Texas passes New York on Fortune 500 list

April 22, 2008
Associated Press

Texas is king of the hill when it comes to corporate headquarters.

The Lone Star Sate passed New York as home to the most big companies in the latest list compiled by Fortune magazine.

Texas now boasts 58 headquarters, three more than New York, the previous No. 1, and California, with 52.

Business experts say it's a matter of simple economics – Texas attracts companies with its low taxes, affordable land and large labor force.

"Cost is overwhelmingly the No. 1 driver," said Albert W. Niemi Jr., dean of the business school at Southern Methodist University, who wrote his doctoral thesis about companies leaving the Northeast for the Sun Belt 30 years ago.

Irving-based Exxon Mobil Corp. remained the biggest Texas-headquartered company by 2007 revenue, and No. 2 nationally, behind Wal-Mart Stores Inc. Exxon Mobil, however, was more profitable, earning $40.6 billion.

High oil prices helped land another Texas oil company, Houston-based ConocoPhillips, at No. 5 in the national rankings, according to the magazine. San Antonio-based AT&T Inc. jumped from No. 27 to 10th place.

Four of the largest six corporations in Texas last year were oil companies, but the state's economy is more diverse than it was a generation ago.

Other Texas companies on the magazine's list include technology, such as Dell Inc., three of the nation's biggest airlines, two of the biggest homebuilders, an insurer, a hospital company and the largest garbage hauler around.

Houston has the most Fortune 500 companies in the state, 25. Dallas boasts 12 – its suburbs are home to seven more – and San Antonio has four.

A few smaller cities also got in on the act: Grapevine, Pittsburg and The Woodlands have one each, as does El Paso.

Texas has been attracting big companies from out of state for nearly three decades, including American Airlines in 1979, and Exxon (before it bought Mobil) and J.C. Penney in the following decade, all from New York.

In recent years, Fortune 500 companies such as Tenet Healthcare Corp. and – just last year – engineering and construction company Fluor Corp. moved in from California.

The reverse Gold Rush from California to Texas has concerned West Coast officials for years. In 2004, consultant Bain & Co. surveyed big companies for a California business group and found that half planned to shift jobs out of state or at least stop expanding in California because of high costs, including taxes. Of that group, 27 percent said they would go to Texas, more than any other state.

Lyssa Jenkens, chief economist for the Greater Dallas Chamber of Commerce, said there is a snowball effect – once a few big companies move in, others follow.

"If you move to Dallas-Fort Worth or Houston, you're in the company of other large companies," she said. "They like to be near each other because there are all kinds of services for corporate headquarters – law, accounting, engineering, (information technology) services."

A spokeswoman for Gov. Rick Perry's office said it's just good business for companies to move here.

"Texas is a state where people can risk their capital with the opportunity to see a positive return on their investment," said Perry spokeswoman Allison Castle.

"Part of the overall success of the Texas economy is a result of corporate CEOs choosing to relocate and grow their businesses in Texas where we have what they need to succeed: smart people, regulatory certainty, low taxes and a quality of life unmatched by any other state," she said.

Some companies look at Texas but walk away. The state engaged in a very public courtship of Boeing Co. in 2001 but lost to Chicago.

By several measures, the Texas economy has performed better than the national economy recently, although it hasn't been immune to the broader slowdown.

The unemployment rate in Texas rose in March to 4.3 percent, but it remained lower than the national average of 5.1 percent. The number of jobs in Texas has grown 2.1 percent since March 2007, compared to a nationwide increase of just 0.4 percent.

Texas employers have added jobs in trade, leisure-related businesses, health care and oil and gas exploration, according to state figures.

The rapid growth, however, threatens to overtax the state's roads and schools and add to air-quality problems.

Traffic is already daunting in Houston, Dallas and Austin. Niemi, the business school dean, said he's seen projections that the Dallas-Fort Worth area could grow to 9 million people in 15 years.

"The negative of all this growth is the problem of infrastructure – traffic and air quality," he said. "Can you imagine Dallas with 2.5 million more people in 15 years?"

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