Area Development Q2 2016

REDEPLOYING CAPITAL WITH SALE-LEASEBACKS

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WHICH COUNTRIES HAVE LOWEST BUSINESS COSTS?

Leading Locations

AREADEVELOPMENT S I T E

A N D

F A C I L I T Y

for 2016

P L A N N I N G

www.areadevelopment.com

www.facilitylocations.com

Q2/2016

ADVANCED MANUFACTURING > PLAYBOOK

disruptive TECHNOLOGIES

Putting INNOVATION Into Play Bringing IDEAS to the Marketplace From PROTOTYPE to Production A WINNING MODEL: Partners, Not Handouts BECOMING a DIGITAL Manufacturer Creating an ADVANCED MANUFACTURING CULTURE REDUCING ENERGY Consumption Game-Changer: R&D TAX CREDIT

GOLD & SILVER

Shovel Awards 2016

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The world’s spotlight is on Ohio.

Last year, Ohio added over 82,000 new private sector jobs. Our large metropolitan areas are ranked among the hottest cities for growth. We even have 19 of the Top 100 micropolitan cities— more than the next two states combined. If your business is looking to expand and grow, it’s time to take a closer look at Ohio. Find out what Ohio can do for your business at jobs-ohio.com.

Welcome to Ohio. It’s on.

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CONTENTS ADVANCED MANUFACTURING > PLAYBOOK

22 Taking a Product From

Prototype to Production

In order to understand a manufacturer’s process of developing innovative products and bringing them to market, Area Development’s editor recently spoke with leadership at Michelin.

57 Partners, Not Handouts: 15 Ideas for Industry

Innovation Put Into Play

A Winning Model for Manufacturing Innovation

Innovation ecosystems and advanced technologies are unlocking opportunities for manufacturers, while advancing national prosperity.

When economic development policymakers are viewed as collaborators, everybody wins.

19 Public/Private Partnerships

60 Becoming Digital —

Help Entrepreneurs Bring Ideas to the Marketplace

By obtaining technology and scientific grants, government performance contracts, and economic development support, innovative companies can quickly flourish.

62 Best Practices for

Creating an Innovative, Advanced Manufacturing Culture

Promoting innovative, advanced manufacturing cultures within a community involves strategic planning and effective partnership with public institutions.

86 Reducing Energy

Consumption of Manufactured Goods

By obtaining technology and scientific grants, government performance contracts, and economic development support, innovative companies can quickly flourish.

and Innovative — Manufacturers

89 The R&D Tax Credit —

Michael Walton, Global Head of Manufacturing Industry, Google for Work, explains why it is important for manufacturers of all sizes to establish a culture of innovation within their organizations.

A Game-Changer for Manufacturers

Recent legislation making the R&D tax credit permanent is a big boon to manufacturers of all sizes, helping them to innovate and expand.

Area Development analyzes economic and workforce data for 394 MSAs to determine their recent and longer-term economic vitality as well as capacity to support business growth and prosperity.

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Exclusive Online Content NOW ONLINE...

• Improving the Commute — and Economic Development — With BRT • Know Your Options When Leasing Office Space • Location & Incentive Opportunities and Strategies: The Value in Exploring “the Rest of the Story”

www.areadevelopment.com

LOCATION USA

Inward Investment Guide

Area Development® Site & Facility Planning (USPS 345-510) is published five times per year (Q1, Q2, Q3, and Q4 — and Annual Directory in December) at Richmond, VA, by Halcyon Business Publications, Inc., 400 Post Ave., Westbury, NY 11590. Periodicals postage paid at Westbury, NY, and additional offices. Single copies, $10. Yearly subscription U.S. & Canada, $75; foreign, $95.

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AREA DEVELOPMENT

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

Volume 51 | Number 2 Q2/2016

Quote:

“I’m here to build something for the long-term. Anything else is a distraction.”

Mark Zuckerberg (1984 – website Facebook

), chairman, chief executive, and co-founder of the social networking

OTHER FEATURES 84 West’s Lead Will Be Tested in 2016 The West and Southeast will remain the strongest economies in the coming year, but there is a good chance the Southeast will outperform the West.

DEPARTMENTS 4

101 Site Selection in the Auto Industry: A Move to Mexico?

A Mexican location holds many advantages for automotive OEMs and their suppliers, but several challenges need to be addressed.

Shovel Awards

6 In Focus

Unintended Consequences of the Open-Office Model

• Which Countries Have the Lowest Business Costs?

• Technological Innovation Essential to U.S. Manufacturing Growth • Chief Executive’s Best & Worst States for Business • Business Location Tracker

States are recognized for their achievements in 2015 in attracting investment and creating high value-added jobs.

10 First Person

Terry Wohlers, President, Wohlers Associates

12 Front Line

2016

Sale-Leasebacks Allow Companies to Redeploy Capital

91 Despite a decline in economic output resulting from lower oil prices,Texas continues to court companies with its pro-business know-how.

Disruptive Technologies Continue to Change the Face of Manufacturing

8 In The Know

25 SPECIAL REPORT

GOLD O OL & SILVER

Editor’s note

14 Front Line

Special Investment Report

Digitization Transforming the U.S. Economy

TEXAS T DAY

Join Our Newsletter areadevelopment.com/newsletter Follow Us On twitter.com/areadevelopment

104 Ad Index/

Web Directory

Online Database Resources www.facilitylocations.com Follow Us On www.fastfacility.com

POSTMASTER: Send address changes to Area Development, Circulation Department, 400 Post Ave., Westbury, NY 11590. Subscribers requesting address changes must provide both old and new addresses. © Copyright 2016 by Area Development® magazine. ISSN: 1048-6534. Printed in the U.S.A. Area Development® is a registered trademark of Halcyon Business Publications, Inc.

AREA DEVELOPMENT | Q2/2016

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EDITOR’SNOTE

Q2/2016

Disruptive Technologies Continue to Change the Face of Manufacturing According to PwC’s 2016 Industrial Manufacturing Trends report, investments in technology are “essential” for the growth of the U.S. manufacturing sector. Innovation — including robotics, augmented reality, 3D printing, the Internet of Things, and other disruptive technologies — are helping to boost productivity and cut costs, as noted in the report. And, according to Nitin Rakesh, CEO and president of leading digital modernization firm Syntel, “Financial pressures in the manufacturing sector are prompting organizations to re-assess how they use technology in their manufacturing operations, to determine how they can best modernize their systems in order to maintain a competitive edge.”

With this in mind, Area Development decided to devote a major portion of our Q2/2016 issue to an “Advanced Manufacturing Playbook.” Articles from experts at leading consulting firms including Deloitte, JLL, Hickey and Associates, and others — as well as executives at Michelin, Google, and the Department of Energy — are included. They discuss the meaning of innovation ecosystems, establishing a culture of innovation, taking a product from prototype to production, partnering with economic development agencies, using incentives for manufacturing innovation, and much more. It is hoped this “playbook” will help lead companies on their path toward growth.

www.areadevelopment.com EDITORIAL E-mail: editor@areadevelopment.com Editor Geraldine Gambale Staff and Contributing Editors Lisa Bastian Craig Guillot James Berger Cynthia Kincaid Dale D. Buss Phillip Perry Dave Claborn Mali R. Schantz-Feld Mark Crawford Steve Stackhouse -Kaelble Dan Emerson Karen Thuermer Tom Ewing Clare L. Goldsberry

DESIGN/PRODUCTION Art & Design Patricia Zedalis Production Manager Jessica Whitebook Production Assistant Talea Gormican EXECUTIVE

With that in mind, those states that are exhibiting the know-how of helping businesses become innovative and grow are recognized in this issue with Area Development’s Gold and Silver Shovel awards. Twenty-two states are honored and “projects of the year” are cited in the automotive, e-commerce, and solar energy sectors as well as in small cities.

Publisher Dennis J. Shea dshea@areadevelopment.com

Also in this issue, Area Development presents its 100 Leading Locations for 2016 report. We’ve ranked 394 MSAs against 21 economic and workforce indicators to determine the leading cities.

These MSAs have exhibited economic strength including year-over-year growth and longer-term (five-year/post-recessionary) growth, as well as the capacity to support business prosperity because of their prime workforces and other factors.

William Bakewicz (ext. 202) billbake@areadevelopment.com

As the economy continues to improve, our “Advanced Manufacturing Playbook” and the special reports in this issue will guide your firm in its expansionary moves.

Sydney Russell, Publisher 1965-1986 ADVERTISING SALES

Valerie Krpata (ext. 218) valerie@areadevelopment.com ONLINE SERVICES Digital Media Manager Justin Shea (ext. 220) jshea@areadevelopment.com Business Development Matthew Shea (ext. 231) mshea@fastfacility.com Web Designer Carmela Emerson Circulation circ@areadevelopment.com

Editor

EXECUTIVE OFFICES Halcyon Business Publications, Inc. President Dennis J. Shea

2016 Editorial Advisory Board Christine Bustamante National Co-Leader, Global Location and Expansion Services, KPMG

Scott Kupperman Founder, Kupperman Location Solutions, LLC

Gregory Burkart Managing Director, Specialty Tax Practice Leader, Duff & Phelps, LLC

Dan Levine Practice Leader, Kathy Mussio Managing Partner, Location Strategies and Economic Development Atlas Insight Oxford Economics, Inc. Dick Sheehy Director, Advanced Planning Jamie M. Lominack Real Estate Manager, & Site Selection, CH2M HILL Michelin North America Eric Stavriotis Senior Vice President, Bill Luttrell Senior Locations Strategist, CBRE Werner Global Logistics, Werner Enterprises, Inc. Thomas Stringer Esq., Managing Director Michael McDermott Consulting Manager, & Practice Leader, Site Selection & Business Global Business Consulting, Incentives, BDO Consulting Cushman & Wakefield Dean J. Uminski Executive, Bradley Migdal Executive Managing Director, Site Selection Consulting, Crowe Horwath LLP Business Incentives Advisory Services, Dan White Senior Economist, Transwestern Moody’s Analytics

Les Cranmer Senior Managing Director, Savills Studley Dennis Cuneo Partner, Fisher & Phillips LLP Tim Feemster Managing Principal, Foremost Quality Logistics Larry Gigerich Managing Director, Ginovus Stephen Gray CEO, Gray Construction Minah C. Hall Managing Director, True Partners Consulting LLC

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AREA DEVELOPMENT

John Morris Leader of Industrial Services for the Americas, Cushman & Wakefield, Inc.

Finance Mary Paulsen finance@areadevelopment.com Business/Finance Assistant Barbara Olsen (ext. 225) olsen@areadevelopment.com

All correspondence to: Area Development Magazine 400 Post Avenue, Westbury, NY 11590 Phone: Toll Free: Fax:

516.338.0900 800.735.2732 516.338.0100

MEMBER of

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

WHAT HAPPENS WHEN

GROUND meets

breaking Michigan receives Silver Shovel Award for the 7th time. Providing a supportive business environment in which companies can flourish. That’s the acknowledged commitment of the state of Michigan. Based on its companies Top 10 job-creation and investment projects from 2015, over 4,100 jobs were created.

And the state remained in the top seven nationally for major new and expanded facilities for the third straight year. If you’re looking to grow your business, look to Pure Michigan.

1.888.565.0052 michiganbusiness.org/AD

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INFOCUS

Unintended Consequences of the Open-Office Model

By KC Conway, Senior Vice President, SunTrust Commercial Real Estate

There is little doubt that open-space workplaces are not only here to stay, but will earn new corporate recruits in the years ahead. According to the International Facility Management Association, about 70 percent of U.S. offices have moved to this model. The benefits are many: more efficient use of space, less vacancy, easier collaboration with colleagues, access to natural light for more people, and an aesthetic that sought-after millennial talent has embraced — and cost savings, of course.

So What’s Not To Love?

KC Conway, senior vice president for credit risk management, is responsible for market intelligence at SunTrust Commercial Real Estate and oversees real estate valuation for SunTrust Bank. Conway is a nationally recognized speaker on a wide range of commercial real estate topics, from appraisals and bank regulation to ports and securitization.

I believe in the future of open-concept workplaces, but as with any disruptive change, there are unintended consequences that emerge as adoption spreads. Not all are necessarily negative, but they are worth studying to mitigate any downside in the future as more companies move in this direction.

• Common areas are becoming the workstation of choice: Private work areas are arguably the fulcrums of the open-office concept because they address the concern that some work requires more intense focus. While the experts behind office redesigns ostensibly create enough of these work areas to accommodate demand, my experience suggests that even more are needed.

In practice, people have been effectively freed to identify the work environment that is best for them. Visit the coffee shop at a modern office building during the workday and you will see what I mean; finding a seat is a challenge.

• Peak parking demand can outstrip supply: Parking challenges often emerge during peak office hours as companies add more employees per square foot. Even if an employee is on the road or working from home four out of five weekdays, at some point he or she will be in the office — and often at the same time as everybody else.

Office buildings constructed decades ago typically had an employee-to-office space ratio of one employee per 300 square feet; now many are in the range of one per 160 to 180 square feet. It is hard to avoid escalating this ratio without straining the underlying infrastructure — including parking.

• Older buildings prove difficult to upgrade: As the demand for open, more efficient workspaces increases, re-tooling older buildings to keep up with the layout and technology needs of today’s businesses is proving to be difficult and, in some instances, nearly impossible. Surprisingly, this is true of purported Class A office space in high-rent areas, as well as buildings in less desirable locations.

Demolishing walls and performing upgrades to accommodate common areas, interior offices, and new technology infrastructure is expensive. It is especially hard to make the math work for buildings designed for traditional offices. As more companies move toward an open-concept workplace, they are naturally gravitating toward buildings where this type of renovation is costeffective.

There may be many benefits of the open-office model, but that shouldn’t prevent companies from fine-tuning the concept in the years ahead. Commercial real estate developers, in particular, should take note and assess what the next iteration of this trend will be. As more companies take a step back to assess how it is working, scrutiny is guaranteed. Developers have an opportunity to help lead that conversation.

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AREA DEVELOPMENT

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

Kansas Offers:

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•

A highly educated, productive workforce

•

A right-to-work environment

•

A central point for distribution

•

Outstanding highway and rail infrastructure

•

Diverse economy

•

Low operating costs

•

Targeted incentives to assist new and expanding businesses

19/05/16 7:02 PM

INtheKNOW

Which Countries Have the Lowest Business Costs?

According to the 2016 Competitive Alternatives report from KPMG, the United States has dropped to 10th place for lowest business costs — the only time the U.S. has ever placed this low in Competitive Alternatives rankings. This is a result of the surging value of the U.S. dollar in 2015, which has greatly impacted the global business landscape, significantly constraining U.S. competitiveness.

According to the report, the high value of the U.S. dollar drives down the cost of doing business in all other countries, when measured in U.S. dollar terms. The U.S. now stands out as a highcost business location relative to its peers.

Top Countries With Lowest Business Costs 1 2 3 4 5 6 7 8 9 10

Mexico Canada Netherlands Italy Australia France UK Germany Japan United States

Two other NAFTA members rank first and second.

As the only high-growth (emerging) country included

in the study, Mexico represents the lowest-cost country examined. In 2016, Mexico’s business cost advantage over the U.S. stands at 22.5 percent, higher than at any point in this decade.

And Canada maintains its second place rank among the 10 countries, with business costs 14.6 percent below the U.S.

Area Development’s ranking of the site selection factors from its 2015 Annual Corporate Survey is also highlighted in the Competitive Alternatives report.

It’s noted that nearly half of the ranked site selection factors have direct implications on the cost of business, including labor costs, corporate tax rates as well as tax exemptions and state and local incentives, available land and buildings, energy availability and costs, and inbound/outbound shipping costs.

Technological Innovation Essential to U.S. Manufacturing Growth It’s no surprise that PwC’s 2016 Industrial Manufacturing Trends report finds that investments in technology are “essential” for the growth of the U.S. manufacturing sector.

Innovation is building a “data-driven factory of the future with robotics, augmented reality, 3D printing, Internet of Things, and other technologies, creating an environment of higher productivity and reduced costs,” the report notes. Additionally, many of the technological innovations used in manufacturing today will be commonplace within the next 5 to 10 years, meaning that manufacturing executives “must lead with an eye toward that reality, and not merely the current bottom line.”

According to Nitin Rakesh, CEO and president of leading digital modernization firm Syntel, the digital age has disrupted many different aspects of manufacturing: “From research and development to 8

AREA DEVELOPMENT

marketing and sales, businesses cannot afford to put production on hold in order to modernize, but must transform their manufacturing processes in order to thrive in an increasingly competitive environment.” Rakesh continues, “Financial pressures in the manufacturing sector are prompting organizations to re-assess how they use technology in their manufacturing operations, to determine how they can best modernize their systems in order to maintain a competitive edge.”

The authors of PwC’s report — Robert Bono and Stephen Pillsbury — further note that although the emerging technologies are potentially transformative, they are unfolding against a backdrop of uncertainty among industrial manufacturing companies. Of the U.S.-based industrial-manufacturing executives responding to PwC’s Q1/2016 Manufacturing Barometer, only 24 percent expressed optimism about the global economy.

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

Track business relocations and expansions on Area Development Online.

Studies/Research/Papers on Area Development Online.

We cull insightful corporate real estate-focused studies, research, and papers from credible industry sources at www.AreaDevelopment.com/Studies.

We track announcements of all significant investment and job-creation projects throughout the United States and Canada at www.AreaDevelopment.com/NewsItems.

BUSINESS LOCATION TRACKER

New Wisconsin Headquarters to Create 200 Jobs Alliance Laundry Systems, a global commercial laundry equipment provider, plans a $62.6 million, 225,000-square-foot expansion to its operations hub in Ripon.

Software Firm to Create 800 Jobs in Indianapolis Salesforce, a software company focused on customer relationship management, will invest more than $40 million over the next 10 years to expand its regional headquarters in Indianapolis, Ind., and will add 800 new jobs over the next five years.

New Ohio Axle Manufacturing Facility Will Support Region’s Automakers Dana Holding Corporation plans to open a new high-tech axle manufacturing facility in Toledo, Ohio, on a site adjacent to I-75. The company plans to invest approximately $70 million and employ more than 300 associates by 2020.

Caterpillar Surface Mining & Tech Center Coming to Tucson The world’s leading manufacturer of construction and mining equipment, Caterpillar Inc., will locate its new surface mining and technology operations in Tucson, Ariz., creating more than 600 new jobs over five years.

Japanese Metal Producer Expanding in Kentucky One of Japan’s leading metal producers, Kobe Steel Ltd., will locate an aluminum extrusion and fabrication facility next to a sister aluminumforging plant in Bowling Green, Ky. The $46.7 million investment will create 105 jobs.

Italian Manufacturer Setting Up Operations in Brownsville, Texas Italy-based SATA USA, a high-tech components manufacturer, will invest $114 million to establish its machining operation at the North Brownsville Heavy Manufacturing Campus in Brownsville, Texas, where it will create 300 jobs over a 10-year period.

400 Associates to Work at S.C. Customer Care Center

Alabama Expansion for UTC Aerospace Systems UTC Aerospace Systems is expanding its production center in Foley, Ala. The company is adding a new manufacturing and nacelle assembly facility that is expected to create 260 jobs in Baldwin County.

Sparta Industries Opening 1,000-Employee Georgia Facility A manufacturer of HVAC duct liner insulation, Sparta Industries, will establish a new plant at the former Rheem Manufacturing building in Milledgeville, Ga., which represents a capital investment of $22.5 million over the next five years.

Sitel, a leading global customer care provider, has opened its customer experience center in Spartanburg, S.C., where 400 associates will support inbound customer care for a telecom and a financial services provider.

Chief Executive’s Best & Worst States for Business Chief Executive magazine recently released its list of the Best & Worst States for Business, based on the responses of 513 CEOs who were asked to rank states they are familiar with on the friendliness of their tax and regulatory regimes, workforce quality, and living environment, including cost of living, quality of educational system, and state and local attitudes toward business.

Based on the CEO responses, Texas and Florida continue their 12-year streak in the number-one and two spots, respectively, followed by North Carolina, Tennessee, Indiana, Arizona, South Carolina, Georgia, Nevada, and Ohio. Interestingly, Ohio jumped from 22nd place to 10th this year, which may have

something to do with the fact that Ohio has added 350,000 jobs since 2011, and Governor John Kasich reduced taxes by $4.8 billion, says the magazine.

The Washington Post puts Ohio among the top-four tax-cutting states in the U.S. And CEOs indicated that the quality of workforce is just as important — in some cases more important — than the tax environment. Utah and Nebraska score highest in workforce quality among all the states.

All of the states appearing on Chief Executive’s top-10 list also garnered Shovel Awards from Area Development magazine for attracting projects in 2015 that resulted in significant amounts of company investment and job creation.

AREA DEVELOPMENT | Q2/2016

9

FIRSTPERSON TERRY WOHLERS

PRESIDENT

WOHLERS ASSOCIATES

After a few fits and starts back in the 1990s, 3D printing/additive manufacturing has grown rapidly from a “prototyping” technology to broad-based manufacturing solutions used on the production floor for end-use parts. What do you think has contributed to its success?

Wohlers: Additive manufacturing (AM) really hit its stride and gained the respect it deserves in the second half of 2012. We credit a number of activities that occurred around that time.

First, the renaming of the process from “rapid prototyping” to “additive manufacturing” provided a mindset that it could serve as a true manufacturing tool. I believe that when ASTM formalized the term to “additive manufacturing,” it had a bigger impact on the industry than most people consider.

Second, the 3D printed gun put AM in the spotlight.

This notoriety introduced AM to a lot of people who’d never heard of it before.

Third, low-cost 3D printers got AM technology into the hands of a lot of people, not just engineers or product designers, but home-grown inventors and entrepreneurs, and media picked up on that fact, publishing many articles on what was possible with the technology.

Fourth, the National Additive Manufacturing Innovation Institute — America Makes — brought together many people and organizations. America Makes is at the forefront of AM research, technologies, processes, materials, and education. This came at a time when large corporations, such as GE, were making significant commitments to AM. Finally, none of this would matter if we weren’t seeing strong growth at the time. Since 2012, the industry has grown at compound annual rate of 31.5 percent, according to our research for the Wohlers Report 2016.

Do you think that 3D/AM is a disruptive technology?

Wohlers: It is indeed a disruptive technology, but not in all cases. We’re seeing some things many didn’t anticipate such as the manufacture of high-value complex parts being made in entirely new ways. For example, Boeing consolidates many parts into one digitally, and uses 3D printing for manufacturing. GE and Airbus are now doing the same thing.

Airbus combined 126 components of a hydraulic reservoir rack into a single part that was made possible by AM. The implications of that are big. It’s not only saving material and weight but also reducing manufacturing processes, inventory, part numbers, labor costs, and maintenance. It’s easier to inspect one part than 126. The reduction in certification paper work alone provides significant savings. AM technology is incredibly important to a

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company like Airbus to the point where it plans to 3D print 30 tons of metal per month by December 2018. It sees this technology as a big part of its future.

What role will the ongoing development of materials — both polymers and metals — play in the continued success of AM? Wohlers: Companies have a strong appetite for a large range of AM materials, yet relatively few have been available in the past. Patents are expiring and new systems and materials are being developed to meet the needs of the market.

Customer demand for new production applications is really driving these developments. OEMs do not rely on a single material supplier; they must have two or more to keep the supply chain moving.

These companies set the rules and not their suppliers. The manufacturers of metal AM machines generally allow companies to buy from third-party material suppliers, which has also contributed to the strong growth of AM. The major players in AM machines, such as Stratasys and 3D Systems, seem to be struggling a bit. To what do you attribute this?

Wohlers: Some of the major players were among the early entrants into this industry, but now have competition that they did not have previously. In 2011, we found 31 companies that sold industrial grade AM machines — those priced at $5,000 or more. Last year 62 companies sold industrial grade machines. Customers have many more options compared to a few years ago. The established AM manufacturers are feeling some pressure.

It seems that many of the big manufacturing OEMs like GE Aviation, Ford, Moog (which just purchased Linear to get access to that company’s 3D printing technology) are embracing AM far faster and in bigger numbers than smaller manufacturers. What is this reluctance among smaller suppliers all about?

Wohlers: We’re seeing companies of all sizes invest in the technology, but the larger ones are getting the most attention.

Their financial resources are enabling them to launch initiatives focused on the use of AM for final part production. Small companies are using it mostly for design concepts, prototyping, and some types of tooling. 3D printers that sell for less than $2,000

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

are available and some are pretty good. They don’t do everything the larger and more expensive machines do, but it’s often good enough for the price.

What is the future of this industry and what are the primary factors that will drive this?

Wohlers: The future of AM is very bright for many applications, including the production of final parts. The industry is going to grow large over time. The world manufacturing economy is about $12.8 trillion, and a market penetration of just 5 percent is $640 billion. Companies such as Canon, HP, and Ricoh are entering the field. While 3D printing continues to be incredibly important for conceptual design and prototyping applications, the real money is in manufacturing. The producers of machines, materials, and services, coupled with major customers, are driving it to places we have never been. Companies are producing very sophisticated parts for rocket and aircraft engines, for example. Market demand and competition are causing the producers of the products and services to constantly improve, such as developing better control systems to meet quality manufacturing

requirements. Even so, there’s a lot of room for growth.

The investment we’re now seeing globally among large OEMs is unprecedented. Stryker, for example, is building a $400 million facility dedicated to AM. For a technology to transition broadly and successfully, a lot needs to happen, including major investment, and we’re finally seeing it. AM is now getting the attention and respect it deserves.

THE ASSIGNMENT One of Area Development’s staff editors recently interviewed Terry Wohlers about the state of the 3D printing industry, aka additive manufacturing, which has experienced enormous growth in recent years, going far beyond its original “prototyping” usage to become a manufacturing tool for end-use products in some of the world’s largest OEM production facilities. Terry Wohlers, founder of Wohlers Associates (an independent consulting firm providing technical and strategic information on new developments and trends in rapid product development), has been a leader in this industry since its inception.

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01/02/16 8:05 PM

AREA DEVELOPMENT | Q2/2016

11

FRONTLINE

Seller

Buyer Sells Property

Becomes

Becomes Leases Property

Sale-Leasebacks Allow Companies to Redeploy Capital

W

hen companies decide to invest in new, custombuilt manufacturing or distribution center facilities, they typically do so because of a lack of existing buildings that would meet their needs. But investing in a new facility doesn’t always mean long-term ownership.

Sometimes companies opt to sell the facility and then lease it back.

One recent example was Smithfield Foods Inc.’s $43 million sale and leaseback of a new, 419,052-square-foot cold storage distribution center in Greenfield, Ind. Centurion Investments, LLC, a private real estate investment firm based in Arlington, Va., acquired the property and is leasing it back to a subsidiary of Smithfield.

When the deal was announced earlier this year, Smithfield’s Vice President and Corporate Treasurer Tim Dykstra said the sale-leaseback would allow the company to “redeploy capital and fund strategic initiatives to further enrich our core business offerings” — in other words, use the money where it would do the most good.

When Smithfield built the facility, the company was unsure whether it wanted to keep it long-term or sell it, according to Cushman & Wakefield Vice Chairman Scott Goldman, who helped with the deal. But, the current low-interest-rate environment, combined with strong investor demand for state-of-the-art facilities occupied by solid credit tenants, made for an “excellent” opportunity for Smithfield, Goldman says. Along with freeing up capital, a lease transfers the risk associated with ownership to the investor/owner, according to Goldman.

Unique Challenges The Smithfield deal was not without challenges, Goldman says, noting, “every major project presents unique

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Tenant

Landlord

By Dan Emerson

issues and challenges. Before closing, we had to negotiate easement rights over a nearby water tower. However, there weren’t any monumental setbacks that prohibited Smithfield and Cushman & Wakefield from executing the transaction as planned.“ According to Goldman, the sale-leaseback strategy is suitable for creditworthy corporate users that occupy high-quality, state-of-the-art facilities and are interested in redeploying capital toward expansion and other higher-return projects.

It’s also an excellent exit strategy for companies, he notes.

Investors and institutions consider corporate real estate that is leased back to the seller a solid investment. In the single-tenant, sale-leaseback market there are a number of significantly funded institutional, public, and private groups that exclusively purchase and own single-tenant assets. “It’s a very ‘niche’ market,” Goldman says. Buyers include private and public REITS, private investors, and institutional and foreign investors.

Creative Deal Structuring In some situations, however, more creativity in deal structuring is required due to specific factors. One example of flexible, creative deal structuring is development financing, which occurs when the sale-leaseback of an existing building that was already under construction is executed. This is a more inclusive approach for a seller and involves a hands-on investor that can buy the land, develop it into a tailored asset, and lease it back to the seller.

Another example of a creative deal structure includes earn-out security deposits; this is a credit-based agreement that eliminates uncertainty for the buyer by linking the risk and return directly to the performance and earnings of the tenant.

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

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20/05/16 4:55 PM

FRONTLINE

Digitization Transforming the U.S. Economy

T

he prevalence of a tech-savvy workforce is beginning to take precedence over nearly every other factor — including low taxes and even the business climate — for many companies making site-selection decisions in a U.S. economy that is being transformed by digitization and where employers simply must corral enough millennials who can help them keep up. In fact, half of corporate real estate executives rated talent availability as the leading consideration in moves and expansions, according to a survey of 229 executives by real-estate services firm CBRE Group in March.

This is certainly fuel for the economies of long-time digital outposts such as Silicon Valley, Boston, and Austin, Texas.

But the fluidity of digital innovation and its lack of dependence on a traditional industrial infrastructure mean that tech havens also are blooming in newer magnets ranging from Ann Arbor, Mich., to Richmond, Va.

Case in Point So, for instance, Greater Boston is luring companies these days almost solely on the strength of its human capital, because high-tax Massachusetts generally has been anathema to many CEOs. The state ranked only No. 25 in the Tax Foundation’s 2016 State Business Tax Climate Index and an abysmal No. 45 in the Chief Executive 2016 Best & Worst States for Business. But it finished No. 1 in the Beacon Hill Institute’s State Competitiveness Index released in 2015.

Now, that index happens to be compiled locally. But General Electric CEO Jeffrey Immelt is one who will testify to the appeal of Boston because of the millennial digital talents who live there. GE is attempting to recast itself as a modern amalgam of tech and fabrication and move away from old perceptions that it’s a traditional industrial company — even though it’s making the same stuff it did before.

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In fact, Immelt made the stunning decision to move GE’s headquarters from high-tax Connecticut to high-tax Massachusetts almost solely because of this factor. And in that way, “Everybody is becoming a ‘software company’,” said Apu Gupta, CEO of Curalate, an e-commerce software outfit based in Philadelphia. “Everyone will be fighting over talent.”

Off the Beaten Path This is one reason for startups to look for pools of digital expertise in cities that are off the beaten path. For example, Andrew Rose chose Richmond, Va., to base his online insurance-shopping startup, Compare.com, over a handful of major cities including Chicago, Dallas, and Los Angeles. “In Richmond,” Rose said, “we can get great talent at a cheaper cost and give them an exceptionally good work-life balance.”

Southeastern Michigan is emerging as a digital-worker magnet as well. Being home to the Detroit Three automakers — with their thousands of engineers and scientists — helps.

The region also is gaining as a result of how traditional automakers are wrestling with Silicon Valley heavyweights such as Google and Apple to control the crucial “self-driving” dimension of the industry’s future.

Thus, for instance, Toyota recently named Ann Arbor, Mich., home of the University of Michigan, as one of its three global test sites for connected-car research; Cambridge, Mass., and Silicon Valley are the other. Ford just announced an initiative that could cost it $1 billion to revamp all its headquarters operations in Dearborn, Mich., to become tech- and millennial-friendly. And a number of carmakers are working with the state of Michigan and other interests to turn an old airport into the world’s biggest and most advanced real-world test site for autonomous-driving technology.

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

ADVANCED MANUFACTURING > PLAYBOOK

Ideas for Industry Innovation Put Into Play

By Craig Giffi, Vice Chairman, U.S. Automotive Industry Leader, Deloitte LLP; and Michelle Drew Rodriguez, Manufacturing Leader, Center for Industry Insights, Deloitte Services LP

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Research Contracts, Licenses, ations have long Partnerships, Lab Facilities RCI, Taxes, Interest Industry Foreign Research Labs Lab Managing Small-to-Medium striven to advance Governments Equity, Regulatory FFRDCs and Other Funding, Royalties Entities Contracts, Revenues Enterprises (SMEs) Support Research Institutions Partnerships Big Enterprises Ne to the next techRes w Goo earc ds h and Research Contracts, nology frontier and Rev Costs, Servi Government New Technologies, enu Pat ces, es ents Department of Energy New Products, Patents , raise their economic well-being. In (DOE), Other Federal Output from Labs, Debriefs and State Agencies Funding, Taxes, Partnerships today’s highly dynamic environment, Other Congress Funding, National Industries Priorities advanced technologies have become even more essential in improving ecoSOURCE: Advanced Technology Initiative, Deloitte and Council on Competitiveness nomic competitiveness and national prosperity. As a result, many nations, including the United States, have invested heavily in establishing national innovation ecosystems that viewed executives and lab directors were also asked about connect people, resources, policies, and organizations to coltechnologies considered most critical to their company’s lectively translate new ideas via advanced technologies into competitiveness as well as high-level recommendations for commercialized products and services. Tapping into these reinvigorating America’s industrial base. Their responses ecosystems enables companies to operate at the forefront led to the following findings: of cutting-edge science and technology in order to translate A Valuable “Knock-Off ” Effect superior products and services more rapidly into the market.

The U.S. manufacturing industry, increasingly propelled To understand and identify current and future trends in by advanced technologies, comprises a large portion of the United States and global scientific research and develthe economy. In order for companies to grow and succeed opment, Deloitte Touche Tohmatsu Ltd. and the Council against aggressive global competition, manufacturers on Competitiveness conducted an Advanced Technology indicate advanced technologies are critical to companyInitiative (ATI) study. To this end, Deloitte and the Council level competitiveness by increasing differentiation through interviewed nearly three dozen C-level executives — increating premium products, processes, and services that cluding CEOs, chief technology officers, chief research capture higher margins. The use of advanced technologies officers, and company presidents from various manufacturto produce complex products also enhances export competing sectors — as well as nearly a dozen directors of U.S. itiveness, leading to greater economic prosperity. This path national laboratories and research facilities. In addition becomes easier by building unique knowledge and capabilito identifying and exploring challenges facing U.S. manuties, and economic complexity is directly related to acquiring facturing and national labs, the initiative was designed and developing manufacturing capabilities. to help identify the most promising advanced technoloNations that have accumulated knowledge around progies in development within the United States. The inter-

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ADVANCED MANUFACTURING > PLAYBOOK duction processes and develhundreds of survey responses Advanced industries drive national prosperity oped manufacturing capabilifrom Deloitte and the Counand generate more jobs, output and earnings ties that other economies do cil’s 2016 Global Manufacnot possess produce more turing Competitiveness • Represent 17 percent of sophisticated and exclusive Index (GMCI), U.S. executives US economy (~$2.7 trillion) products, boost their exports, consistently stressed as their and become more prosperous highest priority the impor• Account for 60 percent of in the long term. Advanced tance of digital technology, US exports (~$600 billion) manufacturing has the effect including the use of predicof strengthening the overall tive analytics. They were also • 70 percent of US advanced economy by creating higherlooking to place significant industries are advanced manufacturing companies income jobs. This creates a focus on innovative, smart, knock-off effect where these and connected products. industries are responsible for While interviewees were • Perform 90 percent of private-sector R&D a greater proportion of jobs highly engaged in discuss(~$250 billion) in the entire value chain, leading the question of which • Represent 80 percent ing to a higher standards of technologies are the most of the nation’s engineers living for the nation overall. To attractive and/or promising, (~5 trillion) unlock this potential, nations and as most of the interneed to continuously invest viewed executives discussed • Generate approximately 85 percent of all US patents in R&D to develop strong and debated nearly every (~360,000) manufacturing know-how, technology they were asked as advanced manufacturing about, there was a strong col• Technology-intensive capabilities depend on a nalective focus on and interest manufacturing has a tion’s support of cutting-edge in advanced manufacturing knock-off effect of 16 R&D activities. technologies such as predic• Advanced industry workers Ultimately, innovation tive computing and anaearn nearly twice as much as and economic growth have lytical modeling, connected those in other industries a compounding and symbitechnology/sensors (i.e., the otic effect. Indeed, a strong, Internet-of-Things or IoT), as • Produce almost twice as much innovative, and technologywell as advanced materials GDP output per worker ($117K vs. $218K per worker) savvy manufacturing base such as advanced ceramics encouraged by an integrated and composites. Collectively, SOURCE: Brookings Institution, World Bank, Bureau of Labor Statistics support structure attracts the ATI study interviewees more businesses which, in felt many of these advanced turn, creates more demand for high-paying jobs, thereby technologies were promising — especially when used attracting more top-tier talent. These foundational elements together in a synergistic manner — and such technologies build upon each other and become incrementally more valuwould be vital to their companies’ future. able as the innovation ecosystem grows. This phenomenon Sustaining National Competitiveness presents both industry and government with a win-win According to the executives interviewed in the ATI study, situation that should encourage them to collaborate to build the competitiveness of a nation ultimately depends upon a strong and vibrant national innovation ecosystem. the success of its national innovation ecosystem. An innovaUnlocking New Opportunities tion ecosystem is composed of people, resources, policies, Executives indicated predictive analytics, Internet of and institutions that promote the translation of new ideas Things, and advanced materials are the most promising into tangible products, technologies, and services. Hence, a technologies for American manufacturers. Across dozens of successful innovation ecosystem efficiently links resources interviews in Deloitte and the Council’s ATI study, as well as invested in the knowledge economy to increased profits by

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creating new products, processes, and services. companies.

These same executives also said the current U.S. innova• Strong venture capital (VC) investments that feed tion system possesses the critical attributes that positions national innovation pipeline: Executives interviewed highit at the forefront of cutting-edge science, technology, and lighted the unique entrepreneurial spirit of U.S. technology companies and the substantial funding made available by innovation, namely through an educational system that venture capital firms as significant competitive advantages fosters creative thinking, superior talent, the world’s leadand key differentiators for the country. The average equity ing universities, an excellent research infrastructure, a solid value of VC deals in the United States between 2010 and venture capitalist presence, and strong support for regional innovation clusters. All of these are instrumental in keeping America at the forefront of cutting-edge science, technology, and innovation.

U.S. industries enjoy a competitive Join the growing group of companies who call Mississippi home. advantage over other nations as a significant amount of basic and applied research occurs within U.S. borders.

U.S. businesses can help maintain this edge, and preempt competition, by bolstering mechanisms to translate these local research outputs into superior products and services before their competition does. This calls for efficient and effective collaborative mechanisms between industry, research labs, and other players in the ecosystem.

THESE COMPANIES KNOW MISSISSIPPIWORKS

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Leveraging Key Strengths Executives participating in the ATI study indicated the United States should leverage key strength areas such as: • World’s leading academic institutions and research facilities focused on innovation: The United States has top-tier universities that provide highvalue talent, while dedicated research institutions and national labs attract highly qualified researchers and scientists from around the world, positioning it well to actualize the substantial promise of advanced technologies by supporting its innovation ecosystem with requisite resources.

• Top-notch technologically advanced firms: From blue chips to successful startups, the United States is home to an enviable number of technologically advanced, innovative

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NEW ADJACENT EXISTING

WHERE TO PLAY (MARKETS & CUSTOMERS)

2014 topped $42 billion, invest in short-term innovaand the United States has tion for immediate benefits TRANSFORMATIONAL A been more efficient than with existing products but Developingg breakthroughs Deve o g and inventing things gs for markets that a don’t yet exist some other nations at should also place emphasis converting early-stage inon long-term R&D investvestments into late-stage ments that result in transADJACENT C ventures. formational gains.

Expanding g from existing business • Proximity to regional • Operate outside of trainto “new to the company” business e innovation clusters: ditional walls. Innovative innovation Regional companies are exploring clusters not only act various mechanisms of colas magnets for top laboration outside of their students, researchers, walls and with the broader CORE innovation ecosystem (e.g., scientists, and VC funds, Optimizingg existing i g productts but also enable fruitful VC arm, joint ventures with for existing customers o partnerships between cross-industry companies/ research and educational organizations, university EXISTING INCREMENTAL NEW HOW TO WIN (PRODUCTS & ASSETS) institutions and corporaand/or national lab innovaSOURCE: Doblin, Deloitte’s innovation and design practice tions that can lead to tion partnerships, crowdrevolutionary research sourced solutions). outcomes in key focus areas. Examples include the IT cluster • Recognize there is no singular solution. Many ad(Silicon Valley) in San Francisco, the biotechnology cluster in vanced technologies hold great promise but the most significant transformational shifts occur when multiple techBoston, and the automotive cluster in Detroit. nologies are combined synergistically for innovative solu• Global leadership in research, technology, and innotions. There is no singular solution where the path to success vation: ATI study results indicate the United States is still is forged in synergistic solutions and perseverance. the biggest global spender on R&D ($356 billion), eclips• Have strategic focus. Successful companies are explicit ing R&D expenditures by other nations around the world. like basic and This is particularly true in foundational areas about aligning their activity and resources across differapplied research. Companies looking to obtain a leadent innovation ambition levels and ensure the approach, ing edge in specific technologies should look at partners organization configuration, competencies, and incentives within the broader ecosystem, such as the national labs, consistently reinforce the strategic goals. to broaden their research agenda, identify new potential • Be risk tolerant. Truly transformative innovations, like applications, and advance their innovation portfolio and basic research breakthroughs, are saddled with high risks of failure. However, if successful, transformative innovations ecosystem. can create new business opportunities that result in signifiPutting Ideas To Work cant market share and profits.

Clearly, a strong focus on innovation is essential to the • Persevere. Firms that have either a fear of failure or a health of not only individual companies, but also the overall fear to bounce back when met with failure will remain as followers to innovative firms that have a greater appetite for U.S. economy. In order for advanced manufacturing companies to capitalize on emerging opportunities while mitigatrisk, consistently innovate, and have gained experience from ing potential risk, there are a number of key insights to guide their failures. solid business strategies and include in their “innovation • Be explicit about innovation ambitions. A company playbook” going forward: should then organize and execute accordingly.

• Look beyond product innovation. This is necessary to • Think like a venture capitalist. In today’s highly dynamic transform other elements of your business system. and interconnected world, highly innovative companies are • Diagnose your capabilities. And build up your innoadopting calculated risk-taking strategies and leveraging vation management system along with your ecosystem best practices from more agile startups. partnerships. ≈ ≈ ≈ • Take a portfolio approach. Companies may need to for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

ADVANCED MANUFACTURING > PLAYBOOK

By Jeff Troan, Principal, Hickey and Associates, LLC

By obtaining technology and scientific grants, government performance contracts, and economic development support, innovative companies can quickly flourish.

Public/Private Partnerships Help Entrepreneurs Bring Ideas to the Marketplace

I

t is unquestionably a challenging task to select the 20th century’s finest prose, but certainly the late President John F. Kennedy has to rank among the best elocutionists of the era. Whether or not you were a supporter of the Kennedy administration, or even alive then, its’ hard not to be moved by eloquence like this: Indian Energy’s Advanced Microgrid is managed by the flex Power SystemTM, “…We choose to go to the moon in this a reliable and secure command and controls platform, and is backed by a game-changing energy storage device. decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the of the future, and his observations and intrinsic belief in best of our energies and skills, because that challenge is one mankind have not proven ill founded. We have indeed seen that we are willing to accept, one we are unwilling to postthe pace of technology accelerate exponentially in each pone, and one which we intend to win, and the others, too.” decade since JFK’s death, with each generation of hardware To put that speech in perspective, JFK uttered those and software built upon the last, with ever more complexwords at a time when the first commercial printed wiring ity, intricacy, and capability. Technology cycles that used to boards (PWBs) were just being introduced (developed under last half a century now are lucky to last half a decade. Instant a military contract, by the way). PWBs are the core of all worldwide communication permeates modern culture as modern electronic/digital technology. Prior to that, people if it were indigenous to the species, and knowledge profliwere roping vacuum tubes together with wire on ungainly gates in microseconds. Today, we are able to fight medicine’s half-ton steel chassis to make radios work. JFK was propospathogens with genetic weapons, thwart tyrants with cell ing going to the moon… phone cameras, and visit the globe from our desktop.

Marvelously, however, that generation of Americans Growth Possibilities for Small Businesses did indeed make it to the moon, and “do the other things” After a childhood spent mesmerized by the moon program, that JFK prophesized in that Rice University speech. In it, an adolescence engulfed in engineering, and more than JFK outlines a new demographic pattern forming, in which three decades working at Lockheed Martin, these days I people all over the world are living longer and healthier, beespecially enjoy working with small businesses in the rapid ing educated better, and communicating more effectively. In growth stage. It is all new technology, and the engineering his vision, he sees these elements condensing into a perfect and business teams see limitless possibilities for growth. storm of human endeavor that would see the pace of techMost exciting is what appears to be a new generation of nology accelerate by magnitudes over the coming century. “old” entrepreneurs in the marketplace (i.e., fifty-somethings) We are now a little over 50 years into Kennedy’s vision

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ADVANCED MANUFACTURING > PLAYBOOK who bring a lot of business savvy, which is good because the entrepreneurial ladder from founder to IPO’d gentry (i.e., company has gone to Initial Public Offering – founder retired) is a lot more difficult than it used to be. Gone is the “new economy” of the 1990s when startups were drowned in equity capital from Wall Street long before showing a hint of profitability. Gone are the easy debt markets of the 2000s when you could leverage your way to solvency on real estate and cheap debt. In the end, the old dictum has proven to remain correct: in the physics of finance, “profit attracts capital and little else.”

So in these days of modern laissez-faire finance, how does one get from founder to IPO’d gentry? Well, most small businesses create adequate capitalization along a hierarchy of the founders’ investments; one or two rounds of friends’ and family investment; one or two rounds of angel investment; and finally one or two rounds of venture capital. Arriving at this point, the financial dictate would be that the business should either move to an IPO, be bought out by another public company, or be dissolved for lack of interest in the first two options.

compensation offered by a public or private source, aimed at developing a certain field of science and/or engineering deemed important to the grantor. Often the technology goals of a small business merge well with those of a grant, and the funds can serve to move a startup toward IPO status.

By far the most prolific site for these grants is operated by the federal government at www.grants.gov. On any given day, there are 2,000 to 2,500 active grants open for solicitation by the federal government. But don’t stop there, you can also find these opportunities at the national laboratories, via state governments, or through private philanthropic enterprises.

Government performance contracts take public/private partnership a step further, by creating a buyer/seller performance contracting relationship between a small business and a federal government agency.

The U.S. government is the largest procurement operation on the planet, buying just about a trillion dollars’ worth of goods and services every year. On large procurements, the prime contractors are required to subcontract 20 percent to 25 percent of the value to small and small disadvantaged business (SDB). Beyond that, the U.S. government conducts billions of dollars of set-aside procurements open only to small business. And it’s’ not just the sales that are good, it’s the cash flow. The government customer prints his own money, paying on terms that are both generous and prompt. Progress payments are often invoked, allowing a contractor to collect revenue while development is under way, rather than waiting until the product is delivered to market.

All this points to government contracting as a great way to improve cash flow for a business working toward IPO. If you’re in a technology industry, it’s likely that either the military or some civil government agency is working along similar lines. Why not leverage a government contract to develop commercial technology and bring in fresh investment cash at the same time? U.S. government Requests for Proposal (RFPs) are listed and updated daily at www. fedbizopps.gov. Open federal solicitations usually number between 25,000 and 50,000, and these break out into further

IT IS ALL NEW TECHNOLOGY, AND THE ENGINEERING AND BUSINESS TEAMS SEE LIMITLESS POSSIBILITIES FOR GROWTH.

Public/Private Partnerships For all but the best technical innovations, the startup company must be profitable, or close to it, before it can become a legitimate IPO or business sale. This means it must endure at least one round of venture capital before reaching the markets. However, if nothing else, capitalism always seeks new efficiencies, and so it has been quietly developing alternate markets to augment classic venture capital financing. These fall in the form of public/private partnerships. The public sector has come to realize that private-sector jobs, especially in core industries, are the sole fuel that drives a local economy.

In the last two decades, the discipline of economic development has matured, providing a defined methodology for job generation in local communities. For the small to medium company trying to reach IPO status, economic development assistance can be found in three forms: 1. Technology and scientific grants; 2. Government performance contracts; and 3. Economic development support Technology and scientific grants are cash or in-kind

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opportunities, as large procurements are subcontracted out to three or four layers of vendors.

Economic development support is the process of utilizing public-sector programs aimed at generating job growth, to “optimize your company’s underlying business climate.”

While scientific grants and government contracting are latent forms of economic stimulation, economic development is explicit. If you operate a small business that may one day blossom to generate a significant employment base, you are eligible for incentives support. If your small business brings in fresh cash spend and exports product, you are extremely valuable to regional economic growth. And if your small business qualifies as disadvantaged, you can add demographic progress to your positive economic attributes.

On the front end of a business’s growth, economic development programs bring discount financing, loan guarantees, infrastructure support, workforce development, and labor subsidies. On the back end, they bring tax abatements.

One of the great mistakes made by small companies is not to worry about state and local taxation until they’re profitable, invested, and manned-up. Tax abatements are based on job generation and capital investment, and can’t be claimed in arrears. So if you take the time to fill out the paperwork when you’re at 10 people and $200k of investment, all the additional growth generates tax-free status. If you don’t, you’ll just wind up in a rather frustrating conversation with your local economic development agency later. Further, sales and property taxes are not income-driven, and while startups generally have a limited liability prior to IPO, cash squandered on tax comes directly from founder compensation. Economic development support can be found in federal, state, and local government agencies, as well as via utilities.

Some Examples Indian Energy LLC is a company that has done an excellent job of using public/private partnership to forward its business, as well as the state of the art in the energy sector.

The company specializes in developing local power microgrids that supply their customers with low-cost reliable power, augmenting and some day bypassing the local public utility grid. Led by Allen J. and Allen G. Cadreau and Henry J. Boulley Jr., all of whom are members of the Sault Ste. Marie Tribe of Chippewa Indians, the firm enjoys Native American SDB status with the federal government, which it has merged with a proclivity for winning U.S. Army contracts for power-related development and implementation. The result

is a financially robust energy growth firm with a lengthening list of proprietary partnerships and patents, including a new form of highly efficient kinetic energy storage and a military hardened energy management and controls platform.

This capability is demonstrated on a large military base in California.

United Precision Corp. (UPC) has a different heritage but similar mission for growth. For nearly a century, the San Fernando Valley in northwest Los Angeles was a haven for aerospace companies. In particular, it was home to the manufacture of precision machined components and subassemblies necessary for advanced aerospace applications in aircraft, spacecraft, and the energy industry. When a legacy supplier of precision machined seals and relief products was acquired a few years ago, the San Fernando Valley operations were closed and decades of workforce experience were in jeopardy of being lost.

Recognizing a danger of losing this skill set and potential industry void, Robert Hawrylo joined with former employees and launched United Precision Corp. Hawrylo re-established operations in the Valley, and hired back the journeyman machinists and engineering staff, which are critical to maintaining quality production. Today the company has expanded to manufacture high precision machined metal seals, burst disc, and relief valve products, along with offering the valueadded services of CNC machining and TIG lathe welding.

UPC [is attempting to] blanket the federal government contracting industry to re-introduce its machined metal seal and burst disc/rupture relief capabilities to the military, NASA, and their major contractors. In addition, the company was able to obtain workforce development incentives from Los Angeles County, and intends to pursue a full range of economic development support from California as sales and profits grow. ≈ ≈ ≈

Click on to the world’s foremost economic development Website — and CLICK TO THE WORLD

www.areadevelopment.com

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I

Taking a Product From Prototype to Production

n order to understand a manufacturer’s process of developing innovative products and bringing them to market, Area Development’s editor recently spoke with Olivier Brauen, head of Michelin Tweel Technologies, and Jack Olney, the director of sales.

Q

M Michelin has been making innovative products for 125 years. I understand that in 2012 the company formed a Group Innovation Committee. Can you tell us about the committee’s purpose and composition?

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B Brauen: The Michelin Group Innovation Board is an 11-person MICHELIN® X® TWEEL® SSL ALL-TERRAIN tire on a skid steer loader group-level team formed to oversee the governance of the innovation process. Set cluding North America, South America, Europe, Japan, up in 2012, it sets the course for Michelin’s strategy in this China, India, and Thailand — they meld their skills and area and chooses the priorities for innovation in order to passion to create innovation. Their research includes ensure resources and energy are channeled into value-createverything from how products are used through fundaing innovations. mental laboratory research.

The corporate Innovation Board has two roles: (1) to R&D teams work over three time horizons that include: define the group’s innovation strategy from a cross-functional • Advanced research (10-year or longer horizon) perspective and (2) to direct the innovation ecosystem’s • Research (3–5-year horizon) vitality to optimize its strength throughout the company.

• Development (1–3-year horizon) In so doing, Michelin opens up fresh opportunities to: • Expand its resources and methods; D Does Michelin partner with academia? Can you • Focus its efforts on its research priorities; and provide specific examples?

• Seek customer and market feedback on projects as early as possible in order to speed up innovation and maintain Brauen: Yes. For example, The College of B alignment on required step-up efforts in the materials field, Charleston’s School of Business worked with since its integration feeds the group’s progress in technology Michelin North America to develop a professional and value creation. development program focused on global logistics and M Michelin has 6,000 employees at its Technology transportation. The School of Business turned the program Centers worldwide. Can you give us examples of from the partnership into a comprehensive logistics profesthe type of work they are engaged in? sional development program open to any business, educational, or government entity operating or looking to operate Brauen: Michelin relies on research and developB in South Carolina. ment teams who work on constantly improving In 2011, Michelin announced plant expansions in the products. At locations all over the world — instate of S.C. totaling more than $950 million in investments

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that would create more than 700 manufacturing jobs. A significant portion of these investments was centered in Lexington County. One of the most difficult and challenging positions to fill was the advanced manufacturing technical position. At the same time, the facilities were preparing to replace employees eligible to retire. Michelin turned to Midlands Technical College and the Lexington County school districts to build a pipeline of technical talent to fill these new positions.

As a result of this endeavor, the Midlands Technical College (MTC) partnership with Michelin North America, Inc. was honored by the American Association of Community Colleges (AACC) as being the best corporate partnership by any two-year college in the country. The AACC presented Midlands Technical College with the Award of Excellence for a College/Corporate Partnership at its annual national convention, which brings together more than 2,000 community college leaders, advocates, researchers, and policymakers.

Additionally, Michelin North America is one of the founding partners of Clemson University’s International Center for Automotive Research (CUICAR). CU-ICAR is home to the nation’s only graduate Department of Automotive Engineering. Here, over 200 Clemson University students are pursuing Master of Science and/or Ph.D. degrees in Automotive Engineering.

These graduate students learn in an innovative research-and-educational program that focuses on the vehicle and its infrastructure from a systemsintegration perspective.

material technology, manufacturing optimization, and other areas that contribute toward innovative mobility. As an example, Michelin has partnered with BASF since 2012 on polyurethanes material technology and manufacturing process optimization in the commercialization of the innovative MICHELIN® X® TWEEL® Airless Radial Tire. This synergy helps Michelin to further improve its innovative products and drive growth in other industrial and utility applications.

Q

How about Michelin’s suppliers? How have they contributed to innovation?

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How H are Michelin’s employees encouraged to foster innovation at the company?

A

Brauen: Michelin has established initiatives to tap B the creative potential of all of its employees. The company has developed an international innovation initiative that promotes innovation in all facets of its operations.

It deploys tools to give impetus to innovation and encourage and facilitate the emergence of these new ideas. Its goal is to foster individual creativity and collective intelligence by encouraging employees to offer suggestions and share ideas.

Because it makes sound business sense, Michelin wants to solicit and develop its employees’ solutions to big and small issues throughout every aspect of the company, including such areas as plant manufacturing operations, business practices, logistics, and of course making the highest quality tires in the world.

Q

You mentioned the TWEEL® Airless Radial Tire, which was named “one of the most amazing inventions of 2005” by Time magazine and one of the “100 most innovative products of 2005” by Popular Science. Tell us about that innovation and on which types of vehicles it is used.

A

O Olney: The award-winning MICHELIN® X® TWEEL® SSL is the first commercially available airless radial tire for skid steer loaders. This revolutionary tire offers a solution to the seemingly unavoidable challenge of chronic flat tires that plague the millions of skid steer loaders relied upon by many commercial operations. The skid steer loader is used in the landscaping, construction, contracting, refuse/recycling, and agricultural industries. The MICHELIN® X® TWEEL® Airless Radial Tire is a non-pneumatic tire/wheel assembly offering several advantages over pneumatic tires: no air pressure to maintain, damage resistance, and improved productivity due to reduced down time (no flat tires), and improved operator comfort — clearly concepts that create value for the end-user.

Q

C you tell us anything about the development Can process of the TWEEL® tire?

A

Olney: In 1999, Michelin engineers were asked to O discover why a pneumatic tire was the dominant technology for mobility, despite the inherent vulnerability associated with air loss. What they found was pneumatic

24

AREA DEVELOPMENT

tires offer significant performance advantages including: • Low contact pressure • Low vertical stiffness • Low rolling resistance over rough surfaces • Low mass per unit load carried When the co-inventors started working on this premise, they were still designing a structure that looked like a regular pneumatic tire. What they discovered was that because they didn’t need to seal in the air pressure, they could change the configuration of the tire, and in doing so the concept of the TWEEL® Airless Radial Tire (a tire and wheel assembly) was born. The TWEEL® tire replaces the 23 components of a typical radial tire. The TWEEL® tire is comprised of a rigid hub, connected to a circular shear beam by means of flexible, deformable polyurethane spokes and a tread band, all functioning as a single unit.

Over the following decade, the engineers worked diligently on various prototypes of the TWEEL® tire and, in 2005, the TWEEL® tire was finally showcased at the North American International Auto Show in Detroit on the iBOT wheelchair and Segway Concept Centaur Human Transporter.

Q

A there any other innovative products in Are Michelin’s pipeline that you are at liberty to tell us about?

A

Olney: The continued focus is to concentrate on O off-highway, low-speed, unregulated markets.

Michelin’s original equipment strategy is to partner with select innovation partners to optimize integration.

Michelin places a high degree of importance on the selection of these partners.

Q

I there anything else you’d like to add about Is Michelin’s culture of innovation ?

A

Brauen: Since 1889, Michelin has constantly B innovated to facilitate the mobility of people and goods. Today, it is setting new global standards in every tire and travel-related services market, while leading a unified strategy to drive sustainable, profitable growth.

In the broad mobility space, the mission of the Incubator Program Office (IPO) is to seek, promote, develop, and deliver novel business activities beyond our core business, which will create value and contribute to profitable growth for the Michelin Group. This mission will also increase the innovation capability of the Michelin Group. ≈ ≈ ≈

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

SPECIAL REPORT

GOLD O OL & SILVER Shovel Awards

E

2016

conomic development departments and teams have a tremendous responsibility — their states depend on their guidance, vision, expertise, networking skills, and marketing savvy to grow the state economy and create good-paying jobs.

With tough competition from other states, and even countries, having the right combination of site selection factors just isn’t enough these days. Economic development teams must, at a deep level, truly understand the needs of the prospect and craft the winning proposal.

Economic development teams often consult with governors and state legislatures to put business-friendly policies and tax incentives in place. They also hustle to find strong prospects for their targeted growth industries that also fit the skills of their workers. And now, seven years after the Great Recession, with an improving economy, companies are getting more serious about expanding — and, after seven years of wage stagnation, workers are eager for new companies and better-paying jobs.

So there is a lot of pressure to out-perform the competition — and the recipients of Area Development’s annual Gold and Silver Shovel Awards know exactly how to do it. The states receiving this year’s Shovel Awards are being recognized for their large numbers of high-impact economic development projects, including $1 billion+ deals with thousands of new jobs. This

AREA DEVELOPMENT | Q2/2016

25

SPECIAL REPORT

CALIFORNIA Gold Shovel Winner

Company * Tesla Northrop Grumman

BioMarin Stripe Medline ICON Aircraft Applied Materials QVC Hyundai Capital ESRI

City/County N/E

# Jobs

Inv. Amt.

Industry

Fremont

E

4,426

$2.39 billion

Automotive

Los Angeles County, Santa Clara County, San Diego

E

1,359

$520.3 million

Aerospace

Novato

E

1,600

$50 million

Biotechnology

San Francisco

N

1,400

$73 million

Online Payment Processing

Tracy

E

500

$75 million

Medical Devices

Vacaville

E

509

$69.3 million

Aerospace

Santa Clara

E

500

$50 million

Semiconductors

Ontario

N

500

$40 million

Logistics

Fountain Valley E

310

$105 million

Auto Financing

370

$105 million

Software

Redlands

E

(pop. 38 million)

*An Automotive Project of the Year

STATES WITH POPULATIONS

year, we honor 22 states for their achievements in winning new business investment in 2015 and job creation. Many of these states are repeat winners, which is no surprise — their economic development leaders make it a point to develop personalized, long-term relationships with the businesses and industries in their states that go long beyond the ribbon-cutting.

12+ MILLION POPULATION CATEGORY

CALIFORNIA — GOLD SHOVEL California’s unemployment rate has fallen 1.2 percentage points over the past year to about 5.4 percent, driven largely by strong growth in the state’s technology and professional services sectors. The Golden State continues to attract investment for its high-tech sectors. Foreign direct investment (FDI) to the U.S. jumped by more than 30 percent in 2015, with California getting approximately one-quarter of total FDI. As a leading life sciences and biotechnology center, California’s top clusters are located in San Francisco and San Diego. A major capital investment in this sector is BioMarin’s $50 million expansion in

26

AREADEVELOPMENT

FOR FREE SITE INFORMATION, CALL

12+ MILLION

Novato, which will require an additional 1,600 workers.

Other key high-tech sectors are electronics and aerospace, where Northrop Grumman is expanding its operations across the state ($520.3 million, 1,359 workers), and ICON Aircraft is increasing its capacity in Vacaville ($69.3 million, 509 workers).

When it comes to high-tech automotive manufacturing, look no further than Tesla’s enormous $2.39 billion, 4,426-employee planned expansion in Fremont, where the latest manufacturing technologies will be employed.

Innovative, high-precision equipment will also be required for semiconductor production when Applied Materials completes its $50 million expansion in Santa

Clara, hiring 500 workers.

With its ports and interstates, California is also a prime logistics and distribution location. Medline Industries, a manufacturer and distributor of medical supplies and services, has started construction on its $75 million, one-million-square-foot distribution facility in Tracy. And QVC plans to build a $40 million, 1.2-million-square-foot warehouse in Ontario, its first West Coast distribution center.

FLORIDA — SILVER SHOVEL Florida’s diverse economy is driven by manufacturing, aviation and aerospace, life sciences, defense, IT, finance, logistics and distribution, and clean technology. Aviation is represented by more than 2,000 aerospace and aviation companies that generate an estimated $144 billion in annual revenues. Florida is also home to two of the nine active spaceports in the U.S.: Cape Canaveral Spaceport and the Cecil Spaceport. A new addition to the aerospace sector is Blue Origin in Brevard County, owned by Amazon.com founder Jeff Bezos.

The $205 million, 330-person complex will include both launch and manufacturing facilities.

Florida is also a hub for the life sciences, with more

800-735-2732, EXT. 225, OR VISIT US ONLINE AT www.areadevelopment.com

than 5,000 companies supporting 79,000 jobs. The state is home to world-renowned biomedical research institutes and pharmaceutical and medical device companies, and is ranked second among the states for FDA-registered medical device manufacturing facilities. Recent announcements in this sector include Johnson & Johnson’s $301 million expansion in Duval County (100 jobs) and Sancilio and Co.’s $6.7 million expansion in Riviera Beach, which manufactures branded prescriptions, over-the-counter and generic prescription pharmaceutical products, and nutritional supplements.

Other manufacturing sectors in Florida include electronic components, compressors, and transportation equipment. For example, VOXX in Orange County is spending $17.3 million to expand its automotive components production facility with a new, state-of-the-art manufacturing center and corporate headquarters in Orlando. And Hoerbiger, a leading player in the fields of compression, drive, and automation technology, is opening a new manufacturing facility in Coral Springs, which

AREA0571.indd 1

GOLD O OL SILVER

will create 420 jobs. “The strength of the workforce makes South Florida the right Shovel place for our newest facility,” Awards notes Don York, president of Hoerbiger Corporation of 2016 America, Inc. Bob Swindell, president of the Greater Fort Lauderdale Alliance, explained that Hoerbiger has been a “good corporate citizen” that has worked to develop a machinist apprentice program at Broward College.

ILLINOIS — SILVER SHOVEL Two key sectors that drive the Illinois economy are agriculture/food processing and manufacturing. Top agricultural products are corn, soybeans, wheat, pork, and cattle. Additional crops grown in Illinois include oats, sorghum, fruits, and vegetables. Food processing is the state’s second-largest manufacturing sector. Recent announcements include ConAgra

4:17 PM AREA DEVELOPMENT10/05/16 | Q2/2016 27

SPECIAL REPORT rate in 2015 was about 4.2 percent). This is because the state has aggressively Silver Shovel Winner diversified into other Company City/County N/E # Jobs Inv. Amt. Industry industries, with strong support from the Texas Blue Origin Brevard County N 330 $205 million Aerospace Enterprise Fund and cluster initiatives. Technology, Johnson & JohnsonDuval County E 100 $301 million Life Sciences Vistakon Vision Care Inc. healthcare, and the Osceola County N 215 $280 million R&D ICAMR, Inc. insurance/financial sector Walmart Polk County N 625 $230 million Distribution Center are hot spots in the Texas economy.

Broward County E 420 $55.2 million Compressors Hoerbiger For example, Liberty UTC Building & Palm Beach N 380 $115 million Headquarters Industrial Systems County Mutual is building a $355 million, nearly one-millionDS Waters of Polk County N 509 $16 million Contact Center America, Inc. square-foot office campus VOXX Orange County E 134 $17.3 million Automotive in West Plano. Also in Plano Electronics is Capital One Financial, Sancilio & Co., Inc. Palm Beach E 275 $6.7 million Nutritional which is undertaking a $35 County Supplements million, 205,000-squareMerritt Island Brevard County N 380 $16 million Yachts Boat Works foot extension of its corporate campus and (pop. 20.27 million) REPRESENTS A STATE/LOCAL SPONSOR will hire 1,200 workers, STATES WITH POPULATIONS 12+ MILLION bringing the total overall campus to 1.5 million square feet.

“The things that one would see in this building, from a work perspective, would be the things that Foods locating its $106 million headquarters in one would see in a leading-edge Silicon Valley Chicago, where it joins other food companies company,” states Sanjiv Yajnik, president of financial including Kraft Heinz and Wrigley. Costco also plans services for Capital One. “We have a great workforce to build a $110 million meat-processing plant in here and in the Dallas-Fort Worth area.”

Morris and hire 85 workers.

Although a surplus of cheap natural gas hurts the Another powerful force in the Illinois economy oil and gas industry, these stockpiles are attractive is manufacturing, especially heavy machinery feedstocks to the petrochemical industry. Recently for construction and agriculture, and farm tools. announced billion-dollar projects include Sempra Chemicals, pharmaceuticals, cleaning solutions, and Energy ($4 billion LNG export facility) and Total paint are other top manufacturing sectors. Last year Petrochemicals in Port Arthur ($2 billion ethane was especially beneficial for the chemical market, cracker), and BASF/Yara in Freeport ($1.1 billion with Cronus Chemicals announcing plans for a $450 ammonia production facility). million, 130-person plant in Tuscola and Aux Sable Liquid Products planning to increase the capacity of its extraction and fractionation facilities in Channahon by 24,500 bpd.

8+ TO 12 MILLION POPULATION CATEGORY Last but not least, the three new distribution/ OHIO — GOLD SHOVEL fulfillment centers bringing a total of 2,250 jobs and $405 million in investment to Joliet — Mars Candy, Ohio is steadily coming back from the Great Amazon, and Ikea — helped Illinois garner a Silver Recession. The state’s annual employment growth Shovel. rate last year was about 2 percent, thanks in part to growth in the manufacturing sector, which contributes nearly $100 billion to the Ohio GSP. Key TEXAS — SILVER SHOVEL manufacturing sectors are small appliances, steel, and automotive.

Texas continues to expand its economy and create Northeast Ohio is home to many auto assembly jobs, despite the slide in oil prices (unemployment

FLORIDA

28

AREADEVELOPMENT

FOR FREE SITE INFORMATION, CALL

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Las Vegas

AREA0592.indd 1

Tahoe Reno

Grand Rapids

Milan

Bangkok

20/05/16 4:52 PM

SPECIAL REPORT

ILLINOIS

Silver Shovel Winner Company

City/County N/E

Arthur J. Gallagher & Co.

Rolling Meadows

Baxalta International

N

# Jobs 500

Inv. Amt.

Industry

$141 million

Financial Services

Bannockburn

N

800

$22 million

Headquarters

ConAgra Foods

Chicago

N

150

$106 million

Food Products

Aux Sable Liquid Products

Channahon

E

25

$130 million

Natural Gas Liquids

Tuscola

N

130

$450 million

Chemicals

* Mars Candy

Joliet

N

500

$130 million

Distribution Center

* Amazon **

Joliet

N

1,500

$155 million

Fulfillment Center

Arlington Heights

N

1,500

$10 million

Financial Services

Joliet

N

250

$120 million

Distribution Center

Morris

N

85

$110 million

Meat Processing Plant

Cronus Chemicals, LLC

HSBC Holdings * Ikea Costco

*A Small Cities Project of the Year * *An E-Commerce Project of the Year

(pop. 12.83 million) STATES WITH POPULATIONS

12+ MILLION

TEXAS

Silver Shovel Winner Company

City/County N/E

# Jobs

Inv. Amt.

Industry

* Liberty Mutual Insurance

Plano

E

5,000

$355 million

Headquarters

*Capital One Financial

Plano

E

1,200

$35 million

Financial Services

San Marcos

N

1,000

$191 million

Fulfillment Center

Austin

E

1,000

$17 million

Job Search Services

Dallas

N

900

$20 million

Fulfillment Center

Sempra Energy Port Arthur LNG

Port Arthur

N

100

$4 billion

LNG Export Facility

Total Petrochemicals

* *Amazon Indeed.com * *Amazon

Port Arthur

N

45

$2 billion

Ethane Cracker

General Motors

Arlington

E

600

$1.4 billion

Automotive

BASF/Yara

Freeport

N

10

Facebook

Fort Worth

N

40

$1.1 billion Ammonia Production $1 billion

Data Center

*A Small Cities Project of the Year * *An E-Commerce Project of the Year REPRESENTS A STATE/LOCAL SPONSOR

(pop. 26.96 million) STATES WITH POPULATIONS

30

AREADEVELOPMENT

FOR FREE SITE INFORMATION, CALL

12+ MILLION

and auto parts plants because of easy access to steel, glass, and rubber.

Ohio produced more than 1.5 million cars and trucks last year at six different assembly plants across the state. Forecasts suggest that automotive employment will increase 19 percent by 2024.

Major automotive projects include ADVICS Manufacturing Ohio, which is spending $150 million to expand its Lebanon operations to produce electronic parking brakes, requiring an additional 260 workers.

Fuyao Glass America is undertaking a $130 million expansion and adding 750 workers at its Moraine facility for increased production of automotive windshields.

D-MAX is also undergoing a $96 million expansion of its diesel engine-related manufacturing plant in Moraine to provide products for General Motors and Isuzu, hiring 150 more workers.

Other important economic sectors in Ohio with big investments in 2015 are food processing, IT, distribution and logistics, business services/administrative support, and advanced manufacturing sectors such as aerospace and biomedical. For example, after looking at sites in Tennessee, Texas, and overseas, global medical device company NuVasive decided to establish a $35 million operation in West Carrollton, creating nearly 200 new jobs.

800-735-2732, EXT. 225, OR VISIT US ONLINE AT www.areadevelopment.com

GOLD O OL & SILVER

Methodology Area Development’s annual Gold and Silver Shovel Awards recognize states for their achievements in attracting high-value investment projects that will create a significant number of new jobs in their communities. We collected information from all 50 states about their top-10 job-creation and investment projects initiated in 2015 (only those projects that actually had monies invested, “broke ground,” began an expansion, started new hiring, etc. were considered).

Based on a combination of weighted factors — including the number of new jobs to be created in relation to the state’s population, the combined dollar amount of the investments, the number of new facilities, the diversity of industry represented — six states achieving the highest weighted overall scores were awarded Area Development’s 2016 Gold Shovels in five population categories: 12+ million, 8+ to 12 million, 5+ to 8 million, 3+ to 5 million, and fewer than 3 million. Runners-up in each of these population categories were awarded 2016 Silver Shovels.

Shovel Awards

2016

Welcome to the fastest growing city in the U.S. Located in the dynamic corridor between Austin and San Antonio, the San Marcos region is where opportunity meets possibility.

It’s where the talent pool is diverse and productive, and where rivers

flow clear and cool next to world class shopping and a fast growing research university. Join us on the road to a bright future, and learn how the Greater San Marcos region can help your company prosper at www.GreaterSanMarcosTx.com.

ĆāĂċăĊăċăąĀĀƫđƫ .! 0!. * . +/ 4ċ +) All rights reserved. ©2016 Greater San Marcos Partnership

AREA DEVELOPMENT | Q2/2016 AREA0566.indd 1

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04/05/16 8:48 PM

SPECIAL REPORT

GEORGIA — SILVER SHOVEL Georgia has one of the steadiest economies in the South, thanks to its diversity and state-led workforce development program. Most key industries have shown steady growth, including aerospace, agribusiness, automotive, data centers, energy, food processing, IT, life sciences, financial services, telecommunications, and headquarters.

More than 250 automotive-related facilities operate in Georgia. About 20 percent of all East Coast automotive exports leave through Georgia’s ports, averaging $9.5 billion a year. Big announcements in 2015 include Mercedes-Benz USA selecting the Atlanta region for its new $74 million headquarters. Vanguard National Trailer Corporation, a leading semi-trailer manufacturer based in Indiana, will invest $30 million in a new manufacturing facility in Trenton. NIFCO KTW, a German automotive supplier of injection-molded components, will locate its first U.S. operation in Toccoa, providing parts to BMW and Mercedes-Benz USA. “Local and regional connectivity is the basis for our success in Germany and we strive to do the

AREA0582.indd 1

same in the U.S. We would like to offer our qualified and motivated employees pleasant and attractive surroundings. In the City of Toccoa, we have found the perfect partner in North America for this goal,” says NIFCO KTW Managing Director Roland Furtmayr.

The greater Atlanta region continues to show strength as an IT/financial center and preferred location for headquarters operations. Atlanta has added a significant 77,000 jobs over the past year, accounting for roughly 60 percent of total job gains in the state. Corporations with world headquarters in the Atlanta MSA are Coca-Cola, Home Depot, UPS, Delta Air Lines, and Turner Broadcasting. Newcomers in 2015 include Lincoln Financial ($20 million, 600 workers), Kaiser Permanente ($22.3 million, 900 workers), and Suniva ($96 million, 500 workers).

MICHIGAN — SILVER SHOVEL Michigan’s unemployment rate — once the worst in the nation — was one of the best in 2015 and is

17/05/16 8:06 PM

OHIO

Gold Shovel Winner Company Vadata/Amazon

* Amazon.com

City/County N/E Dublin, Hilliard, N New Albany

# Jobs

Inv. Amt.

Industry

120

$900 million

Information Services & Software

Etna Township, Village of Obetz

N

2,000

$180 million

Fulfillment Centers

ADVICS Manufacturing Ohio Inc.

City of Lebanon

E

260

$150 million

Automotive Parts

Fuyao Glass America

Moraine

E

GOLD O OL & SILVER Shovel Awards

2016

in Grayling. The $313 million project will produce 424 million square feet of panels D-MAX, Ltd. Moraine E 150 $96 million Automotive per year. “This investment Engines will improve the logistics of Mitsubishi Electric Mason E 100 $80.8 million Automotive our entire manufacturing Automotive Parts America, Inc. footprint and support the growth of our customers in Kroger Co. Blue Ash E 649 $46 million Grocery Administration the Midwest,” says ARAUCO North America President GOJO Industries, Inc. Wooster N 244 $43 million Sanitation Products Kelly Shotbolt.

NuVasive West N 195 $35 million Surgical Other manufacturing Manufacturing Carrollton Instruments sectors with significant Big Heart Pet Brands Orrville N 400 $34 million Pet Foods capital investments include food processing (Clemens * An E-Commerce Project of the Year (pop. 11.61 million) Food Group, $255.7 STATES WITH POPULATIONS 8+ TO 12 MILLION REPRESENTS A STATE/LOCAL SPONSOR million, 810 workers), alternative energy (MOVE Systems, $4.5 million, 318 workers), and warehousing/ distribution (Notions Marketing, $33 million, 250 workers). expected to continue to drop in 2016 and 2017.

Job growth is largely related to booming auto manufacturing. The state unemployment rate for NORTH CAROLINA — SILVER SHOVEL 2016 is expected to be below 5 percent.

Almost half of Michigan’s manufacturing output North Carolina has always had one of the strongest is related to the auto industry. Light vehicle sales for and most diversified economies in the South — a September 2015 were reported to be 18.1 million mix of traditional industries and knowledge-based units — at the time the best month for light vehicle sectors. Traditional industries such as agriculture, sales since July 2005. Continued growth in this textiles, and furniture are still going strong. For category should sustain this momentum through example, Ashley Furniture plans to build a new $8.7 2016. Impressive announcements include ZF North million facility in Davie County and hire 454 workers America, which plans to build a $71.2 million, over the next five years.

210,000-square-foot technology center in Northville In the food processing industry, Butterball, Township for the design, development, and testing of the largest producer of turkey products in the vehicle components and systems.

U.S., will undertake a $66.8 million expansion Michigan’s automotive industry is not just about of its operations in Hoke County and create 367 cars. Indiana-based Forest River Manufacturing, a new jobs over the next three years. In Robeson producer of recreational vehicles, has selected White County, Mississippi-based Sanderson Farms plans Pigeon, Michigan, for a $7 million manufacturing to build a $139 million processing plant and plant. The new facility will require 396 employees hatchery, creating about 1,100 new jobs during over the next five years. the next three years. “When a strong, successful And ARAUCO North America will build the largest company like Sanderson Farms brings this number continuous press particleboard mill in North America of new jobs to North Carolina, especially a rural 750

$130 million

Automotive Windshields

AREA DEVELOPMENT | Q2/2016

8:06 PM

33

SPECIAL REPORT model for high-tech cluster development.

Key industries are aerospace, biotechnology, Silver Shovel Winner pharmaceuticals, life sciences, energy, and Company City/County N/E # Jobs Inv. Amt. Industry finance/IT. One of the biggest announcements Kaiser Permanente Atlanta N 900 $22.3 million Health IT is Novo Nordisk’s $1.2 Mercedes-Benz Sandy Springs N 800 $74 million Headquarters billion expansion of Lincoln Financial Sandy Springs N 600 $20 million Regional its bio-manufacturing Headquarters/ operations in Johnston Call Center County, where it will VXI Global Solutions College Park N 570 $1.8 million Call Center hire nearly 700 new Suniva, Inc. Norcross E 500 $96 million Solar Headquarters workers. Business and ADP, Inc. Augusta E 450 $20 million HR Management financial services projects Systems include O’Neill Data Vanguard National Trenton N 400 $30 million Tractor Trailers Systems ($90.7 million, Trailer Corporation 250 workers), Republic Sandler AG Perry N 140 $86 million Nonwoven Textiles Services ($6.8 million, NIFCO KTW Toccoa N 200 $27 million Automotive 455 workers), and Fidelity Investments at Research National Beef Packing Moultrie E 200 $9 million Food Processing Company Triangle Park in Durham County ($10 million, 600 (pop. 10.25 million) workers).

STATES WITH POPULATIONS 8+ TO 12 MILLION “Fidelity has found North Carolina to be a great place to grow,” says Joan Vinas, senior vice president and North Carolina regional leader for Fidelity Investments.

“More than half of community, it is a game-changer,” states North our North Carolina employees are building careers Carolina Governor Pat McCrory. in technology, operations, and customer-facing North Carolina is also home to a number of positions, and we plan to hire more of the state’s high-tech industries; in fact, North Carolina’s diverse and talented workforce.”

Research Triangle Park is a long-enduring

GEORGIA

Small Cities’ Projects of the Year Sometimes mid-sized is just right. You don’t have to be a big city to reel in big-time investment. Take Joliet, Illinois, and Plano, Texas, for example.

IN JOLIET, a town of about 150,000 just southwest of Chicago, Amazon is opening its first Illinois fulfillment center, representing a $155 million investment (including leasehold improvements and capital equipment for two adjacent buildings). Some 1,500 people will be employed at the 500,000-square-foot facility. Mars Candy also announced it would construct a 1.4-million-square-foot distribution center at the CenterPoint Intermodal Center in Joliet, which will create about 500 new jobs. And Ikea’s new Joliet distribution center will add 250 jobs.

IN PLANO, Texas, a town of about 260,000 residents, Capital One is constructing a new office complex and hiring about 1,200 workers. The new building is an expansion of Capital One’s corporate campus. And in West Plano, Liberty Mutual recently opened its new $355 million, one-million-square-foot regional operations center, which will ultimately be staffed by 5,000 people.

“The community is a vibrant place to do business, and is also a great place to live and call home,” says Sanjiv Yajnik, president of Capital One Financial Services. “The well-being of our associates is of paramount importance to us, and Plano, with its great schools, excellent infrastructure, and quality workforce, strikes the perfect balance.”

34

AREADEVELOPMENT

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5+ TO 8 MILLION POPULATION CATEGORY

TENNESSEE — GOLD SHOVEL The year 2015 was literally the best year on record for economic development in Tennessee. The state landed 161 company commitments totaling $5.5 billion in investment capital, calling for more than 25,000 new jobs. About 40 percent of that investment came from foreign countries, led by Japan, Canada, and China.

Many of these projects are in the manufacturing sector. Automotive is the top manufacturing industry in the state, employing more than 100,000 workers — accounting for about one third of all Tennessee manufacturing jobs. The biggest automotive project announced in 2015 is Nissan North America’s $160 million expansion in Smyrna.

Also, FICOSA North America is building a $58 million facility in Cookeville, where it plans to hire 550 new workers. Gestamp Corporation, a European automotive supplier, will invest another $180 million and add 510 jobs at its Chattanooga operations, making chassis components for VW. Also, DENSO Manufacturing Tennessee is expanding its automotive components plant in Maryville, Blount County, investing $400 million and creating 500 jobs.

Manufacturing includes more than just automotive in Tennessee — companies such as Whirlpool, Electrolux, Eastman Chemical, and Delta Faucet have major operations in the state. One state asset in particular — Oak Ridge National Laboratory — attracted Advanced Munitions International, which plans to build a $553 million global headquarters and state-of-the-art munitions manufacturing facility in Alcoa, hiring 605 workers. And afer a year researching East Coast locations, Lifetime Products Inc., a manufacturer of outdoor equipment, has decided to open a new $115 million manufacturing facility in Knoxville that will employ about 500 people.

Manufacturers also depend on a strong transportation system and logistics/distribution support. Ryder Supply Chain Solutions will expand its warehousing and transportation operations in Spring Hill, investing $16.5 million and creating 606 new jobs in Maury County.

ARIZONA — SILVER SHOVEL Arizona also had a solid year — the economic scorecard shows the state added 61,600 net new jobs and held the unemployment rate at about 6 percent.

AREA DEVELOPMENT | Q2/2016 AREA0581.indd 1

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17/05/16 7:25 PM

SPECIAL REPORT

MICHIGAN

Silver Shovel Winner Company

City/County N/E

# Jobs

Inv. Amt.

Industry

Clemens Food Group

Coldwater

N

810

$255.7 million

Food Processing

ZF North America, Inc.

Northville

N

606

$71.2 million

Automotive

New Boston

E

475

$97.6 million

Automotive

Plymouth Township

E

466

$59.2 million

Automotive

White Pigeon

N

396

$7.1 million

Automotive

Detroit

E

350

$31.9 million

Automotive

MOVE Systems

Grand Rapids

N

318

$4.5 million

Alternative Energy

Notions Marketing Corporation

Grand Rapids

E

250

$33 million

Warehouse/ Distribution

Magna Cosma International

New Hudson

N

250

$56.1 million

Automotive

ARAUCO North America

Grayling

N

250

$313.1 million

Wood Products

Brose North America Magna International of America, Mimco Inc. Forest River Manufacturing LLC Sakthi Auto Group USA

REPRESENTS A STATE/LOCAL SPONSOR

(pop. 9.92 million) STATES WITH POPULATIONS

8+ TO 12 MILLION

N O RT H C A R O L I N A Silver Shovel Winner

Company Novo Nordisk Iberdrola Renewables

City/County N/E Johnston County E

# Jobs

Inv. Amt.

Industry

691

$1.2 billion

Pharmaceuticals

Pasquotank County

N

10

$600 million

Wind Farm

Butterball, LLC

Hoke County

N

367

$66.8 million

Food Products

Sanderson Farms

Robeson County

N

1,100

$139 million

Food Products

Fidelity Investments

Durham County

E

600

$10 million

Business & Financial Services

Ashley Furniture Industries

Davie County

N

454

$8.7 million

Furniture

Alamance County

N

200

$125 million

Warehouse/ Distribution

Dimensional Fund Advisors

Mecklenburg

N

316

$105 million

Business & Financial Services

O’Neill Data Systems

Union County

N

250

$90.7 million

Business & Financial Services

Catawba County

N

455

$6.8 million

Business Services

Lidl Stiftung

Republic Services

REPRESENTS A STATE/LOCAL SPONSOR

(pop. 10 million) STATES WITH POPULATIONS

36

AREADEVELOPMENT

FOR FREE SITE INFORMATION, CALL

8+ TO 12 MILLION

Arizona is predicted to continue its strong economic performance in high-tech and innovative industries.

TechAmerica Foundation’s “2015 Cyberstates Report” notes there are more than 132,000 tech industry jobs in Arizona. Hightech entrepreneurialism is supported by a variety of incubators, accelerators, and co-working spaces around the state. It’s hoped that new startups will contribute to Arizona’s projected job growth of 3.1 percent in 2016.

Top employment sectors include aerospace and defense, semiconductors, electronics, IT, and software. Arizona’s robust aerospace and defense sector contributes about $38 billion annually to the Arizona economy and employs more than 52,000 workers. IT/hightech announcements in Arizona include Groupon (Scottsdale, $3 million, 150 workers) and Orbital ATK (Gilbert, $16.3 million, 86 workers).

Other high-growth tech industries are renewable energy, bioscience, advanced manufacturing, and photonics/optics.

Advanced manufacturer Special Devices Inc.’s (a maker of automotive airbag inflators) new facility in Mesa will employ 174 workers.

Arizona also has a growing reputation for business support, including customer-service centers.

Major announcements include Zenefits in Tempe ($5 million, 1,400 workers) and Santander Consumer

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AREA0338.indd 1

14/10/14 5:14 PM

SPECIAL REPORT

TENNESSEE Gold Shovel Winner

Company Community Health Systems Inc.

City/County N/E

# Jobs

Inv. Amt.

Industry

Nashville

N

1,500

$66.2 million

Business Services

Smyrna

E

1,000

$160 million

Automotive

Aegis Sciences Corporation Inc.

Nashville

E

740

$31.1 million

Forensic Sciences

Ryder Supply Chain Solutions

Spring Hill

N

606

$16.5 million

Trucking

Advanced Munitions International

Alcoa

N

605

$553 million

Headquarters

FICOSA North America

Cookeville

N

550

$57.9 million

Automotive Parts

Gestamp Corporation

Chattanooga

E

510

$180.2 million

Automotive Parts

DENSO Manufacturing Tennessee, Inc.

Maryville

E

500

$400 million

Automotive Parts

Loudon

N

500

$45 million

Vans

Knoxville

N

500

$115 million

Kayaks

* Nissan North America, Inc.

Morgan Olson Lifetime Products Inc.

(pop. 6.55 million)

*An Automotive Project of the Year REPRESENTS A STATE/LOCAL SPONSOR

1 38 AREA0564.indd AREADEVELOPMENT

STATES WITH POPULATIONS OF

FOR FREE SITE INFORMATION, CALL

5+ TO 8 MILLION

USA Holdings in Mesa ($9.4 million, 970 jobs).

Arizona’s business-support reputation did not go unnoticed by Cenlar FSB, the nation’s leading loan servicing provider, which recently announced its first expansion outside New Jersey — a $6 million, Western operations center in Tempe that will create 750 projected new jobs over a three-year period.

INDIANA — SILVER SHOVEL Although Indiana struggled with job growth in 2015 across its major sectors, overall its diverse manufacturing

800-735-2732, EXT. 225, OR VISIT US ONLINE AT www.areadevelopment.com 28/04/16 4:18 PM

ARIZONA

Silver Shovel Winner Company Special Devices, Inc.

City/County N/E

# Jobs

Inv. Amt.

Industry

GOLD O OL & SILVER Shovel

Mesa

N

174

$60 million

Engineered Devices

Groupon

Scottsdale

N

150

$3 million

IT

Awards

InEight, Inc. (FKA Hard Dollar)

Scottsdale

E

50

$1.4 million

IT

2016

Cenlar FSB

Tempe

N

750

$6 million

Business Support Services

Zenefits (YourPeople, Inc.)

Tempe

N

1,400

$5 million

Business Support Services

Isagenix International LLC

Gilbert

N

171

$19.9 million

Consumer Products & Services

KW International

Phoenix

E

135

$1 million

Logistics Services

Orbital ATK, Inc.

Gilbert

E

86

$16.3 million

Aerospace & Defense

Santander Consumer USA Holdings Inc.

Mesa

N

970

$9.4 million

Business Support Services

Phoenix

E

45

$500,000

Biotechnology

Pinnacle Transplant Technologies

REPRESENTS A STATE/LOCAL SPONSOR

(pop. 6.73 million) STATES WITH POPULATIONS OF

AREA0590.indd 1

5+ TO 8 MILLION

5:23 PM AREA DEVELOPMENT18/05/16 | Q2/2016 39

SPECIAL REPORT industry performed well, especially automotive (about $10.5 billion in exports). The biggest news was Subaru of Indiana’s plans for a $140 million expansion of its Lafayette facility, creating about 1,200 new jobs. Other announcements include Chiyoda USA Corporation’s $56.1 million, 90,000-square-foot expansion of its auto parts plant in Greencastle, which will require 300 new

workers by 2017. In addition, NTN Driveshaft plans a $127.9 million, 510-worker expansion of its manufacturing operations in Anderson, boosting its capacity to 300,000 constant velocity joints for the automotive industry.

“After conducting an exhaustive multi-state search, we selected Indiana for this new facility because of its business-friendly climate and policies, the availability of skilled labor, and the strong Hoosier work ethic,” says Jim Riggs, CEO of NTN Driveshaft.

Other leading export industries in Indiana are pharmaceuticals, biomedical equipment, industrial machinery, and computer and electronic products. News in these other sectors includes Excellon Technologies’ (electronic components) $2.1 million expansion in Fort Wayne, creating 415 new jobs, and Hoist Liftruck’s (heavy-duty forklifts) moving of its operations from southwest suburban Bedford Park in Illinois to East Chicago, Indiana, where it will invest $41.6 million and create up to 500 new positions over the next few years.

MISSOURI — SILVER SHOVEL Missouri is known for its diverse economy, low business costs, and strong work ethic. The Tax Foundation recently ranked the Show Me State as third-best in the country for corporate income tax and 17th for best overall tax climate. Missouri has successfully diversified from traditional resource-based industries such as agriculture into bioscience, advanced

40

AREADEVELOPMENT

AREA0573.indd 1

FOR FREE SITE INFORMATION, CALL

800-735-2732, EXT. 225, OR VISIT US ONLINE AT www.areadevelopment.com 13/05/16 10:08 PM

INDIANA

Silver Shovel Winner Company

City/County N/E

# Jobs

Inv. Amt.

Industry

* Subaru of Indiana Automotive, Inc.

Lafayette

E

1,204

$140.2 million

Automotive

FCC (Adams), LLC

Berne

E

73

$128.6 million

Automotive Parts

NTN Driveshaft Anderson Inc.

Anderson

E

510

$127.9 million

Automotive Parts

MetalX, LLC

Waterloo

E

258

$83.7 million

Recyclable Wholesalers

Chiyoda USA Corporation

Greencastle

E

300

$56.1 million

Automotive Parts

Hoist Liftruck

East Chicago

N

500

$41.6 million

Construction Machinery

Carmel

E

614

$32.9 million

Insurance

Republic Services, Inc.

Indianapolis

E

469

$13.6 million

Waste Collection

Knight Transportation, Inc.

Plainfield

E

426

$4.6 million

Trucking

Excellon Technologies, Inc.

Fort Wayne

E

415

$2.1 million

Electronic Components

Allied Solutions, LLC

(pop. 6.62 million)

*An Automotive Project of the Year

Shovel Awards

2016

foot, global services center in Kansas City. “We chose Kansas City because of the quality and diversity of its labor force, location in the central time zone, and cost benefits,” indicates Littler’s COO Robert Domingues.

WISCONSIN — SILVER SHOVEL

Wisconsin’s economy is driven by manufacturing, agriculture, and healthcare.

It continues to diversify into high-tech industries such as water science, food production, power and energy, pharmaceuticals, biotechnology, IT, and gaming.

Anchored by the University of Wisconsin, Madison continues to evolve as a center for scientific research and collaboration.

A wide range of products are manufactured in Wisconsin, ranging from paper and cardboard to transportation equipment, heavy machinery, appliances, and biomedical devices/products. In Fitchburg, Sub-Zero Group, a leading manufacturer of luxury appliances, is undertaking a $62.3 million, 400,000-square-foot expansion of its manufacturing plant that will more than double the size of its current facility. In Beloit, Georgia-based Pratt Industries is building a $52.4 million, 350,000-square-foot corrugated box plant.

Biotechnology/medical devices continue to grow as a vital sector for the Wisconsin economy.

Phillips-Medisize, a contract medical technology manufacturer, has announced it will undertake a $35 million expansion at its facilities throughout the state, a move that is expected to create 484 new jobs.

This will include expanded metal injection molding capabilities as well as cleanroom manufacturing and assembly operations.

In Madison, Exact Sciences Corporation, the developer of a promising colorectal cancer test, plans

STATES WITH POPULATIONS OF

manufacturing, alternative energy, and other hightech sectors such as IT and software.

High-growth industries in Missouri include bioscience, advanced manufacturing, healthcare, transportation and logistics, IT, and software. In fact, in 2015 the U.S. Chamber ranked Missouri as 13th-best in the country for high-tech job growth. This is well demonstrated by World Wide Technology’s decision to build an $80 million, sixstory headquarters building in St. Louis, adding 500 new jobs over the next several years. World Wide Technology is a systems integrator with nearly $7 billion in annual revenue.

Agriculture and food processing are other key drivers of the Missouri economy. In Columbia, Kraft Heinz is investing $113.8 million to build a 25,000-square-foot addition to its existing facility.

In another announcement, Daily’s Premium Meats will construct a $41.5 million, 100,000-square-foot meat-processing facility, creating 212 new jobs in St. Joseph.

Kansas City is growing center for financial/ professional services and headquarters facilities. For example, TriWest Healthcare Alliance is building a $10.4 million facility that will employ 500 workers.

Littler, a global employment and labor law practice, recently opened its new $13.6 million, 53,000-square-

GOLD O OL SILVER

5+ TO 8 MILLION

AREA DEVELOPMENT | Q2/2016

41

MISSOURI

Silver Shovel Winner Company

City/County N/E

# Jobs

Inv. Amt.

Industry

Kraft Heinz

Columbia

E

69

$114 million

Food Processing

Daily’s Premium Meats

St. Joseph

N

212

$41.5 million

Food Processing

Ford

Kansas City

E

900

N/A*

Automotive

St. Louis

E

500

$80 million

IT Headquarters

TriWest Healthcare Alliance

Kansas City

N

500

$10.4 million

Financial/ Professional Services

Hallmark Cards Inc.

Liberty

E

400

N/A*

Distribution Center

Schnucks

St. Louis

E

400

$100 million

Distribution Center

LockerDome

St. Louis

E

300

N/A*

IT

Kansas City

N

275

$13.6 million

Financial/ Professional Services

Riverside

N

267

$51.6 million

Plastics

World Wide Technology

Littler

U.S. Farathane

(pop. 6.08 million) *confidential

STATES WITH POPULATIONS OF

5+ TO 8 MILLION

WISCONSIN

Silver Shovel Winner Company Pratt Industries

City/County N/E

# Jobs

Inv. Amt.

Industry

Beloit

N

140

$52.4 million

Corrugated Boxes

Gardner Denver, Inc.

Milwaukee

N

200

$4 million

Headquarters

Dolgencorp, LLC (Dollar General)

Janesville

N

552

$79.2 million

Warehouse/ Distribution

Sub-Zero Group, Inc.

Fitchburg

E

313

$62.3 million

Kitchen Appliances

Menasha Corporation

Neenah & Menasha

E

300

$59 million

Headquarters

Hudson, Phillips, E Medford, Menomonie, Eau Claire, New Richmond

484

$34.6 million

Medical Devices

Phillips-Medisize Corporation

Deere & Company

Horicon

E

80

$42.9 million

Distributionn Center

Dane County

E

758

$26.2 million

Biomedical

PPD Development LP

Middleton

E

255

$33.8 million Consulting

Contract Research/

Briggs & Stratton Corporation

Wauwatosa

E

247

$3 million

Machinery

Exact Sciences Corporation

REPRESENTS A STATE/LOCAL SPONSOR

(pop. 5.77 million) STATES WITH POPULATIONS OF

42

AREADEVELOPMENT

FOR FREE SITE INFORMATION, CALL

5+ TO 8 MILLION

to invest $26.2 million to expand its operations and hire 758 workers by the end of 2020, in return for $9 million in tax credits — one of the largest awards ever offered by the Wisconsin Economic Development Corporation. “This is an extraordinary incentive to continue growing jobs and our company, right here in Wisconsin,” states Kevin Conroy, chairman and CEO of Exact Sciences.

3+ TO 5 MILLION POPULATION CATEGORY

SOUTH CAROLINA — GOLD SHOVEL Employment grew 3.3 percent in South Carolina in 2015, thanks to increased output from key industry sectors, especially aviation and automotive. Both Volvo Car Group and MercedesBenz Vans plan to build $500 million manufacturing operations in the Charleston area that combined will employ nearly 3,800 workers.

This also means that many of the more than 200 automotive suppliers in the state are in growth mode.

For example, Schaeffler Group USA is investing $166.8 million to expand its ball and roller bearings manufacturing plants in Chesterfield, Spartanburg, and York counties, eventually hiring 443 workers. Akebono Brake Corporation is expanding its existing Lexington County operations, investing more than $40 million in the project, which will create 100 new jobs in West

800-735-2732, EXT. 225, OR VISIT US ONLINE AT www.areadevelopment.com

WHEN IT COMES TO TAXES

ZERO IS HUGE

AND OUR APPROACH IS GETTING CLOSE.

SMALL NUMBERS YIELD BIG RESULTS IN WISCONSIN.

®

What’s good for industry is good for business. In Wisconsin, our tax policies are good for both. We’ve reduced taxes by $2 billion and created an environment that helps every business in our state grow. And by creating a tax credit so bold that there’s virtually no corporate income tax on manufacturing and agricultural activity, we’re giving Wisconsin businesses—in all industries—a competitive advantage. To learn more about the Manufacturing and Agriculture Tax Credit and its 0.4% corporate tax rate when fully phased in, call 855-INWIBIZ (toll free) or visit Results.InWisconsin.com.

In Wisconsin® is a registered trademark of Wisconsin Economic Development Corporation.

AREA0584.indd 1

17/05/16 7:41 PM

SPECIAL REPORT Columbia, Lexington County.

Thanks to its interstates, rail systems, and the Port of Charleston, the second-largest container port on the U.S. Atlantic Coast, South Carolina is a preferred location for distribution and logistics operations.

Target, Walgreens, Dollar General, Wal-Mart, and QVC all have distribution systems in South Carolina.

Recent announcements include Rite Aid Corporation in Spartanburg ($90 million, 600 workers) and Dollar Tree’s plans to build a $104.4 million distribution facility near Spartanburg that will hire 400 workers over the next five years.

“Dollar Tree has been extremely impressed with the South Carolina transportation infrastructure that will support our new distribution center,” states Dollar Tree Chief Logistics Officer Stephen W. White.

“The current Interstate 85 widening project and the efficiencies associated with the Greer Inland Port were instrumental in our site selection process.”

is twice the 2014 total and one of the highest annual totals in recent years. Alabama also attracted foreign direct investment approaching $3.5 billion in 2015.

Big projects were announced in aerospace and automotive. GE Aviation is investing more than $200 million to build factories in Huntsville to mass-produce silicon carbide materials used to manufacture ceramic matrix composite components for jet engines. Polaris will establish a $140 million automotive manufacturing facility in Huntsville that will employ 2,000 workers. Mercedes-Benz U.S. International plans a $1.3 billion expansion of its operations in Vance. Suppliers are also expanding to keep up. For example, SMP Automotive Systems Alabama will build a $153.9 million, 700,000-squarefoot facility in Tuscaloosa to produce painted bumpers, rocker panels, and other parts for the Mercedes Benz U.S. International plant in Vance.

Other sizeable capital investments were secured in the business services and IT sectors. Google has selected Bridgeport for a new, state-of-the-art, ALABAMA — SILVER SHOVEL $600 million data center that will be powered by renewable energy. It will be built on 350 acres of land Alabama attracted $7.1 billion in capital investment owned by the Tennessee Valley Authority at Widows in 2015 and nearly 20,000 new and future jobs. Much Creek, where an aging electrical plant is being of this growth is in key sectors such as technology, decommissioned. aerospace, and automotive. This investment figure “For more than 50 years, the Widows Creek plant has generated electricity for the region,” says Gary Demasi, director of Global Gold Shovel Winner Infrastructure at Google.

Company City/County N/E # Jobs Inv. Amt. Industry “Now the site will be used to bring Internet * Volvo Car Group Berkeley N 2,500 $500 million Automotive services and information Red Ventures Lancaster E 1,500 $90 million Call Center/ to people around the Marketing world — powered by 100 * Mercedes-Benz Vans Charleston N 1,300 $500 million Automotive Manufacturing, LLC percent renewable energy.

We see a lot of potential 600 $90 million Distribution Center Rite Aid Corporation Spartanburg N in redeveloping large Dollar Tree Cherokee N 400 $104.4 million Distribution Center industrial sites like former Schaeffler Group Chesterfield/ E 443 $166.8 million Ball & Roller USA Inc. Spartanburg/ Bearings coal plants.”

SOUTH CAROLINA

York

Haier America Refrigerators Company

Kershaw

E

410

$72 million

Refrigerators

Carolina Poly, Inc.

Chester

N

Akebono Brake Corporation

Lexington

E

300

$100 million

Polyethylene Film

100

$40.5 million

Brakes

Orchids Paper Products Company

Barnwell

N

134

$110 million

Paper Products

(pop. 4.83 million)

*An Automotive Project of the Year

STATES WITH POPULATIONS UNDER

44

AREADEVELOPMENT

FOR FREE SITE INFORMATION, CALL

3+ TO 5 MILLION

KENTUCKY — SILVER SHOVEL Kentucky announced more than 460 new location and expansion projects slated to create more than 16,000 jobs and $5.1 billion in investment in 2015, the most since the state began recording this data

800-735-2732, EXT. 225, OR VISIT US ONLINE AT www.areadevelopment.com

Automotive Projects of the Year According to autonews.com, U.S. auto manufacturers set a new sales record in 2015 of 17,470,659 million light vehicles sold — an increase of 5.7 percent over the previous year and beating the all-time high of 17,402,486 vehicles, set in 2000.

This, of course, is great news for the U.S. economy and manufacturing labor force. Many of the projects cited by this year’s Gold and Silver Shovel Award recipients are automotive-related and will create thousands of good-paying new jobs. Below are seven Automotive Projects of the Year that each generated more than 1,000 positions.

TESLA — Fremont, California: Tesla, the electric carmaker, is undergoing a $2.39 billion expansion, with plans to create 4,426 new jobs by 2019. This will occur at several locations in California, including the auto-manufacturing facility in Fremont, where it plans to add a second model to its assembly line, and the design studio in Hawthorne.

Tesla has already started hiring new employees. When the expansion is complete, Tesla will be the state’s largest manufacturing employer. In return for this level of job creation and capital investment, Tesla will receive $15 million in tax credits from the state of California.

FARADAY FUTURE — North Las Vegas, Nevada: Faraday plans to invest about $1.4 billion to construct an innovative, state-of-the-art manufacturing plant for its 100-percent electric car. Faraday selected Apex, an area northeast of Las Vegas, over other sites in Illinois and Georgia that offered usable auto plants and better relocation incentives because it preferred Nevada’s business environment. The estimated value of Nevada’s incentive package is about $217 million over 15 years. The three-million-square-foot plant will be a fast-track project — the first Faraday Future vehicle is expected to roll off the assembly line in 2017. The company will also hire 4,500 workers.

VOLVO — Ridgeville, South Carolina: Volvo has started construction on its first auto manufacturing plant in North America — a $500 million facility in Berkeley County, about 30 miles northwest of Charleston. The plant will build the company’s new S-60 sedan, which is currently being developed at Volvo Car Group in Sweden. The first South Carolina-built Volvos will roll off the assembly line in 2018, at a rate of 100,000 cars per year. Volvo expects to hire up to 2,500 workers over the next decade. The plant is expected to generate nearly $5 billion in total annual economic output.

MERCEDES-BENZ VANS MANUFACTURING — Charleston, South Carolina: Mercedes-Benz will build a $500 million plant in Charleston, where it will assemble its next-generation Sprinter commercial van, creating 1,300 new jobs. The 8.6-million-square-foot plant will include a new body shop, paint shop, and assembly line. With the new plant, Mercedes-Benz Vans will become one of the largest industrial employers in the region. Mercedes-Benz decided to build the plant because U.S. import duties are too high on its German-made vehicles for it to effectively compete in the U.S. van market.

FORD MOTOR COMPANY — Louisville, Kentucky: Ford expects to create 2,000 new jobs when it completes a $1.3 billion expansion of its Kentucky truck plant in eastern Jefferson County. Improvements include a new body shop, retooling, and facility upgrades for the launch of the all-new 2017 Ford F-Series Super Duty truck. This expansion increases the amount that Ford has invested in the commonwealth of Kentucky and the city of Louisville in the past two years to more than $1.5 billion. Previous expansions have supported Lincoln MKC and Super Duty truck production.

NISSAN — Smyrna, Tennessee: Nissan plans to build a $160 million supplier park at its vehicle assembly plant in Smyrna, creating more than 1,000 supplier jobs. This is the latest investment in the company’s 31-year partnership with the state of Tennessee. The 1.5-million-square-foot, integrated logistics center will serve as an immediate space for suppliers and be used for multiple purposes supporting operations, including inbound production parts and outbound returnable containers. It will also be large enough to support the future growth of on-site suppliers, as needed.

POLARIS INDUSTRIES — Huntsville, Alabama: The new 700,000-square-foot, $140 million Polaris off-road vehicle factory in Huntsville is expected to eventually employ 2,000 workers. Operations at the facility, which will initially manufacture the RANGER model in two-seat, full-size, and multi-passenger styles, include cover vehicle assembly, chassis and body painting, welding, fabrication, and injection molding. The campus will also feature a research and development center and distribution warehouse. The new plant is part of a larger $150 million investment project.

SUBARU — Lafayette, Indiana: Subaru’s 1,200-worker expansion at its Lafayette plant will be the largest increase in the state’s automotive workforce since 2008. The $140 million investment will increase the plant’s production capacity by 100,000 vehicles per year for the Subaru Outback, Subaru Legacy, Toyota Camry, and Subaru Impreza. Hiring of the new employees has already commenced and should be completed by 2017 — a total increase in the workforce by 30 percent.

SPECIAL REPORT

ALABAMA

Silver Shovel Winner Company Mercedes-Benz US International Inc.

City/County N/E

# Jobs

Inv. Amt.

Industry

Vance

E

300

$1.3 billion

Automotive

Bridgeport/ Stevenson

N

100

$600 million

Data Center

Jefferson County

E

150

$27.3 million

R&D

GE Aviation

Huntsville

N

300

$200 million

Aerospace

SMP Automotive Systems Alabama Inc.

Tuscaloosa

N

650

$153.9 million

Automotive

Huntsville

N

2,000

$140 million

Automotive

Farm Fresh Foods, LLC

Guntersville

N

600

$4 million

Food Processing

Viva Health, Inc.

Birmingham

E

400

$7.3 million

Headquarters

Jasper

N

300

$100 million

Automotive

Birmingham

E

354

$534.8 million

Automotive

Google Inc. Evonik Corporation

* Polaris Industries

Yorozu Automotive Alabama, Inc. Kamtek Inc.

(pop. 4.78 million)

*An Automotive Project of the Year

STATES WITH POPULATIONS UNDER

3+ TO 5 MILLION

KENTUCKY

Silver Shovel Winner Company * Ford Motor Co.

City/County N/E

# Jobs

Inv. Amt.

2,000

$1.3 billion

Automotive

Louisville

E

Bowling Green

E

36

$439 million

Automotive

Russellville

E

190

$240 million

Aluminum

Fritz Winter

Franklin

N

343

$193.7 million

Automotive

DHL

Erlanger

E

81

$108 million

Logistics

Robert Bosch Automotive Steering, LLC

Florence

E

212

$84.5 million

Automotive

Catalent Pharma Solutions

Winchester

E

300

$61.8 million

Pharmaceuticals

Bowling Green

E

112

$57 million

Aluminum

Florence

E

430

$14 million

Financial Services

Bowling Green

E

450

$261.2 million

Automotive

General Motors Corp.

Logan Aluminum

Kobe Aluminum Citicorp Credit Services Bowling Green Metalforming, LLC

(pop. 4.40 million)

*An Automotive Project of the Year REPRESENTS A STATE/LOCAL SPONSOR

46

Industry

AREADEVELOPMENT

STATES WITH POPULATIONS UNDER

FOR FREE SITE INFORMATION, CALL

3+ TO 5 MILLION

roughly 30 years ago. It far exceeds the 2014 record of $3.7 billion. Thanks to continued economic development activity, Kentucky’s unemployment rate has dropped to about 5 percent. Top industries are automotive, aerospace, food and beverage, logistics, manufacturing, chemicals, plastics, and rubber.

Kentucky auto manufacturers produced more than 1.3 million passenger vehicles in 2015, a 2.4 percent increase over 2014, making Kentucky one of the largest U.S. producers of cars and light trucks. Last year, 79 new automotive projects were announced, totaling $2.8 billion in investments.

These include Ford Motor Company in Louisville ($1.3 billion, 2,000 new jobs) and General Motors Corporation in Bowling Green ($439 million, 36 additional workers). Kentucky also welcomes Fritz Winter North America LP to Franklin, where the German-owned automotive parts-maker will build a $193.7 million, 240,000-square-foot foundry and production facility, hiring 343 workers to manufacture disc brake rotors.

“Franklin really meets all our requirements in terms of proximity to our customers, availability of skilled labor, favorable electricity costs, and industry-specific training possibilities,” says Fritz Winter CEO Jörg Rumikewitz. “Moreover, Franklin and the Commonwealth of Kentucky have shown tremendous effort in supporting the project.”

800-735-2732, EXT. 225, OR VISIT US ONLINE AT www.areadevelopment.com

(800) 626-2930 • ThinkKentucky.com

Winning We dig it Kentucky just won another national Silver Shovel award, thanks to substantial expansions and new location announcements in 2015.

It was another record year for Kentucky, which offers phenomenal opportunities and unsurpassed personal service.

Locate or expand in Kentucky, and you will be a winner too.

Making Business Strong.

Making Life Exceptional.

AREA0570.indd 1

06/05/16 7:26 PM

LOUISIANA

Silver Shovel Winner Company

Parish

N/E

# Jobs

Inv. Amt.

Formosa Petrochemical

St. James Parish

N

1,200

$9.4 billion

Organic Chemicals Corp.

EPIC Piping

Livingston Parish

E

560

$45.3 million

Fabricated Pipes/Fittings

IBM Application Management Services

Ouachita Parish

N

400

N/A

Computer Systems Design

Lincoln Parish

N

287

$4 million

Motorcycles, Bicycles & Parts

DongSung Finetec

Calcasieu Parish

N

250

$5 million

Urethane Insulation

LACC LLC (Axiall Corp. & Lotte Chemical Corp.)

Calcasieu Parish

N

215

$3 billion

Ethane Cracker & Monoethylene Glycol Plant

Parallax (Live Oak LNG)

Calcasieu Parish

N

100

$2 billion

Industrial Gas

Shintech Louisiana

Iberville

E

100

$1.4 billion

Plastics Material & Resin

St. John the Baptist Parish

N

70

$600 million

Petroleum Bulk Stations & Terminals

Ascension Parish

E

20

$717 million

Petrochemicals

Monster Moto

Pin Oak Holdings LLC Shell Chemical LP

Industry

(pop. 4.67 million) STATES WITH POPULATIONS UNDER

3+ TO 5 MILLION

N E VA D A

Gold Shovel Winner Company

City/County N/E

# Jobs

Inv. Amt.

Teleperformance

Reno

N

500

$7.2 million

Business IT Ecosystems

Scientific Games

Las Vegas

N

202

$5 million

Gaming/ Entertainment Headquarters

Barclays Services

Henderson

E

150

$8.2 million

Financial Services

Reno

N

50

$1.7 billion

Data Center

Switch, Ltd. Machine Zone, Inc.

Las Vegas

N

78

$50 million

Data Center

North Las Vegas

N

4,500

$1.4 billion

Automotive

Sutherland Global

Las Vegas

N

230

$5.4 million

Business Process Outsourcing

Xtreme Manufacturing LLC

Henderson

E

87

$12.7 million

Heavy Equipment

eBay, Inc.

Reno

N

50

$341 million

Data Center

Clear Capital

Reno

N

400

$1.7 million

Headquarters/ Digital Real Estate Analytics

* Faraday Future

(pop. 2.83 million)

*An Automotive Project of the Year REPRESENTS A STATE/LOCAL SPONSOR

48

Industry

AREADEVELOPMENT

STATES WITH POPULATIONS UNDER

FOR FREE SITE INFORMATION, CALL

3 MILLION

And Logan Aluminum, which makes rolled sheets for the beverage industry, is investing $240 million to expand its manufacturing complex in Russellville and add 190 workers, adding the auto industry to its customer base. The company plans to develop aluminum for automakers, which contributes to the overall reduction in vehicle weight, helping to lower fuel consumption and emissions.

LOUISIANA — SILVER SHOVEL As one of the top energyproducing states in the country, Louisiana is deeply experienced in riding out the boom-and-bust cycles of the oil and gas industry.

Despite the downturn in oil prices, Louisiana’s economy grew at a rate of about 2.4 percent. The decline in oil and gas revenues was partially offset by increased demand in nondurable goods manufacturing, including petrochemical refining (which benefits from abundant and low-cost feedstock).

Billion-dollar-plus petrochemical projects announced in 2015 include Live Oak LNG in Calcasieu Parish ($2 billion, 100 workers) and Shintech Louisiana in Iberville ($1.4 billion, 100 workers).

Formosa Petrochemical Corporation is conducting feasibility studies to build $9.4 billion, 1,200-worker ethane crackers with associated downstream plants in St. James Parish, having invested considerable time and money in the plans to date.

800-735-2732, EXT. 225, OR VISIT US ONLINE AT www.areadevelopment.com

In yet another more than billion-dollar project, LACC LLC (Axiall Corporation and Lotte Chemical Corporation) have announced a joint $3 billion capital investment to construct a new ethane cracker facility and monoethylene glycol manufacturing plant in Lake Charles, Calcasieu Parish. Combined, the projects will create 215 new direct jobs.

“Calcasieu Parish was selected for this project based on the state’s skilled workforce and familiarity with the petrochemicals industry and projects of this type,” says Jim Rock, Axiall vice president for operational excellence. “It became the preferred site for several key reasons, including the location of raw materials, pipelines, available steam, electric power, other utilities, and deepwater access.”

FEWER THAN 3 MILLION POPULATION CATEGORY

NEVADA — GOLD SHOVEL

GOLD O OL & SILVER

was a key factor in game manufacturer Machine Zone’s decision to locate a $50 million Shovel data center in Las Vegas. It Awards plans to purchase up to 4,000 servers, which will be housed at 2016 Switch. “We examined multiple locations throughout the western states and decided to locate our operations into the best data center in North America,” says Machine Zone Chief Legal Officer Victoria Valenzuela.

Real estate data analytics company Clear Capital is moving its headquarters from Truckee, Calif., to Reno, with plans to employ 400 workers and pay an average salary of more than $60,000 per year.

And another California-based company — futuristic, electric carmaker Faraday Future — made headlines with its purchase of land in North Las Vegas on which it would build a 900-acre factory employing 4,500 workers. Ground was broken on the 3.4 millionsquare-foot facility in April.

Nevada has struck gold twice — not only with its robust mining industry, but its diversified economy.

UTAH — GOLD SHOVEL Most private-sector industries are adding jobs — over 50,000 new jobs are expected in 2016, bringing the Most experts expect Utah to show the same robust state back to its pre-Great Recession employment economic performance it displayed in 2015, when levels. Key industries are agriculture, aerospace, Utah was one of the top states in the U.S. for job IT, energy, logistics, mining, and manufacturing. growth. Major economic development projects in Impressive projects announced for 2015 include business Solar Projects of the Year support, financial services, automotive BLESSED with an abundance of sunshine and high-tech know-how, Utah supports a and heavy equipment growing cluster for solar energy research and development. Not only is cutting-edge manufacturing, and data research being carried out at academic institutions and in the private sector, providers centers. of solar energy systems and installers are also expanding their business operations in the state.

Expanding its hightech presence in Nevada, VIVINT SOLAR, for example, which designs, installs, and provides monitoring serSwitch, a Las Vegas vices for its residential rooftop solar energy systems, recently announced a $91 million company, announced expansion of its operations in Utah, expecting to hire more than 3,000 people over the next 10 years. (Its success has not gone unnoticed within the industry — Vivant will soon plans for a $1.7 billion, be purchased by SunEdison, one of the largest renewable energy development compathree-million-square-foot nies in the world, for $2.2 billion.) data center near Reno.

It will be connected to SOLARCITY, another provider of residential solar energy systems, recently announced plans to establish a regional corporate headquarters in Utah, investing $94 million over the main Switch campus the next 10 years and creating about 4,000 jobs. Founded in 2006, SolarCity now installs in Las Vegas via a new approximately one third of all solar systems in the U.S. The regional headquarters will fiber loop, which will also include human resources, finance, legal, accounting, marketing, sales, and other support extend to Los Angeles functions. and San Francisco.

“WE CHOSE UTAH as a regional headquarters because of its educated workforce Switch clients include and affordable cost of living,” indicates Brendon Merkley, executive vice president of global giants such as Customer Operations at SolarCity. “In addition to creating many skilled labor and technieBay, Google, Cisco, and cal roles, the growing solar industry also has increased demand for professional services Microsoft. and supporting functional roles.”

Access to Switch

AREA DEVELOPMENT | Q2/2016

49

U TA H

Gold Shovel Winner Company

City/County N/E

# Jobs

Inv. Amt.

* SolarCity

Utah County

N

4,000

$94 million

Headquarters

* V ivint Solar

Utah County

N

3,143

$91 million

Regional Headquarters

EMC Corporation

Salt Lake County

E

700

$62 million

IT

Stadler Rail

Salt Lake County

N

1,001

$30 million

Rail Vehicles

Prosper

Salt Lake County

N

539

$10 million

Financial Services

Procter & Gamble

Box Elder County

E

200

$400 million

Consumer Goods

CHG Health

Salt Lake County

E

503

$9.2 million

Healthcare Headquarters

RAM Company

Washington County

E

139

$11 million

Aerospace

Health Equity

Salt Lake County

E

200

$10 million

Healthcare Headquarters

Health Catalyst

Salt Lake County

N

291

$7.6 million

Healthcare Headquarters

* A Solar Project of the Year REPRESENTS A STATE/LOCAL SPONSOR

50AREA0528.indd AREADEVELOPMENT 1

Industry

(pop. 2.94 million) STATES WITH POPULATIONS UNDER

FOR FREE SITE INFORMATION, CALL

3 MILLION

2015 include solar energy, IT, transportation equipment, financial services, healthcare, and aerospace.

Much of Utah’s growth has been driven by significant investment in IT, including computing, data analytics, and software development.

Technology jobs grew 7.7 percent in Utah last year.

EMC Corporation, for example, is investing $62 million and hiring 700 new workers for its operations in Draper to focus on cloud computing, big data analytics, and security.

Utah has always attracted headquarter locations and expansions. SolarCity recently announced plans to open a regional corporate

800-735-2732, EXT. 225, OR VISIT US ONLINE AT www.areadevelopment.com 11/12/15 7:13 PM

E-Commerce Projects of the Year Amazon.com continues to invest heavily in fulfillment centers as it faces increasing competition from other big online retailers like Walmart.com, eBay, and Google. It now has fulfillment centers in 26 states. In 2015 Amazon announced four new fulfillment centers in Texas, Illinois, and Ohio.

TEXAS HAS BEEN A HOTBED OF AMAZON FULFILLMENT ACTIVITY — in 2015 Amazon announced plans for its fourth and fifth fulfillment centers in the state. A new $20 million, 500,000-square-foot fulfillment center will be built in Dallas to process smaller items such as books, electronics, and consumer goods, with a total workforce up to 900. Amazon will construct another fulfillment center in San Marcos ($191 million, 1,000 jobs). Combined, Amazon’s five fulfillment centers will represent a total investment of nearly $450 million in Texas.

ILLINOIS HAS WON ITS FIRST AMAZON FULFILLMENT CENTER, to be built in Joliet, creating about 1,500 jobs. In return, Amazon will receive significant tax breaks over a 10-year period for retrofitting a 500,000-square-foot building.

The Joliet fulfillment center will be used to fill orders of smaller items like books and electronics.

Amazon selected Joliet because of its proximity to Chicago, available labor, and presence of a distribution/logistics cluster.

OHIO HAS ALSO SCORED ITS FIRST AMAZON FULFILLMENT CENTER — two, in fact.

Amazon plans to open fulfillment centers in Obetz (one million square feet) and Etna Township (800,000 square feet) with a combined investment value of $180 million and a workforce of 2,000 people.

“We are very pleased to continue investing in Ohio by building our first fulfillment centers in the state,” says Mike Roth, Amazon’s vice president of North America operations. “This investment will create thousands of jobs and help us increase our already fast shipping times to our customers.”

GOLD O OL & SILVER

headquarters, investing $94 million over the next 10 years and creating about 4,000 jobs, as did Vivint Solar, which will spend $91 million on a 3,100+-employee Shovel regional headquarters facility.

Awards The state is also drawing healthcare headquarters, including an expansion for Health Equity ($10 million 2016 investment, 200 workers) and a new facility for Health Catalyst ($7.6 million investment, 291 workers) in Salt Lake County.

“We feel the region is one of the best places in the U.S. today to operate as a healthcare technology company,” indicates Dan Burton, CEO of Health Catalyst. “We are grateful that Utah is working with private companies like Health Catalyst to nurture an even stronger environment for innovation and job growth.”

IDAHO — SILVER SHOVEL Idaho has one of the lowest unemployment rates in the country — about 3.8 percent in April 2016 — due in part to a well-diversified economy and a booming construction market.

Agriculture, combined with food and beverage processing, is the state’s leading industry. And although Idaho is rooted in other traditional industries such as lumber and mining and chemical manufacturing, it has steadily diversified into high-tech industries including healthcare, computers, and advanced materials, such as aerospace composites.

Recent manufacturing announcements include Gayle Manufacturing’s relocation of its steel fabrication plant from northern California to Caldwell, Idaho, where it will build a $24 million facility and hire 105 workers. Fabri-Kal is building a $50 million, 100,000-square-foot plastics thermoforming plant in Burley where 150 workers will manufacture plastic and rubber products.

Idaho’s heavy-equipment industry will soon welcome the addition of Heartland Recreational Vehicles in Nampa, where it plans to build a $15 million, 248,000-square-foot facility and hire 275 workers to produce its popular Heartland line of travel trailers.

“We are seeing significant growth of the recreational vehicle market, particularly in the West,” says Chris Hermon, president of Heartland. “As we sought a location to expand our manufacturing capabilities to meet that demand, the Boise Valley brought the perfect mix of location, quality of workforce, and business-friendly environment.”

KANSAS — SILVER SHOVEL Coming back from the Great Recession has been tough on Kansas. Job growth has been fairly flat over the past year. However, there have been major investments in key sectors, especially advanced manufacturing, aerospace, healthcare, and logistics. This activity tends to occur where clusters are located, such as automotive (Kansas City) and aviation and composites (Wichita and Kansas City).

Wichita produces more than 30 percent of the world’s general aviation aircraft and is home to Cessna, Beechcraft, Bombardier Learjet, and Spirit AeroSystems. It is no surprise that when French-based Figeac-Aero, a supplier of airplane parts to these companies and others, was looking for a location for its new North American headquarters, it chose Wichita.

“Figeac really wanted to be in the ‘Air Capital of the World,’” says Vice

AREA DEVELOPMENT | Q2/2016

51

SPECIAL REPORT

IDAHO

Silver Shovel Winner Company

City/County N/E

# Jobs

Inv. Amt.

Industry

Gayle Manufacturing Co.

Caldwell

N

105

$24 million

Prefabricated Steel

AGC AeroComposites

Hayden

E

134

$2 million

Aerospace Composites

Fabri-Kal

Burley

N

150

$50 million

Plastics & Rubber Products

Paylocity

Boise

N

551

$5 million

Professional, Scientific, & Technical Services

Hilex Poly

Jerome

E

45

$6.5 million

Plastics

Sandpoint

E

187

$5.4 million

Aerospace

Nampa

N

275

$15 million

Transportation Equipment

Quest Aircraft Heartland Recreational Vehicles Athlos Academies GrainCorp Malt Sykes Enterprises

Boise

N

50

$6 million

Educational Services

Pocatello

E

10

$75 million

Malting

Boise

N

700

N/A

Customer Support Center

(pop. 1.63 million) REPRESENTS A STATE/LOCAL SPONSOR

3 MILLION

STATES WITH POPULATIONS UNDER

KANSAS

Silver Shovel Winner Company Jet.com

City/County N/E

# Jobs

Inv. Amt.

Industry

Edgerton

N

460

$1.3 million

Logistics/ Distribution

Dairy Farmers of America

Kansas City

N

400

$32 million

Headquarters

USA800, Inc.

Lawrence

N

333

$1.9 million

Call Center

RiskAnalytics Holdings LLC

Leawood

E

233

$6.3 million

Professional Services

S&S Activewear, LLC

Olathe

N

165

$15.9 million

Logistics/ Distribution

Genesis10

Lenexa

N

200

$2.2 million

Professional Services

Excel Industries, Inc. Figeac-Aero WireCo WorldGroup, Inc. Gill Studios, Inc.

Edgerton

N

200

$22 million

Turf Care Products

Wichita

N

200

$23.2 million

Aerospace

Prairie Village

N

167

$13.5 milion

Headquarters

Lenexa

N

165

$2.5 million

Printing

(pop. 2.90 million) REPRESENTS A STATE/LOCAL SPONSOR

52

AREADEVELOPMENT

STATES WITH POPULATIONS UNDER

FOR FREE SITE INFORMATION, CALL

3 MILLION

President and General Manager Hocine Benaoum.

“The fact that available workers are here, and welltrained and experienced with different companies, will definitely help us grow fast.”

Kansas’s central location, infrastructure, and transportation capabilities make it ideal for logistics and distribution. For example, Jet.com plans to build a $1.3 million distribution facility in Edgerton and hire 460 workers. In Olathe, S&S Activewear will locate a $15.9 million, 473,000-square-foot shipping, receiving, and distribution center at I-35 Logistics Park.

“This facility puts us over 1.5 million square feet of inventory, with a big portion of that inventory in the most accessible region of the country,” says Margaret Crow, director of marketing at S&S Activewear. “This will give our customers a larger overnight delivery area with later cut-off times.”

MISSISSIPPI — SILVER SHOVEL Two of Mississippi’s largest industries are also its most traditional — agriculture and timber. Almost one third of Mississippi’s labor force is employed in agriculture or food processing. Investments in these sectors include Raybern Foods’ planned $14.8 million manufacturing operation in Tupelo in Lee County. The project will

800-735-2732, EXT. 225, OR VISIT US ONLINE AT www.areadevelopment.com

MISSISSIPPI

Silver Shovel Winner create about 200 jobs.

Koch Foods recently Company City/County N/E # Jobs Inv. Amt. Industry announced it would expand operations at its Raybern Foods Tupelo N 200 $14.8 million Food Products facilities in Forest and United Furniture Verona E 300 $2.8 million Furniture Morton, Mississippi. The expansions represent Winston Plywood Louisville N 400 $48 million Plywood Products and Veneer corporate investments of approximately $2 H.M. Richards Guntown E 500 $8 million Furniture million and $33 million, Koch Foods Forest & Morton E 203 $35 million Poultry Processing respectively, and will create Sofidel Hattiesburg N 230 $120 million Tissue Paper a total of 203 jobs Biewer Lumber Newton N 125 $85 million Lumber/Sawmill Several major projects are moving forward in the ABB Senatobia E 300 N/A Power & Automation Technology lumber industry. Winston Steel Dynamics Columbus E 40 $100 million Steel Plywood and Veneer, a manufacturer of specialty AmerisourceBergen Olive Branch N 129 $48 million Healthcare/ Distribution plywood products, is building a $48 million (pop. 2.99 million) REPRESENTS A STATE/LOCAL SPONSOR manufacturing facility in STATES WITH POPULATIONS UNDER 3 MILLION Louisville, Mississippi, that will create 400 jobs. In Hattiesburg, Sofidel plans to construct a $120 million enjoy an increase of over 12,000 jobs and more than tissue-paper factory that $240 million in annual revenue within 20 years, if the will create 230 jobs. An $85 million, state-of-the-art federal government lifts a ban on oil and gas drilling sawmill is being constructed by Biewer Lumber in in certain areas of the Gulf of Mexico off Mississippi’s Newton, which will greatly expand the company’s mill southern coast. •••••• production in the South.

Mississippi continues to diversify into other Information for this report compiled by industries, including energy. In 2015, the Fraser Area Development’s Editor, Geraldine Gambale; Institute ranked Mississippi fifth in the world for future oil and gas investment potential. The state could article written by Mark Crawford, Staff Editor.

SPONSORS ARIZONA ARIZONA COMMERCE AUTHORITY The Grand Canyon state offers the best environment in the country for business to start, expand, relocate, and thrive. Arizona’s pro-business policies reflect a statewide commitment that puts business first.

Arizona’s unrivaled economic benefits, leadership in innovation, and highly skilled workforce give companies the competitive edge they need to succeed.

Kevin Sullivan Senior Vice President, Business Attraction Arizona Commerce Authority 333. N. Central Ave., Suite 1900 Phoenix, AZ 85004 602-845-1261 k e v i n s @ A Z c o m m e rc e . c o m w w w. a z c o m m e rc e . c o m

MESA With a population of nearly 500,000, Mesa is the 38th largest city in the U.S. and second-largest in the Phoenix-Mesa metro. Mesa is larger than Miami, Minneapolis, Atlanta, and St. Louis. Mesa encompasses 133 square miles inside a 21-city region that has a population of 4.3 million.

Kim Lofgreen Marketing and Business Development Manager City of Mesa Office of Economic Development 20 E. Main St., Suite 200 P.O. Box 1466 Mesa, AZ 85211-1466 480-644-2398 • Fax: 480-644-3458 k i m . l o f g re e n @ m e s a a z . g o v w w w. m e s a a z . g o v / e c o n o m i c

CALIFORNIA CITY OF HESPERIA Located at the intersection of Highway 395 and Interstate 15 in California’s Inland Empire, Hesperia offers miles of available freeway frontage, and a large number of prime industrial and commercially zoned parcels, including rail accessible and 200+ acre properties ripe for development, making Hesperia the location for manufacturing and logistics.

Lisa K. LaMere Economic Development Management Analyst City of Hesperia 9700 Seventh Avenue Hesperia, CA 92345 760-947-1910 • Fax: 760-947-1917 l l a m e re @ c i t y o f h e s p e r i a . u s w w w. c i t y o f h e s p e r i a . u s / e c o n d e v

AREA DEVELOPMENT | Q2/2016

53

SPECIAL REPORT FLORIDA GREATER FORT LAUDERDALE ALLIANCE Greater Fort Lauderdale offers “Life. Less Taxing” to more than 200 corporate, international, and regional headquarters including AutoNation, Citrix, DHL, Emerson, Microsoft, and Ultimate Software through a cost-competitive business climate and no state personal income tax, combined with robust domestic and international air and seaports and exceptional quality of life.

David Coddington Vice President - Business Development Greater Fort Lauderdale Alliance 110 East Broward Blvd., Suite 1990 Fort Lauderdale, FL 33301 954-627-0123 dcoddington@gflalliance.org w w w. l e s s t a x i n g . c o m

IDAHO REGIONAL ECONOMIC DEVELOPMENT EASTERN IDAHO (REDI) Eastern Idaho is united by businesses and institutions built around science, research, and innovation with two major universities and four science and research labs including a DOE national lab. Industry clusters focus on nuclear, energy, advanced manufacturing, cyber security, agtech, and other innovative materials and technologies. It is also home to the second-largest workforce in the state.

Jan Rogers CEO Regional Economic Development - Eastern Idaho (REDI) P.O. Box 51564 Idaho Falls, ID 83405-1564 208-534-1318/208-320-2136 janr@easternidaho.org w w w. e a s t e r n i d a h o . o r g SOUTHERN IDAHO ECONOMIC DEVELOPMENT ORGANIZATION Southern Idaho Economic Development Organization (SIEDO) is a joint venture of public and private sectors formed to help diversify and strengthen the regional economy through business recruitment, expansion and retention. This “All Things Food” region is 1 of 12 in the country to receive the prestigious Manufacturing Community Designation from the U.S. Department of Commerce in the food category (2015).

Jeff Hough Executive Director Southern Idaho Economic Development Organization (SIEDO) P.O. Box 1238 Twin Falls, ID 83303-1238 208-731-9996 • Cell: 208-251-1033 j e ff h @ s o u t h e r n i d a h o . o r g w w w. s o u t h e r n i d a h o . o r g

KANSAS KANSAS DEPARTMENT OF COMMERCE You’re looking for a great place to locate your business.

Kansas is the place to start that search. From financial and technical resources and a skilled workforce to access to trade corridors that keep you connected with the world, as well as, leaders who know business and have an entrepreneurial spirit, Kansas will set up any business, in any industry, for success. Kansas is also ranked nationally in the top-10 as a pro-business state.

Come home to Kansas to see what we can do to help you and your business invest, thrive, and prosper.

54

AREADEVELOPMENT

Steve Kelly Deputy Secretary Kansas Department of Commerce 1000 SW Jackson St., Suite 100 Topeka, KS 66612-1354 785-296-5298 • Fax: 785-296-3665 s k e l l y @ k a n s a s c o m m e rc e . c o m w w w. k a n s a s c o m m e rc e . c o m

KENTUCKY KENTUCKY CABINET FOR ECONOMIC DEVELOPMENT Companies from all over the world are locating to the Bluegrass State and our existing industries are expanding to keep up with growing demand. These companies represent a plethora of industries, including automotive manufacturing, logistics and distribution, national headquarters, and more.

Mandy Lambert Commissioner for Business Development Kentucky Cabinet for Economic Development 502-564-7140 E c o n d e v @ k y. g o v w w w. t h i n k k e n t u c k y. c o m LOGAN ECONOMIC ALLIANCE FOR DEVELOPMENT (LEAD) Logan County, Kentucky, is located at the crossroads of the I-65 automotive corridor and the aluminum belt. We have exceptionally robust utilities and an agricultural work ethic. Come join Champion Petfoods, Logan Aluminum, and other advanced manufacturers.

An ample supply of water and electricity await you on our Build-Ready site.

Tom Harned CEcD FM Executive Director Logan Economic Alliance for Development (LEAD) 116 S. Main Street Russellville, KY 42276 270-726-9575 • Fax:270-726-2237 tom@LoganLeads.com w w w. L o g a n L e a d s . c o m

MICHIGAN MICHIGAN ECONOMIC DEVELOPMENT CORPORATION Business in Michigan is on the rise. Taxes are the lowest in decades. Our economic development tools, manufacturing leadership, world-class talent, and geography are fueling business growth. Need more proof? For the third straight year, Michigan is in the top seven states for major new and expanded facilities.

Nicole Whitehead Site Consultant Services Michigan Economic Development Corporation 517-719-3157 whiteheadn@michigan.org w w w. m i c h i g a n b u s i n e s s . o r g / A D

MISSISSIPPI MISSISSIPPI DEVELOPMENT AUTHORITY Consistently ranked as a top state for business, Mississippi’s list of global companies continues to grow. From the state’s efficient permitting process to its business-friendly climate, more companies are discovering how a Mississippi location and workforce can give them a competitive advantage.

Becky Thompson Interim Director, Global Division Mississippi Development Authority 501 North West Street Jackson, MS 39201 1-800-360-3323 locateinms@mississippi.org w w w. M i s s i s s i p p i . o r g FOR FREE SITE INFORMATION, CALL

NEVADA ECONOMIC DEVELOPMENT AUTHORITY OF WESTERN NEVADA (EDAWN) EDAWN is a private/public partnership committed to recruiting and expanding quality companies that have a positive economic impact on the quality of life in the Greater Reno-Sparks region. Our vision is to be known as a world-class EDO, with strong local partnerships, regional respect and cooperation, and a national reputation for innovation and creativity.

Stan Thomas Executive VP, Marketing & Competitive Expansion EDA of Western Nevada (EDAWN) 5190 Neil Road, Ste. 110 Reno, NV 89502 775-829-3731 SThomas@edawn.org w w w. e d a w n . o r g NEVADA GOVERNOR’S OFFICE OF ECONOMIC DEVELOPMENT With a talented workforce, education and training partnerships for industry, a business-friendly environment, affordable large-scale real estate, and unmatched technology infrastructure, industry-leading companies such as Faraday Future are calling Nevada home.

Nevada Governor’s Office of Economic Development 1-800-336-1600 success@diversifynevada.com w w w. d i v e r s i f y n e v a d a . c o m SWITCH SUPERNAP Switch SUPERNAP Founder and CEO, Rob Roy, has developed 218+ revolutionary patented data center designs that have manifested into the world-renowned SUPERNAP data centers. SUPERNAP Prime™ data centers lead the industry with their high-density, multi-tenant locations that provide unparalleled agile technology ecosystems and the unmatched cost-saving CORE® telecommunications purchasing cooperative.

The SUPERNAP Edge™ data centers are the company’s single-tenant, on-premise products. Visit supernap.com for more information on the world’s only Tier IV Gold rated multi-tenant, carrier-neutral data centers.

Adam Kramer EVP Strategy Switch SUPERNAP 7135 South Decatur Blvd.

Las Vegas, NV 89118 805-405-7222 adam@switch.com w w w. s u p e r n a p . c o m

NORTH CAROLINA ELECTRICITIES OF NORTH CAROLINA, INC. ElectriCities is a not-for-profit government service organization representing 70+ NC cities and universities that own electric distribution systems. A site selection professional can receive detailed reports from our extensive databases on dozens of NC sites, from mountains to coast, within 48 hours of a request. We’re your turnkey services partner.

Brenda Daniels Manager, Economic Development ElectriCities of North Carolina, Inc. 1-800-768-7697, ext. 6363 Mobile: 919-218-7027 bdaniels@electricities.org w w w. e l e c t r i c i t i e s . c o m

800-735-2732, EXT. 225, OR VISIT US ONLINE AT www.areadevelopment.com

OHIO

TEXAS

JOBS OHIO JobsOhio is a private, non-profit 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 to learn why Ohio is the ideal location for your company.

CITY OF ARLINGTON OFFICE OF ECONOMIC DEVELOPMENT Arlington, located at the epicenter of the thriving North Texas region, is quickly becoming a hub for engineering, advanced manufacturing, technology, and medical science industries. Beyond our world-class entertainment is the backbone of our city: economic vitality, a competitive business environment, and a diverse, skilled workforce.

Ryan Wilson Senior Project Manager JobsOhio 41 S. High St., Suite 1500 Columbus, OH 43215 614-300-1381 wilson@jobs-ohio.com jobs-ohio.com

TENNESSEE

Bruce C. Payne Economic Development Manager City of Arlington Office of Economic Development 101 W. Abram Street, Arlington, TX 76010 817-459-6155 ecodev@arlingtontx.gov w w w. a r l i n g t o n t x . g o v / e c o d e v

GREATER SAN MARCOS Situated in the heart of the Austin-San Antonio corridor, the Greater San Marcos region is one of the nation’s fastest-growing and most dynamic locations for doing business. Home to Texas’ fourth-largest university and multiple career/technical training institutions, Texas’ “BBQ” and “Wedding” capitals, unique natural assets, and connected infrastructure, the area is positioned to foster opportunities for growth and prosperity.

Adriana Cruz President Greater San Marcos Partnership 1340 Wonder World Drive, Suite 108 San Marcos, TX 78666 512-393-3400 a d r i a n a c @ g re a t e r s a n m a rc o s t x . c o m w w w. g re a t e r s a n m a rc o s t x . c o m

BLOUNT PARTNERSHIP The Blount Partnership is the economic development agency for Blount County, Tennessee, which is located in the Knoxville metropolitan area. Nearly half of the U.S. population is within a day’s drive. DENSO, Alcoa Inc., ProNova Solutions, Cirrus Aircraft, TEAM Health, and Newell Rubbermaid all call it home.

Bryan Daniels President/CEO Blount Partnership 201 S. Washington St. Maryville, TN 37804 855-257-3964 • Fax: 865-984-1386 bdaniels@blountpartnership.com w w w. b l o u n t i n d u s t r y. c o m HIGHLANDS ECONOMIC PARTNERSHIP The Highlands Economic Partnership is a public/ private sector program designed to enhance economic and community development throughout the Upper Cumberland region of Middle Tennessee. The Highlands seeks to improve the quality of life regionally through job generation and retention, workforce development and education, and community advocacy.

Stephen Crook Vice President of Economic Development Highlands Economic Partnership One West First Street Cookeville, TN 38501 931-526-2211 • 800-264-5541 Cell: 931-239-4530 s c ro o k @ H i g h l a n d s O f T N . c o m w w w. H i g h l a n d s O f T N . c o m KNOXVILLE-OAK RIDGE INNOVATION VALLEY Innovation Valley is east Tennessee’s regional economic development initiative that is managed by the Knoxville Chamber. The diversity of the region gives companies access to world-class resources and assets that make it a prime business location in the U.S. Doug Lawyer, CEcD Vice President, Economic Development Knoxville-Oak Ridge Innovation Valley 865-637-4550 d l a w y e r @ k n o x v i l l e c h a m b e r. c o m w w w. k n o x v i l l e o a k r i d g e . c o m

AREA0596.indd 1

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SPECIAL REPORT PORT ARTHUR ECONOMIC DEVELOPMENT CORPORATION The Port Arthur Economic Development Corporation (PAEDC) is a Type A sales tax corporation created to enhance Port Arthur’s business climate and overall economic development and tax base. PAEDC is responsible for encouraging and developing business growth and attracting new businesses to Port Arthur such as manufacturing, distribution, warehouses, commercial, and industrial. PAEDC’s mission is to implement a proactive, aggressive industrial recruitment process focused upon specific industrial clusters that can achieve world-class competitive stature in Port Arthur.

Floyd Batiste, CEO Port Arthur Economic Development Corporation 501 Procter Street, Port Arthur, TX 77640, 409-963-0579 • Fax: 409-962-4445 F B AT I S T E @ PA E D C . O R G w w w. PA E D C . O R G TEXAS ECONOMIC DEVELOPMENT CORPORATION/TEXASONE™ Low taxes, strategic location, global access, and competitive incentives — these are just a few reasons why companies like Amazon, Facebook, General Motors, and Liberty Mutual choose to grow in Texas. Add to that world-class infrastructure and the second-largest civilian workforce, and it’s no wonder Texas continues to lead the nation in job creation.

Michael Chrobak Executive Vice President – Lead Generation Texas Economic Development Corporation/TexasOne™ 221 East 11th Street, Suite 400 Austin, TX 78701 (512) 981-6736 michael@texasone.us w w w. t e x a s w i d e o p e n f o r b u s i n e s s . c o m

UTAH UTAH GOVERNOR’S OFFICE OF ECONOMIC DEVELOPMENT With business-friendly accolades from Forbes, the U.S. Chamber of Commerce, 24/7 Wall Street, and others, Utah has earned consideration for expansion projects in multiple industries. Robust transportation and broadband infrastructure in concert with a young, healthy, educated workforce are compelling factors.

WISCONSIN WISCONSIN ECONOMIC DEVELOPMENT CORPORATION Manufacturers operating in Wisconsin benefit from a location and a business environment ideally suited for growth. Applied research, skilled workers, a strong supply chain, and solid infrastructure drive production in industries ranging from food processing to bioscience and information technology. Connect with resources and opportunities for business success In Wisconsin®.

Wade Goodsell Business Attraction Director Wisconsin Economic Development Corporation 201 W. Washington Avenue Madison, WI 53703 608-210-6813 Wa d e @ I n W i s c o n s i n . c o m Select.InWisconsin.com

Theresa Foxley Deputy Director, Corporate Recruitment Utah Governor’s Office Of Economic Development 60 E. South Temple, Third Floor Salt Lake City, UT 84111 801-538-8828 tfoxley@utah.gov Business.Utah.gov

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ADVANCED MANUFACTURING > PLAYBOOK

By Jubal Smith, Executive Vice President and Leader, Business Incentives and Site Selection Practice; and Greg Matter, Executive Vice President, Global Supply Chain; JLL

When economic development policymakers are viewed as collaborators, everybody wins.

Partners, Not Handouts: A Winning Model for Manufacturing Innovation

T

he journey to manufacturing innovation is long — and costly. Economic development incentives can curtail the costs, add other types of value, and generally make it possible to invest in new products and production processes. Often, the ability of a company to explore increased use of high-tech robotics and automation on the production floor depends on these incentives, so it’s critical to understand the environIncentives made headlines in Tesla’s 2014 decision to build its gigafactory in Nevada. ment before entering into a negotiation.

Think you know everything about incentives? Think again. The programs you used to Economic development authorities generally encourknow may no longer exist. Programs are constantly shifting, age innovators and support the promise of future jobs and and many state budgets are stressed by pension obligaeconomic value. However, they want to know how a comtions and other budget pressures. Other programs may have pany plans to build its success; they want to envision the evolved as policymakers uncover best practices or establish end game, not just the short-term. Furthermore, economic new programs to drive job creation and local innovation. development agencies often are in a position to consider The moral of the story: know what’s out there before you a wide range of options to support growth, so companies choose where you should locate and innovate. may leave the table with even more than they imagined Beyond “How Much” before engaging in negotiations. Incentives are more than Contrary to popular perception, a partnership attitude is tax rebates, and can include valuable workforce training, the best approach to garnering incentives of any kind. It’s fast-track permitting, export assistance, or other valuable more than haggling for “how much” — it’s about creating a programs. win-win for both the community and the company. OrgaWhether new or established, a manufacturing innovanizations that focus solely on a specific financial incentive tor should come to the table with a well-prepared business are likely to miss out on larger opportunities. For example, a plan focused on benefits for the state or city. The company company that requests a subsidy or tax abatement for renoshould be able to show how it plans to bring new products vating a property might inadvertently forego an opportunity to market and provide a detailed look at the local economic to build a new facility with state-of-the-art features — someimpact. From that perspective, seeking government investthing a state might have offered in a different negotiating ment is similar to seeking private-investor dollars, in that environment. both parties can gain from sharing information.

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ADVANCED MANUFACTURING > PLAYBOOK Start At the Beginning: the U.S. Federal R&D Tax Credit One of the most popular incentives, the federal R&D tax credit, still applies no matter where a company is located within the U.S. Surprisingly, only one of 20 small- and mid-sized manufacturers eligible for this credit actually takes advantage of it, even though it is not tied to performance.

First enacted in 1981, the federal R&D credit was permanently extended in December 2015. Qualifying costs include inhouse labor wages, 65 percent of contract research, and supplies used in the research process.

Beyond the Feds: State and Local Programs

Manufacturing Concentration

By State 2016 Location Quotient State (Compared to U.S.) Indiana Wisconsin Michigan

1.99 1.89 1.60

Iowa

1.60

Alabama Kentucky

1.55 1.50

Ohio

1.48

Arkansas Mississippi South Carolina

1.48 1.45 1.38

Tennessee

1.34

Kansas

1.34

Incentive Trends of Tomorrow Traditionally, states have taxed manufacturers on the basis of their in-state sales income, employee payroll, and property, and offered incentives accordingly.

However, many states are adopting a new commonsense approach. The following are key trends in how states are considering incentives today: Trend #1. Corporate income tax credits are on the way out. Corporate income tax credits are not very valuable for manufacturers who make most of their income through out-of-state sales, and many states are phasing them out. Some states are making corporate income tax credits refundable or even tradable to companies with in-state sales.

State and local government agenMinnesota 1.30 cies offer an estimated 2,000 to 3,000 tax North Carolina 1.26 credit and incentive programs, including Trend #2. Equipment is becoming Oregon 1.19 property tax exemptions that are particuexempt from property tax. Traditionally, New Hampshire 1.19 states have taxed corporate real estate, larly important to manufacturing innoNebraska 1.15 equipment, and inventory in the general vators. Nearly all rely upon conditional category of property taxes. Given the performance-based contracts in which South Dakota 1.15 enormous capital investments involved the manufacturer does not receive the Vermont 1.14 in retooling for new products or producgrants or rebates unless it creates a certain Pennsylvania 1.13 tion processes, 39 states offer property tax number of jobs or meets capital investSource: U.S. Bureau of Labor Statistics abatement or offsets, often making equipment targets.

Location quotients (LQs) quantify and compare concentrations of industries ment purchases exempt.

These programs include state-level in a particular area. Industry LQs are In one striking example, Nebraska versions of the federal R&D tax credit; calculated by comparing the industry’s share of regional employment with its waives 100 percent of property taxes for nearly all states offer their own, typically share of national employment. Indiana’s new manufacturing and shipping facilities at a lower level than the federal program.

LQ is 1.99, which means that Indiana’s manufacturers are almost twice as for the first 10 years. The reasoning is that Additionally, some states participate in the concentrated in the market than on encouraging a manufacturer to retool or U.S. Economic Development Administraaverage nationwide. to build a new plant increases the likelition’s Investing in Manufacturing Commuhood of retaining or gaining jobs for the nities Partnership (IMCP) program, which state — and it is easier to grow with the manufacturer you funds state-level programs to support investment in startups have than the one you have yet to recruit. and established manufacturers.

An equipment tax exemption can translate into millions In general, state and local incentives fall into five major of dollars in savings on deployments of high-tech, roboticscategories, ranging from income, sales, or property tax enabled production lines. For multi-state manufacturers rebates to direct grants, utility discounts, or contributions considering selective retooling of only certain plants, a state of land. According to the Tax Foundation’s 2015 Location can use the equipment tax exemption to help ensure that its Matters report (http://taxfoundation.org/article/locationplant is selected. matters-2015), 16 states offer withholding tax rebates, 24 offer investment tax credits, and 24 states offer payroll tax Trend #3. Payroll tax rebates reward hiring. As manucredits for new labor-intensive manufacturers.

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facturing becomes more technology-enabled, with rising wages for highly skilled workers, payroll taxes become more meaningful. While states like Texas and Florida do not even have payroll taxes, a handful of the many states that do have begun to offer payroll tax rebates. In Arkansas, for instance, a manufacturer that hires 500 employees, each paid $25 per hour, will receive a rebate of 5 percent on its payroll tax. The more people hired, the larger the rebate — and it’s cash.

Trend #4. Sales tax rebates are becoming more common. With state sales taxes averaging 8 to 10 percent, the impact on a plant retooling could be as high as $10 million.

Recognizing that penalizing capital investment is counterproductive and discourages hiring and investment, many states have begun offering sales tax rebates.

Sales tax rebates or exemptions for electricity and natural gas purchases are also important incentives, particularly for manufacturers whose new productions and processes are highly automated. Some states offer incentives to reduce the electric bill for the first years or possibly longer to help manufacturers focus on expansion and hiring. However, states like Texas require a company to document that its predominant business is manufacturing to be eligible for a tax break.

if it does not create the negotiated number of jobs. From an implementation standpoint, cash grants are very attractive to economic development administrators as well because the outcomes are measurable — number of jobs added, export dollars, economic multipliers, and the like — and make it easy to justify the grants to taxpayers.

Smarter Location Decisions Undoubtedly, the right tax credits and incentives — combined with the right attitude — can improve the prospects for a manufacturing innovator whether large or small.

Incentives play a particularly significant role in finalizing the shortlist for manufacturers, according to JLL’s 2015 Global Incentives Landscape report (http://www.us.jll.com/unitedstates/en-us/Documents/Consulting/JLL-global-incentives. pdf ). Most notably, for instance, incentives made headlines in Tesla’s recent decision to build its gigafactory in Nevada.

Location incentives will always be a valuable part of site selection, but should not overshadow the larger picture. Industry clusters can be fertile ground for manufacturing innovators, whether startups or established companies looking for the next breakthrough. Clusters like Kansas City for food manufacturing, Detroit for automotive industries, or Ontario for aerospace development provide a network of suppliers and access to R&D partners, qualified workers and training resources, and laboratories and universities with compatible research agendas. A productive partnership with economic development authorities can enable an innovative manufacturer to make the most of these assets.

May the smartest manufacturer (and its community) win. ≈ ≈ ≈

INCENTIVE PROGRAMS HAVE EVOLVED AS POLICYMAKERS UNCOVER BEST PRACTICES TO DRIVE JOB CREATION AND INNOVATION.

Trend #5. Direct grants are still available. Since manufacturers have a strong multiplier effect on local economies, direct grants for jobs are a win-win for communities and companies alike. For instance, a state may offer a seed grant that requires a company to document that it is meeting certain employment and investment benchmarks. Budget crises have stymied a few state-level direct grant programs, but certainly not all.

The Texas Enterprise Fund, for example, funds $2,000 to $10,000 per new job, but a company must refund the state

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ADVANCED MANUFACTURING > PLAYBOOK

I

n an exclusive Area Development interview, Michael Walton, Global Head of Manufacturing Industry, Google for Work, explains why it is important for manufacturers of all sizes to establish a culture of innovation within their organizations and how they can go about doing this.

Becoming Digital — and Innovative — Manufacturers

Q

H important is it for manufacturHow ing companies to embrace digital and build a culture of innovation?

A

Walton: We believe in innovation and W the empowerment of all companies, small or large, and we build products to do that. We do studies on companies that use our products for collaboration and empowerment to change their culture. We find that those Automotive companies and those in other manufacturing industries are embracing digital in order to stay competitive. that are publicly traded have higher stock prices after they do a digital transformation than before. I think innovation is core to manufacturers, core to retailers, and core to other industries Walton: The U.S. is the leader in most of the W as well. digital innovations of the world, and there are W countries that study and copy us. They not only What kind of challenges do small companies face in terms of innovation? copy, they improve it. Their investment was minimal compared to what the innovators had to pay. So our backs Walton: We usually see the most innovation with W are against the wall right now. If we don’t become digital new companies and small teams. It’s always been manufacturers, if we don’t become digital retailers, if we some group of people with ideas. But small don’t become digital companies of service, we will continue manufacturers today in the U.S., with less than 50 employto lose market share, and our companies will not be considees, spend two and a half times the amount of money on ered market leaders. If we don’t become digital manufacturmanaging benefits and regulatory compliance, as do large ers, the cost and risk is high. manufacturers. Small companies are probably the most W innovative, but they are being handicapped right out of the What role does leadership play in creating a culture of innovation? gate, as compared to large companies. We need to remove these barriers.

Walton: Leadership is key, but it has to be the W W right leadership. Does the VP of engineering get What do you feel will happen if manufacturing doesn’t embrace innovation? to give an opinion on innovation at the C-suite at a large

Q

A

A

Q

Q

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company? Most typically not. At large companies the CIO does not get a standard vote, nor do the VPs of production.

Neither do the VPs of quality or supply chain management.

All the people who are responsible for making a product better, faster, and cheaper don’t have a voice at the innovation table at the C-suite. There’s the disconnect, and it has to change.

Q

E Embracing innovation also can mean embracing failure. Please explain.

A

Walton: One of my most successful programs was W at a company where we transformed multiple plants in their product quality, inventory, and maintenance. They were able to react faster than they ever had before. But the program was considered marginally successful at the C-suite and director level because it went 6 percent over cost. Companies say, “Please help us, we need this technology.” Their margins and market share are eroding, but program heads are afraid of some innovation because if it fails, they could get fired. And that’s the wrong culture, period.

Q

H important is it for manufacturing companies How to embrace failure as a learning tool?

A

Walton: Most companies do not celebrate failure.

W We always look at the top-performing companies in the world that are considered the most innovative. And I can tell you they have a culture of innovation and collaboration. While they may not be fully there, they are on the voyage of collaboration, transparency, and ideas everywhere. On top of it, these top-performing companies don’t have retribution for failure. They celebrate lessons learned. That’s simply not the case at other less performing companies, whether they make plastic, food, or airplanes.

Q A

T us about the manufacturing maturity model.

Tell

Walton: W The Association for Manufacturing Excellence is changing how they assess the AME Excellence Award for the manufacturing maturity model. They feel like they’ve needed to take a step back and ask more questions. For example, “We saw incremental improvement, but were the ideas sustainable? Was it the

idea of someone at the top, or was it an idea from everywhere? Did we really listen?” So in the future there is going to be an innovation component for companies to be evaluated by the manufacturing maturity model. That’s a big change. Instead of asking, “Are you LEAN? Do you have Kaizan? What’s you safety record?” Now they are asking things like, “Are you collaborative? Do you celebrate failure? Are you innovative?” Those are different questions from “Do you do R&D? Do you have sustainable processes for LEAN?”

Q

A large companies on board with creating a culture Are of innovation?

A

Walton: It’s just recently that the very large compaW nies took us seriously in the manufacturing industry. That’s in large part because they keep acquiring smaller companies that are already lean and advanced. Large companies find out these smaller companies are built on these technologies and they need to be taken seriously.

Q

Te us about Google for Work.

Tell

A

Walton: W We take products that we’ve created worldwide and we’ve created an enterprise called Google for Work. It’s the enterprise edition of those tools for companies to find information faster. The products help companies collaborate better, have a voice of empowerment, be better able to collect data from almost anywhere, and be able to analyze that information. Google for Work helps companies make decisions with real data, not opinion.

In short, we are bringing back mission to the marketplace.

Q

H does a company know it has embraced a digital How and innovative culture?

A

Walton: We are working with a manufacturing W company right now. Their language changed. They now say, “We are a digital company that makes electronics.” If you think like that, you can be a leader in the world today. Some companies are embracing this future.

Others are not. We are at the epicenter. The cusp has already passed. We are now at the cliff of those who do and those who don’t. ≈ ≈ ≈

AREA DEVELOPMENT | Q2/2016

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ADVANCED MANUFACTURING > PLAYBOOK

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

Promoting innovative, advanced manufacturing cultures within a community involves strategic planning and effective partnership with public institutions.

Best Practices for Creating an Innovative, Advanced Manufacturing Culture

A

dvanced manufacturing — broadly defined as the integration and utilization of new technologies to improve products and processes — is a sector that Oxford Economics estimates now accounts for 44 percent of all U.S. manufacturing employment and supports 19 percent of U.S. GDP through its operations, supply chain, and payroll. Companies all too often must choose between introducing advanced The National Institute for Aviation Research (NIAR)’s Multi-Robotic Advanced manufacturing equipment and processes into Manufacturing lab at Wichita State University is utilized in the development of existing plants or shutting down operations next-generation materials and technologies. and beginning production somewhere else.

Consequently, many communities are anxious to support manufacturers that are modernizing plants rather with higher wages and educational attainment (or higher than risk seeing those plants close. skills training), and our data supports that assertion. In a At the same time, forward-thinking manufacturers undernon-advanced manufacturing plant there are approximately stand that partnerships with public entities can accelerate three workers with no more than a high school education for and ease the cost of introducing complex new equipment every worker holding a bachelor’s degree (or higher). In conand production processes into their plants. By examining trast, that ratio is nearly one to one (high school educated two best-in-class examples, this article highlights ways in worker to bachelor degreed worker) in advanced manufacwhich supportive public-private partnerships can be estabturing plants. However, even in an advanced manufacturlished to help facilitate the promotion of advanced manufacing plant, one third of all workers typically hold only a high turing. Each partnership helps companies improve producschool degree (and an equal number have less than a four tivity through either advanced manufacturing skills training year degree). or by offering advanced technological research developA Best-in-Class Example of Company Training ment. This productivity improvement is the key to company Let’s look at B. Braun Medical’s highly innovative program survival, wage growth, and regional competitiveness. to train its existing workforce in the use and operation of the During a recent engagement, Oxford Economics calculatadvanced manufacturing equipment that the company has ed that productivity in the U.S. advanced manufacturing secbeen introducing to its Allentown, Pa., plant. B. Braun is one tor is an estimated $226,071 per worker — more than twice of the world’s leading manufacturers of medical devices. Like the productivity of a worker in non-advanced manufacturing many other manufacturers, managers at the Allentown plant ($106,143). Higher worker productivity is typically associated

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noticed a skills gap in their existing workforce as increasingly sophisticated equipment was introduced into plant operations. The company reviewed the key competencies that workers require in order to understand the theory of how the equipment works and the principles that govern line operations in an advanced manufacturing plant. These competencies include mechanical, electrical, hydraulic, and pneumatic functions. A Progression Based System (“PBS”) was introduced to make sure that all employees receive basic training in each of these functional areas. The underlying strategy behind PBS is to train all workers in these core competencies, and then help the employee learn to apply this theoretical background to the operation, maintenance, and repair of equipment in the plant.

Training is divided into five levels: entry, basic, intermediate, comprehensive, advanced (with a master’s level under development). The expectation is that each employee will advance to the comprehensive level. An estimated 90 percent of all current operations in the plant are covered at the comprehensive level. In other words, an employee completing the comprehensive level of training will possess the theoretical knowledge needed to understand (at the practical level) 90 percent of the plant’s production operations. Each level takes approximately one year to complete and train-

ing is done through a mix of company time and employee’s time (depending on the current level of the employee). All training was initially provided by a local vocational school but has since been expanded to include the local community colleges as well. PBS has allowed B. Braun to retrain and upskill its employees, and the better skilled workforce has, in turn, helped the company reduce its operating and maintenance costs. The program is now being introduced to other B. Braun facilities in the United States.

The success of B. Braun’s PBS program reflects, in part, upon its excellent relationship with the Lehigh Valley Workforce Investment Board (WIB). The WIB helped the company navigate different agencies; helped identify grants that offset some of the training costs associated with PBS; and put the company in close touch with the community’s K-12 educational leaders. Educating guidance counselors, students, and parents at the high school level about opportunities in advanced manufacturing is an important part of the company’s recruitment strategy.

Key to the program’s success was its design around carefully researched training needs. Too often, training providers and companies rely on anecdotal evidence or ready-made solutions without first undertaking the careful data-driven analytics necessary to ensure strategic alignment among

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AREA DEVELOPMENT | Q2/2016

63

ADVANCED MANUFACTURING > PLAYBOOK employees, managers, Americas, a company with training providers, and other a large engineering presinterested partners. This ence in Wichita. NIAR’s initial data-driven foundation, in relationship with the comturn, accelerates the process pany was to provide Airbus of engagement, articulation, engineers with training in program development, and composites and advanced effective implementation materials. The relationship strategies. has since been expanded to The B. Braun program is include full-scale structural B. Braun Medical’s Allentown, Pa., manufacturing facility a best-in-class example of testing in Wichita (the first a company training its core time this is being done by workforce in the skills needed to succeed in an advanced the company at locations outside of Europe). manufacturing environment.

NIAR provides a best-in-class organizational model for university-business partnerships in advanced manufacA Best-in-Class Example of University Support turing. It has applicability to any community with a large The National Institute for Aviation Research (NIAR) at research university and a cluster of companies with common Wichita (Kansas) State University is a best-in-class example research needs. It may also have applicability to communiof a university supporting advanced manufacturing in its ties seeking to leverage the technological expertise found community by providing research and development services on large military bases. For example, one can easily imagine in key technological disciplines. From its inception in 1985, how (former) military personnel can be organized around NIAR was organized to research and develop technologies technological competencies that are specific to the research identified by its industry advisory board (which is comprised and certification needs of military contractors (and civilian of the vice presidents for engineering from many of the leadcompanies utilizing comparable technologies). The estabing aviation and other advanced manufacturing companies lishment of such a research institute in military communities in Wichita). NIAR is organized around labs that operate as might be an important first step in attracting the advanced independent business units. Labs open and close under the manufacturing operations connected to the research and direction of NIAR’s advisory board, with each lab pursuing a testing being conducted. specific technology identified by the board. This orientation The experiences of B. Braun and Wichita State University around the research objectives of local industry (an industrydemonstrate that best-in-class practices to promote innovacentric organizational approach) is quite different from the tive advanced manufacturing cultures within a community faculty-centric organizational approach found in many other do not happen in a vacuum. They involve strategic planning offices of research and technology transfer (in which comand effective partnership with public institutions. Educamercialization of faculty innovation is the primary objective). tional institutions — ranging from K-12 right through adBecause each lab is self-funded, its research must be vanced university research programs — have a vital role to highly relevant to the advanced manufacturers whom it is play. This article profiled effective partnerships in advanced organized to serve. Current labs, for example, are organized manufacturing skills training and technological research and around additive manufacturing, computational mechanics, development. However, similar alignment is needed in encomposites and advanced materials, and more than a dozen ergy, tax, and other regulatory arenas. But one critical lesson other cutting-edge technologies. Large capital expenditures learned from the B. Braun and NIAR experiences is that best(for state-of-the-art equipment) are typically priced into in-class practices can only emerge when leading companies research and certification testing projects done for private view local public partnerships as strategic and take the lead clients, although approximately 15 percent of NIAR’s budget in making sure that their communities create environments comes from the Kansas Aviation Research and Technology that are supportive of advanced manufacturing. ≈ ≈ ≈ Growth Initiative. The university itself funds only a small DAN LEVINE is Practice Leader, Location Strategies and Economic amount of administrative overhead expense.

Development at Oxford Economics, Inc. He can be reached at DanLevine@OxfordEconomics.com.

One recent but not atypical success story involves Airbus

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AREA DEVELOPMENT ANALYZES Picking a place with a solid pipeline of employees who can hit the ground running is key.

economic and workforce data for 394 MSAS to determine their recent and longer-term economic vitality as well as capacity to support business growth and prosperity.

Note: Area Development’s research desk compiled the statistics for this report. Locations were ranked according to the methodology explained herein. Location profiles/articles researched and written by Steve Stackhouse-Kaelble, Staff Editor. Interactive report available at www.areadevelopment.com/LeadingLocations2016 AREA DEVELOPMENT | Q2/2016

65

variety of data to arrive at rankings in four vital factors — Prime Workforce, Economic Strength, Year-Over-Year Growth, and Five-Year Growth. They’re indicators that collectively

What are the hottest American places

demonstrate a metropolitan area’s recent and longer-term economic vitality and success, as well as its capacity to

for new and expanding businesses? That’s a complicated

effectively support the growth and prosperity of businesses

question to answer, because even if you’re aiming for an

that choose to locate or expand there. The factors that go

objective ruling, there are countless metrics that can point

into Area Development’s Leading Locations studies are,

you to locations all over the map.

thus, both an examination of the past and a glimpse into the

For the sixth year, Area Development has tackled the question with a multifaceted approach that crunches a wide

potential future.

This year, 394 metropolitan statistical areas (MSAs) are included in the rankings. It’s worth noting that growth really matters in the calculations for Leading Locations. Careful

TOP 20 Cities – “Prime Workforce”

longtime followers may observe that certain high-ranking locations from last year are nowhere near as high on the list this year. That is not necessarily a sign of economic disaster

CITY/MSA

State

Population

in fact, still enjoy an enviable economic position, but their

1 San Francisco-Redwood CitySouth San Francisco

CA

2 Corvallis

OR

85,579

3 Gainesville

FL

264,275

4 Blacksburg-ChristiansburgRadford

VA

178,237

5 Seattle-Bellevue-Everett

WA

2,644,584

6 College Station-Bryan

TX

228,660

7 Tyler

TX

209,714

8 Napa

CA

136,484

9 Fort Collins

CO

299,630

IA

152,586

10 Iowa City 11 Boston-Cambridge

1,523,686

4,552,402

12 Portland-VancouverHillsboro

OR-WA

2,226,009

13 Chicago-NapervilleArlington Heights

IL

7,262,718

MT

81,327

15 Burlington-South Burlington

VT

211,261

16 Naples-ImmokaleeMarco Island

FL

321,520

17 Denver-Aurora-Lakewood

CO

2,543,482

18 Midland

TX

141,671

SC-NC

376,722

KS

92,719

66

AREA DEVELOPMENT

Prime Workforce always one of the leading factors on the minds of executives choosing the next place to locate or expand. Generally speaking, it’s preferable to pick a place with a solid pipeline of potential employees who will be ready to hit the ground running. And given the ever-present hope of growth, it makes sense to choose a location where expansion requiring more workers will be a possibility, not a potential problem.

Because labor can be a make-or-break variable, prime workforce plays a key role in the Leading Locations equation.

In a nutshell, a high ranking in Prime Workforce indicates

14 Great Falls

20 Manhattan

growth trajectory has cooled a bit since the last tally.

The availability of a qualified workforce is, of course,

MA

19 Myrtle Beach-ConwayNorth Myrtle Beach

in those cities that have slipped in the rankings — they may,

that the area has a strong and growing nucleus of welleducated and qualified 18- to 44-year-olds in the workforce.

Components include the percentage of workers in this age range who have a bachelor’s degree, and how much that percentage has been growing over the past three years.

Also considered is how the area ranks in terms of inward migration of similarly educated workers, as well as whether that rate of migration is growing. Average earnings and how they’re growing also enter into the calculation.

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100 Leading Locations rank CITY/MSA 1 San Francisco-Redwood CitySouth San Francisco 2 Napa 3 Grand Rapids-Wyoming 4 Columbus 5 San Jose-Sunnyvale-Santa Clara 6 Portland-Vancouver-Hillsboro 7 Bend-Redmond 8 Denver-Aurora-Lakewood 9 Reno 10 Anaheim-Santa Ana-Irvine 11 Fort Collins 12 Orlando-Kissimmee-Sanford 13 Saginaw 14 St. George 15 Niles-Benton Harbor 16 Provo-Orem 17 Kalamazoo-Portage 18 Sioux City 19 Elkhart-Goshen 20 Santa Rosa 21 New York-Jersey CityWhite Plains 22 Seattle-Bellevue-Everett 23 Ann Arbor 24 Chicago-NapervilleArlington Heights 25 Oakland-Hayward-Berkeley 26 Salt Lake City 27 Naples-Immokalee-Marco Island 28 Detroit-Dearborn-Livonia 29 Lansing-East Lansing 30 Blacksburg-ChristiansburgRadford 31 Baton Rouge 32 Nashville-DavidsonMurfreesboro-Franklin 33 Lima 34 Warren-Troy-Farmington Hills 35 Savannah 36 San Luis Obispo-Paso RoblesArroyo Grande 37 Battle Creek 38 Ogden-Clearfield 38T Trenton 40 Jacksonville 41 Wausau 42 Wilmington 43 Sacramento-RosevilleArden-Arcade 44 Idaho Falls 45 San Diego-Carlsbad 46 Austin-Round Rock 47 Boston-Cambridge-Newton 48 West Palm Beach-Boca Raton-Delray Beach 49 Boulder 50 Lafayette-West Lafayette

State

Population *

CA CA MI IN CA OR-WA OR CO NV CA CO FL MI UT MI UT MI IA-NE-SD IN CA

1,523,686 136,484 988,938 76,794 1,836,911 2,226,009 157,733 2,543,482 425,417 3,010,232 299,630 2,134,411 200,169 138,115 156,813 526,810 326,589 168563 197,559 483,878

NY-NJ WA MI

13,866,159 2,644,584 344,791

IL CA UT FL MI MI

7,262,718 2,559,296 1,087,873 321,520 1,820,584 464,036

VA LA

178,237 802,484

TN OH MI GA

1,670,890 106,331 2,475,666 347,611

CA MI UT NJ FL WI DE-MD-NJ

269,637 136,146 597,159 366,513 1,345,596 134,063 705,670

CA ID CA TX MA

2,149,127 133,265 3,095,313 1,716,289 4,552,402

FL CO IN

1,320,134 294,567 201,789

rank CITY/MSA

State

51 Atlanta-Sandy SpringsRoswell 52 Sioux Falls 53 Gainesville 54 Ocean City 55 Tampa-St. PetersburgClearwater 56 Fort Wayne 57 Indianapolis-Carmel-Anderson 58 Greeley 59 Eugene 60 Kansas City 61 Cincinnati 62 South Bend-Mishawaka 63 Vallejo-Fairfield 64 Kahului-Wailuku-Lahaina 65 Appleton 66 Boise City 66T Janesville-Beloit 68 Richmond 69 St. Cloud 70 Louisville/Jefferson County 71 Corvallis 72 Midland 73 Elizabethtown-Fort Knox 74 Gainesville 75 Los Angeles-Long BeachGlendale 76 Dallas-Plano-Irving 77 Charlotte-Concord-Gastonia 78 North Port-SarasotaBradenton 79 Mount Vernon-Anacortes 80 Albany 81 New Haven-Milford 82 Columbus 83 Medford 84 Columbia 85 Fargo 86 Newark 87 Madison 88 Green Bay 89 Evansville 90 Asheville 91 Kokomo 92 Tyler 93 Fort LauderdalePompano BeachDeerfield Beach 94 Cape Coral-Fort Myers 95 Toledo 96 Burlington-South Burlington 96T Hartford-West HartfordEast Hartford 96T Milwaukee-WaukeshaWest Allis 99 New Bern 100 Des Moines-West Des Moines

Population *

GA SD FL NJ

5,286,728 228,261 264,275 97,265

FL IN IN CO OR MO-KS OH-KY-IN IN-MI CA HI WI ID WI VA MN KY-IN OR MI KY GA

2,783,243 416,257 1,887,877 252,825 351,715 2,009,342 2,114,580 319,224 413,344 154,924 225,666 616,561 160,331 1,208,101 189,093 1,235,708 85,579 83,629 148,338 179,684

CA TX NC-SC

9,818,605 4,230,520 2,217,012

FL WA OR CT OH OR SC ND-MN NJ-PA WI WI IN-KY NC IN TX

702,281 116,901 116,672 862,477 1,901,974 203,206 767,598 208,777 2,471,171 605,435 306,241 311,552 424,858 82,752 209,714

FL FL OH VT

1,748,066 618,754 610,001 211,261

CT

1,212,381

WI NC IA

1,555,908 126,802 569,633

* 2010 Census AREA DEVELOPMENT | Q2/2016

67

TOP 20 Cities – “Five-Year Growth”

By these measures, no city beats the San Francisco metro area, which also happens to be the #1 Leading Location, when all factors are considered. That’s not entirely surprising, given the area’s reputation as a magnet for young, welleducated, and well-paid professionals. Workers armed with at least a bachelor’s degree make up an outsized share of the population, and more are continually joining the party.

TOP 20 Cities – “Economic Strength” CITY/MSA

State

Population

CITY/MSA

State

1 Napa

CA

136,484

2 Columbus

IN

76,794

3 Greeley

CO

252,825

4 Grand Rapids-Wyoming

MI

988,938

5 Detroit-Dearborn-Livonia

MI

1,820,584

6 Bend-Redmond

OR

157,733

7 San Francisco-Redwood City-South San Francisco

CA

1,523,686

8 Naples-ImmokaleeMarco Island

FL

321,520

9 Saginaw

MI

200,169

MI

136,146

10 Battle Creek

Population

11 Elkhart-Goshen

IN

197,559

12 Provo-Orem

UT

526,810

13 Lima

OH

106,331

14 Janesville-Beloit

WI

160,331

15 San Luis ObispoPaso RoblesArroyo Grande

CA

269,637

WI

101,633

1 Elkhart-Goshen

IN

197,559

16 Fond du Lac

2 Grand Rapids-Wyoming

MI

988,938

17 Anaheim-Santa Ana-Irvine

CA

3,010,232

3 Columbus

IN

76,794

18 Canton-Massillon

OH

404,422

4 Napa

CA

136,484

WA

2,644,584

20 Sioux City

5 San FranciscoRedwood CitySouth San Francisco

CA

1,523,686

6 San Jose-SunnyvaleSanta Clara

CA

1,836,911

7 Kokomo

IN

82,752

8 Anaheim-Santa AnaIrvine

CA

3,010,232

9 Saginaw

MI

200,169

10 Warren-TroyFarmington Hills

MI

2,475,666

11 Santa Rosa

CA

483,878

12 Bend-Redmond

OR

157,733

13 Lake Charles

LA

199,607

14 Kalamazoo-Portage

MI

326,589

15 Ocean City

NJ

97,265

16 Battle Creek

MI

136,146

17 Reno

NV

425,417

17T Orlando-KissimmeeSanford

FL

2,134,411

19 Sioux City 20 Portland-VancouverHillsboro

68

AREA DEVELOPMENT

19 Seattle-Bellevue-Everett

IA-NE-SD OR-WA

168,563 2,226,009

IA-NE-SD

168,563

It’s also not too surprising to find such Prime Workforce characteristics in such places as Corvallis, Oregon, and Gainesville, Florida. They are, after all, college towns, home of Oregon State University and the University of Florida, respectively (Corvallis is also home to a Hewlett-Packard research campus). College communities are, in fact, well represented among the top-10 Prime Workforce locations — again, no surprise, because many graduates choose to stick around and join the workforce. Plus, college towns tend to be hotbeds of innovation.

Economic Strength Economic Strength enters the Leading Locations equation because success tends to breed more success. A strong economy indicates more than just good luck — it’s evidence of leadership that knows how to support the local business community and help

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development prospects reach their full potential.

a downturn, or one that is

Several economic indicators are in the mix for the rating

keeping an especially solid

of Economic Strength, led by gross metropolitan product and

streak alive for an extended

its rate of change over a year, three years, and five years.

period of time. Either way, a good showing on this list

Thus, a strong rating here emphasizes growth that has been

indicates strong planning and smart decision-making.

sustained. But as with the other factors, the growth story is

This collection of indicators formerly went by the title

ever-changing, which means that the leaderboards can vary

of “Recession-Busting.”

significantly from year to year.

With the Great

Leading the way nationally was the Elkhart-Goshen area

Recession fading

in northern Indiana, one of the most manufacturing-heavy

into the rear-

metro areas in the country. Like other manufacturing-

view mirror, it

intensive areas, its economy is a bit of a bellwether, and

makes sense

though it suffered significantly during the Great Recession,

to reframe

its recreational vehicle industry has led a roaring comeback

these

in more recent years. The other Indiana and Michigan metro areas near the top of the Economic Strength list also tend to have economies with strong manufacturing influence.

Times are better for U.S. manufacturing than they’ve been in a good while, so it makes sense that manufacturing-heavy communities are among the strongest economically.

Outside of Indiana and Michigan, the rest of the top-10 metro areas in Economic Strength are all in California, and the economic drivers that put them on the list are diverse.

Technology development is always a strong part of the mix, most notably in the Bay Area and Silicon Valley metro areas on this list, but manufacturing and tourism are powerful forces, too. The Anaheim area is a great example of this diversity, enriched by the presence of Disneyland but also the countless corporate headquarters and IT strength in Irvine and Santa Ana.

Five-Year Growth Five-Year Growth provides evidence of a setting with economic resilience. A win in this column indicates growth that is not a fluke but a sustainable and

Methodology

Area Development ranked 394 MSAs across 21 economic and work force indicators. These 21 indicators were pulled from seven (7) data sets (sub-categories) originating from three sources: the Bureau of Labor Statistics, U.S. Census American Community Survey, and Moody’s Analytics.

Each MSA earned a ranking within each of the 21 indicators based on its statistical performance within that indicator. The MSA with the best performance in a certain indicator earned a ranking score of “1” and the MSA with the worst performance earned a ranking score of “394.”

To calculate “Overall Ranking,” we added the total ranking across all indicators for each MSA and then divided by the total number of indicators to reach an average ranking. The MSA with the lowest average earned the #1 overall ranking, while the MSA with the highest average ranked #394 overall.

We also calculated overall ranking across four categories: “Prime Work Force,” “Economic Strength,” “Five-Year Growth,” and “YearOver-Year Growth.” To calculate the overall ranking within these four categories, we produced an average ranking across only certain indicators. An indicator did not have to be exclusive to our category rankings.

For instance, the “Employment Growth Net 5-Year Change as Percentage of Population” was used within both the “Economic Strength” and “FiveYear Growth” categories.

We have also produced a set of lists, using our overall results and category results, grouping the MSAs by region (see online report) and size. We ranked the top MSAs in each region (defined by Area Development Online taxonomy), and we also ranked the top MSAs across three size groups: “Small” (population <160,000), “Mid-Size” (population 160,000–600,000), and “Big” (population >600,000). We ranked the cities within each size group against our overall rankings and “Prime Work Force,” “Economic Strength,” “Five-Year Growth,” and “Year-Over-Year Growth” categories.

impressive trend — it could be a community that is rebounding smartly from

For a full explanation of the methodology behind our Leading Locations report, go to www.areadevelopment.com/LeadingLocations2016/methodology.

AREA DEVELOPMENT | Q2/2016

69

TOP 30 BIG CITIES economic attributes as Five-Year Growth because these metro areas have really emerged as communities proven to be moving in a sustainably positive direction. These are indicators that compare 2015 with 2010, including how local employment has grown, how joblessness has declined, how the gross metropolitan product has expanded, how wages

State

Population

Rank Within Leadingg Locations

1 San FranciscoRedwood City-South San Francisco

CA

1,523,686

1

2 Grand Rapids-Wyoming

MI

988,938

3

CITY/MSA

have evolved, and how the share of employment involved in

3 San Jose-SunnyvaleSanta Clara

manufacturing has changed.

4 Portland-Vancouver-Hillsboro

What has driven that growth among the top 10 on this list

TOP 20 Cities – “Year-Over-Year Growth” CITY/MSA

State

Population

CA

1,836,911

5

OR-WA

2,226,009

6

5 Denver-Aurora-Lakewood

CO

2,543,482

8

6 Anaheim-Santa Ana-Irvine

CA

3,010,232

10

7 Orlando-Kissimmee-Sanford

FL

2,134,411

12

NY-NJ

13,866,159

21

WA

2,644,584

22

8 New York-Jersey CityWhite Plains 9 Seattle-Bellevue-Everett 10 Chicago-NapervilleArlington Heights

IL

11 Oakland-Hayward-Berkeley

CA

2,559,296

25

UT

1,087,873

26

7,262,718

24

CA

136,484

12 Salt Lake City

IA-NE-SD

168,563

13 Detroit-Dearborn-Livonia

MI

1,820,584

28

3 Reno

NV

425,417

14 Baton Rouge

LA

802,484

31

4 Saginaw

MI

200,169

15 Nashville-DavidsonMurfreesboro-Franklin

TN

1,670,890

32

5 El Centro

CA

174,528

16 Warren-Troy-Farmington Hills

MI

2,475,666

34

6 Niles-Benton Harbor

MI

156,813

17 Jacksonville

FL

1,345,596

40

7 San Jose-SunnyvaleSanta Clara

CA

1,836,911

18 Wilmington

DE-MD-NJ

705,670

42

8 San Francisco-Redwood City-South San Francisco

CA

1,523,686

19 Sacramento-RosevilleArden-Arcade

CA

2,149,127

43

CA

3,095,313

45

1 Napa 2 Sioux City

IN

197,559

20 San Diego-Carlsbad

10 Santa Rosa

CA

483,878

21 Austin-Round Rock

TX

1,716,289

46

11 Yakima

WA

243,231

22 Boston-Cambridge-Newton

MA

4,552,402

47

12 Idaho Falls

ID

133,265

23 West Palm BeachBoca Raton-Delray Beach

FL

1,320,134

48

13 Fort Wayne

IN

416,257

14 Watertown-Fort Drum

NY

116,229

24 Atlanta-Sandy SpringsRoswell

GA

5,286,728

51

15 Ogden-Clearfield

UT

597,159

16 Ocean City

NJ

97,265

25 Tampa-St. PetersburgClearwater

FL

2,783,243

55

17 Norwich-New London

CT

274,055

26 Indianapolis-Carmel-Anderson

IN

2,783,243

57

9 Elkhart-Goshen

MO-KS

2,009,342

60

2,149,127

28 Cincinnati

OH-KY-IN

2,114,580

61

GA

142,227

29 Boise City

ID

616,561

66

IN

117,671

30 Richmond

VA

1,208,101

68

18 Sacramento-RosevilleArden-Arcade

CA

19 Dalton 20 Muncie

70

AREA DEVELOPMENT

27 Kansas City

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AREA0574.indd 1

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TOP 20 BIG CITIES –“Economic Strength” CITY/MSA

State

Rank Within Population Economic Strength

1 Grand Rapids-Wyoming

MI

988,938

2 San Francisco-Redwood City-South San Francisco

CA

1,523,686

3 San Jose-SunnyvaleSanta Clara

CA

1,836,911

6

4 Anaheim-Santa Ana-Irvine

CA

3,010,232

8

5 Warren-TroyFarmington Hills

MI

2,475,666

10

6 Orlando-KissimmeeSanford

FL

2,134,411

17

1973 Chateau Montelena chardonnay stunned the French

7 Portland-VancouverHillsboro

OR-WA

2,226,009

20

wine establishment in a head-to-head competition. There’s

8 Denver-Aurora-Lakewood

CO

2,543,482

21

NY-NJ

13,866,159

23

10 San Diego-Carlsbad

CA

3,095,313

27

11 Toledo

OH

610,001

28

12 Indianapolis-CarmelAnderson

IN

1,887,877

36

13 Sacramento-RosevilleArden-Arcade

CA

2,149,127

37

varies substantially. The California community of Napa (#1 in this category), for example, has an economy that is not as diverse as some successful places — but what it does, it does incredibly well. That, of course, would be making wines that the world has recognized as top-notch ever since the

9 New York-Jersey CityWhite Plains

TOP 20 BIG CITIES – “Prime Workforce” CITY/MSA

State

Rank Within Population Prime Workforce

KY-IN

1,235,708

40

1

MI

1,820,584

42

2,644,584

5

16 Oakland-Hayward-Berkeley

CA

2,559,296

43

MA

4,552,402

11

17 Wilmington

705,670

45

OR-WA

2,226,009

12

18 Baton Rouge

LA

802,484

47

19 Salt Lake City

UT

1,087,873

48

20 Los AngelesLong Beach-Glendale

CA

9,818,605

54

CA

1,523,686

2 Seattle-Bellevue-Everett

WA

3 Boston-Cambridge-Newton 4 Portland-Vancouver-Hillsboro 5 Chicago-NapervilleArlington Heights

IL

7,262,718

12

6 Denver-Aurora-Lakewood

CO

2,543,482

17

7 San Jose-SunnyvaleSanta Clara

CA

1,836,911

22

8 Grand Rapids-Wyoming

MI

988,938

24

9 Birmingham-Hoover

5

15 Detroit-Dearborn-Livonia

1 San Francisco-Redwood CitySouth San Francisco

14 Louisville/Jefferson County

2

DE-MD-NJ

AL

1,128,047

28

economic growth in making Napa’s wines, as well as in the

10 Charleston-North Charleston

SC

664,607

29

tourism trade that the wine industry attracts.

11 North Port-SarasotaBradenton

FL

702,281

33

12 Nashville-DavidsonMurfreesboro-Franklin

TN

1,670,890

35

headquarters and research/development activity of diesel

13 Jacksonville

FL

1,345,596

36

engine maker Cummins. Food processing is a major

14 Houston-The WoodlandsSugar Land

TX

5,920,416

40

VA-NC

1,676,822

43

incredible demand for its green energy product, and that has

16 Austin-Round Rock

TX

1,716,289

47

been good for Greeley. Four Michigan communities have

17 Salt Lake City

UT

1,087,873

50

certainly busted recessionary woes during the past five years,

18 Orlando-Kissimmee-Sanford

FL

2,134,411

51

with the automotive and technology sectors leading the way.

19 Urban Honolulu

HI

953,207

52

Technology and tourism have sustained the growth of other

2,009,342

56

high-rankers, as well.

15 Virginia Beach-NorfolkNewport News

20 Kansas City

72

AREA DEVELOPMENT

MO-KS

The Indiana community of Columbus makes the list through its healthy manufacturing sector as well as the

economic driver in Greeley, Colorado, but a lot of its recent growth is in wind — turbine-maker Vestas has had an

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Year-Over-Year Growth

other California locations where the economy is faring well

Year-Over-Year Growth is a great way to spot those places

due to technology-sector strength. Ongoing strength in the

where the iron is particularly hot right now. Who doesn’t

automotive and recreational vehicle industries is the spark

want to bet on a winning team? The calculations for Year-

igniting a lot of the year-over-year growth among the top 10,

Over-Year Growth are similar to those that go into the Five-

along with other manufacturing sectors, including food.

Year Growth research — they just measure the most recent year’s activity, rather than the last five. Indicators track the trajectory of local employment and unemployment, as well as gross metropolitan product, the change in manufacturingrelated employment, and wage rates.

Not surprisingly, there’s some overlap between the FiveYear Growth list and the list of Year-Over-Year Growth stars.

For example, Napa is at the top of this list, too, along with

Let’s take a look at the leading cities in each population group — big, small, and mid-size cities.

BIG CITIES (Population >600,000) San Francisco-Redwood CitySouth San Francisco Population: 1,523,686 The San Francisco side of the Bay Area is at or near the

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AREA DEVELOPMENT | Q2/2016

73

TOP 20 BIG CITIES –“Year-Over-Year Growth” CITY/MSA

TOP 20 BIG CITIES – “Five-Year Growth” CITY/MSA

State

Rank Within Population Five-Year Growth

State

Rank Within YearPopulation Over-Year Growth

1 San Jose-SunnyvaleSanta Clara

CA

1,836,911

7

2 San Francisco-Redwood CitySouth San Francisco

CA

1,523,686

8

3 Sacramento-RosevilleArden-Arcade

CA

2,149,127

18

4 Orlando-Kissimmee-Sanford

FL

2,134,411

24

5 Portland-Vancouver-Hillsboro

OR-WA

2,226,009

25

6 Grand Rapids-Wyoming

MI

988,938

26

7 Anaheim-Santa Ana-Irvine

CA

3,010,232

28

8 San Diego-Carlsbad

CA

3,095,313

30

9 Fresno

CA

930,450

34

10 Wilmington

DE-MD-NJ

705,670

35

11 Baton Rouge

LA

802,484

41

12 Jacksonville

FL

1,345,596

46

NY-NJ

13,866,159

50

13 New York-Jersey CityWhite Plains 14 Knoxville

TN

837,571

51

15 Camden

NJ

1,250,679

61

1 Grand Rapids-Wyoming

MI

988,938

4

16 Detroit-Dearborn-Livonia

MI

1,820,584

68

2 Detroit-Dearborn-Livonia

MI

1,820,584

5

17 Stockton-Lodi

CA

685,306

75

3 San Francisco-Redwood City-South San Francisco

CA

1,523,686

7

4 Anaheim-Santa Ana-Irvine

CA

3,010,232

17

5 Seattle-Bellevue-Everett

WA

2,644,584

19

6 Warren-Troy-Farmington Hills

MI

2,475,666

23

7 Denver-Aurora-Lakewood

CO

2,543,482

27

KY-IN

1,235,708

28

CA

1,836,911

32

OH-KY-IN

2,114,580

35

OR-WA

2,226,009

37

12 Nashville-DavidsonMurfreesboro-Franklin

TN

1,670,890

40

13 Columbus

OH

1,901,974

41

14 Akron

OH

703,200

42

15 North Port-SarasotaBradenton

FL

702,281

47

16 Columbia

SC

767,598

47

8 Louisville/Jefferson County 9 San Jose-SunnyvaleSanta Clara 10 Cincinnati 11 Portland-VancouverHillsboro

LA

802,484

49

18 Orlando-KissimmeeSanford

FL

2,134,411

51

NY-NJ

13,866,159

55

IL

7,262,718

57

20 Chicago-NapervilleArlington Heights

74

AREA DEVELOPMENT

19 Newark 20 Oakland-Hayward-Berkeley

IN

1,887,877

76

NJ-PA

2,471,171

77

CA

2,559,296

80

top of nearly all of the charts that make up the Leading Locations calculations, so it’s not a wonder that it’s the overall #1 city, as well as tops among the nation’s largest cities.

Among cities of all sizes, it’s first in the Prime Workforce ranking, fifth in Economic Strength, seventh in Five-Year

17 Baton Rouge

19 New York-Jersey CityWhite Plains

18 Indianapolis-Carmel-Anderson

Growth and eighth in Year-Over-Year Growth. Among its bigcity peers, the San Francisco area tops the Prime Workforce list, is second in both Economic Strength and Year-Over-Year Growth, and third in Five-Year Growth.

If one considers venture capital as a bellwether for future growth, it’s reasonable to expect the San Francisco area to remain highly ranked in years to come. The Bay Area was the top-ranked region in venture capital last year, according to the San Francisco Center for Economic Development (SFCED), pulling in 47 percent of the national dollar total and 30 percent of all deals. The total invested was up over the

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year before despite the fact that global economic uncertainty pulled down investments in general in the fourth quarter.

That flood of venture capital points to the fact that the area lives up to its reputation as a technology-centered economy. Historically a financial center and magnet for tourism, the economy these days gets a lot of its strength from the tech sector, biotech, and medical research. The hot economy is creating an abundance of jobs, as reflected in the low unemployment rate — as of March 2016 the Bureau of Labor Statistics pegged the jobless rate at 3.8 percent in the San FranciscoOakland-Hayward area.

All in all, the area has performed incredibly well in recent rankings, topping Mercer’s 2016 Quality of Living Survey, while coming in second only to the San Jose area in the Milken Institute “Best-Performing Cities” economic vitality report. Its strength in Prime Workforce is reflected in its #3 ranking in the Robert Half Career City Index, according to the SFCED.

Grand Rapids-Wyoming, Michigan Population: 988,938 The Grand Rapids metropolitan area was highest among large cities in Economic Strength and Five-Year Growth. It also was a top-10 finisher on the big-city rankings of Year-Over-Year Growth, in the sixth spot, and Prime Workforce, placing eighth.

Grand Rapids enjoys a diverse economy that is a job-creating engine — unemployment as of March 2016 was 3.4 percent, and job growth over the past five years is averaging more than

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TOP 20 MID-SIZE CITIES – “Prime Workforce” CITY/MSA

TOP 30 MID-SIZE CITIES Rank Within Population Leadingg Locations

State

Rank Within Population Prime Workforce

1 Gainesville

FL

264,275

3

2 Blacksburg-ChristiansburgRadford

VA

178,237

4

3 College StationBryan

TX

228,660

6

4 Tyler

TX

209,714

7

5 Fort Collins

CO

299,630

9

6 BurlingtonSouth Burlington

VT

211,261

15

7 Naples-ImmokaleeMarco Island

FL

321,520

16

SC-NC

376,722

19

WA

251,133

21

CITY/MSA

State

1 Reno

NV

425,417

9

2 Fort Collins

CO

299,630

11

3 Saginaw

MI

200,169

13

10 Asheville

NC

424,858

23

4 Provo-Orem

UT

526,810

16

11 Reno

NV

425,417

25

5 Kalamazoo-Portage

MI

326,589

17

12 Provo-Orem

UT

526,810

26

IA-NE-SD

168,563

18

13 Sioux Falls

SD

228,261

30

6 Sioux City

8 Myrtle Beach-ConwayNorth Myrtle Beach 9 Bremerton-Silverdale

7 Elkhart-Goshen

IN

197,559

19

14 Savannah

GA

347,611

31

8 Santa Rosa

CA

483,878

20

15 Prescott

AZ

211,033

41

9 Ann Arbor

MI

344,791

23

16 Fargo

ND-MN

208,777

42

10 Naples-ImmokaleeMarco Island

FL

321,520

27

17 Des MoinesWest Des Moines

IA

569,633

45

11 Lansing-East Lansing

MI

464,036

29

18 Panama City

FL

184,715

48

19 Bloomington

IL

186,133

49

CO

294,567

61

12 BlacksburgChristiansburg-Radford

VA

178,237

30

13 Savannah

GA

347,611

35

14 San Luis Obispo-Paso RoblesArroyo Grande

CA

269,637

36

15 Trenton

NJ

366,513

38

4.5 percent. The area has a long history in manufacturing,

16 Ogden-Clearfield

UT

597,159

38

with a strong presence in furniture, automotive, and aviation.

17 Boulder

CO

294,567

49

Manufacturing is, indeed, a cornerstone of the economy,

N

201,789

50

creating 19 percent of the jobs in western Michigan.

19 Sioux Falls

SD

228,261

52

The area is increasingly strong in the high-tech sectors in

20 Gainesville

FL

264,275

53

particular, from advanced manufacturing and the life sciences

21 Fort Wayne

IN

416,257

56

to information technology. Its biopharmaceuticals sector ranks

22 Greeley

CO

252,825

58

in the nation’s top 10, and the food and agriculture sector

23 Eugene

OR

351,715

59

adds nearly $100 billion to the local economy.

IN-MI

319,224

62

25 Vallejo-Fairfield

CA

413,344

63

near the top of a variety of surveys of business and quality-

26 Appleton

WI

225,666

65

of-life factors. Last year, Forbes placed it #1 on its list of

27 Janesville-Beloit

WI

160,331

66

“Best Cities for Raising A Family,” and second on the list

28 St. Cloud

MN

189,093

69

of “Best Cities for Finding A Job.” It’s among the top U.S.

29 Gainesville

GA

179,684

74

“emerging cities” for global trade, and is home to more than

30 Medford

OR

203,206

83

130 international companies.

18 Lafayette-West Lafayette

24 South Bend-Mishawaka

76

AREA DEVELOPMENT

20 Boulder

Grand Rapids and the surrounding area regularly ranks

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

San Jose-Sunnyvale-Santa Clara Population: 1,836,911 The San Jose-Sunnyvale-Santa Clara metropolitan area

Tahoe, it’s not surprising that Reno’s economy has historically had strong ties to gaming, entertainment, and

has a high reputation to uphold, given its nickname of

tourism. But the city has placed its bets on a more diverse

“Silicon Valley,” and its place on the Leading Locations listing

future, and it has been a good bet. Data centers have been

suggests that it’s doing just fine. It tops the list for Year-Over-

a big part of that diversification, with Switch spending nearly

Year Growth among large cities, ranks third in Economic

$2 billion and others including eBay announcing data center

Strength, and is seventh in Prime Workforce and ninth in

plans.

Five-Year Growth.

The roster of technology companies operating in and

Entrepreneurism is also one of the hottest games in town, with startups and other technology, clean energy,

around the region is a true Who’s Who, led by Cisco Systems

and healthcare businesses driving healthy growth. The

along with such names as eBay, IBM, Adobe Systems, and

geothermal business is energetic, and other advanced

in nearby Cupertino, Apple, to name-drop a few. Just within

manufacturing sectors are on the rise as well.

San Jose, some 25,000 people earn a living in the computer and communications hardware sector, another 16,000 in software, and nearly 12,000 in semiconductors. More than 800 high-tech companies have a San Jose address.

Relatively few are without work in the San Jose area,

Analysis Small and Mid-Size Cities Dominate

according to the Bureau of Labor Statistics. The metro area

By Gregory Burkart, Managing Director, Duff & Phelps

recorded a jobless rate of 3.9 percent in March 2016. That

My first surprise is the strength of two Midwestern cities.

Grand Rapids, Michigan, and Columbus, Indiana, are punching way above their weight. The report describes Grand Rapids as a “Large” MSA and, while technically accurate, the city is probably one of the smallest “large” cities. For two cities that are small to medium in size, ranking #3 and #4 overall this year and #3 and #8 last year is remarkable.

fact, along with the prevalence of high-paying tech jobs, has helped San Jose regularly tally the highest median income among the nation’s larger cities, along with the highest disposable income.

MID-SIZE CITIES (Population 160,000–600,000) Reno, Nevada Population: 425,417 Healthy Year-Over-Year Growth helped put Reno atop the list of mid-size cities — it’s second among mid-size cities and third among all cities in that category. Unlike larger cities, mid-size cities really share the wealth when it comes to the rankings used to determine Leading Locations, and there aren’t any cities that dominate all of the factors. Reno is 11th among mid-size cities in Five-Year Growth and Prime Workforce, and sixth in Economic Strength. Unemployment is higher than in some places but still reasonably healthy, coming in at 5.5 percent in March 2016, according to the Bureau of Labor Statistics.

With its location in Nevada not all that far from Lake

My second surprise is how far and how fast the Texas cities have dropped. Houston went from #2 in 2015 to #225 this year. Plus, in 2015 there were six Texas cities in the top 20 for overall performance and this year there are none. The rate and depth of the drop indicates just how big the energy sector is in the U.S. For companies looking to expand, now would be a good time to look at Texas. Labor and construction costs are soft and, while far from liquidation prices, there are bargains to be had.

My third surprise is the strength of small to mid-size communities in this year’s report. There are currently 13 small- to midsized cities in the top 20 for Economic Strength, while in 2015 there were only 8 in the top 20. That is a 62 percent increase.

What’s remarkable is that this growth occurred in communities that are typically lacking in airport accessibility or high rankings in the millennial aged work force. There must be something else that is not quite apparent from the data driving this performance. (I think there is a bigger story here.)

AREA DEVELOPMENT | Q2/2016

77

TOP 20 MID-SIZE CITIES – “Five-Year Growth” Rank Within Population Five-Year Growth

CITY/MSA

State

1 Greeley

CO

252,825

3

2 Naples-ImmokaleeMarco Island

FL

321,520

8

3 Saginaw

MI

200,169

9

4 Elkhart-Goshen

IN

197,559

11

helped it attract distribution-related businesses eager for a

5 Provo-Orem

UT

526,810

12

location that can hit 80 percent of the 11 western states in

6 Janesville-Beloit

WI

160,331

14

a day or less. Among the most recent announcements are a

7 San Luis ObispoPaso Robles-Arroyo Grande

CA

269,637

15

8 Canton-Massillon

OH

404,422

18

Reno also has distinct transportation advantages that have

distribution center for e-commerce retailer Jet.com and one for wholesaler Quality Bicycle Products.

Fort Collins, Colorado Population: 299,630 Colorado boasts a number of mid-size contenders, led

by Fort Collins, with its Economic Strength ranking of 15th

TOP 20 MID-SIZE CITIES – “Economic Strength” CITY/MSA 1 Elkhart-Goshen

State IN

Rank Within Population Economic Strength 197,559

9 Sioux City

IA-NE-SD

168,563

20

10 Fort Collins

CO

299,630

22

11 Reno

NV

425,417

24

12 St. Cloud

MN

189,093

26

13 Gainesville

GA

179,684

30

14 Corpus Christi

TX

428,185

33

15 Vallejo-Fairfield

CA

413,344

34

16 Trenton

NJ

366,513

36

17 Chico

CA

220,000

38

18 Eugene

OR

351,715

45

19 Santa Rosa

CA

483,878

52

20 Lake Charles

LA

199,607

54

1

2 Saginaw

MI

200,169

9

3 Santa Rosa

CA

483,878

11

4 Lake Charles

LA

199,607

13

among mid-size cities, a fifth-place Prime Workforce ranking,

5 Kalamazoo-Portage

MI

326,589

14

and Five-Year Growth placed at 10th. The hot economy has

6 Reno

NV

425,417

17

driven the jobless rate down to 3.1 percent as of March

7 Sioux City

IA-NE-SD

168,563

19

2016.

8 Gainesville

GA

179,684

22

9 San Luis Obispo-Paso Robles-Arroyo Grande

CA

269,637

24

and including a variety of other prominent tech names.

9T Trenton

NJ

366,513

24

Manufacturing has been an economic mainstay, with

11 Spartanburg

SC

313,268

33

products ranging from control systems to wireless phone

12 Ann Arbor

MI

344,791

35

protective gear to dental devices to beer. Just one of many

13 Provo-Orem

UT

526,810

41

positive headlines in recent months was the planned

14 Lansing-East Lansing

MI

464,036

44

expansion of semiconductor designer Avago Industries, with

15 Fort Collins

CO

299,630

46

more than 1,300 on the payroll locally.

16 Fort Wayne

IN

416,257

49

17 Ogden-Clearfield

UT

597,159

50

good news rolling by funding targeted industry clusters.

IN-MI

319,224

51

Among the more recent recipients are groups representing

19 Redding

CA

177,223

52

biosciences and food-related industries. Outside observers

20 Medford

OR

203,206

53

have taken note of the business-friendly environment,

18 South Bend-Mishawaka

78

AREA DEVELOPMENT

The presence of Colorado State University has been a draw for high-tech industries, led by Hewlett Packard

Local economic development officials strive to keep the

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

TOP 20 MID-SIZE CITIES –“Year-Over-Year Growth” Rank Within YearPopulation Over-Year Growth

CITY/MSA

State

1 Sioux City

IA-NE-SD

168,563

2

2 Reno

NV

425,417

3

3 Saginaw

MI

200,169

4

4 El Centro

CA

174,528

5

5 Elkhart-Goshen

IN

197,559

9

6 Santa Rosa

CA

483,878

10

7 Yakima

WA

243,231

11

8 Fort Wayne

IN

416,257

13

9 Ogden-Clearfield

UT

597,159

15

10 Norwich-New London

CT

274,055

17

11 Vallejo-Fairfield

CA

413,344

21

12 Oshkosh-Neenah

WI

166,994

29

13 Ann Arbor

MI

344,791

31

14 Lansing-East Lansing

MI

464,036

33

15 Kalamazoo-Portage

MI

326,589

35

16 Chattanooga

TN-GA

528,143

38

17 Blacksburg-ChristiansburgRadford

VA

178,237

40

18 Florence

SC

205,566

43

19 Redding

CA

177,223

44

20 Lafayette-West Lafayette

IN

201,789

45

including an “A” rating for small business friendliness from Thumbtack and a Fast Company top-10 ranking for tech jobs.

Saginaw, Michigan Population: 200,169 Next in line is this Michigan community, ranked second in Economic Strength among mid-size cities and ninth overall in that category. Its growing economy has landed it third on the mid-size cities list of both Year-Over-Year and Five-Year Growth. Unemployment in the area was at 5.3 percent in March 2016, according to the Bureau of Labor Statistics.

Saginaw is in the heart of the automotive manufacturing belt, and its multiple advanced manufacturing players build upon these roots, led by Nexteer Automotive, headquartered in Saginaw. But the economy is diverse — Dow Chemical and Dow Corning are headquartered in the region, and Dow Corning is a majority owner in Hemlock Semiconductor, with decades of history in the area. Also

Analysis Diversity of Leading Cities Reflects Commercial Real Estate Demand

By Jason Tolliver, J.D., Vice President and Head of Industrial Research, Americas, Cushman & Wakefield The insight offered by Area Development’s Leading Locations is reflective of prominent trends being witnessed in the industrial market. The diversity, both in terms of size and geography, of the leading cities mirrors a booming industrial expansion that has been more broad-based than previous expansions. The U.S. industrial market has now enjoyed 24 consecutive quarters of positive net occupancy gains, placing the current expansion among the longest — and the strongest — on record. The U.S. industrial market shed over 130 million square feet (msf) of space during the economic downturn, but has absorbed more than 900 msf during the current expansion.

Prominent economic development wins and widespread occupancy gains continue to be registered across the country.

Twenty-two markets reported over one million square feet (msf) of positive net absorption during the first quarter of 2016. As a result, the industrial vacancy rate has plummeted to its lowest level of the past 30 years and currently stands at 6.1 percent. With vacancy at such low levels, there is a lack of functional, modern space on the market, and developers are responding with more speculative construction in many leading cities. Despite this uptick in speculative construction, it remains a controlled development environment and the market nationally is still well below the levels of development observed at the peak of the last cycle. From 2004 to 2009 more than 776 msf of industrial product was delivered, 27 percent more than the 566 msf of product brought online during the current expansion.

Much of what drives demand for industrial space links to the U.S. consumer, and with expected wage and labor market gains referenced in the Leading Locations report, the consumer will have the wherewithal to drive growth. We anticipate another strong year for the property market as the leading cities continue to lead the industrial market to the longest and strongest expansion on record.

AREA DEVELOPMENT | Q2/2016

79

TOP 20 SMALL CITIES – “Prime Workforce”

TOP 30 SMALL CITIES CITY/MSA

State

Rank Within Population Leadingg Locations

Rank Within Prime Population Workforce

CITY/MSA

State

1 Corvallis

OR

2 Napa

CA

136,484

8

3 Iowa City

IA

152,586

10

4 Great Falls

MT

81,327

14

5 Midland

TX

141,671

18

85,579

2

6 Manhattan

KS

92,719

20

7 Ithaca

NY

101,564

27

8 Lawrence

KS

110,826

32

9 Auburn-Opelika

AL

140,247

34

10 Niles-Benton Harbor

MI

156,813

36

11 Columbus

IN

76,794

38

1 Napa

CA

136,484

2

12 The Villages

FL

93,420

38

2 Columbus

IN

76,794

4

13 Midland

MI

83,629

44

3 Bend-Redmond

OR

157,733

7

14 St. George

UT

138,115

46

NY

116,229

53

4 St. George

UT

138,115

14

15 Watertown-Fort Drum

5 Niles-Benton Harbor

MI

156,813

15

16 Bend-Redmond

OR

157,733

54

6 Lima

OH

106,331

33

17 Albany

OR

116,672

55

7 Battle Creek

MI

136,146

37

18 Walla Walla

WA

62,859

57

WA

116,901

58

ID

133,265

59

8 Wausau

WI

134,063

41

19 Mount Vernon-Anacortes

9 Idaho Falls

ID

133,265

44

20 Idaho Falls

10 Ocean City

NJ

97,265

54

11 Kahului-Wailuku-Lahaina

HI

154,924

64

12 Corvallis

OR

85,579

71

13 Midland

MI

83,629

72

14 Elizabethtown-Fort Knox

KY

148,338

73

15 Mount Vernon-Anacortes

WA

116,901

79

16 Albany

OR

116,672

80

17 Kokomo

IN

82,752

91

18 New Bern

NC

126,802

99

19 Winchester

VA-WV

128,472

102

20 Dalton

GA

142,227

105

21 Fond du Lac

WI

101,633

106

22 Lewiston-Auburn

ME

107,702

108

23 Pittsfield

MA

131,219

113

24 Coeur d’Alene

ID

138,494

115

25 Pocatello

ID

82,839

118

26 Grand Forks

ND-MN

98,461

119

27 Walla Walla

WA

62,859

121

28 Rome

GA

96,317

128

29 Manhattan

KS

92,719

129

30 Ithaca

NY

101,564

130

80

AREA DEVELOPMENT

strong locally are the medical technology and renewable energy sectors.

SMALL CITIES (Population <160,000) Napa, California Population: 136,484 The winemaking capital of Napa is a hotbed for economic growth — in fact, it is the small cities as well as the national leader in both Year-Over-Year and Five-Year Growth. It is second among small cities and fourth overall in Economic Strength, and also second among small cities in Prime Workforce.

What puts Napa on the map for most people is its highend reputation for winemaking, and of the 12 percent of the local workforce involved in manufacturing, a large share are producing wine. Indeed, the list of the county’s largest employers is dominated by wineries. Services, including hospitality and healthcare, make up nearly half of the local economy. Of other sectors, the one pegged for the most growth in the next few years is the mining, logging, and

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

construction sector, according to the California Department

third among cities of all

of Economic Development.

sizes in this category, and

There are plenty of jobs to go around, according to the

ranks second among its

Bureau of Labor Statistics, which puts the jobless rate in

peers in Five-Year Growth. Its jobless rate as of March 2016

Napa at 4.4 percent, as of March 2016.

held at 4.2 percent.

Fortune 500 diesel engine maker Cummins, which

Columbus, Indiana Population: 76,794

invested heavily and successfully on the promise of cleanair engines, has an outsized role in the city’s success — it

This Indiana county seat continues on its winning

employs about a sixth of the local workforce, and is the

economic streak. Its forward-thinking and generous locally

biggest reason that Columbus leads the nation in the

based employers not only provide thousands of high-paying

number of mechanical engineers per thousand residents, at

jobs but also share an unusual amount of civic support that

more than 30 (that’s triple the national average).

has, among other things, put Columbus on the map of cities

But it’s far from a one-company town, and has been a

with the highest concentration of top-notch architecture.

magnet for foreign direct investment for years. For example,

Columbus leads small cities in Economic Strength and places

Toyota Industrial Equipment, one of nearly two dozen

Planes, Trains, Automobiles?

How about

UAV’S, ROBOTS & ELECTRIC CARS?

RENO • SPARKS • TAHOE Stan Thomas 775.829.3731 sthomas@edawn.org l www.edawn.org

AREA0588.indd 1

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AREA DEVELOPMENT | Q2/2016

81

TOP 20 SMALL CITIES – “Five-Year Growth” CITY/MSA 1 Napa

State CA

Rank Within Population Five-Year Growth 136,484

1

2 Columbus

IN

76,794

2

3 Bend-Redmond

OR

157,733

6

4 Battle Creek

MI

136,146

10

Japanese-owned companies in the county, has been making

5 Lima

OH

106,331

13

forklifts there since 1990 and last year pledged $16 million

6 Fond du Lac

WI

101,633

16

to build a new national headquarters for its material-handling

7 Kahului-Wailuku-Lahaina

HI

154,924

21

division. Others in the area include Dorel, NTN, and Enkei,

8 Cleveland

TN

115,788

25

and last year Japanese-owned Toyota Industrial Equipment

9 Kankakee

IL

113,449

29

supplier Daiei Giken Kogyo Co. announced it would build its

10 Kokomo

IN

82,752

31

first U.S. production site in Columbus.

11 Farmington

NM

130,044

38

12 Sheboygan

WI

115,507

42

13 St. George

UT

138,115

44

14 Niles-Benton Harbor

MI

156,813

46

15 Wausau

WI

134,063

49

16 Wenatchee

WA

110,884

53

17 Elizabethtown-Fort Knox

KY

148,338

56

18 Coeur d’Alene

ID

138,494

63

19 Ocean City

NJ

97,265

70

20 Sumter

SC

107,456

77

MO-KS

127,329

77

CA

150,865

77

Bend-Redmond, Oregon Population: 157,733 Bend-Redmond, the #4 small city in Economic Strength

TOP 20 SMALL CITIES – “Economic Strength” Population

Rank Within Economic Strength

20 St. Joseph

CITY/MSA

State

1 Columbus

IN

76,794

3

2 Napa

CA

136,484

4

3 Kokomo

IN

82,752

7

4 Bend-Redmond

OR

157,733

12

from its natural beauty and resources. Tourism is a big

5 Ocean City

NJ

97,265

15

economic driver, thanks to the nearby ski slopes and lakes,

6 Battle Creek

MI

136,146

16

and about a sixth of the workforce is supported by visitors.

7 St. George

UT

138,115

24

As in most communities, healthcare and social services

20 Madera

and third-best in Five-Year Growth, draws much of its success

8 Niles-Benton Harbor

MI

156,813

29

provide lots of jobs, but many Bend-area residents make a

9 Lima

OH

106,331

30

living in wood product manufacturing, as well as recreational

10 Dalton

GA

142,227

31

and transportation equipment.

11 Monroe

MI

152,021

32

12 Wausau

WI

134,063

34

emphasis on the growth prospects in the tech sector, both

13 Pittsfield

MA

131,219

37

software and hardware, as well as the pharmaceuticals and

14 Kahului-Wailuku-Lahaina

HI

154,924

39

medical device industries. They’re working hard to attract

15 Jackson

TN

130,011

54

data centers and more makers of apparel and recreational/

16 Sheboygan

WI

115,507

57

outdoor equipment. And they hope to build upon the area’s

17 Idaho Falls

ID

133,265

65

already strong brewing and distilling business, led by one

18 Wenatchee

WA

110,884

74

of the nation’s largest craft brewing operations, Deschutes

19 Elizabethtown-Fort Knox

KY

148,338

75

Brewery. The aerospace business also has a foothold here,

20 New Bern

NC

126,802

93

along with semiconductors and renewable energy, among

82

AREA DEVELOPMENT

Local economic development leaders are placing a strong

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

LEADING LOCATIONS SPONSORS FLORIDA Greater Fort Lauderdale Alliance

other targets of local leaders’ attention.

The March 2016 unemployment rate in the Bend area was 5.1 percent, according to the Bureau of Labor Statistics.

The Leading Locations report on AreaDevelopment.com includes an interactive table, so you can sort the rankings of all 394 MSAs that were studied this year. You’ll find an overall ranking that is based on 21 economic indicators, along with category rankings that are based on subgroups of indicators from the 21 that went into the overall results (check the methodology explanation for more details). Filters allow you to easily segment MSAs by region, population size, and state, and you can use the search field to locate specific MSAs. Check the expanded version of the chart to see how each city ranks in every one of the 21 indicators used in the study.

Note: Area Development’s research desk compiled the statistics for this report. Locations were ranked according to the methodology explained herein. This article was written by Steve Stackhouse-Kaelble, Staff Editor.

TOP 20 SMALL CITIES –“Year-Over-Year Growth” Rank Within

CITY/MSA

State

YearPopulation Over-Year Growth

Greater Fort Lauderdale offers “Life. Less Taxing” to more than 200 corporate, international, and regional headquarters including AutoNation, Citrix, DHL, Emerson, Microsoft, and Ultimate Software through a cost competitive business climate and no state personal income tax, combined with robust domestic and international air and seaports and exceptional quality of life.

David Coddington, Vice President - Business Development Greater Fort Lauderdale Alliance 110 East Broward Blvd., Suite 1990 Fort Lauderdale, FL 33301 954-627-0123 dcoddington@gflalliance.org www.lesstaxing.com

INDIANA Greater Columbus Economic Development Corporation Columbus, Indiana, is known for its manufacturing prowess, engineering strengths, and world-renowned architecture. Highly advanced, durable goods manufacturing drives the local economy, ranking the county in the top 2 percent of the U.S. for manufacturing employment. Information on corporate relocations and expansions by Cummins, Toyota, PMG, and more is at www.ColumbusIN.org.

Jason Hester, CEcD, Executive Director Great Columbus Economic Development Corporation 440 Fifth Street Columbus, IN 47201 812-378-7300 • Fax: 812-372-6756 jhester@columbusin.org www.ColumbusIN.org

NEVADA Economic Development Authority of Western Nevada (Edawn) EDAWN is a private/public partnership committed to recruiting and expanding quality companies that have a positive economic impact on the quality of life in the Greater Reno-Sparks region. Our vision is to be known as a world-class EDO, with strong local partnerships, regional respect and cooperation, and a national reputation for innovation and creativity.

Stan Thomas, Executive VP, Marketing & Competitive Expansion EDA of Western Nevada (EDAWN) 5190 Neil Road, Ste. 110 Reno, NV 89502 775-829-3731 SThomas@edawn.org www.edawn.org

1 Napa

CA

136,484

1

2 Niles-Benton Harbor

MI

156,813

6

3 Idaho Falls

ID

133,265

12

4 Watertown-Fort Drum

NY

116,229

14

5 Ocean City

NJ

97,265

16

6 Dalton

GA

142,227

19

7 Muncie

IN

117,671

20

8 New Bern

NC

126,802

21

9 Bend-Redmond

OR

157,733

23

10 Lima

OH

106,331

26

11 St. George

UT

138,115

31

12 Vineland-Bridgeton

NJ

156,898

37

Greater San Marcos

13 Battle Creek

MI

136,146

38

14 Pittsfield

MA

131,219

42

15 Kahului-Wailuku-Lahaina

HI

154,924

48

16 Jonesboro

AR

121,026

52

17 Elizabethtown-Fort Knox

KY

148,338

53

18 Lewiston

ID-WA

60,888

57

19 Altoona

PA

127,089

57

20 Hot Springs

AR

96,024

60

Situated in the heart of the Austin-San Antonio corridor, the Greater San Marcos region is one of the nation’s fastest-growing and most dynamic locations for doing business. Home to Texas’ fourth-largest university and multiple career/technical training institutions, Texas’ “BBQ” and “Wedding” capitals, unique natural assets, and connected infrastructure, the area is positioned to foster opportunities for growth and prosperity.

Adriana Cruz, President Greater San Marcos Partnership 1340 Wonder World Drive, Suite 108 San Marcos, TX 78666 512-393-3400 adrianac@greatersanmarcostx.com www.greatersanmarcostx.com

TEXAS Greater Conroe Economic Development Council Located within the Houston/Sugarland/Woodlands MSA, Conroe is the county seat of Montgomery County, Texas, which is one of the 10 fastest-growing counties in the U.S. Conroe serves a labor shed of nearly 225,000 within a 30-minute drive. Close to the Port of Houston and Houston Airport System’s international gateway, we are a growing community with excellence in advanced manufacturing, distribution, and office and professional services.

Fred Welch, Executive Director Greater Conroe Economic Development Council 505 West Davis Street Conroe, TX 77301 936-522-3014 • Fax: 936-756-6162 welch@gcedc.org www.gcedc.org

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ECONOMIC ANALYSIS

West’s Lead Will Be Tested in 2016 The West and Southeast will remain the strongest economies in the coming year, but there is a good chance the Southeast will outperform the West.

By Steven G. Cochrane, Managing Director, Moody’s Analytics

T

he Southeast is now vying with the West for the top spot for employment growth. The West is still clearly the leader, but job growth along the South Atlantic coast and in the East South Central — from the Gulf up to Kentucky — has accelerated in recent months.

Meanwhile, commodity prices continue to drag on the economies of the Oil Patch and Plains States. Still, only four states are in recession as of January — Alaska, North Dakota, Wyoming, and West Virginia. All of them are energy producers.

Manufacturing outside of the energy regions is less of a drag now on local economies than one month ago, and homebuilding and home sales remain one of the most important economic drivers across all of the country.

Labor Markets The West leads in the pace of job growth, but it also leads in terms of the types of jobs being created. Its growth is evenly spread across the range of income streams that outpace those of nearly all other regions of the country. Thus aggregate income growth far outpaces that of the other three regions from the combina-

West’s Job Growth Strong and Balanced Employment growth by wage tier, % change yr. ago, Jan. 2016 3.5 3.0

Low-wage

Mid-wage

High-wage

2.5 2.0 1.5 1.0 0.5 0.0

Northeast

Midwest

Sources: BLS, BEA, Moody’s Analytics

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South

West

tion of the absolute rate of job growth and the even mix of jobs across the spectrum of skills and wage rates.

While job growth in the South is well ahead of that in the Northeast and Midwest, its aggregate wage and salary income growth is no different than that of the other two because the South’s job creation is heavily concentrated in low-wage industries. The South’s mix of jobs is also shaped by the loss of mid- to high-wage jobs in energy and related manufacturing and services.

Manufacturing Rebound A rebound in manufacturing is in sight, however. The regional Federal Reserve surveys of purchasing managers have turned more positive since February. New orders are improving rapidly, and indicators of production, backlogs, and trade have generally improved modestly. The most disappointing component of the surveys has been employment, which will be the last to turn around. The greatest losses have been concentrated, however, in the Oil Patch. Smaller losses have occurred in the Plains States, and even fewer in the Great Lakes States. The Southeast has shown the most resilience as auto production and demand for construction materials has risen.

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

Trade The impact of soft global trade adds to the weakness of the midsection of the country. The fall in demand and price for agricultural goods compounds the fall of energy commodities in the region, and much of its manufacturing is tied to domestic and global demand for agricultural equipment and supplies. Further, the primary destination for much of the region’s goods is Canada, where the economy is weak and the currency has weakened by 11 percent versus the dollar over the past year, and 36 percent from its peak in mid-2011. The Great Lakes States, on the other hand, have not suffered greatly from global markets. With more diverse export destinations and its domestic market tied to demand for consumer goods such as autos and light trucks, as well as for aerospace and construction-related goods, the industrial Midwest has weathered the lull in manufacturing over the past year rather well.

Outlook The West and Southeast will remain the strongest economies in the coming year, but there is a good chance the Southeast will outperform the West. Equity market volatility

and caution among venture capital funds are likely to slow the pace of growth of new enterprises in tech-producing areas of the West. Combined with the high costs and tight labor markets in places such as the San Francisco Bay Area, this means growth will continue but at a slower pace.

Without such constraints and with improving population growth and housing markets, the Southeast is poised to challenge the West as the leading region of the country, at least for job growth. Income growth will likely remain the strongest in the West given its better mix of job creation across industries and wage tiers.

The industrial Midwest should remain stable. Many manufacturing industries will benefit from improved demand and an ultimate reduction of inventories so that production will rise.

The oil- and commodity-producing regions of the nation’s central corridor are likely at their nadir. Energy prices have rebounded from cyclical lows, although they have not yet breached break-even values that would entice a return to new exploration. That likely will take at least another year.

Slower income growth will keep the Northeast from breaking out of its current slow pace of growth. ■

Energy, nuclear, cyber security, space, and beyond... ...just another day at the office.

An office that just happens to be one of America’s leading research and development regions!

Join us at www.easternidaho.org / 208-534-1318 AREA0597.indd 1

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24/05/16 8:31 PM

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ADVANCED MANUFACTURING > PLAYBOOK

By obtaining technology and scientific grants, government performance contracts, and economic development support, innovative companies can quickly flourish.

Reducing Energy Consumption of Manufactured Goods

M

ark Johnson is director of the Advanced Manufacturing Office (AMO) in the Office of Energy Efficiency and Renewable Energy.

The AMO partners with private-sector companies, universities, and research institutions to develop emerging technologies that have the potential to increase the global competitiveness of U.S. manufacturing and create high-quality manufacturing jobs at home. The ultimate goal is to develop robust, President Obama and Vice President Biden tour the Techmer PM, LLC production facility and look at a 3-D printed car created using carbon fiber infused polymer materials — and energy-efficient manufacturing processes and announce a manufacturing innovation hub focused on next-generation composite materials. materials that significantly reduce the energy consumed during manufacturing processes, improve energy efficiency in manufacturing processes, thereby reducing costs and conserving resources. or provide benefits for clean-energy products. AMO also One of Area Development’s staff editors recently touched helps fund early-stage R&D, typically through public-private base with Johnson for an update on AMO initiatives. partnerships, to identify and solve the research challenges C you briefly describe the goals of the Advanced Can that inhibit the development of these technologies. We also Manufacturing Office? advise small businesses about adopting new technologies and improving their manufacturing practices, especially with Johnson: Our mission is to enhance the competitive J regard to more efficient use of heat and power. ness of U.S. manufacturing, and create high-quality H does AMO partner with the nation’s research domestic manufacturing jobs by reducing the How labs to advance its mission? life-cycle energy consumption of manufactured goods by 50 percent over 10 years. We are doing this by teaming up with Johnson: The Department of Energy manages 17 J industry, universities, companies, regional groups, and other labs in its national laboratory system. Part of our stakeholders to identify and support the development of job is to transfer innovative discoveries from our promising new clean-energy technologies. AMO also has a labs into the private sector for further development and leadership role in the national interagency Advanced commercialization. Federal partners include the National Manufacturing Partnership.

Institute of Standards and Technology, Department of AMO staff work with our partners on several levels to Defense, Department of Commerce, National Science identify technology platforms that have the potential to

Q

A

Q

A

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for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

Foundation, and NASA, through the Advanced Manufacturing Partnership 2.0.

For example, we have funded research projects at Oak Ridge National Laboratory’s Carbon Fiber Technology Facility, a state-of-the-art, semi-production-scale carbonfiber conversion plant. Researchers there have developed a production method that can reduce the cost of carbonfiber as much as 50 percent, as well as reduce the amount of energy used in its production by more than 50 percent.

These results will likely accelerate the use of carbon-fiber composites in high-volume industrial applications including automobiles, wind turbines, compressed gas storage, and building infrastructure.

AMO also supports the efforts of the National Network for Manufacturing Innovation (NNMI) through its Manufacturing Innovation institutes to identify and develop emerging technological advances for specific industries. For example, through our partnerships with the Department of Defense, the national labs are involved with several research projects in upstate New York at the American Institute for Manufac-

turing Integrated Photonics, an industry-driven public-private partnership that targets the photonic integrated circuit (PIC) sector.

Q

How are disruptive technologies like the Internet of Things and additive manufacturing/3D printing impacting U.S. manufacturing?

A

J Johnson: The Internet of Things (IoT) is crucial for improving energy efficiency in manufacturing sectors. Advanced sensors and controls embedded in equipment provide real-time data that give operators a better understanding of how equipment operates, including identifying areas where energy efficiency can be improved.

IoT is also driving positive change in information management — the huge amounts of data being generated can be analyzed using new algorithms that improve the efficiency of manufacturing processes.

Additive manufacturing (AM) and 3-D printing are

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Brien Thorstenberg, CEcD | Senior Vice President of Economic Development brienthorstenberg@tulsachamber.com | 800.624.6822 ©2016 Tulsa Regional Chamber

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ADVANCED MANUFACTURING > PLAYBOOK revolutionizing the manufacturing space. An increasing number of materials can be printed, including metal.

Sophisticated 3D printers can print parts and products that cannot be manufactured in any other way. 3D printing can also be used to improve the supply chain and operations.

Tooling for manufacturing, for example, can be expensive

3D printing can also be used to improve the supply chain and operations. and time-consuming — it can take up to 12 weeks to make a tool. However, a 3D printer can turn out that tool in a single day. Printing parts on site is another way to shorten the supply chain and deliver the end product faster. Wind turbine blades, for example, are normally too big and expensive to ship. With 3D printing, they can potentially be made on site, saving time and money and speeding up construction.

Perhaps the most impressive 3D printing accomplishment is a new additive manufacturing tool created through a partnership between Oak Ridge National Laboratory and Cincinnati Incorporated. Called the Big Area Additive Manufacturing machine (BAAM), this system is 500 to 1,000 times faster, and capable of printing polymer components up to 10 times larger, than today’s industrial additive machines.

This equipment was used to 3D print a fully functional replica of a Shelby Cobra automobile in six weeks. The machine printed the car from the bottom up using thermoplastic resin and carbon fiber, which are lighter weight than metal or aluminum. Because the BAAM technology is also scalable, we will be able to make even larger components in the future.

Q

H HPC4Mfg (High Performance Computing for Manufacturing), one of your newer programs, involves the use of Department of Energy supercomputers.

How does this program work?

A

J Johnson: Five of the top 12 supercomputers in the world are owned by the Department of Energy.

The HPC4Mfg initiative, which we started in March 2015, is part of the department’s Clean Energy Manufacturing Initiative. Research partners can use these high-performance computing systems to work on modeling, simulating, and analyzing cutting-edge industrial products and processes, giving them a resource that no international competitor

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can match. The program is directed by Lawrence Livermore National Laboratory, with strong support from Lawrence Berkeley National Laboratory and Oak Ridge National Laboratory.

Funding is provided to companies that are inventing potentially disruptive clean-energy technologies, with the hope of dramatically reducing production costs and shortening time to market for these innovations. HPC4Mfg is currently supporting 15 projects that range from improved turbine blades for aircraft engines and reduced heat loss in electronics to improved fiberglass production. Each project has received up to $300,000 for a total of nearly $4.5 million.

Q

W What is on the horizon for AMO over the next few years?

A

Johnson: We will continue to focus our efforts on J solving technical problems relative to the energy space, and transferring these R&D successes as quickly as possible into the marketplace. Collaboration with engaged and active partners is critical for our success. With HPC4Mfg, for example, partners include the Edison Welding Institute, General Electric, GlobalFoundries, the National Network for Manufacturing Innovation’s Lightweight Innovations for Tomorrow consortium, the Ohio Supercomputer Center, Procter & Gamble, PPG Industries, United Technologies Research Center, and ZoomEssence. We will also look forward to partnering with more NNMI institutes as they come online in the near future.

Q

W What accomplishment so far best represents the partnership between AMO and U.S. manufacturing?

A

Johnson: The Shelby Cobra — The first version of a J 3D printed, all-electric vehicle using Big Area Additive Manufacturing (BAAM) technology looked like a typical prototype, with a rough surface. To achieve a high-quality surface finish, the engineering team worked with a local auto body shop, Tru-Design, LLC, to develop a new process for bonding and painting, based on the car’s chemistry. This process will now likely be a model for future large-scale 3D-printed vehicles and products. By sharing his expertise with the Oak Ridge team, the owner of this small business is now hiring scientists and growing the company in a way he had not previously envisioned. This just shows that, with shared vision, we can do great things when we work together. ≈ ≈ ≈

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

ADVANCED MANUFACTURING > PLAYBOOK

By Dean Zerbe, National Managing Director, alliantgroup

Recent legislation making the R&D tax credit permanent is a big boon to manufacturers of all sizes, helping them to innovate and expand.

The R&D Tax Credit — A Game-Changer for Manufacturers

I

t is no secret that policymakers in Washington are highly supportive of domestic manufacturing. Unfortunately, what is a secret is the big tax break intended to help manufacturers — the research and development (R&D) tax credit. Far too many manufacturers — probably 75–80 percent — fail to understand that they may qualify for the R&D tax credit — the largest tax credit provided to business by the federal government (roughly $10 billion a year).

Why the huge number of manufacturers who don’t know that they could benefit from this tax credit? Self-censoring is the main reason. Manufacturers have either outdated or incorrect understandings of what qualifies for the R&D tax credit — and also are understandably unaware of some recent changes in the law that have greatly expanded who can benefit from the credit.

The key for those in manufacturing to understand is that the R&D tax credit is not just about basic research, but also about applied research. The R&D tax credit encourages and rewards manufacturers who are bringing a new or improved product to market (as well as manufacturers who are improving the manufacturing process itself — making a product quicker, cheaper, greener, etc.). In short, unless your company has been making the exact same product the exact same way for the past 10 years — your company may be a good candidate to consider for the R&D tax credit.

Some Examples A classic example of a manufacturer that can benefit from the R&D tax credit is a small manufacturer that does secondary automotive manufacturing for a big carmaker.

Here, it is a production process that qualifies for the R&D tax credit. The small manufacturer is provided the designs of the parts that it is contracted to develop, and its prototyp-

ing and development is the manufacturing process and the assembly line itself. In addition to the qualified prototyping of the parts from the assembly line, the small manufacturer is also ensuring functionality, reliability, and quality of the parts. The heart of development is the assembly line and the manufacturing processes to develop the parts that the big carmaker utilizes for the final automobile. The small manufacturer is removing inefficiencies, improving the cycle time, and improving process performance of the assembly line, which also includes ensuring the reliability and quality of each part created from the assembly line they developed.

In this case, this small manufacturer qualified for an R&D tax credit of just over $1 million (qualifying the manufacturer for all four open tax years as well as for the state R&D tax credit — roughly 40 states have a state R&D tax credit).

Needless to say, this tax savings was a huge game-changer for this small manufacturer, allowing the company to expand its operations. Also note, the fact that the small manufacturer was being paid by the big carmaker to perform this work did not, in this case, disqualify the small manufacturer from obtaining the R&D tax credit.

In other recent examples, a steel ring manufacturer re-

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ADVANCED MANUFACTURING > PLAYBOOK ceived $406,000 in federal credits for design improvements in its product; a molded plastics company received over $200,000 in federal and state credits; and a manufacturer specializing in high-injection-molded components received $330,000 in federal and state credits. The manufacturing companies that qualify for the R&D tax credit run the gamut.

What Work Can Qualify? alliantgroup has worked with thousands of manufacturers across the country to secure the R&D tax credit — including those active in iron casting, sheet metal plating, hot stamping, injection molding, plastics, etc. Examples of manufacturing innovations eligible for the R&D tax incentive include: • Innovating product development using computer-aided design tools • Developing second-generation or improved products • Tooling and equipment fixture design and development • Designing innovative manufacturing equipment • Prototyping and three-dimensional solid modeling Similarly, on the production process side, eligible R&D tax incentives include: • Designing and developing cost-effective and innovative operational processes • Integrating new materials to improve product performance and manufacturing processes • Designing and evaluating process alternatives • Designing, constructing, and testing product prototypes • Achieving compliance with changing emissions laws and regulations • Streamlining manufacturing processes through automation • Improving product quality and yields • Reducing manufacturing times and optimizing manufacturing processes

Not Just for the Big Boys While the big manufacturers in the Fortune 500 take full advantage of the R&D tax credit, there certainly is no bar to small and medium-sized manufacturers taking the R&D tax credit. In fact, recent changes in law and regulations have actually made it much easier for small and medium-sized businesses to utilize the R&D tax credit, and especially for manufacturers to increase their tax savings.

The biggest news from Washington, D.C., was that, first, the R&D tax credit was finally made permanent law. For years, the credit was extended one or two years at a time. In December

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2015, Congress passed and the President signed a major tax law that had as a key piece making the R&D tax credit permanent. Businesses can now have much greater confidence in planning on the tax savings of the R&D tax credit.

The second piece of good news is that Congress — thanks to Congressman Brady (R-TX) and Senators Grassley (R-IA) and Roberts (R-KS) — also made the R&D tax credit good against the alternative minimum tax (AMT). This may sound yawning even to tax geeks — it is not. The numberone impediment to small and medium-sized manufacturers from utilizing the R&D tax credit was that they couldn’t use their credit to reduce their tax liability below their AMT. Now they can…this is big.…very big. If you were told in the past that you couldn’t benefit from the R&D tax credit, ask again.

Third, Congress — thanks to Senator Coons (D-DE) as well Senator Schumer (D-NY) — also allowed the R&D tax credit to be eligible for startups for the first-time with the tax legislation passed this December. So now a new, innovative manufacturer who is in the early stages (not making a profit but still facing payroll taxes) can potentially be eligible for a refundable R&D tax credit of up to $250,000 per year.

Finally, the Treasury (in response to some decisions in the courts) has provided a more expansive view of what supply costs can be included for the R&D tax credit. These changes in the regulations are particularly welcome for manufacturers, and especially manufacturers who are engaged in making a single unique item for a customer (example, a boat).

Yes, it’s hard to believe — good news coming from Washington for manufacturers. However, as they say, “showing up” is still required by manufacturers to qualify and benefit from the R&D tax credit. While the Congress has made it easier for manufacturers to qualify and utilize the R&D tax credit, the IRS isn’t just handing money out. However, after years of experience in this field, we’ve found that it’s fairly straightforward to determine whether a specific manufacturer is a good candidate for the R&D tax credit and to have the proper paperwork in place to make the IRS happy (well, happier).

Congress, on a bipartisan basis, wants to encourage and support good-paying manufacturing jobs in this country and to also foster innovation. The R&D tax credit is the key tax policy that Congress has put in place to accomplish that goal. Sadly, most small and medium-sized manufacturers do not take advantage of the huge tax savings provided by the R&D tax credit. As manufacturers look ahead — expanding, growing, and innovating — the R&D tax credit is an important way to ensure that they have the dollars they need to invest in a better tomorrow. ≈ ≈ ≈

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

Photos courtesy of Office of Governor Greg Abbott

TEXAS T DAY Through industrial diversification, Texas has been able to overcome a decline in economic output resulting from lower oil prices and continues to court companies with its pro-business know-how.

Like the boys in the Alamo, Texas knows it’s got an economic mic developer states are ment bull’s-eye on its back. Other lly businessstriving to put together an equally -famous one friendly environment as the now-famous in Texas, and the Lone Star State is having to struggle with what have becomee stubbornly low oil prices.

But so far, there’s not much signn of slippage

by Texas from the very pinnacle of appeal for mmunity, and CEOs, the location selection community, others who decide where to put and expand facilities. The state’s official mottoo is “Keeping Texas the Beacon of Opportunity,”” and from a nouncements spate of new facility location announcements eputation for to the state’s continued overall reputation business-friendliness, Texas seemss to be staying on top.

By Dale Buss AREA DEVELOPMENT | Q2/2016

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STATE OF TEXAS OFFICE OF THE GOVERNOR Greetings: It’s no secret that everything is bigger in Texas, and the same is true of our economy. If Texas were a nation, it would be the 12th largest economy econo in the world. Texas is a national leader in job creatio creation, with more than 1.85 million privatesector jobs added a over the last decade, and has been the nation’s top exporter for 14 years running.

The key to t our success is twofold: the ingenuity and o the hardworking men and women who innovation of call our state home and the economic framework that allows free eenterprise to flourish. In every aspect of life, Texans value freedom more than anything else. It’s in our DNA, an and it is reflected in our business climate through our low taxes, reasonable regulations, and right-to-wor right-to-work laws. As Governor, I will work to keep it that way and ensure we reach greater heights than ever before.

As one of many efforts to accomplish that goal, my de economic development team is making it a priority to encourage entrepreneurship en and effectively leverage

our business recruitment and retention tools to expand economic opportunity at every level. Texas is already a leader in this arena, but we know there is more that we must do. We will make our economic development efforts bigger, broader, and bolder and be more aggressive in attracting companies and foreign direct investment.

But the most important thing government can do is to create an environment that any business can thrive in — and then get out of the way. That’s the type of environment Texas offers. I will ensure that employers remain free from the burdens of over-taxation and over-regulation and entrepreneurs can start their businesses without needless government hurdles standing in the way.

On behalf of the State of Texas, I invite you to come and take advantage of all the unique opportunities Texas has to offer. I look forward to working with you to make sure that even the future is bigger and brighter in Texas.

Sincerely,

Greg Abbott Governor

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for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com 5/3/13 11:08 AM

TEXAS T DAY

And its business and political leaders understand that they need to keep a good thing going. “The key to our success is twofold: the ingenuity and innovation of the hardworking men and women who call our state home, and the economic framework that allows free enterprise to flourish,” Gov. Greg Abbott told Area Development.

As Tracye McDaniel, president and CEO of the Texas Economic Development Corp., put it, “What Texas has done well is getting business and industry working hand-in-hand with policymakers to create an open market here where business can prosper. We don’t apologize for prosperity or wealth here, and that’s very important, as is limiting the burden of taxes and [sustaining] a regulatory environment that can support growth.”

The Numbers Speak for Themselves The evidence that Texas hasn’t lost a step on the other 49 states is vast. Much of it is numerical and collective, and it overwhelmingly supports the case.

For example, for the 12th year in a row, Texas was ranked No. 1 in the survey of American CEOs by Chief Executive magazine for its 2016 “Best States/Worst States for Business” ranking. And Texas is only one of two states that have won a Shovel Award from Area Development magazine every year for the 11 years the award has been in existence, recognizing its job-creation and investment-attraction efforts.

Meanwhile, Texas has remained the leader among the states in job creation since 2007, adding more than 1.8 million jobs, a string that continued through 2015 despite the pressures on the state’s still-crucial oil econ-

gn and doomy. And combining foreign mestic business investment in the states, BM’s Global Texas ranks No. 1 as well, according to IBM’s Locations Report. porting state Texas also has remained America’s top exporting rth of goods for 14 years, shipping out $251 billion worth or more than last year — exports that alone accounted for ted in 2015.

16 percent of all U.S. goods that were exported assed archriAnd for the third year in a row, Texas surpassed ng $6.3 bilval California for high-tech exports, directing olden State. lion more in such goods abroad than the Golden

Recent Announcements In addition to all of this, Texas presentss ample anecdotal evidence that it remains on top. Consider, for example, just three announcements that thee state made within a week in March: First, McKesson Corp. announced that it would exea and open pand its operations in the Dallas metro area ion was proa new regional office in Irving. The expansion jected to create at least 975 new jobs and $157 million in capital investment in the state. It was prompted in part by a Texas Enterprise Fund grant offer of $9.75 TEXAS HAS AS million, the largest such offer made by Governor REMAINED ED Abbott to date from the THE LEADER DER state’s “closing” kitty.

“After a thoughtful and AMONG THE thorough selection process, STATES IN N JOB we’re excited to consolidate our Dallas-area offices CREATION N SINCE into a new, state-of-the2007, ADDING DDING art facility” in Irving, said David Evangelista, senior MORE THAN HAN vice president and general 1.8 MILLION ION manager of McKesson Financial Center. “Investing JOBS.

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in this new, modern workspace will enINTENSIFIED THE INTENSI able our associates to more effectively serve BUSINESS-FRIENDLY BUSINES McKesson customers CULTURE THAT WAS in the evolving healthcare industry.”

BUILT OVER OV HIS Just five days latPREDECESSOR’S PREDEC er, Texas scored yet TERMS. FOUR TE again by announcing that Pegasus Foods would be in investing more in Texas, constructing a new, 80,000-squa 80,000-square-foot manufacturing plant in Rockwall in order to exp expand its food-production capacity. The expansion is pr projected to create 325 jobs and $10 million in capital inv investment.

Pegasus joins jo those companies relocating or expanding to Texas from California just since 2014, including Apple, G Google, LiveOps, Facebook, Dropbox, and Oracle. Pega Pegasus Foods Principal Jim Zaferis noted that

Texas’ “political leaders understand the importance of creating a business-friendly environment.”

Then, just two days later, on March 16, Texas was able to announce that the Swiss dermatology company Galderma had decided to expand its current North American headquarters in Fort Worth to support research, development, and training. Galderma’s expansion will include the addition of a 100,000-square-foot facility, a $22 million capital investment, and the creation of 342 new jobs. The Texas Enterprise Fund kicked in $2.1 million to help the company, which focuses on scientific and medical products for hair, skin, and nails.

Like many, many companies, Galderma decided to invest in today’s Texas because of its experiences with yesterday’s Texas. It already has 300 employees at its 170,000-square-foot headquarters. Or, as one of the CEOs in Texas surveyed by Chief Executive magazine put it, “Texas has their act together; their government workers go out of their way to assist businesses [to] comply and follow the laws. The taxation and regulatory climate is

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business-friendly and allows a small business owner to make ends meet without having to indenture your future and work 70 to 80 hours a week to make a living.”

TEXAS T DAY

Texas’ Toolbox There are multiple reasons that Texas has been able to retain its nation-leading position in business attractiveness and economic development. One major factor is that Gov. Abbott has continued and perhaps even intensified the business-friendly culture that was built over four terms by his predecessor, Gov. Perry.

“It seems,” says Eric Stavriotis, a Chicago-based senior vice president of CBRE, “that Gov. Abbott and his team are trying to keep a lot of the same things going.”

For example, Abbott hasn’t shied away from using the Texas Enterprise Fund even after state auditors in 2014 found that the deal-closing fund had become infected by

ent, leading cronyism and mismanagement, some lawmakers to call for its abolition. ffset upfront “Incentives that help to offset as Enterprise project costs” such as the Texas nior manageFund “are high impact for senior rry Gigerich, ment company decision-makers,” notes Larry is-based conmanaging director of Ginovus, an Indianapolis-based sulting firm. “Texas has been very successful in this regard.”

So by May of last year, just four months after his inhe first time auguration, Abbott tapped the fund for the to award $3.8 million to Kubota Tractor and Credit Corp. to help bring at least 344 new jobs to Texas and $51 million in capital investment.

Not coincidentally, Kubota was moving its headquarters to Grapevine from California. And Kubota

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TEXAS T DAY

President Masato M Yoshikawa said that Texas’s incen incentives “helped make the decision easier easier” when choosing where in the central ppart of the United States to relocate.

In fact, K Kubota’s decision points to a second factor that is benefiting Texas these days — and is benefiting the Lone Sta Star State more than others. More and more

companies that once looked at a location on either American coast as an advantage are now considering the logistical and cost advantages of locating somewhere in the nation’s mid-section instead.

So are many companies that may be new to locating in the U.S. market, especially manufacturers. Some major metal benders are giving the central U.S. a closer look that might previously have located in the latest hot region for new manufacturing, the Southeast.

“The central part of the United States now is staged to win a lot of new manufacturing projects,” Stavriotis says. “We see a lot of new greenfield manufacturing deals, and not as many looking in the Southeast exclusively. They’re looking within the central time zone, and at logistics, and up and down the I-35 corridor all the way up to Minnesota. But Texas is still a great place to start.”

Third, Texas continues to benefit from its long-term diversification efforts both in terms of business verticals and geographically across the state. This, especially, has helped blunt the drop-off in tax revenues and in overall economic input that has resulted from the decline in oil prices over the last couple of years to down around $40 a barrel from over $100 a barrel. In the 1980s, a swoon in oil prices pretty much wrecked the Texas economy for a while.

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TEXAS CONTINUES

diversifying,” McDaniel says. “So we’re not TO BENEFIT FROM seeing the same impact from lower oil pries as ITS LONG-TERM in the ’80s. We’ve been DIVERSIFICATION able to attract the life sciences, biotechnolEFFORTS IN TERMS ogy companies, aeroOF BUSINESS AND space, information and GEOGRAPHICALLY. computer technologies, which puts us in a skill-based economy. That’s a very important factor to consider.”

Look no further than Midland-Odessa for a dramatic illustration of this new reality. The region is smack dab in the middle of the West Texas “oil patch” and for decades was known mainly for that, with an economy to match. But, McDaniel notes, “Now you’re seeing technology expansion and employment that really has helped them go beyond oil and gas, which is the factor

ate’s] fastestthat has helped them become one of [the state’s] growing economies.” on of Texas And while the economic diversification ey dynamic has been occurring across the state, a key olitan areas is the fact that some of its major metropolitan have come to attract certain types of new and expanding businesses more than others. Austin, for instance, is combining its traditional advantages of being the rsity of Texstate’s capital, and the home of the University as, with other factors, such as its appeal as a haven for anging from an increasingly wide variety of startups, ranging expected digital-tech companies to betterfor-you food enterprises. All of this is amplified by the city’s annual spring technology and arts festival, “South by Southwest,” which

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has burgeo burgeoned from a celebration of arts and mu music into a vibrant platform for technolo technology and entrepreneurial endeavors of al all sorts.

Oracle, ffor example, announced in late 2015 th that it plans to expand its employment in Austin by more m than 50 percent as it builds a cuttingedge campu campus for doing business in the cloud and supporting grow growth in its cloud-sales organization, Oracle Direct. Recr Recruitment efforts, the company notes, will focus on recen recent university graduates and technical professionals at ea early stages in their careers.

“Austin was w a natural choice for Oracle to invest and grow,” says Scott Armour, senior vice president of Oracle Direct. “We already have a high-performing employee base iin the region, and the surrounding technology commun community is teeming with creative and innovative thinkers. Ou Our state-of-the-art campus will be designed to inspire, su support, and attract top talent — with a special focus on the needs of millennials.”

At the same time, Austin has become an enclave for entrepreneurs who are plying the healthy food and beverage industry, as traditional big food and beverage companies cede more and more of the market to startups that are more in keeping with the changing tastes of American consumers — and able to cater to and even create them more quickly.

For one thing, the city is the headquarters of Whole Foods Market, which controls or influences much of the better-for-you retail trade across the United States. An early successful startup, Sweet Leaf Tea, has grown in Austin and supported the rise of other startups. Austin is even known as a city of innovative food trucks.

“Austin is a unique city full of entrepreneurs,” notes Dan Costello, CEO of Beanitos, a company founded in 2010 by two brothers who wanted to offer healthy snack chips made from bean flour. “And the food and beverage industry is one that has really started to shine here in the last several years.”

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Meeting the Challenges of Growth Another important economic macrocosm is the North Dallas area, where a growing number of big companies are deciding to locate or relocate operations focused not only on technology but also sales, marketing, and general business operations. The most famous of these is Toyota, which is in the process of moving about 4,000 jobs from its former headquarters in Torrance, Calif., to Plano, Texas, and its new U.S. headquarters, over the next couple of years.

“It’s been working out well,” says Dennis Cuneo, president of DC Strategic Advisors and a key consultant to Toyota on the move. “There actually have been a higher number

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ticipated, beof transfers from California than [Toyota] anticipated, cause they find out what kind of house they cann buy for the money compared with California.”

In fact, some have expressed concern thatt the DallasFt. Worth area has become such a magnet for jobs that idates to fill the locale might run out of worthy candidates all the new jobs. Companies “need to look at that factor now because so many other companies are locating there that you need to test the waters to make sure it’s still a fit,” Stavriotis cautions. But McDaniell insists that the area remains “poised to support growth in industry” with its qualification of producing one of the nation’s highest levels of “graduates in professional services and with professional degrees.” ere has to be And Cuneo was optimistic too: “Yes, there some catching up by the infrastructure,” hee says. “But growth is better than non-growth. You’d much rather lternative. I have this challenge. It’s better than the alternative. have no hesitation for companies to continuee to seek out Texas.” ✭✭

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TEXAS TODAY SPONSORS Texas Economic Development Corporation The Texas Economic Development Corporation/ TexasOne™ directly supports the Governor’s Office of Economic Development and Tourism (EDT) in their global business recruitment efforts by marketing the state of Texas as the world’s premier business destination.

Michael Chrobak, Executive Vice President – Lead Generation Texas Economic Development Corporation 221 East 11th Street, Suite 400 Austin, TX 78701 512-981-6736 michael@texasone.us www.texaswideopenforbusiness.com

City of Arlington Office of Economic Development Arlington, located at the epicenter of the thriving North Texas region, is quickly becoming a hub for engineering, advanced manufacturing, technology, and medical science industries.

Beyond our world-class entertainment is the backbone of our city: economic vitality, a competitive business environment, and a diverse, skilled workforce.

Bruce C. Payne, Economic Development Manager City of Arlington Office of Economic Development 101 W. Abram Street Arlington, TX 76010 817-459-6155 ecodev@arlingtontx.gov www.arlingtontx.gov/ecodev

Greater Conroe Economic Development Council Located within the Houston/Sugarland/ Woodlands MSA, Conroe is the county seat of Montgomery County, Texas, which is one of the 10 fastest-growing counties in the U.S. Conroe serves a labor shed of nearly 225,000 within a 30-minute drive. Close to the Port of Houston and Houston Airport System’s international gateway, we are a growing community with excellence in advanced manufacturing, distribution, and office and professional services.

Fred Welch, Executive Director Greater Conroe Economic Development Council 505 West Davis Street Conroe, TX 77301 936-522-3014 Fax: 936-756-6162 welch@gcedc.org www.gcedc.org

Converse Economic Development Corporation Converse (population 18,198), is located in Bexar County, Texas, 15 miles NE of downtown San Antonio. This safe, affordable community has a small town feel with all of the big city conveniences. Approximately 1,000 acres of land are available for development, and we can process building permits within 30 days. Converse has a plentiful water supply to accommodate future development.

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Kate Silvas, Executive Director of Economic Development City of Converse Economic Development Corporation 110 W Legion Converse, TX 78109 210-659-9163 or 888-984-5020 (toll-free) Fax: 210-659-0964 ksilvas@converseEdc.com www.converseEdc.com

Greater San Marcos Partnership Situated in the heart of the Austin-San Antonio corridor, the Greater San Marcos region is one of the nation’s fastest-growing and most dynamic locations for doing business. Home to Texas’ fourth-largest university and multiple career/technical training institutions, Texas’ “BBQ” and “Wedding” capitals, unique natural assets, and connected infrastructure, the area is positioned to foster opportunities for growth and prosperity.

Adriana Cruz, President Greater San Marcos Partnership 1340 Wonder World Drive, Suite 108 San Marcos, TX 78666 512-393-3400 adrianac@greatersanmarcostx.com www.greatersanmarcostx.com

Greenspoint District Minutes from Bush IAH and only 22 miles from Houston’s port, Greenspoint is strategically positioned to provide local, regional, and global access. The area has exceptional broadband infrastructure and land available for new development and redevelopment. Technology, energy, hospitality, and manufacturing are a few of the industries represented in Greenspoint.

Greg Simpson, President Greenspoint District 16945 Northchase Drive, Suite 1900 Houston,TX 77060 281-874-2131 gsimpson@greenspoint.org www.greenspoint.org

Lubbock Economic Development Alliance Lubbock’s highly skilled and educated workforce, proximity and connection to major national and international markets, and affordable utility and living costs make it the ideal place to grow your business. The LEDA team has expert knowledge and valuable relationships to ensure your business’ success.

Carolyn Rowley, Director of Recruitment & Innovation Lubbock Economic Development Alliance 1500 Broadway, 6th Floor Lubbock, TX 79401 800-687-5330 carolyn.rowley@lubbockeda.org www.lubbockeda.org

Marble Falls Economic Development Corporation Marble Falls is the gateway to the Highland Lakes area of the Texas Hill Country, and is the regional retail, wholesale, trade, and service center for a primary trade area of 70,000 people and a secondary trade area population of 150,000. Marble Falls is a community where businesses and families thrive.

Christian Fletcher, Executive Director Marble Falls Economic Development Corporation 801 Fourth Street Marble Falls, Texas 78654 830-798-7079 Fax: 830-798-8558 cfletcher@marblefallseconomy.com www.marblefallseconomy.com

Port Arthur Economic Development Corporation The Port Arthur Economic Development Corporation (PAEDC) is a Type A sales tax corporation created to enhance Port Arthur’s business climate and overall economic development and tax base. PAEDC is responsible for encouraging and developing business growth and attracting new businesses to Port Arthur such as manufacturing, distribution, warehouses, commercial, and industrial. PAEDC’s mission is to implement a proactive, aggressive industrial recruitment process focused upon specific industrial clusters that can achieve world-class competitive stature in Port Arthur.

Floyd Batiste, CEO Port Arthur Economic Development Corporation 501 Procter Street, Port Arthur, TX 77640, 409-963-0579, Fax: 409-962-4445 FBATISTE@PAEDC.ORG www.PAEDC.ORG

San Antonio Economic Development Foundation Recognized by Forbes as America’s new “Capital of Influence” for its diverse and skilled workforce, central location, rich culture, and accessibility, San Antonio also offers low business costs and a pro-business economy that attracts investment from more than 30 countries around the world.

The 15 colleges and universities in the area educate 160,000 students, providing a steady supply of skilled talent to the MSA’s workforce of more than one million.

Tom Long, Executive Vice President of Business Recruitment San Antonio Economic Development Foundation 602 E. Commerce St. San Antonio, TX 78205 210-226-1394 tlong@sanantonioedf.com www.sanantonioedf.com

Tomball Economic Development Corporation Conveniently located just 28 miles northwest of Houston’s central business district, Tomball offers low property taxes, a thriving economy, exceptional educational opportunities, and attractive relocation and expansion incentives.

Kelly Violette, Executive Director Tomball Economic Development Corporation 29201 Quinn Rd., Suite B P.O. Box 820 Tomball, TX 77375 281-401-4086 Fax: 281-351-7223 kviolette@tomballtxedc.org www.tomballtxedc.org

for free site information, call 800-735-2732, ext. 225, or visit us online at www.areadevelopment.com

international industry report

Site Selection in the Auto Industry: A Move to Mexico?

A Mexican location holds many advantages for automotive OEMs and their suppliers, but several challenges need to be addressed.

By Alexandra Segers, General Manager Southeast, SSOE Group

W

ithin the last five years, there has been a significant geographic shift in the locations automotive OEMs and suppliers are selecting for new plants and plant expansions. Although the Southeast U.S. has traditionally had a stronghold, Mexico has emerged as a powerful rival for automotive investment. While Mexico does hold many advantages, including a lower cost of labor and favorable free-trade agreements, there remains a strong case to be made for new development in the Southeast U.S. In the future, this region will become particularly attractive if negotiations related to the Transatlantic Trade and Investment Partnership (TTIP), a proposed free trade agreement between the United States and the European Union, become fruitful.

A Buzz of Activity in Mexico The automotive industry has seen a worldwide trend in OEMs moving production capacity from their home countries to Mexico. Japanese (Toyota, Nissan, Honda, and Mazda) and German brands (Daimler, Audi, and BMW) are among those that have invested in Mexican plant locations. The “Detroit Three” (General Motors, Ford, and Fiat/Chrysler) are also increasing production capacity in Mexico — more quickly than they are expanding in the U.S. As a result, the geographic center of all automotive production is moving 14 miles per year in a southwest direction.

OEM investment in Mexico is causing a ripple effect. To minimize logistics costs, OEMs want their Tier 1 and Tier 2 parts suppliers located in

close proximity to their new plants.

In the U.S., suppliers located in Southern States such as Texas, Mississippi, and Alabama have a logistics advantage due to their relative proximity to Mexico. Suppliers who aren’t already well positioned may be forced to consider opening a new facility in Mexico. Mexico has thus also become a big player in the auto parts production market. Even the average U.S.-assembled car now has approximately $4,000 in Mexican parts, a figure that is growing by the day.

In addition to the geographic shift, the site selection process itself has adjusted to today’s changing market.

OEMs are frequently accelerating their site selection process to adjust to increasing demand. As a result, suppliers are often also pressured to proceed on

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$2.5 billion investment in two new facilities in Chihuahua and Guanajuato

$1 billion new plant in San Luis Potosí, 1,500 new jobs

$1 billion expansion in Puebla, 2,000 new jobs

$1 billion new plant in Aguascalientes

$1.3 billion new plant in San José Chiapas, 3,800 new jobs

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a compressed schedule when building a new facility. Indeed, few plants in the automotive industry are now built on anything other than a “fast-track” schedule.

Mexico Encroaches on China’s Territory Mexico’s status as a favored low-cost manufacturing base initially took flight after the signing of the North American Free Trade Agreement (NAFTA) in 1994. In 2001, it took a hit after China entered the World Trade Organization and gained a significant share of factory work. It appears that the pendulum is now starting to swing back.

• Manufacturing wages are low.

Adjusted for productivity, wages are 25–30 percent lower in Mexico than in China. Mexico’s gain in relation to China does have an advantage for the U.S., because Mexican factories use four times as many American-made components as Chinese factories do.

ico, it is difficult to locate a site near a sufficient source of water (which is mainly supplied through wells), and a reliable source of power. In addition, electricity rates are high compared to those in the U.S. Although labor costs in Mexico may be inexpensive, U.S. workers do have an edge when it comes to productivity.

Companies locating plants in the U.S. benefit from the fact that U.S. workers are three times as productive as workers in Mexico, as measured by GDP per hour worked.

Additionally, the Transatlantic Trade and Investment Partnership (TTIP), a free-trade agreement under consideration by the U.S. and the EU, would lessen Mexico’s advantage should it be finalized. The TTIP’s aim is to reduce trade barriers, tariffs, and other restrictions on economic exchanges between the two blocs. If finalized, it would neutralize the trade advantages of locating an automotive plant in Mexico, and is therefore likely to reduce Mexico’s share of produced parts in U.S.- manufactured vehicles.

2014 GDP PER HOURS WORKED*

USA = 63.03 USD GERMANY = 58.88 USD MEXICO = 18.48 USD

• Energy costs are also low.

The Southeast ReNatural gas prices in mains in the Running Mexico are tied to those The Southeast U.S. has GDP per hour worked is a measure of labor productivity. of the U.S., which are exmany advantages as a manuIt measures how efficiently labor is combined with other factors ceptionally low because facturing base and should of a glut of supply on the be considered by companies of production and used to produce a given level of output. market. China pays 50–170 making “fast track” location percent more than Mexico decisions. Southern States, for industrial natural gas. particularly those with seaMexico also has an edge over China in electricity costs, ports on the Gulf of Mexico (Texas, Louisiana, Mississippi, although electricity rates in the U.S. are the lowest of the and Alabama), will continue to be competitive options for three countries.

OEMs as well as suppliers of automotive plants in Mexico.

*

• More free-trade agreements than any other country.

Mexico has free-trade agreements with 45 countries.

These pacts give exporters from Mexico duty-free access to markets that contain 60 percent of the world’s economic output. The agreements result in significant savings — for example, exporting an Audi SUV (Q5) from Mexico to Europe costs approximately $4,500 less than exporting it from the U.S. to Europe.

• A growing cluster of automotive companies.

Mexico has become a major auto manufacturer; 89 of the world’s top 100 auto parts makers have production in the country. The plants are concentrated in five Mexican states, reducing transportation costs.

Challenges Faced by Mexico Although Mexico is an attractive location, there are drawbacks to locating a facility there. Some companies, particularly those in Europe and Asia that may be less familiar with Mexico, are concerned about its high crime rates. They may choose to avoid exposing their employees to the perceived risk of living there.

Other challenges relate to utilities. In some areas of Mex-

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Companies are usually looking for: • Simple ownership • Graded sites • Utilities at site or nearby (maximum 12-month construction/upgrade time) • Flexible covenants • Fast-track permitting • Site in county limits • Incentives approved by legislature • Flexible local team capable of adjusting to cultural differences posed by international clients • Easy and nearby interstate access • Rail-connected or nearby intermodal hub • No environmental issues (e.g., Phase 1, archaeological, endangered species; completed geotechnical and wetland mitigation reports) • No expanding clays, good soil bearing pressure, no sinkholes • Attainment area The competitive threat by Mexico should serve as motivation for the U.S. to ramp up efforts to win new investment by automotive companies. Even in the absence of TTIP, the U.S. has strong advantages to offer. ■

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ARIZONA Arizona Commerce Authority www.azcommerce.com kevins@AZcommerce.com City of Mesa Office of Economic Development kim.lofgreen@mesaaz.gov www.mesaaz.gov/silvershovel

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Southern Idaho Economic Development Organization www.southernidaho.org jeffh@southernidaho.org

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UTAH TENNESSEE 75

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WISCONSIN

Knoxville-Oakridge Innovation Valley www.knoxvilleoakridge.com dlawyer@knoxvillechamber.com

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Wisconsin Economic Development Corporation www.Select.InWisconsin.com Wade@InWisconsin.com

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TEXAS City of Arlington www.ArlingtonTX.gov/ecodev ecodev@arlingtontx.gov

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Converse Economic Development www.ConverseEDC.com ksilvas@converseEdc.com

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Brampton Economic Development Office www.peoplepoweredeconomy.ca edo@brampton.ca

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MICHIGAN Michigan Economic Development Corporation www.michiganbusiness.org/AD whiteheadn@michigan.org

Switch, A Supernap Company www.supernap.com adam@switch.com

Tulsa Regional Chamber www.tulsachamber.com brienthorstenberg@tulsachamber.com

KENTUCKY Kentucky Cabinet for Economic Development www.ThinkKentucky.com Econdev@ky.gov

Nevada Governor’s Office of Economic Development www.diversifynevada.com success@diversifynevada.com

JobsOhio www.jobs-ohio.com wilson@jobs-ohio.com

KANSAS Kansas Department of Commerce www.KansasCommerce.biz www.KansasCommerce.com Steve.Kelly@kansascommerce.com

Economic Development Authority of Western Nevada www.edawn.org sthomas@edawn.org

Electricities of North Carolina, Inc. www.electricities.com bdaniels@electricities.org

INDIANA Greater Columbus Economic Development Corporation www.columbusIN.org jhester@columbusIN.org

Nebraska Public Power District www.econdev.nppd.com econdev@nppd.com

NORTH CAROLINA

IDAHO Regional Economic Development for Eastern Idaho (REDI) www.easternidaho.org janr@easternidaho.org

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FLORIDA Greater Fort Lauderdale Alliance www.gflalliance.org www.lesstaxing.com dcoddington@gflalliance.org

Mississippi Development Authority www.mississippi.org locateinms@mississippi.org

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CONNECTICUT Cheshire Economic Development Corporation www.cheshirect.org jsitko@cheshirect.org

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Brican’s unmanned aerial vehicles lift zero footprint environmental observation to new heights.

17/05/16 7:36 PM