Dallas Dangling a Carrot to Lure More Companies

The Dallas/Fort Worth metropolitan area, now the largest in Texas and the eighth largest nationwide, is aggressively seeking to expand further by luring corporate headquarters.

In just the past month, Motel 6, the nation’s largest chain of company-owned economy motels, and Heritage Media Corp., an owner of radio and television stations, have announced plans to relocate to Dallas.

But the city’s biggest catch came earlier in the summer when J. C. Penney Co., the nation’s third-largest retailer, announced it was relocating to Dallas from New York City. In terms of annual revenue, Penney, with 1986 sales of $14.7 billion, will be the largest company based in Texas.

Two professors at Southern Methodist University, Harold T. Gross and Bernard L. Weinstein, have gone so far as to argue that the relocation of Penney “may presage the end of Dallas’ ‘psychological recession’.”

Influx of Jobs

“Until very recently, there was very little economic strategy in Texas,” said Guy Streatfeild, vice president at The Pathfinders, a Dallas-based economic development firm. “No one felt the need for one. Industry was coming here because it was Texas,” he added.

However, with the downturn in the Texas economy, individual cities and the state have begun to devote more resources to economic development. The Texas economy went into recession when oil prices fell from $30 a barrel in late 1985 to less than $10 in mid-1986.

Although Dallas and Fort Worth are about 35 miles apart and have separate city governments, they are increasingly considered one large urban entity, the so-called Dallas/Fort Worth Metroplex. With a population of 3.66 million, the Metroplex is slightly bigger than Houston, with 3.63 million, according to the most recent U.S. survey.

The Penney move will bring an estimated 2,000 jobs to the area. In addition, the company has bought 429 acres in north Dallas on which to build its new headquarters, providing a substantial boost to Dallas’ hurting construction industry.

In the meantime, with construction slated to begin in 1989 and completion in 1992, Penney is negotiating to lease about 1 million square feet of temporary office space--another boon to a city with an office occupancy rate of about 65% (90% is considered healthy).

In addition, P. Scott Eubanks, president of the Dallas Partnership, said the relocation of a giant company like Penney not only will bring additional relocations in terms of suppliers, but also “provide a stamp of approval on Dallas.

“It’s a tremendous endorsement in the market place,” he said.

The Partnership, an economic development organization affiliated with the Dallas Chamber of Commerce, was set up and funded last year by local businesses concerned about the effect of the recent downturn in the Texas economy.

Its basic job is to sell Dallas to corporations who might be thinking of setting up regional manufacturing plants, storage or shipping centers or even relocating their entire operations, as in the case of Penney.

Eubanks said Dallas’ main competitor was Houston, with Atlanta a close second, adding that the business of economic development was highly competitive.

Incentives as Lure

“I hate to lose,” he said when asked whether Texas cities compete among themselves. “We’re not in business to lose to other communities,” he added, although he conceded that losing to Houston still meant the contract stayed in Texas.

While much of the corporate wooing involves providing basic information about the community, such as schools and cultural facilities, it also involves negotiating tax breaks and other incentives to lure the companies.

Dallas development groups have often met with unidentified representatives of unidentified corporations to explain the benefits of the area. The anonymity is requested so that employees do not hear rumors about a contemplated move.

Eubanks said he had worked with Penney “without knowing who they were” by providing audio visual information on issues like the school system, taxing and transportation.

“Most corporations do it undercover,” said Ray Kuchling, Economic Development Manager for the City of Dallas, who said he had often chaired discussions with individuals identified only as: “Mr. A, Mr. B, Mr. C and Mr. D representing company X.

“They don’t want to tell most of their staff (about a possible relocation),” he said. “It doesn’t help productivity.”