Plant in Leander will be 'game changer' for region

Plant in Leander will be 'game changer' for region

By Robert Bell Friday, 19 June 2009

When you go fishing, sometimes you catch a little fish and sometimes you catch a big fish.

Leander just caught a big fish.

Austin-based Valence Technology, Inc. recently announced it chose Leander as the site for a $585 million plant that will eventually employ 4,000 people to manufacture advanced energy storage devices for powering everything from Segway personal transporters to double-decker buses used in the U.K.

An employer of this scope is big news, and not only for Leander.

“It’s a game changer for the region,” said Biff Johnson, Leander city manager.

If all goes according to Valence’s strategy, the plant will be operational by 2012, with 2,700 employees, and will expand to 4,000 employees by 2016.

The company’s leaders examined many potential sites for the plant across Texas and in several other states, and they determined that Leander had what they were looking for, said Ross Goolsby, CFO of Valence.

Courting the company was a concerted effort on the part of Leander, Williamson County, the Governor’s office, U.S. Rep. John Carter, R-Georgetown, area chambers of commerce and other public and private partners, said Kirk Clennan, director of economic development for the city.

Stimulus and incentives

Just how fast the plant gets up and running — and how many people it will ultimately employ — depends in large part on whether Valence receives federal money it recently requested in a grant application to the U.S. Department of Energy under the Electric Drive Vehicle Battery and Component Manufacturing Initiative.

“We applied for a grant under the federal recovery act,” Goolsby said. “There is a $2 billion line item in the stimulus package specifically for advanced battery technology like what we develop.”

Valence submitted an application requesting $225 million in federal grant dollars over a three-year period, and plans to fund the remaining $359.4 million — about 62 percent of the total project costs — through state and local tax incentives and other sources.

“We have aggressive and forward-thinking plans, and if the grant doesn’t come through, we’re just going to have to reassess what we have to do to expand and to accomplish our goals as an organization,” Goolsby said.

The annual production capacity of the facility would be about 660,000 battery packs, or more than 1 million kilowatt hours of equivalent available energy, according to a press release.

The grant application is a separate request from the company’s March loan application under the Advanced Technology Vehicles Manufacturing Incentive Program, which is also administered by the DOE.

“We’re going to have to expand, and the opportunity to do that in Central Texas is still very good,” Goolsby said. “The grant is not the end-all be-all, but it certainly is a catalyst to get things done sooner.”

Crafting an incentive package for Valence requires a multi-faceted effort. The city, county, state and school district are all involved in creating motivations for the company in the form of property tax abatements, waived fees and other incentives, Johnson said.

Though not all of the details have been determined, the basic package will likely involve tax abatement incentives, he said.

Leander has also offered to waive some soft costs such as permit fees for which the city does not have to pay.

“If it’s something we had to send out for professional services, [Valence] would have to pay for that,” he said. “But if it’s something that city employees are doing, we’ve offered to waive those.”

The incentives will be part of a 10-year deal, with the option to renew them for another 10 years at the end of that time, if all parties agree.

“Which is something that is a good thing to do because you’re not telling future councils or school boards what they have to do,” Johnson said. “It gives them the option to review it in 10 years, and if they think it’s going well, they’ll support it and keep going, and if not, they can make their decision at that time.”

For Valence to receive the incentives, the company will have to meet certain goals, Johnson said.

“It’s a work in progress, but basically it will not cost the taxpayers anything. It’s 100 percent performance based. [Valence] will produce before they get the incentives in phases,” he said, adding that any incentive agreement the city has done has been performance based.

“We don’t just hand people money and opportunities,” Johnson said. “They have to create an atmosphere in which they’re going to succeed, and then succeed before they get the incentives.”

One aspect of tax abatements will come from what is known as Freeport exemption, in which a city, county or school district decides it will waive property tax collections on inventory materials or goods that are in transit or processing.

As of mid-June, the school board had not made a decision on whether it would offer Freeport exemption, said a spokesman for Leander ISD.

Why Leander

In terms of site selection for the plant, Leander had several factors going for it, but rail was a huge consideration, Clennan said.

Valence needs rail access for both the raw materials that will be coming in and the finished goods it will be shipping out — all of which can be very heavy.

And with the potential for several thousand employees, a good number of whom will commute, the fact that Capital Metro’s commuter rail stop is less than a mile away was an important factor, Goolsby said.

The process of choosing a site went fairly quickly from the city’s perspective.

Clennan first became aware Leander was in the running in late February.

Such a swift process was not a coincidence, though. Leander has actively planned to attract companies like Valence, Mayor John Cowman said.

“We have created a landing zone for companies just like this, and I believe this is the first of many,” Cowman said.

Leander’s composite zoning ordinance and smart code were both instrumental in facilitating a development like the Valence plant, by creating an area specifically zoned for such projects, Clennan said.

“If you create these landing strips where companies can come in under the radar, and they know they already have the acceptable uses for the properties identified and the price is set and they can put these properties under contract, that basically creates a landing zone for them,” Johnson said.

American jobs

Often, when a company wants to develop a large manufacturing facility, it will build overseas, where labor is cheaper. Valence opted to build in the United States for a couple of reasons, Goolsby said.

“[One reason] is, the finished product is quite heavy and expensive to ship, so if you’re going to be targeting the U.S. market, you’re going to have an offset to that labor increase with savings in freight costs,” he said.

The second reason is that the company’s most valuable asset is its intellectual property.

“We feel that is better protected and preserved — and the value maximized — in the U.S. In China there’s a little less concern about companies’ intellectual property,” Goolsby said.

“As we migrate to next generation technology, we’re more set to do that here than there,” he said. “It will be more expensive from a labor perspective, but one, there’s offsets, and two, there are some advantages to having a more advanced labor force.

“You can do things more efficiently. You can do things in a more automated fashion. So hopefully, those will more than offset the increased labor costs,” Goolsby said.

Regarding those labor costs, Goolsby said the average salary for employees at the plant will likely be between $45,000 and $50,000 a year, after factoring in benefits.

Employment needs at the plant will run the gamut, from Ph.D. chemists to line workers and cafeteria employees, he said.

Valence’s decision to put the plant in Leander was made easy by the city’s staff and leaders, Goolsby said.

“The city leaders of Leander are super people and understand what something like this can do for a community and really made it a priority,” he said.