|March 17, 2017||Comments Closed|
In recent years, Waco has seen significant growth and building momentum in the area of economic development. The City of Waco is taking many important steps in order to foster economic growth in the city and surrounding region, transforming Waco into an increasingly attractive destination for new businesses, tourists, and workers looking to relocate.
The Perryman Group expects the Waco Metropolitan Statistical Area to expand by some 59,100 residents by 2040, for a total population of 323,000. The economy is likely to double in size as measured by output (Real Gross Product), and could accelerate more through effective planning and strategic investments. This expansion will generate a need for additional infrastructure of all types.
Investments which enhance the attractiveness of Waco as a site for business activity can materially impact future growth in a positive manner. As cities have become increasingly strategic towards economic development and now aggressively compete for new activity, many municipalities view proactive infrastructure investment as an essential part of preparing for future growth.
The Perryman Group estimates that the multiplier for the Building Waco capital investment program construction process will be 3.13, that is, every $1.00 in direct infrastructure spending brings $3.13 in total local spending. The resulting total economic benefits include an estimated $470.5 million in gross product and 5,726 person-years of employment. Moreover, the program can reasonably be expected, at maturity, to support approximately $100 million per year in additional activity in the Waco area.
The City of Waco is taking many necessary and coordinated steps in order to support future growth in the area. Without infrastructure improvements, quality of life in the city could decline and momentum for economic growth could be interrupted. Investments now in Waco’s infrastructure will help to continue expansion that can benefit the entire city and region.
The City of Waco is taking many important steps in order to foster economic growth in the city and surrounding region, transforming Waco into an increasingly attractive destination for new businesses, tourists, and workers looking to relocate. Though any city can unilaterally take steps to encourage growth in their area, both the private and public sectors must work together in order to generate sustainable economic growth. Waco currently has many key initiatives in place which, combined with the city’s unique characteristics, have great potential to produce sustained growth in the area.
Waco has much to offer to businesses looking to locate in the city and surrounding area. New businesses to an area are important as these can be important sources of new jobs for both workers already living in an area and those who would relocate for a position.
The presence of Baylor University, MCC, and TSTC has the potential to provide an educated workforce in both technical and professional fields. Furthermore, Waco is located in the middle of the future educated workforce, with approximately 345,000 students enrolled in four-year institutions and 220,000 enrolled in two- year institutions within a 200-mile radius of the city.46 Waco’s central location is one of its greatest assets, from prospective labor pools to ease of access to the state’s major metropolitan centers.
Another asset that Waco has to offer, like much of the rest of Texas, is available land for development. While having available, reasonably-priced land is not the only factor that businesses look at when considering expanding or locating in a specific area, the lack of ready real estate and infrastructure can be detrimental. In order to stimulate economic growth, the Waco area has eleven business parks sponsored by cities, private individuals, and non-profits such as the Waco Industrial Foundation.
One business park is the Texas Central Park, which covers 3,000 acres along I-35, Texas Highway 6, and US Highway 84. The park is served by the Union Pacific Railroad and is home to approximately 75 companies which employ over 8,600 workers. Furthermore, the Waco International Aviation Park near TSTC offers over 1,000 acres at and near the TSTC airport for development and is currently home to L-3 Integrated Communications, Sanderson Farms, and Dr. Pepper Bottling. Another business park that has an aerospace focus is the McGregor Industrial Park, which encompasses over 9,600 acres (partially in Western McLennan County) and currently houses SpaceX and Ferguson Enterprises.
One recent addition that also seeks to promote new business opportunities in Waco is the Baylor Research and Innovation Collaborative (BRIC) located within the Central Texas Technology and Research Park. BRIC is a research discovery park and business incubator with over 300,000 square feet of laboratory and office space and seeks to encourage local innovation and spur economic development, citing studies that for every job in a research park, another 2.57 jobs are created.53 BRIC is a partnership between Baylor University, the City of Waco, the City of Bellmead, Greater Waco Chamber, McLennan County, Waco Foundation, Cooper Foundation, and TSTC.54 The center not only seeks to offer office and research space, but also workforce training opportunities through TSTC.
In addition, the city offers a wide variety of incentives for business, such as tax abatements, business grants, and a bond financing program. There are also specific incentives for businesses locating or renovating property within certain locations, such as Enterprise Zones, the Foreign Trade Zone, the Downtown Overlay District, Tax Incremental Financing (TIF) Zone, the Public Improvement District Number One (PID1), and the Brazos River Corridor Overlay. State development funds and loan programs are also available for those starting a business in Waco.
Incentive packages offered by cities and the state have played a major role in persuading businesses to locate in the area and often provide benefits in the form of new jobs and additional capital investments well beyond the initial incentive offered. In a 2014 study, The Perryman Group estimated that every one dollar in local incentives for location, retention, or expansion over the past 25 years generated $10.84 annually in economic activity (gross product) in the state of Texas.
Recently, there have been several businesses that have chosen to either locate or expand current operations in Waco. For example, Channel Control Merchants, LLC, who operates the Dirt Cheap brand, acquired a 200,000 square foot building and will invest an additional $1,050,000 in capital improvements and hire nearly 120 employees. Furthermore, Polyglass USA, Inc. also announced plans to establish a manufacturing operation in Waco. The company plans to invest $19 million in a 145,000 square-foot facility and will create 45 full-time jobs within the first three years. In addition, Allergan recently broke ground on a $200 million expansion to its Waco facility that will add 322,000 square feet of manufacturing space and is expected to add from 100 to as many as 250 full time jobs. Another $5.8 million expansion by Time Manufacturing, a truck-mounted hydraulic lift manufacturer, will add over 120 jobs over the next four years. Caterpillar, an equipment manufacturer who has multiple locations in Waco and has invested over $50 million in the area over the past 20 years, installed $6.3 million in additional machinery in 2013 and committed to creating an additional 60 full-time jobs by the end of 2015.
While measures to attract new businesses are important, many economic developers are seeing them as only secondary measures compared to strategies that focus on the fundamental characteristics of an area, such as its ability to attract talented workers to the area, knowing that businesses will follow the talent pool. In order for an area to grow, a location needs to be a place where people want to live. One important strategy for improving the desirability of a location is placemaking, or place-based economic development, which refers to planning, creating, and maintaining public spaces and amenities in order to increase the quality of life in a locale so that people will want to live there. This strategy relies on identifying and utilizing the unique assets of a city in order to help foster a unique and authentic character to create a competitive locale.
One major aspect of creating livable and desirable communities is the presence of parks. There is overwhelming research that points towards the economic and psychological value of parks and valuable open spaces. Parks can increase the aesthetic value of a community, provide valuable recreational opportunities, increase property values, and attract new workers and homebuyers. Waco offers five city-sponsored community centers and over 30 parks with various amenities. The largest and most well-known of these is Cameron Park, a 400-acre park that borders the Brazos and Bosque Rivers. The park includes nearly 20 miles of trails for walking, running, biking, and horseback riding; three playgrounds; disc golf courses; cliff-side views; numerous pavilions; and the Cameron Park Zoo.
Another major focus of placemaking strategies is often the downtown area of a city. Downtowns are a major aspect of the character of a city, from historic buildings to cultural experiences. Although development patterns in recent decades have diminished their traditional role, a renaissance is now underway. Downtowns are again representing the core of a city’s professional and cultural spheres, providing a place for people to come together for all aspects of life. Downtown areas, as opposed to suburban areas where space is desired, typically follow the mantra more is better. The more activity that happens in a downtown, both business and leisure, the more people will want to live, work, play, and interact there.
Downtown Waco has been a major focus of development in recent years. According to the Greater Waco Chamber, more than $750 million in private development activity in the downtown area has been announced since 2007. In 2013, Waco was named a “Texas Main Street City” by the Texas Historical Commission, a designation that recognizes the architectural heritage of a city and opens it to free consulting services from the historical commission as well as potential future grants and investment.69 The designated area includes much of the west side of downtown that is also listed in the National Register of Historic Places, but also includes parts of East Waco, including Elm Avenue. In 2016, the Texas Commission on the Arts approved the Waco Downtown Cultural District, which also covers downtown and parts of East Waco which contain entertainment venues, museums, art galleries, public art, and local restaurants, bars, and shops. The designation, which can produce greater access to funding and promotion, recognizes the important role the arts play in the economic and cultural life of Waco.
There are numerous successful events and destinations downtown that are aiding in establishing the local character of the city and making it into a popular location. For example, the Waco Downton Farmer’s Market offers a range of products from over 60 local farmers, artisans, and food vendors, accumulating around $500,000 in gross sales per year. The market draws 2,000 to 3,000 visitors every Saturday in its peak season and is a noted gathering event for citizens of Waco as well as tourists. The recently constructed McLane Stadium attracts numerous visitors to Waco during football season, and, due to its proximity, increases foot traffic and activity downtown. The stadium, together with other improvements along I-35, also serves as an aesthetic focal point for the area. Other events in downtown throughout the year also draw large crowds, including the Texas Food Truck Showdown, the Brazos Nights concert series, and the holiday celebration Waco Wonderland. These events attract thousands of people to downtown to experience Waco and help build momentum for continued investment and growth.
One large catalyst for downtown momentum has been the Magnolia Market and Silos, the retail destination for HGTV’s “Fixer Upper” stars Chip and Joanna Gaines. The venue, which includes a home décor store, bakery, local food trucks, and outdoor space, is located near downtown and draws, on average, 20,000 visitors to Waco every week. The company reported that it had hosted 1.2 million visitors during 2016 as of November. The surge of tourism in Waco associated with the local attraction contributed to a 19 percent growth in hotel revenues and a record 1.9 million visits to major Waco attractions in 2016 as of November, which is three times the number for all visits in 2015.78 In addition to drawing tourists to their store, the Silos have also produced a lot of positive national attention for the city that showcases multiple local business and attractions in addition to the Magnolia spots.
The growth in downtown activity is spurring further investment and development. One particularly anticipated downtown enhancement is the Brazos Promenade, a riverfront development that will extend along University Parks and the Brazos River from Jackson Avenue to I-35. The development seeks to “enhance the unique elements Waco offers and connect the downtown area to the Brazos riverfront.” The plans include retail, restaurant, and office space as well as a boutique hotel and a plaza designed for use by the local farmer’s market. The City of Waco is set to begin clearing the site in February 2017, with construction beginning in the summer.
The Waco MSA economy is expected to experience growth at a healthy pace over an extended time period, though business cycles in intervening years are likely. The Perryman Group’s baseline forecast indicates that output (real gross product– RGP) in the area will likely rise at a 3.30% annual pace through 2040, resulting in an increase of close to $12.1 billion and ultimately more than doubling in size from the current (2016) level.
The population of the area is projected to expand by approximately 59,100 by 2040 and bring the number of residents to nearly 323,000. Employment is forecast to grow 1.48% yearly through 2040, resulting in almost 51,000 net new jobs. Real personal income and real retail sales are projected to increase by 3.64% and 3.71% per year, respectively, a pace that will support modest increases in overall living standards.
For the purpose of comparison, the rate of growth for output (RGP) in Texas is forecast to be 3.25% annually through 2040, with employment in the state expanding at a pace of 1.70% per year.
Following the pattern typical throughout the US, the services sector is projected to generate a significant share of the net new jobs through 2040, with a gain of more than 31,200 over the period. The wholesale and retail trade sector is also projected to grow markedly, expanding by close to 6,500 jobs. Other significant areas of growth will be in the government, manufacturing, and construction sectors.
The manufacturing sector, particularly durable manufacturing, leads the pace of RGP growth through 2040, with compound annual expansion over the period forecast at a 4.22% annual rate (4.89% per year for durable manufacturing). Several other sectors are expected to see notable growth rates during the period, including services (3.49% growth per year); wholesale and retail trade (3.20%); and finance, insurance, and real estate (2.82%).
The forecast methodology used by The Perryman Group as well as definitions of economic terms are explained in the Appendices to this report. It should be noted that the “baseline” forecast is predicated on currently expected patterns in terms of relative competitiveness of the area. Investments which enhance the attractiveness of Waco as a site for business activity can materially impact future growth in a positive manner.
Growth in the various sectors of Waco’s economy leads to the need for additional real estate, whether for office or retail or other uses. The Perryman Group performed an analysis which makes use of its proprietary US Multi-Regional Real Estate Absorption System in order to estimate the future demand for additional real estate, whether through repurposing existing buildings or adding new developments. This system essentially translates detailed estimates of economic growth from The Perryman Group’s Texas Econometric Model into additional space needs. The largest needs over the long-term horizon are for additional office and industrial space, followed by additional hospitals or health facilities and retail spaces.
Further investments in infrastructure are needed in order to support future growth in Waco, particularly as a growing economy will demand new real estate developments. Infrastructure refers to the “fundamental facilities and systems that are essential to enable, sustain, and/or enhance living conditions and the economy in an area.” These structures often include roads and bridges; water treatment, storage, and distribution; and sewers and wastewater treatment. These underlying structures are absolutely necessary for everyday life but by their very nature are often hidden and therefore go unnoticed most of the time unless there is a problem. In the past, many cities have been merely reactive to city growth and the need for infrastructure improvements, only adding additional facilities and structures as deficiencies become apparent. However, as cities have become increasingly strategic towards economic development and now aggressively compete for new activity, many municipalities view proactive infrastructure investment as an essential part of preparing for future growth.
In order to meet the growing needs of the Waco community, the City of Waco has embarked on a 10-year Capital Improvement Project (CIP) that will renew and expand essential parts of Waco’s infrastructure. Specifically, the program looks to invest $139 million in wastewater projects, $131 million in water projects, and $50 million in street improvements.88 The main goals of the CIP are to “maintain Waco’s quality of life, foster economic growth and increase long-term sustainability.”
The City of Waco currently serves the water needs of more than 131,000 residents and seeks to be able to serve the estimated additional 40,000 residents over the next 25 years. Planning has also taken into account growing business developments by ensuring that large non-residential users were also a part of future projections. This approach is particularly vital as many of the people who work in the City of Waco live outside city limits but will nevertheless contribute to water-use through personal and business activities during the day.
Waco, unlike many Texas cities, is well positioned with regard to future water supplies due to the availability of water from Lake Waco, a major asset to the region. The city has also recently expanded and updated both its water treatment and wastewater treatment facilities in order to increase overall capacity. However, in some segments, Waco’s current infrastructure is 50 to 100 years old and now requires replacement or updating. Much of the CIP involves updating parts of the distribution system such as water lines, pump stations, and storage tanks in order to ensure that areas will have the coverage they require. The City seeks to pay for the CIP through modest increases in water and wastewaters rates that will average about $10 a month for residents and $25 a month for a typical business customer.
There are also plans to update other areas of Waco’s infrastructure in order to support current needs and projected growth in the area. Recently, the Texas Transportation Commission proposed a commitment of $115 million to rebuilding and upgrading the stretch of I-35 that runs through Waco, a project which will ultimately cost $300 million and could start in two years should the proposed funds be approved. Much of the Waco section of I-35 is close to 50 years old and the project could be instrumental in helping traffic flows to the major sections of town, including to and from the industrial sectors along I-35, including the Texas Central Park and Robinson Business Park located near the I-35 and Highway 6 junction. Waco Transit also has plans to reorganize the bus system in Waco through utilizing a “bus rapid transit” system that would cut down the crosstown travel times. A feasibility study is currently underway and the new system, if funding is obtained, could be operational as early as 2022 and could serve those without access to automobiles as well as those who would not typically utilize public transit.
Any economic stimulus, whether positive or negative, generates multiplier effects through the economy. As the City of Waco invests in infrastructure, for example, there will be opportunities for various local vendors of goods and services to work on the project. As these firms purchase necessary inputs and employ local workers, additional economic activity is generated.
These multiplier (or spinoff) effects were measured using The Perryman Group’s input-output assessment model (the US Multi-Regional Impact Assessment System, which is described in further detail in the Appendices to this report) developed by the firm more than 30 years ago and consistently maintained and updated since that time. The model has been used in hundreds of analyses for clients ranging from major corporations to government agencies. It has been peer reviewed on numerous occasions. It uses a variety of data (from surveys, industry information, and other sources) to describe the various goods and services (known as resources or inputs) required to produce another good/service.
This process allows for estimation of the total economic impact (including multiplier effects) of the infrastructure investments. The model used in the current analysis reflects the specific industrial composition and characteristics of the Waco MSA economy.
Total economic effects are quantified for key measures of business activity:
• Total expenditures (or total spending) measure the dollars changing hands as a result of the economic stimulus.
• Gross product (or output) is production of goods and services that will come about in each area as a result of the activity. This measure is parallel to the gross domestic product numbers commonly reported by various media outlets and is a subset of total expenditures.
• Personal income is dollars that end up in the hands of people in the area; the vast majority of this aggregate derives from the earnings of employees, but payments such as interest and rents are also included.
• Job gains are expressed as person-years of employment because of the transitory nature of any construction project.
The Perryman Group estimates that the multiplier for the Building Waco capital investment program construction process will be 3.13, that is, every $1.00 in direct infrastructure spending brings $3.13 in total local spending. The resulting total economic benefits include an estimated $470.5 million in gross product and 5,726 person-years of employment. (For results by detailed industrial sector, see Appendix C.)
Prior research by The Perryman Group indicates that well designed and implemented infrastructure generates an ongoing annual return of about 30%.
Thus, the program can reasonably be expected, at maturity, to support approximately $100 million per year in additional activity in the Waco area.
The City of Waco is taking many necessary and coordinated steps in order to support future growth in the area. The lack of proactive infrastructure improvements not only risks the quality of life in the city, but can also interrupt the momentum for economic growth. Investments now in Waco’s infrastructure will help to continue expansion that can benefit the entire city and region.
Waco is well positioned for future growth. Advantages include basic characteristics such as location and cornerstone industries such as higher education and health care. In addition, other industries continue to develop, including tourism and knowledge-based industries. The area combines the natural beauty of the Brazos River and other assets with important placemaking initiatives and redevelopment of key public spaces.
The Perryman Group expects the Waco Metropolitan Statistical Area to expand by some 59,100 residents by 2040, for a total population of 323,000. The economy is likely to double in size as measured by output (RGP), and could accelerate more through effective planning and strategic investments. This expansion will generate a need for additional infrastructure of all types.
By proactively working to ensure an orderly upgrade of major infrastructure such as water systems to meet future needs, the City of Waco can better avoid disruptions and other problems in the years to come. Planning and investing now will enable Waco to both better maintain quality of life for current residents and attract desirable economic development.