What's
SECO ND QUAR TER 2010
INSIDE 2
Our Economy: Update & Outlook
6
Our Progress: Measuring Our Success
The latest trends in the Capital Region economy
A report on BRAC’s activities in Q2 2010
12
Embracing Reform
14
Seeing the Forest for the Trees
17
Awards
18
From Competitive Disadvantage to Collaborative Advantage
21
Economic Development Investors
A recap of the 2010 legislative session
From pellets to paper towels, the Capital Region’s wood industry stands strong
Site Selection names BRAC one of the country's best
Why some regions are more successful than others in global competition
Leading organizations funding The Campaign for a Greater Baton Rouge
cat·a·lyst (kat’l ist) n. 1) Something that initiates or causes an important event to happen. 2) A person or thing that precipitates an event or change. 3) See also energy, momentum, trailblazer, Baton Rouge Area Chamber.
FROM THE DESK OF
Adam Knapp For months, we have touted our positive economy as compared to the rest of the U.S. We have recently received some of the best validation of this argument yet. In 2007, the Baton Rouge area was noted as the top "Mid-Market of the Year" by Southern Business and Development magazine. After receiving an honorable mention in 2008, we were the market leader again in 2009. Well, we’re back on top for 2010. Here’s what the editors said in the article about the Capital Region:
“Baton Rouge is the new economic development rock star in the South ... Three ‘Mid-Market of Year’ awards in four years [is] something no mid-market has ever done in the South since we irst published this ranking in 1994.”
Our region’s businesses and BRAC’s investors should feel a deep sense of pride in this recognition. These rankings track the number of announced job expansions and project wins by regions across the South. They primarily measure economic development activity, rather than analyzing indicators such as unemployment rates. And we’re even outpacing most of the U.S. in that category, too. (The Brookings Institution’s report, MetroMonitor, recently ranked our area among the top twenty U.S. metros for economic performance in the irst quarter of 2010.) That’s momentum. One of the areas in which the Capital Region has shown strength is the wood products sector. We solidiied our position this year as an industry leader even as other regions struggled in the face of a slow housing market and a decreased demand for lumber (see the story on page 14). From green energy sources to consumer products, we project that this sector will remain a serious economic driver for our region. We also know that universities such as LSU will play a key role in our long-term future: their competitiveness is our competiveness. In this issue, you’ll see results from the 2010 legislative session, during which BRAC participated along with forty-seven business groups in the statewide BILD Coalition, to push the LA GRAD Act through the legislature. Its passage was one of BRAC’s best policy reform victories during our ive-year campaign. To quote LSU Chancellor Michael Martin, “It would not have happened without BRAC and their leadership in the BILD Coalition.”
Enjoy the issue,
Adam Knapp President and CEO, Baton Rouge Area Chamber
T H E
E C O N O M Y
On the Baton Rouge Area Economy
A
stable housing and employment market are necessary for any economic recovery. The Baton Rouge area has
maintained reasonable stability in both of these areas but has experienced a decline in overall retail spending. It’s helpful to keep in mind
Employment According to the U.S. Department of Labor, businesses hired fewer workers in June than previously estimated. The "underemployment" rate in June was 16.5%. This includes those working part-time who would prefer full-time work and unemployed workers who've given up on their job hunts.
that household spending accounts for about
All told, there were 14.6 million people looking for work in
67% of all gross domestic product (GDP), so
July. That's roughly double the igure from December 2007
any signiicant changes are bound to impact
when the recession began.
the economy.
In the Baton Rouge metropolitan statistical area (MSA), total
Since the recession started in the fourth quarter of 2007, the
nonfarm employment increased by 3,300 jobs during the
common theme has been Americans cutting back on their
second quarter. Total nonfarm employment is estimated at
spending. However, the latest numbers from the Bureau of
370,400 for the month of June, up 1,400 from June of 2009.
Economic Analysis show aggregate personal consumption
Total nonfarm employment in December 2007 was estimated
expenditures are up 2.9%, or $285 billion. The table on
at 375,500, which indicates a loss of 5,100 jobs since the
page 3 depicts the goods and services which have shown
beginning of the recession.
an increase in spending since 4th quarter 2007. The selected categories show that people are continuing
Permits
to spend and are not decreasing their dollar commitments
In East Baton Rouge Parish, the number of building permits
on certain items, especially communication. Spending
increased 4.95% through the irst half of the year, from 10,957
on mobile devices has soared almost 17% since the
in 2009 to 11,499 in 2010. Permit value jumped 61.27%
recession started.
through the irst six months, from $173.5 million in 2009 to $279.8 million in 2010.
2
S I N C E T H E R E C E S S I O N S TA R T E D :
Where Americans Have Increased Spending CHANGE IN SPENDING Q4 2007 - Q2 2010
SELECTED CATEGORIES*
PERCENT %
BILLION $
Telephone equipment
16.6%
1.5
Pets
14.4%
5.7
Education (including nonproits)
13.4%
36.9
Child care
12.8%
3.8
Healthcare (including drugs)
10.8%
193.7
Housing (owner-occupied and rental)
6.4%
95.4
Food and drink for of-premises consumption
5.3%
40.3
Communication services (wired, wireless, cable)
5.0%
14.1
Information processing equipment
3.9%
2.6
Personal care products
3.9%
3.4
Sporting equipment, guns and ammunition
3.7%
2.3
Total personal consumption expenditures
2.9%
285.2
PCE less education, health, housing
-0.6%
-40.8
*Selected categories of spending only
DATA: Bureau of Economic Analysis
Q2 2010
3
T H E
E C O N O M Y
Housing According to the Multiple Listing Service (MLS), home sales decreased 37% in the second quarter of 2010 when compared to the second quarter of 2009. However, average sales price increased 6% to $204,427 during the same time period. Analysts at First American Bank say that the national housing market is expected to have a tough 2010, as federal homebuying incentives expire and inventory levels remain high.
The recession is greatly stratiied by geography, socioeconomic status, and sector. The Capital Region continues to perform well economically even though the effects of the recession are evident in housing and consumer spending. As the national economy continues to slowly climb out of a recessionary hole, one of the most important takeaways is the consumer spending increase in speciic areas. This shows a willingness to make purchases even while purse strings are being tightened in other areas. This information is extremely valuable as businesses make future strategic decisions.
Locally, the Baton Rouge area home price index is expected to increase by 1.05% by February 2011, while the state as a its index on public sale records and databases. Five Louisiana metropolitan areas, including the Baton Rouge area, posted year-to-year increases in foreclosure activity during the irst half of 2010, according to a national study by RealtyTrac. Of those, 1,817 were Capital Region properties targeted by a foreclosure-related notice during the irst half of 2010. That's up 46.9% from a year ago. During the irst half of 2010, one out of every 180 homes received a notice. Metro Baton Rouge ranked 150th out of 206 metro areas for foreclosures. Even with such a high percentage increase in foreclosure activity, the Baton Rouge area is still doing better than 72% of the nation.
Retail Sales Sales tax collections across the region are down 4% from the 5-month period of January – May in 2009 compared to 2010. However, sales tax collections are up from the same time period in 2007 when compared to 2010. When the sales tax collections are viewed as an aggregate for all nine parishes, the total sales tax collections remained stable in 2008 and 2009 and have decreased to pre-recession levels in 2010. Year (Jan-May)
Sales Tax Collected
2007
$272.5 MM
2008
$283.9 MM
2009
$284.3 MM
2010
$273.2 MM
An increase in retail spending (consumer conidence) would be one of the best indicators of the ending of a recessionary period in the region.
Economic Review Contributors
whole is expected to post a 0.6% gain. First American bases Renee Areng Baton Rouge Area Convention and Visitors Bureau Jerry Campbell The Advocate Carey Chauvin EBR Parish Department of Public Works Ken Damann Greater Baton Rouge Association of REALTORSÂŽ Tifany Delapasse EBR Parish Department of Finance Todd Denton Mall of Louisiana Huey Dugas Capital Region Planning Commission J. Michael Eades Ascension Economic Development Corporation Connie Fabre Greater Baton Rouge Industry Alliance Marianne Frazee Frazee Recruiting Patty Granier Louisiana Workforce Commission Chris Harrell Regions Bank Bob Israel Louisiana Automobile Dealers Association Stuart Litvin Livingston Economic Development, Inc. Hays Owen Baton Rouge Water Company Drew Pearson Latter & Blum Rene Ragas Our Lady of the Lake RMC Dr. Loren Scott Loren C. Scott & Associates, Inc. Karen St. Cyr Port of Greater Baton Rouge
4
Baton Rouge Area Regional Spending ($ Millions)*
Baton Rouge Area Employment and Unemployment ($ Thousands)* 390
90
380
80
370
70
360
60
1,000
350
50
800
340
40
330
30
320
20
310
10
1,600 1,400 1,200
600 400
0 300 JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN* 2009 2010
100 0 JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY 2009
2010
East Feliciana, Pointe Coupee, St. Helena, West Feliciana, and West Baton Rouge Parishes Iberville Parish
Ascension Parish
Livingston Parish
East Baton Rouge Parish
Indicator
Outlook
08-09 Employment Nonfarm payrolls
09-10 Unemployment Nonfarm payrolls
08-09 Unemployment Nonfarm payrolls
* June employment and unemployment igures are preliminary estimates; all employment estimates relect current revisions. Source: Louisiana Workforce Commission; BRAC analysis
* Sales were estimated from sales and use tax collections and rates of each taxing jurisdiction within each parish. Source: Local tax oices; BRAC analysis
Economic Vital Signs
09-10 Employment Nonfarm payrolls
Strong
Stable or Mixed
Decline
Trend
Latest Statistic
• Jobs down 5,400 over Jun 09
Jobs
Nonfarm payrolls, Jun 10 (p): 370,400 Unemployed, Jun 10 (p): 32,550
Unemployment Insurance Claims
Initial claims per week* Weeks claimed per week*
797 9,928
• Initial claims up 7% from Q2 09
Residential Building Permits
Single-family, Q2 10 Multi-family, Q2 10
736 87
• Total permits have increased by 12% compared to Q2 09
Home Sales
Average home price* Units sold, Q2 10
$204,427 1,181
• Sales prices have increased 6% from Q2 09
Regional Spending
Sales and use taxes, May 10 Total sales, May 10
$53.7 MM $1.09 B
• Sales tax collections as a region have decreased 2% over May 09
Local HQ Stock Performance
Price change over Q2 10: ALB: (6.8)% AMED: (20.4)% LAMR: (28.6)%
SHAW: (0.6)% HEES: (30.5)% CRWS: 30.5%
• Stock prices have decreased across the board except for Crown Crafts, Inc.
Energy Costs
WTI crude oil spot* Henry Hub natural gas*
$77.98/barrel $4.35/MMBtu
• Unemployment in Jun at 8.3%; well-below U.S. average of 9.6%
• Weeks claimed up 28% from Q2 09
• Single-family permits have increased 14% compared to Q2 09
• Units sold have nearly doubled from Q2 09
• Crude oil spots up $1.95/barrel from Q1; up $18.27 from Q2 09 levels • Gas price unchanged from Q1, price is up $0.64/MMBtu from Q2 09 levels
Sources: Louisiana Workforce Commission; U.S. Census Bureau (New Residential Construction); Greater Baton Rouge Association of REALTORS®; Local sales tax oices; Yahoo! Finance; LSU Center for Energy Studies; BRAC analysis
* Q2 10 average
Q2 2010
5
O U R
P R O G R E S S
MEASURING OUR
SUCCES 1
Strategy #1: Retain And Expand Existing Businesses Recognizing that about 75% of future job growth in our region will come from existing businesses, BRAC has developed a robust business retention and expansion program.
In May, the West Feliciana Community Development Foundation approached BRAC about providing temporary business development assistance as the foundation searches for a new executive director. In order to support its parish partner, BRAC assigned its regional project manager, Rachel Pierson, to the foundation’s ofices. Pierson will split her time between focusing on West Feliciana and maintaining her responsibilities related to the region’s other parishes. Second quarter retention and expansion project wins included the re-opening of a lumber mill in East Feliciana Parish by Bayou State Lumber, which will generate twenty new jobs and $800,000 in capital investment, and Project Flavor, which secured ifteen jobs and $600,000 in capital investment (see corresponding stories on page 8 and 9). BRAC ended the second quarter of 2010 by conducting forty-eight on-site executive interviews with existing businesses in the Capital Region. For the year, the BRAC business retention and expansion team has completed eighty-one in-market visits. The team also visited four headquarters with local ties; two in Dallas, TX, and two in New Jersey.
2
Strategy #2: Attract New Business To Our Region A core function of any effective regional economic development program is to aggressively sell the region’s assets to high-potential business prospects.
The Baton Rouge area’s attractiveness as a wood and paper production hub was on display again in May with the announcement of Point Bio Energy’s new manufacturing facility to be located at the Port of Greater Baton Rouge (see cover story on page 14). The new facility, which will produce wood pellets used in heating, will result in 100 new jobs and $124 million in capital investment. The second quarter ended with six ‘Class A’ prospects in the pipeline representing 188 potential jobs and capital investment of approximately $54 million. Our prospect total, including Classes A and B, stands at twenty-six.
6
ESS
The Campaign for a Greater Baton Rouge is comprised of seven strategies that work together to drive economic development in the Baton Rouge area. Each issue of Catalyst features an update on our progress on each of these seven strategies as well as a preview of upcoming goals and activities.
S U M M A R Y
O F
Business Development Prospect Activity
Q2 2010
Project Count
Prospective Job Count
Current Count
Change from prior quarter
Current Count
Change from prior quarter
2010 Project Wins (YTD)
3
+3
73
+73
Prospects: Class A
7
-7
1,058
-831
Prospects: Class B
19
-4
2,701
+1,371
Prospects: Total
26
-11
3,759
+540
PROSPECTS: CLASS A Prospect is actively engaged in dialogue with BRAC or the Capital Region has been speciically identiied/selected to present sites through LED. PROSPECTS: CLASS B Company/consultant has requested information on multiple states/ regions; company identity is frequently unknown. PROSPECTS: CLASS C Company has not requested any information, but based on tip/research, may represent a potential opportunity. *Numbers reflect most recent information at time of publication.
Q2 2010
7
O U R
P R O G R E S S
3
Strategy #3: Develop A National Marketing Program To be successful, it is essential that we market the Baton Rouge area nationally and internationally to decision-makers involved with business relocations and expansions.
As part of its regional marketing award grant from Louisiana Economic Development (LED), BRAC initiated an e-mail marketing campaign to selected companies in targeted industry sectors. The companies were selected by analyzing a host of data that indicated those that have a high-probability of relocating or expanding in the region. The irst two sectors chosen were digital media and corporate headquarters/back ofice services. Although it is too early to analyze the corporate headquarters/back ofice services results, the digital media-focused campaign has generated four active projects. Efforts to connect site selectors and company executives with BRAC’s business development team resulted in attendance at a number of trade shows and conferences. These included an April visit to the Industrial Asset Management Council show in Colorado Springs, CO; the Area Development Consultants Forum in San Francisco, CA; and LOGIN and E3, two digital mediafocused events. The placement of print advertisements in national publications continues to be an important part of the BRAC marketing program. In the May issue of Site Selection magazine, BRAC placed a full-page advertisement that highlighted the Capital
PROJECT WINS Bayou State Lumber 20 Jobs, $800,000 Capital Investment Bayou State Lumber, a Livonia-based lumber company, has committed to re-opening a shuttered sawmill in East Feliciana Parish. The newly-opened mill will create twenty new jobs and will primarily produce rough, industrial lumber used mainly in the oil production and reining industry sectors, especially for ofshore applications. The Jackson, Louisiana mill, which will now be called the Jackson Lumber Mill, has been idle for over a year and a half. The project was identiied through a retention visit with the company in February, 2010 by oicials from BRAC, Louisiana Economic Development, and the Pointe Coupee Chamber of Commerce. “We are grateful to the Baton Rouge Area Chamber retention and expansion group and the East Feliciana Chamber of Commerce for their help in securing the facility and for walking us through the application process for state enterprise zone incentives.” Magruder Hazlip, Bayou State Lumber
8
Region’s prowess as identiied by third-party rankings. A full-page advertisement was placed in Business Facilities magazine that focused on the area’s leadership position in technology and research and development. Finally, BRAC supported the work of its digital media entity, BRADIC, by placing a free-standing insert (FSI) in The Wall Street Journal. The FSI was only included in speciic market issues. The markets were selected due to their high volume of digital media companies.
4
Strategy #4: Create A Robust Business Intelligence Capability Site selection consultants, real estate executives, and other business decision makers depend on BRAC to provide detailed information about our region and the regional economy.
Much of the business intelligence work in the second quarter focused on collecting data for a major business development project. Information related to education/graduation rates; housing prices and availability; workforce; and much more was all needed to prepare the region’s submission to the prospect. A decision on the project’s location is expected in the fourth quarter.
Point Bio Energy, L.L.C. 100 Jobs, $124MM Capital Investment The Baton Rouge area furthered its burgeoning alternative energy sector with the announcement that Point Bio Energy would be establishing manufacturing operations at the Port of Greater Baton Rouge in West Baton Rouge Parish. Point Bio will produce wood pellets for fuel generation. The pellets are in high demand in Europe, where they are regarded as a cleaner fuel source than coal, thereby assisting industrial clients in meeting greenhouse emission reduction requirements. The facility will employ approximately 100 people and will be constructed with a capital investment of close to $124 million. Point Bio estimates that the plant will produce 450,000 metric tons of pellets per year with product deliveries beginning in the fourth quarter of 2010. “Point Bio Energy is extremely proud to be developing its operations in the Capital Region. We want to thank everyone who made this a reality, especially BRAC, the port, and the surrounding community.” Bill New, CEO, Point Bio Energy
Project Flavor * 15 Jobs, $600,000 Capital Investment BRAC assisted a local processing company, with operations in East Baton Rouge Parish and additional production facilities in the southeast, execute their expansion strategy. BRAC helped by expediting and simplifying the permitting process, creating the proper proposal for a state property tax exemption, and inding a low-cost solution to curb their increasing water and sewer costs. This partnership will lead the way for further expansion in the Capital Region as the company continues implementing its three-year plan.
*Company wishes to remain anonymous at this point.
Q2 2010
9
O U R
P R O G R E S S
5
Strategy #5: Create A Special Opportunity Fund The ability to react quickly and lexibly to economic development opportunities that arise—both to help existing businesses expand and to bring new businesses to the Baton Rouge area—is critical to the success of our efforts.
The special opportunity fund was accessed a total of four times in the second quarter. Each time was for the creation and publication of regional tour books to be used by company executives of the aforementioned major business development project. The books provided the attendees information on the community as they made a number of tours of the Capital Region.
6
Strategy #6: Create A Robust Public Policy Capability
As BRAC promotes the Baton Rouge area to businesses looking to relocate or expand, we are working with business and government leaders to improve the competitiveness of our regional economy. Much of the work related to public policy in the second quarter centered on the legislative session that began in late March and ended in late June. Although the ultimate results
of the session were mixed, a number of important pieces of legislation made it through the process. By far, BRAC’s number one priority during the legislative session was the passage of the Louisiana Granting Resources and Autonomy for Diplomas Act (LA GRAD Act). The LA GRAD Act provides critical resources to the state’s higher education institutions and will lead to performance improvements, appropriate enrollment shifts, and other
BRAC’s Economic Development Partners Ascension Economic Development Corporation Oice of the Mayor-President, City of Baton Rouge/Parish of East Baton Rouge East Feliciana Economic Development District Iberville Chamber of Commerce Livingston Economic Development Council Greater Pointe Coupee Chamber of Commerce St. Helena Parish Economic Development Committee West Baton Rouge Chamber of Commerce West Feliciana Community Development Foundation
10
important reforms. The passage of the act is a bright spot in a very dire situation resulting from continued state funding cuts to higher education. Last quarter, BRAC announced the results of its regional innovation strategy (see the Q1, 2010 issue of Catalyst at www.brac.org/catalyst). A signiicant piece of that strategy called for the creation of a true university research park that will attract technology intensive businesses. Through the capital outlay bill, the legislature committed $24 million to develop the research park at LSU’s South Campus. The continued ranking of transportation issues as one of the top concerns of the Baton Rouge area business leaders kept the topic on BRAC’s list of legislative priorities. Importantly, the legislature committed $59 million to BRAC-supported regional trafic congestion projects, including the widening
of I-12 and I-10 and the Pecue Lane interchange, bringing the three-year total funding for these priorities to $266 million. The creation of a mechanism by which local communities could participate in the development of a high-speed rail line between New Orleans and Baton Rouge and a potential new mass transit funding source for the Capital Area Transit System (CATS) were all positive outcomes of the session. Economic development project funding in the Louisiana Mega-Project Development Fund, the Rapid Response Fund, and LED’s Regional Awards and Matching Grant Program — all critical to regional economic development activities — made it through the process, as did the passage of an important development inancing vehicle for Baton Rouge’s River Park Development District.
By far, BRAC’s number one priority during the legislative session was the passage of the Louisiana Granting Resources and Autonomy for Diplomas Act.
7
Strategy #7: Launch A Regional Learning Community Initiative
Our economic development efforts rest on our ability to develop and sustain high-quality educational institutions and to train individuals capable of making a contribution to the community.
In June, BRAC sent a letter to each member of the East Baton Rouge Parish School Board highlighting their concerns about the recently-issued school repair and maintenance contract. The letter identiied three points that need further explanation from the school board.
Public education reform was also a part of BRAC’s legislative priorities. This year’s session saw the passage of muchneeded reforms that will allow Louisiana to continue improving the educational outcomes that are necessary in a 21st century society. Policy wins included the elimination of school board staff micromanagement by board members in personnel matters; measures aimed at increasing teacher performance and accountability through evaluations and incentives linked to student achievement; and the decision to allow schools and districts to apply for four-year waivers of state laws or Board of Elementary and Secondary Education (BESE) policies, if they commit to certain reforms priorities.
Through FuturePAC, the business community has been engaged in candidate recruitment for the East Baton Rouge School Board elections as well as the evaluation of policies for candidate selection. In an attempt to allay any public trust issues, the letter requests a third-party audit of the process. A response was drafted by board president Jerry Arbour, who declined BRAC’s request for the independent audit. As the quarter ended, BRAC was evaluating next steps including funding the audit.
Q2 2010
11
A present and looming budget crisis, a disastrous gulf oil spill, and public friction between the two chambers were all at the forefront of the 2010 Regular Legislative Session of the Louisiana Legislature. But through all of this, true reform was actually a theme embraced by the legislature’s members. Meaningful steps were taken to assist the state’s higher education institutions, gauge the ability of public school teachers by the achievement of their students, support the creation of a New Orleans to Baton Rouge inter-city rail system, secure investments in state economic development deal funds, and much more. While the 2010 session presented considerable challenges, it also resulted in transformative wins for Louisiana and the Capital Region.
HIGHER EDUCATION REFORM
PUBLIC EDUCATION REFORM
BRAC took a lead role to unite forty-seven other organizations of the BILD: Higher Education coalition (see the Q1, 2010 issue of Catalyst), endorsed the LA GRAD Act, which stands for Louisiana Granting Resources and Autonomy for Diplomas Act. The administration's bill, sponsored by Speaker Jim Tucker, allowed for postsecondary education management boards to enter into six-year performance agreements with the Louisiana Board of Regents in order to be granted limited revenue autonomy in exchange for a commitment to meeting performance objectives. Overtime, the GRAD act could allow LSU to secure revenues competitive with other lagship research universities.
The most effective means to dramatically improve student academic performance is to ensure that there is an effective teacher in every classroom. During the legislative session, the state enacted legislation that seeks to increase teacher performance and accountability through evaluations and incentives linked to student achievement.
12
BRAC was also highly supportive of legislation aimed at preventing the micromanagement of school board members in personnel matters and helping to reduce burdensome regulations that may hinder academic growth by allowing all schools and school districts to apply for waivers of certain state laws and policies.
TRANSPORTATION SOLUTIONS The continued inclusion of trafic congestion as one of the top concerns of Baton Rouge area business leaders dictates that BRAC continue to work on implementable solutions. The 2010 capital outlay budget includes $11 million in funding for the Pecue Lane/I-10 interchange, $48 million to complete the I-12 from O’Neal Lane to Walker widening, and $6.5 million for other projects within the Capital Region. The aforementioned support for development of a lightrail passenger line between New Orleans and Baton Rouge would allow local governing authorities to better coordinate the low of transit for their local communities, reduce trafic congestion, provide for an eficient transportation system, and further economic development efforts. A bill sponsored by Rep. Michael Jackson provides a dedicated source of revenues for the Capital Area Transit System (CATS) through the enactment of a local ordinance to increase motor vehicle inspection fees once approved by voters.
ECONOMIC DEVELOPMENT INVESTMENTS
“ While the 2010 session presented
The legislature preserved the $55 million balance in the mega-project development fund, which is an important tool in the state’s economic development arsenal. Investments of $15 million for the rapid response fund and $1.7 million in marketing grants available through Louisiana Economic Development’s (LED’s) Regional Awards and Matching Grant Program were also approved.
considerable
As indicated in BRAC’s regional innovation strategy (www.brac.org/ research), the development of a university-led research park would allow for the cultivation of a valuable land asset that leverages the intellectual richness of LSU and Southern and strengthens the state’s innovation economy. BRAC supported the allocation of $9 million in funding for the land acquisition for the research park and $15 million for its development.
resulted in
OPPORTUNITIES MISSED As in every session, there were some opportunities that got away. One such opportunity was the creation of an angel investor rebate program intended to spur risk capital development for entrepreneurial ventures. The bill unfortunately died in the final minutes of the session, for the second year in a row.
challenges, it also transformative wins for the Capital
”
Region.
BRAC was also actively involved in the proposed development of an air service fund in the state treasury that would be used solely for a program that enhances or increases air service at commercial carrier airports. The bill died in the house transportation committee amid heavy opposition by the state’s general aviation airports.
Q2 2010 13
F E AT U R E
S TO R Y
Across the state, the wood products sector is experiencing tough times. A nationwide housing collapse virtually halted construction, slowing production in many facilities in Louisiana and complete shut-downs of others. Yet in the Baton Rouge area, a different trend is emerging, as the industry is moving in the opposite direction: growth. While BRAC advocates for diversifying into new “economic driver� industries, it also believes that our existing business clusters offer new opportunities for gains. There are few better examples than in wood products.
14
One of the state’s largest wood products plants, GeorgiaPaciic in Zachary, is running full-bore as it produces a wide range of paper products. Another company, Pointe Coupee-based Bayou State Lumber, announced in April that it will re-open a shuttered lumber mill in Jackson, LA, in order to meet increased customer demand. Point Bio Energy has committed to building a $124 million wood pellet facility at the Port of Greater Baton Rouge. All of these examples point to a regional trend that is building positive momentum. On a non-descript corner of Highway 61 sits a large, yet understated, wooden sign announcing the entrance to GeorgiaPaciic’s Port Hudson plant. The sign is indicative of the way Georgia-Paciic has continued to do business in the Capital Region: subtly, but with a big impact. The forty-two-year-old facility, the region’s leading wood products employer, manufactures some of the most widely-identiiable products made in the area, such as Brawny paper towels, Quilted Northern toilet paper, and many other brands. Because of its broad product varieties, Port Hudson is one of the most productive facilities within the Georgia-Paciic family. Currently, the facility is running at full capacity with close to 1,000 employees.
industry. The reinstated facility has been re-named Jackson Lumber Mill. This successful project came to fruition as a result of the coordinated efforts of BRAC, Louisiana Economic Development (LED), the East Feliciana Economic Development District, the East Feliciana Parish Chamber of Commerce, and the Pointe Coupee Chamber of Commerce. Across the globe, a movement is afoot to ind and use alternative forms of energy. The wood pellet industry has experienced signiicant growth recently due to European government incentives intended to reduce greenhouse gas emissions. The wood-based fuel is seen as an environmentally-favorable alternative to coal. Additionally, wood pellets have both industrial and residential applications in both Europe and North America. European demand alone for wood pellets has increased from 6.9 million tons to 8.9 million tons and is expected to grow by 25-30% in the near future1. The Baton Rouge area is beginning to ind its way to the forefront of this new energy market. In the second quarter, BRAC and the Port of Greater Baton Rouge announced the recruitment of Point Bio
A big reason for the downturn in wood products has been the precipitous drop in the housing market across the United States. This market collapse dramatically stymied the demand for lumber and other construction-related products. However, Bayou State Lumber has not only weathered the recessionary storm, but found it necessary to expand in the midst of it. Its acquisition and re-opening of the Netterville Lumber sawmill in rural East Feliciana Parish is a boost to the local economy and demonstrates the overall health of the Capital Region’s wood industry. The project adds twenty new jobs to the area, and included a capital investment of $800,000 to modernize the facility. The company produces rough, industrial lumber used mainly in the oil production and reining industry sectors, typically for offshore applications. They also produce a limited amount of “grade” lumber, mostly cypress, for the construction 1 Source: Wood Pellet Association of Canada
Q2 2010 15
F E AT U R E
S TO R Y
Energy’s headquarters and wood pellet manufacturing plant to the port. The plant will employ approximately 100 people and will be constructed at a cost close to $124 million. Point Bio estimates that the plant will begin production in the summer of 2011 with deliveries beginning in the fourth quarter of that year. The facility will produce 450,000 metric tons of pellets per year, resulting in additional deep-draft ships at port docks. This will increase the port’s overall tonnage and shipping, providing additional indirect jobs for longshoremen and other transportation workers. So why the Baton Rouge area? According to Point Bio oficials, several strategic advantages led to the selection of the Port of Greater Baton Rouge site. The port is one of the few deep water inland facilities in the United States that is also located within a sustainable forest management area with an ample supply of timber. This distinction provides Point Bio with signiicant transportation cost advantages. Its deep water designation, paired with its proximity to rail and interstate, allows for multiple import and export opportunities. Finally, the port offers Point Bio existing infrastructure assets that will provide signiicant capital investment savings with available land for extensive future expansion options.
Although plans are still being inalized, the irm has expressed its intention of reopening the paper mill. State oficials are hopeful the company will achieve the 200 job goal of the previous owner, PanAmerican Capital, which sold the facility to KPAQ out of its bankruptcy. This could happen as soon as the fourth quarter of 2010. The Baton Rouge area has continued to buck the national trend of the recession. One of the key reasons may be the continued strength of the wood products sector. Companies like Georgia-Paciic, Bayou State Lumber, and Point Bio Energy are proving that the timber and paper sector is not just alive and well…it’s growing like a tree.
The recruitment of Point Bio was the epitome of teamwork as BRAC, the port, the West Baton Rouge Chamber of Commerce, LED, and other state agencies all worked together to bring this project to reality. On the horizon, the region may see new growth as well from one of its strongest former players. The former Tembec plant in St. Francisville has recently been acquired by Florida-based KPAQ Industries, LLC.
The wood-based fuel is seen as an environmentally-f avorable alternat ive to coal.
Capital Region Wood Industry Statistics COMPANIES
EMPLOYEES
135
1,861
10% 16
of LA’s Total Sawtimber Board Feet Produced
8%
FOREST LAND
1,557,631
of LA’s Total Pine and Hardwood Pulpwood Produced
ACRES
15%
of LA’s Total Chipn-saw (standard cords) Produced
Site Selection Names BRAC
One of the Country’s Best
W
hen BRAC implemented The Campaign for a Greater Baton Rouge, it set an internal goal of eventually being named one of Site Selection magazine’s top ten economic development
organizations in the United States. It reached that goal in April as the organization was selected to be included in the magazine’s list for 2009. The ranking, which does not designate a specific position within its listing, is based on four objective categories:
BRAC is the first economic
new jobs, new jobs per 10,000 residents, new investment amount, and new investment per 10,000 residents, as
development
well as subjective attributes, including innovation, leadership, and customer service. BRAC is the first economic development organization from Louisiana to
organization
receive the honor since 2004. The honor puts BRAC in the company of much-larger regions such as Pittsburgh, Philadelphia, Chicago, Houston, and Dallas. In the article touting BRAC’s inclusion on the list, Site Selection cited the Baton Rouge area’s $1.52 billion in capital investment and 3,142 new jobs in 2009. Specific projects included ExxonMobil’s $500 million diesel fuel
from Louisiana to receive the honor since
refinery expansion in East Baton Rouge Parish and SNF Holding Company’s $362 million specialty-chemicals plant investment in Iberville Parish. Adam Knapp, BRAC’s
2004.
President and CEO, was quoted as indicating that the importance of BRAC’s regional approach to economic development and the stability of the area’s housing market were two of the most important reasons for the business development success.
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[ IN PERSPECTIVE ] Each issue of Catalyst includes a national expert contributing new ideas about economic development issues.
F r om
E G A T N A V D A S I D E V I T I T E COMP to E G A T N A V D A E V I T A R O B A CO L L By Samuel Leiken*
Why are some regions more successful than others in global competition? While it is doubtlessly true that some regions are better endowed than others to compete in the global-knowledge economy, the problem is rarely that the less-successful regions lack sufficient assets. Instead, these regions seem to lack the ability to think, plan, and act regionally. The ability to link innovation assets — people, institutions,
capital, and infrastructure — is decisive in generating robust, localized ecosystems that turbo-charge a region’s economy. Acting regionally means proceeding with a strategy that is focused on the long-range use of assets to enhance global competitiveness.
But what is “acting regionally”? As with most things, these abstractions are easier to digest through examples. Here are a few examples of regions acting regionally. In 1988, voters in metropolitan Denver approved by a three-to-one margin a region wide 0.01 percent sales and use tax to fund its scientific and cultural facilities district (SCFD). While most of the facilities were in downtown Denver, regional voters recognized that the reputation of the region and its ability to attract the “creative class” and new economy industries depended on whether Denver was perceived as a decaying downtown or an urban destination.
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Southside Virginia, spearheaded by a group of Danville businessmen, secured funding for the creation of the Institute for Advanced Learning and Research (IALR), a technology-based economic development project. The IALR serves the region as a source of distributed research and education in partnership with Virginia Tech; an accelerator for products developed through their research; a test bed for existing technology companies; and a provider of science, technology, engineering, and mathematics (STEM) education for regional students and teachers. The Greater Philadelphia Regional Compact for Science, Technology, Engineering, and Mathematics Education is an agreement among institutions in thirteen counties in the three states that comprise the greater Philadelphia region. The compact’s vision is to expand the region’s capacity to develop a talented, robust, and versatile workforce capable of performing, adapting, and thriving in a dynamic, knowledge-driven economy. While there are many barriers to acting regionally in the U.S., first among them is that our economic regions and our political jurisdictions have different borders. As a consequence, making effective decisions on a regional basis - regions acting like regions - is neither smooth nor orderly. There is no system for resolving the competing interests among cities, counties (or parishes), and towns. Regions, which are fundamentally labor markets, generally do not have the power of the purse and lack both identities and cultural traditions. These obstacles leave U.S. regions at a competitive disadvantage. The examples cited earlier are a product of regional collaborations that would not have occurred but for effective regional leadership. But to be effective, regional leadership must be a new kind of leadership, one that depends on consensus, not hierarchy. Their structures are more frequently networked than formalized. The players move in and out depending on the issues involved. Effective regional leadership bodies, however, must rely on existing regional organizations that can set agendas, call meetings, recruit new leaders, etc. While these organizations can and do vary in form, they all serve as systems integrators and enablers of collaboration. This new kind of leadership confronts a series of tasks that differ substantially from those of the old, local economic model, where the region next door was the competition and recruiting firms from elsewhere was the mission. New regional leadership must create a shared regional narrative, build consensus, institutionalize innovation, and lead change.
* Samuel Leiken is vice president of the Council on Competitiveness and the principal investigator and lead author of COLLABORATE: Leading Regional Innovation Clusters, the Council’s recently published report on which this article is based.
Despite the growing need for collaboration, regional action remains the exception rather than the rule. To paraphrase an old saying, regional collaboration remains an unnatural act between non-consenting adults. Existing jurisdictional boundaries, tax policies, and cultural rivalries undermine regional action. Too many regions across the country act less like regions and more like rival high school teams under Friday night lights. Put simply, the nature of global economic competition requires that the Hatfields and McCoys join ranks if they want to compete successfully against the Chens and Mings and the Agarwals and Singhs.
Q2 2010
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Is Your Business Ready For
Hurricane Season?
If the Capital Region’s business community has learned anything in the last ive years, it’s that it is just as important that your company be prepared for a possible hurricane as it is for your home and family. To assist with that preparation, BRAC, since 2008, has been releasing an annual list of recommendations to help businesses prepare for the effects of hurricanes and tropical storms. Besides strongly advising that businesses of all sizes start preparations immediately, BRAC has also distributed a list of critical business information. Should any large-scale damage occur in south Louisiana, BRAC would also create a section on its website dedicated to recovery efforts (www.brac.org/recovery). In the event that a hurricane impacts the greater Baton Rouge area, BRAC recommends that businesses should: Create a simple written plan, including task assignments, and provide a copy to every employee Understand the vulnerability of your business, including elevation in the event of looding and the condition of your building in the event of severe winds Have an evacuation plan that provides for everyone on the premises to leave the workplace safely and quickly Maintain an up-to-date list of contact information for all employees and mission-critical business partners (including work and cell phones, work and/or personal email addresses, login ids and passwords for business accounts, PINs and codes for security access devices, etc); the list should include employees, customers, vendors, bankers, attorneys, and insurance agents Establish plans and schedules for communicating and coordinating with employees, especially those who have been displaced from their homes by the disaster
In addition to these suggestions, there are several online resources available to assist businesses with their hurricane planning and disaster response: State of Louisiana Governor’s Ofice of Homeland Security & Emergency Preparedness (GOHSEP) Get A Game Plan (www.getagameplan.org) Federal Emergency Management Agency (FEMA) Ready Business (www.ready.gov/business/index.html) Entergy Operation: Storm Ready (http://www.entergy.com/storm_center/default.aspx) Small Business Administration (SBA) Disaster Assistance Loans (www.sba.gov/services/ disasterassistance or dial 1-800-659-2955) NOAA National Hurricane Center (www.nhc.noaa.gov)
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Plan to use multiple means of communication to contact employees, customers, and suppliers, including wired telephone, cellular telephone, SMS text messaging, e-mail, and web services (e.g., Facebook, Twitter) Make clear arrangements for all staff to be able to contact the business or locate information about the business if it is temporarily closed or forced from its normal location Establish management succession procedures and clear chains of authority Identify operations critical to the company’s survival and recovery Identify core personnel, records, procedures, and equipment necessary to maintain business operations Protect vital business records, inancial data, accounting records, personnel information, inventory information, etc., and ensure that all digital information is redundantly backed up with copies placed at off-site locations Develop a continuity of operations (COOP) plan if normal business locations are inaccessible Prepare for lengthy power outages during and after a disaster, including arranging for back-up power sources and fuel supplies
Economic Development
INVESTORS The Campaign for a Greater Baton Rouge (2006–2010) C H A I RMA N’S CO U NC IL
PO L I CY CO UN CI L
ANNUAL INVESTMENT OF $100,000+
ANNUAL INVESTMENT OF $7,500+ (Five-year total pledge of at least $37,500)
(Five-year total pledge of at least $500,000) All Star Automotive Group • Baton Rouge Area Foundation / Commercial Properties Realty Trust • Credit Bureau of Baton Rouge Foundation • ExxonMobil • Georgia-Paciic • Louisiana State University System • Mortgage Finance Authority • Our Lady of the Lake Regional Medical Center
EXECUT IVE COU NC IL
Advanced Oice Systems, Inc. • American Gateway Bank • Cajun Constructors • Faulk & Winkler, L.L.C. • H&E Equipment Services, L.L.C. • I.T. by DESIGN • Kleinpeter Farms L.L.C. • La Capitol Federal Credit Union • Louisiana Radio Network / Tiger Rag • Louisiana Technology Park • Mary Bird Perkins Cancer Center • McDonald’s of Baton Rouge • McGlinchey Staford PLLC • Postlethwaite & Netterville • South Baton Rouge Journal • Starmount Life Insurance Company • United Health Care Group, Inc.
ANNUAL INVESTMENT OF $50,000+ (Five-year total pledge of at least $250,000) Baton Rouge General Medical Center • Blue Cross Blue Shield of Louisiana • Breazeale, Sachse & Wilson, L.L.P. • Capital One • Citadel Broadcasting Company • Clear Channel Radio • CSRS, Inc. • Entergy • Greater Baton Rouge Business Report • Guaranty Group • Jones, Walker, Waechter, Poitevent, Carrère & Denègre, L.L.P. • JPMorgan Chase • Kean, Miller, Hawthorne, D’Armond, McCowan & Jarman L.L.P. • Lamar Advertising Company • LUBA Workers’ Comp • Ochsner Health Center Baton Rouge / Ochsner Medical Center Baton Rouge • Phelps Dunbar, L.L.P. • Regions Bank • Taylor, Porter, Brooks & Phillips, L.L.P • The Shaw Group Inc. • Turner Industries Group • WAFB • Whitney National Bank
AMBAS SAD OR COU NC IL ANNUAL INVESTMENT OF $25,000+ (Five-year total pledge of at least $125,000) Baton Rouge Coca-Cola Bottling Company • Baton Rouge Water Company • Brookwood Properties, L.L.C. • Community Cofee • Dow Chemical Company • EATEL / SunShine Pages • Greater Baton Rouge Association of REALTORS® • Hancock Bank • Hollywood Casino • Latter & Blum, Inc. / C.J. Brown Realtors • MAPP Construction, L.L.C. • Mockler Beverage Company • Wampold Companies • Woman’s Hospital
CO R P OR ATE CO U NC IL ANNUAL INVESTMENT OF $15,000+ (Five-year total pledge of at least $75,000)
SU PP O RT I NG I N VESTO R ANNUAL INVESTMENT OF $2,500+ (Five-year total pledge of at least $12,500) Acme Refrigeration of Baton Rouge, Inc. • Advantage Capital Partners • Apex Constructors, LLC. • Armstrong Relocation • Ascension Economic Development Corporation • Associated Grocers • Babcock Law Firm, L.L.C. • BancorpSouth • Baton Rouge Duplicating Products • Benny’s Car Wash • Cintas • EMCO Technologies • Executone of Central Louisiana, Inc. • Felder’s Collision Parts, Inc. • First Bank and Trust • GoodPeople • GOTECH, Inc. • Grace and Hebert • Gulf Coast BIDCO • Harmony Center • Hollingsworth Richards Automotive Group • Iberia Bank • Jacobs Engineering • Johnson Controls • Kean’s The Cleaner • KPMG LLP • Kurz & Hebert Commercial Real Estate, Inc. • Launch Media • Lee Griin • Lee Michaels • Lipsey’s • MidSouth Bank • Neighbors Federal Credit Union • OMNI BANK • Piccadilly Restaurants • Raising Cane’s Chicken Fingers • SJB Group, LLC • Southpoint Volkswagen • SSA Consultants • Star Service • State Bank & Trust Company • Stonehenge Capital Company • Stone Pigman Walther Wittmann, LLC • The Celtic Group • The Livingston Parish News • Union Paciic Railroad • West Feliciana Community Development Foundation • Wright & Percy Insurance
BRAC also engages in professional services contracts with Louisiana Economic Development (LED) and the City of Baton Rouge/Parish of East Baton Rouge.
Adams & Reese Law Firm • Amedisys, Inc. • Antares Technology Solutions • Area Wholesale Tire Company • Atmos Energy • Cox Communications • Innovative Emergency Management, Inc. • Irene W. and C.B. Pennington Foundation • Merrill Lynch • Object 9 • WHLC Architecture • Womack Construction
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