South Texas cotton producers were elated to hear the news that Brazil's Santana Textiles was building a 500,000-square-foot warehouse in Edinburg, a major denim facility that would provide Texas cotton producers a local market for their crops.
Like most U.S. cotton growers, Texas producers have depended on foreign markets since the U.S. textile industry withered and all but disappeared in the face of global competition, especially from Asia where labor costs remain low.
Edinburg Economic Development Corporation officials called it a "proud day" in 2011 when Gov. Rick Perry spoke at the Santana groundbreaking ceremony welcoming company officials to South Texas. The day was the culmination of Perry's efforts to attract business investors to the state by using the Texas Enterprise Fund to sweeten the deal for potential job providers, a program that supported Perry's state economic plan.
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Perry awarded Santana a $1.65 million grant in 2008 through the Texas Enterprise Fund to support the building and operation of the new denim facility. But the Enterprise Fund has come under fire since then, largely because companies selected for and receiving those funds have failed to comply with the terms of the grant program.
Just last month a state auditor's report was released to the public, charging the Fund came with lack of oversight when it came to monitoring grant recipients who had defaulted on terms of the agreement.
Apparently that is the case with Santana Textiles' new facility. The warehouses have reached the final stage of construction, and brand new machines still stand in the empty facility, wrapped in plastic and awaiting installation.
While the original plan was to develop the denim facility and provide an estimated 800 new jobs for South Texas workers, only 38 have been employed so far, and that was after employment impact estimates had already been reduced from the 800 workers to only about 350 skilled craftsmen some two years ago.
That has resulted in stiff penalties imposed by the state on Santana, fines equaling $280,370 in “clawback” penalties. Last week Perry's office said only about $800,000 of the $1.65 million TEF grant had been delivered to the company, and future TEF funds will not be forthcoming until Santana meets the minimum requirements of the grant.
Santana is not alone in falling into trouble with the Enterprise Fund grant system. This is just one of 115 projects since 2003 to win money from the Enterprise Fund — $506 million of taxpayer money so far — and more than a few companies are falling behind in terms of the state funding program. As of this week, Perry's office was unable to calculate the exact number of companies failing to meet requirements of the grants they received from the fund or the amount in penalties due to the state and not yet received.
But the Governor's office points out that global economics have played a major role in preventing some of the new startup operations from meeting intended deadlines, and overall objectives, including the Santana project.