Toyota Tundra manufacturing line in the Southside, San Antonio. Photo courtesy of Toyota Texas.
The City’s agreement with Toyota calls for the automaker to spend up to $392 million to expand existing buildings and enhance production lines and equipment during the next three years. Credit: Courtesy / Toyota Texas

Mario Hernandez leaves his successor in a much better position than the one Hernandez encountered when he arrive in San Antonio from a state job in Austin in 1984. Texas was about to follow the nation into recession, spurred by a collapse in oil prices, high inflation, rising interest rates, and then the savings and loan crisis. San Antonio, then a city of less than 1 million people, was a two-industry town: tourism and the military. The Spurs finished the 1983-84 season 37-45. No one considered San Antonio a contender.

Hernandez, who has served for 25 years as president of the San Antonio Economic Development Foundation and worked at EDF for a total of 32 years, will retire in June 2016.

“Next year will be my 40th year in the economic development arena, it’s time, ” Hernandez said Thursday in a conversation looking back over that unusually long tenure. “The time is right because we are having another banner year, 4,400 new jobs this year on top of 4,700 new jobs in 2014. I’ll keep going full speed while the board starts its search, but it’s very unusual for someone in my position to last so long in one place, which has been great, but it’s time.”

Hernandez started his career in Corpus Christi in 1976, moved to Austin in 198o to work in the state’s economic development office, and was recruited to San Antonio in 1984 just as all the economic indicators started to head south.

“I remember those years in the ’80s, things kind of fell apart, and we were left to scrounge for little companies with just a few jobs. We had other tough times, too. 2001 was tough and 2008 was slow, but overall, we’ve done well in San Antonio over the years,” Hernandez said. “This is a different city now. When I started, I would come into the office and start making cold calls on the telephone, telling people I was from San Antonio, Texas – I had to say Texas – and people on the other end of the line didn’t know anything about the city or why I’d be calling to talk to them. Now, San Antonio makes all the lists when companies are looking at major U.S. cities. That’s how far we’ve come in 30 years. The change has been phenomenal. In the early ’80s we had tourism and military, maybe a little health care to talk up, but not much else. We didn’t even talk about tech. Not we can point to state-of-the-art automobile manufacturing, aerospace, tech, cloud computing, food processing, and more.”

Mario Hernandez (arms folded) looks on as USAA Chairman and CEO Gen. Robert "McD" McDermott speaks. Courtesy photo.
Mario Hernandez (arms folded) looks on as USAA Chairman and CEO Gen. Robert “McD” McDermott speaks. Courtesy photo.

Asked to sum up the change in the city’s economy in a sentence, Hernandez said, “More economic diversity, better paying jobs, more skilled workforce.”

“Back in the late ’80s, we were thrilled that Sears would come here and hire 1,000 people to work the phones and take catalog orders,” Hernandez said. “Now we are a big data center, a growing cybersecurity center, we have a thriving biosciences community. The city has a lot to be proud of. I have to lot to be proud of.”

What was his finest moment?

“My finest moment and everyone’s finest moment in San Antonio’s economic development was landing the Toyota plant, and making so much of the opportunity once we were given that chance,” Hernandez said. “That’s 6,000 jobs and billions of dollars. I’m proud of how the community rose to the occasion. In the summer of 2002 Toyota started their site selection for their sixth plant in the U.S. and Texas wasn’t even on the list. By February 20o3 we had come all the way, not only getting on the list, but we won, and we’ve proven our city could do it. We had worked so hard, Henry Cisneros and others, to establish close relations in Japan over the years and it paid off.”

Where once San Antonio saw only Mexico as an international trading partner, Hernandez said 20% of all economic development leads at EDF involve foreign companies. Some in the local media have criticized local officials for exploratory, sometimes ceremonial trips abroad, those efforts are increasingly resulting in new international investments here.

“We will now have three or four international based companies locate offices here every year,” Hernandez said. “Almost 20% of our active projects are foreign based. We have Mexico, Japan, Germany, India, Spain, Korean all with companies that have been established here now. We can compete for those international companies, we are finally on the map.”

International business, Hernandez said, is now making up for the “megadeals” that once dominated cities vying for major economic development leaps forward.

“The days of the megaprojects, at least for now, are gone,” he said. “We are not likely to land another original equipment manufacturer, for example, because we have Toyota, but we are likely to land other suppliers. You don’t even see the megadeals on back office operations anymore like we once won. It’s not San Antonio, it’s a national trend. That’s one of the reason being successful in foreign direct investment is so important. The U.S. companies are not producing the jobs the way they did in the 90s.”

The two greatest economic setbacks to hit the city in Hernandez’s time were the slow-motion closing of Kelly Air Force Base over the late ’90s and 2000, and the decision by AT&T CEO Randall Stephenson to move AT&T from San Antonio to Dallas in 2008 without prior warning to local officials. No one could have prevented that move as Stephenson sought a bigger stage for his Fortune 10 telecommunications company, saying at the time that the lack of direct air connections was the city’s Achilles heel. In fact, AT&T’s large fleet of private aircraft meant corporate executives always flew nonstop at the hour of their choosing, but just as his predecessor, former Chairman and CEO Ed Whitacre Jr. had moved Southwestern Bell from St. Louis to San Antonio and then built it into the giant AT&T, Stephenson was determined to make a fresh start in a new setting.

Mario Hernandez making a presentation to Bill Greehey, then-Chairman and CEO of Valero, now Chairman of NuStar Energy. Courtesy photo
Mario Hernandez makes a presentation to Bill Greehey, then-Chairman and CEO of Valero, now Chairman of NuStar Energy. Courtesy photo

I asked Hernandez to name the deal he most regrets not closing. Was it the recent loss of the multi-billion dollar Tesla battery to Reno, NV?

“No, not Tesla. As hard as we fought for Tesla, and I do believe we had a very competitive package, it was always a long shot for us because of the long distance for the company to its base. Bell Helicopter is the deal that has always stuck in my throat,” Hernandez said. “Textron was the parent company, there was the Apache helicopter production, and the City and Bell were looking at redeveloping Kelly AFB. We were about to celebrate and announce the deal, and then Amarillo, of all places, offered them $10,000 per job and Textron, the parent company, took the money. We were so close. It was the late ’90s. There have been others like that, but that’s the big one that got away for me.”

I asked Hernandez to make the case for why San Antonio should be able to go to a leading edge city and recruit away a highly talented economic development executive to replace him.

“I’d have to start with what I’d term big data, IT, cybersecurity, data management and analytics, I think we are going to be big player in that arena, there is a lot of upside potential growth,” Hernandez said. “It’s not easy to get your hands around. It’s a moving target, and the niches can be small. On the cybersecurity side, you’re competing to land a project of 20 or 30 jobs at a time, but a lot of brainpower comes with that group. I’d also tell my successor that we’ve become a good center for transportation equipment manufacturing, both auto and aerospace. Port San Antonio is primed to build its commercial aircraft business, including aircraft production. There’s huge potential for advanced manufacturing in general, and leveraging our ties to Mexico to work together as a region.”

The opportunity, Hernandez said, is one that should attract a lot of talent. How cities compete now and in the future, is bound to become a topic of conversation and debate with the news that Hernandez is retiring. The City of San Antonio, Bexar County, the SAEDF and the leading chambers of commerce all have economic development budgets, executives and strategies. Does San Antonio have the right structure in place? Is the search committees’ task to recruit Hernandez’s successor, or is it to rethink the architecture of economic development at the same time?

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Robert Rivard

Robert Rivard is co-founder and columnist at the San Antonio Report.