Dean Barber

Archive for October, 2011|Monthly archive page

Let Reason Prevail

In Uncategorized on October 30, 2011 at 9:44 am

More often than not, when you drive into Alabama, at the state line, you will see this sign: “Welcome to Alabama the Beautiful.”

I think it is a most appropriate sign because this state, which I called home for nearly 25 years, truly is beautiful on so many different levels. But Alabama, having progressed under a shadow of a tawdry past of racial discrimination and oppression, seems almost tone deaf yet again.

I am speaking of what has become a mass exodus of Hispanic immigrant farm workers, no doubt some of them illegals, as a result of the recently passed Beason-Hammon Alabama Taxpayer and Citizen Protection Act.

Critics say the law is the harshest example of a new breed of state-sanctioned discrimination that has been passed into law by state legislatures. Republican Gov. Robert Bentley signed H.B. 56 on June 9, 2011.

When the U.S. Justice Department challenged the constitutionality of the Alabama law, U.S. District Judge Sharon Lovelace Blackburn on Sept. 28 affirmed many of its provisions, including making it a crime to be undocumented in the state.

She also permitted implementation of the provision requiring all schools to check the immigration status of their students and to report that information to the state. The judge apparently saw no issue with forcing public school officials to become defacto immigration enforcement officers.

Predictably, a climate of fear ensued. Many migrant farm workers simply packed up their families and left. And to that extent, the law accomplished what was intended – marginalizing an unwanted population, not unsimilar to segregationist policies
50 years earlier.

Families with Hispanic surnames are afraid their water and utilities will be shut off unless they can prove their immigration status. Police roadblocks are springing up near Latino-frequented places of worship. And tellingly, the first person picked up as a result of the new law was a legal immigrant, illustrating the potential for the new law to be used to terrorize anyone who looks foreign. They are now under suspicion, required to carry their papers at all times or risk being detained by the police

As U.W. Clemon, Alabama’s first black federal judge, put it, in Alabama, “the Hispanic man is the new Negro … It’s a sad thing to say.”

Now the way I see it, a couple of guiding principles are at work here, causing great consternation in a place that I grew to love.  One is that labor often follows markets and conversely business often follows labor.

A second guiding principle is the law of unintended consequences. You know what I’m talking about. Sometimes elected officials, who have no more capacity to lead than walk a dog, pass laws not knowing or understanding the full ramifications involved.

As a site selection consultant, I am very cognizant that businesses more often than not will seek certain kinds of people with certain skill sets to man their operations. That only makes sense because of the large investment typically involved in the human element.

The farming community in Alabama is no different. It is an existing industry that has for many years depended upon migrant Hispanic labor to do the work. Having done it for generations, they know how to do this very tough laborious work in a most efficient manner.

But now they’re mostly gone, with crops rotting in the fields.

Cullman sweet potato farmer Keith Smith told the Associated Press said he has not had trouble finding people who want to do the work. Rather, his problem is finding people who can do the work.

“Most American workers aren’t in good enough shape. They can’t do this work. You get two, three or four hours out of them, and they’re gone. They say they can’t do this no more,” Smith said.

Smith, who freely admits that he has used illegal immigrants to pick sweet potatoes, said most of his crop is still in the field after his workers moved away.

Relatively high unemployment rates — about 9 percent in the U.S. and 9.9 in Alabama — are not likely to push Americans toward farm work, said Demetrios Papademetriou, president and co-founder of the Migration Policy Institute. He suggested the problem may be more deeply rooted.

“This is a sector and an industry … that a long time ago, going back to the 1940s and probably before that was abandoned,” Papademetriou said. “It was abandoned to foreign workers.”

Wayne Smith, who grows about 75 acres of tomatoes in the northeast part of Alabama,  said he has never been able to keep a staff of American workers in his 25 years of farming.

“People in Alabama are not going to do this,” said Smith, “They’d work one day and then just wouldn’t show up again.”

A crew of four experienced Hispanic farm workers can earn about $150 each by picking 250-300 boxes of tomatoes in a day, said Jerry Spencer, of Grow Alabama, which purchases and sells locally owned produce. A crew of 25 (inexperienced) Americans recently picked 200 boxes — giving them each $24 for the day.

A 2010 report from the Pew Hispanic Center estimated that illegal immigrants made up 5.1 percent of Alabama’s work force.

As would be expected, criticism from the business community has rained down on Alabama legislators and Gov. Bentley. Corporate chicken-processing firms, the lifeblood of many small towns where Hispanic families have long lived in harmony with local residents, may close or cut production after losing a huge portion of their labor force. In urban centers like Birmingham, building contractors say their industry is stalling without immigrant workers, whatever their legal status.

Earlier this year, the Florida Legislature debated and narrowly rejected its own tougher immigration law.

The bill died in part because state Sen. J.D. Alexander, a citrus grower, had a change of heart. In a floor speech, he described meeting with hundreds of farm workers protesting at the Capitol.

“It’s easy to talk about — you know, down at the post office, at the bar — you know, we ought to do this thing,” Alexander said. “But when you start looking in people’s eyes and understand they are people who live and breathe just like us — I think you
all need to think about it very carefully.”

Alabamians still literally cringe when they see old news reel footage of police dogs and fire hoses from 50 years ago. They know that what was inflicted upon black and white citizens during the Civil Rights Movement in 1960s, with discriminatory policies and laws sanctioned by state and local government, was downright criminal, morally wrong.

But reason ultimately prevailed and Alabama entered into a national mainstream that celebrated diversity. In doing so, it became a more business friendly and cosmopolitan place. Mercedes-Benz came in the 1990s, followed by Honda, Hyundai, Toyota and a host of other big names from around the world. (Notice those companies are foreign.)

Largely because it was able to bridge the racial gulf between its black and white citizens, Alabama became a better place to live and do business. And for the record, let me say that I truly believe there are other places in this country that harbor far more racist sentiments than Alabama does today. And, yes, some of those places are in the North.

We are products of our past. Whether we like it or not, we are shaped and linked by our history. Our views on race, religion, and politics are all shaped by who were are and where we’ve been through together. We are supposed to learn from history.

I only hope that Alabama will revisit what it has done. While every nation has the right to protect and police its borders, the idea of a police state targeting certain peoples does not foster a business friendly environment.

Having said that, I would have no compunction as a site selection consultant to take a project to Alabama if the fit were right. But if I my corporate client had qualms about tolerance and acceptance there, I might have my work cut out for me.

It shouldn’t be that way. Alabama is a better place than that. It can and should be “Alabama the Beautiful.”

Need a partner in results-oriented site selection? Contact me, Dean Barber, at 972-890-3733 or at dbarber@barberadvisors.com Barber Business Advisors, LLC is a site selection and economic development consulting firm in Plano, Texas. Please visit our website at www.barberadvisors.com

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Are Our Better Angels Reigning?

In Uncategorized on October 23, 2011 at 8:41 am

While making the 1980 movie “Stir Crazy” in Phoenix, the late Richard Pryor was a frequent visitor to Arizona State Penitentiary, where certain scenes were shot. He used his experience for future onstage material.

“Thank God we got jails,” Pryor said. “I said to one (inmate), ‘Why’d you kill everybody in the house?’

“He said, ‘They was home.’”

And while I think that is pretty funny in a dark sort of way, real crime is no laughing matter. It destroys lives and families. It blights entire neighborhoods, even where the vast majority of people live law-abiding lives.

And crime can be one of the many ethereal quality of life issues considered by companies during a site selection search process. Most people by nature want to avoid high-crime areas. Nobody and no company wants to be a victim.

Fast forward to this past week. Vice President Joe Biden on Wednesday urged lawmakers to pass President Obama’s jobs bill, warning that crime rates have spiked as more and more police are laid off.

“In many cities the result has been — and it’s not unique — murder rates are up, robberies are up, rapes are up.”

Now I like Joe Biden. Regardless of his politics, Joe comes off as a regular kind of Joe (even if he is not) who would be fun to have a beer with and talk about all sorts of things. But on this one, Joe is wrong.

The Experts are Scratching Their Heads

For reasons that truly baffle the so-called experts, violent crime continues a downward spiral. According to the FBI’s Crime in the United States report, released last month, violent crime dropped 6 percent in 2010. It was the fourth consecutive year violent crime declined. A second report, the National Crime Victimization Survey, found that violent crime fell by an even greater 12 percent nationwide last year.

The continued decline in violent crime is forcing some criminologists to re-examine their theories on the causes of crime.

“It will be years before we get the answer, if we do, to what’s going on right now,” said Professor William Pridemore from Indiana University in Bloomington. “Criminologists have been pretty stumped.”

According to conventional wisdom and many social scientists, a bad economy leads to increased crime. When people are out of work and out of money, they turn to crime. At least that is what everyone thought.

But facts can be a stubborn thing.

Crime rose during the Roaring Twenties then fell in the Depression. America’s economy expanded and crime rates rose in the 1960s. Rates fell throughout the 1990s, when America’s economy was healthy, and they have kept falling.  During the current downturn, the unemployment rate rose as the crime rate fell. Between 2008 and 2009 violent crime fell by 5.3 percent.

The one crime that one might expect to rise during tough economic times – robberies — fell by 9.5 percent between 2009 to 2010. The decline in violent crimes was sharpest in small towns, where the rate dropped by more than 25 percent, and among regions sharpest in the South, which saw a 7.5 percent decline.

Cavemen Had it Rough

In 1991, New York recorded 2,200 homicides. Last year, 536. Overall, America’s violent-crime rate is at its lowest level in around 40 years, and its murder rate at its lowest in almost 50.

Harvard psychologist Steven Pinker recently wrote a new book called “Better Angels of Our Nature: Why Violence Has Declined,” in which he argues that our rosy view of a kind and gentler history is pretty much wrong.

In tribal societies, hunter-gatherers and hunter-horticulturalists, an average of about 15 percent of people met their ends through violence, Pinker said. But in the 20th century, combining all wars and genocides, you get to 3 percent. And keep in mind, that in the 20th century, we now have sophisticated killing machines like atomic weapons, laser-guided missiles, aircraft carriers and tanks.

There are a multitude of theories as to why violent crime has been falling.

For one thing, there are now 3 million people behind bars in the United States up from maybe 500,000. And we’ve hired a lot of police to police the streets and investigate crimes and put the bad guys (and gals) away.

The rise and fall of crack cocaine has probably meant for calmer surroundings in most U.S. cities, although drug gang violence in Mexico continues to claim lives at a war-torn pace.

The Unborn Criminals

And while this theory has a cold, almost Darwinian aspect to it, some posit that the legalization of abortion in the 1970s led many of the people most at risk for crime never to have been born. In other words, they weren’t here to do the crimes.

Another theory concerns the Exposure to lead in childhood, which has been linked to aggression and criminal behavior in adults. Jessica Wolpaw Reyes, an economist at Amherst College, argues that the decline in American children’s exposure to lead since it was phased out of gasoline in the 1970s, accounts for much of the decline in violent crime in the 1990s.

Still others contend that video games and the internet keep people indoors, and more removed crime and drugs on the streets. But let me interject here that video games and the internet have also produced a generation of pudgy kids who don’t have a clue about actually playing outdoors. A generation of fat and safe kids.

Ahh, for the good old days. Now when I was a kid, we knew how to be proper juvenile delinquents and petty criminals, which would later serve us well later in life as risk-taking hedge fund managers and consultants.

My Big Fat Deal of the Month

I have decided that it would be a good thing to occasionally highlight large (and mostly industrial) projects that have been announced in this great country of ours.

In doing so, I hope to demonstrate that while we might be down, we are far from being  out. Despite our current economic weakness and an onslaught of news stories predicting financial doom and gloom, we remain a manufacturing powerhouse.

And I would like to frequently remind you of that fact. And while October is not yet over, my “Big Fat Deal of the Month” goes to … (drumroll please) Continental Tire and Sumter, SC.

Continental announced on Oct. 6 that it would invest $500 million and build a new 1-million-square-foot plant in Sumter, to eventually employ more than 1,600 people.

“Somehow the word ‘big’ just doesn’t seem big enough,” said Greg A. Thompson, chairman of the Sumter Economic Development Board.

Competition for the “Project Soccer” was between North Carolina and South Carolina. Press reports would indicate that North Carolina blinked, when legislative leaders there realized they did not have the votes to approve a $45 million incentive package through the General Assembly.

The centerpiece of the Palmetto State’s incentive package was a $31 million infrastructure grant, which did not have to go to the state legislature for approval.

Continental officials say South Carolina won the plant because of it is a right-to-work state, making unionization more difficult; has lower labor costs; and that the Sumter site offered excellent access to the port of Charleston, rail and highway grids.

“The two most significant factors are labor and logistics,” said Tim Rogers, chief financial officer for Continental Tire of the Americas, in an interview with The State, South Carolina’s largest newspaper. “Those are the two biggest costs.”

Construction of the plant in Sumter will begin in mid-2012 with full production by 2017, company officials said.

Need a partner in results-oriented site selection? Contact me, Dean Barber, at 972-890-3733 or at dbarber@barberadvisors.com Barber Business Advisors, LLC is a site selection and economic development consulting firm in Plano, Texas. Please visit our website at www.barberadvisors.com

Watch Florida

In Uncategorized on October 16, 2011 at 9:50 pm

Relentless.

That is the new catchword. It sums up a new ideology that Gray Swoope is attempting to ingrain into the mindset, the corporate culture of the economic development community of Florida.

Hired by Gov. Rick Scott, himself a believer in making sweeping changes to foster job growth,  Swoope became the CEO and president of Enterprise Florida in February, after proving to be more than capable as Mississippi Gov. Haley Barbour’s right hand man in the fine art of industrial recruitment.

Knowing that the task before him would mean that he would be seldom at home, Swoope decided that his family should remain in Mississippi while he took to the road in Florida to preach a new kind of message – Florida, which has not be competitive in the past in winning projects, is now going to compete and even prevail over neighboring southeastern states.

Keep in mind that economic development in the Southeast, where I first cut my teeth on the craft, is quite different than other parts of the country, where it is more process oriented. In the Southeast, economic development is more akin to SEC football – fast and hard hitting.

So when Swoope prompted an audience of economic developers and site selection consultants, myself included, to repeat the magic word, those familiar with his mantra repeated the word “relentless.”

Of course, relentless refers to the pursuit of the deal and closing the deal, which has always been Swoope’s strongpoint. And aggressively competing for deals is now a new foundational strategy as is the expediting of permitting and reducing the number of regulations that have historically thwarted a competitive business environment.

The message is this is not your father’s Florida. A new day has arrived, in which business attraction is emphasized by dismantling regulatory barriers and making deals happen. Swoope sees the announcement of 500 jobs for a Time Warner facility in Tampa as “a shot across the bow” of all the state’s competitors.

Importing Aggressive Talent

But it’s not just Swoope instilling a new aggressive attitude. Florida, particulary Northwest Florida, has of late been importing a bevy of talent from other southern states, all of whom have proven themselves at the art of the deal.

They include two friends of mine from Alabama – Neal Wade, former head of the Alabama Development Office and now a senior vice president of economic development at The St. Joe Company, the largest landowner in Florida – and Ed Gardner, who held various positions in economic development in Alabama and is now the point man for PowerSouth Energy Cooperative based in Destin.

Also in the past year, Don Kirkman was recruited from  the Piedmont Triad Partnership in North Carolina to take the reins as president of Florida’s Great Northwest, and Jim Hizer came from Bowling Green, Ky., to become the president and CEO at the Pensacola Bay Area Chamber of Commerce. Hizer was successful in luring Scott Luth from Entergy Mississippi to become the organization’s senior vp of economic development.

Last month, Barry Sellers came from Arkansas to head up the Gulf County Chamber of Commerce . He told me the presence of Swoope and Wade were contributing factors in making the decision in making the move.

Melissa Medley, who had been the chief marketing officer at the Mississippi Development Office and served with Swoope, rejoined her old boss in Florida. About the same time that Swoope came to Florida, Rick Weddle left North Carolina’s Research Triangle Park to lead Metro Orlando Economic Development Commission.

The point is this: These economic developers from surrounding southern states have a track record of success and I think they will prove to be historic change agents in Florida. Indeed, they came to Florida to be just that. No doubt they will leave some hurt feelings along the way, but they will get things done.

“There is a fervor to economic development in the Southeast that it never reached the same level in Florida in years past,” said John Krug, a site selection consultant a former resident of Florida.

“These experienced economic developers who really understand their trade craft that are willing to stake their careers by coming here is an indication that they see an incredible opportunity here,” said Krug, vice president of Charlotte, NC., based Development Advisors.

A New Florida in the Making

But again, keep in mind that Florida has to a great extent not been a serious player at economic development. Rather, it has been the sunshine state, a mecca for tourism, retail, and real estate development.

“I believe there has been a perception that Florida may have become complacent,” said Kirkman, president of Florida’s Great Northwest. “But the recession has caused Florida to reflect and to understand that it has to be more aggressive. It has to be hungrier.”

Swoope’s hiring and the arrival of Neal Wade and other ED professionals is not coincidental and it sends a message of a new Florida, Kirkman said.

“The state is repositioning itself to be very competitive, particulary for the kinds of projects that have been migrating to the southeastern United States over the past 20 years. Florida will be part of the mix now,” he said.

Krug agrees that something new is afoot.

“Under this new administration, there is a much more aggressive approach toward finding deals and closing deals. It is much more proactive business development approach than I’ve seen in all my experience in Florida,” Krug said.

Don Schjeldahl, a site selection consultant with the The Austin Company, based in Cleveland, said he was somewhat surprised that economic development in northwest Florida has taken on the aggressive, grassroots feel of neighboring states.

“It’s a refreshing change,” Schjeldahl said. “The only other area where you find that in Florida is the probably the Jacksonville area. Down in central and south Florida, economic development organizations tend to be more the mouthpieces for the real estate development industry.”

I would agree with Don that the entire state is unlikely to catch fire with Swoope’s relentless philosophy. Indeed, there remains large swaths in Florida where I would be hesitant to take a corporate client (unless it was their idea) because they retain a mindset bent on commercial real estate development and tourism. But these are places with little or no manufacturing tradition, and where skill sets have not been developed. That’s just the way it is.

But that is not the case with Northwest Florida. While I arrived there on Thursday, I had questions. By the time I left on Sunday, I had answers, that this would be a viable place for some projects. It took me no time to pick up on that Scott/Swoope/Wade gang have big plans. I cannot tell you all of those plans for reasons of confidentiality, but I am telling you this: Watch Florida.

Cowboy Boots and Telephone Chats

Job growth is occurring there, something that appears to be periodically discussed in telephone calls between the Gov. Scott and Texas Gov. Rick Perry, who must be friends or they wouldn’t be talking with such frequency.

After giving a forceful but soft-spoken speech on his humble background and his intention to create a business atmosphere that will foster job growth by cutting regulations, Gov. Scott worked the room to say hello to economic developers and be introduced to site selection consultants.

When the governor came to my table, he soon learned that I was from Texas and somehow the focus was shifted to his cowboy boots, which he was proud to show me. They were adorned with the state flag of Florida and I must admit that they did look fine with his suit. I think I told him that my estimation of him had risen considerably because of his choice in footwear.

Struggles Ahead

But boots aside and despite the governor’s laser-like concentration on job creation, huge challenges remain. The Florida housing market faces a “long and arduous road to recovery,” according to a recent Wells Fargo Economic Commentary, with more foreclosures forecast.

“The return to a ‘normal’ housing market, where supply and demand are in balance and prices are rising 2 percent to 3 percent a year, is still, unfortunately, years away,” Wells Fargo reports.

That in itself means that Florida has a long struggle ahead.

Based on what I saw and heard in Northwest Florida this past weekend, I am optimistic that Gray Swoope’s message will catch on and the economic development in Florida, or at least parts of Florida, will gain that hard and fast hitting SEC edge.

Of course, one of two things eventually will happen – this talented group of imported economic developers will either succeed in changing the competitive landscape for Florida or they will leave to return to other playing fields where the name of the game truly is relentless.

Need a partner in results-oriented site selection?  Contact me, Dean Barber, at 972-890-3733 or at dbarber@barberadvisors.com  Barber Business Advisors, LLC is a site selection and economic development  consulting firm in Plano, Texas. Please visit our website at www.barberadvisors.com

There is Something About Texas

In Uncategorized on October 9, 2011 at 7:01 am

In the early days, these bold newcomers who carved out a future in a wild-and-woolly land called themselves by various names — Texians, Texasians, Texicans, and Texonians, before finally settling on Texans.

In his book “Lone Star,” T.R. Fehrenbach distills the Texas spirit into one simple sentence: “Men who exist get overrun by men who act.”

That may not seem fair or just by today’s standards, but it was the way it was.

A “cult of courage” was developed, where work and risk taking was encouraged and celebrated. “We chose this land; we took it; we made it bear fruit,” Fehrenbach wrote.

Now this might sound a bit crazy, but I still detect that cult of entrepreneurial courage. I moved to Texas less than a year ago, for essentially the same reasons as the early settlers – to fashion a better life, a new start in a place where more opportunities presented themselves.

An Epic Adventure

The chances of me meeting a violent death here are quite remote when compared to the early frontiersmen. But the desire to scratch and claw and build upon a future – I started my national site selection consulting business in Texas – is a tradition here.

And while I might not have the long pedigree, I truly feel like I am a part of a continuing saga, an epic adventure.

This past week, I attended the annual meeting of the Texas Economic Development Council in Fort Worth. There I had the unexpected pleasure of listening to Richard Fisher, president and CEO of the Federal Reserve Bank of Dallas. I say unexpected because I was fully prepared to listen to another arrogant banker. Instead, I heard what I thought was wisdom and truth mixed with a touch of humility. I was touched.

I knew that I liked Fisher when he said he was neither an “R” or a “D”, but politically indifferent. Indeed, you get the distinct impression that he is disdainful of both parties for engaging in partisan politics instead of putting the interests of the country first.

Said Fisher about Congress: “It’s time for them to get their act together and figure out a way to fill up the sinkholes.”

This from the same man who said: “My generation and the people we put in office, for whom we all voted, have basically stolen from our children, our grandchildren, and our great-grandchildren, and something has to be done about it.”

A Real Maverick

Fisher has a history of speaking “the straight skinny” and frequently casts dissenting votes as one of the 17 people who currently make up the Federal Open Market Committee, which is chaired by Ben Bernanke. The FOMC makes decisions regarding interest rates and the nation’s money supply. Fisher dissented at the FOMC’s Sept. 20-21 meeting against the group’s decision to push down longer-term interest rates.

But I really straightened up in my chair when Fisher said during a question and answer session that he sympathized with the protestors of the Occupy Wall Street movement. It would have been so easy for him to dismiss the protestors as clueless, leftist kooks. Instead, he saw validity to their purposes.

“I’m somewhat sympathetic” to the demonstrations, Fisher said. “We have too many people out of work. We have very uneven distribution of income.”

Yes, he really said that.

But Fisher was at the TEDC conference to speak about Texas and so I am here to report.

“The Texas economy has a long tradition of outperforming the nation—a tradition matched only by our long-standing reputation for modesty,” Fisher told the gathering of economic developers.

Even during the past three gut-wrenching years, Texas has fared better.

“Texas was last into the recent frightful recession and one of the strongest coming out. In 2008, the nadir of the downturn, we were still creating jobs here. In fact, while the U.S. lost 3.1 million jobs, Texas added 45,000 private-sector jobs in 2008,” he said.

Texas finally got walloped by the recession in the fall of 2008, losing 362,000 jobs in 2009, but didn’t stay down long.

“We recovered quickly and at a faster pace than the rest of the nation. We added jobs in 2010, and we have continued to add jobs in 2011,” Fisher said. “So far this year, we have added 171,200 jobs (including 13,700 jobs in August) and grown at an annual pace of 2.5 percent―more than twice the national average of 1 percent.”

Fisher predicts moderate job growth in the Lone Star State, “but only if we can preserve the image and reality of Texas’ uniqueness as a place to do business and grow profits.” He said far too many Texans still remained out of work, with a state unemployment rate of 8.5 percent.

From Boots to Suits

So what makes Texas different? According to Fisher, Texans “don’t linger long on the old and we are quick to usher in the new.”

“As I see it, the key to Texas’ success lies in our ability to change to a rapidly globalized and competitive economic landscape. Texas’ transition from a resource-based economy built on cattle, cotton and oil to a knowledge-based economy built on human capital and innovation is our greatest success. We have made a fine transition from cow chips to computer chips and from boots to suits.”

But as Mr. Fisher knows fully well, many of us do wear dress boots with our suits. His point, however, that change comes quickly in Texas is reinforced by the facts.

In the 1930 census, agriculture represented 39 percent of all jobs in the state. Today, it is less than 2 percent. Despite this decrease, Texas is currently No. 1 in ranching and No. 2 in crop production.

In 1981, oil and gas extraction made up 18 percent of the state’s output, Fisher said. Today, oil and gas extraction contributes about 9.5 percent to state output and employs only about 2 percent of the jobs. So it is a myth that the Texas economy has been buoyed largely by the oil and gas industry.

As in most parts of the country, manufacturing jobs have eroded in Texas. In 1970, 15 percent of Texas jobs were in manufacturing. Presently, manufacturing accounts for only 7 percent, although output has fallen from 18 percent to 15 percent. So it is principally the increased efficiency of manufacturing due to technological advances that has created an environment where fewer people are needed on factory floors.

“This has allowed labor to shift to other areas of the economy that are in high demand as our population has become wealthier. These include health care, education, finance, professional business services and leisure services,” Fisher said.

Why We Came

Fisher provides a laundry list of reason why Texas works better. They include low tax and regulatory burdens, flexible labor markets, open land availability, tort reform, great seaports, airports and transportation and communication infrastructure, and “the fact that people come here to work and better themselves.”

“A worker can move from the Silicon Valley or Boston to Dallas or Austin or Fort Worth or Houston or San Antonio or El Paso, and both the company and the worker are better off. The company can pay him, say, 15 percent less, and yet the worker, who spends a significantly smaller amount for the same home he had in Silicon Valley or Boston, is taxed at lower rates, finds the cost of living cheaper and sees his real income increase by a significant amount,” Fisher said.

This “pull factor” has been a key component of the net immigration of workers and job-creating businesses. It’s why I’m here.

Storm Clouds on the Horizon

But this is not the land of all peaches and honey. Dark clouds are looming and future prosperity of Texas could be threatened unless action is taken. The issue: Education.

Texas is dead last in the percent of the adult population that graduated from high school, 37th in percent of population enrolled in degree-granting institutions, 35th in academic R&D and 41st in science and engineering degrees awarded.

“The world of today and tomorrow is driven by digits, not widgets. We will continue to move up the value-added ladder and stay ahead of the competition―not just from other states, but from China and the new emerging powers―only if we are able to nurture and harness Texas brains,” Fisher said.

“We must not lose track of this simple, unalterable, indisputable, critical fact: We have done well so far; our economy is mighty. But to stay ahead of the curve and compete in tomorrow’s global marketplace, Texas must better educate its population.”

So there you have it – the straight skinny on Texas. It is a land of opportunity but also a land where things could turn wrong in a hurry. It is populated by risk takers, who have historically been able to adapt and change and make good things happen.

I have a fondness for many places in this great country. But until further notice, I am pursuing the dream of Texas. I am, in fact, a Texan.

Need a partner in results-oriented site selection? Contact me, Dean Barber, at 972-890-3733 or at dbarber@barberadvisors.com Barber Business Advisors, LLC is a site selection and economic development consulting firm in Plano, Texas. Please visit our website at www.barberadvisors.com

 

So Who is Paying for This Renaissance?

In Uncategorized on October 2, 2011 at 10:15 am

No power company has received a license to build a nuclear plant in the United States since 1978.

So when the U.S. Nuclear Regulatory Commission held two days of hearings this past week on whether to allow the Atlanta-based Southern Co. to build a $14 billion nuclear power plant in eastern Georgia, industry insiders and observers knew the significance.

“This is an important and historic day at the NRC,” NRC Chairman Gregory Jaczko said on Tuesday.

The two-day hearing at the agency’s headquarters in Maryland allowed NRC commissioners the opportunity to quiz their staff, which asserts that Southern Co.’s plan meets federal safety requirments, and Southern Co. officials on the construction and operation of Plant Vogtle’s two new proposed reactors. This is the first time the NRC has considered approving both licenses at the same time.

Previously, a utility would receive construction permits during the project’s initial phase. Then, only after construction was complete, would it seek an operating license as evidence of the reactor’s safety. But the process has been streamlined in hopes of reducing the costs and time associated with building nuclear reactors.

Time and Money Will Tell

And cost and timelines are what is going to make or break this project, which has all the makings of a test case. If Southern Co. can show that nuclear reactors can be built on time and on budget, no easy task, then boy howdy watch out. We could see a nuclear revival in this country.

“We’ve got to be successful,” Southern CEO Thomas Fanning told Bloomberg. “This is the first, best shot for the nuclear renaissance in America.”

But if Southern drops the ball, the time for massive nuclear reactors could go the way of the battleship, moving the nation toward smaller modular reactors or away from nuclear power altogether.

“If the new projects are fumbled — over-budget, behind-schedule — then utilities will be much more hesitant to start new nuclear construction,” said Chris Gadomski, lead nuclear analyst for Bloomberg New Energy Finance.

And the industry has a history of being over budget and behind schedule. Witness Comanche Peak nuclear power plant in Glen Rose, Texas, about an hour from my home. Proponents said 1972 it would cost about $200 million to build and would be operating by 1979. By 1984, it was not built, but cost estimates had jumped to $779 million. When the second unit was finally completed in 1993, the price tag was between $11 billion and $12 billion.

Makings of a Done Deal

The Southern Co. has already spent more than $3 billion at the Vogtle site since 2009, on cooling towers and other structures not deemed essential to nuclear safety while the company awaits final approval to build the reactors, which is expected in January.

With the NRC staff behind it on the safety issues, Southern Co. is banking on the belief that it will get the green light from the commission to go forward with its plans or it would not have spent billions at the site already. So this has all the makings of a done deal.

In a Sept. 20 filing with Georgia regulators, Southern says that Vogtle’s new reactors remain under budget and on schedule to begin producing power in 2016 and 2017. Georgia consumers will pay $6.1 billion of the project’s costs through rate hikes, while the Obama administration has pledged loan guarantees for another $8.3 billion.

And here is where ol’ Dean has a problem. Actually, I have several problems with this deal, none of which center on safety, although that should always be primary concern.

My first problem is one of philosophy. This whole notion of a federal loan guarantee of $8.3 billion on a single project bothers me. Mind you, I am not on an anti-government rant.

If you recall my earlier blog of two weeks ago entitled, “Solar, It’s Been Good to Know You,” I said that I was all in favor of the Energy Department spreading the love in terms of providing small and modest sized grants to universities and research labs delving into new technologies, knowing full well that there will be missteps along the way. That’s government promoting innovation, which I think is essential to our future viability as a
nation.

I can even go so far as to agree with the American Energy Innovation Council, which urges Congress to provide loan guarantees for certain startup manufacturers of new technologies, realizing that we cannot rely solely on the private sector to do that.

But here is where I start to choke — nuclear power is not a new technology and $8.3 billion is a lot of money for the government to be betting on a single project, even if it is with an established company. If you recall, I was miffed that taxpayers were on the hook for a half-billion dollar federal guaranteed loan for solar-power manufacturer Solyndra.

Mind you, I don’t see the Southern Co. – parent company to Georgia Power, Alabama Power, Gulf Power and Mississippi Power – ever going the route of Solyndra with bankruptcy and shutdown. Even if Southern Co. were to fumble the Vogtle project, this is a blue-chip company that is going to be around for a long time.

The Game was Changed

But hear me out on this. The rules of the game were changed in late 2009 so that taxpayers’ interests are now subordinated to those of private investors. That’s because the nuclear industry complained that these DOE loans, created under the Bush administration, were trickling out too slowly.

Apparently, Marv Fertel, president and chief executive of the Nuclear Energy Institute, told the Senate Committee on Energy and Natural Resources in March 2009 that DOE’s interpretation of just who should be repaid when was flawed and slowing things down. He said private investors were less likely to join the government in financing nuclear power plant projects if they felt their capital was being subjected to greater risk. Oh really?

So let me get this straight. Private investors refuse to go it alone on Southern Co.’s $14 billion Vogtle project until or unless the government ponies up most of the money, with guarantees that private investors are to be paid off first. Is it just me or does that not seem quite right?

My second concern is of a lesser nature, but it’s still worth pointing out. There are experts saying that natural gas prices have fallen sharply, making it more difficult for nuclear reactors to economically compete against gas-fired power plants. They would contend that we are sitting on a massive sea of natural gas, reserves that should last 100 years or more. This is the basis for the Pickens plan, which asserts that our country should make a structural shift to this energy resource.

But Does it Make Cents?

Even before the accident at the Fukushima nuclear plant in Japan, nuclear power was a losing investment, said Peter Bradford, a former member of the US Nuclear Regulatory Commission turned industry critic.

“Industry spokespeople will use Fukushima to obscure the fact that new nuclear has been priced out of the market in the US for many years,” Bradford told Gloria Gonzalez with Environmental Finance. “Under these circumstances, adding additional exposure to American taxpayers in the form of nuclear loan guarantees now being proposed in Congress can’t be justified.”

Nuclear has the highest construction costs of any power plant — $4,500 to $6,350 per kilowatt. Natural gas is the cheapest at $950 per kilowatt. Conversely, nuclear enjoys the lowest continuing fuel costs. Fuel costs a nuclear plant $5 to $10 for every megawatt hour, while natural gas costs more than $30 per megawatt hour. Equating those numbers, gas is probably still the better deal over the 40-year life of a plant.

Analyst Paul Fremont at Jeffries & Co. said in a recent conference call that low natural gas prices in coming years will force utilities to choose natural gas over nuclear as a fuel source.

“The biggest obstacle today would be cost and being able to cost-justify the decisions (to build nuclear) relative to other economic alternatives,” Fremont said. “Based on where gas prices are today, it’s unlikely that you will see new investment in nuclear beyond projects that are currently on the drawing board.”

Now I am not so quick as to predict a demise of nuclear power in this country, nor am I necessarily an opponent of it. I realize that utilities build for the long term and they are hesitant to rely too much on any one fuel, where prices can be unstable. That is a smart strategy in terms of business and national security.  Natural gas prices will probably rise as demand increases when this hellish funk we’re in ends and as more coal-fired plants convert to natural gas.

Still, it is clear that the Vogtle project is moving forward largely because of the undergirding of federal loan guarantees. And that give me great pause. Maybe people smarter than me can show me that this is the right approach. I’m open to listen.

I would just feel a lot better if the taxpayers, who are on the hook for $8.3 billion, were not the subordinated investors. Truly, I would.

Need a partner in results-oriented site selection? Contact me, Dean Barber, at 972-890-3733 or at dbarber@barberadvisors.com Barber Business Advisors, LLC is a site selection and economic development consulting firm in Plano, Texas. Please visit our website at www.barberadvisors.com