2011 Vol.

The SETX Economic Times

A quarterly journal of the Southeast Texas Economic Development Foundation

this issue
Welcome to the neighborhood P.1 Beaumont GE goes VPP P.2 Its a GO for Total P.2

Borrower Spotlight
DJs Boudain came on the market seventeen years ago firmly committed to producing a superior quality product. DJ's holds a very exacting standard of quality, not only in the manufacture, but also in the handling and distribution of its product, so that only the freshest product will reach the customer. Because of its commitment to quality, today DJ's Boudain, Inc. is #1 in sales throughout its long-time service area, and is able to develop new and exciting products to be introduced in the near future. DJs is currently undergoing a substantial expansion and SBAlliance Capital is pleased to be able to finance this project through the SBA 504 loan program. This expansion will allow DJs to produce 150,000 pounds of boudain per week. Even with its success and expansion, DJ's Boudain, Inc. remains committed to the quality that has made it what it is today. For more information on DJs Boudain please call (409) 842-0558 or visit them at 4840 Lafin Drive Beaumont, Texas 77705

Seeking Young ProfessionalsP.2 Economic Trends P.3 My Town My Job My Voice P.4

Welcome MPW Industrial Services

The Southeast Texas Economic Development Foundation would like to welcome MPW Industrial Services to our community.
MPW is the leading service provider of integrated technology-based Industrial Cleaning, Facility Management, Water Purification and Container Management in North America. As AK Steel's Supplier of the Year, MPW partners with customers to enhance operational efficiencies, improve reliability and minimize costs. Qualified, highly trained personnel respond to customer needs, delivering services with the highest ethical standards and commitment to safety. Since 1972, MPW has been providing rapid response, making MPW a pioneer in quality.

MPW will locate in the Port Arthur Business Park on West Port Arthur Road. This was the first project of the Regional Economic Development Initiative, an effort to utilize all the assets of Southeast Texas through a collaboration of the economic development professionals in Hardin, Jefferson and Orange Counties.

As available, MPW will utilize local contractors and workers to construct and manage its operations. When complete, they will have added an additional 20-30 jobs to Southeast Texas. MPW is looking forward to being involved in the local communities and having a role in the continued growth of our region. For more information on MPW Industrial Services, or the Port Arthur Business Park, please contact the Port Arthur EDC at (409) 963.0579.

Pandora Methanol to restart Beaumont facility

Pandora Methanol LLC announced on May 13, 2011, the purchase of the methanol and ammonia facility at 5470 North Twin City Highway in Beaumont, Texas. Pandora Methanol LLC is a joint venture of OCI Nitrogen (Netherlands), a subsidiary of Orascom Construction Industries, and Janus Methanol AG, a Swiss Corporation. The integrated methanol-ammonia facility was started in the late 1960s and has a production capacity of 270,000 tons of ammonia and 830,000 tons of methanol per year. The methanol unit was modernized in the early 1980s and a new ammonia line was started in 2000. The last owner of the plant, the Eastman Chemical Company purchased the asset from Terra Industries in 2008 as part of their plans for an industrial gasification facility. It has been idle since 2004. Pandora Methanol LLC will rehabilitate and operate the integrated methanol-ammonia facility. The rehabilitation engineering, and the acquisition cost and capital expenditures related to inspecting, repairing and updating the plants operating systems and environmental controls, will amount to over $ 65 million by year end. Pandora Methanol LLC expects to employ over three hundred contractors during the rehabilitation work and settle into full operations with over fifty fulltime employees. The company expects to hire all employees from the local area and looks to the community for vendors and contractors. Pandora Methanol LLC is working with the economic development staff of the Greater Beaumont Chamber of Commerce and the Southeast Texas Economic Development Foundation to further the development of the project. According to Jim Rich, President of the Greater Beaumont Chamber of Commerce, "this is great news for the community and we welcome the investment estimated at $65 Million.. We look forward to assisting company representatives in their effort to bring methanol and ammonia production back to the United States and the Beaumont area."

The Southeast Texas Economic Development Foundation | SBAlliance Capital 1110 Park Street Beaumont, Texas 77627 | Phone (409) 838-6585 | Fax (409) 833-6718 | www.setedf.org | www.sballiancecapital.org

Lender Spotlight

SBA financing has been the key to many successful businesses. An SBA (Small Business Administration) loan is a type of business loan that is guaranteed in part by the U.S. government. SBA loans can offer certain benefits not available with other types of loans. BBVA Compass has an entire team of experts who focus exclusively on helping customers apply for and receive SBA loans. BBVA has also earned SBA's "National Preferred Lender" status. Through three major business units Corporate Banking, Retail Banking, and Wealth Management BBVA Compass offers customers unique and industryleading products and services with a focus on providing customers with financial solutions to fit their lives. These products and services include commercial and wholesale banking, treasury management, Small Business Administration loans, international services, merchant processing, retail banking services, consumer loans, mortgages, home equity lines and loans, credit cards, personalized Visa Check Cards, securities brokerage, mutual funds and annuities, financial counseling, wealth management, pension plan management and insurance. For more information on BBVA Compass, please call (409) 981.7028 or visit BBVA at 700 Calder Avenue Beaumont, Texas 77701

Beaumont GE Facility Earns OSHA VPP Recognition

GE Power & Water, Water & Process Technologies has been recognized by the Occupational Safety and Health Administration as a Voluntary Protection Programs designated worksite. The Southeast Texas Economic Development Foundation, County Judge Jeff Branick, Commissioner Eddie Arnold and Beaumont Chamber of Commerce President, Jim Rich, were in attendance to congratulate the GE employees on their accomplishment. The Voluntary Protection Programs (VPP) promote effective worksite-based safety and health. In the VPP, management, labor, and OSHA establish cooperative relationships at workplaces that have implemented a comprehensive safety and health management system. Approval into VPP is OSHAs official recognition of the outstanding efforts of employers and employees who have achieved exemplary occupational safety and health. General Electric Executives were pleased to see a community that supports industry and an organization that is diligent in promoting the health and safety among its employees. We congratulate GE Power & Water, Water & Process Technologies on its VPP designation.

Total completes multi-billion dollar expansion

The project began in 2008 and after three years the Total Petrochemicals Port Arthur Refinery has completed its multi-billion dollar Deep Conversion Project. The Port Arthur Deep Conversion Project is the largest investment Total has made at a single refinery. Completion of the project has created an estimated 85 jobs, with an additional 4,700 positions filled during the construction phase. Though the location of the Port Arthur Refinery is nearly a century old, the facility, processing equipment and technology is significantly newer. With beginnings as an oil terminal in the early 1900s, refining operations have been at this site since 1936. The refinery processes a mixture of crudes with conversion capabilities centering on Coking, FCCU and Reforming technologies, with a capacity of 174,000 barrels of crude oil per day. The transformation will allow the refinery to process heavy and sour crude in the Americas and upgrade them to transportation fuels such as gasoline, jet fuel and ultra low sulfur diesel.

Seeking young professionals...

In recognition of Leadership Beaumonts 40th Anniversary, we are launching a new program. The Southeast Texas Young Professionals Organization is a group of 21-35 year old professionals in Southeast Texas organized to promote the retention and recruitment of young professionals through networking and career development opportunities throughout Southeast Texas. SETX YPO meets for morning coffees and happy hours throughout the month. There are also opportunities to network with successful professionals from across the country as we co-sponsor seminars and lecture series. The YPO has two annual fundraising events and multiple opportunities for philanthropy and community involvement. There are a wealth of talented young professionals in Southeast Texas. It is our responsibility to develop this talent in order to grow our region and produce local leaders that will continue this effort. If you are interested in learning more about SETX YPO, becoming a professional, student or corporate member, or sponsoring a YPO event, please contact: Rene Latiolais or Jessica Hill (409) 838.6581 setxypo@gmail.com

The Southeast Texas Economic Development Foundation | SBAlliance Capital 1110 Park Street Beaumont, Texas 77627 | Phone (409) 838-6585 | Fax (409) 833-6718 | www.setedf.org | www.sballiancecapital.org

Throughout the month, as

National Economic Trends -

Richard Lynch, Entergy

scheduled by the lender, SBAlliance Capital delivers breakfast to a local financial lending institution. We take this opportunity to discuss the SBA 504 loan program and any changes that might be underway . The following are our newest members of The Breakfast Club: April: Capital One May: Mobiloil FCU June: BBVA Compass

A no doubt about it slowdown has hit the U.S. economy, with recent economic reports ranging from so-so to borderline dreadful. We continue to maintain that a raft of temporary factors most notably surging commodity prices (temporary because we think they are in the early stages of unsurging), the impact of supply chain problems from the Japanese natural disaster and the inability of our elected leaders to tear themselves away from Tweeting naughty pictures of themselves long enough to solve the budget mess will eventually abate and that economic vigor will reassert itself before the end of the year. In the meantime, during Q2 well be lucky to match that 1.8% GDP growth rate we knocked down in Q1, and in a world of 9.1% unemployment that isnt good enough. Recent trends make it harder to be an optimist, but the flip side is that we also believe that theres been an overreaction to recent events owing to what we like to call Dryer Lint Syndrome. Those of you old enough to have grandparents who lived through the Great Depression know that their behavior was so permanently altered by that event that they tended to take frugality to extremes. Although nobody in our family took to saving dryer lint to knit into sweaters (weve heard stories) we did have one relative who saved gift wrapping paper for re-use and insisted on buying out of date grocery items, cake mix in particular. Dessert at her house was not always the festive ending to a meal that youd like. Similarly, the trauma from the Great Recession will linger for quite some time for this generation, notably manifesting itself by hair trigger reactions from both consumers and businesses to the slightest whiff of a hint of a touch of a problem. Exhibit One being the swift retrenchment by consumers in reaction to $4.00 per gallon gasoline and Exhibit Two being the almost instantaneous pullback in hiring by businesses as soon as they saw consumers getting green around the gills about said gas prices. Until we get some distance from the financial crisis we expect Dryer Lint Syndrome to periodically reassert itself in times of perceived duress. Whats going to be interesting is how permanent a change the Great Recession wrought in American psyches. After all, we were still suffering from out of date cake mixes 40 years after the Great Depression was just a sepia tinged memory. The biggest kick in the pants from recent economic data came from the employment report, which was one of those borderline dreadful affairs. Although it was widely expected that the report would be soft, the net gain of only 54,000 jobs created a definite oh shoot moment for economists, especially those closest to the White House and Federal Reserve. The unemployment rate also ticked back up to 9.1%. As usual, the report abounds with caveats. The temporary shutdown of a number of auto production plants due to the inability to get certain parts out of Japan (particularly electronic engine control modules, which apparently even a lot of the domestic manufacturers use) led to a small decline in manufacturing employment after six consecutive months of increases, a drop that likely will be recouped by the end of the summer. The unusually severe weather that struck large swaths of the South during the survey period also likely had a temporarily depressive effect on employment. Average hourly earnings also increased by 0.3%, which is likely a function of a job market that is tightening somewhat, at least for skilled workers who can demand wage increases. But, for all that, it was a soft report and showed that business executives can suffer from Dryer Lint Syndrome as much as anybody. Also on the list of dreary reports was the latest Institute for Supply Managements manufacturing survey, which took a vertiginous drop from 60.4 to 53.4 in May. The decline was principally due to a drop in new orders, inventory and production, all suggesting that manufacturers went back to their favorite hobby of liquidating inventory as soon as trouble lifted its head above the horizon. Now 53.4 is still a decent number and reflects a manufacturing sector that continues to expand. But we went from woo hoo to oh shoot (there it is again) in one month, which is never good. Especially since weve been counting on manufacturing to carry water for the economy while the services sector and real estate wander around the woods. Speaking of which, we
Continued on Page 4

Free Lunch Friday is taking the summer off to plan for bigger and better events this fall. Look for our Friday lunches to resume in October with special guests at new locations. As usual, this will be your opportunity to learn more about the SBA 504 loan program as well as hear updates on the economic trends of our region. If you would like to attend a Free Lunch Friday, please contact Jessica Hill at 409.838.6585.

The Southeast Texas Economic Development Foundation | SBAlliance Capital 1110 Park Street Beaumont, Texas 77627 | Phone (409) 838-6585 | Fax (409) 833-6718 | www.setedf.org | www.sballiancecapital.org

Continued from Page 3

come to one of the few recent pieces of good economic data, which is that the non-manufacturing ISM actually rose last month from 52.8 to 54.6, with new orders and employment both trending positive. This news would be really cheery if the index hadnt been near 60 only a few months ago, but well take what crumbs we can manage. The divergence of the manufacturing and nonmanufacturing sides indicates that the supply chain issues we mentioned earlier were substantial enough to be genuinely noticeable and a source of at least some of the recent economic swoon.
Picking up speed
Well Servicing Magazine | Mark Crawford

So far MyTownMyJobMyVoice has not received financial support from the oil and gas industry. We received a small grant from an energy company to pay some of the web-related and design expenses, but have been operating out of our own pockets since October 1, 2010, so this is somewhere between a labor of love and an obsession at this point, says Rich. We have applied for a grant from an energy policy group and are awaiting a final response. Companies can choose to support the cause, but will receive no advertising or recognition on the website. Face-to-face contact and providing presentations have been very effective in creating awareness among chambers of commerce. In less than six months MyTownMyJobMyVoice has signed up more than 35 chambers of commerce and is expecting dozens more to join in the next few months. This is truly a grassroots effort, says DeVille. It started as an idea and quickly became a cause, simply because people realize its the right thing to do. Chambers have embraced it because its what chambers are supposed to do protect existing businesses and support new ones. Check us out on the web (www.mytownmyjobmyvoice.org). If you like what you see and want to help, let your local chamber know. Jay Hawkins, president of Hawkins Lease Service in Alvin, Texas and an AESC member, attended a MyTownMyJobMyVoice about six months ago in Baytown, Texas. I was impressed by the message and the openness of the organization, he says. Most AESC members are servicing companies that provide goods, services and personnel to the oil and gas producers. It would be beneficial for everyone to support this group, which is striving to work with those who may not fully understand the efforts we put in, day in and day out, to provide jobs for our communities. The success of the oil and gas industry, and consequently its ability to support and contribute to local, state and national economies, stems from partnerships and strong collaboration between the industry, the community and government officials. If we dont communicate the importance of industry, oil and gas companies will lose their ability to compete in the U.S. Read the full article http://wellservicingmagazine.com/my -town-my-job-my-voice

Interesting thing about auto sales. A few years ago, if the Japanese manufacturers had been caught short of product you would have seen the domestic manufacturers step up the incentives to gain back market share. Not this time kemo sabe. The domestics held the line on incentives and although they gained market share from (particularly) Toyota and Honda, the net result for the industry as a whole in May was a drop in the annualized selling rate of about 10% from April, down to below 12 million units. This reflects three things: 1) the industry has inventories right where it wants them and are willing to accept short-term sales declines in order to protect profit margins, 2) the domestic industry really isnt your fathers Oldsmobile anymore and no longer needs high sales and production rates to cover its outlandish overheads, and 3) the industry can no longer rely on artificial demand from the Ohio State football program, which is obviously going to hurt. Were originally from Ohio, by the way, and our home boy sources tell us that they have a new name they call Jim Tressel and Terrell Pryor, and it isnt kemo sabe. Kemo sabe, as we continue to digress, means trusted friend or trusted scout" according to Wikipedia. Nobody really seems to know for sure, however, since another impeccable internet source claims it derives from a Navajo phrase that means soggy bush. Which seems unlikely but would explain the Lone Rangers mask its got to be embarrassing when your sidekick calls you a soggy bush on national television. Speaking of obvious hurts, weve been avoiding discussion of the real estate market for awhile now because we didnt want to depress you unduly, but its continuing travails are certainly not doing those suffering Dryer Lint Syndrome any good. We are well and truly into a deep double dip in home prices, which through March were down 6.6% from last years tax credit enhanced levels. Finding a bottom to the housing market would sure do the economy a powerful lot of good, since housing is usually one of the sectors that rebounds earliest and strongest from recessions. The obvious source of the ongoing distress is the overhang in foreclosed properties that continues flooding the market. The flow slowed for awhile because of the scandal regarding the robo signers of foreclosure documents at some large financial institutions, but is back at full crest now. The downturn in household formation from the recession and its subsequent painfully slow recovery hasnt helped a bunch either. Even in a best case scenario, it figures to be at least into next year before the foreclosure overhang abates. Moodys Analytics calculates that the number of vacant homes on the market is about 1.5 million units above what would be considered normal given long-term trends. New home construction at todays depressed construction rates is adding around 600 thousand units annually to the available housing stock. To get back to a reasonable inventory of vacant properties, therefore, we need to create enough demand to burn through a bit more than two million units of excess inventory. At current absorption rates, including new household formation, houses lost to obsolescence and second homes, that will take over a year. It might be a little less than that due to the recent surge of speculators moving into the market to purchase homes to use as rental properties. On the other hand, the recent move down in home prices has also increased the number of strategic defaults, where homeowners have the ability to continue to pay their mortgage but decide to walk away because they are so far underwater (the mortgage is higher than the market value of the house) that they dont see the point of throwing good money after bad. Leaving aside questions of ethics and long-term financial planning, this might well lead to another burst of unexpected foreclosures and further delay the market reaching equilibrium. Of course one of the prime motivations for the Federal Reserves dalliance with quantitative easing was to help the housing market. Mission unaccomplished on that score. Actually, it is arguable whether QE 2 has had much of any positive effect other than to drive up stock prices. Its also been one of the principal forces behind the commodity price spike, but unless youre a commodity producer or price speculator thats been a clear negative for most of the rest of the economy. So now that we are reaching the end of the cycle of central bank bond purchases its prudent to ponder next steps. Weve got a camp that is pushing for QE3, we suppose on the grounds that if you keep pounding away at something long enough it has to work sometime. But recent comments by Chairman Bernanke indicate that even the Fed Board of Governors is cognizant that such a course would be borderline insane. Instead, many market participants are now touting an alternative they are dubbing QE 2.5 (were not making this up, honest) which would keep the Fed balance sheet at or near its current bloated state for an indefinite period of time rather than beginning to unwind it as soon as QE 2 concludes. We suspect that this is the course that the Fed will take, as it is the course of least resistance and will not force them to actually tighten at a time when the unemployment rate is increasing.

The Southeast Texas Economic Development Foundation | SBAlliance Capital 1110 Park Street Beaumont, Texas 77627 | Phone (409) 838-6585 | Fax (409) 833-6718 | www.setedf.org |