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Finders. Keepers. | |||
Communities are finding it challenging – and expensive – to keep some of their marquee companies in town. Here’s a sampling of recent business retention opportunities. Officials in Washington D.C. are celebrating the decision by National Public Radio (NPR) to build a new headquarters in the District’s up-and-coming NoMA neighborhood. The celebration comes with a price: property tax breaks worth $40 million over 20 years. The District has also agreed to limit property tax increases on NPR’s existing building to 3% annually for 20 years or until NPR sells it. In return, NPR will build a 10-story headquarters for its 600 employees. It will join CNN, XM Satellite Radio and the Bureau of Alcohol, Tobacco and Firearms in the emerging neighborhood. NPR had also considered a site in downtown Silver Springs MD just north of the District where officials promised $32 million in tax breaks and an $18 million parking lot. The challenge facing leaders in Tacoma WA is a big one: retaining the largest employer in downtown Tacoma while other communities including nearby Seattle make their own pitches for the firm. Russell Investment Group, a global financial services firm, currently employs 1,100 people in four leased office buildings but plans to consolidate operations in a new headquarters facility. To date, officials have assembled a $148 million incentive package that includes the elimination of occupation taxes for financial services and an exemption from certain state taxes if the firm builds in Tacoma’s special economic development zone. It also includes $66 million in infrastructure for a new downtown business district called the International Financial Services Area. Tacoma officials have gone a step further: they’ve presented a detailed study comparing costs in Tacoma and Seattle. Dubbed “The Russell Advantage in Tacoma,” the study identifies an additional $133 million in savings over 10 years, based on commuter costs and lower prices for homes, cost of living and utilities in Tacoma. The message for Russell, according to Bruce Kendall, president of the Economic Development Board for Tacoma-Pierce County is straightforward, “You choose the site and we will make our end of it happen.” Company officials are entertaining proposals from nearby communities as well as San Francisco and Philadelphia; they have told local officials that at least two sites in downtown Tacoma are on their short list. A decision is expected by the end of 2008. In 2007, a $50 million incentive package was instrumental in keeping 2,000 jobs and the headquarters of Goodyear Tire & Rubber Company in Akron OH. Now, local and state officials are assembling an incentive package to retain the Akron technical center operated by Bridgestone Firestone North American Tire LLC. The proposed package includes $68 million in direct and indirect incentives including construction of a new research facility that would be leased to the company. The firm’s current technical center employs 629 workers but is housed in an outmoded 98-year-old former factory. Firestone Tire and Rubber Co. was founded in Akron in 1900 but moved its headquarters to Chicago in 1987. Bridgestone Corporation bought Firestone in 1988 and moved the headquarters of the combined company to Nashville in 1992. Bridgestone Firestone employs over 1,000 in the Akron metro area. Bridgestone Firestone is also entertaining an incentive package from Tennessee officials where it is headquartered. Company officials expect to decide on a site by the end of this year. Source: “NPR to Remain in the District” by Yolanda Woodlee and Miranda S. Spivack. The Washington Post. March 6, 2008. “Tacoma aims to keep Russell Group” by Bill Virgin. The Seattle Post-Intelligencer. April 1, 2008. “Will Russell catch Tacoma’s Hail Mary pass?” by Dan Voelpel. The Tacoma WA News Tribune. April 6, 2008. “Tire maker hears proposal” by Jim Mackinnon. The Akron OH Beacon Journal. March 27, 2008. “Bridgestone Firestone offered $68 million incentive package to keep jobs in Akron” by Shaheen Samavati. The Cleveland Plain Dealer. March 28, 2008. | |||
Focus On The Customer |  | ||
Sometimes, the effort to retain a major employer identifies an opportunity to sharpen the focus of the economic development process. This was the situation facing officials in Columbus OH last year as they worked to retain the local operations of New Jersey-based NetJets Inc. Ohio Lt. Governor Lee Fisher was quick to admit that the local and state response to NetJets site selection process wasn’t always smooth. One problem: NetJets demanded that local and state officials provide one comprehensive incentive package, not a “patchwork of offers.” Fisher noted, “For a very short period, it’s fair to say that the effort between the public sector, private sector, state and local governments was not sufficiently coordinated…. They were dead serious about the possibility of leaving. And NetJets put our feet to the fire in a way that helped us perform better as a state department.” As a result, a full court press went into effect that coordinated various incentives available at the local, regional and state levels. A major effort was made to emphasize the existing assets of the Columbus region including quality of life, potential for expansion at Port Columbus International Airport and the availability of skilled workers graduating from the region’s colleges and universities including Ohio State University in Columbus. The coordinated response also relied on the CEO’s of other major Columbus-based companies to sell the advantages of Columbus to NetJets CEO Richard Santulli. The peer-to-peer meetings involved the CEOs from such high profile firms as the Limited Brands Inc., Nationwide Mutual Insurance Co., New Albany Co., Huntington Bancshares Inc. and Battelle. Santulli also met with Ohio Governor Ted Strickland. Even Ohio State University Jim Tressel was tapped to assist in the retention effort. NetJets $200 million expansion at Port Columbus International Airport was secured with almost $68 million in public incentives. The firm will consolidate operations at the airport, growing its campus from 19 acres to over 120 acres. The firm, which already employs 2,000 in Columbus, could add as many as 800 new jobs over the next three years. It will also expand operations for its sister firm, FlightSafety International, which trains pilots. During its year-long site selection process, NetJets considered locations in Orlando FL and Fort Worth TX. The other finalist was Raleigh-Durham NC adjacent to the Research Triangle Park. Source: “NetJets not landing in N.C.” by Jonathan B. Cox. The Raleigh-Durham NC News and Observer. March 13, 2008. “City’s newfound ‘swagger’ helps keep NetJets” by Adrian Burns. Business First of Columbus. March 17, 2008. | |||
The Heart Of It All | | ||
It’s two-in-a-row for the Buckeye State! For the second consecutive year, Ohio has captured Site Selection magazine’s annual Governor’s Cup, a state-by-state tally of new and expanded corporate facilities. Based on Conway Data Inc.’s New Plant database, Ohio in 2007 generated more new and expanded facilities than any other state – 399 compared to 362 for runner-up Illinois. Key to the win were projects like a new $400 million, 500-job manufacturing plant for Amylin Pharmaceuticals in West Chester and Goodyear Tire and Rubber’s decision to stay and expand its headquarters in Akron with a massive $890 million mixed use development that retains 3,000 jobs and provides a foundation for additional new jobs. State officials cite several factors that make Ohio attractive to new investment including tax reform that makes the state more competitive for new manufacturing operations. Ohio also offers a diverse work force, the Midwest’s reasonable cost of living, good transportation infrastructure and a central location ideal for logistics. An added plus: a strong network of higher education and research centers located across the state. Ohio won the Governor’s Cup in 2003 and notched three-in-a-row from 1993-1995. To be eligible for the Governor’s Cup, a project must meet one of three criteria: a) generate $1 million in new investment; or b) create 50 new jobs; or c) add 20,000 square feet of space. It’s interesting to note that 4,888 projects were eligible in 2007, compared to 4,774 in 2006 and the peak of 12,702 projects in 1999. The analysis also ranks the top metro areas – Chicago is #1 in metros with over one million in population; Greensboro-High Point NC is tops in mid-size metros; and Sioux City IA ranks first among metros with less than 200,000 population. The top micropolitan market for 2007 is Lexington-Thomasville NC. To read more, go to www.siteselection.com and the March issue. Source: “Victory Lap!” by Mark Arend. Site Selection. March 2008. | |||
Car Talk | | ||
Sales may be falling in North America but the Detroit Three have found new life in export markets. This time, the Detroit Three have aggressive plans to sell more U.S.-made cars to Europe, China and Latin America. It’s a dramatic about-face made possible by two factors: the weak dollar and last year’s labor deals which significantly lowered the cost of making autos at home. Autos made in the U.S. are now cost-competitive globally which could translate into more jobs at auto plants across the nation (new hires earn $14/hour instead of the previous $26 under the UAW labor contract). General Motors Corporation plans to export 25,000 made-in-Michigan Buick Enclaves to China. GM may also sell the Chevrolet Malibu, made in Kansas and Michigan, to Latin American markets. Chrysler LLC is exporting Dodge Caravans from its St. Louis plant and Dodge and Jeep models from its Illinois factory to markets across Europe. Exports of the Dodge and Jeep vehicles are up 40% from one year ago. Even Toyota gets the blues – the sales blues, that is. In the U.S., Toyota Motor Corporation is uncharacteristically experiencing some of the same problems as the Detroit Three: declining sales and excess production capacity. U.S. sales in March 2008 fell 10%, almost matching the 12% decline in total U.S. auto sales for the month. To make matters worse, Toyota’s sales have declined in seven of the last nine months. The problem is being exacerbated by the company’s aggressive program to build assembly plants in the U.S., Canada and Mexico to meet sales that had previously grown an average of 12% per year. Toyota now has six North American assembly plants: four in the U.S. one in Canada and one in Mexico. Another plant in Ontario opens later in 2008 while its eighth plant in Mississippi is under construction. Declining sales and excess production capacity are impacting profitability – unfamiliar territory for a company that last year surpassed General Motors Corporation as the world’s largest auto maker. The top five auto producing states hasn’t changed much except for #5. In 2007, auto production in Alabama increased by almost 6%, enabling the state to slip past Tennessee to become the nation’s fifth-ranked auto producing state. 739,000 vehicles were built in Alabama in 2007 at Honda Motor Corporation’s facility in Lincoln; Hyundai Motor Corporation’s plant in Montgomery; and the Mercedes-Benz facility in Vance. Michigan produced 2.3 million vehicles in 2007, making it the top ranked state. The rest of the Top Ten are (in order): Ohio, Kentucky, Missouri, Alabama, Indiana, Illinois, Tennessee, California and Texas. For years, North America led the world in auto production capacity. Now, car makers in Brazil, Russia, India and China – collectively known as the BRIC nations – will surpass North America in total auto production capacity for the first time in 2008. These four nations now have the capacity to produce as many as 20 million vehicles per year compared to 17.4 million in North America. Capacity at North American auto plants has been on a slow but steady decline after peaking at 19.6 million vehicles in 2002, according to the Bank of Nova Scotia. Actual output has also fallen: according to the Automotive News Data Canter, production fell 3% in North America from 15.9 million vehicles in 2006 to 15.5 million in 2007. North American car plants are projected to make just 14.7 million vehicles in 2008. Conversely, capacity and output have grown in emerging markets. Almost 90% of all new vehicle production capacity since 2003 has been located outside of North America, despite major investments by Asian auto makers in Canada and the U.S. The world’s hottest auto market remains China where sales for the first quarter of 2008 grew 21%. Almost 2.58 million vehicles were sold from January through March. While Honda Motor Corporation’s sales declined 0.4% in the U.S. for the first quarter, they grew 29% in China. Ford Motor Company posted a 54% increase in the sales of passenger cars in China while sales in the U.S. fell 0.8%. General Motors Corporation saw its China sales increase just 6.8% for the quarter although GM sold more cars in China in the first quarter than Honda and Ford combined. Source: “Detroit Sets Bold Goal: Exporting U.S. Cars” by John D. Stoll, Norihiko Shirouzu and Neal E. Boudette. The Wall Street Journal. April 8, 2008. “Toyota Feels Pinch Along With Big 3 As Sales Dive” by Norihiko Shirouzu, Mike Spector and Josee Valcourt. The Wall Street Journal. April 2, 2008. “Alabama moves to fifth among automaking states” by Dawn Kent. The Birmingham AL News. April 8, 2008. “Car builders abroad race past North America” by John Partridge. The Toronto Globe and Mail. March 27, 2008. “Strong Demand Drives Rising Car Sales in China” by Patricia Jiayi Ho. The Wall Street Journal. April 10, 2008. | |||
Good News Now. Bad News Later. | | ||
The employment picture in Canada is a case of good news now with bad news to follow, according to economists there. To the surprise of federal officials and many economists, Canada created 90,000 new jobs in January and February 2008 – the most for this two-month period since 2002. Most of the jobs were in the services sector, although construction and utilities added jobs as well. The robust job growth came as the nation’s manufacturing sector continued to lose jobs – 23,700 in the first two months of the year. A total of 106,000 manufacturing jobs were lost in Canada in 2007, with 20,000 lost in Ontario alone. Despite the manufacturing losses and the nation’s links to the U.S. economy, some economists – and politicians – see only good news. Economist Dawn Desjardins with the Royal Bank of Canada, noted, “Canada is becoming increasingly service-oriented… That is supporting these employment numbers.” Federal Finance Minister Jim Flaherty was also optimistic: “This is a good development. We have economic growth in all regions of the country and people are able to adjust to get new jobs.” Most economists in Canada are decidedly less optimistic. They note that up to 80% of Canada’s exports are destined for the U.S. where the slowing economic is being matched by job losses (63,000 in February alone), not job increases. They predict that it’s only a matter of time before the Canadian economy – and job market – is impacted by the U.S. economy. Source: “Canadian job creation runs against U.S. trend” by Kevin Carmichael. The Toronto Globe and Mail. March 7, 2008. | |||
Fueling Job Growth | | ||
During the protracted 2008 U.S. political campaign, politicians of all stripes have touted the potential of alternative energy to create jobs and investment. For some states, the promise is already a reality. One leader is Iowa where wind farms have attracted international equipment manufacturers who have created hundreds of jobs (see "A Mighty Wind" January 2008 Archives). Iowa, however, is not alone. Major new projects from Colorado and California to Texas and New Mexico are underscoring the importance of alternative energy as a way to power local and regional economies. Southern California Edison is building a wind farm in the desert about 100 miles north of Los Angeles that could provide power for as many as three million homes by 2013. Part of a $5 billion initiative, the Tehachapi Renewal Project will generate 4,500 megawatts of electricity when complete, surpassing the 730 megawatts being produced at the Horse Hollow Wind Project in Texas, currently the nation’s largest. Texas oilman Boone Pickens has turned his attention to wind power. He is investing as much as $10 billion to build a wind farm in Texas that would generate 4,000 megawatts of power. At the same time, Shell and TXU Corporation are planning a 3,000 megawatt wind farm in the Texas Panhandle. Already the nation’s largest wind farm state, Texas saw over $700 million in wind farm investments announced in January 2008 alone. About 3% of the state’s electricity is generated by wind power – enough for one million homes. Despite the growth of wind energy in Texas, Renewable Energy Systems Americas (RES-Americas) has moved its headquarters from Austin TX to Broomfield CO. Founded in 1997, the firm completed seven projects last year that produce a combined 870 megawatts of power. The firm is just one of several active in Colorado’s growing alternative energy sector. ConocoPhillips recently announced that it would establish a research and development center for renewable energy at the former StorageTek campus in Louisville CO. In March 2008, Danish wind energy firm Vestas Wind Systems opened a blade manufacturing plant in Windsor CO that will eventually employ 650 workers. The facility is expected to produce 1,800 blades per year for wind farms in the western U.S. Vestas has also put Colorado on the short list for its proposed research and development campus. The R&D center would employ 70 to 95 people and would benefit from the expertise at the state’s colleges and universities and the National Renewable Energy Laboratory in Golden CO. Vestas plans to select a site by the end of 2008. Source: “Southern California Edison breaks ground on wind farm to power 3 million homes” by the Associated Press. As seen in the Pittsburgh Post-Gazette. March 7, 2008. “Move Over, Oil, There’s Money in Texas Wind” by Clifford Krauss. The New York Times. February 23, 2008. “Energy company blows into Colo.” by Andy Vuong. The Denver Post. March 27, 2008. “Colorado fills sail for wind R&D hub” by Allison Sherry. The Denver Post. March 27, 2008. | |||
Fueling Job Growth Part Two | | ||
New jobs and investment aren’t just riding on the wind. A major investment in New Mexico is focused on solar energy… and nuclear energy is back in a big way, generating thousands of high-paying skilled positions. In Albuquerque NM German firm Schott AG is building a 200,000 square foot facility that will make photovoltaic panels and receivers for solar thermal power plants. The initial investment will be $100 million but the firm has plans to quadruple the facility and invest as much as $500 million over the next few years as demand grows. Initial employment will be 350 with the potential for as many as 1,500 when the site is fully developed. According to Gerald Fine, president of Schott North America, “For us, this is more than just another production facility making another industrial product. It’s part of our vision, our legacy and a declaration that we’re committed to solar energy, to high-tech manufacturing and to the future of this country.” In 1979, nuclear power appeared doomed following the Three Mile Island disaster in Pennsylvania. Fast forward to a new century with rapidly rising oil prices and international concern over fossil fuels and global warming. Nuclear power is now being viewed as a safe and reliable alternative to fossil fuels. As consultant Charles Goodnight, explains, “I think the stigma has faded away…. TMI [Three Mile Island] is a distant memory. From an industry perspective, it was a generation ago.” Indeed, the nuclear energy sector is booming: 84 reactors have received or are applying for license extensions. Another 22 new reactors are being planned. All of this activity equates to jobs – as many as 90,000 high paying jobs over the next few years. It's a combination of new positions to meet increased demand and replacements for an aging workforce that wasn't replenished in the years following Three Mile Island. Even as recently as 2000, the nuclear engineering programs at Penn State University, one of the nation’s largest, graduated just six nuclear engineers. The average age of the workforce is 48 and one-third of all workers will be eligible for retirement by 2012. Now, energy companies and the educational system are scrambling to create training programs to supply new talent. In Northeast Pennsylvania, PPL Corporation has joined forces with Luzerne County Community College to train workers for its reactors at Berwick PA. Salaries range from an entry level $43,000/year for electricians and mechanics to $60,000 annually for an inexperienced engineer. What about that nuclear engineering program at Penn State? The trend is definitely in the right direction. Last year, it graduated 44 nuclear engineers with 100% job placement. Source: “N.M. attracts solar manufacturing plant” by Susan Montoya Bryan. As seen in the Miami Herald. March 4, 2008. “A jobs boom is shaking nuclear industry” by Jane M. Von Bergen. The Philadelphia Inquirer. March 14, 2008. | |||
News Briefs | | ||
Q: How do grow one of your state’s key clusters? A: Make sure there’s a steady stream of trained workers. A $1.5 million grant from the U.S. Department of Labor for Pulaski Technical College in North Little Rock AR will be used to develop training programs for the state’s growing aerospace cluster. Aircraft manufacturers and their suppliers in Arkansas are expected to create 5,000 new jobs over the next 10 years. The grant is one of just 69 awarded under the Community-Based Job Training Grants Initiative which drew 341 applications. Aerospace products are the states’ No. 1 export. Georgia plans to have a major presence at the BIO 2008 conference in San Diego in June as a prelude to the event being held for the first time in Atlanta in 2009. Governor Sonny Perdue will speak at the conference and the state will tout its growing biotech sector which is now the seventh-largest in the U.S. Georgia has a strong story to tell. The number of biosciences firms increased by over 38% between 2001 and 2006 while employment increased 11%. Investment by biotech firms increased seven-fold in just 10 years, from $3 billion in 1993 to $21 billion. Source: “Pulaski Tech Gets $1.5 Million to Train Workers for Aerospace in Arkansas.” Arkansas Business.com. March 13, 2008. “Georgia tries for splash in biotech world” by Bill Hendrick. The Atlanta Journal-Constitution. March 20, 2008. | |||
Tech Nation | | ||
AeA, the trade association for the technology industry, has released its 11th annual Cyberstates 2008 report that detail the state of the high tech industry in key tech states and across the U.S. It also provides the most recent state data on employment, wages, tech establishments, payroll and research and development activities. Here are some of the findings:
The AeAwebsite provides more detail on a state-by-state basis. Go to: www.aeanet.org and click on the Cyberstates 2008 icon. Source: Cyberstates 2008: An Overview. AeA. www.aeanet.org | |||
Poll Update: Budget Impact | | ||
The results of the last issue's poll question reads like a good news/bad news situation. First, the good news. 53% of respondents say that their budgets have not yet been impacted by the current economic slowdown. The bad news is, of course, that the remaining respondents have seen a negative impact from the economic slowdown on their agency's budgets. In fact, 20% report a significant impact and the remaining 27% report a moderate impact. Like an earlier poll question concerning the liklihood of $4-per-gallon gas, this question is worth revisiting in a future issue! Be sure to answer this issue's poll question. Source: Editor, The Retention Monthly | |||
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