Dean Barber

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You Gotta Have Somethin’: In Defense of Incentives

In Corporate Site Selection and Economic Development on October 19, 2017 at 8:31 am

There are certain hot-button issues — God, politics, and possibly football – that are so dear to some people that they are incapable of changing their minds once they have formed an opinion.

We are all guilty of this to some degree. We espouse the notion of being objective, unbiased, logical and sensible, but research shows that we consistently fall short.

Confirmation bias causes us to pay closer attention to evidence and arguments that support our own firmly held conclusions and to discount contradictory evidence. We are resolute and the facts be damned.

Once we decide, we don’t like to re-decide. That’s too much work. It’s because of our neurological laziness that we sometimes fall prey to beliefs, impressions, and reports that are just plain wrong.

One of those beliefs, which many economic developers know all too well, is that all financial incentives provided to companies to expand in a given place amounts to “corporate welfare.” Try changing someone’s mind on that one.

Three Mega Projects

This argument goes back for decades, and periodically pops up, usually because of headlines. There are three mega projects in the news right now, and all center around incentives to some degree.

I am referring to FoxConn, which has announced that it will build a plant in Wisconsin, Toyota-Mazda, which publicly announced it will build plant somewhere, and Amazon, which also publicly announced that it will locate a second headquarters somewhere.

The size and scope of these projects, coming literally back to back, have economic developers, a group that is always watched, scrutinized, and second guessed, in a tizzy.

Get Things Right

Wisconsin’s efforts to bring a $10 billion Foxconn Technology Group plant to the state may have hit a snag. The board of the Wisconsin Economic Development Corp. delayed a vote to give final approval to a contract that would provide the Taiwanese firm with $3 billion in economic incentives.

Final action on the contract will not happen before the board’s next scheduled meeting on Nov. 8 at the earliest. Apparently, board members are wanting more safeguards in place.

“We’re going to take whatever time is required to get things right,” WEDC Chief Executive Officer Mark Hogan told the Milwaukee Journal Sentinel. 

The contract being considered would pay up to $2.85 billion in cash to the company over 15 years to offset 17% of its qualifying payroll costs as well as 15% of the capital costs of constructing an up to $10 billion factory that could employ as many as 13,000 people.

Unconventional and Big

The Amazon project has captured the imagination of the nation, partly because the Request for Proposal (RFP) was unconventionally published in a very public manner and the sheer size of it. This project defines big on so many different levels.

If you are reading this on Oct. 19, today is the deadline for the responses from cities that choose to compete. At stake is what Amazon is calling “HQ2,” a second headquarters that will create 50,000 direct jobs averaging $100,000 and approximately the same number of indirect jobs. The capital investment for 8 million square feet of office is estimated to be about $5 billion.

Amazon currently employs about 40,000 people in Seattle, where since 2010 it has paid nearly $26 billion in wages and spent $3.7 billion on buildings and infrastructure. The company estimates it has had an indirect economic impact of $38 billion on Seattle.

Pay to Play

Based on the numbers, I believe the city that wins HQ2 will be offering an incentive package in the billions. The Baltimore Sun has reported that Maryland’s incentive package reaches that mark. And in In New Jersey, outgoing Gov. Chris Christie (R) and bipartisan leadership of the state Legislature have pledged a $5 billion package.

It should be noted that New Jersey ranked 50th and Maryland ranked 43rd in the newly published 2018 State Tax Business Climate Index by the non-partisan Tax Foundation.

That is not to say that Amazon will go to the highest bidder. I don’t think it necessarily will. Tech talent and the culture of the place will go a long way in determining what city will become the next company town. But incentives will play a role, because they have to. It is now the nature of the game. It is what is expected.

The smallest of the three mega-projects is that of Toyota-Mazda. Together the Japanese companies will invest about $1.6 billion in the new plant. By all accounts, that is still a very large project, which is why the automakers are pressing for an incentive package of at least $1 billion, according to a recent Bloomberg report.

About 4,000 direct jobs will be created. Figure another 12,000 to 15,000 indirect jobs will be created.

Will they get it? Probably so based on history. Should they get it? Well, that depends on who you ask.

A Commonplace Tool

It is not just the national headline projects in which economic development incentives are employed. Just do a Google search and you will see that in Bexar County, where San Antonio is the county seat, local economic developers are pushing for a 10-year property tax abatement, worth nearly $3 million, for a credit union that will create about 50 new jobs.

Just last week, officials in San Antonio and Bexar County opted not to bid on the Amazon project, saying the city wouldn’t have been “competitive” on incentives.

In Hoover, Alabama, the city council approved tax rebates of up to $4 million for a Whole Foods Market Plaza shopping center. And in Hodge, Louisiana, the WestRock paper mill, which employs 450 workers with an annual payroll of $28 million, will get a performance-based tax rebate of $1.5 million a year for five years in exchange for a $200 million expansion that will keep the plant competitive.

My point is that incentives are a commonplace tool in economic development, and are not just awarded to the FoxConns, Amazons and the Toyotas of the world.

Textbook Tax-Break Auction

But that doesn’t make it easier for the critics to accept. They contend that companies are going to locate and expand with or without incentives. From their standpoint, granting incentives is an irresponsible and wasteful act that costs taxpayers.

Greg LeRoy, executive director of Good Jobs First, an organization that promotes corporate and government accountability in economic development, has called the Amazon project a “textbook tax-break auction.”

“Taxpayers should watch their wallets as the trophy deal of the decade attracts politicians to a hyper-sophisticated tax-break auction. We fear that many states and localities will offer to grossly overspend to attract Amazon, even though the business basics–especially a metro area’s executive talent pool–will surely control the company’s decision.

“Public auctions for economic development deals, like those staged in the past by Boeing and Tesla, are the rare exception: nearly all are staged in secret. Based on what we know about Amazon, we expect this one to be a textbook show,” he wrote.

A Bad Deal Costs a Good Man

To say there is not a kernel of truth to the critics’ arguments would be a fallacy. To say that mistakes have not been made in awarding incentives would be wrong.

I recently spent time with an economic developer whom I greatly respect and who lost his job because a deal went bad. Several million taxpayer dollars were lost, which naturally caught the attention of the news media.

But that same economic developer could rightfully point to a long track record of good deals that he brokered in which hundreds of millions of dollars, perhaps billions, were invested in his state and thousands of jobs were created.

Did he err? Yes, he would say that he absolutely did. But should he have had to fall on his sword because of one bad deal after a long string of successes? I don’t think so. But that’s what happened.

I could tell that it pained him to talk about it. And yet, he needed to. I’m glad I heard his story, because it put things in context. Incentives can be costly in more ways than one.

Greasing the Skids

But I am philosophically not opposed to incentives, so long as they are judiciously applied with the proper due diligence. Part of that is because I have represented companies in a consulting capacity that have sought incentives during a site selection project.

I always advise companies that incentives should never be the driver of the project, rather that solid business reasons should prevail. But the fact remains that there are substantial costs and risks to a new capital investment and job creation for a company in a new place.

“Greasing the skids” to lessen those upfront costs and risks only make sense to communities that choose to engage in business attraction and compete in the arena for corporate investment. But with this comes great responsibility.

Economic developers and local officials must know what the impact or return on investment will be to the local economy in terms of jobs created, (both direct and indirect) annual payroll, taxes paid, and the general economic ripple effects. Only then, when armed with the numbers, should they be offering public dollars as an inducement.

By the same token, companies should know the numbers and only accept incentives if they certain they can do what they say they will do in terms of capital investment and job creation.

I Was There

Back in 1994, when I was the business editor of The Birmingham News, I heard complaints that Alabama had “bought” the Mercedes-Benz project, a $325 million assembly plant, with a $250 million incentive package.

I didn’t take those comments too much to heart, because I had seen the numbers showing that the incentives would pay for themselves in a matter of four or five years.

The plant in Tuscaloosa went through a number of expansions. I cannot tell you how many. I can tell you that the plant, now in its 20th year of production, was in the midst of a $1.3 billion expansion, when Mercedes announced last month that it would spend an additional $1 billion to manufacture electric SUVs and create an additional 600 jobs.

The economic impact of the latest expansion is to the state is estimated to be $307.9 million annually, according to the University of Alabama Center for Business and Economic Research. That includes contributing $109.2 million to the state’s GDP and $62.4 million in earnings to Alabama households from direct and indirect jobs.

Once this latest expansion is complete, Mercedes will have invested $6.8 billion in the state, a far cry from the initial investment of $325 million. Looking back, that $250 million incentive package was well spent.

Would Alabama have gotten Mercedes, or later Honda in Lincoln, or later still Hyundai in Montgomery, or Toyota in Huntsville without offering financial incentives? No way, and that’s because other states, offering their own incentive packages, were competing hard for those projects.

When I think of economic development incentives, for some strange reason Billy Preston’s 1974 hit record “Nothing from Nothing” pops into my mind.

Nothin’ from nothin’ leaves nothin’, You gotta have somethin’ if you want to be with me.

Billy understood.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. (Send us your RFPs.) Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com or at 972-890-3733.

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Fall From the American Dream

In Corporate Site Selection and Economic Development on October 8, 2017 at 12:05 pm

This last one was different. Only now are we realizing the full extent of the damage. I’m not referring a hurricane, but rather the Great Recession, considered the largest downturn since the Great Depression.

Throughout our history, we have weathered recessions, 34 since 1854.  But this last one cut us to the quick, and to some degree it is still with us, despite the fact that job openings have risen to a record high and that wages are finally rising.

Still, there are indicators that not all is well. The labor participation rate — the proportion of people employed or looking for work in the U.S. — fell to 62.7 percent in September, near a 40-year low. Drug overdoses are now the leading cause of death among Americans under 50. And men have become less appealing to women as marriage partners.

Some economists believe all these are telling factors that are very much tied to this last downturn and the loss of millions of manufacturing jobs.

It’s Not Over

On Sept. 20, 2010, The Economist proclaimed, “It’s Over,” referring to the Great Recession that technically ended in June 2009. But is it really?

Using tax records to trace more than a million workers through the recession and its aftermath, Danny Yagan, an economist at the University of California, Berkeley, found that thousands of workers who lost their jobs ultimately stopped looking.

“The signals say the recession is over, but employment’s not back to normal,” Mr. Yagan told The New York Times “Recession effects aren’t supposed to last this long.”

Certainly, some parts of the country have yet to fully recover.  This holds true especially in rural America where the shutdown of a single major employer can have devastating effects. I have seen it firsthand as a consultant to communities and companies.

Distressed and Disconnected

Indeed, there is a “disconnect between national trends and local realities,” according the Economic Innovation Group, which recently published what it calls The 2017 Distressed Communities Index.

“Distressed communities are disconnected communities,” the report states, “to which the fates of their 52 million inhabitants are diverging from the rest of the country. These are places increasingly alienated from the benefits of the modern economy.”

And it is in these distressed, alienated places where many manufacturing jobs have evaporated. Since 1980, a full third of all manufacturing jobs — five million since 2000 — have been lost, due in part to automation and U.S. trade policies.

In a 2017 paper with the ominous title, “When Work Disappears: Manufacturing Decline and the Falling Marriage-Market Value of Men”, University of Zurich economist David Dorn found that employability and marriageability are deeply intertwined.

Deaths of Despair

A drop from 72 percent of U.S. adults being wed in 1960 to half that in 2014 is due in part to economic forces that are making men less appealing partners to women.

Dorn found that when towns and counties lose manufacturing jobs, fertility and marriage rates among young adults go down, while unmarried births and the share of children living in single-parent homes go up.

As manufacturing jobs are lost, there are also increases to mortality in men aged 18 to 39, Dorn says, with more deaths from liver disease, indicative of alcohol abuse; more deaths from diabetes, related to obesity; and lung cancer, related to smoking, and drug overdoses.

These “deaths of despair” have decimated one demographic group in particular: the white working class, and have taken over a million American lives in the past decade.

A Worsening Crisis

Princeton economists Anne Case and Angus Deaton contend that a gradual “collapse of the white, high-school-educated working class after its heyday in the early 1970s,” has resulted in death rates that have been rising dramatically since 1999 among middle-aged, less educated white Americans, reversing decades of longer life expectancy.

Opioids killed about 33,000 Americans in 2015. Overdose deaths in 2016 will likely exceed 59,000, the largest annual jump ever recorded in the U.S., according to preliminary data compiled by The New York Times. The evidence suggests the crisis is only worsening in 2017.

Last year, Princeton economist Alan Krueger made headlines with a study showing that nearly half of prime age men (or men ages 25 to 54) who are not in the labor force take pain medication on a daily basis. Two-thirds of those men, about 2 million, take prescription pain medication on a daily basis

In a new paper published last month by the Brookings Institution,  Krueger dives deeper and finds that opioid use could account for a 20 percent decline in men’s labor force participation from 1999 to 2015 and a 25 percent of the observed decline in women’s labor force participation.

Of the 35 member countries that make up the Organization for Economic Co-operation and Development, only Italy had a lower labor force participation rate of prime age men than the U.S. in 2016.

Loss of Hope and Identity

Many researchers believe the opioid crisis is due in large part to a loss of hope and identity among white blue-collar workers. The problem is especially acute in small town and rural America, where the unemployment rate remains high and a disproportionate number of residents are on Medicare or Medicaid, according to the Centers for Disease Control and Prevention.

Carol Graham, a senior fellow at the Brookings Institution and a professor at the School of Public Policy at the University of Maryland, says blue-collar whites have had more difficulty in adapting to the loss of manufacturing jobs.

“Discrimination gave blue-collar whites better access to those lifestyles than other groups. Today, minorities are gradually catching up and, perhaps due to their constant challenges in the past, they seem to be better at multitasking in the labor force. They are much more likely to take new low-skilled service jobs in sectors such as health, for example, than are whites, particularly white males,” she wrote.

“While there are challenges for many low-skilled workers in changing economic times, and minorities still face significant disadvantages, among blue-collar whites, due to trends in the economy, the labor and marriage markets, and in health, the fall from the American dream has been a longer and harder one, at least in relative terms.”

Causal or Symptomatic

Federal Reserve Chair Janet Yellen told a Senate Banking Committee hearing in July that rampant opioid abuse in the U.S. is related to the decline in labor force participation among prime-age workers.

“I don’t know if it’s causal or symptomatic of long-running economic maladies that have affected these communities and particularly affected workers who have seen their job opportunities decline,” Yellen said in response to questioning from Sen. Joe Donnelly, D-Ind., on the issue.

The U.S. is “the only advanced nation that I know of where in these communities we’re actually, especially among less-educated men, seeing an increase in death rates partly reflecting opioid use,” she added.

When he was chairman of the Federal Reserve, Ben Bernanke, warned during the recession and the recovery that workers who stayed unemployed too long might drift too far away from the labor market to ever return. That seems to be the case.

Scars Left

Stephen Gold is president and CEO of the Manufacturers Alliance for Productivity and Innovation (MAPI) has said that “maintaining our competitive advantage in global manufacturing starts with people.”

He tells of research showing that of a projected 3.5 million manufacturing jobs expected to be available in the U.S. between 2015-2025, and that 2 million of them could go unfilled.

I think it has become increasingly clear that a significant portion of our American workforce is, in fact, “damaged goods,” and some workers who have been unemployed too long are probably forever lost.

The Great Recession has left its scars and is still being felt in so many places, particularly in rural and small town America. Having treatment centers and vocational training made available in distressed and disconnected communities can only help. I only wish I had better answers than that.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. (Send us your RFPs.) Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com or at 972-890-3733.

Amazon HQ2: An Avalanche of Glass, Steel, People and Money

In Corporate Site Selection and Economic Development on October 2, 2017 at 7:59 am

A plenitude of cities are vying to become the chosen one for Amazon’s future “HQ2,” a second, equal-footing headquarters that will employ 50,000 people at an initial investment cost of $5 billion.

Most people have little understanding about Amazon, much less its plans for HQ2. (“Amazon wins games by changing the way the games are played then being the only ones who understand the new rules,” wrote a former Amazon employee.) I include myself among the ignorant, which didn’t stop me from writing Even a Blind Hog: Handicapping Amazon HQ2. After all, I am a consultant.

But this much I do know – the city that is chosen will be reshaped and transformed for decades to come.

I actually regret writing my Blind Hog blog, not because I demonstrated that I was pretty much clueless like everyone else, (I did say from the outset that I was probably wrong.), but because of the responses that it generated.

Mind you, some were very good in that there was reasoning behind the thoughts. Others were bad because, well, you’ll see.

We Need It and Sis Boom Bah

The bad ones fell into two categories. The first was the “we need this,” almost a “we deserve this” response. It goes something like: “Hey, Amazon, if you have an ounce of humanity, you will choose us, because, well, we’re kinda hurting here, and we really need you. So please do the right thing and choose us.”

I actually came across this type of response back in August, when I wrote two blogs about where a $1.6 billion Toyota-Mazda assembly plant project. By this rationale, companies should abandon siting billions of dollars of capital for business reasons (talent, supply chain, cost of doing business, etc.), and look to places that are economically challenged.

Of course, it is not about what any community needs. Rather, it’s all about what the company wants or needs, which in the case of Amazon is considerable. Those needs are spelled out in their request for proposal (RFP), which does provide us with certain clues as to where the company might go.

Then there is the “cheerleader” response. It’s something like: “Hey, Amazon, we’re open for business, and we’re the best, because, well, we are. Choose us and you won’t be sorry. Rah, Rah, Rah, Sis Boom Bah!”

The cheerleaders may cite some supporting factoids (often they do not), but their responses exemplify little if any critical thinking on why their city would be a good fit for Amazon.

The truth is you can find flaws in every place, and that no city meets all of Amazon’s needs absolutely. And that is what makes this project so interesting, along with its transformative nature.

Best Be Careful

Since Amazon publicly published its RFP last month, there has been no shortage of people speculating on where it might go. And that is all they are doing, speculating. Count me among the guilty. I had to laugh when I read one big commercial real estate company’s ranking of top cities for the Amazon project, misspelling Pittsburgh in the process.

But Pittsburgh Mayor William Peduto did get it so very right when he said, “This is a transformational opportunity unlike any that we’ve ever seen.”

In my last blog, I quoted a remark frequently made by my grandfather, “Even a blind hog will find an acorn on occasion.” Mayor Peduto’s statement reminded me of another: “Best be careful what you wish for, because you may just get it.”

Whichever city “gets it,” it will get what The Seattle Times calls “an avalanche of glass, steel, people and money.” Like Seattle, the HQ2 city will become a company town. And while the benefits will exude to many, HQ2 may make life actually tougher for some. More on that in a moment.

Hit Me With Your Best Shot

I am purposely not reading the newspaper stories of Philadelphia’s bid, or that of Boston, Dallas, Indianapolis, or Denver, or any other of the umpteen cities vying for HQ2. At this point, it would serve little purpose.

Despite their shortcomings (all places have them), some cities have a real shot at winning HQ2, while others are crafting proposals only because they are succumbing to political pressure to do so. The thinking by local politicos is that they would look bad if they did not throw their hats in the ring.

Economic developers and elected officials can then say, “well, we gave it our best shot.” And then go back to business as usual.

One economic developer told me said he hopes he will not be pressured into crafting a proposal to the Amazon RFP. “It would cost me $50,000 to do this, and I don’t want to waste the time and money,” he said.

Trust me, he would be wasting time and money.

Update: My friend will be working on his city’s Amazon proposal for the next 17 days. (Deadline is Oct. 19.) I told him that I was very sorry.

In my Blind Hog blog, I picked Atlanta, although in hindsight Charlotte and Raleigh-Durham might be better choices. But it matters not what I say or anyone else says in speculation.

What ultimately matters is Amazon’s choice. Then over time, we can watch a city that will be forever changed. We only have to look to Seattle as a petri dish for what is to come.

A Juggernaut Dominance

Amazon has spent about $4 billion acquiring about 8.5 million square feet of downtown office space in Seattle, although some estimate the footprint closer to 10 million. The company expects to grow to 12 million square feet in the next five years.

According to an analysis conducted for The Seattle Times, Amazon occupies 20 percent of all prime office space in the city, more than twice as large as any other company in any other big U.S. city. (In most big cities, the top employer occupies less than 5 percent of local office space.)

About 70 percent of new downtown office space added in 2016 was exclusively for Amazon, which has turned formerly forlorn parts of the city, into vibrant live-work-and-play neighborhoods, according to The Times.

Amazon now occupies more office space than the next 40 biggest employers in Seattle combined. It has more local job openings than all of the other region’s major employers combined.

Rider Levett Bucknall, a firm that tracks construction cranes worldwide, said Seattle led the U.S. with 58 cranes at work. Los Angeles, which has six times Seattle’s area, ranked second with 36 cranes.

In short, expect the Amazon juggernaut dominance to happen in the city chosen for HQ2.

An Unaffordable Future?

In the process, the resulting tech boom (50,000 direct jobs averaging $100,000 and 53,000 indirect jobs) will not only alter the chosen city’s cultural fabric but will also increase the cost of living.

In a 2014 op-ed, Jeff Reifman wrote in GeekWire that an Amazon-fueled future is “will be more male, even more white, wealthier and less diverse, unaffordable to those with lower incomes including the firestarters of culture, artists.”

The influx of high-income earners, along with the lawyers and venture capitalists who will support them, will be a harbinger for growth and rising prices. Seattle’s record growth has made it the nation’s hottest homebuying market, with prices rising faster here than anywhere else in the country.

The median price of a single-family home or condo in Seattle was $522,000 in August, according to real estate company Redfin, a 67 percent spike from April 2010, when Amazon opened its headquarters.

Nested’s 2017 Rental Affordability Index ranked Seattle fifth in a nationwide survey of cities and ninth worldwide, with a cost per square foot of $3.07. Monthly rent for a single person, according to the survey, averages $1,288.76.

In a 2015 study, Redin found that for every 1 percent increase in the number of technology workers between 2014 and 2015, there was roughly a 0.5 percent increase in home prices.

Home prices have jumped 64 percent in Austin since 2009, Redfin’s data show. In Boston, prices are up 71 percent. And in San Francisco, the median price of a home is $1.25 million, a 123 percent increase since 2009.

Am I predicting future affordability problems in the HQ2 city that is chosen? I guess I am at that.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. (Send us your RFPs.) Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com or at 972-890-3733.

Even a Blind Hog: Handicapping Amazon HQ2

In Corporate Site Selection and Economic Development on September 12, 2017 at 10:59 pm

First, there was Foxconn. Then there was Toyota-Mazda. And now there is Amazon.

The very thought of three billion-dollar-plus, corporate-site-search projects happening within a few months of each other is pretty much unheard of for both economic developers and site selection consultants.

For the uninitiated, economic developers represent locales, whether they be states, cities, counties or regions. Site selection consultants represent companies in the quest to find the best place for future operations.

(I was once an economic developer, but have gone over to the dark side. I am a consultant.)

Politics of the Day

Wisconsin won the Foxconn project, of which various reports place the value between $7 billion and $10 billion. I get the impression that the project was more “site confirmation” than true site selection, with politics a leading factor.

Foxconn may be a forerunner of things to come, with politics playing an increasing role on where some mega-projects ultimately locate. I believe the Trump administration’s hardline position on NAFTA being renegotiated is why both Ford and Toyota have reversed courses on projects in Mexico, although neither company will admit to that.

Based on the politics of the day and history, I have ventured what can only be viewed as an educated guess on where a $1.6 billion joint venture project between Toyota and Mazda will land. Apparently, my conjecture/analysis in two blogs got enough traction that my friend Andy Levine interviewed me this past week for his latest podcast, Episode 27 of The DCI Blog.

Widespread Speculation

Having worked my share of automotive projects, I had at least some foundational knowledge to fall back on. So it came as quite a shock when an economic developer in Oklahoma City suggested that I write a blog, handicapping the $5 billion Amazon project.

I protested, “You know, I really don’t know anything about it, just what I read.”

“Neither does anyone else, and that hasn’t stopped them,” he said. Good point. There has been widespread speculation in the press on what city Amazon will choose as its second, equal-footing headquarters, which it calls HQ2.

And then I remembered my grandfather saying, “Even a blind hog will find an acorn on occasion.”

The worst that can happen is that I am wrong. And I probably am wrong, so let’s just do it, and have a little fun in the process. Are you with me?

Something Entirely New

Maybe we should first acknowledge that we don’t fully understand Amazon, what it is about or how it operates. It might be one reason why your local shopping mall is being torn down.

“Amazon wins games by changing the way the games are played then being the only ones who understand the new rules,” wrote former Amazon employee Ryan Boudinot in an article for GeekWire and who called HQ2 “something entirely new in the history of global capitalism.”

Boudinot says Amazon constantly pits one idea against another in a process called A/B testing. The concept can be seen on its website itself but also through what Boudinot calls a “cutthroat” corporate culture.

“When the announcement came that Amazon would open not a satellite office, but a doppleganger HQ, my first thought was, “They’re going to A/B test the entire company.”

HQ2 will be “be a full equal to our Seattle headquarters,” Amazon CEO Jeff Bezos said in a prepared statement. Somehow, Hunger Games comes to mind.

Think Big

Amazon tells us in its Amazon HQ2 RFP that this will be one big project, again $5 billion big, creating up to 50,000 jobs. The executives, managers, software engineers, legal staff, accountants and administrative workers employed at HQ2 will be making an average annual wage of $100,000 or more a year.

Amazon currently employs about 40,000 people in Seattle, where since 2010 it has paid nearly $26 billion in wages and spent $3.7 billion on buildings and infrastructure. The company estimates it has had an indirect economic impact of $38 billion on Seattle.

Big requires big. Only big cities need apply. The company states it is looking for metropolitan areas with more than 1 million people, “has a stable and business-friendly climate,” and can “attract and retain strong technical talent.”

The New York Times is picking Denver. My friend and frequent business partner on projects, Tim Feemster, thinks Dallas has a real shot at it. Denver or Dallas, both exhibiting good levels of tech talent, could very well be the choice.

Think East and Extending Hours

But I think it will be “NFL” city, a major market east of the Mississippi River, probably in an eastern time zone to give the company greater band width in terms of time of day business hours and extending its company’s capability to manage its business in Europe and other parts of the world.

That leaves Boston, New York, Philadelphia, Baltimore, Washington, D.C., Charlotte, and Atlanta, all eastern time zone cities.

Cleveland, Indianapolis, Cincinnati, Pittsburgh, and Detroit, all good cities, are not making my first cut, only because I think Amazon will be looking at more high-growth metro areas outside the Midwest. It should be noted that Indianapolis and Detroit have good levels tech talent.

So I’m breaking it down to an NFL city, eastern time zone, and tech talent, I am going to refer to CBRE’s fifth annual Scoring Tech Talent Report.

Think Talent But Also Costs

So now I am looking at New York, Washington, D.C., Atlanta, or Boston. Why not Toronto? Big city, with 183,00 tech jobs. Maybe, but I think of the politics of the day and the Wrath of Khan. Excuse me, I meant the Wrath of Trump. The president would have a field day if HQ2 located in Canada.

I am throwing out Boston and Washington, D.C., for two reasons – the high cost of real estate (although Amazon is no stranger to that in Seattle) and an arguable brain drain when it comes to talent.

The website Recode attributes Real Capital Analytics that the average office price per square foot in Boston is $550, and Zillow in stating the average home price is $560,300, while in Washington, D.C., the office price is $595 per square foot and $382,900 for the average home.

Brain Drain

And while both cities produce a significant number of tech graduates, they have a hard time employing them locally. According to CBRE, from there were 56,623 tech degrees awarded in Washington, D.C., from 2011 to 2015, but 40,270 tech jobs added during the same period.

That is a deficit of 16,353, meaning those graduates probably left the area. Of course, you could rightly argue that those people would stay should Amazon come to town with high-paying jobs.

In Boston, there were 31,400 tech degrees awarded from 2011 to 2015, with 11,790 tech jobs added, a deficit of 19,610. Again the dynamics would certainly change with Amazon’s HQ2. More tech graduates would remain in the city to fill the needed jobs.

I am throwing out New York, which may be a big mistake on my part. The primary reason is because I don’t think “the City” will offer the financial incentives expected or needed by Amazon, and the fact that New York remains a high cost place to do business in terms of taxes, real estate and, well, just about everything.

71 Streets

So that leaves me with Atlanta, with a metro area population nearing 5.8 million and where 71 streets have a variant of “Peachtree” in their names.

In terms of CBRE’s tech talent measure, Atlanta ranks No. 5, behind New York and Washington, D.C. to be sure, but still very good. Atlanta added 22,634 tech degrees from 2011 to 2015, but added 43,180 tech jobs, proving that the talent will flock to the city.

Atlanta has The Georgia Institute of Technology, commonly referred to as Georgia Tech, one of the top research universities in the country. The school provides a technologically focused education to more than 25,000 undergraduate and graduate students in fields ranging from engineering, computing, and sciences, to business, design, and liberal arts.

As large cities go, Atlanta reasonably priced place to do business. Office price per square foot averages $239, while the median home value stands at $212,200, according to Zillow.

In Good Company

Atlanta has Hartsfield–Jackson International Airport, seven miles south of the city’s central business district. The airport serves 150 U.S. destinations and more than 75 international destinations in 50 countries, averaging 275,000 passengers a day. Atlanta is within a two-hour flight of 80 percent of the United States population.

The Atlanta metro area is no stranger to corporate headquarters. Twenty-six companies there are among the 2017 FORTUNE 1000, of which 15 companies are also ranked in the 2017 FORTUNE 500. In fiscal year 2016, these 26 companies generated revenues of $373.9 billion.

Finally, Georgia has historically proved to be a business-friendly state that is willing to go big after the big projects. By and large, its elected officials understand that financial incentives are a necessary reality in today’s world. For that very reason, I am not counting Georgia out in hunt to win the $1.6 billion Toyota-Mazda project.

So there you have it, my choice for the Amazon HQ2 project. Chances are that I am wrong, but I then again I might be right. Are you listening, Amazon? Hey, I can help you with site selection. Honest.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. (Send us your RFPs.) Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com or at 972-890-3733.

How Disaster Reveals Our True Selves

In Corporate Site Selection and Economic Development on August 31, 2017 at 7:56 pm

Within hours after the Boston Marathon bombing on April 15, 2013, the slogan “Boston Strong” appeared as a hashtag on Twitter and rapidly spread around the world.

It was an expression of Boston’s unity following the tragedy, but it is also very much an American expression. Whenever and wherever disaster strikes, come hell or high water, Americans come together.

And so we watched on our TV screens this great coming together as Hurricane Harvey inundated Houston and the nearby region. A flotilla of small boats and inflatable rafts were launched by first responders and citizen volunteers to rescue those trapped in their homes. Helicopters plucked people from rooftops and chest-high waters.

NBC Nightly News anchor Lester Holt, who spent five days in Texas covering the storm, told GQ Magazine that Hurricane Harvey showcased the best of us.

“I think that when something of a magnitude of a Katrina or a Harvey happens, that we see our true selves—we revert to who we are. And we are a good people who know when it’s time to check all our differences at the door and come together—and I’ve seen it time and time again at natural disasters that people focus on one another because in one way or another they’re all saying to themselves we’re together in this. I have nothing but admiration for the people here. Their self-reliance was apparent.”

Here in Texas, where I live, self-reliance and compassion for others is part and parcel of the brand. We saw Houston Strong, Beaumont Strong and Port Arthur Strong. The storm personified true grit.

My friend, David Dodd, founder and president of the New Orleans-based International Public Private Partnerships in Resilience Center, Inc., agreed that resiliency is cultivated in Texas. Dodd’s firm specializes in economic recovery and resilience, born from leading economic recovery efforts after the devastation wrought by Hurricanes Katrina and Rita.

“Texans are proud—true Texans say, “the State of Texas”. There is meaning behind that. Don’t forget that Texas was its own country. (Republic of Texas, March 2, 1836, to February 19, 1846.) They know that and they feel they are separate and apart from everybody else,” said Dodd, who grew up in Louisiana on the border with Texas, and whose father’s business was in Texas.

“The upside of that pride is that they are going to take care of their own. They are not going to let that mental image of their state as being the greatest place in the world collapse. They are going to do whatever it takes to help their neighbors, if only to uphold that image. The result is still good.”

The Worst Natural Disaster

But tough, tough days lie ahead. Hurricane Harvey is the most costly natural disaster to ever befall the United States, said Dr. Joel N. Myers, founder, president and chairman of AccuWeather in a prepared statement Wednesday.

“This is the costliest and worst natural disaster in American history. AccuWeather has raised its estimate of the impact to the nation’s gross national produce, or GDP, to $190 billion or a full one percent, which exceeds totals of economic impact of Katrina and Sandy combined.

“The GDP is $19 trillion currently. Business leaders and the Federal Reserve, major banks, insurance companies, etc. should begin to factor in the negative impact this catastrophe will have on business, corporate earnings and employment. The disaster is just beginning in certain areas.

“Parts of Houston, the United States’ fourth largest city will be uninhabitable for weeks and possibly months due to water damage, mold, disease-ridden water and all that will follow this 1,000-year flood.”

The National Weather Service announced that a gauge in Cedar Bayou, near Mont Belvieu, Texas, recorded a preliminary rainfall of 51.88 inches.  Experts say it may be weeks before floodwaters recede in some locations.

Prior to Harvey, there were nine weather/climate disaster events this year with losses exceeding $1 billion each across the U.S., resulting in the deaths of 57 people, according to the National Centers for Environmental Information (NCEI). At least 28 people have died in Texas due to Harvey and that number could rise.

Not counting Harvey, the U.S. has sustained 211 weather and climate disasters since 1980 where overall damages/costs reached or exceeded $1 billion The total cost exceeds $1.2 trillion, according to the NCEI.

An Investment With a Return

Economic developers have thought that communities should invest in infrastructure, education and workforce training in order to attract and retain corporate investment. Dodd says they should also think the same way about resilience.

“If you had a bridge and you knew that bridge could go out in the next 20 years, wouldn’t you go ahead and invest in strengthening that bridge? That’s the way communities need to look at resilience. It is an investment that has a return,” he said.

On a personal note, if I were advising a corporate client on a location analysis project and we were looking at an area prone to natural disasters, be it a hurricane, a tornado, or an earthquake, I would be asking questions about community preparedness. I would want to know about special building codes, or nearby shelters, evacuation routes, etc.

Facing the Facts

Some communities do not want to face the facts. I know one that wanted to run from the fact that they have had some past disasters. They didn’t even want to talk about it.

When a community leader learned that prospect companies were asking about disaster preparedness and recovery, he pushed the economic development organization to face the issue head on. Today that same community has a brochure outlining what it has done to become more resilient in the face of a disaster. It was a smart move.

A Silver Lining

The thought that something good could come out of tragedy, especially where there has been loss of life, may seem strange or even callous. But the fact is that we learn from disasters, and sometimes they even present us with opportunities or spark ideas.

“There is in every cloud a silver lining,” said Dodd. “This gives a community the opportunity for a reset. Ironically, it is sometimes easier to do that after a major disruption such as a natural disaster for a community to look at where it is and rebuild in the image that it wants to.”

And in that recovery and rebuilding process, that reinvention of place, a community can and should become more resilient.

Joplin, Missouri

The EF5-rated multiple-vortex tornado struck Joplin, Missouri, late in the afternoon of Sunday, May 22, 2011. It reached a maximum width of nearly 1 mile during its path through the southern part of the city.

It left death and destruction in its wake, killing 161 people, injured some 1,150 others, and causing property damage amounting to $2.8 billion. It was the deadliest tornado to strike the U.S. since 1947, and the seventh-deadliest overall. It also ranks as the costliest single tornado in U.S. history.

In the aftermath of the storm, Joplin Strong emerged.

“We had contingency plans about what happens if our chamber building were to burn down or if it were hit by a tornado, but we never anticipated what happens if 500 of our businesses are destroyed or are substantially damaged or 4,000 of your houses are gone,” said Rob O’Brian, president at Joplin Area Chamber of Commerce & Joplin Regional Partnership.

Much of the response was not unlike seat-of-the-pants flying.

“We had to think about what are the needs were and how to address those needs, things that economic development organizations think about day in and day out on a normal scale. We just had to do it much faster,” O’Brian said.

A Marathon

O’Brian agrees with Dodd that a disaster can change a community’s vision about itself and its future.

“When a disaster happens, it brings a lot of focus and a lot of energy to the forefront. People start talking about recovery and rebuilding and how we can do it and how we can do it differently. They start thinking about how we can raise the bar and end up with a better community for ourselves,” said O’Brian.

“In the heat of the moment, it seems like it will be a far stretch to get there. But within days, people were talking about business opportunities, better housing, and building their businesses back in a better way. You do get there over time. But it is a marathon, although the first initial weeks when everybody is scrambling to address immediate needs, it feels like a sprint. You just preserve and keep working on it every day.”

Ideas Revived

Some ideas that had been discussed and essentially shelved prior to the tornado were revived.

“We had energy and we had momentum, and people came forward saying this was our opportunity. It changed some of the vision and brought focus to bringing those projects, talked about for years, to fruition and all with the idea of coming up with a better community,” O’Brian said.

And a better community has resulted. In June, the Kansas City University of Medicine and Biosciences officially opened a second campus in Joplin. It was Missouri’s first new medical school in 44 years. KCU broke ground on the facility last year on the site of Mercy Hospital Joplin, a temporary facility constructed in the aftermath of the tornado. The land and hospital were donated to the school, along with $30 million in local funding. No public dollars were used.

There are probably lessons to be learned here for Houston.

New Orleans

I look at New Orleans today, still in recovery mode 12 years after Hurricane Katrina.

About 100,000 fewer people live there today than the nearly half-million who had lived there before the storm. In some neighborhoods, like the Lower Ninth Ward, many residents never returned, but newcomers have arrived.

New Orleans now has a growing tech industry, with companies such as Electronic Arts, Gameloft, High Voltage Software, inXile, iSeatz, and Turbosquid having opened studios there in recent years.

It is also is a whiter and more expensive city. Gentrification and a growing cosmopolitan atmosphere has sparked debate within the city as to its historic culture is being lost.

Of course, it is for the people of New Orleans to decide the future of their city. But if income, education and corporate investment are all rising, and I believe that they are, I would hope that opportunities for all are rising, too.

There are probably lessons to be learned here for Houston.

Their Strength is Our Strength

Wherever disaster strikes, Americans reveal their true selves, their true grit. They may not know they have this wellspring of resilience deep within them, but they find it. Knocked down, they find a way to get back up and rebuild their lives. They soldier on.

We mourn for the dead and empathize for those who have lost so much from Hurricane Harvey. They have demonstrated courage and compassion, and given the rest of us faith in ourselves and our fellow man. Their strength is our strength. We are with them.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. (Send us your RFPs.) Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com or at 972-890-3733.

Where Will the $1.6 Billion Toyota-Mazda Plant Land? Part 2

In Corporate Site Selection and Economic Development on August 23, 2017 at 12:24 pm

In my last blog, I said both political and business factors will determine what location is chosen for a future assembly plant operated jointly by Toyota and Mazda.

For the dozen or so states competing, this is red meat and bidding war has resulted. The prize is 4,000 good-paying direct jobs, three or four times that in indirect jobs, and a capital investment of $1.6 billion.

The fact that this search was publicly kicked off at a time when President Donald’s Trump administration is pushing for wholesale changes to the North American Free Trade Agreement is no coincidence. The first round of negotiations between the United States, Canada and Mexico ended on Sunday.

Said President Trump at a raucous rally of supporters in Phoenix Tuesday night: “I think we’ll probably end up terminating NAFTA at some point.”

Trump’s threat to pull out of NAFTA probably comes as no surprise to Toyota. The company operates two manufacturing facilities in Canada and one in Mexico, with a second, a $1 billion plant, now under construction in Guanajuato.

As I previously stated, Toyota has a history of building political capital. The fact that the company has 10 manufacturing facilities in eight states is indicative of its political acumen that spreading the wealth is a good strategy. It is the basis for my analysis, which essentially is educated guesswork.

My gut tells me that Project Mitt, as it is being referred to, will go to a state that has no or maybe only one OEM assembly plant. There is a certain appeal to being The Big Fish in a little pond.

I also think Southern states will have an edge over Midwestern states for reasons of taxation, regulation and proximity to ports. But when you mix politics and site selection factors, you are capable of getting a bit of a strange brew. It’s one that JLL, hired in an advisory role, will have to taste.

So here is my quick-and-dirty, state-by-state analysis, with accompanying news reports, much of which are hopeful thinking to say the least.

Alabama

A state where I lived for more than 20 years, I cut my teeth on economic development working primarily on automotive projects. I learned that well-coordinated teams win projects and I was lucky enough to frequently be a member of those teams.

We had a spate of success, successfully recruiting not just the OEMs to the state, but many Tier One and Tier Two suppliers as well. Those experiences as the basis for my consultancy today, so I have very fond memories of Alabama.

Alabama has three auto assembly plants –Mercede-Benz in Tuscaloosa, Honda in Lincoln, Hyundai in Montgomery. Between the three of them, they turned out more than 1 million vehicles last year.

Toyota also has an engine manufacturing plant in Huntsville. Auto-making experience is a given for Alabama, but the state may be hard-pressed to come up with the number of workers than the Toyota-Mazda project will require.

Report: Official says north Alabama may have edge in state’s bid for Toyota-Mazda plant  Birmingham Business Journal, Aug 21, 2017

Arkansas

Arkansas was a finalist for the Toyota factory that opened in Blue Springs, Miss., in 2011. Arkansas Economic Development Commission spokesman Jeff Moore said the state “certainly has interest” again. That would be a “duh” statement.

Toyota-owned Hino Motors recently announced plans to expand its operations in Marion to include 563,000 square feet of manufacturing and office space. Hino makes axles and related parts for different Toyota models.

There is no other OEM assembly plant in the state, which is good, but Arkansas’ biggest drawback may be geography. It may be just too far away from the bulk of its suppliers.

Report: Arkansas submits proposal for $1.6 billion Toyota-Mazda auto plant KATV Aug 18, 2017

Georgia

Georgia makes a lot of sense. Kia’s assembly plant in West Point, near the state line with Alabama, opened in 2009. As such, it is one of the newer assembly plants in the country, employing about 3,000 people, and it’s the only one in the state.

The state’s training program, Georgia Quick Start, has improved the skill sets of more than 1 million employees in 6,500 projects. It’s considered one of the best in the country.

There are more than 500 Japanese companies in the state that employ about 30,000 people. The fact that Georgia has five interstate highways that extend more than 100 miles is a plus. Interstate 75, running north to south, is the longest at 355 miles.

Georgia crafted its largest incentive package ever in 2015 in its bid to win a Volvo, only to have the project choose neighboring South Carolina.

Report: Will Georgia make a play for a Toyota-Mazda factory? Atlanta Journal Constitution, Aug 4, 2017

Illinois

While state lawmakers recently approved the expansion of EDGE tax credits, they also last month passed a 32 percent personal income tax hike. To say that Illinois would be a surprise if chosen is an understatement.

A two-year budget impasse has severely hurt the state’s business climate and reputation. Moody’s Investors Service recently affirmed Illinois’ current rating with a negative outlook, saying a downgrade remains possible in the next two years.

According to Moody’s, Illinois owes over $250 billion in unfunded pension debt, far higher than the $130 billion the state says it owes. For the past three years, Illinois has lost more residents than any other state. 114,144 Illinoisans left for other states from July 2015 to July 2016.

Rivian, a privately-funded startup with research facilities near Detroit and San Francisco, bought the former Mitsubishi plant in Normal, which was shut down last year. The company reportedly has a working prototype for an electric vehicle inside the 2.4-million-square-foot plant. When it comes to actual production, well, I believe it when I see it.

One more thing, Illinois is not a right to work state, unlike all its neighboring states. To be blunt, I’m not sure why Illinois would be in the running for this project.

Report: DeKalb, Rochelle are possible sites as Illinois pursues 4000-job Toyota-Mazda plant Chicago Tribune, Aug 10, 2017

Indiana

Toyota has a 19-year-old assembly plant in southern part of the state that builds the Sequoia sport-utility vehicle and Sienna minivan and is undergoing a $600 million expansion.

The company earlier this year announced it would invest $600 million and hire 400 new workers at the Gibson County plant as part of its plan to expand production of the Highlander SUV. That factory has 5,000 workers.

The auto industry employs more than 100,000 people in Indiana, which include Honda, Subaru and Chrysler. The fact that Toyota is already there and that automotive has such a strong presence in the state may preclude Indiana from being chosen.

A site just east of New Carlisle in St. Joseph County could be under consideration, according to The South Bend Tribune. 

Report: Indiana is vying for a Toyota-Mazda plant that will hire 4,000 people  Indianapolis Star, Aug. 21, 2017

Iowa

While Iowa isn’t known for automotive manufacturing, Debi Durham, director of the Iowa Economic Development Authority Toyota, said Toyota has asked the state for information on specific sites that could house a new assembly plant.

Iowa Gov. Kim Reynolds said the state is “extremely competitive” in its hunt for the Toyota-Mazda plant. I am not sure how she would know that, as that would be the call of the project team.

“We are going to do everything we can ― up to a limit. You have to know where you draw a line,” Reynolds said. “But we’re competitive. This would be great for the state of Iowa.”

The Hawkeye state can point to state rankings showing a lower cost of doing business, but the fact remains that it is distant from most existing suppliers. That is not to say that new supply chains cannot be built by Toyota, but I think Iowa is a stretch because of geography.

Report: In Iowa’s hunt for Toyota factory, this site leads the packDesMoinesRegister.com, Aug. 22, 2017

Kentucky

Gov. Matt Bevin told auto executives that a shovel-ready 1,550-acre site in central Kentucky, south of Elizabethtown near Interstate 65, is an ideal location for the investment.

Bevin pushed successfully for a right-to-work law and other business-friendly measures this year, and pledged to compete aggressively against rival states.

Toyota already has an 8-million-square-foot factory in Georgetown, Ky., that makes more than 500,000 Camry, Lexus and Avalon vehicles per year, as well as 600,000 engines.

Toyota is investing $1.3 billion into the 8,200-job facility, which draws from 350 suppliers and commodities vendors, 100 of them in Kentucky.

While there are certainly efficiencies of using an existing supplier network, the fact that Toyota is already in Kentucky, which also boasts two Ford factories in Louisville and General Motors’ Chevrolet Corvette plant in Bowling Green, may dissuade it from locating there.

Report: Kentucky to make big push for $1.6B Mazda-Toyota factory The (Louisville) Courier-Journal, Aug. 9, 2017

Michigan

No foreign automaker operates an assembly plant in Michigan, the traditional home of the nation’s auto industry. Being home court for the Detroit Three auto companies and the UAW certainly has not created great appeal in the past/

But the union threat is not what it was and Michigan, of all places, became a right-to-work state in 2012. Last month, Gov. Rick Snyder signed a package of bills into law last month that allow companies that expand or relocate to Michigan to receive up to a 10-year, 100 percent abatement on the personal income-tax withholdings of new employees. It applies to companies that bring up to 3,000 jobs to the state at average wages in the region.

The Toyota Motor North American R&D Purchasing and Prototype Development Center, the company’s largest research center outside of Japan, officially opened in May in Ann Arbor. The facility employs 1,600.

While Michigan’s business climate has drastically improved, possibly more so than any other state, it may be a long shot for Toyota to have an assembly plant there. Legacies tend to linger.

Report: Michigan’s bidding for $1.6-billion Toyota-Mazda plantDetroit Free Press, Aug 18, 2017

Mississippi

The Toyota plant in Blue Springs, Miss., opened in 2011 as the sole U.S. assembly location for the Corolla, which the future Toyota-Mazda partnership plant will produce in addition to Mazda crossover models.

About half of the 1,700-acre Blue Springs site, remains vacant, with roads and sewers already in place awaiting further investment. With existing supply chains in place for the Corolla, it would only make sense for the project to locate there.

However, Blue Springs, which employs 2,000 people, may not have the capacity to employ an additional 4,000 people, which is what the joint project is calling for.

Again, I look at Toyota’s history of seeking greener (or at least different) pastures for political purposes. I will say the same for Texas, as I did for Kentucky and Indiana.

Report: Mississippi in the running for new auto plant Jackson Clarion Ledger, Aug 8, 2017

North Carolina

I like the line that I used in my last blog – “Ever the bride’s maid and never the bride.” It’s precisely why I am predicting that North Carolina will win the prize.

The Tar Heel state has no automotive assembly plants to compete with for talent, although it has been in the hunt for them for years. That very void and the fact that North Carolina really wants to win this project is what may prove to the difference maker for Toyota, which would gain political capital from the swing-state’s congressional delegation.

North Carolina has about 26,000 workers at 300 automotive suppliers in the state, which gives Toyota a buildable base from which to work. The tech-savvy Research Triangle will be viewed as a plus, especially in a coming age of autonomous cars.

There are four mega-sites in North Carolina that I identified in my last blog. The 1,774-acre Greensboro/Randolph Megasite, southeast of Greensboro, may be the best. We shall see.

Report: NC’s lack of automaker plant presence may boost chances at landing Toyota-Mazda project Winston-Salem Journal, Aug 13, 2017

Ohio

A strong manufacturing workforce; centrally located; a plethora of automotive suppliers — all logical reasons why Ohio should be in the mix.

Also, Toyota has existing assembly plants in neighboring Indiana and Kentucky and the R&D center in Michigan. Ohio just makes sense, as it would be close to existing and potentially new suppliers.

But like Illinois, Ohio is not a right-to-work state. While that didn’t scare off Honda, which operates a non-union assembly plant in Marysville, it might prove to be a stumbling block for Toyota.

Ohio isn’t saying whether it’s trying to land the Toyota-Mazda plant, which doesn’t mean anything. Staying mum is a defensible strategy.

Report: Could Southwest Ohio win 4000-job Toyota-Mazda plant?Cincinnati.com, Aug 17, 2017

South Carolina

From a pure standpoint of manufacturing environment and business climate, it’s hard to beat South Carolina.

And in recent years, some of the world’s best manufacturers – BMW, Mercedes-Benz, Volvo and Boeing among them — have beat a path there.

But it’s South Carolina’s very success that may hamper its ability to lure Toyota there. Those are big companies that I just named with a big presence in a small state. Toyota/Mazda/JLL may like what they see in South Carolina (I certainly do), but they may come to view the field as being just too crowded.

The onus on the state will be to prove just the opposite.

Report: South Carolina among states chasing 4000-job auto plant  Charleston Post Courier, Aug 9, 2017

Tennessee

Tennessee has been biding its time, waiting, watching, and getting ready.

Hoping to lure the Toyota plant that eventually went to Blue Springs, Miss., the state acquired property dubbed the Memphis Regional Megasite. The 4,100-acre site is situated 32 miles east of Memphis along Interstate 40.

Tennessee has spent more than $140 million on the Memphis Megasite, building roads and water and sewer lines.

“There will be a lot (of) people fighting hard for that plant, and we intend to be at the lead,” Tennessee Gov. Bill Haslam told the Associated Press.

Critical to the Toyota-Mazda team’s thinking is whether the site, or rather the surrounding region, offers a sufficient labor pool in terms of quantity (numbers) and quality (skills.) Tennessee must prove its case to prevail.

To be sure, Tennessee has a strong and growing automotive sector that includes three major assembly plants and automotive operations in 86 of its 95 counties and employing some 130,000 people. There are more than 900 automotive suppliers in the state.

Nissan’s North American headquarters is in Franklin, and with an assembly plant in Smyrna. At its Spring Hill site, General Motors produces the Cadillac XT5 and the GMC Acadia, as well as 4-cylinder and 8-cylinder engines. Volkswagen has more than $1 billion invested in its Chattanooga assembly plant that employs more 3,200 workers, turning out Passats.

Report: Gov. Bill Haslam wants Tennessee to land new Toyota-Mazda plantChattanooga Times Free Press, Aug 8, 2017

Texas

Last but not least is my home state. Within a year or two, I figure those Japanese executives who are based at Toyota’s new North American corporate headquarters in Plano, north of Dallas, will learn to swagger. (We call it walking.)

You see, you don’t just move to Texas. Texas moves into you. Having said that, I would be surprised if Texas were chosen with its investment here, which includes an assembly plant in San Antonio, which opened in 2006.

The San Antonio plant, the sole producer of Tundra full size pickups, in addition to Tacomas, has been running overtime to keep up with demand since April 2015. Built with a production capacity of 200,000 vehicles a year, the plant has been producing more than 230,000 for the last two years.

Texas is an unlikely choice because Toyota wants to spread the love and its clout, my overriding premise. However, if there is one state capable of pulling a rabbit out of a 10-gallon hat, it is Texas. I cannot count Texas completely out, only because it continues to surprise me.

Report: San Antonio officials announce bid to win $1.6 billion Toyota factorymySanAntonio.com Aug 4, 2017

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. (Send us your RFPs.) Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com

Where Will the $1.6 Billion Toyota-Mazda Plant Land? Part 1

In Corporate Site Selection and Economic Development on August 13, 2017 at 9:03 am

Last week, I took a friend of mine, an economic developer from Alabama, on a tour around Dallas. One of the places we stopped was at the new North American headquarters of Toyota in Plano.

I stayed behind the wheel of my Toyota Tacoma truck while my friend stepped out to take pictures. When he returned, I said, “That’s likely where the decision is going to be made on the new plant.”

I was referring to an announced $1.6 billion joint venture manufacturing plant that will be built by Toyota and Mazda, well, somewhere. Making sense of the project, much less where it will ultimately land, is like putting a big jigsaw puzzle together, both for the two companies involved and observers alike.

Toyota, which has manufacturing plants scattered across multiple locations in the United States, will be taking a 5 percent ownership position in the much smaller Mazda, which has no manufacturing presence in the U.S.

This future U.S. plant, expected to open by 2021, will have a capacity of 300,000 vehicles annually and employ 4,000 people. It will produce Toyota Corollas and Mazda crossover models. The companies said they plan to work together to develop new technologies.

Toyota is currently assembling Corollas at its plant in Blue Springs, Miss. The company is also building a new $1 billion plant in Guanajuato, Mexico, that was to make the Corollas. Those plans have now changed. The future plant in Guanajuato will build Tacoma pickup trucks.

This project announcement frankly surprised me. It comes at a time when the auto industry is looking at a substantial and prolonged downturn, and when Mexico has been the preferred location for OEM assembly plants.

The Winds of Change

But things happen, and calculations do change. For one, we have a president in the White House who has openly criticized NAFTA and any company that would even consider expanding capacity in Mexico instead of the U.S.

President Donald Trump singled out Toyota in January for its plan to build a Corolla small-car factory in Mexico. As Toyota’s North American Chief Executive Officer Jim Lentz discussed setting up autonomous- and connected-car business units in the U.S. with Trump in March, the president cut him off and said the company needed to “build those new plants here.”

While the OEMs may deny it (and Toyota subsequently did as did Ford), even the smallest possibility of tariffs being imposed on imported vehicles from Mexico might prompt them into rethinking where they should build.

“The remarks of the U.S. president at the start of the year aren’t related at all” to the decision to build the new U.S. plant, Toyota President Akio Toyoda said at a joint press on Aug. 4 with Mazda chief Masamichi Kogai in Tokyo.

That might very well be true. But smart companies, and Toyota, the world’s largest automaker has proved to be just that, are cognizant of how the winds of change, in both politics and consumer choices, can affect future operations. In short, they can and will adapt.

Why Not Blue Springs?

In his Aug. 4 press conference, Mr. Toyoda said: “Taking into account competitiveness, demand, and getting the most from this joint venture, as well as the fact that we currently make the Corolla in Mississippi, we decided to consolidate production in the U.S.”

So why not just keep making Corollas and the Mazda crossovers at the 1,700-acre Blue Springs, Miss., site, half of which remains vacant, with roads and sewers already in place awaiting further investment?

Opened in 2011 as its sole U.S. assembly location for the Corolla, Blue Springs has proved itself. The plant reached 500,000 cars faster than any other plant in Toyota history, and last year it won a coveted J.D. Power Initial Quality award. Moreover, the existing supply chains for the Corolla in Blue Springs are already in place, which would maintain created efficiencies.

Despite all that, my best guess (and that is all it is) is that Toyota and Mazda won’t be choosing Blue Springs. By the very fact that Toyota and Mazda announced the joint venture project indicates they are unlikely to use an existing site, but seek greener (or at least different) pastures.

In short, they are shopping the project around for a reason, and I believe that gaining political favor is one key factor. And we’re not just talking about the Trump administration. It goes far beyond that.

Toyota wants governors, members of Congress and senators on their side, which I believe will be reflected in the site search for this future plant. More on that in a moment.

Eleven States

If you were to take the word of the Wall Street Journal as gospel, the Toyota-Mazda project has come down to 11 states. Those states are Alabama, Florida, Kentucky, Illinois, Indiana, Iowa, Michigan, Mississippi, North Carolina, South Carolina and Texas.

Some of that makes sense to me, some not so much. With this mix of Southern and Midwestern states, why aren’t Tennessee, Georgia, Arkansas and Ohio included in the mix? Georgia, in particular, makes imminent sense to me for this project.

One possibility is the Journal, which is a great newspaper, just got it wrong. Having been a former business reporter and editor, I can tell you that sometimes happens despite all the best efforts. I remember years ago when the Journal reported that Mercedes-Benz would land in North Carolina, when in fact it ended up in Alabama.

But if the Journal’s latest report is accurate and the search has indeed been relegated to these 11 states, then I am going to venture a guess (and that is all it is) on where this $1.6 billion-dollar plant will go.

History Can Provide a Clue

We cannot predict the future with absolute certainty under any conditions. However, we can often detect patterns from history, which allows us to make educated guesses. That is all that I am offering here, an educated case based on what Toyota has done in the past.

If you look at a map of the many points where Toyota has manufacturing plants in this country, you will notice that the company seldom puts facilities in the same states. This especially holds true with its large vehicle assembly plants. They are all in different states.

Why is that? I believe it is to hedge its bets and curry political favor. With 10 plants and a direct investment of $21.9 billion, soon to go higher, Toyota figures it cannot have too many friends in governor’s mansions and on Capitol Hill.

North Carolina Makes Sense

I will hazard a guess that if the Journal’s list of 11 states is correct, that the winning state will be North Carolina. Why North Carolina?

Ever the bride’s maid and never the bride in the competition for automotive assembly plants in the past, North Carolina is very much hungry for this type of project. The state also represents new ground for establishing new friends and allies, which has been the modus operandi for Toyota.

Florida, Illinois and Iowa could also fill that political bill, but Toyota may have overriding concerns about their strategic locations vis a vis their existing supplier network and customers, or in the case of Illinois, its business climate.

Again, if the Journal’s list proves true, Kentucky, Alabama, Mississippi, Indiana, and Texas are out, only because Toyota already has a big presence there. Those congressional delegations are pretty much locked down.

South Carolina, which I believe has one of the best business climates for manufacturing, is out only because it is a small state where BMW and Volvo have put down roots. BMW is especially the big fish there. Michigan, where Toyota has a design and technical center, is out because it is the legacy home of General Motors, Ford and Chrysler and Toyota’s voice would simply be one in the choir.

A Supplier State

That leaves North Carolina, a supplier state where Toyota buys automatic transmission parts, catalytic converters, driveshafts, window motors and tires. There are about 300 automotive suppliers in the state.

North Carolina is home to Research Triangle, anchored by North Carolina State University, Duke University, University of North Carolina at Chapel Hill, and the cities of Raleigh and Durham and the town of Chapel Hill. All that talent can be leveraged if needed. And it usually is.

What’s more, North Carolina has four mega-sites that could meet the needs an OEM assembly plant.  All four have convenient access to interstates and rail, and have undergone environmental audits, geo-technical studies, have water and sewer lines, offer low-carbon power and provide high-speed fiber optics connectivity.

If I were advising Toyota (hint, I’m only 20 minutes away from corporate headquarters) or Jones Lang LaSalle, which is handling the site search for Toyota, I would tell them to take a long hard look at:

  • The 1,449-acre Kingsboro CSX Select Site, 10 minutes east of Interstate 95 and one hour east of Raleigh
  • The 1,800-acre Chatham-Siler City Advanced Manufacturing Site in Chatham County in the center of the state
  • The 2,700-acre Moncure Megasite, only 20 minutes from Raleigh-Durham International Airport
  • The 1,500-acre Greensboro/Randolph Megasite, southeast of Greensboro

Of course, other sites in other states may fulfill the requirements of the Toyota-Mazda partnership. But North Carolina makes sense, due in part to Toyota’s proclivity to expand its geographical and political footprint, which I think is a very smart move.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. (Send us your RFPs.) Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com

Older Workers are the Future of Work

In Corporate Site Selection and Economic Development on August 1, 2017 at 4:11 pm

In my last blog, which I modestly titled, “The Future of Everything,” I said that predicting how technology will affect the future of work is pretty much a fool’s game.

We should keep in mind John Kenneth Galbraith’s reminder that, “We have two classes of forecasters: Those who don’t know — and those who don’t know they don’t know.”

The older I get, the more I realize how much I do not know. But if I were to hazard a guess, it would be that AI-engineered robots will probably not take all of our jobs and then kill us. But I could be wrong.

Also, as I outlined in my last blog, I believe the findings of a group called Shift: The Commission on Work, Workers, and Technology, a joint project of New America and Bloomberg, has great value as it portends to the future of work.

The Commission outlined four core scenarios that could play out in the next 10 to 20 years, each reflecting whether there will be more or less work, and whether work will exist in the form of jobs or fragmented into “tasks.”

If you want a quick snapshot of those four scenarios, again I would refer you to my last blog or better yet go to the Shift Commission website.

Shaping Places

The future of work will shape cities and regions, but I seldom hear my friends in economic development talk about it. Understandably, much of their focus is on the most pressing question as to whether people in their respective communities have the skills to perform the jobs today.

Disturbing to some, the data shows that the richest cities are pulling away from the rest, with discrepancies in access to education, technology, capital, and networking opportunities.

This is in keeping with Brooking Institution’s reports of the last few years that American cities and metropolitan areas have firmly established themselves as the engines of the nation’s economy and are the centers of technological innovation and global trade and investment.

(I hope to tackle this subject and the notion of innovation districts in cities in an upcoming blog.)

A Profound Impact

Millennials (adults ages 18 to 34), are now the largest share of the American workforce (more than one-in-three American workers), but older adults will have the most profound impact in the coming years on both the supply of labor and the demand for workers.

By 2024, the Shift Commission report notes, nearly one-quarter of the workforce is projected to be 55 or older — more than double the share in 1994. Falling fertility rates and tighter immigration rules mean U.S. employers will likely need to hire and keep older workers just to get the job done in coming decades.

“We will need older workers to do the work,” said MIT AgeLab Director Joseph Coughlin at the Milken Institute Global Conference.

Retiring Retirement

While many consumer companies are gearing their businesses toward a growing “active aging” market, many if not most companies still do not understand that it is in their long-term best interest to retire this whole idea of retirement.

“Older people have so much to offer as workers, colleagues and mentors. It is in the business community’s self-interest to recruit, train, promote and retain them,” wrote Paul Irving, chairman of the Milken Institute for the Future of Aging.

The concept of formally ending work at age 65, while it may have been appropriate in the last century, does not make a lot of sense today. Seventy-two percent of pre-retirees want to work past 65, and nearly half of current retirees either have worked in retirement or plan to, according to the Bank of America Merrill Lynch/Age Wave 2015 report, Work in Retirement: Myths and Motivations.

Major Cost Savings

Eventually, however, more companies will see the light and older workers will become more in demand particularly for reasons of costs. The fact that older workers on Medicare don’t require primary medical insurance will prove to be a major cost savings for employers.

Companies will also like the fact that millions of retirees will move to freelance, part-time or contract employment with no benefits having to be paid.

The Real Gig Workers

While young people are the supposed to be the vanguards of the new economy, valuing happiness over money, gigs over jobs, and flexibility and meaning rather than status and hours at work, older Americans are being more millennial than millennials.

People over the age of 65 are four times more likely to be self-employed than those under 34, and are more likely to work part-time jobs, according to the Bureau of Labor Statistics.

The labor force participation rate, or the share of American civilians over the age of 16 who are working or looking for a job, is expected to increase fastest for the oldest segments of the population—most notably, people ages 65 to 74 and 75 and older—through 2024. In contrast, participation rates for most other age groups in the labor force aren’t projected to change much over the 2014–24 decade.

The rise of “alternative work arrangements,” like freelancing or part-time work, jobs that often lack benefits like health care, have grown significantly in the last decade. As of late 2015, 24 percent of employed 55-75 year-olds were in alternative work arrangements, compared with just 14 percent of prime-age (25-54 year-old) workers, according to the economist Jed Kolko.

Many companies and entire industries are now beginning to realize that they are on the verge of losing a wealth of great talent. As of 2015, almost 33 percent of our workforce – including 48 percent of supervisors – was eligible to retire. Replacing that kind of talent isn’t easy.

A Rapidly Aging Workforce

The workforce is aging because the population is aging. By 2024, the U.S. Bureau of Labor Statistics projects that the labor force will grow to about 164 million people, of which 41 million people will be ages 55 and older—of whom about 13 million are expected to be ages 65 and older.

While they make up a smaller number of workers overall, the 65- to 74-year-old and 75-and-older age groups are projected to have faster rates of labor force growth annually than any other age groups. This in a nutshell means that tomorrow’s seniors will retire later.

Also, it should be noted that the aging population is creating demand for health care jobs, which are projected to lead employment growth over the next decade.

Older Workers are the Future

While the overall numbers favor the millennials, older workers find themselves the future of work. Employers, not wanting to lose valuable knowledge, will do a better job at finding ways to accommodate them, while millions of older workers will transition from full-time jobs to part-time work. Look for growing numbers of older Americans in the gig economy, working freelance, with short-term contracts or with pick-up jobs.

On a personal note, I have come to epitomize that older “boomer” gig economy group. I am a 62-year-old consultant doing contract/consulting work for economic development groups and companies needing help with corporate site selection.

Through the years, I have picked up some knowhow, and I want to continue to grow by learning new stuff. I think of it as expanding my horizons while helping others, which is a pretty good gig.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com

The Future of Everything

In Corporate Site Selection and Economic Development on July 23, 2017 at 4:23 pm

For many of us, our last names reveal the work of our ancestors.

Common Anglo-Saxon names like Baker, Brewer, Butcher, Carpenter, Cooper, Mason, Miller, Sharp, Smith, and Tailor were all trade names, which required craft and expertise acquired over years and passed down through generations.

My last name is Barber. Back in the Middle Ages, Barbers did far more than haircutting. They also performed surgery, bloodletting and leeching, enemas, and teeth pulling, among a host of other things that would probably turn your stomach.  Gosh, I’m glad I didn’t live back then.

The Industrial Revolution wiped out these identities. And today, many of the factory and office jobs that replaced farming and craft trades are themselves disappearing.

We Don’t Know

Much of what I write about in this blog concerns the future of work. I will be the first to admit that while I ponder on the future, I don’t know, nor does anybody else, what lays in store.

I frequently joke that if I called myself a “futurist,” I could charge considerably more than I do now as a consultant for economic development organizations and companies on corporate site selection.

We all hope that the Digital Revolution, like the Industrial Revolution before it, will create as many jobs as it destroys. We sense that big changes are in the air and that dislocations are inevitable. Report after report, and this blog, say as much.

But will automation and artificial intelligence result in a fundamental rethinking of our relationship to work and to one another? How will we change?

The Predictions Differ

The World Economic Forum’s study into The Future of Jobs (2016) estimated that 65 percent of children entering primary school today will work in job types that don’t yet exist. 3.5 times as many jobs could be lost to disruptive labor market changes in the period 2015-2020 than are created.

The study saw job losses in routine white-collar office functions but gains in computing, mathematics, architecture, and engineering related fields.

Some believe that we could see 80 percent or more of current jobs disappearing in the next 20 years, whereas a McKinsey Global Institute report last year found that only 5 percent of jobs can be fully automated by adapting currently demonstrated technology, although for middle-skill categories this could rise to 20 percent.

A Complex Relationship

With all due respect to the World Economic Forum, McKinsey (a group I respect and often quote) and any and all of those who might hazard a guess on the future of work, history teaches us that it’s hard to predict how technological change will unfold.

The relationship between automation and employment is complex. When automation replaces human labor, it can also reduce cost and improve quality, which can increase demand and theoretically create new jobs.

Many assume that it’s going to be people or robots, all or nothing. I don’t quite see it that way. I tend to believe that advances in artificial intelligence will focus more on specific tasks rather than entire jobs. In that scenario, robots will mostly augment rather than replace humans. But what the hell do I know?

Four Futures of Work

Instead of obsessing on predictions, a group called Shift: The Commission on Work, Workers, and Technology, a joint project of New America and Bloomberg, took a different and I think more valuable approach. In its executive summary, the Commission opened with a line that will stick with me forever:

“The future of work is the future of everything.”

Convening more than 100 leaders from multiple sectors, including labor, civic, religious, academic, entrepreneurial, and more traditional business perspectives, the group was asked two basic questions:

(1) Will there be more or less work in the future? (2) Will work continue to be in its traditional form, full-time jobs, or separate into more “task” work (like short-term contracts, part-time gigs, or other alternative arrangements)?

The Commission distilled the common themes from these visions, some positive and some negative, and came up with four basic scenarios, four different futures of work. So what are these different futures? I quote from the Shift report.

Rock-Paper-Scissors Economy: Less work, mostly tasks.

“A community-based, local, and sustainable economy that prioritizes work in person to-person interactions. Advancing automation, in combination with a slowing of the overall economy due to rapidly aging population and a declining birth rate, leads to the elimination of many full-time jobs.

“Available work has been reconfigured to a task-based format; many people piece together their income — and, if they can, benefits — through a series of temporary gigs, identified by digital platforms and facilitated by smartphones.

“The winners are those who provide an experiential service based on a human interaction, activity, or skill, like cooking coaches, gardeners, and eldercare providers. Losers are those whose identities were so wed to a particular job that they opt out of the labor market instead of adapting.

“Of those open to entrepreneurial activities, many join the maker economy and produce organic goods in and for their neighborhoods; more people derive a sense of purpose from contributing to their families, their “contingent families” of friends, and their communities than from their jobs. Free time, once scarce in an economy that pushed people to work ever-harder to sustain high levels of consumerism, becomes a marker of status in an economy in which people work less.”

King of the Castle Economy: Less work, mostly jobs.

“A corporate-centered economy in which economic life is organized around large, profitable companies and those they employ. Increased automation keeps corporate productivity levels high but employment levels low, dampening consumer demand. This leads to less dynamism in the economy and decreased innovation overall as people become worried that leaving a full-time job means they won’t find a new one.

“Lower employment levels generate lower tax revenues and corporate philanthropies take over former city and state functions in the places they operate. Geographic and political tensions rise, and society splits into three clear social classes: those who work in high-tech jobs at large, profitable companies (and successfully defend their jobs, and generous benefit packages, from qualified outsiders); those who have full-time jobs protecting the people and assets in the corporate class, who struggle to assemble health-care and retirement benefits; and those who perform on-demand work when it’s available.”

Jump Rope Economy: More work, mostly tasks.

“A portfolio approach to work in which people build reputational rankings with each task they complete, combining multiple income streams to allow for a career that’s self-driven, entrepreneurial, and constantly changing. An aging workforce that stays engaged, combined with millennials seeking flexibility as they reach their peak parenting years and high consumer demand as a result of full employment, pushes the market into more discrete, task-based jobs.

“Technology assists in efficiently cataloging the different tasks that need doing and helps people develop and monetize their skills, which are always shared on social networks — every keystroke is public. The economy is buzzing, so people can be selective about what they do and can replace traditional corporate-provided benefits. As a result, most people do what they enjoy most of the time and are always on the lookout for the next opportunity.”

Go Economy: More work, mostly jobs.

“A technology-driven economy in which people embrace connectivity in every area of their lives and look for ways that machines can extend their capabilities through data-platforms, electronic devices, and virtual reality. Automation takes over almost all routine, data-processing jobs, freeing workers to focus on creative, strategic thinking.

“As people realize the ways in which AI can help them, they increasingly take risks in their jobs which results in more innovation. Benefits become progressively more generous over time, and eldercare becomes as standard a company benefit as childcare.

“Online retailers hire and train lots of warehouse robot monitors, lawyers take on many more cases as AI takes over the paperwork of discovery, and scientists and intellectuals use AI to file and monitor patent applications. Jobs multiply as new and novel platforms are invented on which to build new ideas.”

The Shaper of Cities and Regions

So there you have it, four different futures of work as envisioned by the Shift Commission. The group concluded that each could work out well for America, or poorly, depending on how we respond.

The commission found that most people want certainty more than making more money, more than doing work they feel is important and meaningful. They value stability of income, health care (Republican Party best be careful), retirement, and the other benefits we have come to expect.

Economic developers should take note that the future of work will shape cities and regions, and that the different futures might affect some areas in different ways than others.

It is very possible that I have provided you more questions than answers in this blog. Perhaps that is my aim.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com

The Price of Prejudice Looms Large in Texas

In Corporate Site Selection and Economic Development on July 15, 2017 at 11:49 pm

Newton’s third law is: For every action, there is an equal and opposite reaction. This is a truism in the world of physics.

In the world of business and politics, for every action, there is a reaction, which may get loud, public and ugly. And so it is happening in Texas, where I live.

The Texas Legislature meets on Tuesday, in a 30-day special session called by Gov. Greg Abbott, who has laid out 20 issues that he wants state lawmakers to tackle. Included in the governor’s agenda is a North Carolina-style “bathroom bill,” which would limit which restrooms transgender people can use.

The “bathroom bill” failed to advance in the last regular session, which was marred by a shoving match and threatened gunplay. (In their infinite wisdom, legislators did pass a bill allowing feral hog hunting from hot-air balloons.)

A Full-Page AD

IBM, the tech giant that employs more than 10,000 people in Texas, is taking out full-page advertisements today (Sunday, July 16) in The Dallas Morning NewsSan Antonio Express-News and Austin American-Statesman opposing the legislation which the company says discriminates against transgender Texans.

“As one of the largest technology employers in Texas, IBM firmly opposes any measure that would harm the state’s LGBT+ community and make it difficult for businesses to attract and retain talented Texans,” reads the IBM ads. “We urge Gov. [Greg] Abbott and the state legislature to abandon any discriminatory legislation during this special session and ensure Texas remains a welcoming place to live and work.

“No one should face discrimination for being who they are.”

Tech Companies Take a Stand

IBM is not alone in its opposition. In May, other top leaders in tech companies with a presence in Texas sent a letter to Gov. Greg Abbott urging him not to pass discriminatory legislation.

In addition to IBM Chairman Ginni Rometty, the letter was signed by Facebook founder Mark Zuckerberg, Apple CEO Tim Cook, Amazon CEO Jeff Wilke, Microsoft Corp. President Brad Smith and Google CEO Sundar Pichai. The leaders of Dell Technologies, Hewlett Packard Enterprise, Cisco, Silicon Labs, Celanese Corp., GSD&M, Salesforce and Gearbox Software also signed the letter.

“As large employers in the state, we are gravely concerned that any such legislation would deeply tarnish Texas’ reputation as open and friendly to businesses and families,” the CEOs wrote in a letter dated May 27.

The Fallout Has Already Begun

A recently released report by Texas Competes, a coalition of nearly 1,300 employers and chambers of commerce, shows the “bathroom bill” debate generated $216 million in negative publicity for Texas from Jan. 10, 2016, through May 22, 2017.

“HR executives and business leaders voice concern to us when headlines about discrimination dominate the news about Texas,” said Jessica Shortall, managing director of the organization, in a statement. “We cannot maintain the pipeline of talent needed to fuel this state’s economy in the face of national coverage that tells young workers that Texas is in the business of discrimination.”

No Events For You

Both the NFL and NBA have put Texas on notice that the state will be overlooked for future big events if lawmakers pass the bathroom bill.

The American Association of Law Libraries said it can no longer host events in Texas, “due to recent moves by the Legislature to discriminate against LGBTQ people.” The event, which draws 3,000 attendees, has been held in San Antonio twice and is being held in Austin this week.

In a letter last week to Austin Mayor Steve Adler and Tom Noonan, president and CEO of the Austin Convention and Visitors Bureau, AALL President Ronald E. Wheeler Jr. wrote, “We cannot stand by as Texas enacts legislation that discriminates against this vulnerable community.”

The Chamber Speaks Up

Also last week, the Dallas Regional Chamber sent a letter to Abbott and Lt. Gov. Dan Patrick a letter expressing opposition to the legislation. Business leaders from North Texas plan to rally against the bathroom bill at the Capitol when the special session convenes.

“When the Texas Legislature reconvenes in Austin next week, we will continue to stand firm against any discriminatory legislation during this special session — and beyond — that could seriously hinder our ability to attract more companies, jobs, and talent to the Dallas Region,” stated the letter from Chamber President and CEO Dale Petroskey and board chairwoman Hilda Galvan.

Some of Texas’ biggest cities, including Dallas and Austin, have anti-discrimination ordinances that extend protections to transgender people in public spaces.

Billions at Stake

If the Texas bathroom bill became law, the reductions in travel and tourism activity would cost the state almost $3.3 billion per year as well as the loss of over 35,600 full-time jobs, according to the Perryman Group, an economic and financial analysis firm based in Waco.

In an April 24 report to the San Antonio Area Tourism Council, the Perryman Group also estimated annual losses of $176.4 million in state revenue and $84.3 million in local fiscal resources. Eventually, those numbers would grow, to $5.5 billion in gross product per year, almost 59,600 jobs, $295.2 million in annual lost state revenue and $141.1 million in foregone local fiscal resources.

A Pile of Manure

House Speaker Joe Straus, often credited with keeping the bill from becoming law in the last regular session, took a hard swipe last week at his fellow Republican leaders, comparing Gov. Abbott’s special-session agenda to a “pile of manure.”

Straus says Texas is sending the wrong message about its priorities with proposals such as the bathroom bill championed by Lt. Gov. Dan Patrick.

The World According to Patrick

Heavy on hot-button issues which appeal to his evangelical and tea party base, Patrick rejects any and all warnings about the potential cost to businesses, the economy and the Texas brand.

Last year, Patrick said he would not shop at Target after the retailer announced a policy to let customers use the bathroom that corresponds with their gender identity. Patrick criticized those boycotting North Carolina after it adopted a bathroom bill, writing in a Facebook post on April 24, 2016.

“I’m totally disgusted with the threats from sports teams, entertainers, and some major corporations who want to punish cities and states who want to keep men out of ladies rooms,” Patrick wrote. “The world has gone mad, and we must stand and fight.”

Straus is Disgusted

While Patrick is clearly an ideologue, House Speaker Straus is a traditional Texas Republican in that he is moderate and business-oriented. He has openly criticized fellow Republicans for focusing on a bathroom bill instead of putting more than a billion dollars into public schools.

Not only does Straus believe the bathroom bill is bad for business in Texas, but he also has moral objections.

Author Lawrence Wright wrote in The New Yorker that Straus told him about a senator coming to his office with a proposed compromise just before the bathroom bill collapsed in May.

“I’m not a lawyer, but I am a Texan,” said Straus, according to the magazine. “I’m disgusted by all this. Tell the lieutenant governor I don’t want the suicide of a single Texan on my hands.”

And Now My Take

Texas holds a special place in my heart. The Lone Star State means freedom, unending opportunity, personal liberty and a people who value hard work and enterprise.

Taking away freedom and liberty goes against the very promise of Texas, which is precisely why I choose to live here. As Sam Houston said long ago, “Texas has yet to learn submission to any oppression, come from what source it may.”

I think an editorial from the Houston Chronicle said it best, “No one should mess with Texas. Most especially, its politicians.”

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com