned
about not getting responses from employers to whom I applied, and how to increase my chances for getting an interview and how to prepare
for it. With the help of the team at ATC, I learned how to analyze my approach and what to change to improve my chances. In this discussion group, I shared my interview experiences, what worked, what didn’t work and how I finally succeeded and landed a job by following the
sound advice from the ATC staff.
The people in the discussion group expressed to me how helpful the information I shared was to them. They identified with the experience of losing my job and were inspired to keep trying and to seek out the wonderful people at ATC who can support them as they did me.
There is hope after NASA.
I’ll be reporting for work this coming Monday, March 14th.
Thanks very, very much – Paul
26
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
cuss what it could offer, Workforce Solutions to discuss
the tools it had available, and many other groups. Two
face-to-face job fairs were held, as well as several “virtual” job fairs. The success of these job fairs will be detailed below.
Commissioner Ronny Congleton, left, with the Texas Workforce
Commission, visits with Bob Mitchell, president, Bay Area Houston
Economic Partnership, on Feb. 10, 2010, following an open house
for a Workforce Solutions Aerospace Transition Center located in Bay
Area Houston.
Photo courtesy of NASA.
Conditions worsened greatly for the industry when
President Obama announced the cancellation of the
Constellation program. As many as 7,000 Texas aerospace employees would lose their jobs when the Shuttle
program ended, and there was not a new program to
absorb the transitioning workforce. Other NASA centers would be impacted, as well.
NASA immediately formed the Space Shuttle Transition Liaison Office (SSTLO) to help coordinate efforts
at all of the NASA centers. BAHEP and HGAC joined
forces with SSTLO to coordinate resources for the JSC
community. Monthly conference calls were held, and
each center shared resources and information on best
practices for dealing with large layoffs. Quarterly meetings featured speakers from many government agencies
that could offer help, including the Department of Labor, Economic Development Administration, National
Institute of Standards and Technology Manufacturing
Extension Partnership, the Small Business Administration, and the Society of Human Resource Management.
Companies at some NASA centers began the layoff process earlier than others, as their shuttle-related work
wound down, and the information they were able to
share was extremely beneficial to others who were just
starting the process.
The liaison office worked with the JSC Human Resources Department to pull in human resources representatives from the area’s aerospace contractor community to meet on transition issues. “HR Principals”
meetings were held monthly and also included members from BAHEP, HGAC, and Workforce Solutions.
HR Principals sub-committees were formed to work on
specific issues, including resource events and job fairs.
The group held six resource events where representatives from many agencies were made available to transitioning employees. These agencies included the IRS
to discuss retirement options, local colleges to discuss
degree and certificate programs, the United Way to dis-
Gulf Coast Workforce Board, HGAC, and
Workforce Solutions Aerospace Transition Center
The Gulf Coast Workforce Board staff worked with
its aerospace and energy committees to deploy a twopronged approach to address the challenges: leadership
engagement and transitional activities.
The leadership approach consisted of building new
partnerships between industries; bridging gaps between economic development groups; and engaging
Texas Workforce Commission subject matter experts to
develop a multi-phased strategy. The transitional activities included opening a new Aerospace Transition Center in Bay Area Houston to provide assistance for the
aerospace workforce; developing an innovative virtual
(LinkedIn) network; opening a collaborative website to
connect NASA and contractor human resources communication efforts; and ongoing consultation with local
and national NASA-led HR committees.
The leadership engagement approach resulted in securing a $5,367,340 National Emergency Grant (NEG)
to fund the transition center and retrain aerospace
workers. The Department of Labor created the NEG to
assist these displaced aerospace professionals.
Transitional activities included employment workshops for more than 3,000 participants; LinkedIn/
Twitter networks; virtual/live job fairs; financial assistance programs; and retraining technical professionals
through the colleges. The most impressive collaboration to date was an 80-company job fair in June 2010
where energy companies made on-the-spot job offers.
The aerospace industry contractors continue to benefit through extensive consultation resulting in strategic
workforce plans; leadership engagement sessions and
NASA and General Motors began working together in 2007 on Robonaut 2, or R2, which
in 2011 became the first humanoid robot in space. NASA and GM are now developing a
robotic glove that auto workers and astronauts can wear to perform their respective jobs,
while reducing the risk of repetitive stress injuries. In this image, Robonaut and a spacesuitgloved hand are extended toward each other to demonstrate the collaboration between robots
and humans in space. The knowledge gained through NASA’s human spaceflight program
translates across many industries, continuing to benefit life on Earth.
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
27
ing them as models for their geographies. The bottom
line is that this integrated approach is proving to be
highly effective in retaining valuable brainpower as
these displaced workers transition into new career
opportunities.
U.S. Senator Kay Bailey Hutchison held a media event in October 2010 at NASA
Johnson Space Center to express her support of NASA and its human spaceflight
program. Shown with her are (l to r) U.S. Representatives Pete Olson, Gene
Green, Sheila Jackson Lee and Al Green.
management training; transitional outplacement activities and re-training for impacted employees; job fairs
and innovative virtual networks; and human resources
collaboration, communication, and motivational events.
This integrated approach benefits the aerospace
community by saving the huge cost of hiring multiple
outplacement firms; provides integrated retraining and
hiring solutions for energy companies; and reduces the
emotional impact on workers and potential for workplace incidents. This approach also engages communities and economic development groups to support the
ongoing efforts. Augmenting the efforts of Texas Workforce Solutions and NASA JSC staff, education and economic development professionals in the region have
invested countless hours working on these multiple initiatives since 2010.
This leadership engagement and transition center
multi-prong, collaborative approach, coupled with the
innovative use of web-based systems, has proven to be
highly successful. Early engagement with aerospace
companies and NASA JSC allowed for the planning
and deployment of resources to prepare the impacted
workforce 6-12 months in advance of layoffs. This
also allowed for the planning of rapid response team
coordination. Leadership engagement opened communications between industries, economic development
professionals, educational institutions, and increased
participation at job fairs by non-aerospace companies.
The LinkedIn/Twitter and Workforce Solutions websites
linked companies and workers together to provide critical information about unemployment insurance, jobs,
training, resource events, motivational speakers, blogs,
etc. Each of these innovative activities is essential to the
success of the overall program and builds the framework for future work in the region.
Other boards within Texas, as well as Florida, Louisiana, Utah, and California, are taking the best practices developed around NASA JSC and are implement28
School District Provides Transition
Assistance
Offers to assist transitioning aerospace employees
have poured in from across the community. The Clear
Creek Independent School District (CCISD), one of
the largest districts in the impacted area, developed a
program, CCISD Cares, to assist families suffering hardships due to the transition. CCISD has also shared its
program’s information and successes with the other
four school districts serving the Bay Area Houston region and asked them to consider developing a similar
program for their district.
This resource was created for families facing temporary financial uncertainty resulting from the slumping
economy, job loss, or other significant challenges impacting family income. The CCISD Cares program benefits include:
• Free or discounted breakfast and lunch for students,
• Free pre-K instruction at one of CCISD’s 26 elementary campuses,
• Enabling students to remain at their home campus
despite any temporary, alternate living arrangement
they experience, and
• The encouragement to continue extracurricular
activities during transition through special arrangements on an as-needed basis such as waiving instrument rental fees, uniform costs, etc.
At the Texas Governor’s Business Forum: Aerospace
Collaboration Opportunities on Feb. 17, 2012, at NASA
Johnson Space Center, the Honorable Hope Andrade,
Texas Secretary of State, announced a new Regional
Center of Innovation and Commercialization (RCIC),
authorized by the Texas State Legislature, which would
act as an agent to identify, evaluate, and submit technology development proposals to obtain state funding
through the Texas Emerging Technology Fund.
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
of experience in understanding
BayTech
human factors in the harsh envi As the vulnerabilities of the
ronment of space contributed to
human space program began to
the successful rescue of the Chilemerge, it became clear that loean miners?
cal core capabilities in human
spaceflight could be utilized in
Over time, to complete the
other technology arenas. Furtransition from previous misther, funding levels for federal The Bay Area Houston Economic Partnership has
sions to future ones, NASA JSC
research and development are created a new, not-for-profit organization to develop
wants to develop an Innovation
approaching historical highs innovative partnerships between NASA Johnson Space
Park to (1) strengthen and leCenter, diverse industries, government and academia.
(well in excess of $144 billion), The Bay Area Houston Advanced Technology Consorverage research capabilities with
with only a small percentage go- tium, BayTech, will work to attract investment in next
university and industry, (2) proing to Texas institutions.
generation technologies.
vide a dynamic, collaborative
environment where technology
Therefore, BAHEP deteradvancement and innovation is
mined that a logical next step
key, and (3) increase economic development of the Bay
would be to attract investment in next generation techArea Houston region and throughout Texas.
nologies by creating a new, not-for-profit consortium to
develop innovative initiatives and partnerships between
NASA envisions an Innovation Park focused on colJSC, diverse industries, government, and academia to:
laborations and research in the areas of commercial
space, energy, and life science and is targeting these
• Preserve and utilize the JSC community’s technical
industries due to Texas industry expertise, predicted
capabilities and critical skills
economic booms, and the strengthening of NASA ini – Maintain human spaceflight core competencies
tiatives. By attracting technologically advanced compa – Strategically position community for future
nies and top tier universities for partnerships, the In opportunities
novation Park will stimulate job creation and will have
– Create new demand for community’s technoloa positive socio-economic impact on the state of Texas.
gies, products, facilities, and talent
• The Innovation Park is in the conceptual stage. It is
• Drive advances in technologies to enhance life in
envisioned as a home for:
space and on Earth
– BayTech as it grows.
• Foster creation of new technical capabilities and
– A new JSC Acceleration Center which would
talents
enable and accelerate the growth of emerging
• Guide regional and statewide jobs creation and
technologies. This center would provide services
preservation through industry partner engagement
to entrepreneurs through education, insight,
access to capital, business development, and
• Generate revenue streams for consortium
related efforts.
participants
– A new Regional Center of Innovation and Com The Bay Area Houston Advanced Technology Conmercialization (RCIC), authorized by the Texas
sortium, BayTech, was established in 2011 and has beState Legislature, which would act as an agent
come a central point of focus around which the aboveto identify, evaluate, and submit technology
mentioned initiatives are beginning to coalesce to create
development proposals to obtain state fundnext generation technologies. BayTech, a 501(c)(3), is
ing through the Texas Emerging Technology
governed by a Board of Directors. Once fully operaFund. The Houston Technology Center (HTC)
tional, BayTech will be funded through allowable grant
would manage the RCIC extension located in
administration dollars.
the JSC community, and HTC’s leadership would
provide the RCIC services. Named by Forbes as
NASA’s Strategic Opportunities
one of “Ten Technology Incubators Changing
Partnership Development Office
the World,” the Houston Technology Center
Meanwhile, back at NASA, JSC’s longer term goal,
provides education, insight, and access to capital
developed through its Strategic Opportunities Partnerthat entrepreneurs need to move towards the
ship Development office (SOPD), is to further foster
path to commercialization.
business development as a major tenet of a new, out– A “tinkering lab” with workshops, tools, and
wardly focused mission. NASA has long had its nose to
labs that would be open to the technical
the grindstone working on the Shuttle program, but it
community.
is now able to pursue collaborations with industry and
academia. NASA is uniquely positioned for this kind
• Cooperative opportunity for the entire state of
of technology transfer activity. For example, did you
Texas.
know that the technology which was developed to au• Bricks and mortar are not essential for the neartonomously dock spacecraft is now used for precision
term; the Innovation Park can be virtual for the
LASIK eye surgery? Did you know that NASA’s 50 years
short-term.
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
29
Walter Ulrich, CEO and president of the HTC, is an
avid believer in these outreach capabilities for job creation potential and has stated, “I believe that leveraging
the terrific resources available in this community can
get us to the point of generating as many as 10,000 new
jobs.”
Real Estate
As this new business development activity blossoms,
where will all the new entities be housed? Fortunately,
the earlier job losses have made several prime real estate
facilities available for expanding tenants. BAHEP’s staff
is diligently identifying all buildings and labs that are
becoming available and is developing a marketing program to present these space opportunities to real estate
brokers and site consultants nationwide.
A Promising Future
It’s been more than 50 years since the earliest Freedom 7 astronauts courageously trained in Bay Area
Houston for their first perilous missions. Their names
have been indelibly inked in history’s annals – Alan
Bartlett Shepard, Jr., Virgil Ivan “Gus” Grissom, John
Herschel Glenn, Jr., Malcolm Scott Carpenter, Walter
Marty “Wally” Schirra, Jr., Leroy Gordon “Gordo” Cooper, Jr., and Donald Kent “Deke” Slayton. Their stories
are legendary, and they have inspired countless humans
to pursue their own dreams. Their lives in space made
our lives better on Earth.
In so many ways, NASA’s experience in space exploration continues to benefit life on Earth. A tremendous community flourished where the early astronauts
trained. This community diversified into a thriving
center for advanced technology, life sciences, specialty
chemicals, and maritime commerce. Much that NASA
has developed over the past 50 years has proven to be
applicable in these industries and others. NASA JSC
is actively pursuing partnerships in R & D, advanced
technology, and new technology applications. These
partnerships will utilize NASA JSC’s world-class expertise and capabilities including unique engineering
facilities; proven design, development, testing, and operation of complex systems; integrated project management; safety and risk analysis; human habitability; and
health and performance expertise.
“All I ask is a tall ship and a star to steer her by.”
NASA’s expertise, developed through 50 years of incredibly successful space exploration programs, will be incorporated into the building of future “tall ships,” as
well as into many industry sectors beyond that of aerospace. The transitioning of Texas’ aerospace industry
truly has created one of the most important and promising economic development opportunities in the state
today.
Accredit Your
Economic Development Organization
Recognizing Professional Excellence in
Economic Development Organizations
“Designation by IEDC
as an AEDO has greatly
assisted our organization in
its fund raising efforts.
The recognition of excellence
serves as a source of pride
to our economic
development program,
contributors, and community.”
K Heightened visibility of your economic development organization’s
efforts in the community and region
K Independent feedback on your organization’s operations, structure
and procedures
K An excellent marketing tool to help promote your organization
For More Information
go to www.iedconline.org
or call
(202) 223-7800.
– Terry Murphy, Ec.D, CED
Munci-Delaware County Indiana
Economic Development Alliance
30
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
31
CalEndar of events
ReCertification
for Certified
Economic
Developers
Fulfill a recertification
requirement without
tapping into your
budget!
Earn two credits
towards your next recertification by having
an article published in
the Economic Development Journal, IEDC’s
quarterly publication.
This is one of a number
of ways that you can
pursue recertification
credits. Submissions
are accepted throughout the year. The
Journal Editorial Board
reviews all articles
and determines which
articles are accepted
for publication.
For more information
contact Jenny Murphy,
editor, at
[email protected]
(703-715-0147).
IEDC sponsors an annual conference and a series of technical conferences each year to bring economic
development professionals together to network with their peers and learn about the latest tools and
trends from public and private experts.
IEDC also provides training courses and web seminars throughout the year for professional development, a core value of the IEDC. It is essential for enhancing your leadership skills, advancing your career,
and, most importantly, plays an invaluable role in furthering your efforts in your community.
For more information about these upcoming conferences, web seminars, and professional development training courses, please visit our website at www.iedconline.org.
CONFERENCES
TRAINING COURSES
2012 Annual
Conference
Sept. 30-Oct. 3
Houston, TX
Real Estate
Development and
Reuse
July 12-13, 2012
Minneapolis, MN
Real Estate
Development and
Reuse
October 18-19, 2012
Atlanta, GA
Economic Development
Strategic Planning
July 26-27, 2012
Chicago, IL
Economic Development
Credit Analysis
November 7-9, 2012
Phoenix, AZ
2013 Leadership
Summit
January 27-29
Orlando, FL
2013 Federal Forum
April 14-16
Alexandria, VA
Economic
Development
2013 Spring Conference Marketing and
Attraction
June 9-11
August 9-10, 2012
Ann Arbor, MI
Atlanta, GA
2013 Annual
Economic Development
Conference
Credit Analysis
October 6-9
August 22-24, 2012
Philadelphia, PA
Baltimore, MD
Business Retention
and Expansion
November 15-16, 2012
Tampa, FL
Neighborhood
Development
Strategies
December 6-7, 2012
Los Angeles, CA
Technology-led
Economic Development
September 13-14, 2012
Albany, NY
Business Retention
and Expansion
September 27-28, 2012
Houston, TX
Workforce
Development
October 4-5, 2012
Baltimore, MD
32
EconomicEconomic
Development
Journal /Journal
Spring 2012
/ Volume
/ Number
Development
/ Spring
2012 /11Volume
11 /2Number 2
CERTIFIED ECONOMIC
DEVELOPER EXAM
September 29-30, 2012
Houston, TX
(Appl. Deadline:
July 30, 2012)
Web seminars
June 27
Manufacturing
Partners: Federal and
State Resources to Grow
Local Manufacturing
July 18 (free)
Strategies to Spur
Disaster Recovery in
Rural Communities
September 19 (free)
Financing Small
Businesses to Spur
Post-Disaster Recovery
October 24 (free)
Financing Critical
Infrastructure and
Redevelopment Projects
November 28 (free)
Initiatives to Protect
Community Assets from
Disaster
December 5 (free)
How to Engage Your
Small Businesses in
Continuity Efforts
News from IEDC
AEDO Accredits Two Organizations,
Reaccredits One
IEDC is proud to
announce the accreditation of two organizations: the Great Falls
Development Authority (MT) and the Tulsa Metro
Chamber’s Economic Development Department
(OK). In addition, IEDC announces the reaccreditation of the Jefferson Parish Economic Development Commission, located in suburban New
Orleans, which has been an AEDO member since
2008.
These organizations represent the high quality
and dedication to excellence that the AEDO (Accredited Economic Development Organization)
program demands. Earning accreditation is a
great way for economic development entities to
increase their visibility in the community and gain
independent feedback on their organizational
operations. For more information about becoming
one of the program members, which now total 31,
contact Tye Libby ([email protected]).
EDRP Launches Report on Shifts
Impacting Economic Development
Organizations
IEDC announced
the launch of a new
research report that
examines the shifts
impacting economic
development organizations (EDOs) due to
broader shifts in the
global economy. New
Realities for Economic Development Organizations analyzes broad
ranging shifts affecting several business practices
among EDOs, both urban and rural, and sets the
stage for the remainder of the year where some of
these shifts will be examined in more detail.
Specifically, the report looks at issues such as
organizational funding, performance measurement, strategic planning, and leadership development, among others. It includes brief case studies
from all over the country on how different organizations are dealing with these shifts. This report
was funded through the Economic Development
Research Partners (EDRP) program.
New Report to Focus on Clean Tech
What does clean tech mean for economic
development? IEDC is exploring this question
through a grant from the Rockefeller Brothers
Fund. The organization is focusing on three areas
of clean technology: electric vehicles, net-zero
energy homes, and offshore wind, examining
opportunities and strategies for future market
growth and job creation.
These industries are relatively underdeveloped
in the U.S. but have the potential to significantly
impact economic development. This will be driven
in part by consumer demand but also through
nationwide goals such as 20 percent wind energy
by 2030 and a 30 percent reduction in energy use
in existing homes by 2020. Look for the full report
on IEDC’s website later in 2012.
Technology-led Economic
Development Training Course
Coming to Albany, NY
AICP Certification Maintenance points: CM I 16
This September 13-14 in Albany, NY, IEDC will
be holding its Technology-led Economic Development training course. In this course, participants
will be introduced to the legal and financial
framework for bringing an innovation to market, including technology protection and product
licensing.
Learn how to partner with government, industry, higher education, and the private sector to
create a highly integrated network of technology
and innovation. Multiple case studies will be presented to explain the role of business incubators,
accelerators, venture capital, angel networks, gap
financing, and more.
IEDC Presents Free Web Seminars
on Economic Recovery in Disaster
Impacted Communities
IEDC has launched a free, six-part “Economic
Recovery in Disaster Impacted Communities” web
seminar series through a grant from the Economic Development Administration of the U.S. Department of Commerce. IEDC welcomes participants
to attend all six – or any combination – of these
new, no-cost online learning events. The web
seminars are based on real pre-disaster planning
and post-disaster experiences, and each seminar
equips participants and communities with ideas
and tools to plan and sustain economic recovery
following a disaster.
The next web seminar in the series occurs July
18 at 2:30 p.m., with the final seminar delivered
in December. To learn more about the six-part
IEDC web seminar series, visit: www.iedconline.
org/?p=Disaster_Recovery_Webinars.
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
33
galveston’s business
Recovery Plan
Photo courtesy of City of Galveston
By Jeffrey Sjostrom
Galveston – during Hurricane Ike.
Jeffrey Sjostrom
is president of
the Galveston
Economic
Development
Partnership
(sjostrom@gedp.
org)
t
Introduction
he city of Galveston, Texas, is located
on a barrier island 32 miles long and
2½ miles wide, just off the upper Texas
coast in the Gulf of Mexico. The island city is
approximately 50 miles southeast of Houston, the
fourth largest metropolitan area in the country.
Galveston is accessed by a causeway that links the
island to the mainland on the north end of the city,
a toll bridge on the western end of the island, and
a ferry service at the east end of the city. A ten-mile
long, 17-foot-high seawall protects a portion of the
city from hurricane storm surge.
The economy of Galveston is based on the Port of
Galveston and related maritime interests; tourism; financial, educational, and insurance institutions; and
the island’s largest employer, the University of Texas
Medical Branch at Galveston (UTMB) and its education,
research, and healthcare delivery components.
In September 1900, Galveston was in the eye of a
hurricane that is still the worst natural disaster in the
United States when measured by the loss of human life.
In one night, 8,000 people died – almost 23 percent of
the city’s population. In 2005, the National Hurricane
Center compiled a list of the five places in the United
States most vulnerable to hurricanes. Galveston was
one of the five areas named. Low elevation and limited
evacuation routes off the island were the primary reasons for the city’s inclusion on that list.
Hurricane Ike struck Galveston Island on September
13, 2008. Business recovery following a natural disaster remains an under-developed practice for communities. This article focuses on the efforts made by a local
economic development group (Galveston Economic
Development Partnership - GEDP) in both preparing
for and responding to a catastrophic event. Pre-planning and post disaster strategies are discussed with an
awareness that more work needs to be done at all levels
from the local to the national stage.
Background
The hurricane season of 2005 went down in history
as having produced what has been estimated to be the
costliest natural disaster in U.S. history. Katrina resulted in an estimated cost of devastation of over $125
billion. Galveston Island was impacted indirectly by
Katrina, through the housing and provisioning for over
3,000 estimated evacuees. Rita, which came later on
September 21, 2005, narrowly bypassed Galveston Island. However, the city and its citizens were challenged
to react by implementing their emergency management
processes during a mandatory evacuation of the island.
The passing of a very active hurricane season (26
named storms in 2005) and the realities of what was
experienced along the Gulf Coast states of Texas, Loui-
Disaster Recovery – from Theory to Practice
Shortly following Hurricane Katrina in 2005, the Galveston Economic Development Partnership (GEDP) initiated a
Hurricane Recovery Task Force with the mission of applying lessons learned from Gulf Coast communities impacted by Katrina. The GEDP examined financial issues for the city, identified local business preparedness and recovery strategies, and
formulated concepts (theory) for assisting businesses impacted by a natural disaster. The GEDP visited areas impacted by
Katrina, researched efforts made by other communities, and facilitated discussions with local leaders in developing action
steps/recommendations for improving Galveston’s overall preparedness. Hurricane Ike hit Galveston in September 2008.
This article chronicles the efforts made in addressing business recovery after a natural disaster.
34
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
siana, Alabama, and Mississippi during this season
prompted a charge from Mayor Lyda Ann Thomas to
the GEDP. This charge was to form a Hurricane Recovery Task Force to identify what Galveston Island could
do – proactively – in assessing mitigating factors for disaster response and recovery.
The Galveston Economic Development Partnership
(GEDP) is a private, non-profit 501(c)(6) organization
that is membership based. Founded in 1999, the GEDP
works to facilitate new projects and investments across
the island while maintaining an eye toward the longterm sustainable growth of Galveston Island.
In October 2005, the GEDP convened the Hurricane
Recovery Task Force with two primary objectives:
1. Evaluate what impacts would be felt by the city if
a major hurricane was to strike and the resulting
devastation affected more than 50 percent of the
city’s tax base; destroyed the city’s infrastructure;
and recovery could span a period of 5-10 years.
2. Evaluate and assess what actions/services the
GEDP could provide to the local business community that would aid in the education and preparation for a catastrophic event and the expedited
rebuilding of the city’s tax base.
The need for this Hurricane Recovery Task Force
was put to the test when Hurricane Ike struck the coast
of Texas on September 13, 2008, as a category 2 storm
with a category 4 storm surge. “With wind bands extending 120 miles from center, recorded high water
marks of 19 feet, and damages exceeding $50 billion,
Hurricane Ike was likely the physically largest and costliest hurricane to ever hit Texas. It also may prove to be
the second costliest hurricane in U.S. history, behind
only Hurricane Katrina” (Governor’s Commission for Disaster Recovery and Renewal - January 2010). Impacts
from Hurricane Ike to the city of Galveston included:
• Approximately 80 percent of the 3,500 businesses
experienced severe damage;
• Water levels greater than nine feet in the Historic
“Strand” district;
• Significant damage to the Port of Galveston, major
cultural facilities, and major medical campus (the
University of Texas Medical Branch at Galveston
(UTMB));
• A total of 80 percent of residences had flood
damage;
• Only 60 percent of the city population had returned six weeks after the storm; and
• Significant labor shortages for most of the local
businesses that re-opened.
The Galveston Seawall protected the city from storm
wave attack. However, Galveston was flooded by a
storm surge that entered Galveston Bay and came into
the city from the north. The surge also passed over the
west end of Galveston Island and Bolivar Peninsula to
the east of the island. The highest storm surge has been
estimated at 17 feet, possibly 20 feet in some areas.
Business Continuity Planning Chart
Issues to Focus on for Continuity Planning
• Shelter
– Pre-secured living trailers to
house workers. Sites pre selected and transportation
arranged.
• Utilities
– Sanitary facilities (port-a-johns)
– Emergency power and fuel
supply
– Potable water supply
– Wash water supply
– Food supply
• Gap Financing
– Access to financial resources
during the period between
catastrophic event and when
insurance or other proceeds are
received for recovery and
rebuilding
• Workforce Planning and
Housing
– Personnel plan for essential
and non-essential staff
– Employee housing depending
upon severity of event
– Continuity for communications
and scheduling
• Security
– 24 hour security provided at
work site or place of operations
• Communications and
Information Technology
– Backup plan for employees,
vendors, customers, etc.
– Computer back-up and
re-establishment after event
• Medical
– EMT/First Response personnel
and equipment provided
• Transportation
– Access limited to business necessary travel (no sight seeing). Available equipment
to service and maintain vehicles
(tires). Fuel source provided.
Business to provide tracking
and accountability for all
personnel allowed in.
• Identification
– Business will provide graduated
list of personnel prior to storm
season. Personnel will need to
provide pre-arranged ID for
access.
Level 1: immediate access
personnel to perform
initial damage assess
ment in order to priori
tize assets and update
capabilities list
Level 2: personnel to perform
immediate mitigation
efforts and/or provide
recovery resources
to government personnel
Level 3: non-essential personnel
who can wait until
general clearance is given
to the public
One area in particular that changed from theory to
practice was the issue of self sufficiency. As a result of
the impacts felt by Hurricane Ike, experiences proved
those that planned better prior to the event were more
successful in mitigating financial loss and hardship following the storm.
Continuity Planning
As the name implies, a continuity plan is a premeditated strategy for continuing business in the event
of a disaster. While never a guarantee that a business
affected by disaster will go completely unscathed, preparing a continuity plan will help the small business
owner minimize potential losses and anticipate the actions they will need to take in the event of a disaster.
A continuity plan is not a contingency plan. It does
not attempt to spell out in detail who must do what in
the event of a specific contingency – such as a store fire,
robbery attempt, or power failure – although it may be
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
35
GEDP Disaster Recovery Guide
Prior to Ike, the GEDP collaborated with the Charlotte County
– Florida, Economic Development Office. Taking from their prior
work in preparing a Disaster Preparedness and Continuity Guide,
the GEDP adapted this tool and developed a guide for use by the
Galveston business community.
will help business owners increase the odds that their business
will make it through the next disaster. While targeted to the
small business owner, the materials may assist contingency
planners working for larger corporations in the development of
their programs.
The GEDP Disaster Recovery Guide was created in an effort
to provide an easy-to-use resource in which business owners are
able to perform a self-assessment of key information needed in
the event of a catastrophic event.
This guidebook was developed for GEDP members and the
Galveston business community. Becoming familiar with the
content and completing the forms included in the publication
The recovery guide works to:
• Outline what actions may be taken to minimize the disruptive
effects of a disaster on the operation,
• Explain the differing roles and responsibilities of government
and business owners in disaster recovery, and
• Provide the information needed to develop a comprehensive
business disaster continuity plan.
ing community infrastructure and ensuring that housing needs are met. The Small Business Administration
(SBA) may offer loans to business owners damaged by
a disaster to make necessary repairs. Other federal and
state programs may be available after a disaster, including Economic Development Administration resources,
but these funds are typically not available to small business owners. While local, state, and federal disaster recovery employees will work with small business owners
after a disaster, on the whole, most post-disaster recovThe Role of Government in Private Sector Disaster
ery resources are not designed to help a small business
Recovery
owner get back in business.
The Federal Emergency Management Agency
Even though a business owner may benefit greatly
(FEMA) is the federal agency charged with ensuring
from government sponsored disaster recovery programs,
that America can recover from disasters. Each state
such as the SBA disaster loan program, business owners
has an emergency management office that is charged
are mostly on their own when it comes to remaining in
with a similar responsibility. In Texas, each county and
business. This is why it is critical for all business ownmost cities also have an emergency management office
ers to take steps to reduce their vulnerability and unresponsible for dealing with emergencies in its jurisdicderstand the steps that must be taken in the aftermath
tion. As the scale and magnitude of a disaster increases
of a disaster – before a disaster strikes. These issues can
and the capabilities of one level of government to manbe questioned and covered through the development
age the disaster are exceeded, the next higher level of
of individual business continuity plans. The GEDP Digovernment will provide assistance. Most major disassaster Recovery Guide has been developed specifically
ters include the involvement of FEMA, the state, and
to assist small businesses in assessing their vulnerabilcounty/city emergency manity and highlighting
agement offices.
While local, state, and federal disaster recovery critical information
Most federal and state
employees will work with small business that will be useful folprograms focus on restorlowing a catastrophic
owners after a disaster, event.
Photo courtesy of City of Galveston
quite helpful for a business owner to write down stepby-step procedures for dealing with each of these emergencies. The continuity plan focuses on procedures
for minimizing potential losses and ensuring a speedy
recovery from disaster. Examples of issues that should
be included in any continuity plan are: shelter, utilities, gap financing, workforce planning and housing,
security, communications and information technology,
medical, transportation, and identification (see chart).
on the whole, most
post-disaster recovery
resources are not
designed to help a
small business owner
get back in business.
Emergency
Management
Emergency management is quite simply
the business of minimizing the social and
economic impacts of
natural and technological hazards. Emergency management has four basic
phases, described below:
Mitigation – Reducing the potential for loss of life
and property
Galveston – after Hurricane Ike.
36
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
Preparedness – Understanding the effects of disasters, the actions that must be taken to respond to
and recover from these events, as well as what can
be done to mitigate future losses
Response – Handling an emergency as it is impending and occurring
Recovery – Restoring all aspects of a community
damaged by a disaster
A small business owner should consider what actions they plan to take during each phase of emergency
management. A business recovery plan is typically
organized into four sections to address each phase of
emergency management. When completed, this plan
should establish an operational framework for managing hazards likely to affect a small business. While not
exhaustive, the following list outlines the type of emergencies small business owners may face:
Accidents: Fire, explosions, power loss, water leaks
or plumbing failure, hazardous spills
Weather: Severe storms, lightning, tornadoes,
hurricanes, floods, freezes, wildfires
Civil Disturbances: Criminal incidents, rioting,
vandalism
Terrorism: Bomb threats, computer viruses,
sabotage
Business Recovery Activities
On the afternoon of September 13, 2008 (Hurricane
Ike landfall), the Galveston Economic Development
Partnership embarked on implementing the Business
Recovery strategies identified from the Hurricane Recovery Task Force. Now, three years later and seven
temporary offices since, the results of the GEDP Business Recovery initiative include:
Hurricane Ike Recovery Loans
Overview:
Facilitated by the GEDP/Mayor Lyda Ann Thomas
with four local lenders (Frost, Hometown, Moody
National, and Texas First). Program included a
180-day short-term loan with a fixed 5% interest
rate. The loan structured was a “single-pay note”
bridge loan. The participating lenders individually administered loans. The GEDP assisted in the
development of a marketing campaign to publicize
the availability of funds.
Results:
Between September 13, 2008 (Ike landfall) and
December 31, 2008 it was estimated that $40-$50
million was lent back into the Galveston business
community. The participating lenders managed
their individual portfolios and businesses of every
size and shape were assisted.
Galveston Business Recovery Fund
Overview: Facilitated by the GEDP with corporate and philanthropic contributions. Total amount raised was
approximately $250,000. Loan structures were
Hurricane Ike severely damaged 80 percent
of the 3,500 businesses in the city of
Galveston and only 60 percent of the city
population had returned six weeks after
the storm.
short-term (10 years) low
interest (5%) loans with no
pre-payment penalties.
100% of all funds were designated for relending out to the
Galveston business community. Funds were deposited in
the regional planning council
(Houston-Galveston Area
Photos courtesy of City of Galveston
Council) - Regional Center of
Excellence 501(c)(3) on behalf
of the Galveston Business Recovery Fund.
The GEDP marketed the program and assisted
in preparing the application packets for the identified businesses.
Results:
Seven loans were approved that ranged from
$10,000 - $40,000. Businesses financed included
restaurants, flower shops, hardware stores, and
others.
HGAC Regional Revolving Loan Fund
Overview: Funded by the Economic Development Administration, HGAC operates a $10 million regional revolving loan fund. Loan terms are from 10-20 years
with a low fixed rate (approx. 4%).
Federal guidelines remain attached to the loan
proceeds and eligibility criteria are reviewed on a
case-by-case basis. Maximum loan amounts cannot
exceed $350,000 under general parameters. The
GEDP assisted in the designation of these funds for
the HGAC. GEDP markets the program and introduces local companies to the program.
Results:
Several businesses from throughout the HGAC region are in processing for consideration. Paperwork
and regulations slowed implementation of this initiative, however cooperation and collaboration have
resulted in program streamlining and clarity.
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
37
Photo courtesy of City of Galveston
Other Business Recovery Activities
Economic Development Administration
The single most responsive and supportive federal
agency before, during, and after Hurricane Ike remains
the Austin Regional Office of the U.S. Department of
Commerce - Economic Development Administration
(EDA). Under the leadership of Pedro Garza, this office
remained vigilant in identifying and assisting priority
projects in the rebuilding and recovery from Hurricane
Ike.
Primary jobs and strategic infrastructure investments
were made for the Port of Galveston, the University of
Texas Medical Branch at Galveston, and the HoustonGalveston Area Council. Investments included $10 million for maritime infrastructure at the Port of Galveston; $10 million for UTMB and its Technology Transfer/
Technology Incubator at the Custom’s House; and $10
million for the creation of a Regional Revolving Loan
Fund at the Houston-Galveston Area Council (HGAC).
HGAC is a regional planning organization dedicated to
overseeing regional plans and resources for transportation, environmental, economic development, job training, and other programmatic areas. HGAC administers
the Gulf Coast Economic Development District through
funding allocated by the EDA.
Business Recovery Task Force
Following Hurricane Ike, the GEDP Hurricane Recovery Task Force evolved into the Business Recovery
Galveston Business Recovery
Task Force. The focus of this
Loan Program
task force was targeted to adFollowing Hurricane Ike, the GEDP
Overview: dressing business recovery
Hurricane Recovery Task Force evolved issues for the local business
The city of Galveston allocated $2.5 million for small into the Business Recovery Task Force. community. This task force
business disaster recovery
updated the Disaster RecovThe focus of this task force was
loans from Round 1 - Comery Guide to enhance postmunity Development Block
targeted to addressing business
event lessons learned from
Grant - Disaster Recovery
Ike. In addition, the work of
recovery issues for the local
funding. These deferred
this group set about establishbusiness community.
- forgivable loans were
ing new relationships with
structured with a maximum
the public sector (city, county,
loan amount of $50,000
UTMB), reinforcing the need
and a term of one-year.
to utilize local companies in the rebuilding and recovery efforts, continues addressing the development of a
Results:
comprehensive listing of all businesses located within
Applications to this program were released on June
Galveston, and other activities identified as important
6, 2011. Applications were accepted between June
to the needs of the business community. Central to this
13 and August 8, 2011. A total of 107 applications
work, one of the primary gaps that appeared followwere submitted, 72 applications were reviewed,
ing Ike was the lack of continuity between the business
and 64 applications were approved for funding,
community and those agencies/entities charged with
impacting almost 700 local jobs. Small business
allocating projects and resources in the recovery and
needs exceeded the amount of funding available,
rebuilding of Galveston.
but for those companies assisted, these resources
have aided in keeping doors open and providing for
This task force has now updated the Disaster Recovadditional optimism in recovering from the impacts
ery Guide for small businesses; worked with the city,
of Ike.
county, and UTMB to prioritize the need of using local
companies as a critical component in recovery activities; and developed a new web site dedicated to business recovery.
Galveston – after Hurricane Ike, a category 2 storm with a
category 4 storm surge.
38
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
Following Hurricane Ike, the GEDP joined forces
with the Galveston Chamber of Commerce to identify
business recovery resources for the business community. In addition to the Recovery Guide and website
activities, significant efforts were made with GEDP’s
public partners. One example of this collaboration are
the efforts of the University of Texas System (Office of
HUB development), UTMB, and the prime contractors
selected to oversee their massive rebuilding efforts.
Leadership from UTMB (Dr. David Callender, president and Mike Shriner, vice president - Business Operations and Facilities) and the University of Texas System
(Hopeton Hay, manager - Office of HUB Development)
collectively laid the foundation for ensuring local businesses the opportunity of participating in the rebuilding. The GEDP and Chamber facilitated a strategic partnership with UTMB, resulting in multiple outreach and
technical assistance efforts geared toward educating and
informing local companies of upcoming business development opportunities as they occur.
recovery, economic climate and assemble those practices employed following Ike for transferability to other
communities that may be vulnerable to similar events.
The Disaster Resistant & Resilient
Business
Disaster recovery is not complete unless economic
recovery is complete. History has demonstrated that it
is far easier to rebuild roads, public facilities, and houses, than it is to restore economic vitality to a community
affected by a disaster. According to U.S. Department of
Labor statistics, over 40 percent of all companies that
experience a disaster never reopen and over 25 percent
of the remaining companies close within two years.
While the disaster recovery plan is organized around
the four phases of emergency management – mitigation,
preparedness, response, and recovery – the rationale behind preparing a plan is basic. Businesses invest time
and resources into preparing and implementing a plan
to stay in business. To stay in business, a small business
owner must ensure that his or her operation is disaster resistant – able to withstand the effects of whatever
hazard may strike – as well as disaster resilient – able to
rebound economically from a disaster and to take advantage of post-disaster market opportunities.
Planning Initiatives
Locally, over two dozen plans have emerged following Hurricane Ike. The most effective planning (from an
economic development perspective) has come from the
International Economic Development Council (IEDC),
the Urban Land Institute, and EDA. These efforts have
lessons Learned
combined local issues with regional and national col As a result of Hurricane Ike, many lessons were
laboration and best practices.
learned in spite of the unprecedented levels of pre IEDC in conjunction with the U.S. Chamber’s Busiparedness training available throughout the city prior
ness Civic Leadership Center and the National Associato this catastrophic event. Following are a number of
tion of Development Organizations facilitated a stratelessons that were learned and continue to be refined as
gic planning session on a Post-Disaster Small Business
part of the GEDP Business Recovery Task Force planRecovery workshop. Results from this effort included
ning efforts.
a series of recommendations to the federal government
for improving federal response to post-disaster economDisaster recovery is not complete unless economic
ic recovery. In addition, this initiative created a working network of over 27 individuals/communities who
recovery is complete. History has demonstrated that it
collaborated on this report. The IEDC has maintained
is far easier to rebuild roads, public facilities, and houses,
a leadership role in disaster recovery ranging from the
than it is to restore economic vitality to a community
hurricanes of 2005 through the oil spill of 2010.
affected by a disaster.
The Urban Land Institute (ULI)
performed two studies on Galves- Photo courtesy of University of Texas Medical Branch
According to U.S.
ton Island after Hurricane Ike. The
Department of Labor
first was an overall assessment of
the island’s economic climate as
statistics, over 40 percent
well as a number of recommendaof all companies that
tions for moving forward in makexperience a disaster
ing Galveston a more sustainable
community. In addition, ULI comnever reopen and over
missioned a housing panel study to
25 percent of the
evaluate Galveston’s housing market pre and post Ike.
remaining companies
Capacity building for the GEDP
close within two years.
was enhanced through a planning/
capacity building grant from the
Economic Development Administration. This effort will enable the Galveston today – moving beyond recovery, University of Texas Medical
GEDP to evaluate the community’s Branch at Galveston. New Jennie Sealy Hospital, a $438 million project.
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
39
Pre-planning Initiatives
• Continue to encourage local businesses to complete the GEDP Disaster Recovery Guide for continuity planning purposes.
• Work to clarify and improve re-entry protocols and
procedures.
• Create comprehensive database listing all Galveston businesses.
• Coordinate with utility providers to ensure databases are updated to current address status and
priority timing understood by business community
in general for reconnections.
• Educate on permitting process for re-entry, repairs,
utilities, and additions.
Photo courtesy of TAMUG
Procurement for Business Community
• Discuss with city administration on how to coordinate local businesses in the response and recovery
activities following a hurricane.
• With regard to local contracting, develop a financial
component. Local contractors will be confronted
with bonding, insurance, gap financing (when they
perform the work and when they get paid from the
city/state), etc. There must a strategy in place to
assist in this regard.
• Promote discussion pertaining to companies or an
industry pre-planning for self-sufficiency following
a hurricane for re-entry purposes (permits, temporary structures, housing, entry/re-entry, etc).
• Implement the business database program to create
a “real time” listing of local businesses that have
reopened following a catastrophic event and which
have resources that could assist in the city’s response
and recovery stages.
Texas A&M University at Galveston is home to the newest, largest and most expensive
marine science and policy facility on the Gulf of Mexico. The Ocean and Coastal Studies
Building, which has just recently opened, is a 104,000-square-foot facility representing
$53 million of investment. TAMUG continues working to expand partnerships between
the education institutions, the private sector, and the government.
40
In most instances, community disaster
recovery plans are prioritized toward
housing, infrastructure, social services,
and health and public safety concerns.
Business recovery is often overlooked
or simply not included as a structural
component of disaster planning protocols.
Most expect the business community to
fend for itself.
Financial Resources for Business Recovery
• Continue building the resource base of the Galveston Business Recovery Fund.
• Maintain alliance with Houston-Galveston Area
Council for access to the Regional Revolving Loan
Fund and other programs of assistance.
• Continue to educate local businesses on the requirements of federal loan programs that are made available following a catastrophic event.
Organizational Initiatives
• Develop business communication strategy following
a hurricane (phone calls, texting, website, email database, information dissemination, utility coordination, public relations, etc.).
• Develop contingency plan for office facilities and
operations.
• Develop process for better post hurricane assessment estimates: amount of damage incurred,
number of businesses impacted, status of businesses
re-opening, barriers to re-opening as they are identified, and greater coordination with city for resource
allocation and information sharing.
• Recognize that resources are limited for capacity
building following a catastrophic event.
Conclusion
There is a reason why catastrophic events are termed
“disasters” and not inconveniences. Irrespective of your
level of preparedness or continuity planning, a certain
level of adaptability and flexibility must be a component
of your community’s overall disaster recovery plan.
In most instances, community disaster recovery
plans are prioritized toward housing, infrastructure,
social services, and health and public safety concerns.
Business recovery is often overlooked or simply not included as a structural component of disaster planning
protocols. Most expect the business community to fend
for itself.
Galveston worked to identify financial and technical
assistance resources for the local business community.
Unfortunately, these resources were developed from
scratch and took too much time in bringing them to
fruition. There remain many businesses that have not
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
Photo courtesy of Landry’s
received the needed assistance or who
simply could not survive the devastating
impacts of Hurricane Ike.
Since 2008, over $100 million of
business recovery/business development
resources have been identified and allocated to rebuilding Galveston’s economic
base. The primary hope that remains
in Galveston is two-fold. First, that the
programs and resources that were developed as a result of the experiences of
Hurricane Ike can be shared with other
communities facing similar vulnerabilities of catastrophic events. Second, that
the programs initiated will not only be
replicated in the future but will be refined and improved upon as Galveston
continues to emerge from the economic
impacts of Hurricane Ike.
Landry’s newest development on Galveston Island – an estimated $60 million investment creating
650+ jobs.
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take advantage of IEDC’s Job Center. You can access job
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Questions? Call (202) 223-7800.
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
41
panama canal
“Game Change” Depends on Who Provides the Best
“Playing Fields”
By James T. Edmonds
The U.S. Gulf Coast’s dominant seaport – the Port of
Houston – is one of several U.S. ports developing and
implementing strategies to facilitate whatever changes a
wider canal will bring.
The Barbours Cut Terminal at the Port of Houston Authority opened in the 1970s and
helped make Houston the busiest container port on the Gulf Coast. The port handles nearly
70 percent of all containers moving through the U.S. Gulf of Mexico.
James T. Edmonds
is chairman of the
Port Commission of
the Port of Houston
Authority.
i
t is repeatedly being referred to as a
“game-changer” – an intriguing phraseology
choice, since it suggests an event so significant
that it radically alters course and outcome.
Since no one can predict with any certainty how
completion of the $5.25 billion Panama Canal expansion project will affect trade routes or cargo volume
transiting the U.S. Gulf and Southeast Atlantic, it is
safe to assume that the game could remain the same for
some time.
What could change, however, is how the major
players are defined and which ones will be courageous
enough to invest in the infrastructure necessary to ensure home port advantage.
The Panama Canal – by the numbers
Once completed, with 2014 initially set as the target date, the expansion will double the capacity of the
Canal through construction of a third set of locks that
include:
• Two three-chamber lock complexes – one on the
Atlantic side and another on the Pacific side, including three water-saving basins;
• Excavation of new access channels to the new locks
and the widening of existing navigational channels;
and
• Deepening of the navigation channels and the
elevation of Gatun Lake’s maximum operating level.
Gatun Lake, at one time the world’s largest manmade lake, forms a major part of the Canal.
The project is seen as a boon to the Panamanian
economy. After Cabinet approval, National Assembly
and voter referendum, former Panamanian President
Martin Torrijos predicted in 2007 that the expanded
Canal would thrust Panama into first-world economic
status.
Its economic impact beyond Panama’s borders is a
wild card, however.
In order to better appreciate the variables, one needs
a solid understanding of the constants surrounding the
Panama Canal, its role as a primary maritime shipping
route, leading competitors, and primary drivers of its
expansion.
21st Century Gold Rush?
On some fronts, there is an almost giddy anticipation associated with the Canal’s expansion that one
Port of Houston Prepares for the Challenge
The impending completion of the $5.25 billion Panama Canal expansion project has spawned a tremendous amount of
speculation about the widened channel’s impact – speculation that ranges from ‘revolutionary’ to ‘benign’. This article takes
a look at the pre- present-day and post-completion dynamics surrounding the project with the goal of putting into perspective, the effects the wider canal will have – particularly on Gulf Coast ports such as the Port of Houston.
42
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
could liken to a 21st Century Gold Rush, as if torrents
CGM SA, formed alliances to consolidate trade routes.
of cargo will come rushing through its locks, bringing
By early December, the number of idle container ships
with it unparalleled prosperity to the Gulf and South
worldwide had risen to an 18-month high of 210 ships,
Atlantic.
with a combined carrying capacity of 526,000 twentyfoot-equivalent units (TEU – an industry standard unit
That appears highly unlikely. For one, the decision
of measurement). This glut came at the end of a six-year
to widen the Canal was driven by the Panamanians’ derun in which the size of the world fleet doubled.
sire to remain competitive in a shipping industry that
was trending toward more efficient cargo transport
Another set of estimates – projections of 3 percent
through the use of larger, more fuel-efficient vessels. In
annual growth for 20 years in the container cargo flowother words, the decision was made, primarily, to preing through the Canal – was also predicted by proserve market share.
expansionists. Those projections, if sustained for an
entire generation, mean that there will be a doubling of
That dynamic alone accelerated the competition
the cargo transiting the Canal between 2005 and 2025.
among the Canal’s two primary competitors for shipments from Asia to the U.S. East Coast – the Suez Canal
Unfortunately, the slowdown of the global recession
and the United States Intermodal System connecting
of 2008 and subsequent slow recovery have resulted in
Pacific Coast ports with markets east of the Mississippi
a relatively flat performance involving Gulf Coast conRiver, where roughly 80 percent of U.S. consumers live.
tainer volumes over the past two years. There are going
to have to be some exceptional growth spurts over the
As the movement toward manufacturing post-Pannext 14 years in order to meet the projected estimate.
amax ships (those presently too large to transit the Canal) intensified, so did the attractiveness of these U.S.
Still, it is abundantly clear that all Gulf and South
bookend coastlines. The numbers were already stacked
Atlantic Coast ports planning to benefit from expansion
heavily in favor of the U.S. ports. A 2010 U.S. Departof the Panama Canal must be willing to follow the Panment of Agriculture report
amanians’ example to
entitled “Impact of Panama commit to developing
Still, it is abundantly clear that all Gulf and
Canal Expansion on the
shipping channels with
South Atlantic Coast ports planning to benefit
U.S. Intermodal System”
adequate depth in adfrom expansion of the Panama Canal must be
points out that five seadition to berthing and
ports all located on either
willing to follow the Panamanians’ example to cargo-handling facilicoast – Los Angeles-Long
ties with the strength
commit to developing shipping channels with
Beach, New York-New
and capacity to handle
Jersey,
Seattle-Tacoma,
post-Panamax vessels.
adequate depth in addition to berthing and
Savannah, and Oakland –
Prominent among
cargo-handling facilities with the strength and
handle 70 percent of U.S.
those ports is the Port
capacity to handle post-Panamax vessels.
ship imports. All of these
of Houston – an ecocan handle post-Panamax
ships.
By contrast, the report
goes on to say, the Panama Canal handles only 20 percent of the U.S. imports from China. Ideally, it takes
18.3 days (12.3 days by ship; six additional days by
cross-country rail) to get cargo from China via the U.S.
West Coast.
Since the West Coast is closer, most Asian cargo (75
percent) flows toward those ports. Only 20 percent
flows through the Panama Canal (a longer route at 21.6
days) and the rest flows through the Suez.
Panamanian proponents of the expansion project
estimated that by the end of 2011, 37 percent of the
world’s container ship fleet would be comprised of vessels too large to fit through the Canal. Their fear was
that many of these large ships would be used in routes
that compete with the Canal.
Those estimates were conservative. It turned out
about 45 percent of the world’s container ship fleet
consisted of post-Panamax vessels. At the end of 2011,
due primarily to increasing fleet size and slow demand,
The Port of Houston Authority’s Bayport Container Terminal opened in 2007 and is being
built out in phases. Plans call for the deepening of the Bayport channel from 40 to 45 feet to
six shipping lines led by the world’s second- and thirdaccommodate larger vessels.
largest owners, Mediterranean Shipping Co. and CMA
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
43
Port Authority officials won’t have to wait until the
nomic driver for the Houston region and the state of
expansion project is complete to see whether the larger
Texas for nearly 100 years.
vessels can be handled. Over a three-month span in
Each year, activity at the Port of Houston generates
mid-2011, a total of six post-Panamax ships – each
more than 785,000 statewide jobs, nearly $118 billion
in the 8,100-TEU class and the largest ever to call at
of economic activity, and nearly $4 billion in state and
Gulf Coast ports – called at Bayport Container Termilocal taxes.
nal. Those ships, which sailed from Europe, represent
Additionally, the port annually generates $285 bila class that is destined to be the workhorse of the U.S.
lion in national economic activity, $16.2 billion in tax
Gulf. Presently, the 5,000-TEU container vessels are
revenue nationwide, and
the largest that can transit
1.5 million direct, inthe Panama Canal. PostIn an effort to ensure the smooth, efficient
duced, indirect and rePanamax ships fit into the
lated jobs in the U.S.
flow of intermodal cargo, the Port of Houston 8,000-9,000 TEU class,
In an effort to ensure
while super post-Panamax
Authority – which owns/operates the public
the smooth, efficient flow
vessels can handle from
terminals at the port – has ambitiously
of intermodal cargo, the
12,000 to 18,000 TEUs.
Port of Houston Authorcontributed to the infrastructure of the
While Bayport has
ity – which owns/operates
proven it can successregional supply chain.
the public terminals at the
fully handle the big ships,
port – has ambitiously contributed to the infrastructure
it should be noted that draft restrictions – particularly
of the regional supply chain. It has accomplished this
within the 40-foot Bayport channel – necessitated reby investing tens of millions of dollars into local road
strictions that allowed the post-Panamax vessels to call
and rail projects, spearheading formation of the Gulf
only during daylight hours and under ideal weather
Coast Rail District, as well as the Houston Ship Channel
conditions. It will cost about $150 million to dredge
Security District.
the Bayport channel wide enough (from 350 to 400
However, in addition to its contributions to the local,
feet) and deep enough (from 40 to 45 feet to match the
state, and national economies, the Port Authority’s most
designed depth of the Houston Ship Channel) to safely
daunting challenge could come in preparing its own faaccommodate vessels with a capacity of 8,000 TEU.
cilities and the ship channel it stewards for the changes
If the Port of Houston is to be a serious contender
that lie ahead.
in the race for post-Panamax gold, it must be prepared
The Port Authority’s Barbours Cut and Bayport terto invest more heavily in its infrastructure than it ever
minals dominate container cargo throughput in the
has before and at a time universally regarded as the
U.S. Gulf – handling about 69 percent of the containers
worst for government funding to augment these masmoving through the Gulf and 96 percent of the watersive projects.
borne containers that move through the state of Texas.
Its prominence and geographic location make the Port
Current infrastructure in dire need of
of Houston a likely beneficiary of whatever increased
upgrades
cargo comes via a wider Panama Canal.
This increased investment is necessary because parts
East Asia trade is the fastest-growing market for the
of the current infrastructure are not capable of efficientPort Authority, showing an increase of 250 percent durly handling some of the larger vessels. For example, at
ing the period between 2003 and 2010. West Coast
the Barbours Cut Terminal, existing cranes cannot unSouth America is another key trade round utilizing
load the larger vessels that called Bayport in 2011 bethe Panama Canal, showing a 116-percent total trade
cause the cranes are not tall enough and cannot extend
growth during the same period.
all the way across to reach the containers on the far side.
Port of Houston – Average Container Ship Capacity (TEUs)
All US Ports – Average Container Ship Capacity (TEUs)
3400
4000
3200
3600
3000
2800
3200
2600
2800
2400
2400
2200
2000
2000
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: Lloyd’s Maritime Intelligence Unit via MARAD, Dept. of Transportation
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: Lloyd’s Maritime Intelligence Unit via MARAD, Dept. of Transportation
The capacity of container ships calling Port of Houston Authority docks has been growing in recent years. Several vessels in excess of 8,000 TEUs
have called.
44
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
Port Authority officials have identified $3 billion in
capital improvement needs over the next 15 years, with
the container terminals at Bayport and Barbours Cut as
priorities, in preparation for the larger ships.
The $1.4 billion Bayport Container Terminal, a
state-of-the-art facility that opened in January 2007, is
essentially 50 percent complete. In coming months, the
Port Authority intends to invest $114 million constructing two new berths and installing a gate system using
optical character recognition technology to ensure
smoother, faster flow of commercial vehicles through
the terminal.
In addition, the 35-year-old Barbours Cut Terminal is targeted for $600 million in upgrades, primarily
through reinforcing and expanding its berths to hold
the enormous cranes needed to work the big ships.
Those capital needs echo a sense of urgency. It is
The Port of Houston Authority’s Bayport Container Terminal already is equipped with
expected to take about 18 months to modernize each
cranes to handle the larger vessels that will be calling after the Panama Canal expansion
wharf at Barbours Cut at a cost of $25 million per wharf
is completed.
and about $65 million per wharf to equip it with wharf
cranes and rubber tired gan Depth and ship passEqually critical and costly are the
try cranes. Presently, there
ing restrictions limit the
are six wharves at Barconstruction and maintenance needs
drafts of ships navigating
bours Cut that must be rethe channels and signifirequired
to
keep
the
Houston
Ship
Channel
furbished. These infrastruccantly reduce the amount
ture investments – though
safe and navigable at its authorized depth
of cargo carried per trip,
costly – are necessary and
slow ship movement, and
of
45
feet
and
width
of
530
feet.
The
Port
can reap substantial returns.
increase the cost of both
Authority, working in concert with the
A Port Authority analysis
imports and exports.
involving three scenarios
U.S. Army Corps of Engineers, is the local
Eventually, that is rewas completed in Decemflected in higher costs to
sponsor of the federally owned ship chanber 2011 showing what the
consumers.
nel and is responsible for helping to secure
revenue gains would bring
However, because of
with moderate modification
funding necessary for its maintenance.
silting and shoaling, the
of existing containerized
52-mile-long ship chancargo service.
nel is in need of constant
In the first scenario, simdredging. It is an expensive annual undertaking, but is
ply upgrading a current Asia service from a 5,000-TEU
easily justified when considering the economic benefits
vessel to an 8,000-TEU weekly service vessel would reand volume of cargo that transit this critical waterway.
sult in increased revenue of $9.8 million per year.
Additionally, the challenge can be met if federal funding
policies were changed to better utilize and distribute
The second scenario assumes the addition of a 4,200the taxes collected to fund harbor maintenance.
TEU weekly service vessel to the existing service, and
projects an increase of $13.9 million in annual revenue.
Consider these facts:
A third scenario assumes a combination of the first
• The Corps of Engineers estimates that it costs
two and assumes increased revenue of $23.7 million.
between $40 million and $50 million a year to
maintain the channel at its authorized depth.
Houston Ship Channel’s needs critical
• As a result of several years of underfunding, the
and costly
channel is in such a state of decline that it needed
Equally critical and costly are the construction and
$86 million in 2012 for maintenance dredging
maintenance needs required to keep the Houston Ship
simply to keep it at its designed width and depth.
Channel safe and navigable at its authorized depth of
The federal government allocated slightly over $28
45 feet and width of 530 feet. The Port Authority, workmillion for this critical work.
ing in concert with the U.S. Army Corps of Engineers,
• Each year, the activity along the Houston Ship
is the local sponsor of the federally owned ship channel
Channel generates approximately $127 million in
and is responsible for helping to secure funding necesrevenue for the federal government through the
sary for its maintenance.
Harbor Maintenance Tax. Nationwide, the tax gen-
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
45
Work is under way at the Port of Houston Authority’s Barbours Cut Terminal to strengthen the wharves and equip the terminal with new cranes
to handle the larger vessels traversing the Panama Canal.
erates around $1.4 billion. However, only half of
those funds are appropriated each year for dredging
work.
The Port Authority has been working hard to educate federal legislatures on the local effects of this funding disparity.
There is a proposal in Congress that will go a long
way in addressing this inequity. Bills have been filed in
both the House and Senate that would effectively dedicate the revenues collected through the Harbor Maintenance Tax for their intended purpose – maintaining
U.S. ports and waterways. The proposal was introduced
several years ago, but has gained significant support (at
the time this was written, the U.S. House of Representatives just passed the measure as part of a larger bill
regarding federal transportation projects).
It is imperative that Congress understands and appreciates that the goods and commerce generated by
seaport industries are critical, not just to their local areas, but to the economic health of the state and the nation. Those petroleum products, consumer goods, and
other commodities imported and exported from their
districts are also heavily reliant on adequately maintained ports and waterways.
Houston – a vital gateway to America’s
heartland
Houston ranks as one of the nation’s leading consumption centers with a population growth rate three
times that of the national average and a total population projected to double within the next 20 to 30
years. However, that dynamic alone won’t be enough
to substantially draw increased cargo from Asia. There
46
must be increased capacity in the supply chain and that
comes from increased demand up and down the line,
particularly since the voyage is only one part of the
movement of cargo.
Recognizing this, Port Authority representatives
have been promoting and marketing Houston and
its port more aggressively and expansively than ever
before.
Port of Houston Authority Commissioners in 2011
adopted a vision that included wording stating that the
Port of Houston Authority serves as the maritime gateway to Texas and the heartland of America. Buttressing
that statement is the fact that more than 96 intermodal
trains operate weekly between Houston and the rest of
the country, 16 of which are just between Chicago and
Houston. Four of those are express trains.
Port of Houston Authority Commissioners
in 2011 adopted a vision that included
wording stating that the Port of Houston
Authority serves as the maritime gateway
to Texas and the heartland of America.
Buttressing that statement is the fact that
more than 96 intermodal trains operate
weekly between Houston and the rest
of the country, 16 of which are just
between Chicago and Houston.
Four of those are express trains.
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
Consistent with the Port Authority’s outreach, in
2010, it established representative offices throughout
Asia to promote all-water direct trade between Asia and
Houston through a two-year professional services contract. That agreement effectively positions the Port of
Houston in one of the fastest-growing regions in the
world for cargo shipping. The network establishes a
presence for the Port of Houston and Port Authority
in 100 cities across 15 countries, including Cambodia,
China, Hong Kong, India, Indonesia, Japan, Malaysia,
Myanmar, Philippines, Singapore, South Korea, Sri
Lanka, Taiwan, Thailand, and Vietnam.
Additionally, the Port Authority has formed a marketing collaborative with the ports of Mobile, AL and
Tampa, FL. Called the “Gulf Coast Advantage,” this
initiative promotes the Gulf Coast as the ideal regional
gateway with direct services to Houston’s and Tampa’s
strong consumption bases and Mobile’s thriving manufacturing industry. The Gulf Coast Advantage promotes
the Gulf region as an all-water alternative to the more
expensive West and East Coast port calls.
While it is impossible to nail down now, steps such
as these could well position the Port of Houston as a
primary beneficiary of the expansion of the Panama
Canal as shippers continue to look for efficiencies
in the overall supply chain and consider more cargo
movements through the Gulf Coast. But it will take
time before any conclusions can be drawn.
While it is impossible to nail down now, steps such
as these could well position the Port of Houston as a
primary beneficiary of the expansion of the Panama Canal as shippers continue to look for efficiencies in the
overall supply chain and consider more cargo movements through the Gulf Coast. But it will take time before any conclusions can be drawn.
The Economic Development
Research Partners (EDRP) Program
Designated for Innovative Leaders
in the Economic Development Community
The Economic Development Research Partners (EDRP) Program
Economic Development Research Partners Program membership opens doors to concepts and schemes
that assist economic development professionals in operating at a higher level.
Aims of the EDRP Through the EDRP Program, IEDC is taking its mission to a new level, assisting practitioners to successfully compete in the global economy and increase prosperity for communities at an accelerated pace,
empowering ED professionals to better define their vision and voice.
Methods and Benefits of the EDRP Program The Partners meet 4 times a year, sometimes with
experts in the field, to coordinate activities and focus agendas on pertinent and practical issues. This innovative
program provides an incredible opportunity to strengthen the communities in which we operate and the profession
as a whole.
For further information on membership details, please contact:
Mary Helen Cobb, Director of Membership and Development at
202-942-9460 or [email protected]
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
47
48
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
synergies between
economic development and public policy
By Lane Everett Sloan
t
raditional economic development involves marketing, networking, and
outreach – that is putting the best image forward, knowing the key relocation consultants, and making visits
to key opportunity areas. Certainly this is im-
portant, but in this highly competitive world of attracting new businesses to the community, it is not
sufficient in this day and age. This is particularly true
for business sectors where the community has a distinct advantage that can be further leveraged and
developed.
Houston is known as the “Energy Capital of the
World” with almost half of its economic activity energy
driven. Tulsa, Oklahoma, was once known as the oil
and gas capital; Pittsburgh once the steel capital; Detroit
once the automobile capital; and New York is even facing pressure on retaining its financial capital status. A
region’s core strengths can change without a proactive
strategic initiative to keep abreast with new dynamics.
In this vein, the Energy Collaborative was established
within the Greater Houston Partnership (GHP) in 2005
to “perpetuate Houston as the Energy Capital of the
World.” Through its various committee structures, the
Energy Collaborative Committee developed a Strategic
Plan to fulfill this mission, which includes leveraging
synergies between economic development and public
policy.
GHP is the primary business advocate for the
10-county Houston region with its member companies
accounting for every one in five jobs in the Houston
region.
Economic development often involves attracting
a prospective company when the company has announced intentions to move or start up new operations.
Energy Capital of the World – oil & gas in Houston
Our approach is to seek out energy companies anywhere in the world to move to this region to enhance
that specific energy cluster’s critical mass in developing
premier global capabilities. This process of strategic
doing beyond strategic planning is the fundamental approach of the Energy Collaborative.
Economic Development Evolving to
Match Cluster Strategies
Cluster management is the globally proven vehicle
for achieving synergisms and harnessing them for nationally and globally competitive rates of economic
development. It is inherently rooted in geographic
regions. Cluster management represents a radical
departure from more traditional mechanisms for development – moving away from solution creation in
search of problems and toward creating coordinated
solutions such as technology, workforce, industry
Lane Everett
Sloan is the
co-chair of the Energy Collaborative
Committee. He
also is president of
Sloan Consulting
Services. (http://
www.sloanconsultingservices.
com/ )
Energy Collaborative Committee’s Strategy
Economic developers can’t afford to use the same strategies they’ve always used and expect different results. Instead, everchanging dynamics in business and the economy require creative new responses. One method is to tailor a public advocacy
program based around your community’s core strengths and targeted industry clusters. This article focuses on the 10-county
Houston region’s alliance with legislators, innovators, and educators to advance both the traditional and alternative energy
sectors. Communities also can leverage their existing industry strengths while developing new, complementary ones by embracing a regional approach to job creation and capital investment. In both instances, collaboration can spell success for the
community.
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
49
New York for Houston in 1971. Through the years, the
Houston region has expanded its energy portfolio to
encompass traditional oil and gas as well as alternative
sources of energy including biofuels, wind, solar and
green energy. For example, more than 13.5 percent of
the nation’s total biodiesel production capacity resides
in the Houston region. The EPA recently ranked the
City of Houston as No. 1 purchaser of green energy for
municipalities.
Of the 20 largest U.S. oil and gas companies in the
nation, ten have their headquarters in Houston. There
are more petroleum engineers here than any other place
in the world by far. The local area has one-eighth of the
U.S. refining capacity, and one quarter of the Texas Gulf
From left to right: Gilberto Kassab, Mayor of São Paulo, Brazil meets with
Houston Mayor Annise Parker while Dr. Cotait Neto Alfredo, Secretary for
Coast is included. The region has nearly 40 percent
International Relations of the São Paulo City Hall, follows the conversaof the U.S. petrochemicals manufacturing capacity, and
tion. The Greater Houston Partnership hosted a trade mission to Brazil
Houston controls roughly half of the nation’s oil and gas
led by Mayor Parker. The mission is a prime example of the synergies that
pipelines and is the major center for energy trading.
exist between elected officials and the business community to stimulate job
Oil and gas represents almost two-thirds of the tocreation, capital investment, and trade opportunities.
tal energy consumption
in this country today. It is
supply chains, plus supporting inWhen considering measurement,
fundamentally important
frastructure and services. Today,
it specifically articulates economic too much emphasis has been placed that Houston perpetuate
its global center of gravdevelopment-driven problems that
on economic developers for “not
ity as the premier energy
continuously evolve with market
creating
jobs.”
However,
the
reality
hub. Energy is a core pillar
conditions.
is that economic developers do not of economic security and
Economic development is likenational security. An uncowise evolving to match cluster typically create jobs but facilitate the
ordinated diffusion of this
strategies. Regional planning has
critical mass will spawn a
process
for
existing
businesses
and
involved the use of community pronew center of gravity likely
filing tools and database templates
start-ups to do so. Therefore, the
outside the United States,
to measure community assets versus
economic developer must make sure which would have signifiother communities. Job creation,
cant national implications.
that there are sufficient economic
economic output, and increase in
Thus, the GHP’s Entaxable basis are the most common
development programs in place to
vironment & Energy Polmeasurement tools. When considassist the businesses in achieving
icy Committee, linked to
ering measurement, too much emthe Energy Collaborative
phasis has been placed on economic
their goals.
Committee, developed in
developers for “not creating jobs.”
2009 a balanced energy
However, the reality is that econompolicy
resolution
–
recognizing
the world will need all
ic developers do not typically create jobs but facilitate
the
energy
it
can
produce
over
this next half century.
the process for existing businesses and start-ups to do
The
oil
and
gas
sub-committee
developed
a GHP resso. Therefore, the economic developer must make sure
olution in favor of the Keystone pipeline as a secure
that there are sufficient economic development prosupply of imported oil from Canada to our advantaged
grams in place to assist the businesses in achieving their
refineries here in the Gulf Coast. The Keystone Pipeline
goals. Those types of programs are usually policy-creatSystem is a pipeline system to transport synthetic crude
ed and can be local, regional, statewide, and national in
oil and diluted bitumen (“dilbit”) from the Athabasca
nature. Those policy incentives need to be incorporated
Oil Sands in northeastern Alberta, Canada to multiple
with developing core strengths or clusters. Policy also
destinations in the United States, which include refinermust be pursued that retains the current leadership poies
in Illinois, the Cushing oil distribution hub in Oklasition of dominant sectors.
homa, and proposed connections to refineries along the
Gulf Coast of Texas.
Incorporating Policy Incentives with
Similarly, the Environment & Energy Policy ComDevelopment Core Strengths
mittee sponsored a resolution to end the prolonged
Houston has been dominant in oil and gas since
moratorium on Gulf of Mexico offshore developthe 1970s. Houston’s high concentration of energy exment stemming from the Macondo oil well spill.
pertise and experience has meant a large number of
The Deepwater Horizon oil spill (also referred to as
relocations to the Houston region since Shell Oil left
the BP oil spill, the BP oil disaster, the Gulf of Mexico
50
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
The Energy Collaborative’s biofuels commercialization task
force has evaluated evolving biofuels companies around
the country that would be advantaged to locate in Greater
Houston. Houston already has over 30 biofuel players,
and with its infrastructure, workforce, and supporting
services, it is the natural place with the necessary scale
to lead in commercialization of next generation biofuels
beyond corn based ethanol.
oil spill, and the Macondo blowout) was an oil spill in
the Gulf of Mexico which flowed unabated for three
months in 2010. It is the largest accidental marine oil
spill in the history of the petroleum industry. The spill
stemmed from a sea-floor oil gusher that resulted from
the April 20, 2010, explosion of Deepwater Horizon,
which drilled on the BP-operated Macondo Prospect.
The explosion killed 11 men working on the platform
and injured 17 others.
Providing Leadership in New Energy
Clusters
The world energy landscape is evolving, and Houston must not only keep pace but provide leadership in
new energy clusters that fit the region’s strengths.
The Energy Collaborative formed a cluster development sub-committee that has focused on wind, solar,
biofuels, and smart grid.
The first target was wind, as Texas enacted an RPS
(Renewable Portfolio Standard) in 1999 that resulted in
the state becoming the largest wind electricity producer
in this country. A RPS is a regulation that requires the
increased production of energy from renewable energy
sources, such as wind, solar, biomass, and geothermal.
Since many companies that are part of the wind value chain reside in Houston, the Energy Collaborative
helped develop The Wind Alliance organization. It is
a collection of industrial, academic, and public-sector
entities that collaboratively focus on continuous precompetitive improvement of workforce, infrastructure,
and technology within the wind industry. The joint effort of the GHP and The Wind Alliance was successful
in attracting Vestas to locate its U.S. research offices in
Houston. The Danish Vestas Wind Systems A/S is the
world’s largest manufacturer, seller, installer, and servicer of wind turbines.
Texas has the largest solar potential in the United
States. While the cost of solar power has not been competitive with alternatives, the decline curve suggests it
will reach grid parity as soon as 2015. The view has
been the timing is right to help sponsor an infrastructure supportive of solar developments.
According to the State Energy Conservation Office,
Texas has a virtually unlimited solar energy supply,
ranking first in the nation in solar resource potential,
with high levels of direct solar radiation. West Texas has 75 percent more
direct solar radiation than East Texas,
making it an ideal location for utilityscale concentrating solar power (CSP)
technologies. The energy from sunshine falling on a single acre of land in
West Texas is capable of producing the
energy equivalent of 800 barrels of oil
each year.
GHP has supported inclusion of
tier 2 technologies (non-wind renewables) in the Texas RPS in 2009 and
again in 2010. The issue is currently under review by
the Energy and Environment Advisory Committee for
support in 2012.
GHP’s energy/environment policy program focuses
on advocacy on regulatory and policy issues.
Examples of recent issues include:
• Support for construction of the Keystone XL
pipeline,
• Support of Gulf Coast restoration through penalties and fines collected as a result of the Deepwater
Horizon oil spill,
• Opposition to the 2010-2011 offshore drilling
moratorium, and
• Support for carbon capture and storage projects.
The Energy Collaborative’s biofuels commercialization task force has evaluated evolving biofuels companies around the country that would be advantaged
to locate in Greater Houston. Houston already has
over 30 biofuel players, and with its infrastructure,
workforce, and supporting services, it is the natural
place with the necessary scale to lead in commercialization of next generation biofuels beyond corn based
ethanol. The task force was instrumental in developing a web page showing Houston’s capabilities (http://
www.houstonenergyfuture.com/energy-collaborative/
biofuels-commercialization-task-force/). It is now looking at policy positions for the GHP to support. These
would facilitate creating Houston’s critical mass for next
University of Houston Energy Research Park
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
51
Collaboration Creates Prosperity for the Future
By Kimberley R. Baker, Director, Marketing and Media Relations, Greater Houston Partnership
In addition to the lessons of collaboration as illustrated
through GHP’s Energy Collaborative and other committees,
how can economic development professionals benefit from the
Houston story?
The Houston region often teams up with the state in hosting
events for site consultants and C-suite executives, joint marketing and media efforts, participation at important industry trade
shows, and even in global outreach through trade missions.
The Houston region learned many lessons from the chal Texas voters have put in place specific policies and incentives
lenges of the energy industry downturn in the 1980s. During
that enable state and city economic development organizations
that time, the region’s primary economic base was oil and gas
to represent and promote doing business here. Houston has en– more than 50 percent was
terprise zones and tax abatement,
based upon that one industry.
for example. While other comThe region’s advice to other communities
In the 1980s, the region also
munities in Texas utilize a sales tax
would be to diversify your economy by not for economic development that
experienced overbuilding in
the residential and commercial
exists outside the state budget and
investing so heavily into one industry.
properties.
must be voted on by each local
Economic development professionals
community before it can be put in
The biggest lesson learned
can work with elected officials and
place. It’s designed specifically to
was that the Houston region
re-evaluated its business model
local businesses to look for opportunities – help fund local business start-ups
and attract new business to the
and diversified its economic
even if these opportunities are not tied
community.
base to encompass a multitude
to their traditional industry strengths –
of industries such as aero
Two other state programs
space and aviation, advanced
that aid businesses in Texas are the
that will position their community well
manufacturing, information
Texas Enterprise Fund (TEF) and the
for the future.
technology, biotechnology, and
Texas Emerging Technology Fund
life sciences. This is one of the
(ETF). TEF provides the state’s
primary reasons why the Housleaders with a “deal closing fund”
ton region was one of the last major metros to enter the most
that has the flexibility and financial resources to help strengthen
recent national and global recession. Houston was the first
the state’s economy. The fund can be used for a variety of
major metro to regain almost all – 99.8 percent – of the jobs lost
economic development projects including infrastructure and
during the recession.
community development, job training programs, and business
incentives. ETF commercialization awards provide selected, early The region’s advice to other communities would be to diverstage investments in new, technology-based, private entrepresify your economy by not investing so heavily into one industry.
neurial entities that collaborate with public or private institutions
Economic development professionals can work with elected
of higher education in Texas, and which, if successful, may
officials and local businesses to look for opportunities – even
provide significant economic benefit to the state.
if these opportunities are not tied to their traditional industry
strengths – that will position their community well for the
future.
One of the challenges of any community is to remain relevant for job creation and capital investment opportunities.
A vital ingredient in remaining relevant is to enlist the aid
of elected officials and business advocates in telling your story.
These officials not only can help shore up incentives to attract
jobs and capital investment, but they also are able to secure
funding and resources that assist with items including infrastructure improvement, workforce development, and even marketing
to position the community as a preferred location.
GHP advocates embracing a regional approach to economic
development. Communities can leverage their resources by
not just thinking in terms of the competition next door but by
broadening their scope to link to local companies and entities
that do business globally.
Communities should also build alliances with their state economic development office. Texas is quite often noted as the No.
1 state in the U.S. for business combined with its designation
as our nation’s top exporter, the state embraces a pro-business
environment.
52
If a particular business is on the fence about whether or not
to move to Texas or to begin a project in Texas, the state can use
incentives from programs like the TEF or ETF to make the move
more attractive.
The story of Texas and Houston can be replicated across the
U.S. and internationally. While the incentives used to attract or
retain jobs or for capital investments may differ, the approach of
teaming up with your state, your region, or businesses in your
communities can be replicated for success.
As economic developers, it is essential that alliances and
synergies be explored to ensure success for the future. Opportunities can arise in unexpected places, but communities must
be ready to meet the challenge.
The future for Houston looks bright as does the future for
doing business here. A solid foundation has been laid in part
because of hard lessons learned during challenging times but
primarily because of the synergies that have been forged between economic development and public advocacy.
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
generation biofuels to make a difference in the transport fuel equation. The task force’s input will be coordinated with the renewables and efficiency policy
subcommittee.
The Energy Collaborative’s smart grid task force
has championed the formation of SURGE Accelerator.
Located in the Energy Capital of the World, SURGE
Accelerator is looking for entrepreneurs solving the
world’s energy problems using software. Similarly, the
GHP collaborates with the Houston Technology Center
(HTC), whose CEO, Walter Ulrich, is the co-chairman
of the cluster development sub-committee. About half
the HTC’s entrepreneurial clients are energy focused,
which matches the economic impact of energy on the
Greater Houston area. The launching of the HTC was
facilitated by support from the City of Houston. This
is a case where local policy initiatives support organic
economic development within the community.
HTC client companies include:
• Rebellion Photonics, Inc., a company that has developed an advanced optics technology that allows
users to decipher an object’s chemical composition
while simultaneously taking a traditional visible
picture or video.
• Nortalis Corporation, a company that connects
ocean carriers, brokers, shippers, and other logistics
professionals with a web-based service that is
designed to solve communication problems that
plague the ocean freight industry.
•Houston Medical Robotics, Inc., a company that is
developing and commercializing revolutionary image guided, hand-held medical robotics for use in
various therapeutic applications.
Houston Mayor Annise Parker visits with Odebrecht corporate executives during
a mission to Rio de Janeiro, Brazil in 2012.
marily focusing on grades K-16. One of the critical
needs of a world-class competitive city is to have several Tier One research universities. Tier One is a designation for colleges and universities that are ranked
and ordered by combinations of factors. In addition to
entire institutions, specific programs, departments, and
schools are ranked. Rankings are conducted by magazines, newspapers, governments, and academics.
Rice University is Tier One as is Texas A&M within
relative short driving distance. But with the University
of Houston as the major public university within the
city, launching UH to Tier One status has been an important agenda item for the GHP in lobbying for the
state’s Tier One funding initiative. This is particularly
significant for developing Houston’s energy clusters as
Proactive Economic Development
a major strategic thrust of UH is to become the “energy
Proactive economic development of a cluster also
university.” The Carnegie Foundation classifies UH as a
includes insuring the necessary workforce is available
top-tier research university.
within the Greater Houston area to attract and retain
The Energy Collaborative marketing sub-committee
energy companies. Both traditional and next generapursues brand positioning through publications and
tion energy workforce needs are significant, particuHoustonEnergyFuture.com website. The website delarly encouraging our youth to pursue STEM (Science,
veloped by Opportunity HoustonSM outlines the Energy
Technology, Engineering and Mathematics) educational
Collaborative activities that include for example the
opportunities to support the technical demands of the
specific energy policy resolutions. However, the Energy
energy industry. The Energy Collaborative’s workforce
Collaborative feels there needs to be a stronger marketdevelopment sub-committee has been very active priing outreach and is seeking media features on
Proactive economic development of a cluster also includes insuring
key economic and public
policy energy issues to
the necessary workforce is available within the Greater Houston area
support the healthy deto attract and retain energy companies. Both traditional and next
velopment of the energy
industry in the Greater
generation energy workforce needs are significant, particularly
Houston area.
encouraging our youth to pursue STEM (Science, Technology,
The Opportunity HousEngineering and Mathematics) educational opportunities to support
tonSM lead generation and
marketing program was
the technical demands of the energy industry.
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
53
launched by the Greater Houston
Partnership in 2006. The program
The Energy Collaborative provides a vehicle for the Houston
will help create 600,000 regional
region to leverage economic development activities
jobs, attract $60 billion in capital investment, and expand foreign trade
and policy initiatives. The cohesive strategy also integrates
by $120 billion for the greater Housthe other necessary components of workforce development
ton area by the end of 2015.
and proactive market development. As a highly
Opportunity HoustonSM targets macollaborative activity within the GHP, synergistic
jor economic sectors like aviation
and aerospace, corporate headquarresults happen.
ters, distribution and logistics, advanced manufacturing, energy and
petrochemical, medical and biotech The Energy Collaborative provides a vehicle for the
nology, information technology, and nanotechnology.
Houston region to leverage economic development ac The Environment & Energy Policy Committee has
tivities and policy initiatives. The cohesive strategy also
also worked within the Greater Houston area to imintegrates the other necessary components of workforce
prove our air quality (through public awareness and
development and proactive market development. As a
public advocacy). This cooperative endeavor has prohighly collaborative activity within the GHP, synergistic
duced significant improvement in Houston’s air qualresults happen.
ity. For example, the one hour daily maximum ozone
concentration has decreased 44 percent from 1987 to
2010. This healthy community approach to fulfilling
regulatory requirements provides an attractive business environment for energy companies to relocate. Of
course, there are many more GHP initiatives to enhance
the quality of life in Houston, making it one of the best
places to live and work in the country.
Hiring?
Seek a Certified Economic Developer (CEcD).
As an employer, you can be assured that the Certified Economic Developers you hire will be wellconnected and well-informed of innovative strategies and industry trends. Select your next
employee from among the best candidates – add “CEcD preferred” to your next job posting!
Working on staff development? Encourage your staff to become Certified Economic Developers.
You have talented employees that you want to retain. By supporting
your staff in obtaining the Certified Economic Developer designation,
you provide an opportunity for them to achieve recognition
for their proficiency in economic development.
For more information contact Kobi Enwemnwa at
[email protected] or (202) 942-9483
or visit our website www.iedconline.org
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Economic Development Journal / Spring 2012 / Volume 11 / Number 2
Economic Development Journal / Spring 2012 / Volume 11 / Number 2
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