Around the South

QUIZ

Mexico has benefited from NAFTA, which took effect 10 years ago on Jan. 1, 1994, by (a) 22 million new jobs; (b) 12 million new jobs; (c) four million new jobs or (d) 300,000 new jobs created in the last 10 years by U.S.-based manufacturers that moved operations south of the border.

(Scroll down for answer)

Texas Governor: "We are going to recruit Arizona companies."

In the winter quarter, Texas Gov. Rick Perry visited Arizona in an industry hunting trip. Arizona routinely targets California-based companies in their recruiting efforts and Perry said his state will do the same with Arizona. Perry cited Texas' new tort reform legislation that would benefit companies based in Arizona. Arizona and Texas already compete in a variety of industry sectors, including semiconductors, aerospace and defense.

Tennessee Governor Wants to Change Workers' Comp System

Tennessee Gov. Phil Bredesen wants to change the current court-based system that is used for judging workers' compensation cases. Bredesen has proposed forming commissions to settle claims as opposed to using the courts. Bredesen maintains the court-based cases are a burden for employers in the state. In the South, only Alabama and Tennessee use the courts to settle workers' compensation cases.

Palm Beach Bond Rating May Have Played a Large Part in Scripps Location Decision

The biggest biotech deal and potentially one of the biggest deals in the South's history may indeed come in the form of the Scripps Research Institute's decision to choose a large piece of farmland in western Palm Beach County, Fla. for its newest lab and office facility. It has been estimated the California-based biotech concern will spin-off as many as 50,000 new jobs in South and Central Florida in addition to the 6,000 it will employ directly. Scripps officials looked closely at a location in the Orlando metro for the project, but eventually chose Palm Beach County. Palm Beach, located just north of Fort Lauderdale and Miami, just happens to currently sport a AAA bond rating by Standard & Poor's and Fitch. That ranking is the highest given out by the two well known financial analysts that examine closely the ability of governments to pay off bonds. Moody's Investors Service rates Palm Beach County's bonds Aaa, which is its highest rating as well. Palm Beach County is but one of 37 counties nationwide that have earned AAA bond status and it's the only one in Florida, apparently the only state targeted seriously by Scripps for an East Coast operation. As a result of the more than $200 million in incentives offered to Scripps by Palm Beach (in addition to more than $300 million from the state of Florida, much of that backed by federal funds), the county must float a bond of equal value. A $200 million bond for a single project is huge by any county standard. But it's the ability of Palm Beach County to float such a bond that may have played a large part in Scripps' decision to locate there.

Looking for Low Union Membership States? Try the Carolinas

North and South Carolina continued to sport the nation's lowest union membership rates in 2003. South Carolina's union membership rate is 4.2 percent of all employed persons and North Carolina's rate is the lowest in the nation at 3.1 percent. New York and Michigan had two of the highest union membership rates, both topping 20 percent. The automotive industry was the No. 1 union sector with a membership of over 25 percent. Interestingly, no foreign automakers building cars and trucks in the U.S. are unionized. Most of those plants are located in the Southern Automotive Corridor (www.SouthernAutoCorridor.com).

Big Incentive Deal in West Virginia

West Virginia recently agreed to give $127.5 million in incentives to Cabela's for a large distribution center that's being built on Interstate 70 outside Wheeling, W.V. The incentive package, which includes almost $80 million in tax-increment financing for the Fort Henry Industrial Park, is the largest given out for a single deal in West Virginia history. Cabela's distribution center will employ 800 and a retail store built near the center will employ 400.

Rayovac Latest Company to Relocate HQ to the South

Madison, Wis.-based Rayovac Corp., a maker of batteries and the Remington electric razor, announced in mid-January it is moving its headquarters to the Atlanta metro community of Sandy Springs. Founded in 1906, Rayovac is the third-largest maker of household batteries in the U.S. and is No. 2 in Europe. Rayovac follows Newell Rubbermaid, which announced it would move its headquarters from Illinois to Atlanta last year.

Brach's Moving HQ to Dallas from Illinois

Following Newell Rubbermaid's relocation of its headquarters from Illinois to Atlanta in 2003, candy maker Brach's Confections announced it is moving its HQ to Dallas from the Chicago metro market of Woodridge, Ill. The company has about 1,600 employees with sales of $350 million in fiscal 2003.

Editorial

Magazine Ranks Incentives as No. 1 Site Selection Factor

Area Development magazine published a study in the winter quarter indicating that incentives have become the most important factor for companies looking to expand, startup or relocate. It's the first time incentives have claimed the top spot in the 18-year history of the study.

In the last decade several issues in the site selection game have held the No. 1 position, including location, logistics, taxes, labor availability, labor quality, operating costs, labor unions and availability of product, such as buildings and serviced industrial parks. But in the economic times we've seen over the last three years, it's easy to understand that companies creating jobs and making significant investments are going to be more interested than normal in handouts such as tax breaks, free land or buildings, infrastructure improvements or cold, hard cash (recruiters frown on the cash aspect, but it exists, especially with larger projects).

Furthermore, communities and states recruiting industry have seen their existing industrial base shrink over the last three to five years, some to the extreme. When a company does come around with the promise of jobs and investment in a time when job losses have been paramount, incentives certainly play a big part on the recruiter's side as well. In other words, they are going to do everything they can to land the project.

We agree with Area Development's survey that incentives have become the No. 1 factor for companies like yours looking to expand or relocate. However, we believe that in this economic environment, operating costs are right up there at the top with incentives. After all, low-wage industries have not left the U.S. in droves over the last few years for incentives being offered by Mexico, India and China. No, they have left the U.S. to take those less skilled jobs to places where operating costs are much lower than those found anywhere in the U.S., even the South.

Additionally, in the last year the South has benefited from more major headquarter relocations to the region from the Northeast, West and Midwest by a large margin compared to any year in the last 25 years. Incentives and operating costs were at the forefront of those decisions, we suspect.

If you are considering expanding or moving your business to the South, we can say with great confidence that you will find no greater or more valuable incentives anywhere in the U.S. than what can be garnered in selected locations in the American South. As for incentives and operating costs combined, we'll use the example of Philip Morris, a company formerly based in New York, N.Y., that is currently moving its headquarters to Richmond, Va. Philip Morris officials estimated it will cost them about $120 million to move from Manhattan to Richmond. They are receiving about $40 million in incentives from local and state agencies in Virginia. And the move will save the company about $60 million a year. You do the math.

Lee Burlett (lee@sb-d.com)

Atlanta Named No. 1 Market for Entrepreneurs

In February, Inc. Magazine named Atlanta the best large market for entrepreneurs. The survey is a first for the magazine. Atlanta was followed by Riverside-San Bernardino, Calif., Las Vegas, San Antonio and West Palm Beach. Three other Southern markets landed in the top 10, Fort Lauderdale, Jacksonville and the Washington, D.C. region. Some of the worst markets for entrepreneurs, according to Inc., are San Jose (the Silicon Valley? Oh, how the mighty have fallen), Grand Rapids, Mich., Dayton, Ohio, Rochester, N.Y., New York City, San Francisco, Portland, Boston and Philadelphia. Inc.'s survey named Florida as the top state for entrepreneurs.

Magazine Cites Southern States' Attraction to Industry

It was almost a clean sweep for Southern states in this year's Plants, Sites & Parks' top 10 locations for business. The No. 1 state for relocating and expanding industry according to PS&P this year is Virginia, followed by South Carolina, Alabama, North Carolina and Texas, all Southern states. Rounding out the top 10 are Kentucky, Georgia, Mississippi, Indiana and Pennsylvania. Indiana and Pennsylvania: Come on, PS&P, couldn't you have slipped in Tennessee (11th), Oklahoma, Louisiana, Arkansas or Florida in that ninth and tenth spot?

CSX Promoting Development of Industrial Parks Near Rail Lines

Jacksonville, Fla.-based CSXT, parent company of CSX Transportation, has launched a program designed to encourage communities in the South to develop new industrial parks near its rail lines. Called The Parks for Growth program, CSX recently assisted officials in Southampton County, Va. in the development of a 400-acre piece of land located adjacent to one of its rail lines into a new industrial park. As an incentive, CSX will build a new switch off its main lines to new tenants of any new industrial parks developed under the program.

Grubb & Ellis Names Atlanta Hottest Office Market

Commercial real estate giant Grubb & Ellis recently predicted in a study that Atlanta will have the strongest demand for office space over the next five years. The forecast is based on potential job creation in the Southeastern market. Currently, Atlanta's vacancy rate for all office classes is slightly above 20 percent, nearly three percent higher than the national average.

Magazine Ranks Dallas No. 1

Plants, Sites & Parks magazine recently ranked Dallas the No. 1 market in the nation for corporate relocation. The publication surveyed readers by asking them which markets in the U.S. would they most likely expand to. Other markets that ranked high on the survey include Atlanta, Charlotte, Austin, St. Louis and Phoenix.

Nashville Lands another Headquarters

On the heels of Asurion and Louisiana-Pacific's headquarter relocations to Nashville; another company has announced it is also moving to the Music City. Rockford, Ill.-based Clarcor Inc., a manufacturer of industrial filtration products, announced in January it would move its headquarters to Nashville. The company did not say how many people if any would relocate from Illinois to Tennessee. However, company officials did say they would employ about 75 at the new office facility in Nashville.

Cheap Textiles Continue to Flood U.S. from Overseas

Offshore textiles arrived in the U.S. in 2003 at an 85% increase over 2002, which was more bad news for domestic firms. Over 50,000 jobs were lost in 2003 in the U.S. textile manufacturing sector, with most of those job loses coming from the American South.

North Carolina May Adjust Incentives Again

Since 1996, when the William S. Lee Act was adopted in North Carolina, lawmakers in the Tar Heel State have tinkered with incentives for locating and expanding industry several times. There's nothing wrong with that. After all, economies change -- North Carolina's certainly has -- and as a result, state incentives for industry should as well. In the 1990s, North Carolina officials tried to steer investment and job making deals to its rural regions with a tier-based incentive plan. That's exactly what the William S. Lee Act was designed to do; give out more incentives to companies investing in poorer regions of the state and less to companies investing and hiring in NC's metro areas. At the beginning of this decade, the Act was adjusted with the addition of a "big deal" initiative that was designed to lure large, single investments such as automotive assembly plants. That adjustment included rebates of employees' state wage withholdings during the first few years of operation. North Carolina called that incentive the Job Development Investment Grant program. The program remains in place and is an excellent incentive for large projects. As the year 2004 began, there was talk in North Carolina that lawmakers and economic developers saw a need to adjust state incentives again. In the spring, when lawmakers convene, look for new incentives in North Carolina that will focus on urban economic development and especially on smaller projects of 50 to 100 jobs locating in rural and metros alike.

Missouri Governor Signs "Buy in State" Order

Missouri Gov. Bob Holden signed an executive order this winter that requires state agencies to purchase goods and services from Missouri-based companies if price is equal or lower to that of vendors located outside the state. The order also gives Missouri companies rejected in the bid process to receive a letter explaining why they were rejected. Currently, the state purchases about 70 percent of its products and services from Missouri-based companies.

Let Us Shock You: Majority of Digital Cities Located in the American South

The annual survey conducted by the Center for Digital Government, a national research organization that studies information technology in government and education, recently released its 2003 results. The report breaks down its top digital cities (not MSAs) in three categories: large cities over 250,000, mid-sized cities (125,000-249,999) and small cities (75,000-125,000). The American South landed 21 cities in the top 10 of all three categories, or 21 cities of the top 46 cited (curiously there were numerous ties in the ranking). That means 45 percent of the top digital cities in the nation are located in the American South.

Top 10 Digital Cities: Major Markets

1. Tampa
2. Colorado Springs
Los Angeles
3. Virginia Beach
4. Tucson
5. Seattle
6. Chicago
Nashville
7. Kansas City
8. Corpus Christi
9. Jacksonville
10. Honolulu

Top 10 Digital Cities: Mid-Markets

1. Fort Wayne IN
2. Winston-Salem NC
3. Des Moines IA
4. Plano TX
Salt Lake City UT
5. Richmond VA
6. Lincoln NE
Norfolk VA
7. Torrence CA
8. Irving TX
9. Hampton VA
Bakersville CA
Mobile AL
10. Madison WI
Naperville IL

Top 10 Digital Cities: Small Markets

1. Roanoke VA
2. Coral Springs FL
Ogden UT
3. Denton TX
Fort Collins CO
4. Olathe KS
5. Bellevue WA
Carrollton TX
6. Boulder CO
Schaumburg IL
7. Independence MO
Pueblo CO
Tyler TX
Westminister CO
8. Macon GA
9. Arvado CO
10. Costa Mesa CA
Manchester NH
Roseville CA

* Bold indicates Southern cities

North Carolina Considers Privatizing State Department of Commerce

North Carolina House and Senate members discussed privatizing the North Carolina Department of Commerce during the winter quarter. Plans are in the works to possibly set up a public/private state economic development agency when legislators meet in the spring. Tar Heel State leaders are pointing to the Virginia Economic Development Partnership as a model. That quasi-private group was started by former Virginia Gov. George Allen shortly after he took office in 1994. North Carolina is not unfamiliar with state-level economic development changes. In the mid-1990s, North Carolina set up the most comprehensive regional economic development initiative ever done in the South. The state has also made more changes to its incentive packages for industry than any state in the South over the last eight years.

After Five Years, FedEx Gets Green Light in North Carolina ... For Now

In the 1999 SB&D 100, this magazine named the 1998 spring quarter announcement by FedEx that it would build a cargo hub in Greensboro, N.C., one of the Top 10 Deals of the Year. After five years, maybe we should now recant that recognition and make the FedEx project in the Triad one of the top 10 deals for 2004. The U.S. Army Corps of Engineers in December finally agreed to give a federal water permit to the Piedmont Triad Airport Authority, paving the way for the 1,000,000-square-foot cargo hub. The permit is the last FedEx needs to build the facility that is expected to be operational by 2008 or 2009. When announced in 1998, the hub was expected to cost $300 million. That figure is expected to jump to over $400 million now. Opponents of the hub are expected to challenge the issuance of the permit.

QUIZ ANSWER

January of 2004 marked the 10th birthday of the passage of the North American Free Trade Agreement. Perceptions exist that Mexico, as a result of NAFTA, has robbed many states in the U.S. of millions of manufacturing jobs. Nothing could be further from the truth. Since the passage of NAFTA 10 years ago, manufacturing productivity per hour in the U.S. grew 60 percent faster than in the 10 years prior. Manufacturing wages grew almost 15 percent in the U.S. since NAFTA was passed in 1994. From 1984 to 1994, they grew by a 7.5 percent rate. Over 100,000 manufacturing jobs were created in the Rural American South in the mid-to-late 1990s, the region that has seen more plants close and move to Mexico than any place in the U.S. since the economic downturn started in 2001. But since 2001, more than 250,000 manufacturing jobs have been lost in the rural South. Did they all go to Mexico? Hardly. Since NAFTA was passed 10 years ago only (d) 300,000 jobs have been created by U.S.-based manufacturers in Mexico.