GOvERNOR GREG ABBOTT

April 4, 2018

The Honorable Joe Straus

Speaker of the Texas House of Representatives
P.O. Box 2910
Austin, Texas 7876$

Dear Speaker Straus:

Thank you for your recent letter about the Texas Enterprise Fund (TEF) and the geographic
diversity and competitiveness of its applicants.

As you noted, since taking office in January 2015, I have implemented a number of measures to
improve the transparency and accountability of TEF. In addition to fully implementing the
recommendations of the 2014 State Auditor’s Office audit, my office has also proactively
managed existing contracts, resulting in the return of more than $50 million to TEF based on
award performance. We have also strengthened the TEF grant contract for new awards to ensure
companies fulfill required job creation commitments.

As you are likely aware, TEF helped close the deal on 27 projects from 2015—20 17 that
committed to over $820 million in new capital investments in Texas and more than 16,000 new
direct jobs all across the state. TEF also serves as a jobs multiplier, supporting thousands more
indirect jobs at existing local and small businesses in those communities. The $70 million of
TEF funds invested in job creation over the last three years also helped close the deal on six
corporate headquarters relocations to Texas.

In your letter, you expressed your perception that an inordinate percentage of those TEF awards
are concentrated in the North Texas region, which you believe indicates a lack of geographic
diversity in TEF awards. However, since 2015 only 57 percent of applications received from the
DFW region were extended TEF award offers. Statewide, the average approval rate is 53
percent. The region of the state with the highest approval rate since 2015 is San Antonio, with a
70 percent approval rate, followed by the 64 percent approval rate for non-metropolitan and rural
areas.

During my tenure as Governor, I have had the opportunity to consider more than 85 TEF
applications from across the state. This review process encompasses a number of data points
related to the business and program requirements, but it does not include the geographic location

PosT OFFICE Box 1242$ AUsTIN, TEXAS 78711 512-463-2000 (VOICE) DIAL 7-1-1 FoR RELAY SERvIcEs
The Honorable Joe Straus
April 4, 2018
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or the legislative district in which the business chooses to locate. We accept applications from
all eligible businesses; neither I nor my staff advocate for one Texas community over another.
Additionally, we do not allow political calculations to influence an award selection process
focused on business success and job creation. As a result of this comprehensive due diligence
for each application, only 53 percent of those applicants have been extended TEF award offers.

Of course, the due diligence performed by my office is only the beginning of the process.
Statute requires the Governor, Lieutenant Governor and Speaker of the Texas House of
Representatives to unanimously agree to grant an award. Of the nearly 50 projects I have
submitted for your approval during my time as Governor (some of which have not yet been
announced), you have only withheld your approval on three projects, leading me to believe your
assessment of each of those projects led you to the same conclusion I reached: the applicant
represented a successful opportunity to create additional jobs for Texans.

Your letter also mentions your concerns with awarding TEF grants to companies seeking to
significantly expand already-existing operations in Texas. Nearly every Fortune 100 company
has a presence in Texas. Indeed, an existing nexus in Texas is the driver for the many corporate
headquarters relocations we have seen recently. However, a TEF award will only be made for
new jobs created and new capital investment where a single Texas site is competing with another
viable out-of-state option, and we closely monitor the performance of every grant contract.

We continue to see the intended effects of the deal-closing power of TEF. For example, a $1
million dollar TEF award offer to Oracle in 2013 helped close the deal on the company’s $5.3
million investment and commitment to create 200 new jobs in Austin. Less than five years later
without any additional incentives from the state— Oracle is opening a new Austin campus,
spending an estimated $300 million and planning to create 2,600 new jobs. That is the additional
return on investment from the first TEF grant.

I appreciate your taking the time to share your concerns regarding TEF. I have stated repeatedly
that I view this program as a critical tool in our ability to continue to grow the Texas economy
and to grow jobs for Texans all across this great state, and I will work to ensure future
Legislatures continue to stipport this critical economic development program.

Sincerely,

Greg Ab ott
Governor

cc: The Honorable Dan Patrick

Members of the Texas Senate
Members of the Texas House of Representatives