Location USA 2019/2020 Area Development

LOCATIONUSA FOR

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INVESTOR

2019/2020

FDI in the USA Remains Unrivaled A Site Selector’s Checklist U.S. States Dig FDI Practical Considerations for Expanding into the U.S. Workforce Strategies Making a Well-Informed U.S. Location Decision

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Table of Contents

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4 FDI in the USA

Remains Unrivaled

Companies choosing to invest in the United States are selecting a market powered by innovation with a diverse, highly skilled workforce and globally renowned educational and research institutions.

Through the leadership of President Donald J. Trump, the United States has entered an era of nearly unprecedented economic revival. Due to regulatory cuts and a new simplified tax structure, America has once again become the best place in the world for business investment and opportunity. And we are just getting started. This Administration is working to eliminate even more barriers to economic growth — creating an environment where all companies operating in the United States can grow and flourish. In other words, now, more than ever, is the time to invest and do business here.

The SelectUSA team at the International Trade Administration of the Department of Commerce provides data, business intelligence, and assistance navigating the U.S. regulatory system to firms looking to invest in this market. The ultimate expression of these services is the annual SelectUSA Investment Summit, the highest-profile foreign direct investment event in the United States.

By attending the Investment Summit, companies from around the world discover new investment opportunities and meet directly with the people on the ground who drive projects. Participants also have the chance to improve their understanding of the U.S. business climate through discussions with policymakers and business leaders, while also learning of beneficial resources and tools.

It is an exciting time to invest and expand in the United States, and the SelectUSA team is ready to work with you.

6 A Site Selector’s

Checklist for Locating in the U.S.

From choosing a property to recruiting workers to navigating tax and regulatory considerations, challenges will occur — but with the right strategy and the help of an EDO, they can be mitigated.

10

U.S. States Dig FDI

There’s an emerging trend among the individual states to encourage and support international investment, realizing all the economic and social benefits it brings to their regions.

13 Workforce Strategies

for Projects Generated

by FDI

Companies need to remain aware of U.S. workforce trends and realize that data alone may not give them a complete picture of the labor situation in a particular market.

18 Practical Considerations

for Expanding into the U.S.

To learn more about our Investment Summit and services, go to selectusa.gov, follow us on Twitter @SelectUSA, connect with our Investment Services team in Washington, D.C., or our colleagues in the Foreign Commercial Service located at posts and embassies across the globe.

The U.S. is well-positioned to attract FDI, but comprehensive due diligence and planning is still necessary for a business to make an optimal investment decision.

INFRASTRUCTURE TRADE AGREEMENTS

21 Making a Well-

Sincerely,

Informed U.S. Location Decision

Ian Steff eputy Assistant Secretary for Manufacturing, D International Trade Administration U.S. Department of Commerce

By properly defining their search and taking advantage of expert help, food and beverage companies can make a well-informed U.S. location decision.

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Sponsors

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FDI in the USA Remains Unrivaled Companies choosing to invest in the United States are selecting a market powered by innovation with a diverse, highly skilled workforce and globally renowned educational and research institutions.

Contributed by SelectUSA

The United States is currently in its second-longest period of economic expansion and our economic growth shows no sign of letting up. A lower corporate tax rate, fewer regulations, and renewed confidence in the American market have created the opportunity for further global investment. It is easy to see why the world’s companies flock to the U.S. market. From a diverse, highly educated, and skilled workforce to strong intellectual property protections, millions of global business investors select the United States to grow and succeed.

MORE THAN $4 TRILLION The total stock of foreign direct investment (FDI) in the United States is valued at $4 trillion, which is the single largest amount in the world for any nation. In 2017 alone, the diverse flow of FDI into the United States was $277 billion. Some of the world’s largest economies and America’s closest economic partners account for more than half of the $4 trillion total.

7.1 MILLION U.S. JOBS DIRECTLY SUPPORTED

Among them are the United Kingdom ($614.9 billion), Canada ($523.8 billion), Japan ($476.9 billion), and Germany ($405.6 billion).1 The fastest-growing sources, based on the compound annual growth rate (CAGR) between 2012 and 2017, include rapidly changing markets in South America and Asia including Argentina, Thailand, Singapore, and China — all of whom had CAGRs greater than 30 percent.

SELECT THE USA FOR ENTREPRENEURSHIP When companies select the United States for investment, they are choosing a market powered by innovation. The Global Entrepreneurship Index,2 noting a flourishing environment for building ideas into profitable businesses, ranked the United States first out of 137 countries for its businesscreation ecosystem.

With a deeply-rooted business culture of experimentation and expansion, wide access to capital, as well as other resources designed to help new ideas take flight, there is ar-

$60.1 BILLION IN R&D SPENDING

$370 BILLION TO U.S. GOODS EXPORTS

Source: Bureau of Economic Analysis, 2016

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guably no better market than the United States where entrepreneurs can thrive.

THE U.S. IS RECOGNIZED AS A LEADER IN RESEARCH AND DEVELOPMENT AND HAS ONE OF THE HIGHESTACCLAIMED NETWORKS OF UNIVERSITIES AND RESEARCH INSTITUTIONS IN THE WORLD.

SELECT THE USA FOR INNOVATION The United States is a recognized leader in research and development and has one of the highest-acclaimed networks of universities and research institutions in the world, while also featuring one of the most robust systems of intellectual property protections. This culture of innovation offers an added competitive advantage to the business community and keeps the United States at the cutting edge of new ideas, technologies, and prosperity.

organizations (EDOs) navigate the federal regulatory system. Working with EDOs, the program supports business investors seeking information and guidance about entering or growing their operations in the United States.

THE SELECTUSA INVESTMENT SUMMIT High-profile events like the annual SelectUSA Investment Summit facilitate many such connections, allowing business investors to talk with economic development representatives from across the nation over the course of three days.

Investment Summit participants also hear about the U.S. business and investment climate directly from senior government officials and industry leaders, while also learning about specific resources and tools to invest in the United States.

This year’s Investment Summit takes place June 10-12 at the Washington Hilton in downtown Washington, D.C. For more information regarding the annual SelectUSA Investment Summit, visit www.selectusasummit.us and join the conversation @SelectUSA on Twitter. • • •

MADE IN THE USA International companies become part of the cities and towns in which they invest. More than seven million U.S. jobs — with an average salary well above the economy-wide average — are directly supported by the U.S. affiliates of majority foreign-owned firms. The impact of foreign investment does not end there: millions are employed indirectly in jobs across an array of 1 https://www.bea.gov/news/2018/direct-investment-country-andindustries around the country as well. At $370 industry-2017 2 https://thegedi.org/global-entrepreneurship-and-development-index/ billion, these affiliates produced more than a fifth of all U.S. goods exports in 2016, which is the latest available data.

Additionally, companies LOCATION LOCATION LOCATION exporting from the United States reap benefits not only from the The best LOCATION on the web to help with your corporate “Made in the U.S.A.” brand LOCATION needs. premium of innovation, quality, The best LOCATION to and reliability, but also from U.S. start your site and facility government export assistance search. programs, giving American-made The best LOCATION to goods a competitive edge in stay on top of industry global markets. needs.

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FEDERAL-LEVEL SUPPORT SelectUSA is the United States’ national investment-promotion program that works to facilitate job-creating business investment and raise awareness of the important role that FDI plays in the U.S. economy. Moreover, SelectUSA serves as a single point of contact to help business investors and U.S. economic development

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A Site Selector’s Checklist for Locating in the U.S. From choosing a property to recruiting workers to navigating tax and regulatory considerations, challenges will occur — but with the right strategy and the help of an EDO, they can be mitigated.

By Dan Levine, Practice Leader, Location Strategies, Oxford Economics, Inc.

Foreign manufacturers own an estimated $2.6 trillion in capital stock in the United States and employ 2.5 million workers (2016, BEA). Attracting foreign investment helps keep the U.S. manufacturing sector competitive and provides critical economic development support to communities throughout the country. This article summarizes the key issues likely to be encountered by advanced manufacturers during the site selection process.

Logistic requirements tend to define the initial target area for manufacturing projects. A target area might range in size from anywhere in the U.S. to a focused zone along a particular interstate. Once the target area is defined, however, five geographically variable inputs dominate the site selection process, with final decisions often involving tradeoffs among these factors: 1. Availability of property 2. Recruitment and training of workers 3. Cost and reliability of utility service 4. State and local taxes 5. Regulatory climate

ach of these factors involves E its own challenges, as follows: AVAILABILITY OF PROPERTY Industrial vacancy rates are below 5 percent nationwide — and many older “industrial” properties turn out to be glorified warehouse space. That means finding a suitable vacant building may prove to be difficult, especially if the project has specialized facility requirements such as freezer space, special access, or an advanced water-discharge system.

Most projects thus require significant improvements to an existing property or, if time and budget allow, new construction.

Advanced manufacturers willing to pay top dollar for Class A industrial space will find many more opportunities (albeit still

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• New construction • Existing facility • Shell buildings

• Skill requirements • Training options • Apprenticeship programs

• Corporate tax rates • Personal property and real estate taxes • Tax incentives

• Utility costs • Upgrades • Incentives programs

• Permitting • Environmental issues • Labor laws

restricted), but most projects are on a tighter budget.

Fortunately, in many communities, there are industrial shell buildings that can be fitted out to specifications in under 18 months. Finding these opportunities or a pad-ready industrial site is not nearly as challenging as finding a suitable existing

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MANY GAS OR ELECTRIC UTILITIES ARE FULLY ENGAGED IN LOCAL ECONOMIC DEVELOPMENT BUSINESS RECRUITMENT EFFORTS AND ARE OFTEN WILLING TO HELP.

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property, especially if you have partnered with a local economic development organization (EDO).

RECRUITMENT AND TRAINING OF WORKERS Advanced manufacturers are up against three distinct challenges when recruiting and training workers: • Skill requirements are changing as machine operations become integrated with engineering and computer-assisted manufacturing (CAM) software.

• Cultural bias discourages many qualified young people from seeking a career in manufacturing.

• An aging workforce is making specific positions particularly difficult to recruit (e.g., maintenance, quality assurance).

Foreign-owned advanced manufacturers are frequently at the forefront of implementing strategies to address these challenges. Successful strategies include working with local partners such as workforce investment boards, community colleges, or local school districts.

In addition, many advanced manufacturers are pioneering flexible approaches to scheduling and training including progression-based training programs. These programs encourage workers to participate in cross-functional and increasingly advanced skills-based training that is designed to address changing technical skills requirements, such as the application of CAM software, or to gain a better understanding of core engineering disciplines like electronics or pneumatics.

Foreign-owned advanced manufacturers also are leaders in introducing apprenticeship programs. Outreach to public school systems to encourage young people to consider careers in manufacturing sometimes starts as early as middle school. By the time these students graduate from high school, they (and their parents and guidance counsellors) are familiar with the apprenticeship option. Flexibility is a key feature of apprenticeship programs; recent

high school graduates are encouraged to work full time but also enroll in a program leading to an associate’s degree. Upon completion of the degree program, the student is often required to accept a full-time position with the sponsoring company for a limited period of time. This approach, familiar to many foreign companies, is generally offered in the U.S. only by very large manufacturers.

EDOs in every community try to work constructively with manufacturers on workforce training and recruitment challenges. However, the effectiveness of local partners in executing on these strategies varies widely. This variation should be carefully evaluated during the site selection process.

COST AND RELIABILITY OF UTILITY SERVICE Utility service territories are fragmented and estimating expected cost is complex. Most manufacturing projects have a least one missioncritical utility concern — usually gas or electric reliability and cost, but sometimes including water and sewage. One unique U.S. challenge is the complexity of franchise service territory boundaries, which frequently divide communities. As a result, it is common for price and service to significantly differ between properties located in the same area; a community with a single labor market will often have multiple gas or electric providers.

Many gas or electric utilities are fully engaged in local economic development business recruitment efforts. For example, utilities are often willing to help estimate your project’s future utility costs at a proposed site, based upon past usage. Manufacturers often require service upgrades at the desired property. Although many utilities are willing to help, there is wide variation in how much leeway utilities have to rapidly respond to these requests.

Utilities frequently offer incentive programs.

For example, many offer financial support to manufacturers willing to implement demand-side

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LOCATIONUSA

management (DSM) programs such as backup generators for use in interruptible service contracts. And some electric utilities offer reduced economic development rates to entice manufacturers to locate in their service territory. Similarly, a water-intensive manufacturer might be offered significantly reduced water and sewage rates in exchange for installation of an advanced filtration water discharge system. In short, it is almost always worth discussing your new project with the local utility companies, and the local EDO is the quickest way to establish appropriate contacts.

STATE AND LOCAL TAXES State tax policy with respect to manufacturers varies widely and can significantly impact project costs. However, the taxes that matter most are not the ones companies often focus on.

For example, state corporate income tax burdens for manufacturers range from insignificant to major depending on how that state’s apportionment formulas apply to a particular company. Corporate tax rates, therefore, tell you very little, and your tax department should advise as to states where a new plant might trigger unexpected tax consequences. Most states exempt from sales tax the purchase of equipment used in the manufacturing process so frequently this will not be an issue — or is an issue that can be negotiated away.

Two taxes to pay close attention to are business personal property tax (BPPT) and real estate taxes. BPPT is a tax on a company’s machinery and, hence, is particularly important to capital-intensive advanced manufacturers. Moreover, since it is based on the value of equipment after depreciation, it hits new facilities hard, when equipment is new and not yet depreciated.

In states with a BPPT, abating or reducing BPPT is often a part of the incentive package offered to advanced manufacturers.

Local real estate tax is often the most significant tax paid by manufacturers. In the United States, the same property is taxed by multiple jurisdictions (municipal, county, and school district).

Most states allow localities to abate the incremental increase in property taxes attributable to the real property improvements made by advanced manufacturers, but this requires local negotiation. While reducing real estate tax is a common business incentive, the rules for abating often vary among the multiple jurisdictions taxing the property. This, too, is an area in which a strong relationship with the local EDO can be extremely helpful.

State business incentives vary widely; programs based on capital investment tend to support advanced manufacturing, while those based on large numbers of highly paid (i.e., aboveaverage county wage) workers tend to be less applicable.

When securing discretionary incentive packages — which are often the most generous but require approval — it is critical to remember the common requirement that the incentive be negotiated prior to committing to or announcing your final location decision. Timing and regular communication with the state EDO matter greatly when seeking discretionary incentive awards.

REGULATORY CLIMATE The local regulatory climate is best assessed by talking to manufacturers in the community. A key consideration for most manufacturers, regulatory concerns focus first on permitting required to expedite building construction or improvement.

Once the plant is operational, the key regulatory concerns turn to environmental, transportation, or labor regulation.

The local EDO can often help arrange for the company or its consultant to confidentially interview manufacturers in the area. On several of our engagements, the manufacturing CEO considering the community participated in these interviews with the primary intent of exploring the regulatory landscape.

In particular, the CEOs wanted to discuss with their counterparts strategies for dealing with the specific regulators with whom they expect to have the most interaction.

FINAL THOUGHTS Every site will come with its own tradeoffs. Locations attractive to one advanced manufacturer are likely home to other advanced manufacturers. For example, a location with very low energy costs has probably attracted other energy-intensive manufacturers and, as a result, local labor market conditions are tight. On the other hand, a community with a great property still available probably has other issues — perhaps unfavorable tax policy, high energy costs, or poor labor relations. A successful site selection engagement will uncover and quantify these tradeoffs, identify specific strategies for your company to mitigate local challenges, and position your advanced manufacturing company for success at your new U.S. location. • • • OXFORD ECONOMICS is an independent global advisory firm with 22 offices around the world. Its Global Economic Model and complementary suite of sectoral models provide detailed forecasts covering 200 countries, 100 industries and over 7,000 global cities and regions. The firm’s Location Strategies Practice helps clients identify the best location for corporate success, and the best strategies for government to accelerate economic development. For more information, email DanLevine@OxfordEconomics.com.

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U.S. States Dig FDI There’s an emerging trend among the individual states to encourage and support inter national investment, realizing all the economic and social benefits it brings to their regions.

By Nancy McLernon, President & CEO, Organization for International Investment (OFII)

Companies from all over the world want to do business in the United States. That international investment is highly beneficial to the U.S. economy, as these companies establish operations across the country, hire American workers, contribute to domestic exports, and strengthen the communities in which they sustainably operate.

With international companies employing more than seven million Americans, including 20 percent of our nation’s manufacturing workforce, courting international investment is a top economic priority for most states. In fact, America’s governors are on the frontline in attracting these job-creating companies.

That said, some states understand the unique challenges that international companies face when entering a new market better Denyo Manufacturing Corporation, in Danville, Kentucky, recently completed an $8.7 million expansion and currently employs approximately 150. Denyo than others. For instance, international comis part of Itochu Corporation, which employs more than 1,700 at its various panies must analyze the unique regulatory and Kentucky locations. tax frameworks within all 50 states when deciding where to invest and create jobs. Many states provide great aftercare to companies rent governors in Arkansas, Indiana, Kentucky, Louisiana, Misonce they’ve made the decision to invest in the region. souri, New Hampshire, North Carolina, and Pennsylvania have All too often, however, policymakers knowingly or unjoined former governors in Florida and Michigan in issuing knowingly violate our international trade agreements and tax Open Investment Policy Statements (OIPS).1 These declarations treaties. Whether it be procurement policies that preclude state agencies from buying American-made products that include proclaim that their state is “open for business” and will help imported parts or tax policies that double tax corporate income international companies succeed by treating them fairly. by ignoring America’s tax treaties, state policymakers run the When signing Indiana’s OIPS in late 2018, Governor Eric risk of losing out in the global race for jobs. Savvy economic Holcomb said, “I’m committed to taking Indiana to the world developers know what their legislatures and regulatory agenand bringing the world back to Indiana. We’re home to over cies are pursuing and help connect the dots between those 950 international companies, employing over 190,000 Hooproposed policies and their impact on the state’s overall attracsiers. In the last five years alone, foreign investment jobs in tiveness to major employers.

Indiana have grown by over 40 percent. We’re going to keep that going, which is why I’m proud to reaffirm Indiana’s comOPEN INVESTMENT POLICY STATEMENTS mitment to being open for international investment.”2 Thankfully, there is an emerging trend among America’s Governor John Bel Edwards echoed these remarks, highgovernors to show support for international companies. Curlighting the great contributions that international companies

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AEROSPACE, DEFENSE INDUSTRIES SOAR IN ARKANSAS

The Aerojet Rocketdyne facility in Camden, Ark., produces solid rocket motors and is one of many aerospace and defense-related companies that have found success in the state, yet there’s plenty of room for expansion or relocation.

have made in Louisiana by “pumping many billions of dollars in capital projects alone into our economy in recent years…The 500 foreign-owned companies operating in Louisiana are directly responsible for 74,300 jobs in our state. In an era of increasing globalization, it’s essential for us to show leadership and support of foreign direct investment in Louisiana in a positive, open, and fair manner.”3 PROACTIVE MEASURES In addition to proactively connecting with international companies, many states are taking important steps to strengthen their business environments for these firms.

For example, several states are ensuring that the new federal tax reform law doesn’t result in a big tax hike on employers that have borrowed capital to invest and create jobs in the United States. Specifically, they have deliberately decoupled from this regulation that is part of the new federal law.

Connecticut, Georgia, Indiana, South Carolina, and Wisconsin have led the way in preventing this unintended tax increase on companies growing operations in their states.

Tennessee’s full “decoupling” takes effect in 2020, and Virginia has partially decoupled from the new federal rules. States still considering decoupling legislation include Massachusetts, Missouri, and New York.

Preventing this tax hike sends a strong message to the international business community — and contrasts with those states that fail to prevent these new taxes on growing companies in their state.

And states have good reason to stay competitive — nationwide, international firms produce 23 percent of U.S. exports, fund

The aerospace and defense industries have a significant impact within the state, both in the private and public sectors. The Little Rock Air Force Base — one of five military installations across the state — is the fourth-largest employer in Arkansas and has a local economic impact of more than $813 million each year. Dassault Falcon Jet anchors a large business jet cluster in central Arkansas, and Aerojet Rocketdyne recently expanded its rocket motor center in Camden, which is home to several defense contractors well positioned to grow due to recent investment in military infrastructure at the national level.

To capitalize on Arkansas’ ready labor force and its skills, Gov. Asa Hutchinson created a statewide initiative specifically to support the state’s military and defense interests. As technology in the industry continues to evolve, opportunities arise in the aerospace and aviation fields, and Arkansas’ network of two- and four-year institutions of higher education have programs in place to ensure the workforce can meet the needs of the ever-changing industry.

Several colleges across the state offer aviation and aerospace programs to produce a continuous supply of aerospace/aviation workers.

These programs include airframe and power plant technology, aviation maintenance technician, aviation management, aviation power plant maintenance, aviation technology, and electronics/avionics technology.

Arkansas has a prime location and access to markets which is vital for growing aerospace companies. An intermodal transportation network of highways, railways, and waterways provides easy access to U.S. and international markets. Major commercial airports are located in central and northwest Arkansas, and six regional airports are located throughout the state. This clears the way for the aerospace industry to get its products across the country and around the world efficiently.

The aerospace industry attracts businesses of all sizes, large and small, to provide both direct and indirect jobs to the industry. The Arkansas Economic Development Commission and Gov. Hutchinson will continue to make the sector a priority, heavily recruiting businesses to the state. Get ready to watch the industry soar in Arkansas.

Copy supplied by Arkansas Economic Development Commission

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New aerospace and aviation businesses looking to expand into the U.S. will find that a strong aerospace and defense base already exists in Arkansas, one that is positioned for growth.

In fact, aerospace consistently ranks as one of the top exports in Arkansas, growing each year and accounting for more than $1.8 billion in aircrafts and parts. Today, nearly 180 aviation and aerospace-related companies call Arkansas home, employing about 10,000 people in jobs that run the gamut from researchers and engineers to mechanics and machinists.

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IN ADDITION TO PROACTIVELY CONNECTING WITH INTERNATIONAL FIRMS, MANY STATES ARE TAKING IMPORTANT STEPS TO STRENGTHEN THEIR BUSINESS ENVIRONMENTS.

Access & Advantage Ideal for logistics, manufacturing and more: • On I-65, midway (1 hour) between Indianapolis, IN and Louisville, KY • 566,000+ workers within laborshed • Over 30% of workforce employed in manufacturing • 110 million consumers within a day’s drive • Shovel-ready sites • JCIDC Workforce Partnership … addressing labor force needs

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16 percent of U.S. innovation efforts, and pay their workers 26 percent higher compensation than the economy-wide average. Moreover, they are leaders in workforce training and development.

FURTHER BENEFITS OF FDI In addition to offering economic benefits, these companies strengthen the fabric of the U.S. communities in which they operate, accomplishing a tremendous amount of social good. They are global leaders in environmental sustainability, scoring notably higher than the U.S. average in reducing their products’ carbon footprint and launching successful initiatives focused on protecting the environment.

These companies are also very active in their charitable support that includes healthcare, education, the environment, and others, donating billions of dollars toward positive change. Over the past decade, international companies in the United States have increased their charitable contributions by 123 percent.

States are doing a great job in attracting and retaining these valuable employers. Most U.S. governors are thinking about ways they can keep their business environment competitive and their state economy growing through investment from global companies, and I applaud those efforts and [those states that are making] foreign direct investment a top priority. • • • 1

https://ofii.org/statesthatgetit https://ofii.org/pressrelease/governor-holcomb-promotes-importance-ofinternational-companies-for-indiana 3 https://ofii.org/policy/louisiana-open-investment-policy-statement 2

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Workforce Strategies for Projects Generated by FDI Companies need to remain aware of U.S. workforce trends and realize that data alone may not give them a complete picture of the labor situation in a particular market.

By Ann Petersen, Managing Director, Cushman & Wakefield

Earlier this year, U.S. Citizenship and Immigration Services announced that it received fewer H-1B visa applications for the second year in a row, reflecting recent policy changes that have negatively affected the number of approved applications a company can expect each year. An H-1B visa is a temporary category that allows employers to petition for entrance into the U.S. for highly educated foreign professionals to work in “specialty occupations” that typically require a bachelor’s degree or the equivalent. For instance, foreign professionals working in fields such as mathematics, engineering, and technology often qualify, making these visa opportunities equally applicable to companies making foreign direct investment (FDI) decisions for office and industrial site selection projects alike.

There is a statutory limit placed on the number of approved visas available for new hires — the current cap is 85,000 total H-1B visas available for for-profit companies each year. Although the recent legislation affecting the H-1B program under the Protect and Grow American Jobs Act was not ultimately enacted, the current administration continues to seek policy decisions that will severely limit the ease with which companies have been able to relocate foreign talent to the U.S. through the H-1B program.

The U.S. continues to experience record low unemployment numbers, and at the same time many companies continue to seek new U.S. locations for FDI for both office and industrial projects in all industries. As with any new site selection project for a new facility location, company leaders are faced with the question of how to best staff the new facility, with there being two schools of thought regarding the best way to develop

a workforce at a new facility. Companies usually make the upfront strategic workforce decision as to whether they will organically grow talent within their organization or acquire outside talent — put another way, will the company develop and train inexperienced new hires within the organization, or will they acquire a large number of already experienced hires (often at a cost premium) from the existing labor pool.

WORKFORCE STRATEGIES: “GROW” VERSUS “ACQUIRE” FOR FDI As with any business operation decision, there are pros and cons to each workforce scenario described above. In a “grow” scenario, a company often has the opportunity to relocate a key group of existing employees to the new facility who are well versed in the company culture, goals, processes, and what it takes to be successful within the organization. These expe-

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COMPANIES MAKE THE UPFRONT STRATEGIC WORKFORCE DECISION TO ORGANICALLY GROW TALENT WITHIN THEIR ORGANIZATION OR ACQUIRE OUTSIDE TALENT.

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rienced existing employees are then tasked with training and developing new hires at the facility, who can often be hired at a lower entry level and trained and mentored as they gain technical skills and move their way up at the facility and within the organization.

For organizations that make the decision to “acquire” talent, the company often chooses to relocate a large group of existing employees, and the company focuses its hiring on experienced professionals that already possess the necessary required technical skills. In the “acquire” scenario, very little technical training or development is needed outside of some potential skills upgrades; instead, the focus is on acclimating the experienced hire into company culture and systems. The preferred strategic hiring plan differs among companies and depends on the facility’s timeline and need for immediate versus long-term scalability.

Low unemployment rates across the United States have increasingly created pressure for companies that are looking to quickly ramp up a new facility — the number of available positions consistently outpaces the available workforce in almost all markets across the country. As such, the current workforce scarcity issues and policy changes with regard to the H-1B visa program raise additional workforce considerations for companies considering new FDI projects within the U.S. For instance, in recent years there have been a number of new project announcements in the information technology (IT) and software development industries in markets across the U.S., and many of the announcements were made by companies locating their first facility in the United States. The employment model that many of these IT companies rely on in the U.S. is built on the ability to bring large numbers of experienced software developers into the country through the H-1B visa program. Companies that announced growth plans prior to H-1B policy adjustments are now having to

staff for planned growth from the local market as well as back fill positions that were previously filled or intended to be filled by employees holding H-1B visas. New developments in the H-1B program have had unintended consequences for companies that rely on experienced foreign technical talent that otherwise cannot be found within the U.S. and have put further pressures on markets with an already lean available pool of experienced talent.

MORE TO A MARKET THAN JUST THE DATA Companies considering an FDI project may be able to solve for these workforce challenges in a variety of ways. One way is to take a deeper dive into the available workforce data for the preferred market such as net migration versus overall population rates, graduation rates, proximity to competitors, and staffing metrics.

An existing skilled workforce may help to reduce a company’s exposure to risk associated with finding skilled labor, and while it seems intuitive to target only those markets that have an already existing highly skilled workforce, net migration data, for instance, may help to complete the workforce picture in a particular market.

Net migration data indicates whether or not more workers are moving into a particular market versus moving out, and low or negative net migration numbers may indicate a trend leading to more workers exiting the state versus remaining. For example, although highly educated states like Minnesota and Massachusetts1 enjoy high levels of skilled workers, both states’ net migration numbers for 2016–2017 are extremely low or even negative (-3.4 percent net migration for Massachusetts; 1.4 percent net migration for Minnesota, according to data from the U.S. Census Bureau).2 Net migration may provide a further data point as to why there are more entry-level or experienced workers available in a particular industry, or why employers in the market are experiencing inflated wage levels.

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claycorp.com

FOREIGN INVESTMENT. DOMESTIC IMPACT. CONSTRUCTABILITY | SCHEDULING | BUDGETING | MASTER PLANNING

As a fully integrated design, development and construction company with projects across the United States, we have the ability to comprehensively lead our customers from around PROJECT DAYTON the world through planning, design and construction process efficiently. Our expertise allows DAYTON, TN 03.27.2018 us to deliver successful projects on time and on budget to create lasting domestic impact.

To see how we are currently helping Nokian Tyres design and build its first North American manufacturing plant, visit claycorp.com/nokian-tyres.

Copyrig

Bachelor’s Degree

Graduate Degree and Higher

Alabama

14.7%

8.6%

Alaska

17.8%

9.6%

Arizona

17.0%

10.0%

Arkansas

13.5%

7.4%

California

19.6%

11.4%

Colorado

24.1%

13.9%

Connecticut

20.5%

16.1%

Delaware

17.4%

11.9%

Florida

17.2%

10.0%

Georgia

18.4%

10.8%

Hawaii

19.9%

10.1%

Idaho

17.5%

8.2%

Illinois

19.7%

12.3%

Indiana

15.5%

8.8%

Iowa

17.9%

8.5%

Kansas

19.9%

11.1%

Kentucky

13.1%

9.2%

Louisiana

14.7%

7.8%

Maine

18.8%

10.2%

Maryland

20.4%

17.1%

Massachusetts

22.3%

17.7%

Michigan

16.5%

10.5%

Minnesota

22.2%

11.2%

Mississippi

12.9%

7.7%

Missouri

16.7%

10.3%

Montana

20.2%

9.6%

Nebraska

19.7%

9.7%

Nevada

15.0%

7.8%

New Hampshire New Jersey

21.6%

13.0%

22.5%

13.8%

New Mexico

14.5%

11.1%

New York

19.1%

14.5%

North Carolina

18.5%

10.0%

North Dakota

20.3%

7.4%

Ohio

16.3%

9.7%

Oklahoma

15.9%

8.0%

Oregon

19.3%

11.3%

Pennsylvania

17.1%

11.0%

Rhode Island

18.6%

12.6%

South Carolina

16.6%

9.3%

South Dakota

19.0%

8.1%

Tennessee

15.8%

8.9%

Texas

18.1%

9.3%

Utah

20.7%

10.2%

Vermont

21.2%

14.1%

Virginia

20.8%

15.3%

Washington

20.9%

11.8%

West Virginia

11.5%

7.4%

Wisconsin

18.3%

9.2%

Wyoming

16.7%

8.8%

State

Percent of population with bachelor’s degree or higher

As discussed, raw workforce data alone may only tell a portion of the story for a particular market’s true labor trends. One additional way for a company to understand the full picture of what it would be like to operate in a particular market versus another is to pursue market-based employer interviews as a last step to the vetting process. This technique gives the FDI prospect an opportunity to hear directly from other companies in the market that have recently completed a site selection project and that have successfully located a facility in the community.

Topics such as workforce trends, staffing and labor challenges, and operational concerns and “wins” can be explored with employers who are operating similar facilities. Discussion can also be focused on the true availability of a particular skill set in the workforce, and whether or not the company should expect to staff with new graduates or experienced hires, contract or seasonal labor, etc. Data is always a powerful tool in the site selection process; however, an FDI prospect is always encouraged to investigate further to ensure that the market is actually performing according to what the data indicates.

WORKFORCE DEVELOPMENT SOLUTIONS For companies that are utilizing a large number of new, entry-level workers, it will be important to look at the potential new market’s available workforce development programs such as Georgia’s QuickStart or Louisiana’s LED FastStart program (two states that offer robust, best-in-class workforce development programs to new and expanding businesses) as part of the overall analysis of a potential market’s workforce, workforce pipeline, and potential training/retraining opportunities should a skills gap exist.

Further, programs like Idaho’s Workforce Development Training Fund provide cash grants that can offset a broad variety of training-related expenditures, such as the potential to offset travel costs for U.S.-based hires for training at international facilities. State and local workforce development and/or apprenticeship programs offer companies a unique cost-sharing model that provides the company a training cost offset during the initial ramp-up period (and oftentimes beyond initial ramp-up) when the company needs to retain capital the most.

CAREFUL ALIGNMENT WITH MARKET TRENDS IS KEY New hire/employee strategy is just one of the pieces for consideration for companies executing on FDI in the United States. With the competitiveness of the U.S. labor market at an all-time high, all companies need to be aware of strategic initiatives that will help to attract and retain top industry talent. FDI site selection projects need to be particularly aware of attraction and retention strategies for new U.S.based facilities and consider how facility location ultimately impacts the company’s new workforce.

As discussed, a successful and innovative company culture is one of the hardest items to replicate in a new market venture, and this is

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especially true for foreign investors looking to locate a new facility into the U.S. for the first time. Although standard employee policies can vary widely from one country to another, an FDI prospect should carefully consider whether or not the company’s culture and employee policies translate well to the U.S. workforce. Attracting the best talent in the market can be measured in a variety of ways whether the organization’s goals are salary, benefits, or workplace flexibility driven. Employee perks that are meaningful in one market, may not apply in other areas of the country. A company’s careful review of benefits, employee perks, and other fringe benefits should be completed to ensure that the company is aligned competitively with others in the industry with whom it will be competing for labor.

There are numerous data sources and experts who can provide the level of detail and analytics required when making a significant decision as to where to establish investment and jobs. As part of the overall site selection process, a labor and demographics study can be completed to show areas of the U.S. where experienced employees or new graduates with certain skill sets and skill traits can be found more readily.

Ultimately, any company will want to ensure that — through the site selection process — it is creating a framework for the new facility’s success. As the U.S. continues to refine the process for securing H-1B visas, companies will have to rethink their hiring and employment strategies, as it may not be possible to transplant an existing workforce into the selected U.S. market.

As such, companies will have to remain aware of U.S. workforce trends to ensure that their employee attraction, retention, training, and development policies remain competitive within the U.S. market and the preferred local site location. • • • 1

ercent of population with a bachelor’s degree or higher – ESMI P Quarterly Census of Employees and Wage – 2018.3 EMSI Class of Worker 2 https://www.businessinsider.com/state-domestic-migration-map2016-to-2017-2018-1

KENTUCKY BUSINESSES STEP UP TO ADDRESS WORKFORCE NEEDS States across the country are hard at work to rectify workforce issues in a number of key industries. In Kentucky, businesses are joining together to take a leadership role. Led by the Kentucky Chamber of Commerce, those efforts Toyota Motor Manufacturing Kentucky is one of have taken the form of a pipeline that many companies working ensures educator-employer partnercollaboratively to solve workforce-related issues ships create a vast and diverse talent and to target and train pool ready to serve the needs of any the next generation of business. workers.

The industry-led Talent Pipeline Management (TPM) system was established in September 2018 to build talent supply chains for more than 75 critical high-demand jobs in the Commonwealth by July 2020. TPM unites employers within specific regions with the goal to supply talent across the business landscape.

Though still in its infancy, the initiative has already gained traction.

“We are excited to see how quickly the Talent Pipeline Management program is providing results,” said Kristina Slattery, executive director of the Kentucky Cabinet for Economic Development’s Office of Workforce, Community Development and Research. “In less than six months, we have over 120 companies involved that are providing real-time occupation projections that far outpace the demand growth we predicted. This information is going to allow us to respond to that demand in a way we’ve never been able to before.”

The recently launched program has already grown to include 14 regional collaboratives throughout the state focused on job creation within the manufacturing, logistics, healthcare, construction, IT/business services, and equine industries. The initial challenge for each group has been to establish the greatest needs within target industries.

Leaders of the Health Careers Collaborative of Greater Louisville found that nearly 3,000 registered nurses will be needed over the next two years across 10 specialties. The group is currently establishing a relationship with local educators to build and train the future workforce to meet evolving needs within the medical field.

Meanwhile, Construction Leaders of Central Kentucky estimate 273 commercial electricians will need to be added to the available workforce over the next two years. The collaborative found that half of the industry’s talent has historically come from high school students transitioning directly into the workforce. As such, the group has begun discussions with educators at the local and district level to recruit students to an electrician pathway that meets the industry’s specific needs.

The U.S. Chamber of Commerce, Kentucky Chamber of Commerce, and the Kentucky Education and Workforce Development Cabinet fund TPM. The Cabinet for Economic Development assists with promotion of the program. Kentucky is the first state to form this type of publicprivate partnership, and training has been provided for 40 of the Commonwealth’s workforce leaders through the TPM Academy to implement the program statewide.

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LOCATIONUSA

Practical Considerations for Expanding into the U.S. The U.S. is well-positioned to attract FDI, but comprehensive due diligence and planning is still necessary for a business to make an optimal investment decision.

By Brian Smith, U.S. Location Investment Leader and Indirect Tax Leader; and Zachary Weinstein, Manager, Indirect Tax; Ernst & Young LLP

As global companies analyze where to locate capital investment, they are faced with a very complex and ever-changing global business environment that is being disrupted by geopolitical considerations around trade, tax, and economic policy.

Further, companies are balancing these geopolitical considerations with speculation from economists that the global economy may fall into recession at some point in 2019 despite strong U.S. economic growth. Despite these potential challenges — or perhaps because of them — the U.S. is well-positioned to attract foreign direct investment (FDI) due to myriad factors, such as U.S. tax reform, reconfiguration of global supply chains, aggressive economic development policies, and an overall stable business environment.

THE GLOBAL ECONOMY: A Complex Landscape Global economic and geopolitical uncertainty is affecting the day-to-day capital investment decisions of companies in virtually every industry and region of the world, whether they are middle-market German firms or Global 100 South Korean organizations. An annual survey conducted in 2018 by The Conference Board, a global business think tank, revealed that CEOs viewed a recession as the single largest concern for 2019. Looking back at the same survey one year prior, the fear of recession barely made the list of the CEOs’ top 20 concerns, ranking 19th.1 These global economic vitality concerns also need to be balanced by geopolitical considerations such as the Trump Administration’s “America first” policy, Brexit and European Union negotiations, and China-U.S. trade relations. Over the last two years, there has been an increase in protectionist trade measures and ensuing responses such as the U.S. Section 301 tariffs on US$250 billion of Chinese goods and China’s tariffs on over 800 U.S. food and agricultural exports.

Despite these complexities, many global companies continue to analyze whether to expand existing U.S. operations, acquire U.S.-based companies, or enter the U.S. market. U.S. tax reform, a significant consumer market, reduced business

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regulations, the relative ease of doing business, and plentiful resources are some of the various factors that make the U.S. an attractive market in which to invest. According to the United Nations Conference on Trade and Development’s World Investment Report 2018, the U.S. was the largest beneficiary of FDI, as compared with other countries (it ranked first with approximately US$275 billion).2 We would expect the U.S. to remain in the top ranking because of the country’s tax reform and potential insulation from an impending recession.

In terms of a recession, the U.S. seemingly is in a stronger position than most other developed or emerging economies.

National unemployment remains at historic lows, approaching 3.8 percent in March 2019.3 A shortage in labor availability is leading to increased employee wages, with year-over-year growth of 3.2 percent.4 The Commerce Department currently projects that the U.S. gross domestic product (GDP) grew at an annual rate of 3.2 percent in the first quarter of 2019.5 On a cumulative basis, businesses that make up the S&P 500 and Nasdaq continue to regularly surpass all-time stock price records.

TAXES, INCENTIVES & TRADE On December 22, 2018, President Donald J. Trump signed into law the Tax Cuts and Jobs Act (TCJA), significantly reducing the corporate and individual tax rates. With a stroke of a pen, the U.S. increased its competitiveness with other Organization for Economic Cooperation and Development countries by reducing the corporate tax rate from 35 percent to 21 percent, as well as permitting companies to immediately expense 100 percent of qualified property with a phase-down not starting until 2023.

This monumental corporate tax overhaul — in addition to fostering a more favorable business regulatory environment — has reduced the current and future economic burden of companies contemplating FDI into the U.S. As global companies contemplate potential U.S. investment, they should have a comprehensive due diligence process in place to appropriately

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5/15/19 12:51 PM

analyze operational, tax, financial, and trade considerations while identifying opportunities to reduce costs through a proactive economic development strategy.

Even though U.S. tax reform has been implemented, the multilayer U.S. tax structure at the federal, state, and local levels is typically more complex than that of other foreign jurisdictions. Because of this complexity, a company should create a thorough tax and financial model to take into consideration the various taxes that may affect their current and future investments in the U.S. Taxes typically overlooked by foreign companies because of the differences between their home country and U.S. taxing regimes include local property taxes, state and local sales taxes, utility taxes, local income and withholding taxes, and various local fees associated with operating a business, such as development, connection, impact or permitting fees. Further, the creation of a tax and financial model allows a company to understand its potential cost outlays and determine where to prioritize potential economic development discussions with state and local jurisdictions to assist in mitigating the various taxes and costs of doing business.

Additionally, the subsidy and incentives opportunities in the U.S. are very different as compared with those in a significant number of other countries.

Within the U.S., incentives can come in a variety of forms, whether they be Corporate tax rate (TCJA) statutory (i.e., “as-of-right”) credits provided to companies if they meet various Local property taxes requirements or discretionary incentives that typically are negotiated with state State and local sales taxes and local economic development agencies. Companies should also review Utility taxes Local income and withholding taxes federal incentives opportunities such as the New Markets Tax Credit, Work Opportunity Tax Credit, and Research and Development (R&D) credit.

Under the TCJA, Congress created a new opportunity with the Opportunity Zone program, which gives companies the ability to defer certain capital gains and potentially eliminate future capital gains. It is important to note that state and local incentives usually provide the most lucrative assistance to companies, FEDERAL INCENTIVES but they may require a “but-for” argument demonstrating that an alternative New Markets Tax Credit jurisdiction is being considered. This “but-for” concept and states’ proactive Work Opportunity Tax Credit competition against one another are different than State Aid restrictions in the R&D Tax Credit Opportunity Zones European Union, for example. Once a company receives preliminary offers from the affected jurisdictions, it can then build out its tax and financial model to STATE AND LOCAL INCENTIVES take into consideration reductions to the overall costs of doing business in one Statutory credits (“as-of-right”) jurisdiction versus another.

Discretionary incentives (negotiated) Upon reviewing the preliminary incentives offers, the company should closely examine whether the proposed incentives package is realizable through the offsetting of a current or future tax, above-the-line benefit (e.g., indirect tax offset or refundable credit) or operational offset (e.g., infrastructure assistance).

For instance, many states offer companies income tax credits that are limited Unemployment rates in benefit to a company’s state corporate income tax liability. In many cases, Minimum wage laws manufacturers have very little or no state corporate income tax due — so this Labor regulations Worker commute times incentive would be of little to no value. States that target manufacturers often have statutory sales tax exemptions that apply to a business’s purchases of manufacturing machinery and equipment. While it may seem as if an economic development agency is offering your company a great incentive deal by providing a big exemption, your company may already be entitled to this benefit.

Additionally, to properly articulate the proposed project to relevant governTransportation infrastructure/costs Proximity to raw materials mental agencies, an economic impact report should be considered. In addition to Proximity to markets the direct jobs and investment the project would bring, your investment will also Utility costs/reliability have indirect and induced economic impacts on the community. The hiring of construction workers, the purchase of local services and products, and the impact your business’s suppliers will have at the state and local levels should all be considered for incentives purposes. If the economic impact report sheds a positive light on the proposed project’s impact to the community, economic development and Tariff rates government officials can utilize the report to explain to their constituents why the Trade wars level of incentives offered makes sense and benefits the community.

FACTORS TO CONSIDER WHEN INVESTING IN THE U.S. • • • • •

TAXES

INCENTIVES

• • • •

• •

• • • •

• • • •

LABOR

INFRASTRUCTURE

TRADE AGREEMENTS

• •

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TRAINING THE WORKFORCE OF THE FUTURE IN JACKSON COUNTY, INDIANA Over 20 years ago, and with an eye to the future concerning the need for workers in Seymour, Jackson County and South Central Cummins, a member of the Workforce Partnership, Indiana, the Jackson County has invested over Industrial Development Corpora$200 million in its Technical Center in Seymour, tion (JCIDC) created the Workforce Indiana.

Partnership. Under the umbrella of JCIDC, the partnership was established with a goal to bring industry, schools, local elected officials, and economic development leaders together to make the county’s employers more competitive.

The partnership, comprised of manufacturing companies and Schneck Medical Center, works in conjunction with the county’s four public and one private high school. It focuses on aligning and integrating new opportunities into pathways for students, enabling them to receive the education and training necessary to obtain the knowledge and skills required to meet the demands of the 21st century employer. More than 30 percent of the workforce throughout the region is employed by industry.

Jackie Hill heads the Workforce Partnership, and at last year’s annual JCIDC awards luncheon, 31 companies and entities were honored for their support of the program on the 20th anniversary of its establishment.

Projects undertaken by the partnership include expanding Project Lead the Way curriculum and implementing a school-based enterprise entitled “Owl Manufacturing”. Both are examples of student exposure to science, technology, engineering, and math (STEM) careers in manufacturing. Additionally, a countywide elementary and middle school VEX Robotics program has engaged over 200 students in the world of robotics. Introducing students to robotics at a younger age will generate interest in continuing this career path into secondary and post-secondary education.

In an effort to create career interest in students before completion of secondary education, the partnership develops and administers programs in the county schools helping students navigate through the decision-making of which roadmap to pursue. Awareness activities such as career days, industry panels, and mock interviews provide an opportunity for students to gain insight into careers in high-demand fields.

Working alongside the Jackson County Education Coalition, the partnership is striving to provide an educated and educable workforce. Located in Seymour, the Jackson County Learning Center houses an advanced manufacturing lab and basic science education lab providing the infrastructure necessary for training classes that support certifications and degreed programs that support the skill sets required to meet the needs of our industry partners.

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Finally, a company should also consider the constantly evolving trade agreements and policies that affect the business. A sensitivity analysis, whereby different tariff rates are applied to various inputs, can help you understand the what-ifs related to a trade war that is either escalated or resolved. Strategies focusing on duty deferral and elimination can also be modeled out, as many planning opportunities are dependent on the geographic location of the site.

VARIABLE COSTS There is no end to what can be modeled and analyzed, but the greatest amount of resources should be focused on the most significant variable costs. In addition to incentives, taxes, and trade, there are other financial and operational factors, often deemed more important to the long-term success of a project.

While U.S. unemployment remains below 4 percent at the national level, every local labor market is unique. Certain regions of the country have higher unemployment, accompanied with higherthan-ideal crime rates and varying minimum wage and labor laws. In certain towns, employees may be willing to drive up to one hour to their principal place of business, while in other cities, a commute longer than 20 minutes could be practically unheard of. Where labor availability of certain job positions is extremely tight or nonexistent, without proper planning, the cost of employing the needed workforce may make a project unsustainable.

Transportation costs of moving in raw materials and shipping out finished products can vary tremendously depending on the chosen site. Proximity to infrastructure, customers, suppliers, and ports of entry should all be taken into consideration and included in your cost model. Utility cost, reliability and utility infrastructure make up some additional key considerations, and the list goes on and on.

Whatever factors are important to a company’s U.S. investment decision, through comprehensive due diligence and planning, a business can make optimal investment decisions while achieving the highest return on investment. • • • 1

“ In 2019, CEOs Are Most Concerned About Talent and a Recession,” The Conference Board, 17 January 2019, www.conference-board.org/press/ pressdetail.cfm?pressid=7650 2 https://unctad.org/en/PublicationsLibrary/wir2018_en.pdf 3 “The Employment Situation — March 2019,” U.S. Bureau of Labor Statistics, 5 April 2019 (accessed via www.bls.gov) 4 “Real Earnings — March 2019,” U.S. Bureau of Labor Statistics, 10 April 2019 (accessed via www.bls.gov) 5 Gross Domestic Product, First Quarter 2019 (Advance Estimate),” U.S. Bureau of Economic Analysis, 26 April 2019 (accessed via www.bea.gov)

The views expressed are those of the authors and do not necessarily represent the views of Ernst & Young LLP or any other member firm of the global EY organization.

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5/23/19 11:54 AM

LOCATIONUSA

Making a Well-Informed U.S. Location Decision By properly defining their search and taking advantage of expert help, food and beverage companies can make a well-infor med U.S. location decision.

By Scott Kupperman, Founder, Kupperman Location Solutions

Interested in opening a U.S. manufacturing location for your foreign-based food business? Hardly surprising, as the food consumption patterns and trends of the U.S. consumer have opened the doors for an increasingly wide variety of products and brands that have made their way into the daily eating habits of millions. You are undoubtedly hopeful your product and its distinct brand message and value proposition will find a businessfriendly location in the United States that will allow for, and potentially foster, cost-effective production in a low-risk manufacturing environment.

Like thousands of other food and beverage industry companies in the U.S. and abroad, you have an interest in expansion and growth of your manufacturing footprint but lack meaningful experience in determining where an optimal, or simply beneficial, location would be for your business. How do you formulate a plan for a search, execute upon it, and keep your existing business operations functioning? There is an infinite combination of factors that can be considered for such an important decision to your business, many of which you are keenly aware of, but some that will come as a surprise due to limited exposure to operating within a specific region of the U.S. I would like to offer some advice on how to approach this effort and put your team and business on a path to a well-informed location decision.

3 CONSIDER HIRING A SITE CONSULTANT. The support of a well-qualified site consultant will be especially helpful if you have little or no experience in undertaking a U.S. location decision. Despite similarities in their general description, site consultants differ significantly in how they operate. Before deciding whom to hire, there are some critical things to consider.

Look for a consultant who has at least some experience in conducting a search for a facility type and use relatively similar to your own. Arguably, this experience is more critical than the level of geographic familiarity and experience within the desired search region. Ideally, you can find a consultant who possesses both.

You also should understand what services and analysis the consultant will and will not provide. Be comfortable with the search process he/she employs and the likely duration as well as cost. Ask and get clarity as to what other service providers might be necessary to complete the site search process and whether the consultant will be able to help you identify and procure those services, when they are legitimately needed.

Make sure you take the time to explain your existing business successes and challenges and how you envision those could translate to U.S. markets. Your consultant needs to understand your facility and operating needs. This should include

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CONSTRUCTION LEADER CLAYCO RECOMMENDS EARLY ALIGNMENT WITH A DESIGN-BUILD PARTNER Companies from around the world continue to see the United States as a profitable market for expansion, but foreign direct investment and overseas To assure project success for their first North business expansion to the United States American facility, Swedish can appear daunting when facing bearing and seal manufacturer SKF engaged regulations that investing companies Clayco to develop, are unfamiliar with. International design, and build a new state-of-the-art manufac- businesses must consider permitting, turing facility. business dynamics, and constructability issues, while also navigating the intricacies of national, state, and local locations for infrastructure, workforce, utilities, and incentives.

One of the most important factors in assuring project success and avoiding pitfalls is an early alignment with a nationally focused and experienced design-build company. This is essential for international companies looking to minimize their risk and maximize their return on their U.S. investment by gaining control of their projects’ scope, schedule, and budget early on.

When selecting a design-build partner, be sure the firm has a keen focus on these five areas: 1. Constructability — A focus on design-build constructability will allow a company to understand what site variables must be considered, including the options of ownership, soil and environmental conditions, infrastructure availability, and incentive negotiations.

2. Scheduling — Turn-key design-build firms mobilize quickly and see the project’s schedule holistically, including planning, land acquisition, design, permitting, procurement, construction, and commissioning.

3. Budgeting — National design-builders have the experience to effectively control a project’s budget and will provide transparent financial progress throughout the lifespan of the project.

4. Master planning, architecture and design — Master planning will help provide a phased development plan with requirements for the current facility needs and future growth. With in-house architecture and design, the critical planning and design phases will yield a valuable return on investment.

5. Technology — With a focus on innovation and technology, integrated design-build firms will deliver modeling and data that integrates each phase of a project helping with scheduling, planning, and clash detection. This data will also facilitate integrations that connect teams and prepare for the management of a facility beyond construction.

A design-build construction partner should have both a local and national footprint, with an ability to bring resources in from across the county. Larger firms could have an established network of subcontractors that offer capabilities and labor availability that smaller general contractors may not have.

If a design-build firm focuses on these key strategies, the value will begin to be realized before your site is even selected.

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a visit to an existing facility on foreign soil.

And, above all else, be comfortable that the individual or team are people you can start and maintain a trusted relationship with for an extended period, as the search process will not happen quickly and will likely involve moments of surprise and frustration.

3 S TART BY TAKING SOME TIME TO DEFINE WHAT YOU NEED FROM YOUR NEW LOCATION. Start the search process by taking the time to put your required needs (in their broadest definition) in writing. Doing so will have significant benefit; it will provide you and your team the chance to consider and define what success would look like in the way of property, labor, utilities, access and transportation infrastructure, other businesses in the area, food facility support services, taxes and incentives, etc.

You can look for guidance from your consultant as to what should and should not be included, especially after he/she has a chance to see your existing operations. This will serve as the benchmark basis to compare various proposed alternatives. Economic developers who receive a well-constructed and detailed RFI/RFP will appreciate the detail and look upon your requirements and team as being serious and well organized.

3 A S YOU NARROW YOUR LIST, LOOK FOR LOCAL RESOURCES THAT WILL HELP YOUR BUSINESS LONG TERM. Stay focused on the fact that your search should be a process of elimination, rather than an immediate jump to a conclusion.

This process will involve many judgements along the way, which will likely get more difficult as your list of prospective locations becomes shorter.

Whenever possible, place value in resources and local factors that will benefit your business over the long term. These may be related to overall operating cost, real estate, supply chain, utility cost/availability and, of course, labor cost and supply. Almost any food-related business will benefit from a predictable and low-cost operating environment that minimizes the risk associated with delivering and operating a facility. It’s important to take a longterm perspective during your search.

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5/23/19 11:57 AM

SPONSORS

3 K EEP INCENTIVES IN PERSPECTIVE. In researching or discussing your plans to expand to the U.S., the subject of incentives has likely surfaced, possibly with some dollar figures that seemed surprisingly high. However, any incentive award, regardless of size, will not make a fundamentally poor location decision any better.

Also be aware that the vast majority of the dollar value noted in other incentive announcements you may have heard or read about were not in the form of cash that flowed directly to the company; these figures typically include significant amounts of cost avoidance, various forms of credits that have limited value, and awards that will flow to the company over time, subject to reaching specific milestones for investment and job creation.

Incentive programs will vary in size and form based on a very wide array of factors.

Location, wages, level of economic impact, type of industry, policy of the governing jurisdiction(s) in office at the time are among just a few of them.

3 H IRE A QUALITY TEAM FOR TECHNICAL AND LEGAL SUPPORT. As you go through your search process and narrow your options, you will likely be increasingly focused on various technical (site development and constructionrelated), legal (real estate, form of corporate entity, incentive-commitment related) issues to understand and quantify the impact on your location decision. An experienced consultant should be able to help identify which of these service providers are needed and, more importantly, when the time is right to get them involved. Utilizing the services these firms can provide can often save you time and money, as well as help you to avoid unexpected setbacks later in the process, when addressing them may very well be more costly and time-consuming.

Your own site selection requirements and concerns will surely involve a distinct set of resource needs and constraints that will be added to the list above. But adopting the strategies outlined herein will help your efforts stay focused and result in a wellinformed decision. • • •

ARKANSAS

Arkansas Economic Development Commission 7 Created in 1955, the Arkansas Economic Development Commission seeks to create economic opportunity and generate positive growth throughout The Natural State. Arkansas is a pro-business environment operating leaner, faster and more focused through a streamlined state government designed to act on corporate interests quickly and decisively.

Mike Preston, Executive Director Arkansas Economic Development Commission 900 W. Capitol Ave., Suite 400 Little Rock, AR 72201 1-800-ARKANSAS www.ArkansasEDC.com

ILLINOIS

Clayco Corporation 15 Clayco is a full-service, turnkey real estate, master planning, architecture, engineering, and construction firm that delivers the highest quality solutions on time, on budget, and beyond expectation. We comprehensively lead customers from around the world through the planning, design, and construction process efficiently to deliver successful projects.Clayco has offices in St. Louis, Chicago, Atlanta, and South Carolina.

Clayco Corporation 35 East Wacker Drive Suite 1300 Chicago, IL 60601 1-312-658-0747 www.claycorp.com

INDIANA

Jackson County Industrial Development Corporation (JCIDC) 12 Celebrating its 35th anniversary in 2019, Jackson County Industrial Development Corporation (JCIDC) in Seymour, Indiana, is recognized as one of the top industrial and economic development agencies in the Midwest. Located on Interstate 65 in South Central Indiana, Seymour-Jackson County has seen “promised investment” of over $950 million and the creation of more than 2,400 new industrial jobs since the economic downturn of 2008–10.

visit us at LOCATION USA.com

MakingWellInformed.indd 23

Jim Plump, CEcD, FM, Executive Director Jackson County Industrial Development Corporation 301 N Chestnut Street P.O. Box 783 Seymour, Indiana 47274 812-522-4951 jimplump@jcidc.com www.jcidc.com

KENTUCKY

Kentucky Cabinet for Economic Development C2 Kentucky helps new and existing companies of all sizes meet their workforce needs. Kentucky fosters growth through a variety of services designed to raise capital, increase business, and encourage investment within the food processing and other industries. Explore the many advantages of the Commonwealth and you’ll find Kentucky will go the extra mile to exceed your needs.

Erran Persley, Commissioner of Business Development Kentucky Cabinet for Economic Development Old Capitol Annex 300 W. Broadway Frankfort, KY 40601 502-564-7670 or 1-800-626-2930 www.ThinkKentucky.com

OHIO

JobsOhio C4 JobsOhio, Ohio’s economic development corporation, is a private nonprofit corporation designed to help companies locate, expand, and prosper in Ohio. To understand the needs of growing companies, the JobsOhio team of industry experts provides businesses with the tools necessary to succeed.

Contact us at JobsOhio.com to learn why Ohio is the ideal location for your company.

Andrew Deye, Managing Director JobsOhio 41 S High St. #1500 Columbus, OH 43215 614-224-6446 Deye@JobsOhio.com www.jobsohio.com

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