Area Development Q3 Issue 2017 by Area Development

NEW FOCUS ON APPRENTICESHIP PROGRAMS

DRIVERS OF INTERMODAL ACTIVITY

AREADEVELOPMENT S I T E

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FA C I L I T Y

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Q3/2017

ADVANCED TECHNOLOGIES FOR THE

“COO NNECTED AGE” ALSO IN THIS ISSUE:

• W O M E N I N M A N U FA C T U R I N G : CLOSING THE GAP • H O W U . S . M A N U FA C T U R E R S C A N N AV I G AT E T H E N E W TRADE POLICY • R E G U L AT I O N ’ S I M PA C T O N M A N U FA C T U R I N G • OPEN DURING CONSTRUCTION • U N D E R S TA N D I N G F E D E R A L TA X & T R A D E R E F O R M • VA L U E O F S U S TA I N A B I L I T Y

W W W . A R E A D E V E L O P M E N T. C O M

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TOP STATE FOR BUSINESS

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Gold

er inn W

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Dear Friends: Since taking office, I’ve made it my top priority to make Georgia the No. 1 place in the nation to do business, and we’ve now accomplished that unprecedented goal four times in a row. But it takes a team. These accolades speak to the commitment and support from Georgia companies, our industry partners, communities and the citizens of Georgia. Many of the steps we’ve taken during my administration reflect our commitment to creating a pro-business environment and strengthening our workforce infrastructure. One of the primary building blocks of Georgia’s business climate is our highly skilled workforce. In 2014, I created the High Demand Career Initiative, which connects the Georgia Department of Economic Development, the University System of Georgia, the Technical College System of Georgia (TCSG) and key business leaders in our private-sector industries to meet the future workforce needs of Georgia businesses. TCSG’s Georgia Quick Start is the No. 1 workforce training program in the country, providing free customized workforce training in classrooms, mobile labs or directly on the plant floor to qualified Georgia businesses in a wide range of new and expanding industries. Georgia continues to see existing businesses expand and out-of-state companies relocate here, including NCR, Honeywell, Kia, Caterpillar, Porsche, Mercedes, Shire and Comcast. Some 17 Fortune 500 headquarters call Georgia home, including UPS, Coca-Cola, Delta Air Lines, and Home Depot. Georgia also boasts a solid and seamlessly connected logistics infrastructure — we are home to the world’s most traveled airport and a top-ranked international air-cargo hub, the fastest-growing and largest single container terminal in America and six major interstates. We are also fortunate to be served by two Class I railroads and 24 short-line companies, the largest railroad network in the Southeast. Our infrastructure investments are paying dividends domestically and globally. In 2016, total trade between Georgia and the world exceeded $121 billion, spanning 223 unique countries and territories. Georgia companies exported $35.5 billion in goods in 2016, with Georgia imports totaling $86.2 billion. Based on these numbers, we know that Georgia companies are pursuing international markets and that international companies are looking to us for business opportunities, and our international representation is well aligned to support them. With the help of Georgia businesses, communities, our economic development partners and citizens, we are a state committed to creating quality job and investment opportunities at every corner. We look forward to doing business with you. Sincerely,

1. NCR 1,800 jobs $145 million investment Financial Technology 2. SENTURY TIRE 1,000 jobs $530 million investment Automotive 3. ANTHEM 1,800 jobs $20 million investment Information Technology 4. UPS 1,250 jobs $400 million investment Logistics/Distribution 5. HOME CHEF 1,200 jobs $3.4 million investment Packaging/Delivery Services 6. HONEYWELL 800 jobs $19 million investment Information Technology 7. KAISER PERMANENTE 800 jobs $51 million investment Customer Service Center 8. AMAZON 500 jobs Fulfillment Center 9. DOLLAR GENERAL 500 jobs $85 million investment Logistics/Distribution 10. VOXPRO 500 jobs $4 million investment Information Technology

Nathan Deal Governor of Georgia

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CONTENTS

COVER STORY

FEATURES 14 Women in Manufacturing: Closing the Gap

The manufacturing industry is recruiting and advancing women to close the talent gap.

16 Regulation’s Impact on Manufacturing

26 How U.S. Manufacturers Can Navigate the Route to the New Trade Policy

Technologies for the “Connected Age”

With new applications for leading-edge technologies seemingly being developed on an almost daily basis, the eventual implications for business and consumers, and on aspects of daily living, are only just beginning to be understood.

Tax and Trade Reform Proposals

What do federal tax reform proposals mean for state taxes and the potential impact on discretionary incentives?

56 Drivers of Intermodal

The volume of rules and policies with which manufacturers need to comply is onerous — cutting into their competitiveness and growth opportunities.

20 Advanced

53 Understanding Federal

Manufacturers need to prepare now for prospective trade policy changes so that they may recalibrate their supply chains if need be.

50 The Value of Sustainability in Business Operations

Despite the administration’s focus on removing environmental protections, businesses’ sustainability efforts generally have a positive effect on their image as well as bottom line.

Activity

Transportation costs, finite trucking capacity, and the rise of e-commerce are among the leading factors responsible for the growth in intermodal activity.

58 Shedding Light

on the Workplace

Natural light in the workplace enhances “human energy,” which translates into a benefit for business.

82 Open During Construction Early engineering paves the way for feasible, cost-efficient repair and renovation projects.

NOW ONLINE...

Exclusive Online Content • In Focus — Taking A “Servant Leadership” Approach to Culture Change • Front Line: Apple’s $1 Billion Fund to Support U.S. Manufacturing

• Foxconn: Breaking Down a $3 Billion Incentives Package • A 20-Year Take on the Supply Chain Revolution • New FASB Lease Standard Targets Real Estate Conflicts of Interests

www.areadevelopment.com • Location Notebook — Project 95: Innovating to Bring New Prosperity to Rural Tennessee

• Location Notebook: Louisville-Southern Indiana Offer Bi-State Regional Advantages

• Location Notebook — Big Manufacturing Investments Keep Kentucky’s Automotive Industry Rolling Along

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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for free site information, visit us online at www.areadevelopment.com

Volume 52 | Number 3 Q3/2017

Quote:

“Nearly all men can stand adversity, but if you want to test a man’s character, give him power.” Abraham Lincoln (1809–1865), 16th American president

4 Editor’s note

Legislative Uncertainty Rules the Day

DEPARTMENTS 6 In Focus

The Changing Workplace: The Rise of Coworking in the Modern Business Landscape

SPECIAL REPORTS 29

2017 Top States for Doing Business

8 In the Know

Area Development presents the results of its 8th annual Top States for Doing Business survey of site consultants. Results indicate their top picks overall and in 12 weighted subcategories that factor into the overall rankings.

Editor’s Report

9 Business Location Tracker

Location Canada

10 First Person

Dr. David B. Williams, Ohio State University

12 Front Line Investors from around the world seeking an open, stable, and welcoming environment continue to see Canada as a top investment destination.

Join Our Newsletter areadevelopment.com/newsletter

A New Focus on Apprenticeship Programs

84 Ad Index/Web Directory

Online Database Resources www.facilitylocations.com

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 2017 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 | Q3/2017

EDITOR’SNOTE

Q3/2017

Legislative Uncertainty Rules the Day As we went to press on this issue, the 23-year-old North American Free Trade Agreement (NAFTA) was about to get an overhaul by the Trump administration. When first proposed, NAFTA was touted by then-President Bill Clinton as a “job engine,” while Ross Perot predicted it would result in a “giant sucking sound” as American jobs shifted to Mexico. Neither prediction appears to have come true. In examining the agreement last year, the International Trade Commission noted there was “little or no change” in U.S. employment as a result of NAFTA. Economists instead believe that job losses — especially factory job losses — were brought about by automation, not trade deals. According to a study by Ball State University, an estimated five million U.S. factory jobs have been lost since 2000 and most of those (88 percent) were lost because of increased productivity brought about by automation. Our cover story in this issue, “Advanced Technologies for the ‘Connected Age,’” explains how new applications for leading-edge technologies — including automation/robotics, 3D printing, and artificial intelligence — are seemingly being developed on an almost daily basis. Their eventual implications for business and consumers are only just beginning to be understood. Which jobs will be created by these technologies — and which jobs will be lost to them — also remains to be seen. Aside from job creation or destruction, what NAFTA has changed, however, is the supply chain for U.S. manufacturers of industrial goods. Bob McCutcheon, Industrial Products Leader at PwC, advises manufacturers on preparing for prospective trade policy changes so they can recalibrate their supply chains if need be. U.S. tax reform may also impact the direction of future trade proposals under the Trump administration. And not only is tax and trade reform up for negotiation but also government regulation. Read about all these issues and others that affect your company’s growth trajectory in this issue of Area Development magazine. Having this expert advice on hand will prepare you to handle whatever policy changes lie ahead.

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

DESIGN/PRODUCTION Art & Design Patricia Zedalis Production Manager Jessica Whitebook Production Assistant Talea Gormican EXECUTIVE Publisher Dennis J. Shea dshea@areadevelopment.com Sydney Russell, Publisher 1965-1986 ADVERTISING SALES William Bakewicz (ext. 202) billbake@areadevelopment.com 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 EXECUTIVE OFFICES

Editor

Halcyon Business Publications, Inc. President Dennis J. Shea Finance Mary Paulsen finance@areadevelopment.com

2017 Editorial Advisory Board Josh Bays, Principal, Site Selection Group, LLC

Stephen Gray CEO, Gray Construction

Marc Beauchamp, Vice President and Partner, The CAI Global Group

Minah C. Hall Managing Director, True Partners Consulting LLC

Christine Bustamante National Co-Leader, Global Location and Expansion Services, KPMG

Scott Kupperman Founder, Kupperman Location Solutions, LLC

Gregory Burkart Managing Director, Business Incentives Advisory, Duff & Phelps, LLC

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

Brian Corde, Managing Partner, Atlas Insight, LLC

Jamie M. Lominack Real Estate Manager, Michelin North America

Les Cranmer Senior Managing Director, Savills Studley

Bill Luttrell Senior Locations Strategist, Werner Global Logistics, Werner Enterprises, Inc.

Dennis Cuneo Partner, Fisher & Phillips LLP

Michael McDermott Consulting Manager, Global Business Consulting, Cushman & Wakefield, Inc.

Tim Feemster Managing Principal, Foremost Quality Logistics

AREA DEVELOPMENT

Bradley Migdal Senior Managing Director, Business Incentives Practice, Cushman & Wakefield, Inc. John Morris Leader of Industrial Services for the Americas, Cushman & Wakefield, Inc. Eric Stavriotis Senior Vice President, Advisory & Transaction Services, CBRE Thomas Stringer Esq., Managing Director & Practice Leader, Site Selection & Business Incentives, BDO Consulting Dean J. Uminski Executive, Site Selection Consulting, Crowe Horwath LLP Dan White Senior Economist, Moody’s Analytics

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

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PURE TALENT

From engineers to construction workers, one state has a talent pool deep enough to meet the needs of any business. Michigan. Our state ranks first in the U.S. in concentration of industrial designers and engineers and eighth in the skilled trade workforce. Plus, Michigan offers a pipeline of high tech talent that flows from 33 public and private universities. Whether businesses require STEAM or skilled trades, Michigan has the talent they need to succeed.

michiganbusiness.org

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INFOCUS

The Changing Workplace: The Rise of Coworking in the Modern Business Landscape By Christy Blake, Business Development Manager, Montgomery County Economic Development Corporation (MCEDC)

Prior to joining MCEDC, Christy Blake was a business development manager at the Loudoun County (VA) Department of Economic Development, where her work involved community building, revitalization efforts, business development, and research.

When you close your eyes and picture what coworking means to you, you might imagine an earlystage incubator for new, emerging entrepreneurial ventures, or a millennial hotbed of freelance creativity with a state-of-the-art espresso maker and hip design. In reality, while coworking can (and does) take these and several other forms, what is clear is that it is an increasing trend in the modern workplace as a key driver of small and fast-growing companies. So, what is coworking anyway? I’d define it is as a trend in the configuration and organization of independent professionals and small startups. According to www.coworking.com, this approach is “a global community of people dedicated to the values of collaboration, openness, community, accessibility, and sustainability in their workplaces.” Coworking delivers a myriad of benefits ranging from meet-ups, networking, 24/7 access, and administrative functions, as well as virtual office space. It also offers an increased community focus and character, and a knowledge-sharing spirit of collaboration compared to traditional workplaces. Some additional benefits include: • Keeping talent local. Coworking facilities play a huge role in nurturing talent and providing necessary services and resources to support business growth, along with a commitment to the larger community that cuts down on relocation. • Work-life balance and collaboration. Independent working spaces offer an option for entrepreneurs to work where they live, which helps to spur creativity, collaboration, and engagement in their passions to create even greater and more sustainable growth. • A ‘marketplace’ of resources and services for mutual benefit. Similar to an old-fashioned market tableau, coworking spaces drive some of their greatest value in their ability to pool local resources and their “wares” in a common space, which promotes several advantages for “collaborative consumption” opportunities for everyone involved, such as bartering of services; sharing of ideas/brainstorming; and developing transverse “learning networks,” where individuals of different organizations participate and facilitate learning processes, and thus increase the overall innovation capability and pace of a region/jurisdiction. • Engine of innovation, idea creation, and thought leadership. The centralized, yet independent working style coworking initiates is the backbone of our evolving and ever-changing economic landscape.

A True “Coworking in Action” Story One example of a recent coworking success story can be seen in the journey of Enam Noor, CEO and Founder of Gaithersburg, Maryland-based Insightin. Insightin is a tech firm that specializes in healthcare membership engagement, predictive analytics, and big data. Enam joined Launch Workplaces’ (Launch) Gaithersburg coworking space in May 2016, less than a year after founding his company. After landing several large clients early on, by November 2016, Insightin had moved from an interior executive office space at Launch to a window and glass-lined suite over 500 percent larger, custom-made and designed from underutilized space at the Launch facility. Among the top elements of his successful experience thus far, Enam credits the synergies and partnerships that are formed via coworking, along with the creative ways the facility readily addressed his space needs as the organization expanded. Fostering connections with other Launch members that specifically helped attract venture capitalists; sharing video production time; and partnering with a furniture company who agreed to use Insightin’s new space as a remote showroom are all other ways Enam has seen the measurable value of coworking for his business. Enam stated, “Being here at Launch has allowed us to move a lot faster. And we can continue to do so in the future as we are also poised to expand additional staff into the coworking area as needed.”

AREA DEVELOPMENT

for free site information, visit us online at www.areadevelopment.com

WHEN WE CUT RED TAPE, WE DO IT WITH A BUZZ SAW.

The saying, “time is money,” carries some real weight down here in Arkansas. We know that you don’t have the luxury of wasting valuable resources when you could be getting down to business. That’s why Governor Asa Hutchinson is cutting red tape in a big way and running our state government like you’d run your business. Want to learn more about how we’re creating an environment for industry to prosper, visit ArkansasEDC.com/asa.

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INtheKNOW

As NAFTA’s rules of origin currently stand, tariffs are lifted for the auto industry as long as at least 62.5 percent of the value of autos, light trucks, engines, and transmissions originates in one or more of the three NAFTA countries. How U.S. Manufacturers Can Navigate the Route to the New Trade Policy p. 26

A new record for the fastest ever data transmission rate between a single transmitter and receiver was set in 2016 by researchers in the UK, who achieved a rate of 1.125 terabits per second.

Advanced Technologies for the “Connected Age” p. 20

Rail intermodal traffic has mushroomed, from 3.1 million shipping containers and truck trailers transported by train in 1980, to more than 13 million moved in each of the past three years, according to the American Association of Railroads. Drivers of Intermodal Activity p. 56

The National Association of Manufacturers (NAM) has found that the industrial sector faces a staggering 297,696 restrictions on their operations from federal regulations. Regulation’s Impact on Manufacturing p. 16

According to the EY 2015 US Investment Monitor, the top five states with the highest capital investment (AL, CA, KY, LA, and TX), as well as the top five states with the highest job creation in 2016 (CA, FL, OH, TN, and TX), all have competitive discretionary incentive programs targeted at the manufacturing industry. Understanding Federal Tax and Trade Reform Proposals p. 53 8

AREA DEVELOPMENT

A study conducted by KPMG notes that Canada currently has the lowest business costs among the countries that are part of the G7, with a 14.6 percent cost advantage over the United States. Canada: A Favorable Destination for Foreign Direct Investors p. 64

According to the Bureau of Labor Statistics, the labor force participation rate for women in 2015 was 56.7 percent, compared to 69.1 percent for men. Women in Manufacturing: Closing the Gap p. 14

According to a 2015 study by University of Oregon, Eugene (UOE) of some 7,600 office workers, those who work in offices with natural elements — of which light is an integral factor — are 6 percent more productive and 15 percent more creative overall, and workers in offices with poor lighting quality and obstructed window views take significantly more sick leave than those in offices with good natural light. Shedding Light on the Workplace p. 58

A Nielsen Global Survey on Corporate Social Responsibility conducted across 60 countries found that 55 percent of consumers are willing to pay more for products and services from companies with sustainability programs. The Value of Sustainability in Business Operations p. 50

for free site information, visit us online at www.areadevelopment.com

BUSINESS LOCATION TRACKER 05 TTENNESSEE High-End Appliance Maker to Expand in Tennessee H Monogram Refrigeration, a subsidiary of GE Appliances, a Haier company, will expand its manufacturing facility in Selmer, Tenn., investing $9.3 million and creating approximately 210 new jobs in McNairy County.

08 10

06 N NEW MEXICO RRaytheon Planning Expansion in Albuquerque, New Mexico

Raytheon will expand its operations hub in Albuquerque, N.M., resulting in the creation of 60 new high-tech manufacturing jobs to support the development and production of directed energy systems, range monitoring systems, and telemetry systems for U.S. and coalition partners.

07 N NEW JERSEY C Canadian Packaging Products Company to Open in New Jersey

01 N NORTH CAROLINA

Canada-based Cascades Inc., a leader in recuperation of recyclable materials and in manufacturing of green packaging products, will invest $80 million to construct a new containerboard packaging plant in Piscataway, N.J., which will create 120 jobs. Operations are slated to begin in Q2 2018.

Allstate to Expand Operations in North Carolina A Allstate Insurance Co. will add 2,250 jobs over three years as it expands its operations in Mecklenburg County, N.C. As part of the expansion, the company plans to invest more than $22 million in the Charlotte area.

GEORGIA 02 G

08 O OHIO Spanish Textile Developer to Open in Columbus, Ohio S Fluvitex, a Spain-based global leader in textile development, plans to open its first U.S. production facility in metro Columbus, Ohio. Its American subsidiary, Fluvitex USA, Inc., will create 80 jobs and invest a total of $12 million at the facility.

Canadian Paper Products Company Investing in Georgia C A Canada-based manufacturer of household paper products, Irving Consumer Products, will invest about $400 million to open a production plant at Sofkee Industrial Park in Macon, Ga., by 2019, creating 200 jobs in the region.

09 N NEW YORK Retailer to Open Northeast Distribution R Center in Upstate New York Tractor Supply Co., an operator of rural lifestyle retail stores, broke ground on a $75 million, 930,500-square-foot Northeast distribution center in the Town of Frankfort, Herkimer County, N.Y., which will create 350 new jobs over the next six years.

04 IINDIANA Northern Indianapolis Data Center Expands N Expedient, a cloud computing and data center infrastructure as a service provider, has initiated a $4.5 million expansion and upgrade of its data center in Carmel, Ind., representing the third expansion and upgrade of the data center since September 2013.

O OKLAHOMA Greenheck Group Building Tulsa Manufacturing/ G Distribution Campus Greenheck Group will build a new operations center in Tulsa, Okla., with initial operations to begin by the summer of 2018. The northeast Tulsa campus will include manufacturing/distribution operations for the companyâ&#x20AC;&#x2122;s Accurex brand of commercial kitchen ventilation systems and its Tempered Air Products line.

10 VVIRGINIA LLife Sciences Company Expanding in Virginia Beach LifeNet Health, a leading global regenerative medicine company, will invest $12.25 million to expand its global headquarters operation in Virginia Beach, Va., adding warehouse, office space, and R&D space as well as a production facility across three campuses, resulting in the creation of 321 new jobs.

Track business relocations and expansions on Area Development Online. We track announcements of all significant investment and job-creation projects throughout the United States and Canada at www.AreaDevelopment.com/NewsItems.

AREA DEVELOPMENT | Q3/2017

FIRSTPERSON DR. DAVID B. WILLIAMS

THE OHIO STATE UNIVERSITY

We’ve been talking about the skills gap for upwards of three decades. Are we making any progress in closing it, as far as you can tell? Williams: Depends on which politician you speak to, I guess! Part of the challenge is the skills gap changes every several years. As new manufacturing processes come on board, there’s a need for a new set of technical skills. Five years ago, additive manufacturing was a curiosity. Now GE builds whole engines out of additive manufacturing. There’s an additive manufacturing operation on the International Space Station, and they’re talking about sending one to Mars to build the first habitation on Mars. So, there’s a whole new way of making things that didn’t exist five years ago. So, for four-year engineering colleges and, for that matter, two-year technical schools, how much should we be getting into those particular skills — or should we be taking a broader approach? Williams: I think there’s a balance between knowing the fundamentals, which are often quite detailed, and knowing enough to be able to apply those fundamentals in a totally new situation. And I think the same would happen to skills from two-year community colleges and vocational training organizations. Additive manufacturing is new. The robotic aspects of it are probably not too fundamentally different from robotic welding, which has been around for 20 years. The scale is different, the speed is different, the source of material is different, but you’re still welding materials to one another, just on a much more controlled scale. So, understanding the fundamentals, but then being able to apply them in a new situation would work for a robotic technician as well as somebody pushing the limits of how we make the next complicated device with an additive manufacturing approach. Education and industry — what responsibility does each have in developing the workforce needed and how are they connected? Williams: Industry goes ahead and uses the next generation of technology because it will go to its own bottom line. It will, perhaps, improve quality without raising expense, or it will improve turnover without the challenges and inaccuracies of human beings. And then, they worry about the workforce that’s required to maintain what they’ve put in place.

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That’s not a criticism; that’s just what drives industry. I think the role of universities is to give industry the tools they need so that they can manufacture products more reliably, perhaps cheaper, with better materials, in a shorter time, less waste, more environmentally friendly — all the issues that drive modern manufacturing. And then, uh-oh, where’s the workforce to do that? So, in some senses, maybe universities are part of the problem! Are the students you meet looking to manufacturing for a career, or have we undersold manufacturing over the years? Are people stuck with old visions of what manufacturing is? Williams: Yes, yes, and yes! We can’t change the word. The Latin roots mean “hand-made.” The Midwest is still termed “The Rust Belt,” even though we haven’t made steel for a generation. Do manufacturers need to take responsibility to get kids into their plants and have them understand this is a new, clean, different technological environment? Williams: Perhaps the bigger challenge, in many cases, is the parents of the upcoming generation. Many of those parents came from areas in Ohio and the Midwest where old manufacturing has disappeared and the communities are paying the consequences. They don’t wish their daughter to become a welding engineer because they think she’s becoming a welder when, in fact, what she’s doing is helping Elon Musk build his next generation of spacecraft, which needs materials to be joined, which is what a welding engineer would figure out. Anybody who actually goes to a modern manufacturing plant is rapidly disabused of the notion that it’s anything like it used to be. What about soft skills? Williams: Very important. And, yes, we focus on them in freshman year — teamwork, oral communication, written communication. The challenge always is, for every class where we introduce a new soft skill, which part of the fundamentals of engineering do we decide not to teach? Because we are constrained politically and fiscally to a fouryear engineering program, while the engineering knowledge a starting engineer needs isn’t getting any less on a weekly or a yearly basis. There’s no right answer here. for free site information, visit us online at www.areadevelopment.com

How do you see the roles of four-year institutions like Ohio State versus community colleges, tech schools, vocational schools? Do you think students understand the difference between these various levels and career paths? Williams: Not necessarily, and neither do their parents — and, in many cases, neither do university professors! There are many, many sound reasons why an 18-year-old young man or woman should go to a community college. Unfortunately, society has deemed that the four-year college education is something that everybody needs, and without which, you are a failure. This is the wrong message to send. There are multiple essential areas where a two-year community college education will give you a skill set that’s extraordinarily valuable and that people will pay to use. Do we need to drop the silos and find ways to blend these assets so that we have a more seamless system? Williams: As I say, there are many positions where somebody should go to a community college and get their two-year associate degree. They’ll be in a much bet-

ter position to get a job than many four-year college graduates. But again, that message isn’t going out there. So, I think there’s a lot more selling to be done about the value of the two-year system. Part of the challenge is, however, the degree completion rate for young men and women in the two-year system is not really very good. That might be a combination of family backgrounds, fiscal backgrounds, understanding the need to study hard in community colleges as well as at four-year universities.

THE ASSIGNMENT Dr. David B. Williams is Executive Dean of the Professional Colleges and Dean of The College of Engineering at The Ohio State University. As part of his role, he serves on the board of Columbus 2020, Central Ohio’s economic development organization, and is a regular participant in meetings with companies considering the area for expansion. Dr. Williams spoke recently with Area Development on the subjects of higher education and workforce development.

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01/02/16 AREA DEVELOPMENT | Q3/2017

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FRONTLINE

A New Focus on Apprenticeship Programs

hen President Donald Trump, former host of the reality show The Apprentice, signed an executive order in June designed to boost apprenticeship programs nationwide, he followed in his predecessor’s footsteps in embracing a workforce development tool that until recently has received relatively scant attention and resources in the United States. In fact, this year marks the 80th anniversary of the National Apprenticeship Act, the governing statute of apprenticeship training in the U.S. However, according to Eric Seleznow, former assistant deputy secretary in the Department of Labor and now a senior adviser with the nonprofit Jobs for the Future, the apprenticeship option has gone largely untapped in the United States, especially in comparison to programs in Europe that have thrived for centuries. “For the past 80 years in this country, labor unions and the building trades have figured out how to develop high quality apprenticeship programs to create really good jobs with really good wages,” Seleznow says. “But everybody else has sort of ignored apprenticeships.” Trump’s order came three years after President Barack Obama fashioned a new emphasis on developing federal apprenticeship programs, complete with a $90 million funding commitment. The Obama administration effort helped boost registered apprenticeships from approximately 375,000 to 550,000, Seleznow says. “We’ve been growing not only the numbers of apprenticeships in this country but also diversifying the occupations and industries,” Seleznow notes. “You’re seeing more of them now in healthcare, IT, cybersecurity, manufacturing, the insurance industry, and others.”

Fulfilling Manufacturing’s Need Trump’s stated goal, which is backed by his push to more than double federal funding to $200 million, is to

AREA DEVELOPMENT

By Tom Gresham

reach five million registered apprenticeships. The Executive Order, which aims to reduce the federal government’s regulatory role in developing and managing registered apprenticeship programs, cited the need to help fill, among other positions, “the 350,000 manufacturing jobs currently available.” Carolyn Lee, executive director of The Manufacturing Institute, says the U.S. manufacturing industry has about 30,000 registered apprenticeships, but also untold unregistered programs implemented by organizations that declined to go through the government’s registration process. Lee says the Executive Order’s advocacy for third-party credentialing for registered apprenticeship programs — instead of requiring programs to be credentialed through the federal government — could, if enacted, spur improved creativity and interest in apprenticeships and accelerate growth, even to the ambitious levels Trump has cited. “Allowing for custom solutions for the programs to fit regional and local needs could create an environment where five million registered apprenticeships is not an impossible goal to attain,” Lee explains. Seleznow and Lee say they hear from employers who lament the difficulty of identifying and hiring sufficiently skilled workers for their operations. Each agrees that apprenticeships can play a major role in addressing that shortage. In addition to increased government support, Lee says, companies will need to strengthen their resolve to implement apprenticeships and seek out regional partners, such as community colleges, technical schools and other companies. “Apprenticeships are highly valuable and allow companies to play a role in the education of the next generation of workers, while customizing the training and skills for workers specific to the needs of their companies,” Lee says. “It’s a win-win for companies and workers.” for free site information, visit us online at www.areadevelopment.com

AS A TOP 5 STATE FOR MANUFACTURING ESTABLISHMENTS, FLORIDA IS BUILT FOR YOUR BUSINESS. Why do more than 19,000 manufacturing companies call Florida home? Because not only do we have the space to accommodate them, we also have the custom-trained workforce, infrastructure and trade expertise to ensure success. Add to that a pro-business and costcompetitive environment, and it’s easy to see why Florida ranks among the nation’s top ﬁve states for manufacturing. And we have no doubt that your company can make something big of that. Discover what a future in Florida means for your business at ﬂoridathefutureishere.com/manufacturing, or call 877-YES-FLORIDA.

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WORKFORCE

Women in Manufacturing: Closing the Gap The manufacturing industry is recruiting and advancing women to close the talent gap.

courtesy Boeing

By Noelle Salerno and Jennifer Vernon, Consultants, Avalanche Consulting, Inc.

Debbie Errazo, numerical control programmer for composites fabrication in Charleston, S.C., and a Boeing inventor of specialized tooling

omen have played a role in the manufacturing industry since World War II, when the U.S. government called upon women to fill vacated positions left by male enlistment in the armed services. During those years, women took up jobs in the factories and shipyards that were largely considered to be only suitable for men. The image of Rosie the Riveter, among others, was used as a campaign to draw women into the workforce, appealing to their sense of patriotism. And it worked. During these times, women excelled at jobs in the aviation, munitions, and many other industries. But as the war ended, a majority of these women left their factory jobs or were replaced by the men returning from war. Over the years, the role of women in the workforce has changed. According to the Bureau of Labor Statistics, the labor force participation rate for women in 2015 was 56.7 percent, compared to 69.1 percent for men.1 Equity in earnings has improved with women now earning 81 percent of their male

AREA DEVELOPMENT

counterparts, up 19 percent from 1979. At the same time, jobs in manufacturing have greatly changed with the introduction of automation and other advancements. Despite these developments, women still represent less than 30 percent of the manufacturing workforce.

A Dedicated, Tailored Approach The shortage of talent in manufacturing is probably one of the most talked about issues in the industry. A 2015 Deloitte study2 estimated upward of two million manufacturing jobs that may go unfilled over the next decade. For an industry that is desperately trying to fill that talent gap, one might see increasing the number of women in manufacturing as a viable solution. Based on our findings, however, it will take more than simply calling upon our patriotic duty to do so. Bringing more women into the manufacturing workforce will take a dedicated and tailored approach in the recruitment, retention, and advancement of women in the industry. Here we will showcase a few great examples of what those in the manufacturing industry are already doing to support and grow the number of women in their workforce pipeline.

Addressing Perception Challenges Perception is a major factor in

the manufacturing talent shortage, particularly for women. Addressing these perception challenges requires companies and organizations to focus on the entire talent pipeline, including parents. The examples we found take a hands-on approach that not only showcases the many career opportunities available in manufacturing, but also introduces young women to female role models in the industry. One such program — All Girls Auto KnowTM 3 — takes 200 young women from middle schools and 100 educators and parents from around Upstate South Carolina and introduces them to the many opportunities that exist for women in STEM-related fields. Put on by the Southern Automotive Women’s Forum — in partnership with Clemson University and major automotive companies such as BMW, Michelin, Dräxlmaier, and Bosch — the day-long All Girls Auto KnowTM program includes an introduction into STEM and automotive-related career opportunities, tours of automotive manufacturing and training facilities, hands-on engineering challenges, and a showcase of local automotive companies. Current plans are to expand the program to other regions of South Carolina, in addition to Birmingham, Alabama, and Georgia. Another great example is the two-week Camp GADgET (Girls Adventuring in Design, Engineering & Technology)4 summer camp at Triton

for free site information, visit us online at www.areadevelopment.com

College in Illinois. The goal of GADgET is to introduce young women between the ages of 12 and 16 to the world of engineering and to empower them to seek opportunities in this male-dominated field. During the two-week camp, a group of 20 young women tour local engineering and manufacturing companies, talk with females in the field, and create their own gadgets in Triton’s fabrication lab. The camp is led by instructors from the Engineering Technology program at the college.

Establishing a Talent Recruitment Program Dedicated to Women In 2017 The Manufacturing Institute, APICS, and Deloitte surveyed over 600 women professionals in the manufacturing industry.5 Over two thirds of the survey respondents indicated that their companies do not have active recruitment programs to attract female employees. However, we’re seeing evidence that this is changing as top manufacturers spearhead dedicated talent recruitment efforts. For example, Boeing launched the WomenMakeUsBetter campaign6 that encourages women to pursue STEM careers. Their online talent recruitment website highlights female engineers and outlines development opportunities available to female employees through the Boeing Women in Leadership Association, Society of Women Engineers, and Women of Color in STEM. Boeing also helped found the Women in Aviation International professional association. Another example as reported by CNN Money7 is Carey Manufacturing, whose workforce is nearly 50 percent female. In fact, women outnumber men on the factory floor. The combination of local trade schools and colleges that are recruiting women to enroll in STEM-related training programs and Carey Manufacturing’s reputation for giving “everyone a fair shot” has led to gender parity in the company’s hiring process. Manufacturers are not alone in their recruitment efforts. An example of a training provider that is developing a strong pipeline of women pursuing STEM talent for local manufacturers is Vincennes University in Indiana. The program provides scholarships to 46 women each year who are pursuing degrees in industrial maintenance, architectural studies, construction, precision machining, and other highskill manufacturing fields. The university partners with the Indiana Manufacturing Association to help recruit candidates for the program.

Creating a Culture of Inclusion A strong culture of inclusion, starting with top leaders and embedded throughout an organization, signals that a company is committed to supporting its female employees. Additionally, having programs in place that help women advance in their careers, such as mentorship or leadership training programs, will increase talent retention rates. With that in mind, Rockwall Automation has been implementing a comprehensive Diversity and Inclusion (D&I) strategy over the past 10 years. Its Culture of Inclusion initiative was launched in 2007 in response to data that showed the company had lower retention rates of women and people of color compared to white men. Senior leaders renewed their commitment to D&I, and programs were deployed across the company by “Inclusion Change Teams” to identify barriers to inclusion, hold D&I training workshops, and implement D&I best practices across the organization. Changing a company culture takes time, but Rockwall Automation’s dedication to the Culture of Inclusion initiative is paying off, advancing women across businesses and functions at the company. According to a recent company report,8 “Between 2008 and 2016, women’s representation in the United States has increased from 11.9 percent to 23.5 percent among vice presidents, from 14.7 percent to 23.2 percent among directors, and from 19.3 percent to 24.3 percent at the middle-manager level. At the most senior leadership levels, women’s representation

ADVANCING BUSINESSES From nanochemicals enabling the ﬁrst synthetic organ transplant to the world’s most advanced warships, Mississippians can customize your product. Just ask Nissan, Toyota, Hybrid Plastics, Huntington Ingalls, GE Aviation or many of the other industry leading manufacturers located in the state. Mississippi has the productive workers and customized training programs, both for new and existing industries. Mississippi’s research universities have a strong reputation for partnering with industry to move innovation from concept to reality. The business advantages are clear. Choose Mississippi.

MISSISSIPPI

ADVANCED mississippi.org/advanced

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GOVERNMENT REGULATION

Regulation’s Impact on Manufacturing The volume of rules and policies with which manufacturers need to comply is onerous — cutting into their competitiveness and growth opportunities. By Stephen Gray, President & CEO, Gray Construction

he U.S. manufacturing industry is a force to be reckoned with. From its emergence during the Industrial Revolution in 1820, the sector has experienced repeated blows from the Great Depression to the Great Recession more recently. Despite these setbacks coupled with a highly evolving global industry, U.S. manufacturing has shown its resilience. Modern manufacturing is thriving across America.1 The fact remains that manufacturing has much more potential, if certain hurdles weren’t in the way. Among the top challenges manufacturers face are regulatory concerns, an inequitable tax system when compared with certain other

Manufacturing Process Step

Number of Parts of Code of Federal Regulations

Number of Restrictions

Sourcing Production Quality Control Labeling and Packaging Distribution and Shipping Post-Sale Follow-Up Human Resources Tax Governance Marketing and Sales Research and Development (R&D) and New Products Health and Safety

43 239 83 47 64 9 54 26 8 35 22

4,168 44,628 23,951 7,477 21,057 1,644 17,042 51,760 8,884 1,518 12,833

102,734

Totals

715

297,696

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countries, and, in some cases, unfair subsidies provided to certain industries by foreign governments. Manufacturers recognize that a safe working atmosphere and healthy environment are ensured through regulation. But, the complexity of regulations often results in duplicative, poorly designed and thus ineffective rules adding an unnecessary burden to manufacturing operations. Since 1981, the federal government has issued at least one manufacturing-related regulation each week. The National Association of Manufacturers (NAM) has found that the industrial sector faces a staggering 297,696 restrictions on their operations from federal regulations.2 Is the federal government overstepping its intended power? Rules and policy within reason are valuable, but will the U.S. economy begin to falter if the rate of regulation continues to rise? Notably, no regulations have been eliminated. With the sheer volume of new rules and policies to keep up with, manufacturers are not able to focus on competitiveness and growth opportunities, factors that feed into a prosperous economy.

The Burden Manufacturing Faces The Environmental Protection Agency (EPA) has issued the majority of rules that impact industrial productions across the United States. While environmental issues are vital to the future of humanity, some flaws exist that counter the real benefits. American companies and associations, including U.S. Steel Corporation and the American Petroleum Institute, have openly voiced how regulatory burdens prevent building and expansion opportunities. Valero Energy Corporation, which is a member of the American Fuels and Petrochemicals Manufacturers Association, has pointed out that its manufacturing operations are “significantly impacted by the inefficiencies of the current permitting process, the burdens of the current regulatory regime, and the competitive disadvantage this situation places on American manufacturing.”3 The Manhattan Institute found that compliance costs for the EPA’s manufacturing-related regulations are more than double that of all other regulatory agencies combined.4 In for free site information, visit us online at www.areadevelopment.com

addition, spending on regulatory compliance has been rising faster than any other cost in the manufacturing process. Since the Great Recession, financial policies instituted by Congress to prevent another downturn have also added to the regulatory burden of manufactures. Though unintentional in nature, these regulations have made it increasingly difficult for small manufacturers, which make up 90 percent of the quarter of a million manufacturing companies in the United States, to borrow money. According to the Small Business Administration, the new financial regulations have been instrumental in driving small community banks — those that typically work with small manufacturers — out of business. Unfortunately, federal regulations are simply part of the burden. State and local regulations also impact manufacturing investment. Often, policies at all levels of government are implemented as one-size-fits-all. All manufacturers can attest that any two processes are rarely alike. Another problem is the lack of oversight. The institutions intended to govern the regulators issuing new laws are becoming scarce or obsolete. As a result, new legislation is being introduced piling on top of other rules that contain inconsistencies and replications that create an enormous challenge for manufacturers to navigate. Manufacturers have indicated that, even if a portion of the time spent on managing their role with existing and pending regulation could be allocated toward job growth and product and market expansion, they would achieve more innovation and productivity.

Alleviating the Regulatory Weight Effective regulation needs to be strategically designed and executed to create positive impact. Regulations are necessary, but they should be transparent and cost-effective. If current rules were audited regularly, outdated and inefficient policies could be eliminated before new legislation is introduced. President Trump signed an Executive Order declaring that for every new regulation issued, two be removed. In April, the Office of Information and Regulatory Affairs (OIRA) issued a guidance5 for federal agencies on how this order should be implemented. The Office of Management and Budget is also expected to release the regulations that agencies intend to eliminate or modify to balance new regulations. The administration has withdrawn or delayed over 860 proposed regulations in the past five months.6 “The president has indicated a really fundamental shift in the way that we’re going to think about regulations,” said Neomi Rao, the newly confirmed administrator of the OMB’s Office of Information and Regulatory Affairs. “And we’re focusing very much on reducing the overall regulatory burden.”7 In a further effort to cut some of the red tape for manufacturers and allow the U.S. business climate to flourish, the Regulatory Accountability Act (RAA) is trying to make its way through Congress. In short, the bipartisan bill would hold federal agencies more accountable and allow for a more transparent rulemaking process by enabling public participation in the shaping of legislation, requiring agencies to utilize the most cost-effective option and ensuring public review of high-impact policy. “The facts about the RAA reveal a narrowly tailored effort by Congress to make sure that for the costliest one-half of 1 percent of regulations, the agencies do a better job of finding the facts, getting the science right, involving the public, and ensuring the benefits outweigh the costs,” explained William Kovacs, the senior vice president for Environment, Technology & Regulatory Affairs at the U.S. Chamber of Commerce.8

MISSISSIPPI DELIVERS Mississippi’s multi-modal connectivity and well-integrated infrastructure provide unparalleled distribution and delivery for manufacturers. With six interstates, 14 federal highways, 15 ports, seven commercial airports, ﬁve Class 1 railroads and 2,500 miles of track, Mississippi is the epicenter of one of the fastest-growing regions in the nation and is within a day’s drive to more than 100 million people. By air, by sea, by rail or by road, getting your goods to market is easy in Mississippi. Delivering business advantages is just one of our strengths.

MISSISSIPPI

DISTRIBUTION mississippi.org/distribution

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The House counterpart of the RAA was passed as part of a larger suite of bills including the Small Business Regulatory Flexibility Improvements Act of 2017, Separation of Powers Restoration Act, Require Evaluation before Implementing Executive Wishlists (REVIEW) Act, and All Economic Regulations Are Transparent (ALERT) Act. The Senate Homeland Security and Governmental Affairs Committee also recently passed the following: Providing Accountability Through Transparency Act, Early Participation in Regulations Act, and Federal Agency Customer Experience Act. All these bills aim to streamline and improve the regulatory process for small businesses, intending to move U.S. business forward. If made law, they would require agencies to analyze how the regulation they propose and implement impacts small businesses, including manufacturers. Though the fate of these bills is uncertain, the fact is manufacturing supports more than 12 million jobs across America,9 plus many more when calculating the indirect supply chain. Trends show that foreign manufacturers want to invest in the U.S. For the first time in a decade, the Reshoring Initiative found that more reshoring happened than offshoring.10 Domestic companies also want to invest further into the economy but need the support of federal and local governments. Of particular note are certain tax proposals being considered by the Trump administration and Congress that would better level the playing field for companies that make products in the United States. If effective policies exist — regulatory, tax, and otherwise — the possibilities for U.S. manufacturing now through 2025 are monumental. ■ 1 https://www.forbes.com/sites/joelkotkin/2017/06/12/wheremanufacturing-is-thriving-in-the-u-s/#546405281ff7 2 http://www.nam.org/Data-and-Reports/Reports/Holding-UsBack--Regulation-of-the-U-S--Manufacturing-Sector/ 3 http://sanfrancisco.cbslocal.com/2017/04/21/epa-administrator-industry-leaders-target-environmental-regulations/ 4 https://www.manhattan-institute.org/sites/default/files/RMM-0617.pdf http://sanfrancisco.cbslocal.com/2017/04/21/epa-administrator-industry-leaders-target-environmental-regulations/ 5 https://www.whitehouse.gov/the-press-office/2017/04/05/ memorandum-implementing-executive-order-13771-titledreducing-regulation 6 https://www.impomag.com/news/2017/07/trump-cuttinghundreds-planned-regulations 7 https://www.bna.com/picture-becoming-clearern73014461704/ 8 http://thehill.com/blogs/pundits-blog/uncategorized/334136separating-fact-from-fiction-in-the-regulatory 9 http://www.nam.org/Newsroom/Top-20-Facts-AboutManufacturing/ 10 http://reshorenow.org/may-15-2017/

Women in Manufacturing Continued from page 15 doubled, increasing from 11.1 percent to 25.0 percent among the CEO’s direct reports, and from 11.1 percent to 20.0 percent on the board of directors.” Another initiative that is encouraging women to pursue careers in manufacturing is The Manufacturing Institute’s STEP Ahead program,9 which provides mentoring and recognition for women in manufacturing and raises the visibility of female leaders in the field. Since 2012, an annual event in Washington, D.C., has honored the achievement of over 670 women in manufacturing. A new STEP Forward10 series brings tailored programs to local communities, whether it’s an informal networking event or a fullday workshop with educational programming. For communities with a strong manufacturing presence, hosting events like these can help spur local companies and educators to pursue their own initiatives that help close the gender gap. There is no one solution for addressing the talent gap in the manufacturing industry. The discussion around talent must include a holistic and collaborative approach to alignment, attraction, and retention, including programs that reach untapped talent in this field. Communities, educators, and employers that proactively implement these initiatives will come closer to bridging the manufacturing talent gap and set themselves up for success in the future. ■ 1 https://www.bls.gov/opub/reports/womens-databook/2016/ home.htm 2 http://www.themanufacturinginstitute.org/~/media/827DBC7 6533942679A15EF7067A704CD.ashx 3 http://southernautomotivewomen.org/all-girls-auto-knowshows-young-girls-the-world-ofstem-and-automotive/ 4 http://www.triton.edu/Content.aspx?id=702 5 http://www.themanufacturinginstitute.org/Initiatives/Womenin-Manufacturing/~/media/ 3B9BF94AEF0A46A5B755D17F1F1336BC.ashx 6 http://www.boeing.com/careers/organizations/women-makeus-better/#/empowering 7 http://money.cnn.com/2017/05/25/smallbusiness/careymanufacturing-women-workers/index.html 8 http://www.catalyst.org/knowledge/rockwell-automationculture-inclusion-journey 9 http://www.themanufacturinginstitute.org/Initiatives/Womenin-Manufacturing/STEP-Awards.aspx 10 http://www.themanufacturinginstitute.org/Initiatives/Womenin-Manufacturing/STEP-Forward/STEP-Forward.aspx

CAN-DO ATTITUDE Before your doors open or the ﬁrst product is produced, Mississippi and its community college system provide customized workforce training, giving you a skilled team of employees from Day 1. As new production techniques and processes develop, our team continues to train your team. Our eight universities – including four research institutions – are honing talent capable of giving your business a competitive edge.

Let Mississippi deliver job-ready employees for your business.

MISSISSIPPI WORKFORCE mississippi.org/workforce

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COVER STORY

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for free site information, visit us online at www.areadevelopment.com

ADVANCED TECHNOLOGIES FOR THE

“COO NNECTED

AGE ”

WITH NEW APPLICATIONS FOR LEADING-EDGE TECHNOLOGIES SEEMINGLY BEING DEVELOPED ON AN ALMOST DAILY BASIS, THE EVENTUAL IMPLICATIONS FOR BUSINESS AND CONSUMERS, AND ON ASPECTS OF DAILY LIVING, ARE ONLY JUST BEGINNING TO BE UNDERSTOOD.

EARLY LAST YEAR, when a team of researchers in the UK set a new record for the fastest data transmission rate, it may not have been considered immediate, “breaking news.” But the 1.125 terabits per second rate, achieved using an optical transmission system and about 50,000 times faster than the average UK broadband connection, was a sign of worldchanging things to come.1 The accelerating flow of data has become the driving force for the mushrooming growth of certain key industries that used to be known as “high tech” — they include photonics, 3D printing, robotics, autonomous vehicles, and augmented reality, among others. The phrase “high tech” has lost its meaning since every industry has become technology-driven. “Data is the new currency, across all industries,” says Brian Raymond, the National Association of Manufacturers’ director of Innovation Policy.

BY DAN EMERSON

THE “CONNECTED AGE” What has been the most important technological advance of recent decades — the Internet — is rapidly becoming the Internet of Things (IoT). The “Information Age” has set the stage for the “Connected Age.” The chipmaker Intel predicts that the total number of connected devices globally will grow from about 10 billion today to 50 billion by 2020. Intel notes these new devices fall into four broad classes, which are on the brink of explosive growth: wearables, home, automotive, and technology for cities and infrastructure. At the 2017 Las Vegas International Consumer Electronics Show (CES), more than 900 companies displayed innovations for connecting consumer devices into the network. While consumers have been quicker to adapt new technologies, businesses are rapidly catching up. Ericsson, the Swedish telecom and networking firm, projects there will 29 billion connected devices by 2022, 18 billion of them industrial IoT devices in factories, transportation, and the grid.

According to eetimes.com, traffic to the cloud is AREA DEVELOPMENT | Q3/2017

doubling each year, fueling demand for new technologies ranging from mobile phones to the architecture of data centers.2 Data centers are ramping their investment in high speed connectivity at a 60 percent compound annual growth rate as they strive to double their data traffic every year. According to a recent report from Deloitte, “Coverage and signal strength are everything. In telephony, 4G coverage will likely increase and stabilize and 5G will emerge.” Optical communications systems allow for super-speedy data transmission by sending pulses of light through an optical fiber instead of using an electric current to transfer information.3

and welding, advanced manufacturing sectors that depend on photonics include electronics, ICT, defense, energy, as well as healthcare. The largest end-use industry for photonics is the media, broadcasting, and telecommunications sector due to the rising demand for optical fibers.

Wireless network capabilities will become more widely available, and easier to move between, says Deloitte. As more corporate work is performed remotely, more and more data will be flowing between data centers and wireless networks, which may be anywhere in the world.

The state of New York has developed a growing photonics cluster, led by established optics and imaging companies like Bausch & Lomb, Corning, Kodak, and Xerox, as well as many dynamic, smaller firms. The city of Rochester in Monroe County is a regional photonics cluster, with more than 100 OPI (optics, photonics, and imaging) companies, 17,000+ employees, and in excess of $3 billion in annual sales. Monroe County is home to the nation’s Laboratory for Laser Energetics, the University of Rochester Institute of Optics, and the Rochester Institute of Technology, with established programs in imaging sciences and microelectronics.

To keep up with the accelerating traffic, data center buildout is booming. Several billion dollars worth of data centers have been announced in 2017. Earlier this

3-D PRINTING BECOMING MORE ACCESSIBLE

year, Las Vegas-based Switch opened its Citadel Campus outside Reno, Nev., bringing online a 1.3 million square foot data center that is the largest co-location facility ever built.4 The SuperNAP project connects to the main Switch SuperNAP campus in Las Vegas via a fiber loop. Switch plans to create a super loop, which will connect to Los Angeles and also the Bay Area. And in May, Switch, announced plans to develop a more than one-million-squarefoot data center campus in Atlanta to meet client demand in the southeastern United States.5 In February, Apple announced it would invest about $2 billion in a “global data relevant” data center in Mesa, Ariz. The site is a vacant, 1.3-million-square-foot factory Apple acquired from a bankrupt tech manufacturer. At this facility, Apple plans to implement a 100 percent solar-powered central command center to monitor its other global data centers, according to published reports.

DATA TRANSFER DRIVES THE PHOTONICS MARKET According to Transparency Market Research (TMR), the demand for highly capable and efficient electronic products, as well as the rise in data transfer volume, is driving growth in photonics, which is the physical science of light (photon) generation, detection, and manipulation. The global photonics market is set to reach $766 billion by 2020, with a compound annual growth rate of 5.8 percent, according to TMR.6 With lasers being used for precision machining

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Another exciting new technology, 3-D printing, isn’t actually new, according to NAM’s Director of Innovation Policy Raymond. “It’s been around since the 1970s, but it is just now becoming accessible to companies of all sizes, and is starting to transform a wide range of industries.” For example, GE Aviation has used 3-D printing to build the biggest commercial jet engine in the world. At 11 feet in diameter, the GE9X engine will power the next generation Boeing 777X. The engine, which took four years to develop, employs a number of new materials, including titanium alloys.7 Even more groundbreaking, Silver Spring, Md.-based United Therapeutics Corp. — which has previously focused on pulmonary hypertension drugs — is working to pioneer the practice of human organ manufacturing. The firm is collaborating with a 3-D bio-printing company, Rock Hill, S.C.-based 3D Systems, to create “solid-organ scaffolds” for human transplants.8 The collaboration with United Therapeutics subsidiary Lung Biotechnology PBC will use patient-specific biological material, including re-differentiated stem cells, to create materials for the transplants. The project will be based at 3D Systems’ new bio-printing lab in San Diego.

SMARTER, MORE AFFORDABLE ROBOTICS IN USE In workplaces across the U.S., cloud-connected robots are taking over many formerly “human” tasks. The Global Cloud Robotics Market is projected to grow at an annual

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rate of around 29.2 percent over the next decade to reach approximately $36.64 billion by 2025.9 In addition, Boston Consulting Group reports that although robots currently handle only about 10 percent of manufacturing tasks, this number is expected to increase to 25 percent by 2025. Not only will robots become smarter, they will also become more affordable. Increased automation in the workplace could cut labor costs by an average of 16 percent across the world’s 25 largest goods-exporting nations — 22 percent in the U.S. alone — enhancing U.S. global competitiveness. One of the global centers of robotics R&D and manufacturing has developed in the state of Massachusetts. The three largest robotics manufacturers in the region are Brooks Automation, iRobot, and Symbotic. According to bizjournals.com,10 the 19 largest robotics companies in Massachusetts (not including large defense contractors or nonprofit labs) reported a combined workforce of 2,486. One promising firm is Cambridge-based Humatics Corp., a two-year-old startup focused on the intersection of robotics and Internet-connected devices. Humatics has raised $16.5 million and is seeking up to $6 million more, according to a recent filing with the U.S. Securities and Exchange Commission.

AUTONOMOUS AND CONNECTED VEHICLES GENERATE EXCITEMENT Much excitement is being generated by the development of autonomous and connected vehicles. According to researchers at Goldman Sachs, sales of connected vehicles are projected to pass 60 million by 2020, more than half of all cars sold worldwide. These cars will likely communicate with other cars and jointly make decisions with them to optimize travel patterns, while other connected devices assess the health of passengers and convey useful information to drivers, both about the road and about destinations.11 The semi-autonomous vehicles market was estimated to be 3.17 million units in 2016 and is projected to reach 7.84 million units by 2021, with a compound annual growth rate of 19.85 percent. The autonomous vehicles market was estimated to be 0.18 million units in 2025 and is projected to reach 1.01 million units by 2030, with compound annual growth of 41.26 percent. The growth mainly results from global vehicle production of 92.6 million units in 2015, compared to 89.9 million units in 2014.12 A research group at the University of Michigan is collaborating with Santa Clara-based Commsignia Inc., a leader in the field of connected car (V2X, Car2X) applications, to extend the capabilities of connected

automated vehicles (CAV). The ultimate goal is an autonomous car and smart mobility ecosystem that will make driving safer while reducing congestion and lowering emissions.13 I-Phone maker Apple has also joined the self-driving car technology race — something the company views as “the mother of all AI projects,” according to CEO Tim Cook.14 Legacy automakers Ford and GM are also in the hunt, with each making strategic acquisitions. Ford acquired ride-sharing service Chariot and invested in Velodyne, a company producing lidar, a laser scanning technology touted as essential for self-driving cars. GM gained self-driving expertise with a startup called Cruise, and partnered with Lyft to put the resulting vehicles on the road.15

AUGMENTED REALITY (AR) REPRESENTS A PARADIGM SHIFT While augmented or “virtual” reality has received much of its exposure through consumer applications, at the Augmented World Expo earlier this year, a wide range of businesses described more practical uses such as handsfree machine maintenance that can be done by novices guided by remote experts. A number of companies are making “smart glasses” that can do even more than smartphones. Manufacturing firms can use them to communicate instructions to their workers. Companies like Microsoft, Meta, and Magic Leap are developing even smarter headsets. Microsoft has been running trials of its HoloLens headset in architectural firms and medical schools. “We’re still in early stages of using these devices in business,” Jay Wright, president of Vuforia, an AR software environment with 40,000 apps and as many in development, told eetimes.com. 16 The firm’s number of registered developers increased 76 percent, with most of the growth in China. “There’s a tremendous amount of developer activity…We are on the verge of a paradigm shift in how we interact with information.” ■ 1

http://www.sciencealert.com/scientists-have-just-set-the-record-for-the-fastest-ever-datatransmission-rate http://www.eetimes.com/author.asp?section_id=36&doc_id=1331858 3 https://www2.deloitte.com/content/dam/Deloitte/us/Documents/technology/us-conscloud-and-infrastructure-end-users-data-everywhere.pdf 4 http://datacenterfrontier.com/switch-opens-1-3-million-sf-data-center-at-citadel-campus 5 http://www.bizjournals.com/prnewswire/press_releases/2017/05/25/LA00113 6 https://www.photonics.com/Article.aspx?AID=61327 7 https://3dprintingindustry.com/news/ge-builds-worlds-largest-jet-engine-3d-printing-77183/ 8 http://www.prnewswire.com/news-releases/3d-systems-and-united-therapeutics-announcebioprinting-agreement-300445628.html 9 http://www.researchandmarkets.com/research/jlpgf3/global_cloud 10 https://www.bizjournals.com/boston/news/2017/03/31/the-list-robotics-cluster-continuesto-thrive-in.html 11 https://flex.com/intelligence/iot/connected-age-warp-speed 12 http://www.prnewswire.com/news-releases/semi-autonomous-and-autonomous-vehiclesmarket-is-projected-to-reach-784-million-units-by-2021-300466718.html 13 http://www.crossroadstoday.com/story/35659685/commsignia-university-of-michigan-todemonstrate-control-of-autonomous-cars-using-v2x-technology 14 http://www.bizjournals.com/sanjose/news/2017/06/14/apple-aapl-self-driving-cars-timcook-tesla-tsla.html 15 https://www.wired.com/2017/04/detroit-stomping-silicon-valley-self-driving-car-race/ 16 http://www.eetimes.com/document.asp?doc_id=1331848 2

AREA DEVELOPMENT | Q3/2017

VIRGINIATHE PERFECT FIT

Twenty-five years ago,

Virginia Business published the first edition of what was then known as the Virginia Site Selection Guide. Companies have come and gone since 1992, but the reasons why Virginia is a great place for business remain the same. This includes a top-notch work-

force and education system, a centralized location, and a superb quality of life. These are the reasons why some of the nation’s largest corporations call Virginia home, such as McLean-based hospitality company Hilton Worldwide Holdings and Richmond-based used-car retailer CarMax. The Commonwealth also continues to rank favorably in national business rankings. Virginia is in the top 10 of Forbes’ and CNBC’s “Best States for Business” rankings. In addition to highlighting the Commonwealth’s accolades, the Virginia Business Site Locator contains lists of recent major economic development announcements in the state, higher education institutions, and research and development facilities offering groundbreaking research and office space. In the Virginia Business Site Locator, you’ll also find features on specific business locations in the Old Dominion, from the breathtaking Shenandoah Valley to the bustling Hampton Roads region, home to several military bases and the state’s marine terminals. H E R E A R E 2 5 R E A S O N S T O L O C AT E Y O U R B U S I N E S S I N V I R G I N I A : 1. Virginia is a right-to-work state with the 12th-lowest unionization rate in the country (6.9 percent). 2. There are 14 commercial airports, including Washington Dulles International and Ronald Reagan Washington National airports, offering nonstop commercial airline service to 145 destinations. 3. The Port of Virginia is one of the three busiest container ports on the U.S. East Coast. The port is the only East Coast port with congressional authorization to dredge to 55 feet. 4. With a world-class transportation system, Virginia has several innovative infrastructure projects in the works, including a Bus Rapid Transit System in Richmond and an extension of the Washington Metro to Dulles airport in Northern Virginia. 5. There are numerous economic development incentive programs for companies locating or expanding in the Commonwealth. The Commonwealth’s Opportunity Fund is administered by Virginia’s governor and matched by localities. The Virginia Jobs Investment Program offers recruiting and training assistance to companies creating new jobs or going through technological change. 6. Virginia’s corporate income tax rate of 6 percent hasn’t increased since 1972. 7. The state’s affordable cost of living falls below the national average in many categories. 8. Tax credits are offered for job creation and investment in economically stressed areas. 9. Virginia ranks sixth among the 50 states for tech industry employment.

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for free site information, visit us online at www.areadevelopment.com

Contacts for Your Location Needs 10. The state has a labor force of nearly 4.2 million. 11. Virginia provides companies with an educated workforce — one in three Virginians holds a bachelor’s or advanced degree. 12. Companies benefit from Virginia’s central location: 55 percent of the U.S. population lives within a 750-mile radius. 13. Ten railroads operate in the state, including two of the nation’s largest railroads — CSX Corp. and Norfolk Southern Corp. 14. The Commonwealth boasts the third-largest statemaintained interstate network including I-95, I-81, I-64, I-85, I-77 and I-66. 15. Virginia has the largest and most active data center market in the nation. 16. Seventy percent of the world’s Internet traffic passes through the Ashburn-based Metropolitan Area Exchange East. 17. Virginia is home to 11 federally funded research and development (R&D) centers and 23 Federal Laboratory Consortium (FLC) laboratories, including the Homeland Security Institute, NASA Langley Research Center, and the Thomas Jefferson National Accelerator Facility. 18. Career and technical education programs in Virginia public schools serve more than 284,000 students in grades 6–12. 19. There are 15 public, four-year colleges; 45 private, accredited four-year universities; and almost twodozen community colleges in the state. 20. Foodie culture thrives in Virginia, where there are more than 285 wineries and over 200 craft breweries. 21. The Commonwealth’s more than 400-year-old history attracts tourists to places like Colonial Williamsburg, Jamestown Settlement, and numerous Civil War sites. 22. Virginia has a diverse landscape, from lively cities to tranquil rural areas. 23. The state offers a moderate four-season climate. 24. For those who love nature, the Old Dominion has

Amanda Jarrett President Franklin Southampton Economic Development Inc. Franklin, VA 757-562-1958 ajarrett@franklinsouthamptonva. com www.franklinsouthamptonva. com Leonard Sledge Director of Economic Development Hampton Department of Economic Development Hampton, VA 757-727-6237 or 1-800-555-3930 lsledge@hampton.gov www.chooseHampton.com Rick L. Weddle President & CEO Hampton Roads Economic Development Alliance Norfolk, VA 757-627-2315 rlweddle@hreda.com www.hreda.com Brian Shull Director of Economic Development Harrisonburg Department of Economic Development Harrisonburg, VA 540-432-7736 econ_dev@harrisonburgva.gov www.HarrisonburgDevelopment. com Tom Elder Economic Development Director Isle of Wight County Isle of Wight, VA 757-356-1962 telder@isleofwightus.net www.insidetheisle.com Marantha Edwards Economic Development Director Town of Leesburg Leesburg, VA 703-737-7017 medwards@leesburgva.com www.leesburgva.com

William Roberts Business Development Manager Liesfeld Contractor, Inc. Rockville, VA 804-749-3276 wroberts@liesfeld.com www.liesfeld.com Marjette Upshur Director of Economic Development Lynchburg Office of Economic Development Lynchburg, VA 434-455-4490 marjette.upshur@lynchburgva. gov www.opportunitylynchburg.com Florence Kingston Director of Development City of Newport News Newport News, VA 757-926-8428 fkingston@nn.gov www.newportnewsva.com Russell Held Vice President, Economic Development The Port of Virginia Norfolk, VA 757-683-2115 rheld@portofvirginia.com www.portofvirginia.com Jeff Kaczmarek Executive Director, Business & Economic Development Prince William County Gainesville, VA 703-792-5500 JKaczmarek@pwcgov.org www.pwcecondev.org Warren Harris Director Virginia Beach Department of Economic Development Virginia Beach, VA 757-385-6464 wharris@vbgov.com www.YesVirginiaBeach.com Larry Lombardi Economic Development Director Currituck North Carolina Economic Development 252-232-6015 Larry.lombardi@ currituckcountync.gov www.thinkcurrituck.com

22 national parks and 36 state parks. 25. Sports lovers can enjoy several live professional events in Virginia or across the border, including NASCAR, football, baseball, and hockey.

AREA DEVELOPMENT | Q3/2017

BUSINESS GLOBALIZATION

How U.S. Manufacturers Can Navigate the Route to the New Trade Policy Manufacturers need to prepare now for prospective trade policy changes so that they may recalibrate their supply chains if need be. By Bob McCutcheon, Industrial Products Leader, PwC

ore than half a year into the new administration, there still remains a heightened sense of uncertainty around trade. As trade reform agendas and negotiations come into focus and begin to yield a more concrete trade policy, U.S. manufacturers of industrial goods will likely be one of the industries affected the most. To navigate impending changes, manufacturers need to begin preparing now for the most practical scenarios, including the potential recalibration of their supply chains, reconsideration of where they produce and sell and, in some cases, consideration of whether the current business model even remains viable. Regardless of the outcome around hot-button issues like the North American Free Trade Agreement (NAFTA) and the Trans-Pacific Partnership (TPP), there are three practical considerations that business leaders can focus on now to begin to adapt to, and even capitalize on, the global trade policies in flux.

Consideration #1: Whatâ&#x20AC;&#x2122;s the imported content of my products? A major focal point of the 2016 U.S. presidential election was the need to reprioritize domestic jobs. This is sure to be a major priority for policymakers as they look to reshape trade agreements. As such, it is important for

AREA DEVELOPMENT

manufacturers to understand exactly what components of their finished products contain imported elements. But this is easier said than done, thanks to the complexity of global supply chains. Take the auto industry, for example. With vehicles containing hundreds of parts, many of which are imported from global suppliers, it can be an onerous task to track down the origins of each nut and bolt. But as NAFTAâ&#x20AC;&#x2122;s rules of origin currently stand, tariffs are lifted for the auto industry as long as at least 62.5 percent of the value of autos, light trucks, engines, and transmissions originates in one or more of the three NAFTA countries. If the rules of origin levels are increased to encourage more do-

mestic business (and discourage the importation of parts from non-NAFTA countries), it could be difficult for automakers to quickly adjust to the new requirements. The good news: manufacturers have time to implement changes now that will greatly help if and when we see an increase in these rules-of-origin levels. First, it will be critical for U.S. end-customers who import components to perform a deep and transparent accounting of where their parts are sourced. This will make the handling of any additional reporting requirements a much smoother process than having to start from scratch. This also allows time if more stringent requirements need to be

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imposed on suppliers to get accurate origin information from their supply chain. It will also be critical to establish a more rigorous process of cataloguing the origin of all imported content and accurately assign the value for the parts. This becomes more difficult when accounting for components that have been shipped back and forth across borders, such as a raw material that is sent from the U.S. to Mexico, included in a component, and then exported back to the U.S. Spending the time now to fully understand these nuanced conditions will surely pay off in the long run. Consideration #2: Preparing for supply chain disruption Once manufacturers have a clearer picture of the origination point of the components in their end products, and are able to accurately attach values to them, it is now time to consider if a reconfiguration of the supply chain is in order. Changes to NAFTA could cause complex shifts of cross-border supply chains and may result in an accelerated search for new suppliers in different jurisdictions and, in some cases, the need to look toward supplier networks that have the capability to implement a “build where you sell” model. A shift away from NAFTA could also result in large multinational manufacturers significantly re-organizing their supply chains, which could have major effects on small and mid-sized suppliers. To meet these new demands, M&A targets and divestitures may also be a key strategy. To prepare for the potential of having to rapidly deploy a new supply chain, manufacturers should consider forming a task force around operational supply chains to model how various trade policy scenarios would specifically affect their companies. Models and scenarios should be run around all countries with which the U.S. has existing trade agreements and where there might be new ones. While time-consuming, this in-depth planning will allow for manufacturers to build a range of possible supply-chain change scenarios that could occur in this current uncertain environment. Conducting stress tests on their supply chains is a critical component of the scenario planning. While the exact timing of the changes are not yet clear, it is likely that they will come swiftly. Therefore, it is key to make sure that supply chains can withstand sudden trade policy shifts. M&A may be one of the most efficient ways to rapidly adjust to new supply chain requirements. As the landscape may quickly become competitive and crowded, developing plans for M&A or strategic partnerships now is also important. Besides the supply chain, it is important to understand how changes in trade policy could affect cross-border data flows and potentially force the localization of data. Prepar-

ing infrastructure and technology now to be nimble and adjustable will likely pay off in the future. Consideration #3: Preparing your plan B and C While the specifics of trade reform remain hazy, there have been signals in general directions that could help business leaders discern their vulnerabilities. In order to get ahead, companies should identify potential red flags that affect their businesses and prioritize accordingly. It’s important to note that manufacturers of low-margin products may become particularly vulnerable if higher tariffs affect their imports from countries like Mexico and China. These companies could be in a Catch-22: it may be too expensive to source from both inside and outside the U.S., threatening the viability of their business model. Building trade policy and government affairs teams that focus on prospective trade policy changes and anticipate the range of outcomes will provide a significant advantage for manufacturers. It is also important for companies to identify their biggest “country exposures” — those areas to and from which a company imports or exports a significant amount of product. Assessing and understanding geopolitical risks and how strained national relationships could affect their business are also key. While U.S. industrial manufacturers remain in the dark about trade reform, their hands are hardly tied. By taking a proactive approach to not only understanding their organization from top to bottom, but also researching and planning their next moves carefully and strategically, they will be well prepared for the changes to come. ■

Find the Right Location for Your Next Project. FacilityLocations is a GIS map-driven, online economic development directory used to research potential locations during the business re-location or expansion process.

FacilityLocations.com AREA DEVELOPMENT | Q3/2017

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site consultants survey

2017

STATES for Doing Business

B Y

M A R K

C R A W F O R D

T he to o p-ranke d state s h ave co mmi t t e d t o a d d i n g v a l u e as econ om i c de vel opm e n t l e a d e r s a n d p ro b l e m- so l v e r s, c har a cteri sti cs that are re co g n i ze d b y co n su l t a n t s t o industry.

1 2

Georgia South Carolina

3 4 5

Texas Tennessee Louisiana

6 7

Alabama Indiana

T TWENTY T 8 9 10

North Carolina Mississippi Ohio

Virginia

Florida

Bringing in business is a top priority for every state. New corporate locations 13 New York and expansions create jobs and expand and diversify the tax base. Even though most 14 Oklahoma would agree we have largely recovered from the Great Recession, the memories of that 15 Michigan brutal downturn are still painfully sharp and linger — and still impact decision-making 16 Arkansas by corporate leadership. Today companies pay more attention to how states held on to and supported business during the Great Recession; in turn, states are more motivated 17 Kentucky to do all they can to attract, diversify, and support new business and stand out from 18 Utah competing states. 19 Idaho The economic development playing field is more competitive than ever. Standard 20 Wisconsin incentives just don’t cut it anymore — it is a buyer’s market, and companies aren’t shy about telling states what they want, and how they expect to be treated. They are also fully prepared to shop around, even if it lengthens the decision-making process. States are oﬀering more than they used to — incentive packages rich with discounts and credits and tax breaks, free land and infrastructure, faster permitting, energy discounts, shovel-ready sites, creative funding options, workforce training, etc. And although the incentives package still matters, what companies really want (and what might even tip the balance) is a state that is a willing and proactive partner. A state that will take the time to understand each company’s unique set of needs, and go above and beyond to deliver solutions (and even innovate). Many companies aren’t thinking short-term, either — they want a long-term partner that will help them negotiate the future, whatever it might bring. This is what top-ranked states do. They commit to adding value as an economic development leader and problemsolver — even during lean economic times. Any manufacturer will tell you that a big indicator of quality — and sound management — is consistent, repeatable results. This is also true for state government — especially the first six states

TWENTY

AREA DEVELOPMENT | Q3/2017

2015, the state passed an in our “Top States for M E T H O D O L O G Y FOR 2 0 1 7 across-the-board 25 perDoing Business” surT O P S TAT E S F O R D O I N G B U S I N E S S cent reduction in the franvey for 2017. Georgia, chise tax; Governor Abbot South Carolina, Texas, Our 2017 Top States for Doing Business rankings reflect the has pledged to further cut Tennessee, Louisiana, results of our recent survey asking the consultants to give us the franchise tax by $250 and Alabama (ranked million, freeing up more first through sixth, retheir top state picks in 12 categories that impact companies’ capital for companies to spectively) retained their location and facility plans. The responses were weighted with invest in their operations. exact rankings from Texas is also home to one 2016. Florida, which their #1 choice in each category receiving three points, of the most competitive, placed seventh last #2 choice receiving two points, and runners-up in each category deal-closing incentive proyear, dropped to 12th receiving one point. States were ranked in order based on the grams in the nation — the this year. This opening Texas Enterprise Fund. allowed Indiana, North total of weighted scores across all 12 categories. Companies also want Carolina, Mississippi, to see sound fiscal manand Ohio to all move up agement in their states. one position from last Georgia, for example, year, to round out the mandates that it must maintain a balanced state budget. top 10 — an impressive indicator of consistent and reThe state consistently maintains one of the nation’s lowpeatable economic leadership. est debt-per-capita levels. Georgia is one of a handful of states to have the highest bond rating (AAA) from all three Let’s take a look at the 12 factors major municipal bond rating agencies — Moody’s, Fitch, on which the states were ranked. and Standard & Poor’s. The ratings, combined with stable outlooks, mean Georgia can continue to borrow money overall Cost of doing business for major projects at lower interest rates. Indiana, which Key categories that contribute to the overall cost ranked 14th in CNBC’s 2017 “America’s Top States for of doing business in a state are corporate income tax, Business,” also has an AAA bond rating. North Carolina is business incentives, and access to capital and project another state with a long history of prudent fiscal managefunding. A cooperative and responsive state government, ment that carries an AAA bond rating. North Carolina conregulatory environment, utility rates, speed of permitting, tinues to reduce and streamline its business taxes. and shovel-ready sites as well as the labor cost environment also make an impact. If a state excels in many or most of these categories, chances are it will have some corporate tax environment of the lowest costs of doing business in the country. Evaluating the eﬀective corporate tax rate can be a Therefore, it’s no surprise that Texas ranks first for the bit of a challenge — each state has a diﬀerent corporate overall cost of doing business. The Lone Star State placed in tax rate (flat, adjusted, or none). But other factors often the top five in six other categories. With its long history of tax come into play to determine the overall adjusted tax rate, reform and cutting red tape, Texas is always tough to beat. In such as type of business structure, and taxes on payroll, property, inventory, goods in transit, and sales, as well as any credits or adjustments to those taxes. According to the Tax Foundation’s “State Corporate Overall Cost of Corporate Tax Income Tax Rates and Brackets for 2017,” 44 states levy Doing Business Environment a corporate income tax. Tax rates range from 3 percent in North Carolina to 12 percent in Iowa. Nevada, Ohio, Texas 1 Texas 1 Texas, and Washington impose gross receipts taxes inSouth Carolina 2 Florida 2 stead of corporate income taxes (gross receipts taxes can be more economically harmful than corporate inGeorgia 3 Georgia 3 come taxes). South Dakota and Wyoming are the only Mississippi 4 Nevada 4 states that do not levy a corporate income or gross reNorth Carolina 5 South Dakota 5 ceipts taxes. Indiana 6 North Carolina 6 Texas, which placed first in this category, has no Tennessee 7 Tennessee 7 corporate or personal income tax. Other significant tax advantages are sales tax exemptions on selected equipAlabama 7T South Carolina 8 ment and machinery, R&D-related exemptions, and propLouisiana 9 Indiana 8T erty tax abatements. Utah 10 North Dakota 8T Florida, ranking second in this category, has a flat cor-

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Business Incentive Programs South Carolina Georgia Mississippi

1 2 3

Louisiana Texas Indiana Ohio Arkansas

4 5 6 6T 8

New Jersey Alabama New York

8T 10 10T

porate income tax rate of 5.5 percent of gross income. The federal corporate income tax, by contrast, is a marginal bracketed corporate income tax. Florida’s maximum marginal corporate income tax rate is the fifth lowest in the country. Fifth-ranked South Dakota also has no corporate income tax or personal income tax, which helps give it a top reputation for business friendliness and entrepreneurial activity. The Small Business and Entrepreneurship Council ranked South Dakota the best state in the country for tax systems for entrepreneurship and small business in its “Small Business Tax Index 2016” survey. Other tax benefits in South Dakota are no personal property, business inventory, or inheritance taxes. Several states have passed corporate income tax rate reductions and other reforms in 2016 and 2017. Perhaps most notable, according to the Tax Foundation, is North Carolina’s corporate income tax changes for 2017, which “include a cut of its corporate income tax from 4 percent to 3 percent, as the final component of the multiyear phasein of its comprehensive 2013 tax reform package.” North Carolina now has the lowest rate of any state levying a corporate income tax, down from 6.9 percent in 2013.

business incentive programs

Access to Capital & Project Funding New York California

1 1T

Texas Georgia Tennessee

3 4 5

North Carolina Michigan

6 6T

Illinois New Jersey Massachusetts

6T 9 10

Cooperative & Responsive State Government

Georgia South Carolina

1 2

Tennessee Louisiana Virginia Texas Alabama

3 4 5 6 7

Indiana Mississippi Ohio Oklahoma

7T 9 10 10T

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Business incentives are becoming more integrated, multi-purpose, and higher value (for example, Wisconsin recently announced it would provide $3 billion in incentives to secure Foxconn’s $10 billion proposed manufacturing campus). Incentives are typically linked to economic and job-creation performance. They are increasingly tailored to specific company needs, such as land acquisition, infrastructure improvements, low-interest financing, tax credits, and expedited permitting. Companies are especially attracted to incentive programs that help oﬀset operating costs, such as income tax exemptions (sometimes payment is waived for up to a decade), job creation tax credits, and property tax abatements. For example, the Mississippi Aerospace Initiative Incentives Bu si n e ss i n c e n ti v e Program includes a 10-year p rog r a ms a re exemption from state income b e co mi n g m o re and franchise taxes, as well as integrated and a sales and use tax exemption mu l t i - p u r p o s e . for the purchase of component building materials and equipment related to the start up or expansion of an aerospacerelated facility. And eighth-ranked Arkansas provides up to a 5 percent payroll rebate (annual cash payments based on a company’s annual payroll) for new, full-time, permanent employees. Another cash-equivalent incentive that lowers project costs is a deal-closing fund. Texas is well known for its Texas Enterprise Fund (TEF), which awards cash grants as a financial incentive tool to close out deals that bring significant job creation and capital investment to the state. Since its inception in 2004, TEF has invested nearly $600 million across a number of industries, creating more than 80,000 jobs. Other states have similar closing funds that target specific sectors. Ranked first in this category, South Carolina’s incentive packages target services and manufacturing. Three discretionary grant funds (one of which is the Governor’s closing fund) are administered by the South Carolina Coordinating Council for Economic Development to secure high-value projects on a case-by-case basis. States also provide specialized incentives that target certain industries. Fourth-ranked Louisiana recently announced it would create and manage a $7 million economic development fund for the 23-parish service territory for Cleco, an energy services company in

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site consultants survey

2017

central Louisiana. The purpose of the fund is to provide infrastructure improvements and other investments that will attract new capital investment and job-creating projects to the area, by both existing firms and new employers coming into the region.

access to capital and project funding An acute memory that many companies have from the

Great Recession is the frustration (and even panic) in not being able to acquire funding for their operations — especially for improvements that would make them more eﬃcient, productive, and competitive, or allow them to take advantage of market openings. Access to capital is essential for business growth, in good economic times and bad. With companies in the driver’s seat as “buyers” when it comes to site selection, they expect funding help — even if it is just

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Odessa College

Oil and Gas

Standard Sales

University of Texas of the Permian Basin

Located in the largest single source of oil and gas deposits in the United States, Odessa has long been known for its rich resources. In recent years, new businesses have come to the city that have diversified the economy. Odessa’s diversified economy is a focal point for product distribution for many national and international companies outside of the oil and gas industry. Odessa proudly boasts world-class cultural and recreational opportunities as well as healthcare facilities and transportation often associated with larger cities. Financial incentives, quality site selection and coordination, a qualified workforce, easy access to foreign markets, and our greatest resource, our community, make it easy to do business in Odessa, Texas. Odessa has proven to be ideal for business. Come and discover the return our resources can provide for you. If you’re looking to expand your business or need a new location, contact the Economic Development Department at 432-333-7880.

Economic Development | www.odessatex.com

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AREA DEVELOPMENT | Q3/2017

Favorable Regulatory Environment

Speed of Permitting

Texas South Carolina Georgia

1 2 3

Louisiana Georgia South Carolina

1 2 3

Louisiana Mississippi Alabama Indiana

4 5 6 6T

Texas Alabama Mississippi Indiana

4 5 6 6T

Tennessee Virginia

8 9

Tennessee Virginia

8 9

Oklahoma

North Carolina

to “retain” current jobs in existing operations. States realize if they are too slow or reluctant with funding, these companies will go somewhere else. This is where knowing a company’s needs is essential for designing the best funding package, ranging from a variety of loans and grants and payback periods to private activity bonds, closing funds, and connections with venture capitalists. Tied for first place in this category in the 2017 Top States for Doing Business survey are New York and California, both of which oﬀer a variety of creative funding options. For example, New York provides its Linked

2017 Top States Commentary By E R I C S T A V R I O T I S , Senior Vice President, and G A B E K E N N E D Y , Advisory & Transaction Services, CBRE

One of the most notable aspects of Area Development’s Top States for Doing Business survey is that eight of the top-10 states in the overall rankings are in the southern United States. This trend is likely due to the common perception that the South offers aggressive economic development programs and the relative competitiveness of these southern markets on a national scale. The added correlation between Cooperative and Responsive State Government, Speed of Permitting, Shovel-Ready Sites, and the overall market rankings demonstrate the often-overlooked importance of existing state infrastructure and

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legislation. Most importantly, these existing conditions and economic programs provide the added benefit of speed to market and shorter project timelines. The ability for the Southern States to quickly engage projects is often one of the most salient factors in relocation and expansion location decisions. A cooperative and responsive state government influences the effectiveness of a deal as project deadlines and budgets are met, and windows of opportunity are not closed due to poor timing. The cooperation of state government additionally allows for increased speed of permitting as economic development organization representatives work with project leaders to move projects down the line. Time is of the essence during a deal and the quicker a business can

get in the ground, the more willing it will be in picking a location. Shovel-ready sites, in concert with a cooperative state government and fast permitting time, create an ideal project backdrop in these southern markets. The importance of these rankings is demonstrated by Area Development’s survey as we compare these Southern States in the Access to Capital and Project Funding field with their overall ranking. The markets quickly fall behind in rank for Access to Capital and Project Funding, but still remain strong overall. This suggests that the Southern States can make that up by their top ranking in the Overall Cost of Doing Business category. Although there are countless factors at play in location decisions, the state and local governments’ roles in the speed and ease of the project cannot be overlooked.

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Shovel-Ready Sites Program Tennessee Georgia South Carolina

1 2 3

Alabama Indiana North Carolina Louisiana Texas

3T 3T 6 7 8

Kentucky Mississippi Ohio Wisconsin Iowa

9 10 11 11T 13

Favorable Utility Rates Washington Tennessee

1 2

Georgia South Carolina Oregon

3 4 5

Louisiana Alabama

6 7

North Carolina Idaho Texas Kentucky

7T 7T 10 10T

Competitive Labor Environment Texas Georgia

1 2

South Carolina North Carolina Indiana Tennessee Mississippi

3 4 5 6 6T

Florida Virginia Ohio Alabama

8 9 9T 9T

AREA DEVELOPMENT

Deposit Program, which helps companies obtain reduced-rate financing to improve productivity, market access, and competitiveness. Other programs include the $47.3 million Innovate NY Fund that invests in seed-stage businesses and the Women and Minority Micro-Enterprise Loan Fund Program, which provides loans for real property, equipment, and working capital. In California, the Capital Infusion Program has provided $4 million in grant funding to small businesses. In addition, the state’s Opportunity Fund plans to issue approximately a total of $75 million in loans for California’s small businesses. Sixth-placed Michigan also has some innovative funding programs in place. Its Collateral Support Program helps companies acquire financing that might otherwise be unavailable due to collateral shortfalls. The program supplies pledged cash collateral accounts to lenders for approved projects. Grow Michigan, a public-private W h e n a st a te h a s partnership between governa re p u t a t io n ment agencies and a number of fo r b e i n g banks, is structured to operate b u si n e ss- f ri e n d l y, below the traditional mezzanine w o rd g e t s a ro u n d . markets and oﬀer loans (up to $3 million) in a secondary collateral position at attractive rates. This capital, delivered in conjunction with a senior bank lender, helps businesses grow into new contracts or finance succession/acquisition events.

cooperative and responsive state government When a state has a reputation for being business-friendly and responsive, word gets around. All states provide significant incentives — but what sets top states apart is that they know prospective companies are on a short timeline and want to make decisions quickly. In response, the states provide solutions quickly in a proactive way, so they can close the deal. These economic development teams are also empowered to make their own decisions quickly too, such as zoning modifications, streamlined permitting, variances and exemptions, providing infrastructure and services, etc. — all of which minimize red tape. This also reassures prospective companies that the state will be a long-term partner. Georgia, which has a longstanding reputation as a cooperative and responsive state government, placed first in this category. Its reputation starts with its business-friendly climate, including reasonable statutes, sound economic development policy, and strong business development support. The Georgia Department of Economic Development collaborates with the Georgia Chamber of Commerce, Georgia Economic Developers Association, and other state and local agencies to help businesses quickly find the perfect fit for their operations. State economic development representatives (who are typically experts in the industries they represent) can customize incentives and tax

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2017 Top States Commentary G R E G O R Y B U R K A R T, Managing Director, Business Incentives Advisory Practice Leader, Duff & Phelps, LLC

The Top States rankings reflect the practicality of working real projects in these states. This is apparent when you compare rankings from ALEC (American Legislative Exchange Council) or the Tax Foundation with Area Development’s survey results. New Jersey, New York, and California consistently rank at the bottom of these other surveys, however, for our profession these states rank #26, #13 and #22, respectively. The difference lies in actually getting projects done. The economic development organizations in these states, despite sometimes large cost differentials, work tremendously hard to win and locate projects. The top-10 states are remarkably resilient and stable. These states have consistently ranked in the

AREA DEVELOPMENT

top 10 because there has been a bi-partisan focus on economic development. The party residing in the governor’s mansion may change, but the importance of economic development has remained paramount. Eight of the top-10 states are located in the southern part of the country and, more impressively, they’ve ranked in the top 10 for at least two out of the past three years. The same observation holds for Indiana and Ohio, which are the only two Midwestern states that have cracked the top 10 in the past three years. The biggest risk to the states in the top 10 is Competitive Labor Environment. To ensure their continued competitiveness, Texas, Georgia, and South Carolina will need to turn their attention to retaining and attracting more younger workers to their states. Otherwise, they run the risk of being victims of their own success.

credits to meet a company’s needs. This is also the case in Louisiana, which ranked fourth in this category. Industry experts at Louisiana Economic Development are highly knowledgeable in their fields and can respond quickly to prospective companies interested in relocation or expansion. Ninth-place Mississippi takes a “holistic approach” to foster industry growth and considers all the factors up front that contribute to a company’s relocation or expansion. Such collaborative, cross-communication between Mississippi Development Authority (MDA) representatives and the prospective business leads to quick decision-making. MDA works with local economic developers and state and local leaders to find the ideal site, apply for necessary permits, and start the screening and hiring process. MDA also opens new markets for its businesses by funding trade missions overseas. Businesses are invited to participate at a low, subsidized cost to explore the potential of these new markets and make contacts. Additional services include scheduled meetings with qualified buyers, free pre-mission market research and businesspotential assessment, and a customized itinerary and logistical support. After the trip, MDA works with Mississippi companies to capitalize on opportunities resulting from the development mission.

favorable regulatory environment A reasonable regulatory climate is also essential for healthy business growth. Top concerns are environmental, legal, workers’ compensation, labor/HR, and administrative-related regulations. Changes don’t have be complicated — they can be as simple as eliminating duplicate steps and changing the way documents are received and handled. Also, regulatory reform is not just about reducing the number of regulations or easing their limits, but getting rid of red tape and making processes easier and faster. Companies expect regulatory improvements; in response, many states have launched red-tape initiatives to identify outdated laws and regulations that can be removed or revised. These initiatives also often include a

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2017

lowest-ever interest rate). Other AAA-rated states with fasunset provision of regulations with periodic review. vorable regulatory environments are Indiana and Georgia. For example, in 2016 Kentucky launched the Red Tape Reduction Initiative to review each of its nearly 5,000 regulations with the goal of eliminating those speed of permitting deemed unnecessary or duplicative, and simplifying othCompanies are in a hurry — they want to set up and ers that seem too complex. As of July 2017, 160 adminget to work on the shortest possible timeline. Permitting istrative regulations had been repealed and 181 had been amended. In February 2017 the Kentucky legislature approved House Bill 50, which calls for ordinary regulations to automatically expire seven years after their last eﬀective date. This law will force agencies to regularly Ranked among the best places to live and do business, Cape Coral is a review their regulations and take front-runner for global corporate relocations and business expansions. action to keep them in eﬀect. In South Carolina, ranked secHow hot is the business climate? The Cape Coral-Fort Myers MSA ond in this category, the Governor ranks No. 1 in the nation for job and population growth. With 266 signed an executive order in April days of annual sunshine, it’s easy to see why. to establish a framework to “promote responsible regulation.” The Contact the Cape Coral Economic Development framework includes establishing team to learn how we can help you a four-part test in promoting new make a seamless business regulations, looking at reductransition to Cape Coral. ing regulations, and promoting transparency in the rule-making process. States that have undergone tort reforms show prospective companies that they are looking out for business interests. A tort is either an omission or an occurrence that harms or injures another person. Tort systems, which used to call for maximum compensation for the injured person, are now being revised across the country to limit damages to a set amount. Because payouts are capped, employers have more money to invest in business growth, rather than high insurance premiums. It is no surprise that Texas, which ranked first in regulatory environment in our survey, has undertaken tort reform over the last 10 years. A sound regulatory climate also Cape Coral Economic Development Office helps secure better bond ratings (239) 574-0444 for a state. For example, Tennessee (866) 573-3089 has successfully overhauled its tort ecodev@capecoral.net and workers’ compensation laws bizcapecoral.com and has a triple AAA rating (in fact, its most recent bond sale was at the

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Leading Workforce Development Programs Georgia Louisiana

1 2

Alabama South Carolina Tennessee

3 4 5

North Carolina Virginia

6 7

Texas Indiana Ohio

8 8T 8T

Most Improved Economic Development Policies Ohio Michigan Alabama North Carolina Indiana

1 2 3 3T 5

Wisconsin Arkansas Georgia Kentucky Tennessee

6 6T 8 8T 10

Arizona Missouri

10T 10T

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delays hurt their productivity, return on investment, delivery schedules, and ultimately their bottom line. A firm start-up date is also essential for construction scheduling and hiring employees. Therefore, businesses fervently hope for predictability and efficiency in government regulations. This especially means speed for permitting — without the necessary permits in place, projects stall and time and money are wasted. The permitting process can be especially hard on small businesses or startups with limited funds, where a slow permitting process limits what they can afford to do and impacts their profits. “Dealing with local government permitting has become a nightmare for our small business members who have no in-house compliance department,” says Will Newton, executive director for the National Federation of Independent Business in Texas. “Time is money, and small business owners are strained in both areas.” There are two main ways to achieve faster permitting for businesses: fewer permits and/or faster approval and delivery of permits. About 75 percent of states use a small business flexibility analysis to adjust regulatory burdens (including permitting) on small businesses. In Virginia, for example, the agency that proposes the regulation must prepare a regulatory flexibility analysis that considers using alternative methods that will accomplish the same objectives, while minimizing the adverse impact. These alternative methods could include less stringent compliance with permitting requirements, such as relaxed schedules or deadlines, easier threshold limits, or sometimes even full Bu si n e sse s ho p e exemptions. fo r p re d i c ta b i l i ty The Alabama Department a n d e ffi ci en c y i n of Environmental Management g o v e r n men t (ADEM) fast tracks permitting re g u l a t i o n s . by working with state and local economic development officials on the front end of a project to evaluate permitting requirements and ensure communication is at the forefront. If there are no serious permitting obstacles, complex air and water permits are usually issued by ADEM within 60 days and storm water permits within two or three days. Prevention of significant deterioration (PSD) analyses for major air permits can be completed in 120 days or less, in most cases. This collaborative approach with economic development teams is essential for a fast permitting start on new projects.

shovel-ready sites program State-sanctioned “shovel-ready” or “certified” sites are all about speed and risk. Because the due diligence has already been completed and approved by the state, companies can build quickly with no risk of having to mitigate any problems that might surface and otherwise delay the project. Most certified sites target industrial, oﬃce, or mixed-use projects of 10 to 25 acres in size. Due diligence includes zoning restrictions, title work, environmental studies, soil analysis, and other surveys. Sometimes states will invest significant resources to clean up and certify contaminated sites, especially if they are in areas where the city or

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state would like to see development (for example, infill brownfield sites within city limits). Certified sites are important economic development tools that attract major projects. Ranked first in this category, Tennessee’s program — Select Tennessee Certified Sites — gives communities, especially those in the state’s rural areas, an advantage when competing with other states for economic development projects. The sites must include at least 20 developable acres with proper zoning, existing utilities on site (or a formal plan to extend to site), and truck-quality access roads. To date, 48 sites have been certified. In neighboring Alabama, the AdvantageSites program has brought in more than 20 projects since the program’s inception in 2008, representing nearly $1 billion in capital investment and 4,000 jobs. Alabama currently has 56 active sites. Sometimes a state oﬀers multiple levels of “readi-

ness,” depending on a company’s needs. Indiana’s Site Certified program provides three tiers of readiness: silver, gold, and prime. The silver tier defines property boundaries, establishes a price, demonstrates local government support, defines utility capacity, and provides some initial surveys. The gold tier calls for a minimum of 20 contiguous acres, a location no more than five miles from a state highway, and additional surveys, including geo tech, seismic hazard, and environmental. The prime tier requires 30 contiguous acres, a location no more than 2.5 miles from a state highway, and an archaeological investigation. Certified sites can also be a good way to attract employers to areas of underemployment. In Kentucky, on a Build-Ready site, construction can begin immediately. All Build-Ready sites include a 50,000-square-foot concrete pad and utilities that extend to the site’s edge. The state just announced its fourteenth site near Ashland, which

2017 Top States Commentary BY BRIAN CORDE, Managing Partner, Atlas Insight, LLC

After participating in, and reviewing the results of the Top States for Doing Business Survey, there were a few items that jumped out at me as being quite interesting about the survey and the outcomes. First of all, kudos to the Southeast! Out of the top 10 states in the rankings, only three were from outside of the general region (Ohio, Indiana, Texas). In fact, the lowest ranking received by a southeastern state was Florida at number 12, demonstrating the powerful probusiness message being shared by the region.

AREA DEVELOPMENT

One of the other major items that jump out based on the results is the overwhelming performance of the top 10 states in what could be considered “speed to startup” categories. Nine of the top 10 overall performers were in the top 10 for Speed of Permitting and ranked no lower than 11 overall in their Shovel-Ready Sites Programs. This indicates that companies are very interested in being able to start their projects quickly and get to market as soon as possible. On the post-construction side, nine of the top 10 performers were also in the top 10 for their Leading Workforce Development Programs. I personally took this category to mean the availability of training

grant (or similar) programs, and I believe many of my peers did as well. Given the current state of the labor market, which is short on technical talent, it is understandable why these factors weighed so heavily in the states’ overall performance. I would have to question, however, if there is not a major factor missing from the analysis, and that is the availability of talent overall. While states like New York, New Jersey, California, Oregon, Washington, and others did not perform as well in this survey, one would question that if availability of existing talent were factored into the analysis, and weighted heavily, would some of those more populated states make significant headway?

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site consultants survey will hopefully attract an employer to the area, which needs jobs.

favorable utility rates Energy availability and cost are top site selection considerations for any company, especially those that consume large amounts of energy, such as data centers, manufacturing operations, and 24/7 facilities. Energy costs vary significantly, according to the type of energy source and its proximity to the business operation. Companies prefer a consistent and reliable energy source, with minimal risks for disruption (usually brought about by shortages or increasing regulations). State and local governments often collaborate with utility companies to provide innovative, low-cost energy plans for companies looking to locate or expand. Utility incentives include rate discounts, tax exemptions, and grants for utility infrastructure improvements. Delivering a customized energy plan that meets a prospect’s energy needs is a key part of closing any deal. In general, states with large amounts of hydro-generated power have lower energy rates. For example, according to the U.S. Energy Information Administration,

HOT

2017 industrial energy rates in the state of Washington (ranked first in this category) are 38.1 percent lower than the U.S. average. Washington’s hydroelectric system is one of the largest in the world — nearly 75 percent of its power needs are generated by its fast-moving rivers. This vast renewable resource, combined with expanding capacity from wind and solar power, keeps rates as low as 4.13 cents per kWh for industrial customers. Washington also provides competitively priced natural gas delivered via pipeline from Canada. Many states in the South and Midwest still depend on coal. Although the Trump administration wants to cut back environmental regulations and revitalize coal mining, many states continue with eﬀorts to bring solar and wind power into their grids. These sustainable-energy technologies are becoming more eﬃcient, lower-cost, and can be easily connected. They are also in high demand by consumers. Kentucky, which tied for number 10 with Texas in this category, has plentiful coal and natural gas supplies, which keep the state’s industrial sector’s electric power costs low. Demand, however, is starting to drop. For example, at one point, more than 90 percent

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of the electric power provided by East Kentucky Power Cooperative (EKPC) was coal-fired. That number has fallen to about 70 percent; in response, the cooperative is installing a 33,000-panel solar field on one of its properties. “What we’re doing is recognizing customer demand,” said Nick Comer, manager of External Aﬀairs for EKPC. “And not just residential customers, but also businesses. When companies are considering areas to locate a plant or facility, they’re looking for energy options that are cost-eﬀective and sustainable.” Texas is another energy powerhouse. Unconventional oil shale deposits in West Texas (and New Mexico) contain an estimated 75 billion barrels of oil, making the region one the world’s largest oil reserves. Texas has also become the national leader in wind power. With an installed wind power capacity of nearly 18,000 MW, Texas produces more wind energy than the next three states combined. Texas also led the nation in wind farm expansions in 2016, with plans to add more than 5,000 MW of capacity.

competitive labor environment For most companies, the number-one site selection concern is labor — availability and cost, skill level, training resources, and state support. Companies seek regional labor pools that meet their needs for qualified workers. The labor pool must also be large enough to fulfill additional staﬀ-ups resulting from future expansions, even if competing companies move in and deplete the labor pool. This is where free or low-cost workforce development programs can reassure CEOs that states will step up and provide trained employees when needed. Another attribute companies like to see is right-to-work status, which tends to reduce overall labor costs. A common denominator for states with top-ranked workforces is a strong network of universities and colleges. For example, the Texan workforce (which ranked first in our competitive labor environment category) is supported by nearly 40 public universities and 50 community college districts. Graduates from these schools enter the labor pool with skill sets that are in high demand among employers. Availability of skilled labor is another major concern, especially for manufacturers dealing with the “skills gap.” A report by Deloitte and the Manufacturing Institute pre-

AREA DEVELOPMENT

dicts that nearly 3.5 million manufacturing jobs will be created by 2025; however, two million will be unfilled because workers don’t have the required skills, especially STEM (science, technology, engineering, and math). Some states are working proactively with their educational systems to build a future workforce interested in careers that require STEM skills. For example, in Tennessee, the “Drive to 55” program aims to bring the percentage of Tennesseans with college degrees or certifications to 55 percent by the year 2025. About 41,000 students graduated with STEM-related qualifications at Tennessee institutions in 2015 — an increase of 20 percent in just five years. Graduates in engineering, engineering technologies, and engineering-related fields grew by 25.2 percent over the same time period.

leading workforce development Programs When making a site selection decision, companies ask if the location’s workforce will have the training needed to perform the job, especially when it comes to STEM skills. To alleviate these concerns, many states provide comprehensive workforce development programs. With the help of local postsecondary educational institutions, these programs screen, select, and train the workforce a company needs for a new location or expansion. In fact, some companies have cut back on internal training resources because they know states will design and implement customized training programs. The training is typically free for employers that meet state requirements for job creation. This can save companies millions of dollars and close a deal. The best-known programs are in the South. For example, Georgia, Louisiana, Alabama, and South Carolina have top-rated programs that serve as models for other states. The number-one ranked workforce development program is Georgia’s Quick Start, which has trained more than one million employees in 6,500 projects, many of them for large-scale manufacturing projects. Quick Start is a highly versatile program, whose industry experts can design and implement cutting-edge training programs for workers in aerospace, biotechnology, pharma, advanced manufacturing, food and beverage, and other industries. Training is conducted in classrooms, mobile labs, or on site using the company’s own equipment and processes. Quick Start will even build state-of-the-art training fa-

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site consultants survey cilities using identical equipment oﬀ site at a nearby technical college to assure company workers will be fully trained and ready to go once their new facility has been constructed. For example, Quick Start is helping NIFCO KTW, a leading global supplier of automotive injection-molded parts, expand in Stephens County, Ga., adding 200 jobs. Quick Start will provide job-specific training in injectionmolding, assembly, and paint operations. Development of employees’ “soft skills” — leadership, quality and productivity enhancement, etc. — is also being provided. Louisiana Economic Development’s FastStart program provides comprehensive employee recruiting, screening, training, and orientation to assure smooth start-up for new operations. FastStart is also engaged in creating new employment opportunities in regions hurt by the oil and gas slump, as well as educating high school students about career opportunities in manufacturing and other industries. Since 1971, AIDT has been providing workforce development programs in Alabama in order to attract new industries and expand existing ones. Training is provided by AIDT staﬀ or contracted instructors and delivered through classrooms or 38 mobile training units on site to meet specific company needs. These include projectbased training centers for Honda, Hyundai, Mercedes Benz, Navistar, and Airbus among others. In 1961 South Carolina launched a statewide, comprehensive technical and industrial training program for the state’s workforce. Called readySC™ today, it continues to design and implement customized training for new employees and also works with existing employees to meet or maintain their certifications and credentials. Training resources are provided through South Carolina’s 16 technical colleges. The program has trained about 289,000 employees for more than 2,000 companies since its inception.

2017 most improved economic development policies As stated, tax incentives — including credits, exemptions, and deductions — are an important economic development tool that states use to attract new businesses, create jobs, and diversify their economies. The more a state can improve its incentives, the greater the business investment that will result. That said, incentives are a

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JOINT ECONOMIC & COMMUNITY DEVELOPMENT BOARD OF WILSON COUNTY GC Hixson • 615-443-1210 • gchixson@doingbiz.org www.DoingBiz.org JECDBofWilsonCountyTN JECDBofWilsonCounty

WARNING: Joining companies like Under Armour, Wonder Porcelain, and FedEx in Wilson County, Tennessee may result in an increased heart rate and shortness of breath. Don’t worry, it just means you’re excited.

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significant chunk of the state budget, totaling billions of dollars every year. And, because of fierce competition between states, these packages continually get more expensive. Therefore, legislators are demanding more in-depth information about the effectiveness of tax incentives, and how they can be improved. According to the Pew Charitable Trusts, over the last five years, 27 states and the District of Columbia have made progress in gathering this data on their economic development tax incentives. For example, Ohio, which ranked first in improved economic development policies, has implemented a plan for regular evaluation of tax incentives and also established a legislative committee to study tax incentives. Third-ranked Alabama is following a similar plan and also hired a contractor to develop a set of best practices for evaluating incentives. When lawmakers gain this information, they usually act on it. “Policymakers in numerous states have made changes to incentives that were consistent with the findings or recommendations of evaluations,” writes Pew Charitable Trusts. “Changes both large and small — from ending ineffective programs to subtly modifying the design or administration of incentives — can greatly improve the effectiveness of state economic development efforts.” The number-two ranked state in this category, Michigan, also was ranked the most improved in CNBC’s 2017 “America’s Top States for Business.” Among the changes implemented in Michigan were a comprehensive overhaul and simplification of the state’s corporate income tax and passage of a right-to-work law. Sometimes all lawmakers have to do is listen to business. In response to calls from the Arizona business community for streamlined regulation, the Arizona legislature approved fundamental changes in the administration of Arizona’s transaction privilege tax system, streamlining the process and eliminating the need for multiple (state and local) tax licenses, tax returns, and tax audits. Economic development is also bolstered by supporting entrepreneurs and startups. Wisconsin provides business startups and early-stage companies with funding sources and a network of industry accelerators, usually associated with post-secondary schools throughout the state. To strengthen this effort, the Wisconsin Economic Development Corporation recently launched its Entrepreneurship Support pilot program, which provides grants between $10,000 and $100,000 to eligible Wisconsin nonprofit organizations or communities for projects that promote entrepreneurship.

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site consultants survey

2017

SPONSORS

ALABAMA

Georgia Ports Authority Georgia ports provide greater scheduling flexibility and market reach with direct links to I-95 and I-16, on-terminal rail, and 35 weekly container ship calls. The Savannah market features 21,000 acres ready for construction, while Georgia offers a business-friendly tax structure and targeted workforce training. Stacy Watson, General Manager Georgia Ports Authority P.O. Box 2406 Savannah, GA 31402 912-964-3879 • Fax: 912-964-3869 swatson@gaports.com www.gaports.com

FLORIDA

Georgia QuickStart Georgia QuickStart®, the nation’s oldest and most successful workforce training organization, provides comprehensive, customized training — free of charge — to qualified companies locating or expanding in Georgia to ensure the highest quality workforce required for business success.

AIDT AIDT, Alabama’s primary workforce training program, arms the state’s workforce with the specific skills needed for new and expanding industry. Since 1971, the program has played a critical role in preparing Alabama’s workforce and in building industry in the state. Ed Castile, Director AIDT One Technology Court Montgomery, AL 36116 334-242-4158 • Fax: 334-242-0299 info@aidt.edu www.aidt.edu Enterprise Florida, Inc. From a talented workforce to a strategic geographic location, Florida has the breathing room businesses need to grow. Freedom from high taxes and prohibitive regulations make Florida the #1 tax climate in the Southeast and 2nd-best state for business in the U.S. Learn how Florida can help your business thrive. Tim Vanderhoof, Senior Vice President Business Development Enterprise Florida, Inc. 800 N. Magnolia Ave, Suite 1100 Orlando, FL 32803 tvanderhoof@EnterpriseFlorida.com www.enterpriseflorida.com City of Cape Coral Cape Coral, Florida, consistently ranks among the top 10 areas for business start-ups. The largest city in Southwest Florida, Cape Coral is known for its attractive waterfront, competitive cost of living, and rapidly growing commercial base. The Economic Development Office provides assistance for business relocations and expansions to Cape Coral. Visit www.bizcapecoral.com to learn why this tropical city is the ideal fit for your business. Dana Brunett, Manager, Economic Development City of Cape Coral 1015 Cultural Park Blvd. Cape Coral, FL 33990 866-573-3089 or 239-574-0444 ecodev@capecoral.net www.bizcapecoral.com

GEORGIA

Georgia Department of Economic Development The Georgia Department of Economic Development is the state’s sales and marketing arm, the lead agency for attracting new business investment, encouraging the expansion of existing industry and small businesses, aligning workforce education and training with in-demand jobs, locating new markets for Georgia products, attracting tourists to Georgia, and promoting the state as a destination for arts and location for film, music, and digital entertainment projects, as well as planning and mobilizing state resources for economic development. Tom Croteau, Deputy Commissioner, Global Commerce Georgia Department of Economic Development 75 5th Street NW, Suite 1200 Atlanta, GA 30308 404-962-4000 communications@georgia.org www.Georgia.org

Rodger Brown, Executive Director Georgia QuickStart® 75 Fifth St., N.W., Ste. 400 Atlanta, GA 30308 404-253-2800 • Fax: 404-253-2821 Rbrown@georgiaquickstart.org www.GeorgiaQuickStart.org

INDIANA

Indiana Municipal Power Agency (IMPA) IMPA is a wholesale power provider to 59 communities in Indiana and Ohio. IMPA is proud to partner with its member communities and their local economic development professionals, to support their economic and community development efforts. Bryan Brackemyre, Director of Marketing and Economic Development Indiana Municipal Power Agency 11610 North College Avenue Carmel, IN 46032 317-575-3879 • Mobile: 317-903-9721 bryanb@impa.com http://www.impa.com

IOWA

Iowa Economic Development Authority Iowa offers lower operational costs, a fair regulatory environment, and a strong, diverse economy. Companies thrive due to the collaboration among business leaders, government, and educational institutions. The skilled workforce, plus ideal quality of life, positions Iowa for future growth. Visit iowaeconomicdevelopment.com to learn more. Debi Durham, Director Iowa Economic Development Authority 200 East Grand Avenue Des Moines, Iowa 50309 515-725-3000 info@iowaeda.com www.iowaeconomicdevelopment.com

AREA DEVELOPMENT | Q3/2017

SPONSORS KENTUCKY

MICHIGAN

Joint Economic & Community Development Board of Wilson County Wilson County is strategically located in the center of thriving Middle Tennessee with access to three interstates, rail, and an international airport. Wilson County truly has something of interest for everyone. From Cumberland University to major corporate headquarters and state parks to modern suburbs, the county offers a dynamic mixture of opportunity, prosperity, and experience. G.C. Hixson, Executive Director Joint Economic & Community Development Board of Wilson County, TN 115 N Castle Heights Ave., Suite 102 Lebanon, TN 37087 615-443-1210 Fax: 615-443-0277 gchixson@doingbiz.org www.doingbiz.org

MISSISSIPPI

Tennessee Department of Economic & Community Development It’s no accident that some of the biggest and most respected brands in the world have chosen to call Tennessee home. We provide companies a central location with unparalleled infrastructure, a highly qualified workforce backed by game-changing education reform, a low tax burden, and a collaborate environment with a business-friendly administration. Allen Borden, Deputy Commissioner of Business, Community and Rural Development Tennessee Department of Economic and Community Development 312 Rosa L. Parks Ave. Nashville, TN 37243 615-532-1294 allen.borden@tn.gov TNECD.com

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. Kentucky’s new right-to-work status and pro-business approach is attracting a wide variety of industries, including automotive manufacturing, logistics and distribution, national headquarters, and more. Mandy Lambert, Commissioner for Business Development Kentucky Cabinet for Economic Development 300 West Broadway Frankfort, KY 40601 502-564-7670 Econdev@ky.gov www.thinkkentucky.com 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? Michigan is consistently in the top states for major new and expanded facilities. Nicole Whitehead, Director, Sales & Service Operations Michigan Economic Development Corporation 300 N. Washington Square Lansing, MI 48913 517-719-3157 whiteheadn@michigan.org www.michiganbusiness.org/AD Mississippi Development Authority Consistently ranked as a top state for business, Mississippi’s portfolio of national and global companies continues to grow. From the state’s one-stop permitting process to its business-friendly climate, more companies are discovering how a Mississippi location and workforce give them a competitive advantage. Find out why Mississippi works at www.mississippi.org. Billy Klauser, Chief Economic Development Officer Mississippi Development Authority Post Office Box 849 Jackson, MS 39205 800-360-3323 • Fax: 601-359-4339 bklauser@mississippi.org www.mississippi.org

TENNESSEE

Bristol Tennessee Essential Services BTES provides 10 gigabit fiberoptic service and reliable, low-cost TVA power to an impressive inventory of publicly owned, pad-ready sites in beautiful northeast Tennessee. With prime transportation access, strong development partnerships, and a skilled, ready workforce, Bristol is built for business. April Eads, Business Development Manager Bristol Tennessee Essential Services 2470 Volunteer Parkway Bristol, TN 37620 423-793-5532 aeads@btes.net www.networkstn.com

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TEXAS

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 Odessa Development Corporation Odessa is known for its rich resources, and boasts world-class cultural and recreational opportunities. Lucrative financial incentives and a qualified workforce make it easy to do business here. Odessa has proven to be the ideal place for your business. Come and discover the return our resources can provide for you. Wesley Burnett, CEcD, MPA, Director of Economic Development Odessa Development Corporation 700 N. Grant Ave. Odessa, TX 79760 877-363-3772 or 432-333-7880 Fax: 432-333-7858 wburnett@odessaecodev.com info@odessaecodev.com odessatex.com

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White Papers:

Aggregated from the top consultants, think tanks and institutions, and distilled into usable information • Reviewable Archives: Search the Area Development archives for content, opinion, and reports spanning the last five years from the top industry minds

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Providing What Others Don’t

GOVERNMENT POLICY/ SUSTAINABILITY

The Value of Sustainability in Business Operations Despite the administration’s focus on removing environmental protections, businesses’ sustainability efforts generally have a positive effect on their image as well as bottom line. By Cindy Madrick, Vice President of Business Development, Cornerstone Environmental, Health and Safety, Inc.

n his opening statement at a June budget hearing, EPA Administrator Scott Pruitt reiterated the agency’s commitment to a “back-to-basics” agenda1 focused on removing environmental protections that inhibit job creation. As part of the administration’s plan to allow states to take over many of the agency’s responsibilities, Pruitt also stressed that “a one-size-fits-all strategy to achieve environmental outcomes doesn’t work.” Furthermore, the President’s staff has stated that the proposed budget aims to reduce redundancies and inefficiencies and prioritize EPA’s core statutory mission of providing Americans with clean air, land, and water as well as ensuring safe chemicals — the

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proposal includes a 31 percent cut in the budget. Additionally, the White House has indicated that EPA should rewrite certain Obama-era rules that have curbed carbon emissions. In January President Trump had signed an Executive Order for a hiring freeze, which was lifted in April. But in light of other potential budget cuts, EPA is not rushing to staff up. Some report that the President could move to dismantle EPA. However, there are so many institutional, political, and legal obstacles, that the prospect of dismantling EPA is highly unlikely. After all, changing laws takes a very long time and is an arduous process. In addition, it is widely documented that the majority of Americans (including both Democrats and Republicans) support EPA and its efforts. Most certainly there will be budget cuts, but Congress would encounter high public resistance for efforts beyond the back-to-basics initiatives. Whether you support President Trump and EPA Administrator Pruitt’s plans or not, consensus is that EPA will remain intact and much of its core statutory mission will continue. Regardless, environmental stewardship remains an important topic and, to many, a critical

component for the business community and beyond.

The Case for Environmental Stewardship The reasons for organizations to implement environmental stewardship programs may vary — reducing waste and inefficiencies, “doing the right thing,” a spiritual duty of being a good steward of the environment. Regardless of the underlying motivation, the inclusion of an environmental sustainability program into a business model is a wise choice for any business owner. The beneficial results of such programs vary widely: less expense and higher profit, improved regulatory agency relations, reduced waste, enhanced continuous improvement of operation, innovation, expanded market potential, customer loyalty — to name a few. If you were to break those down further, you would also find reduced energy usage in electricity, water, gasoline, and natural gas. Small, but significant, operational changes can also result in reduced labor hours on one process that can generate higher production in other areas. Each of these greater efficiencies improves the bottom line of a business. Around the world, businesses continue to evaluate and implement environmental sustainability pro-

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grams. Such programs are extensive and increasing across industries and municipalities: automotive, medical device, aerospace, cabinetry, printing, plastics, farming, community recycling, or landscaping — even Disney! Whether grand or minimal projects, businesses stand to gain economically from effective sustainability programs.

Complying With International Standards The International Organization for Standardization (ISO) is a non-government organization and is an international standard-setting body with over 150 countries participating. An organization may choose to adopt one or more of the standards to improve its business practices, or may be compelled to implement these programs based on their customers’ requirements. ISO 14001, the Environmental Management Standard (EMS), focuses specifically on managing a company’s environmental responsibilities. For example, in the automotive industry, it is common for original equipment manufacturers (OEMs) to require their supply chain to conform to ISO 14001 and IATF 16949. The latter is the international Quality Management System (QMS) standard for the automotive supply chain sector. The focus is multi-faceted and includes audits, improved communication, life cycle analysis, and consideration of environmental challenges such as climate change, in addition to compliance management. Businesses may implement environmental management systems or conform to ISO 14001 as a result of a customer requirement, marketing initiative (to gain market share or increase customer awareness) or simply because it is the right thing to do — the drivers vary. Regardless of EPA budget cuts and rule rewrites, environmental compliance and environmental stewardship will not go away and remain significant to the global community — including numerous non-governmental organizations (NGOs) that lead the charge.

Effects on a Company’s Image and Market Further, the reputation of a company can be affected — positively or negatively — by environmental actions. Customer interest and loyalty are influenced by a company’s sustainability practices. A Nielsen Global Survey on Corporate Social Responsibility2 conducted across 60 countries found that 55 percent of consumers are willing to pay more for products and services from companies with sustainability programs. Conforming to an ISO standard or implementing an EMS can result in an increase in business and/or obtaining a new client. In addition, employees are known to seek out employers who take a proactive approach to environmental affairs. Forbes noted that one of the top-five factors in attracting employees is for their employer’s ethics to match their own values (e.g., social responsibility), and that 50 percent of mil-

lennials are more likely to search for such an employer.3 On the flip side, environmental violations by a company (online databases are available to anyone today) allow the public to see violations or a major pollutant release. Violations can have an adverse effect on a company’s relationship with business partners, vendors, and customers. Paying a fine as a result of a violation has no benefit to a company’s bottom line (or reputation). In light of the current climate at EPA, there is a trend of increased enforcement versus education and assistance to businesses. The potential for enforcement penalties for noncompliance are very steep; for example, as much as $14.7 billion for Volkswagen to remedy their Clean Air Act violations.4 The maximum civil daily penalty for a Class I EPCRA violation is $53,907,5 while the RCRA maximum penalty is $70,117 per day, per violation.6 A more prudent approach is to allocate resources for environmental management (including compliance efforts). This could include developing, implementing, and maintaining an EMS or conforming to ISO 14001. If a company has a global footprint, there are additional sustainability standards and policies such as the European Union’s Restriction of Hazardous Substances (RoHS) and the Registration, Evaluation, Authorization, and Restriction of Chemicals (REACH) that require businesses to avoid or strictly regulate chemicals. In the United States, California has a unique law in Proposition 65 (Prop 65 or Safe Drinking Water and Toxic Enforcement Act), intended to help Californians make informed decisions about chemicals dangerous to human health. Without complying with these kinds of policies or rules, businesses are limited in the extent of their potential market.

Some Specific Examples In Indiana, the Environmental Stewardship Program (ESP) and the Partners for Pollution Prevention comprise over 70 entities selecting energy conservation programs customized to their industries. In order to become a member of the ESP program, organizations must develop, implement, and maintain an EMS. Continued membership requires an assessment of an organization’s EMS by a third-party every three years (at a minimum). Three case studies of Indiana ESP members exemplify the potential for return on investment, improved regulatory relations, and continuous improvement of operations through implementation of their environmental programs: Subaru of Indiana Automotive (Subaru), Carrier Corporation, and American Commercial Lines. Subaru has seen exceptional reduction in waste in the last two decades. In 2004, the company achieved zero landfill status, meaning the operation does not send any waste to landfill. Through objectives identified in its EMS, the company has created a system that reduces, reuses, or recycles all byproducts. For example, scrap metal is sent to recycling for new car parts, AREA DEVELOPMENT | Q3/2017

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shipping materials are reused perpetually, and the automaker has eliminated waste from the weld-testing process by changing its process. Subaru has reduced waste 46 percent since 2000! In 2016, it saved $2.4 million through its sustainability programs. Advantages of connecting with regulators include having a voice in environmental roundtables with the IDEM Commissioner, being able to work with the same permit writer for renewals or amendments, and discussion of environmental innovation in environmental stewardship. American Commercial Lines noted that its sustainability program is an excellent way to differentiate from the competition. The firm “receives substantial financial benefits by eliminating waste streams and preventing pollutions.” Risk aversion and reduction is another gain. Fewer waste streams going off site means less risk for the community; fewer hazardous waste on site reduces risk for employees. Carrier Corporation has seen the benefits from partnering with local environmental entities: reduction in waste, innovation, augmented culture. Its EMS allowed the company to move its financial resources from environmental recording, reporting, and writing permits toward continuous improve-

ment in business activity. Even a small solution had a big impact, such as how products were washed, which reduced Carrier’s water usage by 21 percent over just a couple of years. For more on these three case studies, watch Gerry Dick of Inside Indiana Business as he speaks with Jean-Francois Brossoit, plant manager, at Carrier Corporation; Tom Easterday, senior vice president of Subaru Indiana Automotive; and Sam George, vice president of Environmental Compliance at American Commercial Lines, about being members of the Indiana Environmental Stewardship Program. 7 In sum, the way of the future absolutely points to businesses being environmentally responsible. It is not merely feeling good about conserving the environment, it is essential to survival. ■

Being environmentally responsible is not merely about feeling good — it’s essential to business survival.

AREA0718.indd 1

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https://www.epa.gov/newsreleases/epa-launches-back-basics-agenda-pennsylvania-coal-mine http://www.nielsen.com/us/en/press-room/2014/global-consumers-are-willing-to-put-their-moneywhere-their-heart-is.html 3 https://www.forbes.com/sites/ashleystahl/2016/10/12/employers-take-note-heres-what-employeesreally-want/#26459f271c83 4 https://www.epa.gov/enforcement/enforcement-annual-results-fiscal-year-2016 5 http://www.environmentallawpost.com/2016/07/legislation/maximum-civil-penalties-forenvironmental-violations-set-to-dramatically-increase/ 6 https://www.lion.com/lion-news/july-2016/epa-raises-civil-penalties-for-environmental-nonco 7 http://www.in.gov/idem/prevention/pages/videos/esp_video.htm 2

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GOVERNMENT REGULATION

Understanding Federal Tax and Trade Reform Proposals What do federal tax reform proposals mean for state taxes and the potential impact on discretionary incentives? By Leslie Macek and Christine Spratley, Senior Managers, Credits & Incentives – Location Investment Services, EY

Key States Conformity Structure As of January 11, 2017

OH doesn’t have a corporate income tax; applies to passthrough entities and personal income tax

Fixed Rolling Selective No income tax

NH conformity date was recently updated to Dec. 31, 2015 (had been Dec. 31, 2000)

CA’s personal income tax law differs in its conformity to the IRC compared to CA’s corporate tax law

pon taking office, President Trump made it clear that early priorities would be to overhaul the current U.S. tax structure and renegotiate trade agreeTX conformity date is Jan. 1, 2007 ments in an effort to make the United States a more attractive place for companies that produce and manufacture goods — a sentiment shared by the Republican advance a tax reform that “reduces tax leaders in the House of Representatives. rates as much as possible, allows ‘unThe current tax reform plans outlined by President Trump on April 26, 2017 precedented’ capital expensing, places and the House GOP Blueprint (see accompanying table) go about promoting a priority on permanence, and encourgrowth through a number of commonalities: reducing individual and corporate ages U.S. companies to bring back jobs income tax rates, general elimination of tax breaks for special interests, etc. These and profits from overseas.”1 plans effectively create a broader federal corporate income tax base while reducing The result of U.S. tax reform may the corporate income tax rate. also impact the direction of future On July 27, 2017, the “Big Six” (a group of administration and congressional trade proposals currently being evalunegotiators) announced that they had set aside border adjustability in order to ated by President Trump. On February AREA DEVELOPMENT | Q3/2017

28, 2017, while speaking to a joint session of Congress, President Trump stated, “We must create a level playing field for American companies and workers. I believe strongly in free trade but it also has to be fair trade.” He repeatedly stated his intention to renegotiate or withdraw from the North American Free Trade Agreement (NAFTA) during his campaign, and a short time later, on May 18, became the first American president to begin renegotiating a comprehensive free trade agreement. NAFTA trade rules have led to integrated supply chains among companies in the U.S., Canada, and Mexico for the past 23 years. Companies with strong international activities such as these will want to monitor both trade and tax proposals and consider the potential impacts on their businesses.

State Tax Reform: The Response to Federal Changes When discussing the impact that federal tax reform will have on state taxes, it is important to consider both the income tax base (the amount of income that is subject to tax) and the income tax rate that is applied to the base. The gen-

eral principle for federal tax reform is to broaden the base and lower the rate. States use the Internal Revenue Code (IRC) as the starting point for determining state taxable income; therefore, if the IRC changes, for example by deduction, elimination or credit modification, which broaden the federal tax base, barring any additional state tax law changes, these will broaden the state tax base as well. States differ on how they conform to federal changes, following a rolling, fixed or selective conformity structure. The accompanying map illustrates each state’s conformity structure. Sixteen states are either currently undertaking comprehensive studies of their tax system or have recently completed studies with final recommendations; but with federal tax changes potentially being released in 2017 or 2018, it is unlikely that there will be enough information to trigger these states to make dramatic changes to their own structures accordingly. Regardless of how states handle federal conformity to the IRC, it is important to also look at how they may alter their tax rate. The federal government is expecting tax reform to

R E C E N T TA X R E F O R M P L A N S

TA X P R O P O S A L S

TRUMP PROPOSAL AS OF APRIL 26

HOUSE GOP BLUEPRINT

Top corporate tax rate (now 35%)

15%, corporate alternative minimum tax (AMT) eliminated

20%, corporate AMT eliminated

Top pass-through tax rate (now 39.6%)

15% rate for pass-through entities that retain profits within the business

25% top rate for active business income passed through to individuals

Taxation of future foreign earnings

Territorial system

Territorial tax system with 100% exemption for dividends from foreign subsidiaries; border adjustments (exempts exports, taxes imports)

Mandatory tax on previously untaxed accumulated foreign earnings

Calls for one-time tax but rate unspecified, to be negotiated with Congress

8.75% for cash/cash equivalents, 3.5% otherwise, payable over eight years

Cost recovery

Not addressed in April 26 proposal; previously mentioned expensing for manufacturers

100% expensing: tangible, intangible assets, except land

Interest expense

Not addressed; previously evoked terms for manufacturers electing to expense capital investment suggesting they lose the deductibility of corporate expense

No current deduction will be allowed for net interest expense

Other business tax preferences

Mentioned intent to “eliminate tax breaks for special interests”

Calls for tax breaks for special interests to generally be eliminated, except for R&D credit and last in, first out (LIFO)

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be somewhat neutral from a budget prospective, despite the lower rate, because the lower rate is expected to be applied to a broader base. While those states that have some level of conformity are likely to see a broader base, they set their own tax rate. State income tax rate increases and decreases remain at the discretion of the state legislature. When evaluating whether a state will choose to mirror the anticipated federal corporate income tax rate reduction, it is important to consider the state’s fiscal position, its political alignment, and the term limit of the existing governor. For example, as of March 2017, Republicans controlled 32 state legislatures, including those in Florida, Kansas, North Dakota, Texas, Wisconsin, and Wyoming; these six states anticipate a fiscal year 2017 revenue shortfall. Due to the projected revenue shortfall, these states may not follow the federal government in making a proportional tax rate cut in order to fill that revenue shortfall. Another 10 states — Alaska, Colorado, Connecticut, Illinois, Louisiana, Maryland, Massachusetts, New Mexico, Pennsylvania, and Virginia — have legislatures under split-party control but also have a fiscal year 2017 revenue shortfall. These states, as well as states with Democratic-controlled state legislatures, could very well maintain their corporate income tax rates or implement a smaller rate cut in the short term to reap the benefits of the additional income tax revenue and wait to decrease rates, strategically aligning with re-elections.

Indirect Impact to State Discretionary Incentives

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Although the long-term directive of how states will handle federal tax reform may vary, there is likely to be a short-term surge in state revenue as a result of a broader tax base… It is likely that we will see additional funds allocated toward discretionary incentive programs.

The anticipated increase in capital investments and jobs through a reshoring of operations by U.S.-based companies, coupled with increased foreign direct investment (FDI), driven by tax and trade reform discussed above provides a fertile landscape for states to compete for the additional spend and jobs. For example, the Texas Taxpayers and Research Association (TTARA) has already begun reaching out to manufacturing companies, reminding them of the ability to benefit from property tax relief under Chapter 313 if certain conditions are met. In conjunction with state tax reform, state and economic development groups are reevaluating how effective their current tax credit and incentive offerings are and how well they align with the expected impacts of tax reform. With an increase to the state tax base through IRC conformity, and in

the absence of a proportional state income tax rate reduction, states could shift revenue to discretionary incentive programs to more competitively vie for these jobs and investments against other states that have discretionary programs. Several states have either passed or proposed recent legislation intended to attract manufacturing to their state. For example, the Wisconsin Economic Development Corporation (WEDC) announced special legislation to pass a $3 billion incentives package to Foxconn Technology Group after the company announced a $10 billion manufacturing facility in Wisconsin.2 Maryland recently enacted the More Jobs for Marylanders Act of 2017, which provides a variety of tax incentives for up to 10 years for new manufacturing operations. Illinois recently passed House Bill 0162, revamping its jobs tax credit, which includes manufacturing as a targeted industry. According to the EY 2015 US Investment Monitor,3 the top five states with the highest capital investment (Alabama, California, Kentucky, Louisiana, and Texas), as well as the top five states with the highest job creation in 2016 (California, Florida, Ohio, Tennessee, and Texas), all have competitive discretionary incentive programs targeted at the manufacturing industry, including California Competes, Florida’s Qualified Target Industry Tax Refund, JobsOhio, and the Texas Enterprise Fund. Although the long-term directive of how states will handle federal tax reform may vary, there is likely to be a short-term surge in state revenue as a result of a broader tax base. This, combined with the competitiveness between states to capture more than their fair share of any increases in jobs and investments, means it is likely that we will see additional funds allocated toward discretionary incentive programs. At EY, our clients are already benefiting from this as they obtain more attractive and more creative discretionary packages than in the past. ■ The views expressed are those of the authors and do not necessarily reflect the views of Ernst & Young LLP.

“Joint Statement on Tax Reform,” Speaker of the House of Representatives website, http://www.speaker.gov/press-release/joint-statement-tax-reform, accessed 07 27 2017.

“FOXCONN IN WISCONSIN,” In Wisconsin website, http://inwisconsin.com/wp-content/ uploads/2017/07/FOXCONN-WISCONN-MEDIA-KIT.pdf, accessed 07 30 2017.

2015 US Investment Monitor, Ernst & Young LLP, 2015, see www.ey.com/Publication/vwLUAssets/ EY-2015-us-investment-monitor/$FILE/EY-2015-us-investment-monitor.pdf.

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SUPPLY CHAIN/ LOGISTICS

Drivers of Intermodal Activity Transportation costs, finite trucking capacity, and the rise of e-commerce are among the leading factors responsible for the growth in intermodal activity. By Kevin Mohoney, Vice President, Ridge

ntermodal connectivity is a priority in many industrial real estate searches today, enhancing a site’s appeal among tenants and investors alike. But whether or not a facility takes immediate advantage of a site’s intermodal access, the capability to move product via rail or truck, and in some cases sea or air, has become a common tenant requirement. To understand what is driving the recent growth in intermodal activity, it may help to remember that supply chains have fueled economic activity and the affluence of civilizations throughout history. The term “intermodal” may be a product of the 20th century, but the concept of linking multiple transportation modes has been around since Silk Road traders packed Far East goods over land to waiting merchant ships on the Mediterranean. Rail entered the picture in the 19th century, introducing comparatively rapid freight to existing networks of waterborne shipping and horse-drawn wagons. The last century added trucking to the equation as an expedient method of transporting merchandise in volume to locations inaccessible by rail or water, traversing the distance between ports or railheads to manufacturers, and from warehouses to retail stores. As the growth of American cities outpaced rail expansions, new roads and highways enabled trucking to dominate the freight industry. Then and now, supply chains adjust continually to make efficient use of available resources and transportation methods in moving materials and finished goods.

Today’s Definition of “Intermodal” Today, however, intermodal activity refers chiefly to the movement of containers via some combination of ship, rail, or truck. Intermodal yards operated by the

major rail providers are designed to transfer containers between railcars and trucks for inland ports, or direct from cargo ships to trains or trucks for seaports. Rail intermodal traffic has mushroomed, from 3.1 million shipping containers and truck trailers transported by train in 1980, to more than 13 million moved in each of the past three years, according to the American Association of Railroads.1 This is the model that moves the majority of consumer goods filling American households. The Intermodal Association of North America (IANA) estimates that railcars move 17 million intermodal loads in the United States each year, generating more than $20 billion in revenue for the 10 largest rail carriers. In fact, more than a quarter of U.S. railroad revenue now comes from intermodal freight, the IANA found.2 The number of intermodal yards is also growing. Already, 60 North Amer-

RidgePort Logistics Center is a 2,500-acre industrial park, located 35 miles southwest of Chicago, featuring immediate access to I-55 and fronting a two-mile section of the BNSF mainline running from ports of Los Angeles and Long Beach to Chicago.

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ican ports handle shipping containers, as do more than 1,000 inland facilities, and more intermodal yards are in planning and development across the country. What is fueling this resurgence of multimodal freight in the United States, making intermodal capability a priority for so many industrial users?

Drivers of Intermodal Growth There are many reasons for this rail renaissance and the subsequent upsurge in intermodal activity. Contributing factors range from deregulation of rail service providers and shipping companies beginning in the 1970s, to the rising volume of consumer goods imported from China and other low-cost labor markets. More recently, however, a few factors As the growth stand out as the leading impeof American tus for intermodal growth.

cities outpaced

Transportation costs: More rail expansions, than 60 percent of supply chain new roads costs involve transportation, so it is only natural that compaand highways nies gravitate to service providenabled trucking ers and methods offering the to dominate the lowest transportation expense. Trains are roughly four times f r e i g h t i n d u s t r y. more fuel-efficient than trucks, providing an advantage on the price of fuel, but rail alone seldom offers sufficient access to carry goods from a point of origin to destination. In order to take advantage of rail, supply chain managers must move material to and from the rail segment of a journey. That requires a distribution facility on one or both ends of the rail leg, contributing to the demand for intermodal yards and associated industrial development. Finite trucking capacity: Federal regulations limit a driver’s hours behind the wheel and require rest periods to reduce the incidence of fatigue-related accidents. An aging workforce and high driver turnover have further compounded the ongoing shortage of trained labor in the sector. And as same-day delivery becomes more common, job opportunities are increasing for short-haul drivers within metropolitan areas; this has increased the difficulty of staffing long-haul companies, luring away potential drivers with the prospect of sleeping in their own beds at the end of each workday. These limitations on trucking have increased the perceived value of rail, where carrying capacity has been increasing. Practices such as the conversion from boxcars to shipping containers, which can be double-stacked on rail lines up to two miles long, have increased train capacity dramatically over the past 20 years. The rise of e-commerce: Modern shopping habits and evolving consumer expectations are bringing profound change to distribution practices. Online purchases accounted

for 11.7 percent of all retail sales in 2016, according to the U.S. Commerce Department,3 and many economists expect that volume to double or triple over the next decade. Customers now expect delivery in one or two days, rather than in the five to seven days that were typical a few years ago. As these trends continue to accelerate, it is becoming critical for supply chain managers to establish a reliable and diversified multimodal distribution chain. Retailers including Amazon are still determining the best formula to meet today’s customer expectations, but most scenarios involve an increased reliance on distribution and fulfillment centers in or near major population centers to process orders close to customers. Finished goods generally reach these facilities via a multimodal channel, which often begins at one of the country’s major seaports. In choosing a location for a distribution or fulfillment center, a supply chain manager must balance the savings potential of sites near an intermodal yard, typically on the outskirts of population centers, against last-mile delivery costs that increase with the distance to those customers. As more transactions move online, many traditional brick-and-mortar retailers have reduced the size of onpremise inventories, using showrooms in physical stores as a place where customers can make purchases or examine merchandise before buying it online in their preferred size and color. But with smaller on-site inventories, retailers must place a greater emphasis on establishing a diversified and reliable supply chain that includes multimodal capabilities.

Mitigating Risk Just as a prudent investor seeks to reduce exposure in any one asset type within a portfolio, supply chain managers can mitigate risk by diversifying their distribution methods. Rising transportation costs, driver shortages, and port labor disputes are all potential sources of disruption within a supply chain. By providing access to multiple highways and proximity to an intermodal yard, seaport, or airport with cargo service, supply chain managers can mitigate the impact of unforeseen disruptions in any one transportation component. In our experience, industrial tenants have shown a preference for proximity to rail and intermodal yards, whether or not they plan to access those services in the near term. As supply chains continue to evolve, and regardless of the dominant mode of transit, intermodal facilities and associated industrial developments will remain critical components in serving the nation’s growing population centers. ■ 1 2 3

https://www.aar.org/BackgroundPapers/Rail%20Intermodal.pdf https://intermodal.org/resourcecenter/docs/IntermodalFactbook.pdf https://www.digitalcommerce360.com/2017/02/17/us-e-commerce-sales-grow-156-2016/

KEVIN MOHONEY is vice president of Ridge, the industrial arm of Transwestern Development Co., a leading provider of corporate real estate development and investment in state-of-the-art warehouse, distribution, and manufacturing facilities throughout North America. Ridge’s principals have been involved in the development, construction, ownership and management of more than 138 million square feet of institutional-quality real estate and have an average 25 years of experience in the real estate industry. Ridge is based in Chicago, with regional offices across the U.S. in Atlanta, Dallas, Los Angeles, Houston, and Harrisburg, Pennsylvania. AREA DEVELOPMENT | Q3/2017

FACILITY PLANNING

Shedding Light on the Workplace Natural light in the workplace enhances “human energy,” which translates into a benefit for business. By Brandon Tinianov, Vice President of Business Development, View, Inc.

Letting light into buildings naturally energizes people, improving work performance. Shown here is the lobby of View’s Dynamic Glass facility.

n today’s modern knowledge economy, the most successful organizations thrive and grow on human energy — or the sum of workers’ health, productivity, and happiness. From Silicon Valley startup offices to industrial facilities, space designed with what I like to call the “human energy factor” is generating immense shared value for property owners and their tenants. This includes everything from improving employee productivity through a stronger, more satisfied workforce to ancillary benefits for facility managers and building owners alike, from higher rents to lower tenant turnover. Let’s face it: most buildings are “unnatural” places that take a toll on their inhabitants’ human energy. Each day, a certain amount of human energy enters the building, is exhausted, and exits. To improve the human energy factor for individuals both at work and at home, a workspace must be able to anticipate and respond to the employees and their tasks. In an industrial facility, this may be more critical than ever given the stresses of modern manufacturing. While these needs may vary, human energy generally is impacted by personal fulfillment, exercise, nutrition, and socialization, among other factors. But one of the most important factors for promoting human energy is also its most often overlooked — natural sunlight.

A Lot of Benefit for a Little Natural Light Today, people spend around 90 percent of their day inside, often away from

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windows and removed from nature, according to a 2017 report by Harvard School of Public Health.1 This is something to worry about, considering humans evolved outside in dynamic environments. For most of human existence, sunlight dictated daily life and biological rhythms. When we shutter ourselves inside all day bathed by artificial lighting, we wreak havoc on our circadian rhythms, which can lead to sleep disorders and other well-known health issues. The business implications of the human energy factor are becoming increasingly apparent. As people are an organization’s largest expense and most valuable resource, even a small increase in productivity or decrease in costs can amount to a major boon for the bottom line. To put the costs into perspective, for every $1 spent on energy, $10 is spent on real estate, and $100 is spent on people. According to a 2015 study by the University of Oregon, Eugene (UOE) of some 7,600 office workers,2 those who work in offices with natural elements — of which light is an integral factor — are 6 percent more productive and 15 percent more creative overall. Meanwhile, workers in offices with poor lighting quality and obstructed window views take significantly more sick leave than those in offices with good natural light.

Daylight Improves Occupant Health That sunlight is good for us is a no-brainer, yet companies continue to subject their most valuable assets to dark and unnatural environments.

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And the benefits of increased access to natural lighting go well beyond productivity and into the direct health of building occupants. Daylight exposure and access to windows at work are linked to improved sleep duration and mood, reduced sleepiness, lower blood pressure, and increased physical activity, the University of Oregon report states. While increased natural light elevates human energy, a lack of it is associated with physiological, sleep, and depressive symptoms. The introduction of natural light can lead to improved cognitive function at work and improved sleep quality at home. Conversely, the lack of sunlight can contribute to ailments such as seasonal affective disorder, a type of depression. Furthermore, people working in offices with windows sleep an average of 46 minutes more per night than workers without windows, according to a 2013 study by Northwestern University.3 This leads to better work performance the next day, supporting the concept of the human energy factor, which is based on the simple concept of creating workplaces that let light into buildings to naturally energize people.

Natural Light Lifts Up Property Values Natural light’s benefits may make HR happy, but they also help real estate developers, builders, and real estate investors, who have much to gain from creating healthy, human energy-friendly buildings. A majority of U.S. building owners (73 percent) who recognize the impact of healthy, light-filled buildings report faster occupancy rates, and 62 percent report higher property values, according to a 2016 report by Dodge Data & Analytics.4 Meanwhile, some 69 percent of building owners also report improved satisfaction due to their healthier building investments. Countless businesses already have embraced the concept behind the human energy factor. Adobe told BBC Capital5 that it had renovated its headquarters to incorporate plants,

sunlight, and views. Overstock.com chose to use dynamic glass that automatically tints to create a design that promotes employees’ exposure to natural light. McKesson’s headquarters in Virginia was also recently renovated to optimize access to natural light and uses LED fixtures that brighten and dim automatically to mimic how sunlight changes throughout the day — adapting to people’s natural circadian rhythm.6 In short: buildings where people are happy and healthy will better position a company for continued success. The best environment is bound to attract the best talent. Facility design “unequivocally” impacts employees’ decisions whether or not to work somewhere, according to a third of those polled for the UOE study. While the term is an evolution of the new but growing fields of biophilia and human wellness, the “human energy factor” describes a very real truth, applied to all businesses generating shared value for people who work inside buildings. Humans need natural light for health and happiness — give them what their minds and bodies need, and they’ll give you what your business demands. ■ 1

http://9foundations.forhealth.org/ http://www.prnewswire.com/news-releases/global-study-connects-levels-of-employee-productivityand-well-being-to-office-design-300058034.html 3 https://www.psychologytoday.com/blog/the-athletes-way/201306/exposure-natural-light-improvesworkplace-performance 4 https://analyticsstore.construction.com/smartmarket-reports/HealthierBuildings16SMR.html 5 http://www.bbc.com/capital/story/20161125-why-you-cant-afford-to-ignore-nature-in-the-workplace 6 http://fortune.com/2016/07/13/mckesson-headquarters-well-building-certification-wellness/ 2

A recognized expert in cleantech, sustainability, and building sciences, BRANDON TINIANOV is vice president of Business Development at View, Inc. (https://viewglass.com/). He is on the national advisory council to the U.S. Green Building Council (USGBC), on the board of directors of the Health Product Declaration Collaborative, a member of the California Technical Forum, and has served on the USGBC Northern California’s Board of Directors for six years, twice as chairman.

FacilityLocations.com AREA DEVELOPMENT | Q3/2017

CANADA

By Steve Kaelble

ompanies that choose a location in Canada end up with much more than just a key to a building. A Canadian business investment, in fact, provides keys to entire markets, even whole continents. That’s the magic that happens when you combine prime geography, an exceptional workforce, advanced technologies, a businessfriendly environment and favorable trade relationships. Begin with access to the continental market of North America. Nearly half a billion consumers live there, and their economic activity adds up to a GDP of about US$20 trillion. Canada shares more than 5,000 miles of border with the United States, and more than $2 billion in trade crosses that border every day. Thanks to the North American Free Trade Agreement, those who invest in Canada get preferential access to that entire, giant market. If that’s not enough, consider what is possible upon implementation of CETA, the Canada-European Union Comprehensive Economic and Trade Agreement. It passed the European Parliament earlier this year, and needs approval from EU national parliaments in order to take full effect. But when it does, that opens the door to another half billion consumers with a similar level of GDP, eliminating the vast majority of tariffs. Clearly, from the perspective of international trade, Canada can be a highly lucrative base of operations. Truth be told, it’s a lucrative market in and of itself, not even counting what lies beyond the border. It’s a nation of more than 36 million people, with a GDP of more than US$1.5 trillion. Scotiabank predicts that the GDP will be up by 2.7 percent by the end of

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2017, its best showing since 2011 — that would make Canada one of the industrialized world’s fastest-growing nations.1 None of this is a secret. Canada’s business advantages have been turning heads for quite some time now. Consider some of these accolades: • U.S. News & World Report publishes an annual “Best Countries” survey, and the most recent edition ranks Canada #2 overall. In the subcategories, Canada is the leader in quality of life, the leader in education, and second as a place to locate a corporate headquarters, among other noteworthy accolades. As the publication observes, “Canada is a high-tech industrial society with a high standard of living.” And as for corporate headquarters advantages, the

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NOTSO-SECRET THE

ADVANTAGES of a CANADIAN LOCATION

Canada’s business advantages have been recognized for quite some time, resulting in the nation receiving numerous accolades.

magazine points out Burger King’s corporate move across the border to Ontario a few years ago, resulting in tax savings in the hundreds of millions of dollars.2 • The World Bank Group lists Canada as the top country in the G20 for starting a business, and second among all of the world’s countries. Canada also ranks highly in ease of getting credit, and protection of minority investors.3 • KPMG’s Competitive Alternatives report lists Canada as having the second-lowest business costs of the countries studied, behind only Mexico. Its costs come in at just 77.5 percent of the costs in the United States. It should be little surprise, then, that when cost rankings are drilled down on

a city basis, Canadian cities tend to rank as the most favorable. Among the biggest Canadian and American cities, the three most favorable are Toronto, Vancouver, and Montreal. And when costs are compared by industry, Canada beats the U.S. across virtually all of the categories.4 • The OECD’s “Economic Outlook” paints a positive picture for Canada’s economic future, with healthy GDP growth, reasonable inflation, and a manageable unemployment rate.5 • The OECD’s “Better Life Index” ranks Canada highly in quality of life — tops among G7 nations and fifth overall.6 • When Forbes ranked the best countries for doing business, it placed Canada well ahead of the United States.7 Rankings, of course, only tell small slices of the story. What’s most important to any particular business seeking a great location? The answers vary tremendously, and as important as costs are, other factors weigh heavily, too. Consider innovation. Canadian governmental entities work hard to create an environment where tomorrow’s ideas can readily rise to the surface and thrive. Just one example of the effort is the Scientific Research and Experimental Development (SR&ED) tax incentive program. Foreign investors that have businesses established in Canada can apply for these incentives that help defray the cost of employees engaged in R&D, materials, overhead, and contract expenditures. It takes smart minds to succeed at R&D, of course, which is why education gets so much high-level attention in Canada. The country

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CANADA CONTENTS ranks at or near the top of a wide range of education-related metrics, including the percentage of the workforce that has post-secondary education, the skills and capacities that go into the World Economic Forum’s Human Capital Index,8 and the educational attainment levels of Canadian schoolchildren. Most industries benefit from Canadian levels of ingenuity and work ethic, including some of the world’s most cutting-edge and high-growth sectors. For example, Canada is a leader in both the development and adoption of Internet of Things technologies. The term refers to the wide range of devices and objects plugged into the Internet for one advanced reason or another. This was a $3 billion market in Canada in 2013, according to analyst IDC, and that should more than double by 2018.9 Helping make that happen is the nation’s low softwaredevelopment cost structure and the more than 100 Canadian master’s level programs in various applicable disciplines. Another example is robotics. Led by such advanced sectors as automotive manufacturing, unmanned aerial vehicles, and space technologies, Canadian robot orders are noticeably higher than across the continent as a whole. So are Canadian robotic shipments. Canada is even home to the continent’s first fully digital hospital, which employs a range of robotic technologies in the delivery of patient care. That’s just a small portrait of the opportunities associated with a Canadian business address. Plenty of other business sectors have equally compelling stories to share, from big data to biopharmaceuticals, financial services to functional foods, virtualization to wireless communications. •• 1

https://www.biv.com/article/2017/7/canadas-projected-gdp-growth2017-highest-2011-sco/ 2 https://www.usnews.com/news/best-countries/rankings-index 3 http://www.doingbusiness.org/rankings 4 https://www.competitivealternatives.com/ 5 http://www.oecd.org/eco/economicoutlook.htm#cns 6 http://www.oecdbetterlifeindex.org/#/11111111111 7 https://www.forbes.com/best-countries-for-business/list/#tab:overall 8 https://www.weforum.org/reports/the-human-capital-report-2016 9 http://www.international.gc.ca/investors-investisseurs/assets/pdfs/download/Niche_ Sector-Internet_of_Things.pdf

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63 Minister’s Letter F E AT U R E S

60 The Not-So-Secret Advantages of a Canadian Location

Canada’s business advantages have been recognized for quite some time, resulting in the nation receiving numerous accolades.

64 Canada: A Favorable Destination for Foreign Direct Investors

By facilitating trade and technological modernization, Canada continues to break into the investment attraction competition.

69 Skilled Talent and a Collaborative Environment Give Canada a Competitive Edge

Its highly educated and diverse population, along with policies geared toward attracting the best and brightest talent, has made Canada essential to technology companies’ growth plans.

74 Canada Offers R&D-Focused Companies a Range of Opportunities

Canada’s strong mix of funding programs makes it a location worth considering for companies expanding their global R&D footprint.

76 A Message from Allan O’Dette, Chief Investment Officer, Province of Ontario

SPONSORS ALBERTA

ONTARIO

67, 78

71,80

www.CalgaryEconomicDevelopment.com www.bepartoftheenergy.ca leads@calgaryeconomicdevelopment.com

InvestinOntario.com

Calgary Economic Development

Ontario Has It All

75, 79 City of Woodstock:

The Crossroads of Business lmagyar@cityofwoodstock.ca www.cometothecrossroads.com

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CANADA MESSAGE FROM CANADA’S MINISTER OF INTERNATIONAL TRADE

s Canada’s Minister of International Trade, I am pleased to welcome readers of the 2017 edition of Location Canada, which this year marks its 20th anniversary.

market of more than 480 million consumers through the North American Free Trade Agreement (NAFTA). Once the CanadaEuropean Union Comprehensive Economic and Trade Agreement takes effect, this additional market will bring Canada’s free-trade access to a total of more than 40 countries — with nearly 1.2 billion of the world’s wealthiest consumers and a combined GDP of US$37 trillion representing one half of the world’s output of goods and services.

Global investors have long seen Canada as an innovative and growing economy that delivers secure returns. In Canada, investors find a regulatory environment that supports openness to trade, investment, and talent, with rock-solid investor protections. As the global economy enters a period of political and economic uncertainty, investors from around the world seeking an open, stable, and welcoming environment continue to see Canada as a top investment destination.

The Canadian government has also announced a number of initiatives as part of Canada’s Innovation Agenda — an ambitious plan that fundamentally enhances how foreign investors can participate in the Canadian economy. The new Canada Infrastructure Bank, Canada’s new Global Skills Strategy, its Strategic Investment Fund, and Venture Capital Action Plan provide tremendous opportunities for foreign investors to benefit from and participate in Canadian economic growth.

Canada provides investors with unparalleled market access. Businesses operating in Canada already benefit from preferential access to a North American

In 2017, we will be launching the new “Invest in Canada Hub” as a single-window concierge service to assist international investors as they navigate all of

the advantages and incentives that Canada has to offer. There has never been a better time to invest in Canada. Canada is one of the best places in the world to do business. Canada has the fastest-growing economy among the G7 group of countries and offers foreign direct investors the lowest business taxes in the G7. Your operations will benefit from the most highly educated workforce in the OECD and a highly competitive research and development tax environment. Canada is one of the most open and multicultural countries in the world and investors can rely on a financial system that is ranked as one of the most stable in the world. I invite you to read the following pages and to visit www.investincanada.com to learn more about how you can benefit by investing in Canada. Sincerely,

The Honourable François-Philippe Champagne Minister of International Trade

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CANADA By MARC BEAUCHAMP, Vice President and Partner, CAI Global Group

COST ADVANTAGES RELATIVE TO THE U.S. Έ%Ή OVERALL RESULT

RESEARCH & DEVELOPMENT 14.6

26.0

22.4 16.5

16.0

B ase l i n e JP

9.5

21.0

10.7

B ase l i n e

7.7

27.7

11.9 12.8

B ase l i n e

9.1 7.3

DIGITAL SERVICES

12.2 11.0 11.2

14.4

Source: KPMG, Competitive Alternatives 2016

CANADA: A FAVORABLE DESTINATION FOR FOREIGN DIRECT INVESTORS By facilitating trade and technological modernization, Canada continues to break into the investment attraction competition.

ince 2017, Canada’s business climate has experienced a series of positive changes. At the federal level, the government provides investors with competitive advantages in relation to their trade agreements with other major economies. From a provincial perspective, Canadian provinces have made significant progress in implementing their 2016 budgets

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related to investment attraction. In 2017, Canada remains a favorable destination for foreign direct investors. According to a study conducted by KPMG,1 Canada currently has the lowest business costs among the countries that are part of the G7, with a 14.6 percent cost advantage over the United States. In comparison to the United States, Canada’s average

business costs are even lower in knowledge-based areas, including 27.7 percent lower in research and development services and 26 percent lower in digital services. Additionally, Canada’s ease of access to key global markets makes it an excellent platform for doing international business. As a key member of NAFTA, Canada is entitled to preferential access to the wider North American market. From an area-covered point-of-view, NAFTA is the largest free-trade region in the world and has a combined GDP greater than US$20 trillion and consists of more than 480 million consumers. Furthermore, the upcoming Canada-European Union Comprehensive Economic and Trade Agreement (CETA) will allow investors in Canada to access an additional 500 million consumers and a GDP of US$17 trillion. The aforementioned two agreements will allow Canadian investors to access markets covering over US$37 trillion and close to one

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ESTIMATED PST PAID ON ELECTRICITY BY BUSINESS SIZE ͷ 2015/16 billion consumers. In addition to its effort on facilitating international trade, Canada is working on eliminating regulatory inconsistencies across provinces that cause unnecessary barriers to doing business. The federal, provincial, and territorial governments have made collaborative efforts to renew and modernize the 20-year-old Agreement on Internal Trade (AIT). Announced in April 2017, the new Canadian Free-Trade Agreement replaces the AIT and will improve the flow of goods and services and reduce the cost of doing business across provinces. For the purpose of this article, three provinces, Ontario, Quebec, and British Columbia, have been randomly selected to further exemplify the business environment in Canada. BUSINESS GROWTH, TRADE, AND AUTO INITIATIVES IN ONTARIO In its 2016 budget, the government of Ontario announced the Business Growth Initiative (BGI)2 to support Ontario’s transition to the new economy. The province has already built a strong foundation for innovation and entrepreneurship, with internationally recognized research institutions, and more than 574,000 Ontarians employed in science and engineering occupations in 2016. The BGI was created to make Ontario’s economy more innovative, help small businesses scale up into mediumsized and large enterprises, and

Large business $5 1 m i l l i on

Government $ 1 4 m i l l i on

Large industrial users $ 4 9 m i l l i on

Small and medium-sized business $ 5 0 m i l l i on

reduce the regulatory burden on businesses. The BGI will also allow Ontario to experience an increase in the creation of quality employment. Since the 2016 budget announcement, the government has started to implement a number of key commitments to deliver on the BGI. Such commitments are illustrated in the accompanying chart (p. 66). Due to the fact that trade accelerates innovation, increases foreign investments, and creates jobs, the promotion of international trade has also been important for the province of Ontario. It is important to note that this initiative creates opportunities for Ontario businesses to grow its economy locally via global market presence. In 2016, the value of Ontario’s international exports was more than one third of the provincial GDP. Additionally, the Ontario

government is continuously incentivizing foreign multinationals in order to attract strategic investments. The latter increases exportation levels and creates and retains employment in the automotive sector. According to the government of Ontario, “Since 2004, Ontario has committed $1.35 billion, leveraging $15.62 billion in private-sector investments, which has helped support 70,524 direct jobs, as well as thousands more in the auto supply chain.” Since 2017, the government has already announced two large investments. In January 2017, Ontario committed up to $41.8 million to Honda to conduct upgrades at its Alliston assembly plant in order to secure the automaker’s $492 million global investment. The governmental support will provide the facility with a new state-of-the-art paint shop and leading-edge vehicleassembly technologies, as well as help to increase R&D activities. The investment will also create 4,000 direct jobs. Two months later, in March of 2017, the Ontario government secured a $1 billion investment by Ford, which includes the upgrade of its Windsor Engine Plant, by committing up to $102.4 million. Additionally, the project will preserve 500 jobs. The investment also establishes a global Connectivity Innovation Centre that will create approximately 300 new engineering positions in Ottawa, Waterloo, and Oakville, along with significant additional R&D expenditures.

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TRANSITIONING TO DIGITAL TECHNOLOGY, STIMULATING R&D IN QUEBEC

ONTARIO INITIATIVES COMMITMENT

UPDATE

Cleantech Equity Fund —

A new $55 million fund to make equity investments in cleantech firms, supporting Ontario SMEs. In January 2017, an Expression of Interest was issued for a fund manager.

Perimeter Institute —

Investing $50 at the Perimeter Institute, a world-class research center for theoretical physics, to provide funding through 2021–22. This investment will support research that helps foster the next generation of technological advancements in areas such as quantum computing.

Scale-Up Voucher Program —

Investing $32.4 million over four years to provide high-impact firms with vouchers to access business development tools and services. This will help firms in Ontario with high-growth potential reach the next stage in their development. The program was scheduled to be launched in spring 2017.

Small Business Innovation Challenge —

A $28.8 million pilot to help Ontario SMEs demonstrate innovative technological solutions to problems identified by the government. The program was officially launched in March 2017.

ScaleUP Ventures Fund —

Ontario committed $25 million to a new venture capital fund targeting a final size of over $75 million. The fund will also provide mentorship to entrepreneurs. To date, the fund has invested in seven companies.

Colleges Applied Research and Development Fund —

A three-year, $20 million fund to support industryacademic collaboration between Ontario businesses and colleges. The fund was launched in January 2017.

Automobile Supplier Competitiveness Improvement Program (ASCIP) —

Investing $5 million over two years to establish ASCIP, which launched in October 2016 to support the automotive parts sector in adopting industry-leading software and hardware and to provide related training to increase the competitiveness of the industry in Ontario. Up to March 31, 2017, ASCIP has provided funding to 22 industry projects.

Ontario Investment Office —

The recently established Ontario Investment Office will provide a one-window concierge service for businesses looking to invest and expand in the province. In March 2017, the first Chief Investment Officer was named.

Source: Ontario Ministry of Finance, 2017

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In 2017, the government of Quebec seeks to further encourage businesses to modernize, increase their productivity, and develop new production capacities in order to increase its presence on international markets. As such, the 2017 Quebec Economic Plan encourages business transition to digital technology by providing an additional 35 percent deduction in the capital cost allowance and incentivizes large investment projects by extending the tax holiday until Dec. 31, 2020. In addition, Quebec has already established incentives such as a rebate on electricity to encourage business investments by companies in the manufacturing and natural resource development sectors. Furthermore, the Quebec Economic Plan provides additional initiatives totaling over $830 million by 2021-2022 to stimulate research and innovation in several advanced activity sectors. Notably, the government allocates $305 million to encourage scientific innovation and $100 million to develop an artificial intelligence super-cluster. It will also invest $125 million to promote the development of the innovative manufacturing sector. MODERNIZING BUSINESS TAXES IN BRITISH COLUMBIA In its 2016 budget,3 the government of British Columbia announced that an independent Commission on Tax Competitiveness would be

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Calgary is home to the people who created the world’s first neurosurgical robot, advanced wearable technology, internationally recognized solutions for addressing climate change – and so much more. With a highly collaborative community of world-class entrepreneurs and innovators, and a quality of life unmatched with the great outdoors at your doorstep, there’s never been a better time to be part of our energy.

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ESTIMATED PST PAID ON ELECTRICITY BY SECTOR ͷ 2015/16

Accommodation and food services, $11 m illio n

Arts, entertainment and recreation, $5 million Education and healthcare, $ 11 m i l l i o n

Transportation and warehousing, $11 m illio n

Local government, $3 million Other government, $1 million

Wholesale and retail trade, $21 m illio n

Manufacturing, $46 million

Other services, $27 m illio n

Construction, $2 m illio n

established to advise the province on how to modernize British Columbia’s business taxes. The Commission’s report included four key recommendations: 1. Exempt business capital expenditures, including machinery and equipment, from PST (Provincial Sales Tax); 2. Exempt business use of electricity and other energy inputs, software, and telecommunications services from PST; 3. In the long-term, engage the public in a process to consider and design a made-in-BC value added tax; and 4. Introduce a framework within which major investors and municipalities can negotiate long-term property tax arrangements to increase certainty.

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Utilities, $2 million

Services Goods

Primary industry (agriculture, forestry, mining, etc.), $21 million

Consistent with the Commission’s recommendations, the government will first phase out PST on electricity. Effective Oct. 1, 2017, the tax rate on electricity will be reduced to 3.5 percent from 7 percent. Effective April 1, 2019, electricity will be fully exempt from PST. When fully implemented, the exemption for electricity will provide businesses with savings of more than $150 million annually. Large businesses and industrial users will save approximately $100 million per year, while SMEs will save approximately $50 million. These savings will be shared across all sectors and should increase the competitiveness of British Columbia’s businesses internationally. The reduced costs will foster new investment and job creation. This measure will benefit industries of all sizes and provide considerable cost reduction to

industries such as manufacturing, wholesale and retail trade, and primary industry. Although this article concentrated its efforts on depicting the local business incentives in three provinces, it is important to note that every Canadian province welcomes business expansions and foreign direct investments. The latter is what truly enables Canada to remain on top as one of the best countries in attracting foreign investments and economic growth. ••

Notes: 1. https://home.kpmg.com/ca/en/home/media/press-releases/2016/03/canada-keep-stop-spot-as-cost-competitivemature-market.html 2. http://www.fin.gov.on.ca/en/budget/ontariobudgets/2017/ ch3.html#ch38 3. http://bcbudget.gov.bc.ca/2017/bfp/2017_Budget_ and_Fiscal_Plan.pdf

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CANADA By STEPHEN THOMPSON,

Senior Economic Officer – San Francisco, Ontario’s Ministry of International Trade

Canada has hundreds of thousands of STEM degree holders. According to research by Randstad, in Toronto there are more than 44,000 engineering candidates averaging 32 applicants per job. Source: Ontario’s Ministry of Economic Development and Growth

SKILLED TALENT AND A COLLABORATIVE ENVIRONMENT GIVE CANADA A COMPETITIVE EDGE Its highly educated and diverse population, along with policies geared toward attracting the best and brightest talent, has made Canada essential to technology companies’ growth plans.

alent is the life blood of a company. Without talent, businesses cannot compete, innovate, or meet their

economic goals. Unfortunately, for some industries, the demand for talent is increasingly outweighing the supply.

In a recent study,1 Indeed surveyed 1,000 hiring managers and recruiters in the United States’ technology industry to gauge their experiences in hiring tech talent. It found that there is a “demand gap” for highly technical jobs in the technology field. Specifically, the study found that interest in software architect job postings meets only 29.4 percent of the employer demand. Likewise, development and operations job postings meet only 39.6 percent. Despite how critical finding the right talent is for companies, time is not always on their side. Companies are desperate to achieve their hiring goals, and are often forced to settle for subpar candidates. According to the findings, 53 percent of respondents have hired tech talent despite candidates not meeting the job description requirements. When companies hire the right talent, they can achieve the growth they seek. As a result, the war for the best and brightest within the science, technology, engineering, and math (STEM) fields continues to gain momentum. Education, diversity, and regulations that promote business innovation and expansion are all factors that contribute to a rich talent pool. While a unique mix, one

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CANADA country offers businesses and technology talent all the right elements: Canada. But more than just talent, at every jurisdictional level, Canada has a long record of engaging with the private sector to sustain growth and allow businesses to do what they do best. Through my experience over the past four years as Ontario’s representative in the U.S. Southwest, I’ve met a surprising number of people who are quite familiar with Canada — from my dentist who has cousins in Mississauga, to my neighbor whose company just hired a Toronto-based marketing firm, to a venture capital investor who has invested in several Ontario companies. I’ve also met an equally surprising number who couldn’t pinpoint Canada on a map and are shocked to learn that a flight from California to Toronto is shorter than a flight from California to Boston or New York. Both groups — with the exception of a number of investors — are surprised to learn that Ontario has the second highest number of IT companies in North America after California. A NEW HUB OF EDUCATED TECHNOLOGY TALENT Canadians are highly attractive to foreign employers because they’re among the most equipped labor force for the 21st century knowledge economy: 53 percent of Canadian adults hold a tertiary qualification, which is the highest level among OECD countries.2 Canadian universities are consistently ranked among the top in the world, and they’re renowned for preparing our young graduates for highly

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31,000 candidates averaging 26 applicants per job in Montreal; and Ottawa also has a large per applicant average — 74 per job out of 24,000 candidates. With a quality educational system in place, firms will continue to have an increasingly large and qualified labor pool from which to choose the best fit.

technical careers. The University of Toronto is ranked3 in the top 25 universities globally and the top 50 most innovative universities in the world. The University of British Columbia is also ranked among the top 20 public universities in the world, and nearly a quarter of their students are international, coming from 162 countries. The University of Waterloo has the world’s largest co-op education program, and as The Wall Street Journal notes,4 Waterloo graduates are prized by top firms. Its graduates are also known for their entrepreneurial nature and fresh thinking. Waterloo is the number-one Canadian university for venturecapital-backed student businesses in North America. Canada is stocked with STEM degree holders, and it has a high number of engineering applicants per job, indicating intense competition between qualified candidates. In fact, according to research by Randstad,5 in Toronto there are 44,000 candidates averaging 32 applicants per job. In Vancouver there are 16,000 candidates averaging 22 applicants per job;

A DYNAMIC POPULATION Beyond the extensive homegrown talent pool, Canada is also home to a diverse population, with a strong history as an inclusive attractor of talent from around the world. Among the G7 countries, Canada has the highest proportion of foreignborn population6 (20.6 percent). In some regions that figure can be significantly higher — such as in Toronto where approximately 50 percent of the population is foreign-born, with representation from all 193 countries in the world. While the Canadian refugee program has generated headlines, most of our immigrants are skilled migrants. Canada has visa policies meant to attract the most highly skilled workers from around the globe. Changes in Canadian policies are facilitating greater ease for talented workers to move to Canada. At the national level, Canadian Finance Minister Bill Morneau recently unveiled a plan7 “aimed at making it easier for growing firms and major companies to get access to the highly skilled foreign talent they need that is not available in Canada.” Under the

”

CANADA IS HOME TO A DIVERSE POPULATION… AND IS AN INCLUSIVE ATTRACTOR OF TALENT FROM AROUND THE WORLD.

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SET YOUR SITES ON

ONTARIO

Ontario is at the vanguard of technological convergence, whether it’s developing the next generation of autonomous vehicles or creating cutting-edge robotics and automation to streamline advanced manufacturing processes.

“Our new Technology Centre [in Toronto, Ontario] furthers our commitment to growing Canada’s preeminent hub of innovation and solutions of the future.” Jim Smith, President and Chief Executive Officer of Thomson Reuters

FROM SEARCH TO SHOVEL AND BEYOND The Ontario Investment Office (OIO) is the face of international investment for the province. Through our Business Concierge Services, we deliver tailored insight and intelligence on taxes, regulations, incentives and immigration. We help investors build relationships with all levels of government and across supply chains. Our customized site selection services include confidential property searches along with permitting and approvals coordination. We also offer pre-qualified sites through our Investment Ready: Certified Site Program. Discover why Ontario has been named Canada’s Best to Invest for two years running by visiting InvestInOntario.com/OIO

Paid for by the Government of Ontario

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CANADA current system the minimum processing time for companies to obtain visas and work permits is six months. Now, however, that process will be exponentially expedited with approvals moved up to within a two-week span. There will also be the creation of a 30-day work permit that can be spread across a year, meaning companies can bring in workers for short stints without the need to apply for new paperwork each time. This influx of talent has spurred healthy competition among the Canadian provinces to attract new neighbors. For example, the Ontario Immigrant Nominee Program seeks to attract migrants seeking to invest in, or start, a business. The program also allows Ontario to nominate individuals who have the skills and experience to contribute to Canada’s economy to become permanent residents. Canada is truly the ideal jumping-off point for firms seeking to scale globally. Individuals from every country in the world who speak hundreds of languages call Canada home, and Pearson International Airport in Toronto

INDIVIDUALS FROM EVERY COUNTRY IN THE WORLD WHO SPEAK HUNDREDS OF LANGUAGES CALL CANADA HOME. 72

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has more than 1,000 flights daily to destinations on all six continents. Multiculturalism makes Canada stand out among countries as a source for talent. According to research on How Diversity Can Drive Innovation,8 diverse countries out-innovate and outperform others. In fact, the author states, “Employees at these companies are 45 percent likelier to report that their firm’s market share grew over the previous year and 70 percent likelier to report that the firm captured a new market.” BUILDING NEW INDUSTRIES TOGETHER At all jurisdictional levels, Canada has a strong record of collaboration with the private sector. Canada was among the first to open its roads for autonomous vehicles.9 Seen as one of the top emerging technological advancements, autonomous vehicles are a growing industry in Canada, where cities are doing what they can to continue the trajectory. For example, Waterloo, Ontario, is the birthplace of the smartphone and home to Ontario’s first road-tested autonomous vehicle. Stratford, Ontario, has become one of the first fully connected cities, allowing full testing of driverless vehicles and connected car technology. Another emerging market — artificial intelligence (AI) — is also growing in Canada. Major technology companies like Google, Microsoft, and IBM have all expressed

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plans to grow their AI research teams in Canada. The government of Prime Minister Justin Trudeau pledged $93 million ($125 million Canadian)10 to support AI research centers in Toronto, Montreal, and Edmonton (public-private collaborations) as part of its new budget. The investment is a continuation of the work Canada has already done to advance research in AI, with the Vector Institute for Artificial Intelligence in Toronto already positioned as one of the most respected hubs for AI innovation. AI was, after all, discovered by a Canadian-bychoice, Dr. Geoffrey Hinton, who is now chair of the Vector Institute. TIME TO GO NORTH With a highly educated and diverse population, policies geared toward attracting the best and brightest talent, and a friendly climate to do business, it’s no surprise that Canada’s economy is flourishing. Canada is becoming an increasingly essential equation in firms’ growth plans as they look to enhance talent, scale-up, and be globally competitive For technology leaders, the time has come to consider Canada. •• Notes 1 http://blog.crossover.com/tech-talent-study 2 https://www.oecd.org/edu/Canada-EAG2014-CountryNote.pdf 3 https://www.usnews.com/education/best-global-universities/ rankings?page=3 4 https://www.wsj.com/articles/why-silicon-valley-recruiters-areflocking-to-ontario-1462385408 5 https://www.randstad.ca/hot-jobs/engineering-jobs-indemand/ 6 http://www.statcan.gc.ca/pub/91-003-x/2007001/4129904eng.htm 7 http://www.reuters.com/article/canada-immigration-idUSL1N1J90LE 8 https://hbr.org/2013/12/how-diversity-can-drive-innovation 9 http://www.cbc.ca/news/technology/driverless-cars-ontariopilot-project-1.3268641 10 http://www.newswire.ca/news-releases/canada-funds125-million-pan-canadian-artificial-intelligence-strategy-616876434.html

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CANADA BY GREG MACDONALD, P. ENG., Leader, Atlantic R&D and Government Incentives Practice, Grant Thornton LLP

R&D FUNDING R&D FUNDING R&D FUNDING R&D FUNDING

DIRECT FUNDING

SECTOR FOCUS

Superclusters Strategic Innovation Fund

INDIRECT FUNDING

Cleantech

Agri-food

SR&ED Tax Credit

Digital Industries

CANADA OFFERS R&DFOCUSED COMPANIES A RANGE OF OPPORTUNITIES Canada’s strong mix of funding programs makes it a location worth considering for companies expanding their global R&D footprint.

s companies of all kinds look to expand internationally and better leverage the burgeoning global economy, Canada stands as a destination rife with opportunity. The country offers a range of valuable advantages and attributes, such as economic stability, geographic proximity to both U.S. and European markets, and strong support for innovation on multiple levels. Companies involved in R&D should

be particularly interested, as a number of recent developments, as well as key aspects of existing funding programs, have enhanced the appeal of the Canadian R&D landscape. As in most countries, Canada supports industrial R&D through a combination of direct and indirect government funding. Traditionally, the majority of that support has been indirect, delivered via the Scientific Research & Experimental Development (SR&ED) tax credit

program. While this approach remains prevalent, a number of changes in recent years have increased the proportion of direct funding. In 2015 the government of Canada merged the Ministry of Science and Technology with Industry Canada to create Innovation, Science and Economic Development Canada (ISED). Its revised mandate is to work “with Canadians in all areas of the economy and in all parts of the country to improve conditions for investment, enhance Canada’s innovation performance, increase Canada’s share of global trade and build a fair, efficient and competitive marketplace.” Subsequently, the 2017 federal budget included an “Innovation and Skills Plan” that outlined a combination of new programs, and changes to existing ones. The focus was on improving the commercialization of innovations, streamlining programs that support business innovations, AREA DEVELOPMENT | Q3/2017

CANADA and attracting increased foreign investment. DIRECT FUNDING: CANADA’S INNOVATION AND SKILLS PLAN Superclusters — One of the more significant direct funding additions was the creation of the Innovative Superclusters Initiative, designed to accelerate growth within highly innovative industries. Providing significant support to a small number of industry-led consortia, Canada hopes the five-year, $950 million program will both accelerate the growth of participating companies and maximize their significance globally. As part of this, the involvement of international companies is encouraged. Strategic Innovation Fund — Through the consolidation of a number of existing programs, the Strategic Innovation Fund (SIF) is designed to simplify access, accelerate processing, and provide a more “results focused” program. The SIF is comprised of four streams: 1. R&D/commercialization 2. Expansion and growth of existing firms 3. Attracting new investments 4. Collaborative R&D and technology demonstration Streams one to three provide up to 50 percent of eligible costs with a mix of repayment terms. Of particular note, stream four targets the establishment of new facilities and/or new mandates in Canada, ranging from R&D to establishing R&D facilities. SECTOR FOCUS The 2017 budget’s Innovation and Skills Plan also identified six sectors that the government

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will support with the objective of making Canada a world leader in innovation: advanced manufacturing, agri-food, clean technology (cleantech), digital industries, health/bio-sciences, and clean resources. Of the six, cleantech, digital industries, and agri-food are being focused on first, and the magnitude of support, as well as the funding mechanisms, varies by sector: Cleantech — Through a mix of existing and new funding support, cleantech is the most significant of the three initial sectors. Through 2022, support for finance growth/ expansion, R&D and technology demonstration/adoption, and enhanced collaboration is just over $1 billion, of which just under 50 percent targets the development of clean energy, transportation, and cleantech development/adoption in the natural resources sector. Digital industries — Support for the digital industries includes a mix of measures to further both digital infrastructure and capabilities, as well as Canada’s leadership in artificial intelligence (AI). The Canadian Institute for Advanced Research (CIFAR) will administer funding under the Pan-Canadian Artificial Intelligence Strategy. The goal is to support collaboration between AI expertise in Montréal, TorontoWaterloo, and Edmonton, and to attract and develop top AI talent. Agri-food — Innovation supported in this sector will include advanced research in agricultural science and genomics at Agri-Food Canada, with a focus on emerging issues such as climate change impacts. INDIRECT FUNDING: SR&ED TAX CREDIT PROGRAM REMAINS STRONG Although there has been

a reduction in the relative proportion of indirect funding Canada provides for R&D through its SR&ED program, it is still a significant part of total funding (85 percent in 2013, per the OECD1). The SR&ED program provides credits on qualified expenditures incurred (as opposed to incremental R&D only) with a basic tax credit rate of 15 percent (nonrefundable). Many provinces also provide credits through the SR&ED program ranging between 10 percent and 20 percent. While project eligibility rules follow the federal program, rules governing expenditure eligibility and calculation of the credits can vary. Some provinces offer fully refundable credits, while others offer only partially refundable or entirely nonrefundable credits. Certain aspects of the SR&ED program are particularly relevant to international companies considering establishing Canadian R&D operations. For example, the SR&ED program requires neither that the R&D performer claiming SR&ED credits retain ownership of the resulting intellectual property (IP), nor that the IP remain in Canada. In addition, companies that perform R&D are not required to reduce their SR&ED claim because of any payments they receive for performing R&D for related or non-related foreign companies. This provides organizational and tax planning flexibility on a global basis. For example, consider a scenario in which a foreign company (ForCo) establishes an R&D center in Nova Scotia, Canada (CanCo), such that ForCo fully funds CanCo operations and all IP is transferred to ForCo. In this scenario, CanCo’s SR&ED claim would not be impacted by the IP transfer, nor by the fact that

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Industry is at a Crossroads. It’s called Woodstock, Ontario, Canada.

On highways 401 and 403, at the junction NE "@M@CH@M /@BHƥB @MC "@M@CH@M -@SHNM@K Q@HK RDQUHBD Ŕ @S SGD KNFHRSHB@K BQNRRQN@CR NE -NQSG America – Woodstock sees enough business to know how much – and how rapidly – our world is changing. At the intersections of industry and agriculture, productivity and sustainability, and the last economy and the next one, here’s a place that doesn’t just support how business is done today – here’s a place that also supports how business will be done tomorrow. 519-539-2382 x2115 information@cityofwoodstock.ca cometothecrossroads.com

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they receive payment for the R&D performed; rather, they would earn a 15 percent, fully refundable Nova Scotia tax credit, as well as a 15 percent nonrefundable federal tax credit. (It’s worth noting that even if CanCo performed SR&ED for an unrelated foreign customer who fully funded the R&D and retained ownership of the resulting IP, CanCo would still not need to reduce their claim by the payment received. However, if they were paid to perform R&D for a Canadian customer, CanCo would need to reduce any SR&ED claim by the amount received.) In practical application, SR&ED works well with other funding programs. While the additional assistance does reduce the amount of SR&ED tax credits received, the combined federal and provincial

tax credits remaining usually warrant filing. More importantly, repayment of any government assistance (such as conditionally repayable loans) earns federal tax credits in the year of the repayment (however, only if the repayment had previously been deducted from an SR&ED claim). CANADA’S POTENTIAL MAY ALIGN WITH YOURS In addition to a stable economic and political landscape, Canada’s strong mix of funding programs — along with substantial government focus on fostering innovation and attracting investment — makes it a location worth considering for companies expanding their global R&D footprint. Given that funding options vary significantly from country to country, understanding

Allan O’Dette was appointed as Ontario’s first Chief Investment Officer (CIO) in April 2017. He leads the newly created Ontario Investment Office, which has both a domestic and international facing mandate to secure increased investment in key sectors while strengthening the overall competitiveness of Ontario firms.

& QA

both their eligibility criteria and how they interact is key in both identifying those that align best with your R&D goals and comparing potential expansion locations. •• 1 Appelt, S. et al. (2016), “R&D Tax Incentives: Evidence on design, incidence and impacts”, OECD Science, Technology and Industry Policy Papers, No. 32, OECD Publishing, Paris. http://dx.doi.org/10.1787/5jlr8fldqk7j-en

About Grant Thornton in Canada Grant Thornton LLP is a leading Canadian accounting and advisory firm providing audit, tax and advisory services to private and public organizations. We help dynamic organizations unlock their potential for growth by providing meaningful, actionable advice through a broad range of services. Together with the Quebec firm Raymond Chabot Grant Thornton LLP, Grant Thornton in Canada has approximately 4,000 people in offices across Canada. Grant Thornton LLP is a Canadian member of Grant Thornton International Ltd., whose member firms operate in over 100 countries worldwide.

Perhaps most notably, we have an R&D cost advantage of nearly 28 percent versus the U.S.

What labor force/education and training advantages does Ontario offer to companies choosing to locate in the province? MESSAGE FROM O’Dette: From a statistical standpoint, 67 Allan O’Dette, percent of adults in Ontario have a postChief Investment Officer, secondary education, higher than any other Can you describe the “one-stop” Business Province of Ontario, OECD country. Our 44 colleges and universities Concierge Services of the newly established Canada ensure that graduates have the skills and Ontario Investment Office? knowledge to excel in their chosen career field. O’Dette: Whether you are a domestic business The province produces about 40,000 STEM trying to get established or an international graduates per year, plus thousands more with masters and multinational looking to expand beyond your borders, the Ph.D.s in a diverse array of fields. process can frankly be overwhelming. Where do you even start? You have state/provincial government, municipal government and, of course, federal government. Each comes Are particular sectors being targeted for investment? with its own multiple layers and processes. How can an O’Dette: As IT continues to converge across all traditional investor be expected to know all the right connections and sectors, we sometimes find ourselves talking in terms of a the proper business channels? knowledge-based economy. For example, we can no longer We made a conscious decision to untangle the red tape. talk about automotive without including IT. And because With everything under ‘one tent,’ our Business Concierge we have the second-largest IT cluster in North America, Services deliver tailored insight and intelligence on taxes, we continue to thrive. However, the quick answer to the regulations, incentives, and immigration. We help investors question is that we have strengths in automotive, aerospace, build relationships with all levels of government and across cleantech, fin-tech, food and beverage manufacturing, supply chains. By working with us, you don’t just get a list of automation and robotics, life sciences, and ICT. services; you get a single point of contact — a champion — who will be with you from search to shovel and beyond. What resources are available for research and development? O’Dette: Ontario is where industry, academia, research How does doing business in Ontario compare with doing business in the U.S. from a tax and financial centers, incubators, accelerators, and government standpoint? collaborate to take world-changing concepts and ideas to O’Dette: We are extremely competitive from a tax and commercialization quickly. It really is an innovation ecosystem like no other. To encourage innovation, we have the Scientific overall business cost standpoint. Reports such as KPMG’s 2016 Research and Experimental Development (SR&ED) Program. Competitive Alternatives show Canada as having the lowest Combined with various other provincial R&D programs, this business costs in the G7. A deeper analysis of those numbers can reduce after-tax costs by about 40–60 percent. shows an even greater advantage specifically to the province of Ontario. The combined federal/Ontario general corporate To read this interview in its entirety, go to income tax rate is 12 percent lower than the U.S. average. www.areadevelopment.com/Canada-Investment-Guide/

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2nd EDITION

CANADIAN FDI FORUM Hôtel Château Laurier • Québec City October 22-24, 2017 Produced by:

An outstanding roster of speakers and panelists will discuss Canada’s advantages in policy, taxation, select markets, and workforce among other factors that can make your location an optimal choice for foreign direct investment.

Thank You to Our Platinum Sponsors

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Innovation Ecosystem in Calgary The energy sector in Calgary — both hydrocarbons and renewables — has been a catalyst in fostering an environment that embraces innovation across sectors. Similar clusters of expertise are also emerging in areas as diverse as fin-tech, transportation and logistics, aerospace, agribusiness, wearable technology, and consumer goods.

Calgary is home to 1.5 million people and an innovation ecosystem that’s made it a center of excellence globally for all things energy.

SILOS HAVE BEEN PART of the prairie landscape for generations, but in agricultural architecture and modern business culture they are disappearing fast. In Calgary, an innovation ecosystem is emerging quickly to accelerate the advance of technology in the energy sector and elsewhere by bringing together people and organizations to facilitate the transfer of scientific breakthroughs, and the latest knowledge to the commercial economy. The clean tech ecosystem is being built on the legacy of a cluster of trailblazing companies in the oil and gas sector that for decades has competed and collaborated to support innovation and advance technology. The new goal is ambitious — to transform and reenergize the city’s economy. To do so, the business community must collectively up its game around clean resource innovation to ensure Calgary is a global center of excellence in all things energy. The rapidly evolving global energy market and society’s increased focus on environmental issues are prompting intense competition to spur technological innovation. Across a dozen city blocks in downtown Calgary, a unique combination of startup companies and global corporations, entrepreneurs and experienced business leaders, venture capitalists and angel investors, post-secondary institutions and government agencies, is coming together to create ecosystems to take on the challenges. It will take all these organizations working in concert to take on these societal issues.

Calgary Economic Development supports the ecosystem approach to the application of technology and sees innovation as critical to the sustainability of all sectors in a diverse economy. As a city, Calgary has all the ingredients — a highly educated workforce, an entrepreneurial mindset, advanced infrastructure, and an exceptional quality of life — to be a global innovation hub. Just recently, RocketSpace, the Silicon Valley tech accelerator, announced the opening of its first Canadian campus in Calgary to be part of the energy transforming the city. A structural change in the energy sector is propelling the changing attitude in Calgary. More than two dozen shared workspaces are operating as a highly educated workforce finds new ways to turn ideas into business success. Across the business landscape in Calgary, it’s clear that silos have been replaced by clusters.

To learn more visit www.bepartoftheenergy.ca

Calgary Economic Development 731 1st Street SE Calgary, AB T2G 2G9 403-221-7831 or 888-222-5855 Fax: 403-221-7828 info@calgaryeconomicdeveloment.com

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City of Woodstock, Ontario The Crossroads of Business

The City of Woodstock owns and maintains four industrial business parks, all located in close proximity to the Highway 401/403 interchange. The Pattullo Ridge Business Park is located at the Highway 59/401 interchange, while the Bysham Park Business Community is located just off Highway 2, approximately five kilometers from the Highway 2/401 interchange. A third business park, CommerceWay, opened in 2005 and is located along the north side of Highway 401. The fourth and newest, North East Business Park, is located less than one mile from the Toyota Motor Manufacturing plant. Industrial land prices range from $85,000 to $125,000 per acre, depending upon proximity to the Highway 401/403 corridor. All of our business parks are fully serviced. Woodstock also maintains a business-friendly environment through such policies as no development charges on industrial construction.

THE CITY OF WOODSTOCK is a dynamic and growing community of 41,000 located in the heart of southwestern Ontario at the crossroads of super highways 401 and 403. The city’s progressive actions have made it a leader in the region for conservation, environmental initiatives, and longterm commitment to managed growth. Woodstock has roots in both agriculture and manufacturing, as the recognized dairy capital of Canada and as home to Toyota’s second Canadian manufacturing facility. With a skilled workforce, affordable housing, and a new community hospital, Woodstock truly is a growing city with a lot of rural, small-town charm. In Woodstock, just-in-time delivery is a part of daily life. With an excellent supply of serviced and zoned industrial land, the community is eager to meet the needs of new and expanding businesses. Woodstock is capable of servicing a 100-acre industrial site for large-scale manufacturers.

Our people know how to work hard and they have attained the skills to ensure the success of well over 140 manufacturers who make Woodstock their home. Combine all this with a relaxed lifestyle and real affordability and you’ll see why Woodstock continues to attract more than its share of new business.

If you want to know more about Woodstock, visit our website at

w w w. c o m e t o t h e c r o s s r o a d s . c o m

or call us at 519-539-2382, ext. 2115.

Len Magyar,

Development Commissioner City of Woodstock 500 Dundas Street, P.O. Box 1539 Woodstock, ON N4S 0A7 519-539-2382, ext. 2112 lmagyar@cityofwoodstock.ca www.cometothecrossroads.com

AREA DEVELOPMENT | Q3/2017

Ontario Has It All It was fantastic.” — Kim Warburton, VP of Communications and Public Affairs, GE Canada Adopting Advanced Technology The OIO helps businesses in Ontario adopt advanced technology that makes them globally competitive. Our Business Advisors, located across the province, maintain close relationships with companies and deliver customized advice. Our Toronto-based account management team builds enduring relationships with leading companies — newly arrived or long-established — that are creating the economy of the future.

FROM FINTECH TO FORESTRY, from medical devices to mining, from automotive to IT — Ontario’s history of nurturing a variety of sectors has given rise to a dynamic economy. Ontario is home to a thriving venture capital industry. Canadian venture capital activity increased by 36 percent in 2016 with Ontario leading the way. Ontario experienced a 48.2 percent increase, lifting the province to a fourth-place ranking among states and provinces in North America for venture capital activity. According to Teleport Inc., Toronto is the best place in the world to live for software developers, surpassing New York City, London, Melbourne, and Berlin. The results are based upon comparisons of 180 data dimensions from more than 58 sources, with topics ranging from an active tech scene to travel connections. Almost half of Canada’s full-time R&D personnel, and five of the top-10 corporate R&D investors are in Ontario, where more than $14 billion is spent annually. Ontario is home to more than 20,000 IT firms, located mainly in three technology clusters: the Greater Toronto Area, Ottawa, and Kitchener-Waterloo. The Ontario Investment Office The Ontario Investment Office (OIO) has both a domestic and international facing mandate to secure increased investment in key sectors. Ontario-based companies and foreign investors alike can access our Business Concierge Service, a one-stop source for information to increase business growth. We deliver tailored insight and intelligence on taxes, regulations, incentives, and immigration. We help investors build relationships with all levels of government and across supply chains. To support real estate requirements for greenfield investments, we offer streamlined and customized site selection services, including confidential property searches, and permitting and approvals coordination. We also offer pre-qualified premium sites through the Investment Ready: Certified Site Program, the first province-wide program of its kind in Canada. What Investors Are Saying About Our Business Concierge Services GE Power, a General Electric Company division focused on power generation solutions, is set to break ground in Welland, Ontario, this year on a multimodal facility that will feature cutting-edge data science and analytics technology to enhance efficiency and streamline production. This will be the first facility of its kind in Canada. And here’s what they had to say about our commitment to service: “It was a one-window approach — we always felt like we were working with the province, the region, and the municipality and that everyone was providing information, data, and insight.

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Transformative Technology Ontario is at the forefront of the development of game-changing technologies. In artificial intelligence (AI), for example, Ontario is a global leader, with such luminaries as the “godfather” of deep learning, Geoffrey Hinton, performing research at both Google and the University of Toronto. The advancements in AI can already be seen in advanced manufacturing, life sciences, and even financial services. The Vector Institute for Artificial Intelligence was recently established in Toronto. Its website states: The Vector Institute will work with academic institutions, industry startups, incubators, and accelerators to advance AI research and drive the application, adoption and commercialization of AI technologies across Canada. Set Your Sites on Ontario Ontario is at the frontline of technological convergence. This is where the next generation of autonomous vehicles are being created. It’s where cutting-edge robotics and automation streamline advanced manufacturing processes. It’s where the next big medical breakthrough will come from. And it’s where major industry players choose to locate: “Our new Technology Centre [in Toronto, Ontario] furthers our commitment to growing Canada’s preeminent hub of innovation and solutions of the future.” — Jim Smith, President and CEO, Thomson Reuters

Take a closer look at Ontario by visiting InvestInOntario.com

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FacilityLocations.com

Find the Right Location for Your Next Business Site, Facility or Headquarters FacilityLocations is a GIS map-driven, online economic development directory used to research potential locations during the business re-location or expansion process.

Discover Search and identify potential site and facility locations within big, easy-to-navigate, GIS-driven maps

Research Drill-down into location profile pages: • Google Streetview and Bing Bird’s Eye Imagery • Heat Maps and Data Layers • Downloadable Point-and-Click Radius Demographics Reports • Available Property Listings and Key RE Assets

Connect A directory with 5000+ listings including: • Local and Regional Economic Development Contacts • Port Authority Contacts • Utility Contacts • Foreign Trade Zone Contacts • Foreign Inward Investment Contacts If you are an economic development agency and want to have an enhanced listing with a location profile on FacilityLocations.com, please contact Dennis Shea at 800.735.2732 x 208 or dshea@areadevelopment.com

ASSET MANAGEMENT

Open During Construction Early engineering paves the way for feasible, cost-efficient repair and renovation projects. By Gavin Kaleta, SSOE Group

he renovation of an existing manufacturing facility can be even more challenging than beginning new construction. Managers do not want to interrupt the production process when dealing with sensitive processes. Expensive raw materials, clean room environments, and active pharmaceutical ingredients all contribute to the high value of materials. Therefore, there are significant implications when production slows or stops. Unplanned downtime is a constant worry for all managers as a major shutdown would be extremely detrimental to the bottom line. A consistent goal is to have zero unplanned downtime and to prevent the possibility of losing a batch of product, or more than one batch, or shutting down a line that was not planned. Executing a renovation project involves planning, scheduling, and front-end loading (FEL) as the initial steps. In addition, managers must also consider cost benefits of the project as well as viability or feasibility issues to ensure that time and/or funds are not wasted.

Early FEL is always better. Many companies begin with the planning and capital requisitions phase, working to put the budget in place. However, some leaders only do enough engineering to set the budget, but not enough (FEL) to address risk and make decisions to commit resources to maximize the potential for success. FEL is a process that places a heavy emphasis on early planning at a disproportionate budget cost.

Much of this investment is in engineering because up-front engineering consistently pays back in project savings — almost every time — and mitigates productivity and efficiency issues down the line. In many cases, the money companies spend early on would have been spent later on in the design phase, but using it early can help to identify and create significant savings in materials and construction, which generally make up 95–97 percent of an overall project budget. Another advantage is the team that worked on the engineering process will be familiar with the project particulars and can easily transition to the design phase, thus saving time in the long term — uncovering hidden costs or feasibility issues. Plus, more engineering up front may help to prove or disprove the true feasibility of a project before a significant investment is made.

It’s all in the planning.

Managers do not want to interrupt the production process when dealing with sensitive processes.

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Sometimes it may be difficult to justify the investment needed for the higher level of planning required of the FEL process, particularly when the design budget is evaluated separately from the overall project budget. However, even these increased engineering costs are minimal compared to the changes they can help to avoid in the field or the need for an additional shutdown if the renovation project was not properly planned and phased. Early planning provides a framework for a detailed schedule and sets boundaries for active production. Looking closely at how a facility is run and reviewing goals early on will help keep them consistent and on track

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throughout the project. Even experienced teams should follow the planning steps to help identify potential risks during a renovation, such as disrupting pure water flow in a high-tech environment. Unplanned During a renovation, teams must remember not to disturb the rest of downtime the manufacturing operation. For example, it is important not to contaminate clean areas when bringing is a constant in equipment. The project must not disrupt shared utilities such as waworry for all ter for injection or pure water. Central systems cannot be shut down, managers as movement maintains the purity of the water. It is wise to be prepared for as a major complacent team members when trying to change a mindset or shutdown a method of doing business. Various project team members would be can be resistant to change or trying something new and may attempt to minimize extremely challenges or ignore advice of team leadership. Some detrimental to do not see the value of upfront engineering bethe bottom line. cause they haven’t done it in the past and don’t believe the project Zero unplanned needs it. Having a clear, downtime is a tight schedule is important to manufacconsistent goal. turers where timeto-market is often critical. Trying to beat a competitor to market can actually backfire if manufacturers take a shortcut and skip steps; this can actually add more time to the product lifecycle.

Aim for feasibility and acceptance. FEL helps identify the truly feasible projects and eliminate those that are not viable before time and capital is invested — or expensive manufacturing delays result from a project that isn’t viable. More planning also arms purchasers and managers with the tools they need to make informed decisions, thus boosting their confidence and competitiveness in a global marketplace. Planners can also produce a reliable scope document when FEL is done, which results in a more competitive proposal. Having a clearly outlined scope can give owners a more accurate price during the bidding phase of a design project and also provides more of an apples-to-apples comparison between bidding parties. More definition and a more

competitive fee usually equate to a lower and also more reliable fee.

Consider containment safety. In addition to considering feasibility aspects of a project, safety considerations should also be a part of the FEL early planning process. Operators must be protected from any hazardous materials, as follows: • There must be a clean manufacturing mentality to contain potent, expensive ingredients within their containers for transport. • Containment affects facility processes, equipment, room design, and operator access. • Keeping handlers protected adds a layer of complexity, in addition to the normal parts of working in an active plant. • Some manufacturing materials may have a degree of explosivity through static electricity. Special methods are used, such as grounding and bonding, to deal with a unique combination of potential issues. • Code requirements and risks are covered in the very early planning stages of a renovation to identify potential issues; however, not all companies have expertise in this area. Ultimately, it is up to project leadership to break through many of the stereotypes they may encounter and truly focus on all the benefits of FEL. Planning and scheduling can cut costs and improve productivity and efficiencies in the long term for both small and large renovations, keeping operations open during construction. ■ GAVIN KALETA, PE, LEED AP BD+C is a mechanical department manager and senior associate at SSOE Group, a global project delivery firm for architecture, engineering, and construction management. He can be reached in SSOE’s Hillsboro, Oregon, office at 971-205-1455 or Gavin.Kaleta@ssoe.com

LOCATION. LOCATION. LOCATION. The best LOCATION on the web to help with your corporate LOCATION needs. The best LOCATION to start your site and facility search. The best LOCATION to stay on top of industry needs. The best LOCATION for the newest and most relevant industry produced studies and research papers.

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ADINDEXWEBDIRECTORY Advertiser

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Alabama Industrial Development Training www.aidt.edu info@aidt.edu

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Iowa Economic Development Authority www.iowaeconomicdevelopment.com info@iowaeda.com

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Arkansas Economic Development Commission www.ArkansasEDC.com/asa bstory@arkansasedc.com

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City of Cape Coral Economic Development www.BizCapeCoral.com EcoDev@CapeCoral.net Enterprise Florida, Inc. www.EnterpriseFlorida.com tvanderhoof@EnterpriseFlorida.com

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Georgia Ports Authority www.gaports.com swatson@gaports.com

Georgia QuickStart www.GeorgiaQuickStart.org Rbrown@georgiaquickstart.org

INDIANA

Indiana Municipal Power Agency www.IMPA.com bryanb@impa.com

MICHIGAN

GEORGIA

Georgia Department of Economic Development www.Georgia.org communications@georgia.org

Kentucky Cabinet for Economic Development www.ThinkKentucky.com Econdev@ky.gov Michigan Economic Development Corporation www.MichiganBusiness.org/AD whiteheadn@michigan.org

Odessa Development Corporation www.OdessaTex.com wburnett@odessaecodev.com info@odessaecodev.com

VIRGINIA

Virginia Business www.VirginiaBusiness.com

MISSISSIPPI

Mississippi Development Authority www.Mississippi.org bklauser@mississippi.org

15, 17, 19

NEBRASKA

Nebraska Public Power District www.EconDev.NPPD.com EconDev@NPPD.com

City of Rochester www.RochesterEDC.com Karen.pollard@rochesternh.net

TENNESSEE

Bristol Tennessee Essential Services www.NetworksTN.com ecodev@networkstn.com Tennessee Department of Economic & Community Development www.TN.gov/ecd TNECD.com allen.borden@tn.gov

24, 25

CANADA ALBERTA

Calgary Economic Development 67 www.CalgaryEconomicDevelopment.com www.bepartoftheenergy.ca info@calgaryeconomicdeveloment.com

ONTARIO

NEW HAMPSHIRE

Lubbock Economic Development Alliance www.LubbockEDA.org carolyn.rowley@lubbockeda.org

City of Woodstock www.ComeToTheCrossroads.com www.cityofwoodstock.ca lmagyar@cityofwoodstock.ca Ontario Ministry of Economic Development & Growth www.InvestInOntario.com info@InvestInOntario.com

Statement of Ownership, Management and Circulation. Publication Title: Area Development. Publication Number: 345-510. Filing Date: 10/1/2017. Issue Frequency: 4x. Number of issues published annually: 4. Annual Subscription Price: $75. Complete mailing address of known office of publication: 400 Post Ave. Westbury, NY 11590-2226. Contact person: Dennis J. Shea. Telephone: (516) 338-0900. Publisher name: Dennis J. Shea. Editor name: Geraldine Gambale. 400 Post Ave. Westbury, NY 11590-2226. Owner: Halcyon Business Publications, Inc. 400 Post Ave. Westbury, NY 11590-2226. Stockholders owning or holding 1% or more of total stock: President Dennis J. Shea and Secretary Randi S. Shea. 400 Post Ave. Westbury, NY 11590-2226. Known bondholders, mortgagees and other security holders owning or holding 1% or more of total amount of bonds, mortgages or other securities: None. Publication title: Area Development. Issue date for circulation data below: Q3 2016. Extent and nature of circulation: corporate real estate executives. Average number of copies of each issue during preceding 12 months: Total number of copies: 34,581. Legitimate paid/ requested distribution: Outside country paid/requested mail subscriptions stated on PS 3541: 17,622. In-county paid/requested mail subscriptions stated on PS 3541: 0. Sales through dealers and carriers, street vendors, counter sales and other paid/requested distribution outside USPS: 0. Requested copies distributed by other mail classes through USPS: 0. Total paid/requested circulation: 17,622. Non-requested distribution: Outside county non-requested copies stated on PS 3541: 16,608. In-county non-requested copies stated on PS 3541: 0. Non-requested copies distributed through USPS by other classes of mail: 0. Non-requested copies distributed outside the mail: 350. Total non-requested distribution: 16,958. Total distribution: 38,453. Copies not distributed: 196. Total: 34,776. Percent paid/requested circulation: 50%. Number of copies of single issue published nearest to filing date: Total number of copies: 35,033. Legitimate paid/requested distribution: Outside county paid/requested mail subscriptions stated on PS 3541: 17,939. In-county paid/requested mail subscriptions stated on PS 3541: 0. Sales through dealers and carriers, street vendors, counter sales and other paid/requested distribution outside USPS: 0. Requested copies distributed by other mail classes: 0. Total paid/requested circulation: 17,939. Non-requested distribution: Outside county non-requested copies stated on PS 3541: 16,744. In-county non-requested copies stated on PS 3541: 0. Non-requested copies distributed through USPS by other classes of mail: 0. Non-requested copies distributed outside the mail: 350. Total non-requested distribution: 17,094. Total distribution: 35,033. Copies not distributed: 191. Total: 35,224. Percent paid/requested circulation: 51%. Publication of Statement of Ownership for a requester publication is required and will be printed in the Q3 2017 issue of this publication. I certify that all information furnished on this form is true and complete: Dennis J. Shea, Publisher.

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