By Laylin Copelin AMERICAN-STATESMAN STAFF
Gov. Rick Perry put a spotlight on Texas with his recent 12-day trip to Asia, where he promoted the state as a place to do business. The trip also brought more attention to TexasOne, the corporate-backed economic development fund that footed most of the bill.
The fund's contributors are members of an exclusive club, who enjoy special privileges, according to the amount they pay to sit at the table where economic development is the agenda. Contributions range from $1,000 to $50,000 a year.
In 2009, the fund collected $2.2 million and spent $1.6 million marketing the state.
Top-dollar donors, including corporations such as AT&T Inc. and organizations such as the Greater Austin Chamber of Commerce, get opportunities to network with corporate officials looking to expand or relocate their businesses to Texas.
TexasOne typically invites a few donors to do that at "signature events," mostly major sporting contests (think Super Bowl or NBA Finals) in Texas.
This being Texas, a pair of custom-made cowboy boots is thrown in for yearly donations of $10,000 or more.
On TexasOne's website, the public can view the names of donors, but not the annual reports that tout the organization's successes and how it spends its money. The reports are on a members-only Web page, although Perry's office provided them for this story.
Perry's Democratic opponent, Bill White, has criticized the arrangement as a "slush fund" that Perry has abused to promote himself and to underwrite a lavish lifestyle. White demanded the release of TexasOne records, but Perry was in China and did not respond.
Perry's office declined interviews for this story.
Modern-day governors always have been concerned with, and held responsible by voters for, the state's economic well-being.
In 2003, the Legislature upped the ante by consolidating the state's economic development responsibilities in the governor's office. It authorized the governor to solicit private donations, which are tax-deductible, for economic development. Lawmakers also created the Texas Enterprise Fund — initially $295 million in public money — so the governor could give companies incentives for expanding or relocating.
The arrangement allows Perry to be seen as the CEO of the world's 12th largest economy, a deal-closer in a roomful of business executives and a globe-trotting head of state.
Because of the unique nature of the setup, the line between public and private can get fuzzy.
Salaries of select employees of the Economic Development and Tourism division of the governor's office are subsidized by the Texas Economic Development Corp., the nonprofit parent of TexasOne, according to the nonprofit's tax returns.
Aaron Demerson , a Perry staff member and executive director for economic development, received a $12,504 supplement as an ex-officio member of the nonprofit's board in 2007, the most recent figure available from the nonprofit's tax returns.
Likewise, TexasOne pays for certain Perry trips. TexasOne will pay the $170,000 cost of sending Perry, his wife Anita and eight staff members on the Asia trip, for example.
A company owned by Jennifer Lustina, a former campaign manager for U.S. Sen. John Cornyn, R-Texas, helps raise money for TexasOne. The firm was paid $231,000 in 2007, according to the latest tax returns available.
The donations are kept in a separate account by the state comptrollers office, and by law are dedicated to economic development, although Perry's office maintains that the donations are not state money.
Perry's economic development division has never been audited, although state law requires Demerson, as executive director, to have a private audit if the state auditor defers. Perry's office said its internal auditor has decided that the risk level is too low to warrant an audit.
Perry hires Demerson and appoints the overlapping boards of the nonprofit corporation and TexasOne.
Aside from paying for Perry's travel, TexasOne contributed $250,000 of the $425,000 required for Texas to have its own week of recognition at the USA Pavilion at the Shanghai World Expo 2010. Perry attended the expo and met with government and business officials in China, Taiwan and South Korea. The trip was intended to lay the groundwork for future business ventures.
Massey Villarreal, a Houston business executive and the first president of TexasOne, said the private donations are necessary.
He noted that the Legislature at times has questioned Perry's use of Enterprise Fund incentives.
"When you are talking about marketing, there's even more scrutiny," Villarreal said. "I guess the Legislature would want more oversight" if tax dollars were used for that purpose.
Over the past six years, membership in TexasOne has grown from 21 companies, cities and organizations to more than 150.
The annual reports also have changed as the operation became better funded and more sophisticated.
In 2004, the governor's office and TexasOne spent 80 percent of the money on hosting members and executives at the Super Bowl, a PGA golf tournament and a Major League Baseball All-Star Game — all held in Houston that year.
Super Bowl-related entertainment cost more than $65,000; the golf tournament and baseball game each cost about half that.
In each case, TexasOne claimed in its literature that the events led to corporate relocations or expansions, although the $48.75 million in public subsidies that Perry gave the four companies that later created jobs in Texas might have had something to do with it.
The 2005 report collapsed the details of spending, including entertaining at the sporting events, into categories such as "lead generation and development," "Texas recruitment activities" and "membership development."
In 2009, the report had added a "Big Picture" category. That's the one used for the donation from Perry campaign contributor Doug Pitcock, who loaned his construction company's private jet for the governor's 2009 trip to Israel to receive the "Defender of Jerusalem" award and meet with business and government leaders.
The cost of using the jet was $180,471, according to a TexasOne document.
Sometimes, TexasOne entertaining occurs out-of-state.
When the University of Texas played for the national football championship in the Rose Bowl in 2006, Texas officials had the opportunity to mingle with California executives.
"It's a good way to carve out time in their busy schedules," said Michael Rollins, president of the Austin chamber of commerce. "If we can get an executive there, we know we will get some one-on-one time."
He said the $300,000 that the Austin chamber has donated to TexasOne over the past six years is money well-spent.
He said 30 percent of the business leads that Austin pursues come from the governor's office.
Rollins cited Home Depot's decision to create a technology center in Austin in 2004 as one direct result of working through TexasOne and the governor's office.
Rollins echoes other TexasOne participants who say Perry is excellent at closing deals with business executives.
"He knows what's important, and he can speak about it at their level," Rollins said.
TexasOne's sliding dues-schedule allows even smaller communities to participate.
For its $1,000, the Buda Economic Development Corp. doesn't get invited to Super Bowls or the meetings reserved for big-dollar donors.
But Warren Ketteman, executive director of the Buda organization, said, "I just want to be a player and be part of the process."
He also subscribes to a trickle-down theory of economic development: "What's good for Austin, what's good for San Antonio, is good for me."
Andrew Karch, an associate professor of government at the University of Texas, said economic development has changed with global competition after an historic recession.
"Economic development has become more entrepreneurial," Karch said. "Governors are acting more like venture capitalists."
Governors not only lure large company expansions; they also try to identify emerging industries, as Perry did with wind power, to get their states in on the ground floor, Karch explained.
Bob Wingo, the co-owner of an El Paso advertising firm, is president emeritus of TexasOne and has served in almost every capacity on its board.
"We've become more masterful in talking to companies and having the governor close deals at our events," he said.
Some states, such as Michigan, are spending large sums to market themselves, Wingo said, while TexasOne has focused on networking with company officials, corporate site selectors and other decision-makers.
"Not only do we connect with them, we know them," he said. "We have their cell numbers. We can reach them with BlackBerry. We have an ongoing network of key folks."
Wingo said board members are personally involved, going on trade missions, monitoring the financial details and being part of closing deals.
But the key, Wingo said, is Perry: "He is the guy, our executive who has led the charge."
lcopelin@statesman.com; 445-3617
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