Texas - Law Firms The Lone Star State's Multiple Attractions

Thursday, September 1, 2005 - 01:00

Editor: Please tell us about your background.

Menges: I have lived in Dallas and have been practicing law here for over 23 years. Prior to my college years at Boston University and law school at Harvard Law School, I attended junior high and high school in the Dallas area.

Editor: What led to your interest in the economic development of Texas?

Menges: It is both a personal and professional interest. My major as an undergraduate was in business management, including economic development as a matter of public policy. Since arriving in Dallas I have been active in a number of local organizations, most notably, the Greater Dallas Chamber of Commerce. The Chamber does not confine its interest just to Dallas but has a regional focus encompassing the twelve-county area of North Texas. It is the only regional economic development organization in this part of the state. I have served on the board of the Chamber for a number of years, including serving as head of the international division for the past three years. In that capacity I have worked diligently to attract businesses in general to Texas as well as focused on international business opportunities.

Editor: I would assume that Dallas has been successful in attracting foreign investors.

Menges: Dallas has attracted a large number of foreign investors, and Texas has been the number one state in volume of exports from the United States to other countries for at least a couple of years. Historically, that spot was occupied by California and New York but Texas is now number one. Exports from a variety of industries brought us to the number one status.

Editor: Please tell us about the tax structure of your state that is so attractive to business.

Menges: Texas is proud that it does not have a personal income tax. We also do not have a corporate income tax, but instead have a franchise tax which is a fairly modest 4.5% tax on certain aspects of a company's business. That is extremely attractive to businesses and their executives as they contemplate where to base their operations, especially when compared to higher tax jurisdictions like those on the East and West Coasts.

Editor: Texas seems to be very business-friendly.

Menges: Texas prides itself on being business-friendly. It is not just the low tax rates that make this the case. There is also an educated and readily available workforce in Texas, especially in our urban and suburban areas. The technology workforce is very well trained; in all of the four major cities, Dallas/Fort Worth, Houston, Austin, and San Antonio, a robust group of technology workers is available for redeployment. In many Western European countries there is a serious shortage of a skilled, technical workforce, so this feature in Texas is very attractive. And without trying to promote a cliché about everything being big in Texas, there is also plenty of room to grow in Texas, unlike many other parts of the country. If you look at major metropolitan areas in the U.S., there are almost always natural or governmental boundaries as to how far an area can grow. In some cases it is a mountain range, a state border, or a coast. In Dallas, there are no such barriers for hundreds of miles in any direction. When you combine that with a great transportation infrastructure, it allows a business considering moving here to see that there are a number of possibilities for sites, including numerous industrial parks and free trade zones. Especially in the North Texas area, there are limitless possibilities.

Another example is the $295 million Texas Enterprise Fund, which allows the state to respond aggressively to opportunities to bring jobs and employers to Texas. The Fund, which can be used for a variety of economic development projects, including infrastructure development, community development, job training programs and business incentives, provides the state's leaders with the funds to "close the deal."

Editor: Tell us about the transportation facilities for navigating these vast spaces.

Menges: Texas has a well-developed multi-modal transportation system. Texas is the origin, and encompasses the bulk, of the NAFTA highway, which is the interstate highway that runs from Mexico to the Upper Midwest. Also, we have a very extensive rail network that runs parallel to the highway network. Businesses have a choice of shipping by either rail or truck. This has made Texas a leading logistics and distribution center. In addition, development of airport facilities all over Texas, especially in Dallas/Fort Worth, has been phenomenal. The Dallas/Fort Worth Airport has been described as the engine of North Texas' growth, and it is the first selling point I make when I talk to businesses in other regions about relocating here. DFW has opened one of the largest international terminals among all U.S. airports in the last month. It is also the only airport in the country that can accommodate eight simultaneous landings and departures. For those businesspeople who are accustomed to sitting on the runway at LaGuardia or O'Hare, let alone Heathrow, the prospect of having eight simultaneous departures and landings is extremely attractive.

Editor: Is the workforce heavily unionized in Texas?

Menges: There is relatively little unionization of Texas workers. It is a right-to-work state, which makes it more difficult for unions to get a foothold in a place of employment. It is also a state with a strong cultural orientation toward individual action as opposed to collective action. The only industries that have any significant union penetration are some manufacturing, transportation and oil and gas concerns, primarily related to businesses that have multi-state operations.

Editor: The medical facilities in Texas are also an attractive feature of the state. Please describe some of their advantages.

Menges: Healthcare is among the fastest growing industries in Texas, along with aviation and financial services. M.D. Anderson is widely recognized as the premier cancer treatment center in the world with its base in Houston. Likewise, in Dallas there are several hospitals with nationally recognized specialists for transplants and heart procedures. In San Antonio, thanks to the Defense Department, facilities for treatment of burns and other trauma are among the best in the nation. Besides business executives wanting high-quality medical care for themselves and their employees, high-quality medical facilities also attract business in an indirect way. The presence of superior healthcare institutions has several spin off values since those institutions need ancillary services, whether they are pharmacies, research organizations, or other suppliers such as device manufacturers. Not the least of these are research centers adjacent to or connected with the health centers, which are attractive to Nobel laureates and other world-class researchers. In Dallas we have a number of Nobel prize-winners, most of whom are tied to the medical centers in the Dallas/Fort Worth region.

Editor: Tell us about the reforms in the laws that make Texas attractive to corporations.

Menges: Texas was fairly criticized in the 80s and early 90s for issues in our judicial system. This led to calls for judicial reform, and the Texas Legislature jumped into the issue. After a series of legislative initiatives, we have seen a lessening in the number of lawsuits filed over the last several years. The bulk of these reductions have come in medical malpractice cases because there are now limits on the types of damages that can be awarded. There are exceptions, of course, as there are in any fluid system, but overall there has been a trend of fewer lawsuits.

Editor: I understand that Texas' class action rules make it harder to certify a class.

Menges: The Texas Supreme Court has consistently strengthened the requirements for class certification over the last decade and has played a critical role in this area. This, combined with comparable developments at the federal level, has made class certification more difficult.

Editor: Please tell us about the venture capital and other financial services funds that attract entrepreneurs to the state.

Menges: There are various types of funds - hedge funds, private equity, and venture capital funds - with a lot of overlap as to types of investments and investors. Dallas has the third-highest concentration of hedge funds in the country after New York and San Francisco. All of these financial vehicles, whether they are classic venture capital funds that invest in emerging companies, or private equity funds that have historically participated in management buyouts and going private transactions, or hedge funds that deal primarily with publicly traded securities, are playing an increasingly important role in Texas.

Editor: Maybe you would like to talk about the Fortune 500 companies in Texas.

Menges: Texas has the third-largest concentration of Fortune 500 headquarters, and Dallas and Houston rank among the top five cities nationwide. Examples in Dallas range from Exxon Mobil, American Airlines, J.C. Penney, Texas Instruments and Affiliated Computer Services to Ericsson and Nokia, which have their North American headquarters here. Houston is, of course, known as the energy capital of the United States and is the home base for companies such as Anadarko Petroleum, Dynegy, Reliant Energy, ConocoPhillips, El Paso Corporation and CenterPoint Energy, to name a few. Austin and San Antonio have their fair share as well, including Dell, Temple-Inland, Clear Channel Communications and Valero Energy. These corporate headquarters draw talent to our areas. Their presence emphasizes the importance of the airport because each of these companies requires mobility. Each one adds to the dynamic of industrial growth, attracting other businesses which provide ancillary services or seek proximity to their customers or suppliers.

Editor: Would you comment on the high quality of educational institutions which compare favorably with any in the country?

Menges: We are especially proud of our colleges and universities. The most important recent development in Texas higher education is the increase in the number of research programs at these institutions. The University of Texas at Dallas, University of Texas Medical Branch at Galveston, UT Southwestern Medical Center, University of Texas at Austin and Texas A&M have all developed large research programs covering a wide variety of industries, which have had their own multiplier effect. Furthermore, the cities in Texas understand that to be dynamic they must develop solid business partnerships with their local universities. One great example is Southern Methodist University's James M. Collins Executive Education Center at the Cox School of Business, a state-of-the-art training facility for business professionals and executives, which will open this month. Not only do these institutions attract business and venture capital seeking to invest in these startup ideas, but they help the economy in providing research in important Texas industries such as technology and agriculture and in fueling existing industries such as healthcare. They also make for a vibrant climate for business and academia to work.

Editor: Is there anything that you would like to add?

Menges: In my position as head of the international division of the Chamber, I am asked a variety of questions by different business leaders about life in Texas. One under-appreciated aspect of the Texas experience is that we are a growing cultural center. The quality of the arts in each of our major urban areas is astounding. The museums of Fort Worth and Houston are of a national class. The Dallas Symphony Orchestra is rapidly joining the first tier of orchestras in the country - and is about the only one with a balanced budget. The Nasher Sculpture Garden in Dallas has the largest collection of privately owned modern sculpture in the world. We have much to offer to patrons of the arts, whatever their interests might be. And that makes for a healthy social environment, which also makes for a great business environment.

Please email the interviewee at kmenges@akingump.com with questions about this interview.