In January, Thomas Hook, chief executive officer of Greatbatch (GB), was looking to move his growing medical device company from Buffalo to a place with warmer winters and lower taxes. He was all but settled on Florida when officials from Frisco, a city north of Dallas, cold-called to pitch the virtues of Texas. One conversation in particular helped close the deal. Texas Governor Rick Perry phoned to tell Hook how much he wanted Greatbatch to call Texas home. “He reached out directly,” says Chris Knospe, Greatbatch’s head of government relations. “It’s nice to be wanted.” In May the 3,300-employee company announced its move to Frisco.
The last memory most Americans have of Perry is his exit from the 2012 presidential race after forgetting during a debate one of the three federal agencies he’d eliminate if elected. (“Oops,” he said in an understatement.) On July 8, Perry announced he won’t seek reelection in 2014, ending the longest current tenure of any U.S. governor. Whatever his shortcomings as a presidential candidate, Perry’s Texas record isn’t easily reduced to caricature. The state had a less bruising recession than the rest of the U.S., and even his most unforgiving critics concede there’s one very visible part of the job he excels at: selling Texas as the best place in the nation to do business.
“Rick Perry gets it,” says site selector Dennis Cuneo, who helps companies choose where to build new factories and offices. In the past two years alone, Google (GOOG), Apple (AAPL), General Motors (GM), State Farm, and Visa (V) have opened offices or plants in Texas. Perry often closes these deals himself. This year, Site Selection magazine awarded Perry its Governor’s Cup for the fourth year. (It’s a real cup, and for one photo shoot, at least, Perry had it on his desk.) The cup stays with the state that attracted the most capital investment in the last year.
Perry admits he started out as a terrible pitchman. In 2001, Boeing (BA) announced it would move its Seattle headquarters and was considering Dallas. On the job for only five months, Perry lost the prize to Chicago’s more aggressive offer. “I gathered my staff up,” Perry recalls. “I said, ‘We really suck at this.’ ”
He decided to get good at it. First, Perry persuaded the Texas legislature to place the state’s economic development agency within the governor’s office. Then he started weekly meetings to identify companies to pitch and seduce. He formed the Texas Enterprise Fund—referred to internally as the “deal-closing fund”—a cash reserve that has distributed close to $500 million among 106 companies since 2004. Often it’s used to offer companies a bonus for each job they bring to the state. Perry says it helps that he has an easy product to sell. Texas has no personal income tax, limits awards in lawsuits, and is famously skeptical of regulation. Aaron Demerson, who’s run economic development on and off for the Perry administration, describes the various efforts to attract business as building a “strike force capacity.”
In 2003, Toyota (TM) was looking for a place to build a new plant and was on the verge of committing to Arkansas. Perry got hold of land near San Antonio from a family that had held the title since Texas belonged to Spain, and convinced two rail companies to run spurs to the site. “When I first looked at [the land],” says Cuneo, who worked on the deal, “there were some wild hogs on it.” Toyota chose Texas. In 2008, after an unsolicited call from Perry, Toyota also decided to move its Tacoma production to the same plant.
Many governors focus their charms on the CEOs of large companies actively considering a relocation. Perry calls everyone—even CEOs who aren’t contemplating a move. “I call John Chambers, CEO of Cisco (CSCO)—I call John often and ask him to consider,” says Perry. “I talk to California technology chairs, CEOs, CFOs, on a fairly regular basis.” In January golfer Phil Mickelson publicly mused about leaving California’s taxes behind. “I called Phil,” says Perry. “I said I just want you to know I would love to have you in Texas.”
Texas also runs ads in other states urging companies to move. “It’s brazen, I’ll give him that,” says Greg LeRoy, who runs Good Jobs First, a group in Washington that tracks money states give to businesses. But LeRoy argues the time and money spent luring companies to the state is largely wasted. Texas has seen a net inflow of 80,000 jobs between 2001 and 2010, not much in an 11 million-job economy. Leroy describes the zero-sum game of moving jobs among states as “job redistribution.” States get bragging rights, but the U.S. economy doesn’t see any new net growth.
Governors don’t see it that way. The number of new plants in the U.S. has dropped steadily since the late 1990s. States are competing with each other—and with other countries—for those that remain. Republican Bobby Jindal of Louisiana has started a Texas-style business recruitment program. Last year, Gavin Newsom, California’s Democratic Lieutenant Governor—and Perry’s political opposite in every possible way—spent a couple of hours alone with Perry’s head of economic development.
Replacing Perry’s salesmanship won’t be easy. In 2012, after speaking at a development conference in Italy, he took a side trip to look at cars and meet with Luca Cordero di Montezemolo, chairman of Ferrari (F:IM). “They have a really upscale beautiful little coupe. It’s called the California,” says Perry. “I call him, I said, Luca, I’m completely biased, but the brand that has the most cachet for the future is not California, it’s Texas. You should sit down with your marketing folks.” The chairman of Ferrari, says Perry, thought that was an interesting observation.