In a glass-walled conference room at the California headquartersof Space Exploration Technologies Corp., Chief Executive OfficerElon Musk told Texas officials he was interested in building theworld's first commercial rocket launchpad in their state — if thestate could compete.

In the months after the 2011 meeting, state and local officialsgave Musk, a billionaire, what he and his lobbyists sought: about$20 million of financial incentives, laws changed to close a publicbeach during launches and legal protection from noise complaints.SpaceX, as the company is known, hasn't said whether the Texassite, near Brownsville, the poorest metropolitan area in thenation, will be selected over locations in Florida, Georgia andPuerto Rico.

State and local governments often fall into bidding wars forjobs, offering tax breaks and sweeteners amounting to $70 billionannually, according to Kenneth Thomas, a political scienceprofessor at the University of Missouri in St. Louis.

“You've got to make sure you're providing what everybody else isproviding for tax incentives and tax breaks,” said John Baldacci,who was governor of Maine from 2003 to 2011 and regularly receivedrequests for tax breaks.

Three years of discussions among Texas officials and SpaceXrepresentatives culminated with the incentive offers, according tointerviews. SpaceX hired lobbyists and flew a key lawmaker to itsoffices. Musk gave about $12,000 in campaign contributions.

Emily Shanklin, a SpaceX spokeswoman, declined to comment onincentives. Texas officials said they're necessary to lure jobssought by many other states.

The state stepped up its corporate blandishments in 2003 bycreating a dedicated fund. It was two years after Boeing Co.decided to locate its headquarters in Chicago instead ofDallas.

The issue of government subsidies drew national attention inJanuary as states from California to South Carolina offeredbillions to land production of Boeing's 777X aircraft. Officials inLouisiana last year agreed to as much as $257 million in incentivesfor Johannesburg-based Sasol Ltd. to build a plant to convertnatural gas to diesel fuel and other products. Rental-car companyHertz Global Holdings Inc. agreed in 2013 to move its headquartersfrom New Jersey to Florida after being offered $85 million inincentives.

For Texas, the second-most-populous state, where unemployment is6 percent and 252,400 positions were created last year, SpaceXwould represent a blip in the economy.

Left Behind

The employment potential — including about 600 directly employedby SpaceX — is more significant for the local economy. In theregion near the launch site, at Boca Chica Beach in the state'ssouthernmost tip, two of five residents live in poverty. Leaders ofthe historically impoverished border town are seeking to make it aswell known for space travel as Houston, home of NASA's JohnsonSpace Center.

Some current and former Texas lawmakers say the state shouldn'tgive away revenue in exchange for jobs.

“A lot of money is given to people that doesn't benefit but afew people,” said A.R. “Babe” Schwartz, a lobbyist who served inthe legislature for 26 years until 1981. “It's good for whoever gotthe money and for the lobbyists who got it.”

The Texas negotiations started with SpaceX's telling RepublicanGovernor Rick Perry's staff of its interest in early 2011, saidJosh Havens, an aide to Perry at the time.

Perry's office called Gilberto Salinas, executive vice presidentof the Brownsville Economic Development Council, which recruitsbusinesses, as he was on his way to dinner to celebrate his son'sbirthday.

Three weeks later, Salinas and four other people fromBrownsville met with Musk, who also started PayPal, the Internetpayment system, and Tesla Motors Inc., an electric car company, atthe company's Hawthorne, California, headquarters, Salinas said.Musk, 42, has a fortune of $9.8 billion, according to the BloombergBillionaires Index.

He founded SpaceX in 2002 to build and launch rockets to servethe International Space Station. The company has conducted launchesat the Kennedy Space Center to supply the space station under acontract with the National Aeronautics and Space Administration andin December won the right to lease a launch pad there.

During the meeting, Musk described his dream to take people toMars, Salinas said. He also said Texas needed to compete with otherstates.

“They told us, 'You're one of quite a few locations we'relooking at,'” Salinas said.

Salinas said he concluded the project would transform theregion.

Hiring Lobbyists

“It made me want the project,” Salinas said. “I thought, 'Ifwe're not going to go all out for this project, which one will wego all out for?'”

In downtown Brownsville, 350 miles (560 kilometers) south ofAustin, aging buildings and small homes share the landscape withshaggy palm trees and oxbow lakes. The area has the lowest medianhousehold income of any metropolitan area in U.S. states, about$32,000, compared with a national average of about $53,000,according to the Census Bureau.

Economic development officials began selling the project toskeptical residents, said Salinas. At one meeting with residents todiscuss the project, Salinas was mocked as Buzz Lightyear, afterthe character in “Toy Story” who thinks he's a real astronaut.

The company started buying undeveloped land at the proposedsite, a sandy prairie with grass and an occasional cactus.

SpaceX increased spending for lobbying. The company had onelobbyist starting in November 2011. By the end of 2012, it waspaying five between $95,000 and $200,000 in aggregate, according tostate records, which require that the company report only a rangeof expenditures.

Company lobbyists and lawyers opened discussions with stateRepresentative Rene Oliveira, a Brownsville Democrat. They laid outwhat the company wanted from state and local officials, includingchanges in the law and incentives, he said.

SpaceX wanted the government to cover the cost of buildingelectric and water lines to Boca Chica Beach, the proposed launchsite, near where the Rio Grande empties into the Gulf of Mexico,said Oliveira.

In 2012, before the biennial legislative session, Musk and atrust in his name donated $1,000 to Representative Jim Pitts, aRepublican who is chairman of the House Appropriations Committee,$1,000 to Oliveira and $3,000 to Senator Eddie Lucio Jr., aBrownsville Democrat.

California Trip

Pitts and his then-chief of staff, Aaron Gregg, visited SpaceX'sheadquarters in January 2013. The company spent $6,803 on thethree-day trip, including bills for a hotel steps from the SantaMonica beach, according to state records.

SpaceX won Pitts's support, which was key to getting incentivesapproved, said Oliveira.

He “was very helpful in obtaining the commitment to spend $15million,” Oliveira said.

Requests to interview Pitts were referred to his chief of staff,Victoria Weber, who didn't respond to written questions. Greggdeclined to comment.

As the legislative session was under way, Oliveira said he toldMusk to “plant the flag” by meeting with lawmakers.

Musk heeded the advice. On March 8, he appeared at a hearingbefore Pitts's committee, which oversees spending, at the Capitolin Austin. Oliveira and a SpaceX lobbyist appeared with him.

“Any support Texas can offer would be helpful,” Musk said at thehearing. While Texas was the leading candidate, “We are absolutelylooking at other locations.”

Oliveira said Texas had to compete with other places. He toldlawmakers that Florida had $20 million this fiscal year to recruitspace-related companies.

Tina Lange, a spokeswoman for Space Florida, the state'saerospace economic development agency, declined to comment on thevalue of possible incentives. Officials in Puerto Rico and Georgiaaren't publicly discussing any.

“For us to be competitive with other states, we have to makethis attractive,” Oliveira told committee members. “We've heardnumbers from other states that are pretty aggressive.”

By the end of the 2013 legislative session in May, lawmakersapproved everything the company wanted, including changes to thelaw and $15 million for infrastructure.

Approval of incentives by the local officials is pending a finaldecision by the company, according to Salinas. Cameron County,where the beach is located, plans to offer tax breaks that couldsave SpaceX $2 million over 10 years, said County Judge CarlosCascos, the top elected official.

The company likely will receive $3 million in incentives fromthe Brownsville Economic Development Council, which receivesgovernment funding, according to a person familiar with thenegotiations who asked not to be identified because no finaldecisions have been reached.

State and local officials said they hope the incentives they puttogether will close the deal.

“We've moved forward over the past three years and doneeverything they've asked of us,” said Tony Martinez, mayor ofBrownsville. “We were competitive with whatever Florida was puttingtogether.”

Bloomberg News

Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.