McAllen still vying for auto plant

McALLEN - The final card will soon be played, and for the Rio Grande Valley to leave the table with a European automaker in tow, it must up the ante.

McAllen's pesky opponent, an unnamed state also vying for the auto plant, continues to raise the stakes, offering the company a huge economic package to forget about Texas - a move that is commonplace in negotiations for big-time manufacturers, officials said.

Texas is responding in kind, seeking local, state and federal sources to create its own package similar to the $133 million in incentives Toyota received in 2005 to build the San Antonio Tundra plant. And officials are offering to lay the utility lines and other groundwork for free.
It's a game of one-upmanship and the latest hand in what has been a long and frustrating process.

"The rules of the game have changed," said Keith Patridge, president of the McAllen Economic Development Corp. "We're still competing with another state and the other state keeps ratcheting up."

Thousands of potential jobs, thousands of dollars in tax revenue and the civic pride that goes with landing the area's first auto plant are at stake - especially considering the city lost the last time it played for an auto plant.

City officials are seeking a myriad of funding sources, including $9 million from a planned federal economic stimulus package to prepare the proposed site, which will likely be located in South McAllen near South Ware Road and Military Highway - on or near the McAllen-Mission city limits.

The city is also lobbying South Texas legislators on Capitol Hill to support a proposal to secure funding from a $25 billion loan program Congress passed in September to entice auto manufacturers to develop more fuel-efficient cars, said Teclo Garcia, McAllen's director of government affairs.

Congress set aside $7.5 billion from that package for economic incentives to attract new automakers and auto part manufactures. The unnamed company, not the city, must apply for the funding, but congressional support is crucial, Garcia said.

"When you talk job creation and sustainability and improving your community or region, that really opens people's eyes and gets their attention," Garcia said, adding that considering the nation's economic woes, answers aren't quick. "It's kind of weird timing. It's difficult to get answers on this thing."

The city of McAllen is also weighing the use of a half-cent city sales tax.

"For McAllen to be the only entity to be looked at for incentives is foolish," McAllen Mayor Richard Cortez said. "It's first a Texas asset. It just happens to be located - or hopefully will be located - here."

Landing an auto plant when the economy is falling apart and when U.S. automakers are flirting with bankruptcy is a difficult challenge.

If Detroit's Big Three go bankrupt, it could put potential suppliers out of business and might even threaten the project, said Pat Townsend, president and chief executive officer of the Mission Economic Development Authority. If one of the U.S. companies fails, auto executives have said, it's possible they could all go down.

"Everything kind of works together. ... There are suppliers located all over that are intended to supply this plant," Townsend said. "The issue is if they also supply Ford, (General Motors), Chrysler or Nissan or whatever, and there are problems there, it disrupts the planning of this."
Still, officials said, it's difficult to gauge the potential impact on the project if Congress doesn't bail out the industry.

What officials most want to avoid is a repeat of what happened when they courted Kia Motors Corp. In 2006, officials failed to attract the South Korean manufacturer to the Valley, blaming the news media for thwarting the project when they named the company before the deal was finalized.

This time, officials have been diligent in keeping the company's identity secret.

"If we disclose (the name) the deal is dead," said Patridge, the McAllen Economic Development Corp. president "That's in the contract."
That contract, signed by both city officials and the company, lays out the boundaries for negotiations. Patridge did not disclose the other elements of the contract.

McAllen first publicly acknowledged the project at a news conference in May this year, a few weeks after officials traveled to Germany to meet with the company.

In another effort to preserve secrecy, the development corporation sued Texas Attorney General Greg Abbott to block the release of travel itineraries for which The Monitor had filed a public records request and that the city argued disclosed the name of the manufacturer.

Monitor Editor Steve Fagan said at the time that the city did not clearly detail how the release of the itinerary could kill the deal or why the development corporation didn't consider the itinerary public information, considering it received $1.4 million annually in public funding.
Fagan said recently that the paper's focus was not on disclosing the name, but merely confirming that the process was still ongoing.
"I don't think actually disclosing the name has been a pivotal focus," he said. "If they have a concern like that, we certainly understand."
Speculation on the company's identity has run the gamut of German auto manufacturers, including Volkswagen AG and its subsidiary Audi AG, companies that auto experts have said are unlikely. Experts have said the company is likely a smaller manufacturer of electric or hybrid vehicles, such as German-based Smart, a subsidiary of Daimler AG.

Those manufacturers are poised to expand despite the world's deepening economic crisis, officials said. California-based ZAP, a small electric car manufacturer, actually began construction on a $100 million plant in Kentucky in September.

"It's a wonder that (the company is) able to do what they need to get done in light of the general conditions," said Townsend from the Mission Economic Development Authority. "The answer we get back is they're moving. They have not lost either investors or sources of lending."

Officials hope they can make an official announcement on the project by Mayor Cortez's annual state of the city address in mid-January - just in time for the spring municipal elections when the mayor's seat and three city commissioner seats are up for grabs.