Job Creation: Art or Science?

1. Job Creation:Art or Science? June 6, 2013 43rd Annual Alabama County Government Institute Presentation Auburn, Alabama Alabama Department of Commerce

2. The Alabama Department of Commerce Created: 1969 Secretary of Commerce: Greg Canfield Employees: 32 Mission: “To coordinate economic development resources leading to quality job creation throughout Alabama.” Organizational Components: Business Recruitment AIDT International Trade Small Business Advocacy Film Office Budget Source: General Fund

3. Alabama Department of Commerce’sGoal Drive Economic Development in the State of Alabama

4. Fundamentals of Economic Development Economic Development is … • The increase in the standard of living of the state’s population; • It’s scope includes the process and policies by which the state improves the economic, political, and social well-being of its people; • Or, another definition is………. JOBS!

5. State Economic Activity

6. What are some factors within economies that might influence the economic development process? PEST Analysis Political Factors Economic Factors Social Factors Technological Factors

7. Influencing Factors • Public Policy • International Conflicts • Monetary Crisis • Natural Disasters • International Trade • Consumer Confidence • Others…

8. Fundamentals of Economic Development “Uncertainty is the enemy of capital investment.”* *Area Development, “Uncertainty: The New Normal for Site Selection and Facility Investment”, Mark Sweeney, January 2012

9. Fundamentals of Economic Development ““…ready communities with reduced risk profiles will win the day.”* *Area Development, “Uncertainty: The New Normal for Site Selection and Facility Investment”, Mark Sweeney, January 2012

10. Areas of Economic Development • Industrial Recruitment • Business Retention • Commercial / Retail • Tourism • Film • Government • Others

11. What is our concept of competition, and……

12. Why Select the USA? World’s Largest Economy Competitive Business and Investment Climate Commanding Consumer Market Vast Internal markets = Economies of Scale Center of Research and Innovation World’s Top Universities The Global Leader in Information Technology Protector of Intellectual Property Highly Educated and Productive Workforce Source: Published on SelectUSA (http://selectusa.commerce.gov)

14. Business Advantages • Team Alabama • Workforce Availability and Training • Right-To-Work State • Competitive Taxes and Incentives • Readily Available Products-Buildings and Sites • Heart of the Southeastern Transportation Network • One-Stop Shop for Environmental Permitting • Proven Record of Investment and Trade Successes

15. A Decade of Alabama’s Announced Job Creation Source: EDPA

16. Job Creation Categories • Expansion • Direct • Consolidation • Re-Start • Joint Venture • Co-Location • Business Arrangement • New • Domestic • International • Start-Up

17. What are the top site selection factors, as cited by corporations?

18. 1. Highway Accessibility 2. Labor Costs 2T. Availability of Skilled Labor 4. Corporate Tax Rate 5. Occupancy or Construction Costs 5T. State and Local Incentives 7. Energy Availability and Costs 8. Tax Exemptions 9. Proximity to Major Markets 10. Low Union Profile Corporate Survey Site Selection Factors Source: Area Development magazine, 26th Annual Corporate Survey, published Winter 2012.

19. 1. Low Crime Rate 2. Healthcare Facilities 2T. Housing Availability 4. Housing Costs 5. Ratings of Public Schools 6. Colleges and Universities in Area 7. Climate 8. Recreational Opportunities 9. Cultural Opportunities Corporate Survey Quality of Life Factors Gulf Shores, Alabama Source: Area Development magazine, 26th Annual Corporate Survey, published Winter 2012.

20. Competitive Site SelectionScreening Process Candidate Locations Define Search Region • Center-of-Market Analysis Regional Screening Project Criteria RFP & Proposal Screening Site Visits / Comparative Assessment Cost Modeling / Incentives Risk Analysis Site Decision Source: McCallum Sweeney Consulting, Courtesy of Ms. Jeanette Goldsmith

21. Job Creation Due Diligence Examples • EMSI Workforce Analysis • Tax Incentive Analysis • Revenue Evaluation (Local & State) • Benefit/Cost Analysis • AIDT (Training) Valuation • Transportation/Logistics Sensitivity Analysis • Incentive Evaluation/Net Present Values • Cost Modeling • Risk Mitigation • Others

22. Typically, what are Alabama’s economic development incentives?

23. Incentives Taxes - Sales and Use Tax Abatements - Property Tax Abatements and Exemptions - Income Tax Credits and Deductions - Inventory Tax Exemption - Enterprise Zone Credit/Exemption - Full Employment Act of 2011 Training - Alabama Industrial Development Training - ADECA Workforce Development Division - Alabama Technology Network (ATN)

24. Incentives Infrastructure - Industrial Access Road & Bridge - Economic Development Grant - Community Development Block Grant - USDA Rural Development - Appalachian Regional Commission - Economic Development Administration Environmental Permitting - One Stop Environmental Permitting

25. Incentives Financing - AlabamaSAVES - CAPCO - Alabama NMTC - ED Revolving Loan Programs - TVA Economic Development Loan Fund - Community Development Block Float Loan Program - Industrial Revenue Bonds (IRBs) - USDA Rural Development

28. What is the view from Site Selection Consultants?

29. Relative Importance of Incentives to Clients when making Location Decisions: 1. Have always been of great importance 40% 2. Are more important now than in the past 45% 3. Are less important now than in the past 15% Which Types of Incentives do Clients Consider Most Important when Deciding on a Location? 1. Tax incentives 42% 2. Cash grants 33% 3. Other financial incentives 21% 4. Working training incentives 9% 5. Other incentives 23% Source: Consultants Site Guide, Area Development magazine, Winter 2012, www.consultantssiteguide.com.

30. Which Factors have you Evaluated in Recent Location or Expansion Projects that you Discovered to be Most Deficient? 1. Labor Availability 26% 2. Incentive closing funds 40% 3. Advanced ICT service 2% 4. Pre-qualified sites 32% 5. Other 10% Source: Consultants Site Guide, Area Development magazine, Winter 2012, www.consultantssiteguide.com.

31. How are site locations determined, and…….. ……..what is your probability?

33. What are the properties we can promote in Alabama? • 511 Existing Buildings* • 479 Industrial Sites/Property* • 39 Favored Geographic Areas** • 28 Approved Enterprise Zones*** • 28 Speculative Buildings* • 40 AdvantageSite Designations* * Source: Economic Development Partnership of Alabama, April 18, 2013 ** Source: Alabama Department of Revenue *** Source: Alabama Department of Economic & Community Affairs

34. AdvantageSites

35. AdvantageSite Successes Alabama’s AdvantageSite Program has been recognized by Southern Business & Development Magazine as one of the country’s top 10 site programs.

36. AdvantageSite – Raising the Bar 2008-2012 Designations 2008–2009 Designations 2013 In the Pipeline

37. What are Alabama’s Targeted Markets?

38. Alabama’s Targeted Market Sectors

39. Alabama’s Targeted Market Sectors

40. US Auto Sales Trends

41. Expanding Production 300,000 350,000 340,000 250,000 300,000 350,000

42. Airbus Business Opportunities

43. What some key attributes a community must possess for successful economic development?

44. Key Attributes: • Financing • Plan • Organization • Direction • Staff • Control • Product

45. Economic Development is a Journey . . . not a destination!