QUIZ

Five cities in the South make up half of the top 10 markets in the U.S. with the most Fortune 500 companies. Name those Southern cities.

(Scroll down for answer)

Alabama and Florida Luring Lockheed

Reports from Denver confirm that economic development representatives from Alabama and Florida have talked to Lockheed Martin officials about relocating their aerospace operations in Colorado to one of the states. Both Alabama and Florida have promised large tax breaks, lower operational costs and cash grants if the company relocated. It's unclear whether Lockheed Martin contacted the two states, but it's likely considering Alabama and Florida have proposals on the table at the same time. Lockheed Martin Space Systems is one of Colorado's largest employers and is headquartered in Denver. The company designs, develops, tests, manufactures and operates a variety of advanced technology systems for military, civil and commercial customers. Primary products include space launch systems, communications satellites, missile systems and interplanetary spacecraft. Lockheed Martin's astronautics operations are located in Huntsville, Ala. and Cape Canaveral Air Force Station, Fla.

Boeing Moving All of Delta Work to Alabama

Boeing Integrated Defense Systems is closing its Pueblo, Colo., Delta launch missile facility and moving all assembly operations to its plant in Alabama. Called the "rocket ranch" by Boeing officials, the three-year-old missile assembly facility in Decatur is located on the Tennessee River in north Alabama. The move is one of consolidation and will include the relocation of almost 200 Pueblo-based workers to Decatur. Boeing tests and assembles the Delta IV rocket in Decatur.

Kansas Approves $500 Million for Boeing

In what is most likely the largest incentive package offered a company in economic development history, the Kansas Senate and House overwhelmingly approved in May $500 million in state backed bonds to help Boeing create jobs at its huge plant in Wichita. Boeing officials have said they will use the money to pay for research and development and for tooling the facility for new components of the new 7E7. Officials in Puget Sound, where all of Boeing's final assembly plants are located, are worried Boeing will use the incentives to prepare the Wichita facility as the final assembly site for the 7E7. The 7E7 work would create 4,000 new jobs at the Wichita plant. Under the incentive proposal, income tax on the 4,000 new Boeing workers making $50,000 or more a year would be withheld for 20 years, a total of $200 million. That would pay more than half the interest on the bonds. Boeing is responsible for paying the remaining interest.

Is Airbus Scouting Wichita?

With over 11,000 laid-off aircraft workers, most coming from the massive Boeing facility, Wichita, Kan., certainly has the available work force for a new aircraft assembly plant. Rumors are circling that Europe's Airbus may be looking to Wichita for a new facility or an expansion of its existing plant to manufacture A330 air refueling tankers. The Air Force is scheduled to replace its fleet of 550 KC-135 air-refueling tankers and Airbus wants to get in on the action. Airbus officials have denied they are looking to expand facilities in Wichita, however, a story in Business Week said otherwise.

Only One Southern Market Makes Most Expensive List

A report done by The Boyd Co., a New Jersey-based consultunt, shows that only one Southern market is included in the 10 most expensive places to operate a headquarters in the U.S. The study looked at cities that are home to clusters of Fortune 500 companies. Boyd maintains that San Jose is the most expensive market in the U.S. to operate a headquarters followed by San Francisco, New York, Los Angeles, Stamford, Conn., Fairfield Co., Conn., Philadelphia, Chicago and Boston. Fairfax, Va. also made that list, ranking as the ninth most expensive market to operate a headquarters. On the other end of the study, Boyd claims that the Greensboro/Winston-Salem/High Point region in North Carolina is the least expensive place in the U.S. to operate a headquarters followed by San Antonio and Richmond.

South Dominates Small Business State Ranking

A study published on www.bcentral.com on the best and worst states to run a small business showed that seven of the top 10 states are located in the South. The report, written by Phillip Harper, took into account tax liability, utility costs, workers' compensation costs, crime rates, right to work laws and number of bureaucrats. Nevada topped the ranking as the No. 1 state favorable to small business followed by Florida, Texas, Alabama and Virginia. Rounding out the top 10 were Arizona, Tennessee, Colorado, South Carolina and Georgia.

Workers' Comp Rates Rise in Florida

On April 1, 2003, workers' compensation premiums rose by over 13 percent for companies operating in the state of Florida. Losses and exposures in the workers' comp market in the Sunshine State forced the rise in premiums. Last year, the National Council of Compensation Insurance, a rating agency, requested that workers' compensation rates in Florida increase to over 20 percent to enable insurance companies to consider additional coverage. That request was denied.

Crime Rate at 30-Year Low in Florida

Crime is increasing in most states in the U.S. That's natural. It usually does in a struggling economy. But crime is not increasing in the Sunshine State. In fact, the index crime rate, which is based on murder, robbery, assault, burglary, larceny, auto theft and forcible sex declined by 3.3 percent in 2002 to a rate that hasn't been matched in 30 years. Is it a coincidence that the state's crime rate is bucking the trend and dropping when Florida is the only state in the nation that has seen 11 straight months of positive job growth?

Atlanta Breaks Out Big Guns in Bid for HQ

Atlanta officials revealed in early May a high-powered collection of governmental, academic, business and diplomatic leaders that will make up Hemisphere Inc., a non-profit whose sole goal is to land the headquarters of the secretariat of the Free Trade Agreement of the Americas. Already with $2 million behind the effort and the promise of more if needed, Hemisphere Inc. will now turn its attention to leaders in Latin America. Members of the group include Gov. Sonny Perdue, Atlanta Mayor Shirley Franklin, as well as board members representing Delta Air Lines, BellSouth, UPS, Coca-Cola and other corporate giants headquartered in Atlanta. The proposed free trade region will run from Chile to Canada including every country except for Cuba. Miami, which might be the front-runner in the quest for the headquarters, formed its group two years ago. Other markets pursuing the FTAA HQ include Mexico City, Panama City, and the Port of Spain in Trinidad and Tobago. Reports from throughout the region say that a free-trade agreement among all countries won't be hammered out until at least 2007.

Is New Ford Plant in Georgia Simply a Land Swap?

At this writing, it's unclear if reports about Ford building a new assembly plant in Georgia indicate a second Ford plant in the state or closure of its Hapeville facility in order to make way for a new plant. The deal could simply mean a land swap with the state. Ford would close its land-locked Hapeville facility that was built in the 1940s and build new farther outside the Atlanta MSA. Sites in Morgan County, located east of Atlanta, and Meriwether County, located near LaGrange southwest of Atlanta, have been visited by the Michigan-based automaker. It's been reported by the Atlanta Journal-Constitution that state economic development officials have said Ford is looking for a "replacement site" for the Hapeville plant. Yet, officials in Fulton County, where Hapeville is located, maintain Ford officials have told them they will not close the Hapeville factory.

Is Division of ExxonMobil Relocating from New Orleans to Houston?

The east production division of ExxonMobil could decide to relocate its offices in downtown New Orleans and move to Houston, SB&D has learned. The move could result in 400 employees relocating to Houston. ExxonMobil officials have confirmed the relocation is being considered and that a decision should be made this summer. Houston is already home to ExxonMobil's worldwide and west production divisions.

Editorial

Here's a Blockbuster: Ford Site Searching in South Texas

By Mike Randle

On the heels of Toyota's announcement made in February that it would build a pickup truck plant in San Antonio, Ford officials have been sighted in South Texas during the weeks of April 7 and April 14. The information SB&D received was unusual in that it provided much more than we ever could have imagined from an initial site search. From what we gathered, Ford is looking to build a pickup truck plant in South Texas that would include union participation. We also gathered information that if the automaker opened a plant in Texas, it would pay wages that are about half that of what the company pays on average in Michigan, or about $18 an hour.

The information we received makes perfect sense. During Toyota's site search, we questioned the choice of San Antonio for the simple fact that no automotive supplier network exists near San Antonio, yet there's an extensive one across the Mexico border. In other words, suppliers would be forced to spend hundreds of millions of dollars to set up shop just to service a single OEM facility. That's why we thought the Marion, Arkansas site, Toyota's apparent second choice, was a better location simply because it was close enough to tap into a large, existing supplier network located in Tennessee, Kentucky, Alabama and Mississippi.

But Toyota officials must have known something we didn't know. Most likely they won over the suppliers with an argument that centered on something like this: "You won't be servicing just our plant. You'll be supplying three or four new plants." How else could they rationalize the choice of San Antonio to their suppliers? They knew other automakers would follow

If Ford, or any domestic automaker builds a new plant in the American South it would be the first in over 30 years, outside of the Saturn plant built by GM in Spring Hill, Tenn., in the 1980s. But the mere fact that Ford is looking in the South is big, big news. If Ford did build a pickup truck plant in Texas, GM and DaimlerChrysler would quickly follow suit. And, once built, if those pickup truck plants showed profits and productivity -- which they would -- that greatly exceeded their existing plants in the Midwest, how long would it take for the domestics to relocate their car plants to the South?

Let's put this first tidbit of information regarding Ford's site searching in the American South in perspective. If a domestic automaker locates an assembly plant in the American South, it will be the beginning of the end of the automotive industry in the Midwest. If it occurred, it would be one of the most significant stories in the history of American business, commerce and industry. That's how big the story would be.

mike@sb-d.com

Big Automotive Supplier Network Expected to Form in Texas

With no existing supplier network to speak of, the San Antonio/Austin, Tex. regional economies are expected to benefit in the next few years from up to 100 new automotive suppliers as a result of Toyota's decision in the winter to build an $800 million vehicle plant near San Antonio. Few if any existing suppliers located in automotive states in the South such as Alabama, Tennessee, Kentucky or Mississippi will be able to supply the Toyota plant because of San Antonio's far western location in the Southern Automotive Corridor. Which is exactly why the San Antonio choice by Toyota was a curious one. We've heard that more than one large automotive supplier was upset that Toyota officials chose Texas. It means that suppliers will be unable to serve the facility by simply expanding existing operations in the central South. They will be forced to spend hundreds of millions of dollars collectively on new facilities in South Texas. In a related story, we received information in early May that Ford was scouting sites in South Texas for a new assembly plant. Could it be that Toyota officials eased supplier concerns by explaining to them that it's not just Toyota they'd be supplying by building in Texas, but two or three more assembly plants?

DaimlerChrysler Incentives Top $300 Million

It's been awhile since a new automotive plant has received $300 million in incentives, but that's what Georgia gave up to lure DaimlerChrysler to a site near Savannah. Counting state and local tax exemptions, reduced rates for use of the Port of Savannah, roads, rail and other infrastructure, a museum on site, the purchase price of the site itself, free English language classes for German execs, their spouses and children and a critical $70 million in upfront incentives and bonuses and the total comes to $322 million that DaimlerChrysler will ultimately receive to build its Sprinter van plant in Pooler, Ga. The total comes to about $80,000 per job of the 4,000 to be hired at the plant. Interestingly enough, South Carolina was willing to offer more for the plant. Their incentive proposal totaled $346 million, however, it did not include the site or upfront cash and tax exemptions. Site work on the DaimlerChrysler plant is expected to begin this summer.

Georgia's New Economic Development Chief Dislikes the Word "Incentives"

So far 2003 has already been a good year for big deals in Georgia. Rubbermaid announced in the winter quarter it was relocating its headquarters to Atlanta from Illinois and Daimler/Chrysler announced it would build an assembly plant near Savannah. On top of that, it looks as if Ford will break a 35-year Southern domestic automaker new plant drought by announcing a new plant soon. Considering the current economic environment, all three deals will probably make our top 10 when we look at the biggest deals announced in the South in 2003 this time next year.

Yes, more big deals have occurred in Georgia recently than at any time in the last two years. What's up, better incentives in the Peach State? Glenn Cornell, the new chairman of the Georgia Department of Industry, Trade and Tourism would rather use the word "investment" as opposed to "incentives."

"The word incentives has some negative implications," Cornell said. "We've got to take it out of that mentality and describe it as a return on investment. We can show that if you invest "x" and you get back "x" in a period of time, then that's a good investment. But you've got to have an input/output model that clearly shows the investment will have a positive effect ... that this really does work in our best interest whether through additional taxes or other forms of revenue."

It's certainly refreshing to hear a state economic development official make some sense out of the one word that clouds the economic development industry for the uninformed.

Finally, a Large Semiconductor Deal Announced

In 1996 Virginia turned a couple of big semiconductor deals. At the time, you would have thought economic development in the South was changed forever. Florida immediately began hunting semiconductors deals almost exclusively. They would end their expensive hunt a few years later. Other states did the same thing. Based on what state economic development groups were saying the South was about to find itself hip-deep in semiconductor deals. Since then, however, we've only seen a couple of small expansions of existing facilities in that sector. But in April, the largest semiconductor investment announced in the South in seven years was made in Austin by Samsung. The Korean company's plant will undergo $500 million in improvements. The project will add 40,000 square feet of clean room space and the facility will be updated from 130-nanometer to 90-nanometer technology. Samsung employs 950 workers at its Austin facility. The expansion is expected to create 300 new jobs.

Southern Markets Dominate Ranking

Plants, Sites & Park's annual business outlook ranking of major U.S. metros showed a distinctive Southern flavor this year. The annual reader's poll ranked Atlanta as the No. 1 U.S. metro in which readers would consider opening a new office or industrial facility. Chicago got the second place nod and Charlotte landed in third place. Following the top three were Raleigh-Durham, Houston, Dallas/Fort Worth, San Diego, San Antonio, Nashville and Charleston, S.C., meaning eight out of PS&P's top 10 come from the American South.

QUIZ ANSWER

New York City leads all U.S. cities with 40 Fortune 500 company headquarters. Right behind New York in second place is Houston with 18 Fortune 500 companies. The other four Southern cities making the Fortune 500 top 10 markets include No. 3 Atlanta (12 Fortune 500 companies); No. 5 Charlotte (7); No. 5 Dallas (tie-7); and No. 10 Birmingham (6).

Jacksonville Nets Second Fortune 500 HQ

In the spring quarter CSX Corporation announced it would move its Richmond-based headquarters to Jacksonville, Fla. The big rail carrier, which also is involved in oil & gas and other transportation sectors, will relocate only about 15 executives in the move, including new CEO Michael Ward. CSX Intermodal and CSX Technology already have their headquarters in Jacksonville, where over 5,000 people work for the company. More than 1,600 workers will remain in Richmond and other markets in Virginia.

Lots of Retention Moves in Missouri

Missouri Gov. Bob Holden has recently introduced legislation aimed directly at saving 2,600 jobs at Ford Motor's Hazelwood assembly plant, which is scheduled to close in August of 2005. Ford announced this spring it would shift production of the Ford Explorer and Lincoln Aviator from Hazelwood to its plant in Louisville. Kentucky's Governor has already signed into law a measure giving Ford tax credits for the expansion of the Louisville plant. Holden announced an Enterprise Zone designation that includes the site of the plant along with other incentives directly associated with the facility. Last year Holden appointed a 22-member task force to look into ways to keep the plant open. At about the same time Holden introduced his "Ford" legislation, state Sen. Sarah Steelman introduced a bill that would help stop job losses in Missouri through a myriad of new measures. Missouri has lost over 100,000 jobs in the last 18 months, by far the largest number of any state in the South.

Magazine Ranks Missouri No. 1 for Educated Workers

Business Facilities magazine recently named Missouri as the No. 1 state in the nation for the education level of the state's workers. The publication based its ranking on ACT and SAT scores, degrees, and student/teacher ratios.

NC Governor Announces New Workforce Program

North Carolina Gov. Mike Easley announced a new workforce development program that will allow state employers to apply for grants of up to $50,000 for employee training. All private and nonprofit businesses in North Carolina may apply for the grants. The program is being funded by federal money from the Workforce Investment Act.

Texas No. 1 Exporter

Texas blew past California and New York in 2002 to become the nation's No. 1 exporter with $88 billion in products shipped to other countries. U.S. Department of Commerce data shows that Canada and Mexico were the top two export markets for the Lone Star State and that machinery is the state's top exported product. Other markets Texas exported to in large volumes were Japan, Singapore, Taiwan and the United Kingdom. Texas' exports accounted for 13 percent of all exported goods from U.S. states last year.

Lowe's New Satellite HQ in NC Luring Vendors

Mooresville, N.C. is the site of a massive new satellite headquarters for retail giant Lowe's. It is also the site of a tremendous amount of commercial real estate activity as vendors line up to supply and woo the nation's second-largest home improvement chain. Companies that sell products to Lowe's are scrambling to find office and warehouse space near the new Lowe's campus located just north of Charlotte. Moreover, companies that have not secured a contract with Lowe's are planning to set up shop near the headquarters in order to conveniently hawk their wares. It's been reported that as many as 300 companies are searching for space near the 2,000,000-square-foot Lowe's headquarters, which is currently under construction. The new headquarters is expected to house as many as 8,000 Lowe's employees.

Finally, Some Good News on the Biotech Front

A recent survey done by the North Carolina Biotechnology Center showed that biotech companies in that state are upbeat about job creation this year and beyond. The survey of 32 biotech companies operating in the Tar Heel State showed that they expect to create 950 new jobs this year and 1,000 more by 2005. The bio-manufacturing and pharmaceutical companies surveyed employ more than 13,000 people in North Carolina. The survey also estimated that biotech employment from new companies opening shop in the state will grow by about 350 jobs each of the next three years.

Alabama, Mississippi Form Regional Effort

In an unprecedented move, east Mississippi and west Alabama counties have formed a regional partnership in order to attract large industrial projects such as automotive suppliers and assemblers. Called the Regional Economic Development Alliance, the partnership links mostly rural counties on both sides of the border near where Interstate 20/59 crosses the state lines. The only city of any size in the region is Meridian, Miss. The two regions will attempt to combine resources and costs in an effort to market the area. As far as we know, it's the first regional rural economic development effort that crosses state lines in the history of industrial recruitment in the South.

No Takers Yet for NC's New Incentives

For years many economic development officials in North Carolina complained about the vanilla incentive programs that were available for new and expanding industry in the state. They pointed to major projects lost such as Mercedes to Alabama 10 years ago and Eli Lilly to Virginia last year as proof the Tar Heel State's incentives weren't competitive. In response, Gov. Mike Easley passed the North Carolina Economic Stimulus and Job Creation Act. The new incentive plan, which became law in the fall of 2002, was hailed throughout the state's economic development community. The main part of the plan gives back qualifying new or expanding companies much of their state withholding taxes. In fact, up to $120 million has been set aside this year alone for the new incentive plan. Yet, to date, no companies have applied for the new incentives. You can bet, however, that when the economy changes for the better, those applications will be rolling in.

Editorial

It's Bad Out There. But It's Not As Bad Down Here

By Lee Burlett

We've said it until we are blue in the face. We've repeated it so many times that we're developing a tic. We have been arguing in every edition for two years that the economy cannot even remotely revert to mid-1990s performances unless the federal government assists state financial budgets. We've argued that any tax cut on the federal level will simply be offset by bigger tax increases on the state level. Fact is, it's worse than that. No significant tax cut has occurred yet on the federal level. However, state tax increases are occurring throughout the nation as I write this.

As you've heard, states across the nation are facing their worst financial crises in the last 60 years. They have found money everywhere it can be found to stop the flow of red ink. States have raided tobacco money, which was supposed to be used for child health care, gutted rainy day funds and put additional regressive taxes into motion. The only revenue sources left for the states are even more tax increases.

On the other hand, the federal deficit has skyrocketed with no apparent concern in Washington. The fed can play with its money. The fed can manipulate it. The fed can even spend billions of it during wartime. But let's not forget, they print it. States don't.

We have stood firm in our belief that tax cuts, particularly in a recession, are a bad idea. We maintain that we wait until the economy changes for the better, then look at cutting taxes. That's what many states did in the last few years of the 1990s. That's what the Clinton administration should have done in the late 1990s.

In short, we have argued that as long as the majority of states in the U.S. are bleeding red ink (and you can now throw the U.S. government in that crowded bucket of stink), the economy will not improve significantly.

The attraction of new business is not the job of the federal government. It is the job of the states and their economic development arms. But, many of those arms have been cut off. California, for example, is facing almost a 60 percent reduction in the funding of their economic development efforts. Good luck, Golden State! Lifeboats can't be found to the far right. Nor can they be found to the far left. If we are to re-float this ship, a centrist view must somehow arise from the muck created by "Democrats" and "Republicans."

For the most part, states in the South haven't experienced the level of red ink now flowing in many states in the West and Northeast. On the other hand, Southern states are nowhere near flush. But today they make up the one haven in the U.S. where your deal can receive the most attention, the most incentives and the most assistance overall than any region in this stick-in-the-mud economy.

lee@sb-d.com

Four New Enterprise Zones in Florida

Gov. Jeb Bush recently approved new Enterprise Zones in Pensacola, Tallahassee, Tampa and Cocoa. Locating and operating a business in the zones provides incentives such as job tax credits, sales tax exemptions and tax refunds on equipment, electric power, and building materials. Florida now features 51 Enterprise Zones in the state.