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June/July 2009

MAY REVENUE (IN MILLIONS): SALES TAX: $1,778.6 OIL PRODUCTION: $57.1 NATURAL GAS: $24.2
MOTOR FUELS: $250.9 MOTOR VEHICLE SALES: $185.7 TOBACCO: $111.5

Around Texas

  • Employment in Texas’ clean energy sector grew twice as fast as overall jobs between 1998 and 2007, according to a new study released by the Pew Charitable Trusts.
  • Dallas-based Dean Foods has agreed to purchase the Belgium-based soy beverage company Alpro for about $455 million.
  • Software company Tyler Technologies Inc. is building a new Lubbock facility that is expected to create more than 100 high-tech jobs.
  • Standard Renewable Energy, a Houston firm selling solar and wind energy equipment and related products and services, has announced plans to open a new office in San Antonio.
Corporate Giants

Big Names Dominate Texas Business

by Michael Castellon

Across the nation, state and local government officials strive to create business landscapes that appeal to A-list companies in hopes of attracting jobs and new opportunities – factors that contribute greatly to the economic health and prosperity of the citizenry. Competition for the big players, needless to say, is stiff.

Texas has already set the bar for attracting the corporate elite. More Fortune 500 companies are headquartered in Texas than in any other state, with 64 companies in 2009, up from 58 in 2008.

Staying Power

The largest corporations headquartered in Texas have deep roots. The top five Fortune 500 companies based here have at least a 17-year history in the state.

Marathon Oil is based in Texas, as are AT&T, Dell, Sysco, J.C. Penney, Exxon Mobil, Blockbuster and Neiman Marcus.

“The presence of so many high-profile and successful corporations in Texas is an indicator of the strong business climate in our state,” says Texas Comptroller Susan Combs. “These companies are a critical component of our economy and are one of the primary reasons we’re so resilient. For example, Texas added 1.2 million jobs between 2004 and 2008. More than 70 percent of job growth in the U.S. in 2008 happened in Texas.”

Why Texas Works

Michael Brandl, a senior lecturer at the University of Texas at Austin and an expert in the relationship between public policies and economic growth, says that while the mantra of “lower taxes, less regulation” does explain the state’s attractiveness to some degree, it is important to look beyond that and examine smart and efficient taxes and regulations.

“We hear it’s simply lower taxes and regulation,” he says. “But in Texas, it’s more than that. We have regulations, but we have fair and just regulations, unlike many states. Our tax system is more efficient and less susceptible to political manipulations. For many of our programs, it’s ‘you use it and you pay for it.’ It’s win-win.”

Brandl uses the newly developed Katy Toll Road as an example.

Top Five Fortune 500 Companies Based in Texas

CorporationFortune 500 RankLocationYear Headquartered
in Texas
Exxon Mobil1Irving1990
Conoco Phillips4Houston1950
AT&T8Dallas1992
Valero Energy10San Antonio1982
Marathon Oil23Houston1990

Source: 2009 Fortune 500

“If commuters want to get through traffic faster, they have to pay for it, and the road is financed that way rather than with an income tax where everyone pays for it,” he says. “And if you can’t afford it, you can drive in the free lanes. Much of our tax system has been established the same way, and that’s conducive to corporate growth.”

Flying Right

Airlines have an especially important presence in Texas. Continental is based in Houston; Southwest Airlines is based in Dallas; and American Airlines' parent company, AMR, is based in Fort Worth.

“Texas has been a big part of our success,” says Kevin Cox, vice president of state and community affairs for American. “We have 25,000 employees in Texas. With the educational level and quality of work force here, we find it pretty easy to attract quality people. These are often high-paying jobs, so one begets the other.”

American moved its headquarters from New York City to Fort Worth in 1979. Since then, the company has had a tremendous impact on the state’s economy, contributing more than $33 billion in 2008.

The company’s economic impact on the state is massive. The AMR system, which also includes American Eagle, earned nearly $24 billion in revenue in 2008. A newly announced daily flight from DFW to Madrid alone is expected to generate $130 million annually in the North Texas economy, airline officials estimate.

A Natural Fit

Texas is also attractive to employees. The absence of a state income tax lures relocating workers, especially during economic downturns. A robust work force and diverse and specialized academic programs give companies a leg up.

That’s a point stressed by Jerry Howard, senior vice president of corporate affairs for the Marathon Oil Corporation.

Jerry Howard, Senior Vice President of Corporate Affairs, Marathon Oil Corporation

Photo courtesy of Marathon Oil Corporation

In the first quarter of 2009, Marathon, which employs nearly 2,000 people in Texas alone, reported a net income of $282 million. In 2008, the company paid $39 million in taxes to the state, as well as $130 million in royalties. Marathon relocated its headquarters from Ohio to Houston nearly 20 years ago.

“We view Texas as a business-friendly state that has a lot going for it in terms of pro-growth strategies and a regulatory system that isn’t as burdensome as many other states,” he says.

Global giants like Marathon depend on attracting highly skilled, highly educated workers from around the world.

“Our employees find that housing is incredibly affordable, and health care here, especially in Houston, is second to none,” Howard says. “There are a lot of cultural and sporting activities and other quality-of-life [advantages], and these are things that potential employees favor. I recently learned that 90 languages are spoken in Houston, so the diversity here is incredible. When you’re a global company, things like that matter.”

Corporate Responsibility

UT’s Brandl says for Texas corporations to thrive, business leaders and state officials need to continue supporting initiatives that are not only conducive to profitable business, but also improve public services and infrastructure.

Did You Know?

Fourteen of Fortune’s 100 Best Companies to Work For in 2009 are based in Texas, second only to California, home to 15.

“Corporations are beginning to understand that if public services suffer, they’re going to be affected negatively,” he says. “When schools are underfunded, the result is lower income levels, which affects consumer bases and promotes an unskilled work force. I’d like to see business leaders push for improved public services as much as they push for lower taxes.”

This is a sentiment echoed by Marathon’s Jerry Howard.

“We realize we need to have a positive impact in the communities in which we operate,” he says. “Health, education and environmental quality are major factors in our success. I think that philosophy is pervasive throughout our company.”

Last year, the company donated $16.5 million to charity, and employees donated an additional $6 million. The company has been a major sponsor of the Susan G. Komen Race for the Cure since 2005, and is active in a number of Adopt-A-School programs.

The Downturn and Beyond

Tightening credit markets and reduced consumer confidence have taken a toll on companies all over the world.

Kevin Cox,
Vice President of State and Community Affairs,
American Airlines

Photo courtesy of American Airlines

“We’re continuing to watch the economic situation,” says American Airlines’ Kevin Cox. “Obviously, there are a number of challenges, from the volatility of the cost of jet fuel to the recession and tightening of the capital markets. Having said that, we’re doing things that will help our outlook. We’re cutting costs, reducing capacity and reinvesting for the long-term. We’re very good at working through challenges that might push other companies to the wayside.”

Marathon Oil, as well as the entire energy industry, is keeping a close eye not only on the economic downturn but also on federal climate change legislation that could impose more than $30 billion in additional taxes directly on the industry.

“With respect to proposed legislation, a key factor to consider is that the reduction of emissions is a global issue that requires a global solution,” Howard says. “Any solution that doesn’t incorporate commitments from other countries is doomed to failure and can result in a major competitive disadvantage for U.S. and Texas companies.” FN

See Texas Ahead for a breakdown of companies in Texas by industry, or for site location tools and data.

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