Who You Gonna Call?

Where's a Good Ol' Boy Go to Finance a Small-Town Business? Try Austin and D.C.

Quincy Ellis
Quincy Ellis

After four years trying to open a $4 million ceramic tile factory, Jim Brim -- a silver-haired cattle rancher and former oilman -- has come to believe that the state doesn't place a very high priority on developing new rural business. With no revenues to borrow against, Brim couldn't get a bank to touch his project. So he ran through a long, withering gauntlet of government loan programs and came up short. "You wade so far out where you can't get back to the shore, but you can't push on through to the other side, either," says Brim. "Everybody wants to help. But they don't know how to help."

Not too long ago, rural Texans like Brim had come to take such help from state lawmakers for granted when prosperity turned elusive in their more traditional lines of work -- ranching or oil exploration. They've depended on the Legislature to keep bureaucratic entanglements out of their path, and to approve regulatory exceptions and tax breaks for their industries when economic forces threatened to sink them.

Brim's factory is one of a handful of manufacturing companies that the tiny town of Early has funded in an attempt to encourage local business development. And in doing so, they've defied economic trends that have reduced most small Texas towns to dust, especially towns in semi-arid and overgrazed cattle country. Early -- a town of 2,380 near the Central Texas town of Brownwood -- has made national news by creating $5 million worth of new business inside its city limits over the past seven years.

But local ingenuity and grant money haven't been enough to get Brim's company, Tejas Clay Products Inc., off the ground. And now Brim is eager to send a message to Austin: Give me someone down there who knows how to navigate the bureaucracy, he says, who knows where to find the government grants and loan guarantees for start-up capital. How else are entrepreneurs such as himself supposed to create new jobs in cash-strapped rural areas? Brim doesn't need a reporter to deliver that message for him, though. Agriculture Commissioner Susan Combs has toured Brim's factory and touted it, along with the Early Economic Development Corporation, which helped get the factory built, as a model for rural revitalization. And Speaker of the House Pete Laney himself is firmly behind an initiative pushed by the Texas Rural Caucus to establish a new state agency that will steer funding for business development and infrastructure expansion into small-town Texas.

Not only is it surprising to see conservative rural Texans demanding government aid, but their timing seems a bit off as well. Two consecutive tax breaks pushed through the Legislature by George W. Bush have left the state so strapped for cash that some legislators are openly talking about a raid on the state's meager Rainy Day Fund. Where in this tight-fisted state will money for another public assistance program be found? Panhandle Republican Warren Chisum answered that question last month, when he persuaded the state Sunset Advisory Commission to take $85 million in federal block grants away from the Texas Dept. of Housing and Community Affairs and place it under the authority of a new agency, to be called the Office of Rural Community Affairs.

Handout or Hand Up?

Proponents of the new agency swear that they're not creating a free handout program for the likes of Tex, Hoss, and the usual cadre of landowners and councilmen who typically get their fists around whatever meager revenues flow their way. No, say legislators, this agency will assist communities in planning their futures and help them find seed money for economic development projects. The idea is to get small towns to marshal their own resources first before coming to Austin to beg, says Bobby Gierisch, research and analysis director in Speaker Laney's office: "Austin is not going to save rural communities. If they're going to be saved, they've got to save themselves."

Chisum says he won't even ask for a slice of the state's General Fund to supplement the $85 million in federal money. The Rural Community Affairs office would merely make sure that state and federal dollars already earmarked for rural improvements get delivered. "First of all," says the soft-voiced Republican, whose reputation as a water-carrier for the anti-gay and lesbian interests around the state often overshadows his otherwise sober counsel, "we want all of [my constituents] to have the ability to have a telephone."

That sounds like an exaggeration of rural deprivation until Chisum points to a map that shows large swaths of Panhandle counties such as Briscoe, Motley, and Oldham that are outside the service area of any telephone company. Granted, there are no towns and few roads in those regions, either. But Chisum argues that even the loneliest stretches of the state are supposed to get phone service funded through the state's Universal Service Fund, $50 million collected annually as a surcharge on phone bills. The state, however, has never given the Public Utility Commission the authority to require phone companies to pick up those high-cost service areas, and that's exactly the kind of bureaucratic slight of rural Texas Chisum wants the new agency to prevent.

With both chambers of the Capitol headed by small-town legislators (Speaker Laney is from Hale Center, pop. 2,067, and Lt. Governor Bill Ratliff is from Mt. Pleasant, 12,291), the establishment of the Rural and Community Affairs office is pretty much a done deal. And it's no accident that the issue has come up now, before the Legislature draws new electoral boundaries that will shift more power from rural to urban Texas. Given the population booms concentrated around urban centers, rural legislators don't expect to emerge from this session as powerful as they went in, so now is the time, they say, to get the state focused on rural issues.

For urban Texans, particularly if they happen to be from oh, say, Austin, there's some Texas-sized irony in this push from rural, mostly Republican, legislators to create a new agent of government to coordinate community planning. But these small-town politicians, steeped to their eyeballs in the mythos of rugged individualism and the primacy of property rights, were stunned by a report released by a House interim committee in December. They've all known that the economic pulse in their individual districts is weak. But seen in the naked light of the report, none of rural Texas looks healthy. The report describes huge swaths of the state where resources such as timber, ore, and oil flow out, but no money flows back in. Rural regions are described as aging, poor, filling up with immigrants, cut off from the Internet, and lacking organized and professional leadership. And it's not just the colonias along the state's border with Mexico where people are suffering; 72 Texas counties are mired in persistent poverty, and only about a third lie adjacent to the Rio Grande.

Pampa Rep. Warren Chisum
Pampa Rep. Warren Chisum (Photo By John Anderson)

Meanwhile, rural populations are growing, not shrinking. Not growing at the prodigious rate of the Austin-San Marcos region, but still way faster than the average population growth of most states. Gierisch points out that nearly three and a half million people live in Texas counties classified as rural. That's a population about the size of the Houston metropolitan area. Can the state afford to let that many people sink into Third World oblivion?

Gierisch -- along with many rural legislators -- complain that the state agencies that oversee the patchwork of federal and state aid programs designed to counter rural poverty have been catering to suburban areas, trying to get the biggest per-capita bang for the buck. According to Gierisch, "farm-to-market" freeways now serve the outskirts of Houston and the Dallas-Fort Worth Metroplex, and all but one of the last 70 projects funded by block grants earmarked for rural improvement lie east of a line running from Wichita Falls to Laredo, most along Interstate 35. "The I-35 corridor doesn't need a lot of help," he says. "We don't need to be spending rural development dollars in Georgetown."

The Speaker's office, Chisum, and other rural leaders want to see that money instead put into DSL cables, roads and bridges, and other basic infrastructure nonexistent or neglected in remote areas. They also want to free up more grants for economic development and raise more bond money through the Rural Water Development Fund. It won't be so hard to find money for rural areas, says Chisum, if it's the job of one particular agency to do that. The way things are now, he says, rural leaders have to scratch up funds from a host of agencies that may not even be sure what they have to offer. "I'm not throwing rocks at the other agencies," Chisum says, "but we want to make sure we have an advocate agency for rural Texas."

In the past, would-be entrepreneurs in small towns haven't shown much inclination to plan sustainable economic growth, however, and some wonder if a new influx of capital will fund thousands of acres of new catfish farms, empty industrial parks, and outlet malls.

Getting the Dollars to Early

That brings us back to Early, one of the few beacons of local initiative that gives legislators hope. Seven years ago, Early was one of only two towns to apply for a state grant to build a business incubator, a facility that provides office space and consulting to start-up businesses. It also took advantage of a state law allowing the town to raise a half-penny sales tax to fund an Economic Development Corporation. The initial investment in the incubator cost the town just under a half a million dollars, and the EDC invests $145,000 yearly to keep the project going. The town has also sunk more than $2 million in state and federal aid into local infrastructure improvements.

To head the Early EDC, the town hired a relentlessly upbeat former business professor, Quincy Ellis, who proudly tells visitors they can find him by turning off SH 377 onto the recently christened Industrial Blvd. At the end of that road is the Small Business Incubator, a tin structure housing a new cabinetmaking shop, tool and die manufacturer, and half a dozen other start-up companies. Inside, the incubator has the feel of a vocational technical college, where brightly painted hallways of linoleum and sheetrock open into workshops smelling of cut steel and oil. Ellis' pitch is that local initiative needs to be primed by tax dollars. "When we need baling wire, it's hanging on every fence in rural Texas," is one of Ellis' favorite quotes. "We don't have to go to the hardware store in Austin." He affects a hillbilly accent to make the argument that Early isn't begging. "We don't want to say [to Austin] 'You have some money, I want some,'" says Ellis. "Instead, we match internal need to external resources. At least when Austin or Washington, D.C., do throw dollars, they will know we have a plan in place where we can maximize those dollars."

Ellis and the Early EDC already have been busy maximizing dollars. Since 1993, they've secured a grant from the Texas Capital Fund, the state block grant allotment that rural leaders are trying to reclaim from suburbs along I-35, to build utility lines and a service road for Brim's factory. The EDC also drew from the Capital Fund to subsidize the expansion of a concrete and asphalt plant down the road. A steel housing manufacturer that got on its feet through the incubator now has its own site nearby. Altogether, claims Ellis, the EDC and incubator have helped plant about 100 new jobs in Early (manufacturing jobs, Ellis stresses, not "bottom-feeder" retail gigs) in the past five years. And while the typical failure rate for small-town ventures is about 80%, that's Early's success rate. The new jobs created in Early pay between $8 and $10 per hour, Ellis reports, which isn't exactly propping up the middle class, or likely to keep the town's young folks at home after they graduate high school. But they are jobs that weren't there before the EDC was up and running, and for roughly $2 million in local investment, they've come relatively cheaply.

Early might not be the ideal test environment for rural economic development, because there are too many variables. Situated at the crossroads of two state highways, and pressed right up against a university town of 20,000 people, Early has commercial potential most towns its size don't share. The four-lane Highway 377 is lined with motels, auto and tire supply stores, even a mall featuring a Beall's and JC Penney. Local retailers say it's the commuter traffic on 377 that makes cash registers hum. And the businesses along 377 have made it without the aid of government grants and loans.

Then there's Brim's factory, which still hasn't opened its doors after four years of finagling loan guarantees from the U.S. Dept of Agriculture and the cities of Early and Brownwood. Already worn down, he says, by mountains of government paperwork, Brim still needs another $1.5 million to get up and running. He stabs at an imaginary line on his desk as he tries to describe the assistance he wishes he could get from Austin: a review that would check on his progress at six months, then again in a year, evaluating the feasibility of his project and offering financial aid to keep it afloat. What Brim wants, essentially, is a government loan agent who can pull together a portfolio of financing from a myriad of federal and state sources. And that's just what Rural Community Affairs is supposed to do.

The proposal to create the office even has the support of some of the most outspoken advocates of the urban poor. Houston Rep. Garnet Coleman says he's behind the effort, as is Harryette Ehrhardt, D-Dallas. Both of those legislators have specific agendas for the new agency -- Ehrhardt wants to find a new administrator for the low-income housing tax credit program, currently run by the Dept. of Housing and Community Affairs, and Coleman hopes to strengthen rural health care -- but both say that easing rural poverty ultimately benefits cities as well.

"When you look at inner-city issues, they're very similar to rural areas," says Coleman, citing the lack of health insurance, economic development, housing, and job training. "If they're [rural legislators] solving the problems for their people, they're also resolving the problems of mine."

Not all of rural Texas is as industrious in creating business nor as creative in asking for government aid as Early. Asked what economic development projects are under way in her district, Rural Caucus chair Judy Hawley reels off a list of tourism promotions: a camping park, an archeological dig, restored downtowns, a hunting festival, the town of Kenedy's push to become the "Horned Lizard Capital of Texas."

The Texas Municipal League's Monty Akers says the TML will be watching to make sure bad stuff isn't attached to the legislation creating the new office. But Akers also says he sympathizes with small-town Texas. "Rural areas have always been behind the 8-ball," says Akers. "All the benefits of the new economy, they're still waiting on." end story

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Jim Brim, Early, Pete Laney, Susan Combs, Warren Chisum, Rural and Community Affairs, Warren Chisum, Rural Caucus, economic development, Judy Hawley, Garnet Coleman, Monty Akers, Harryette Ehrhardt

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