TIP Strategies is a privately held Austin-based economic development consulting firm committed to providing quality solutions for public and private‑sector clients.
This blog is dedicated to exploring new data and trends in economic development.
By: TIP Strategies
For its recent Leadership Summit, IEDC organizers invited “thought leaders and practitioners at the cutting edge of the economic development profession” to share innovative ideas and case studies in five-minute “Ignite” presentations.
Under a title slide forewarning “DISRUPTION,” TIP Principal Jon Roberts took the stage and led audience members on a rapid-fire review of the disruptive forces altering economic development.
Citing disruptive technologies in the fields of consumer electronics, autonomous vehicles, 3D printing and device connectivity, Jon declared three disruptors changing the face of economic development: the future labor pool, evolving supply chains, and changing social norms.
According to the US Bureau of Labor Statistics, roughly a million people will enter the labor force annually for the next 10 years. Accustomed to digital music, driverless vehicles, and smart appliances, the next generation of American workers will bring to and require of the labor market a unique set of skills. Traditional expectations of this workforce will have to be set aside in favor of new models.
As disruptive technologies transform how we live and work, they also introduce massive shifts in the supply chain. The historical focus on manufacturing and assembly of durable goods will give way to software development and “intelligent systems,” while producer, broker, and distribution roles in creative fields are already being bypassed and may soon be obsolete.
The resulting shift in social norms, while a threat for those not prepared, creates a wealth of new product and value creation opportunities. In his closing, Jon asserts that we must redefine public-private partnerships to capitalize on the disruptive changes, and divorce ourselves of the notion that the next wave of economic development will be based solely on job creation.
In the below article for Area Development, Beth Mattson-Teig cites announcements by Yokohama, IBM, UBS and others as the latest examples of diversified expansion in the South. Congratulations to TIP client Clarksville, Tennessee, for being selected by Hankook for its $800 million manufacturing facility.
By: Beth Mattson-Teig
Via: Area Development Online
A highly skilled work force and good transportation infrastructure are also drawing aerospace and other high-tech companies.
Automotive Shines Spotlight on Region
Automotive continues to be a powerful engine for growth across much of the South. Yet the region is firing on all cylinders, with expansion occurring across a variety of sectors ranging from aerospace and advanced manufacturing to data centers and technology.
As more of the old line industries that dominated the region, such as textiles, moved off shore, the resurgence in automotive manufacturing is one of the key industries that has fueled economic growth throughout the region. “That has continued, albeit in different volumes and different project types,” says Eric Stavriotis, a senior vice president at CBRE in Chicago.
Eight of the top automakers, ranging from Ford to Hyundai, all have major manufacturing facilities in the South, namely in the states of Alabama, Kentucky, Mississippi, and Tennessee. Those major auto manufacturing hubs continue to fuel growth among major OEMs and suppliers. For example, Korean tire manufacturer Hankook Tire Co. announced in October that it would invest $800 million in a state-of-the-art manufacturing facility in Clarksville, Tenn., that will create 1,800 new jobs. The company is expected to break ground on the new plant by the end of 2014 and begin tire production by 2016.
That announcement comes on the heels of another announcement earlier this spring that Tokyo-based Yokohama Tire Corp. will locate a commercial truck tire plant in West Point, Miss. The company plans to invest $300 million in the initial project that will create 500 new jobs, with potential future expansion that could bring total employment at the plant up to 2,000 jobs. Automotive has helped to shine a spotlight on the region for other industries and emphasized area strengths such as the employment base and transportation infrastructure. In addition, companies also have had the chance to see how the states have put together incentive packages and worked with companies on expansion and relocation projects, says Stavriotis. “Those types of investments do become a catalyst for other industries downstream,” he says.
Targeting Advanced Manufacturing
Automotive — along with a broader focus on advanced manufacturing jobs — continues to be a top focus for the region, including industries such as aerospace, metals, and chemicals. Notably, aerospace is a thriving niche, and Alabama, Mississippi, and Louisiana are all members of the Aerospace Alliance. Those three states join with Florida to promote the region as an aerospace corridor. Those states are home to major manufacturing and testing operations, as well as NASA facilities.
For example, France-based Eurocopter announced in September that it would start work on expanding its plant in Columbus, Miss., to serve as a final assembly and test site for its AS350 helicopters, the top-selling civil helicopter in the U.S. market. The plant is expected to be ready for assembly operations by Q4 2014.
“We are targeting aerospace, and we are working across state borders to promote the region, and we are finding success in winning some of those projects,” says Adam Murray, a target market specialist for the Tennessee Valley Authority Economic Development.
The entire site selection process is getting more nuanced and more case-by-case depending on a particular business and its unique requirements. “If you were to draw a gross generalization around manufacturing, the Southeast continues to win more than its fair share of projects because of the pro-business environment and lower overall operating costs and high incentives structure that [these states] have set up,” says Stavriotis.
In addition to the myriad of tax credits and financial assistance packages available to today’s businesses throughout the South, there is a distinct emphasis on providing resources to support worker training and development. Louisiana is certainly recognized for its efforts in this area with its FastStart program, which is a customized employee recruiting, screening, and training service that is available to eligible companies at no cost.
Another notable initiative to further expand advanced manufacturing in the region is an effort being led by the University of Alabama-Huntsville to land one of 15 regional Institutes for Manufacturing Innovation (IMIs) that are proposed by the Obama administration. President Obama has proposed the National Network for Manufacturing Innovation (NNMI) to promote advances and growth in the industry, and he is proposing funding the network with a one-time $1 billion investment.
The University of Alabama-Huntsville is specifically focusing on creating an institute that would promote digital manufacturing and design innovation. If that effort is successful, it could help to establish the area as not only a manufacturing hub, but also an R&D hub for digital manufacturing and design, notes Murray. “That is one example of how we are working across state borders to promote advanced manufacturing,” says Murray.
Pursuing High-Tech Jobs
States throughout the South are continuing to court advanced manufacturing businesses, but there also is a concentrated effort to diversify that business base and attract more higher-paying jobs in industries such as technology.
Louisiana has been very aggressive in pursuing technology, software development, e-commerce, and media companies. Those efforts have paid off with the major coup of landing IBM. The firm selected Baton Rouge as the home of its new IBM Services Center. The $55 million project, which includes an office building and residential tower, broke ground in September, with completion set for mid-2015. The new facility is expected to create 800 new direct jobs by the end of 2016.
Most people don’t consider Baton Rouge to be a hotbed for technology but, clearly, the state put some significant resources behind the project, says Stavriotis. Those resources extend beyond assistance related to constructing the facility to focus on developing the educated work force that IBM will need: the state of Louisiana will provide $14 million over 10 years to expand higher-education programs designed primarily to increase the number of annual computer science graduates. At least 65 percent of those funds will be provided for expansion of the Computer Science Division of the School of Electrical Engineering and Computer Science at Louisiana State University.
Basically, the state has said that if we can get IBM to show up, it will build that technology cluster around them, notes Stavriotis. “That takes a lot of time and resources, and it is pretty impressive that the state could package something like that, and that IBM would be willing to take them up on that offer,” he adds.
Data Centers & E-Commerce
Another target industry for the Southern States is data centers. The South is emerging as a strong player in this market because the fiber and IT infrastructure is getting built to give companies the connectivity and speed that is very important to the data center industry. In addition, companies are becoming more comfortable with the existing work force.
“We have had quite a few success stories, both in the Valley and the South in general, of companies that have come and tested the market and been successful,” says Spencer Sessions, a target market specialist for TVA Economic Development. For example, UBS announced in August that the company would establish a new shared services center in Nashville that will represent a $36.5 million investment and create 1,000 new jobs over the next five years. The new UBS Nashville business solutions center will offer expanded business services in support of UBS’ wealth management and investment banking divisions. UBS currently provides operations support in Nashville through over 200 employees, in addition to its full service Wealth Management office.
To further entice large data center projects to locate in Alabama, the state passed new legislation last year that enhances its existing sales, use, and property tax abatements available to qualifying projects. Both Louisiana and Mississippi also offer incentives specific to data center projects.
The South also continues to garner attention for distribution and e-commerce. For companies that are looking to fulfill a major distribution or warehouse component, Louisville and Memphis automatically jump to the top of the short list because of their ability to get product to their end destinations very quickly. Louisville is a major distribution hub for UPS, while Memphis is a key hub for FedEx. The UPS Worldport Louisville is the largest automated package handling facility in the world. It can handle up to 3.6 million packages per day, and more than 140 companies have located in Kentucky just to be close to the UPS hub.
by Caroline Alexander, Senior Consultant, TIP Strategies
TIP, in partnership with Bob Wernersbach, recently completed a market study for the San Marcos Regional Airport (HYI). Communities often face the challenge of how to leverage an airport as an economic development asset. San Marcos provides a useful example of how to approach this challenge for general aviation airports, in particular.
The San Marcos Regional Airport is owned by the city of San Marcos and managed by Texas Aviation Partners. It is situated between Austin and San Antonio between IH-35 and the new SH-130 with access to rail and a workforce of over 1.9 million people within a 50-mile radius of the airport. It is also a short drive away from one of Texas’ most popular tourist destinations – the San Marcos Outlet Malls.
The San Marcos Regional Airport competes not only with the general aviation facilities of Austin-Bergstrom and San Antonio International Airports but also with the airports located in New Braunfels and Georgetown. To understand how the San Marcos airport fits into the regional competitive landscape, we conducted a detailed analysis to score the competing facilities based on 27 criteria across 4 topic areas. The 4 topic areas were value, location, growth potential, and airport facilities.
With the understanding of how San Marcos fits into the competitive landscape, we identified market opportunities and niches for the San Marcos Regional Airport. We proposed a vision for the airport and the surrounding land that will guide investments and development at the airport. Finally, we made specific recommendations on site preparation and infrastructure development that should made and devised a marketing strategy. These recommendations outline the steps the City of San Marcos, Texas Aviation Partners, and the Greater San Marcos Partnership must take to realize the ambitious vision for the airport.
The result of the study is a more coordinated effort to promote the airport as a growth center in the region. Through the planning process, San Marcos was able to engage its stakeholders and build support for the airport vision. Texas Aviation Partners has embraced the study and is building its business plan around it. The Greater San Marcos Partnership, too, will incorporate this study into its over-all economic development strategy. Through this coordinated effort, the community is likely to see strongly positive results.
Over the past two months, we have been engaged in a conversation about the future of jobs with economic development practitioners at the TEDC and IEDC conferences.
Now, we’d like to create an open forum to continue this dialogue beyond the conference setting. In the comments section of this post, you’re invited to respond to the following questions, or pose additional questions for your peers.
How will the “future of jobs” change how you approach economic development?
What mechanisms have you created to support corporations and freelance workers in your community?
Below you’ll find a video of Jon’s recent IGNITE presentation from IEDC’s Leadership Summit in San Antonio. The IGNITE structure allows speakers 5 minutes total to present in the form of 20 slides, with 15 seconds per slide. A brief overview of the presentation follows the slide show.
The Future of Jobs from GIS Planning on Vimeo.
This is a discussion about the future of jobs. The idea of what a job is has changed throughout history (and continues to change). Farmers and craftsmen have always had trades, or livelihoods. Since the industrial revolution, a fundamental shift in the nature of jobs has occurred; individuals are employed by entities (corporations) and in return for their labor (9-5), they are compensated (wages) and receive benefits (healthcare, etc.). When unemployment is high, as it has been in the aftermath of the recent recession, we must ask ourselves who should create jobs: the public sector? the private sector? Can the economy continue to grow, even if jobs are not being created? (answer: yes).
The economy grows when value is created. Corporations can create value by increasing productivity (but not necessarily increasing employment), and independent contractors can create value outside of a traditional employee-employer relationship. If we take this thought experiment to its logical extreme, could there be corporations without people on the horizon? Will trade guilds become an organizing structure for independent contractors in a variety of professions?
If jobs are no longer the most useful or accurate measure of economic development success, how can practitioners best promote economic vitality in their communities? Are there mechanisms by which cities, regions, and states can offer resources to corporations and freelancers that will support their ability to create value, regardless of hiring trends or employment status?
We invite you to participate in this conversation in the comments section below.