HARLINGEN — You might refer to them as “sweeteners.”
Job creation grants are common tools used by local economic development officials to reward companies that decide to locate in their communities by doling out money for each new job created.
The Harlingen Economic Development Corp. last year budgeted nearly a million dollars to a half-dozen companies in anticipation they would meet the job creation goals to which they agreed.
Some of that money has already been dispersed to the companies as an advance. The deal is, as they hire more workers, they eventually “earn back” the grant funding on a money-per-hire ratio set in the agreement. But this year, many of these employers came up short.
In fact, in budget workshops this month aimed at crafting a new HEDC budget for fiscal year 2017-18, several of the city’s largest and most high-profile employers did not meet hiring goals.
Qualfon, the call center, back office and business outsourcing firm, was allocated $250,000 in the HEDC’s 2016-17 budget.
It received nothing, and according to a proposed HEDC budget for 2017-18 which zeroes out any money for Qualfon, things aren’t looking any better.
Qualfon’s original incentive package was a total of $700,000 for creation of up to 1,300 jobs over five years.
“The way it was supposed to start out, it was $200,000 up front for the creation of 200 jobs, so it’s a thousand dollars per job, which in the economic development world is very inexpensive,” said Raudel Garza, manager and chief executive officer for the Harlingen economic agency.
“I know cities that are offering up to $10,000 per job,” he added.
Qualfon did not respond to inquiries for this story.
It’s not just Qualfon
Other companies in the city also fell short of their job creation agreement goals.
United Launch Alliance, the space company, failed to meet its numbers, which was hardly a surprise after the layoff of 43 employees this summer to reduce staffing to about 75.
ULA was supposed to receive $350,000 for job creation in FY 16-17, but was awarded just $150,000. That latter sum will be available to them in FY 17-18 if hiring improves, at least according to the HEDC’s draft budget.
ULA did not return an email seeking comment for this story.
Other companies, like Fox Valley Molding and Texas State Rentals each earned about half of the total budgeted to them for job creation, $21,083 and $17,500 respectively.
Strategic Behavioral Health, which opened a new psychiatric treatment facility in the city one year ago, received all $100,000 for hitting its hiring goals and will be eligible for that same amount next year.
SpaceX, the rival space launch company, was not awarded any funding for job creation, although it is on the budget for this year for $150,000.
Against the economic grain
The inability of some companies to reach employment goals is at odds with the rest of the economy of the City of Harlingen. Residential housing permits are up, and sales tax reimbursements to the city have been strong month after month, with the city up 3.81 percent in sales tax revenues over last year.
“It’s always a concern when incentive recipients don’t meet their goals, but that is why the incentives are performance-based,” Mayor Chris Boswell said via e-mail.
“These companies are responsible for generating enough business to support the employment targets to earn the incentive,” he added. “In the case of (Qualfon and ULA), their business comes from outside of our region and from the federal government.
“That’s not as reflective of what’s happening in the local economy,” the mayor said.
Changes at Qualfon
Garza said Qualfon appeared to be doing well in its new Harlingen location, with employment at one time more than 300 staffers. He said they were well on the way to meeting the $200,000 advance they received, but in the second and third years, hiring practices changed.
“For whatever reason, their business model changed, or their customer preferences changed, and they had to cut back,” he said. “Like any other company, they cut back and let go of some folks.”
Garza said he doesn’t know what the staffing levels at Qualfon are today.
So far, Qualfon has about $53,000 outstanding in its agreement with the HEDC.
“They’ll earn the credits by creating at least 200 jobs and they’re about halfway there right now,” Garza said. “They’ve got some new clients, they’re starting to hire people again, and they’re starting to train people again.”
Another incentive Qualfon has is the company’s investment in a 40,000-square-foot office here that remains underutilized.
“They’ve invested a lot of money in that square footage, and they need to maximize the use of that space,” he added. “Otherwise they’re actually not getting the potential return, right?”
As for ULA, which has seen several companies rise quickly as competitors in the space launch business, including SpaceX, Garza said he and his staff met with the company’s CEO, Tory Bruno, and will continue to try to ascertain the company’s direction.
“It is not the ideal situation to see these companies cut back on their employees,” Garza said. “But if they don’t meet their goals, then they’re not going to earn the money that’s set aside for them.”
Mayor Boswell said the inability of some companies to live up to their hiring agreements has been offset in Harlingen by increased hiring in the support service industry and by other manufacturers.
“And we know from past experience that sometimes the work they have slacks off and also can increase — their workload can be cyclical,” the mayor said. “I’m optimistic that so long as they stay here, their workload will increase in the future and they will hire more people.”