Dean Barber

Archive for the ‘Corporate Site Selection and Economic Development’ Category

That Was the Week That Was

In Corporate Site Selection and Economic Development on February 11, 2018 at 9:07 am

Wall Street had its freak-out and a new space race was born. What a week. With a little bit of luck, I can bring these interesting new developments “down home” and show how they may affect us all.

Let’s first look at the wild ride last week on Earth, on Wall Street to be precise, leaving many of us scratching our heads and wondering what was going on.

What we have learned is that good news on Main Street – that the U.S. economy added 200,000 jobs in January and that wages grew at the fastest pace in eight years — can be viewed bad news on Wall Street.

For investors, the long dormant fear of inflation was revived – that bigger paychecks might mean bigger price increases and eventually bigger rate hikes on the part of the Federal Reserve. That would be bad for business and the economy at large, which means most of us.

No doubt, investors had become a bit complacent with the stock market rising and never suffering a bad loss. The Dow and other major stock market indexes hit record highs on Jan. 26. The S&P 500 was up 7.5 percent in 2018, with the Dow industrials up 7.7 percent and the Nasdaq 8.7 percent. Amazon and Netflix had sprinted 20 percent and 43 percent.

But last week was crazy. The Dow average experienced two drops of more than 1,000 points and two gains of more than 300 points. The Dow and the S&P 500 both ended the week 5.2 percent lower, their worst performance since January 2016.

What are We Seeing?

Wall Street uses different words for a drop in the markets, all with different shades of meaning. Are we seeing a “dip,” a brief downturn from what has been a long-term uptrend? Or are we looking at a “crash,” a sudden and very sharp drop in stock prices, which while rare, do happen after a long-term uptrend.

Perhaps we are experiencing what most analysts are calling a “correction,” defined as a 10 percent drop in the market from recent highs. Then again, we might be in the early stages of a “bear market,” a long, sustained downturn in which losses will surpass 20 percent from the market’s most recent high.

I doubt that anybody truly knows right now. I cannot help but recall the words of John Kenneth Galbraith who said, “The only function of economic forecasting is to make astrology look respectable.”

A Lack of Serious Leadership

And while the fundamentals of the economy appear to be very good, I do worry that our nation’s debt, now at over $20 trillion and growing, is not being addressed in any serious manner by policymakers in Washington, D.C.

And therein may be another underlying cause for the jitters on Wall Street – nobody, it seems, is minding the store, the ship of state, in a competent manner. I quote from the New York Times from last week:

“Republicans propelled themselves to power in Washington by promising an end to fiscal recklessness. They are now embracing the kind of free spending and budget deficits they once claimed to loathe.

“Congress is debating a bipartisan spending deal that would blow through the caps imposed by the 2011 Budget Control Act, unlocking $300 billion in additional spending for the military and domestic programs over the next two years. That comes on top of last year’s $1.5 trillion tax cut package and as the White House prepares to unveil Monday a $1.5 trillion infrastructure plan that would require $200 billion in government funding.

“While the White House says it plans to offset that $200 billion through unspecified cuts, none of the other spending is paid for at a time when the nation’s debt already tops $20 trillion.”

Some day the chickens are going to come home roost, and I fear that it’s going to get very, very ugly.

Now let’s go onto something a little more uplifting.

A New Space Race

Somewhere floating out there in outer space is a red shiny 2008 Tesla roadster with a space-suited mannequin named “Starman” behind the wheel. Conceivably car and driver could be up there for a very long time. And the car will probably get a little dusty along the way.

“It’ll probably get hit with something the size of very fine sand every year or so, and get hit a few times an hour with 100-nanometer-size dust,” Andy Rivkin, a planetary astronomer at Johns Hopkins Applied Physics Laboratory, told The Atlantic magazine. “On average, we think it’d get hit by a fist-sized rock every several million years.”

Several million years. And to think, back here on Earth, Consumer Reports says the average life expectancy of a new vehicle these days is around eight years or 150,000 miles.

This Tesla’s life expectancy was extended by its billionaire owner, Elon Musk, the real-life Iron Man whose enthusiastic embrace of technology for technology’s sake and desire to push the limits of what is possible for private enterprise has ignited a new space race.

“We want a new space race,” Musk told a press conference in Cape Canaveral after the launch of his SpaceX’s Falcon Heavy rocket into deep space. “Races are exciting.”

Mind you, the original space race was between the old Soviet Union, which took an early lead with the launch of Sputnik 1, the first artificial Earth satellite, on October 4, 1957, and the United States, which came roaring back with NASA’s Mercury and then Apollo programs, which resulted in man setting foot on the moon.

Competition is the American Way

Last week’s launch of the Falcon Heavy, now the most powerful operational rocket in the world, underscores that we have entered a new era in which companies and not just governments are competing for a place in space.

And it comes at a time when the Trump administration is looking to restructure the role of NASA, ensuring that private enterprise and international partners work closely with the space agency. Musk is forcing the issue whether NASA likes it or not.

“He’s being Elon again. I’d call it competition, and competition is the American way of life,” said John Logsdon, professor emeritus at George Washington University and founder of the Space Policy Institute told the British newspaper The Guardian. “SpaceX has challenged the traditional launch industry in the United States and in Europe and in China and in Russia.”

Elon, Jeff and Richard

Now billionaires and their companies have ambitions well beyond government contracts but the commercialization of space itself. Virgin Galactic, the space company founded by Richard Branson, and Amazon founder Jeffrey P. Bezos’ Blue Origin are hoping to fly humans for the first time this year on suborbital jaunts that could reach the edge of space.

Blue Origin recently opened a facility at Kennedy Space Center in Florida to build the New Glenn reusable rocket system, named after John Glenn, the first American to orbit Earth, which will be even bigger than the SpaceX Falcon Heavy rockets. In a tweet posted Tuesday night, Bezos congratulated Musk on the launch with a “Woohoo!”

Branson, founder of airline Virgin Atlantic, established Virgin Galactic back in 2004 with the goal of provide suborbital spaceflights to tourists and suborbital launches for missions into space. There are also plans for orbital human flight.

“Elon is absolutely fixated on going to Mars and I think it’s his life mission,” Branson said on CNBC “Squawk Box” in October 2017. “Jeff and ourselves [at the Virgin Group] are more interested in how we can use space to benefit the Earth.”

So 49 years after the first man set foot on the moon, we have entered a new era, a new space race where the private sector may take the lead. While this may alarm some of the traditionalists at NASA, I believe this is a very good thing in the long run.

Along Florida’s Space Coast, most of which lies within Brevard County, there is a renewed excitement

“No question that other companies around the world, they are looking at establishing facilities in Florida so they can be near the center of space activity,” Space Florida President and CEO Frank DiBello told the Orlando Sentinel. “We want to drive all of those to create tourism and job opportunities for next-generation engineers and the space workforce.”

Musk was right. Space races are exciting.

I’ll see you down the road.

Dean Barber is the principal of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. Dean is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com. Visit us at http://www.barberadvisors.com to learn more.

The U.S. Emerges as an Energy Superpower

In Corporate Site Selection and Economic Development on February 5, 2018 at 2:13 pm

No doubt you have heard the expression, “that which does not kill us makes us stronger.” That might be in essence the story of America’s oil and gas industry. Not surprisingly, Texas, where I live, has figured prominently in it.

From 2000 to 2008, the price of oil saw an unprecedented spike, going from under $25 per barrel to almost $150 per barrel. In response, U.S. drillers began in earnest to employ hydraulic fracturing, a technology pioneered by Mitchell Energy in the early 1980s near Fort Worth. In short, fracking — blasting water and sand deep underground to free oil from shale rock — gave the drillers access to once inaccessible shale gas reserves.

That development did not escape the attention of Saudi Arabia, which soon recognized this “fracking revolution” to be a potential threat to its hegemony around the world. Faced with the prospect of ceding market to these upstart American wildcatters, the Saudis convinced other OPEC nations to increase production, figuring that plentiful supply and lower oil prices would devastate the U.S. industry.

And it did. The price of oil dropped from over $100 a barrel in the summer of 2014 to $26 a barrel in February 2016. Most U.S. oil and gas producers were scratching and clawing just to survive, and many did not. More than 100, nearly half of them in Texas, went bust. The oil patch workforce in Texas dropped from 300,000 in December 2014 by 192,000 workers by September 2016.

Firing on All Cylinders

But late 2016, the Saudis came to the realization that these crazy Texans were in it for the long haul and would not go away. OPEC then decided to cut production and the price of oil rose to where it is today at about $65 a barrel.

Now that prices have stabilized, the Texas economy is “firing on all cylinders,” projected to add about 366,000 new jobs in 2018, according to Keith Phillips, senior economist for the Federal Reserve Bank of Dallas.

(The gross domestic product of the state is $1.6 trillion. If it were an independent country, and it once was, it’s economy would rank 10th in the world. My apologies for the apparent bragging about Texas. As a New York Times writer noted, “You don’t just move to Texas, Texas moves into you.)

Doing More With Less

Texas oil production is projected to reach 1.42 billion barrels a day this year, beating the 1972 record of 1.26 billion barrels. But it is worth noting that oil companies will do that with 75,000 fewer workers than at the peak in 2014 when 300,000 worked in the industry in Texas.

Efficiency is now the watchword. In short, the drilling companies have learned they can do more with fewer people. And that, too, has the world watching.

U.S. shale is “seemingly on steroids,” Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. in London, told Bloomberg. “The market remains enchanted by the ability of shale producers to adapt to lower prices and to continue to grow.”

And while the oil and gas industry remains a key economic driver in certain cities in Texas, Midland and Odessa would be examples, it represents less than 1 percent of the workforce in the Dallas-Fort Worth Metroplex. Statewide, it is less than 3 percent.

Explosive Growth

In his first state of the union speech last week, President Donald Trump, not surprisingly used the word “strong” to describe the state of the nation (all presidents do), all the while taking credit for an economy that appears to be doing very well.

Notwithstanding the Dow loss of 1,100 points last week in what most analysts says was a self-correcting response, the Labor Department on Friday reported that the economy added 200,000 new jobs in January, up from 160,000 in December.

Wages saw their biggest year-over-year increase since June 2009, rising by 2.9 percent over January 2017.

Other than saying, “we have ended the war on American energy,” Trump touched little on that subject. But prior to his speech, he has talked not only of energy independence for the U.S., but energy “dominance” in the world. There are indications that this might be actually happening.

U.S. oil production has surged above 10 million barrels a day for the first time since 1970, and the International Energy Agency says the U.S. is poised for “explosive” growth in oil output that will push it past Saudi Arabia and Russia this year.

Exports of crude oil and petroleum products have risen 20 percent in 2017 in the past few months to 7 million barrels per day. Natural gas production has also hit a record of more than 93 billion cubic feet per day.

“For the last 40 years, since the Arab oil embargo, we’ve had a mindset of energy scarcity,” said Jason Bordoff, founding director of the Center on Global Energy Policy at Columbia University and a former Obama administration official in an interview with Bloomberg. “As a result of the shale revolution, the U.S. has emerged as an energy superpower.”

That is also the assessment of Dr. Daniel Yergin, author of “The Prize: The Epic Quest for Oil, Money and Power.”

“This is a 180-degree turn for the United States and the impacts are being felt around the world,” Dr. Yergin told the New York Times. “This not only contributes to U.S. energy security but also contributes to world energy security by bringing new supplies to the world.”

Trump no doubt will claim credit for this relatively newfound superpower status, but the shale fracking revolution took place mostly during the Obama administration. The ban on crude exports from the U.S. was lifted in 2015, also when President Obama was in office.

Environmental Concerns

Much to the ire of many, the Trump administration supports opening 90 percent of the outer continental shelf to oil drilling as well as the Arctic National Wildlife Refuge where there is an estimated 11.8 billion barrels of recoverable crude.

Alarmed at the prospect that an offshore spill could devastate tourism in their respective states, governors of states along the Atlantic and Pacific coasts are seeking the same exemption that Florida Gov. Rick Scott (R) apparently got from the administration that would keep the offshore drilling ban in place.

Truth be told, there is not much planet sensitive about the current administration’s energy plans. Many environmentalists argue that shale drilling only extends the life of fossil fuels, much to the detriment of the planet.

It should be noted that the last three years have been warmest in 138 years of record keeping, resulting in, what scientists point out, the decimation of coral reefs, thawed polar ice at an unprecedented rate and raised global sea levels.

“We’re warming up pretty much at the rate we anticipated a decade ago,” Gavin Schmidt, director of NASA’s Goddard Institute for Space Studies, told Bloomberg. “Basically, all of the warming of the past 60 years is attributable to human activities.”

Whether you agree with that assessment, held by most scientists, or not, the environment would appear to be a low priority with the Trump administration.

What Does This Mean?

So what does the shale revolution and America’s rise as an energy superpower mean to most of us? Lower energy costs, at least compared to much of the world, is likely one result, which can and should be a boon to certain industry sectors, particularly manufacturing.

Will there be a movement away from renewable sources of energy, such as solar or wind? Possibly, which would not be in the nation’s long-term best interests. But in the short-term, the economy is very much cooking with gas.

I’ll see you down the road.

Dean Barber is principal of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. Dean is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com. Visit us at http://www.barberadvisors.com to learn more.

In Pursuit of Business and Deer

In Corporate Site Selection and Economic Development on January 23, 2018 at 9:23 am

This much we do know – that economic development is business development. And business development means, in some form or fashion, outreach.

If we are to further break it down in the simplest of terms, and I think there is value in doing that, then it follows that much of what economic development organizations should be doing is about reaching out to businesses.

This holds true whether businesses already exist in a community or are outside a community. One forms the basis for business retention and expansion (BR&E), while the other is the bedrock for attraction.

And yet despite stating what might seem the obvious, I’ve come across more than a few economic development organizations that are not so accomplished at business outreach. They don’t know where to start. They don’t know how to start.

This past week, I was engaged by the Lake Martin Economic Development Alliance in Alabama to show them the wheres and hows. Using my laptop computer, I sat down beside Denise Walls for most of a day and showed her how to cross reference and hone in on potential prospects using a variety of methods that I have learned over time. We identified prospect companies, decision makers within those companies and then “scraped” for phone numbers and email addresses.

The following days I would be looking for scrapes of a different sort.

Develop Your Base

Years ago when I was a newspaper reporter, I somehow came to understand that it was vital for me to develop trusted sources who would tell me things, sometimes on the record and sometimes off the record.

I was only as good as my sources, people to whom I developed relationships with over time. Years later, when I became an economic developer, I took that journalistic model of developing sources and applied it to building a network of business contacts.

Periodically, not too often as to be annoying, I would “touch” my contacts – sometimes by telephone, sometimes by email — to see how they were doing, if there was anything new happening with their company, and inform them of things that I thought might be of interest.

And that approach worked. I found projects, some of which resulted into substantial capital investments by companies. It’s a system that I have never abandoned but have only refined now that we have social media such as LinkedIn, Twitter, Facebook and host of other platforms.

Now, too, we have the benefit of digitally-based CRM and research tools at our fingertips that can help us determine who the corporate decision makers are, where they went to school, and even their hobbies.

Where to Start

The Lake Martin Economic Development Alliance is not unique in the fact that it has been largely dependent on the state to bring it projects, to which I would quote Dr. Phil: “How’s that been working out for you?”

That is not a cut at the Alabama Commerce Department, but rather a declaration that all local economic development organizations, no matter where they are, will have to tackle business development on their own.

You got to start somewhere and slowly but surely building a base of contacts, inside and outside your community, is a pretty good place to start. Indeed, I would argue that it is foundational, just as it was for me as a newspaper reporter in developing my sources.

If you are an economic developer and are not on LinkedIn, then I have to wonder what in the hell are you doing. I’m serious. And if you don’t have at least 500 contacts on LinkedIn, are you being serious about business development?

But here is a cautionary note and one that must be said. Business development is very time consuming and is far from being a perfect science. I’m not sure it’s even an art so much as a methodology. Mistakes and miscues will be made. Rejection comes with the territory. There are no guarantees.

Then What?

It might take me three minutes to find a CEO’s email address and direct phone number or it might take me three hours. Or I might not be able to find it at all using all my tricks of the trade. And even if I do find the desired contact information, then what? How do I best make contact and what is my message?

The hard truth is that business development is a rocky road to travel, which was the subject of a blog that I wrote in 2015. Since then, I have come up with a more refined way of developing contacts, to which I am willing to share to those so interested. (Using LinkedIn is only one segment.)

But the basics are that you must build your base of business contacts, you must continually expand and update your base (people do leave jobs), you must periodically touch base with your contacts, and you must develop a tailored message approach that clicks with people.

Your goal is making an emotional connection, developing a relationship of trust. Without that, you’re just making noise.

Study Up

Tailoring a specific message to a specific contact or contacts that will create a favorable impression is one that many economic development organizations struggle with. Your message to senior executives in the food processing industry will be and should be quite different from that of automotive suppliers. One size, one message, will not fit all.

What that means is that it is incumbent on economic developers to develop a deep knowledge of their target industries and about business in general. In short, it means studying up on the subject matter, knowing the players, the drivers, trends and challenges, of any particular industry sector.

At Consultant Connect’s annual Economix event last month in New Orleans, it was revealed that economic developer’s No. 1 gripe about site selection consultants was the frequently imposed short deadlines for submitting information on projects.  Their No. 2 complaint — that many consultants come off as arrogant know-it-alls, to which I would agree.

Default Contacts

A primary criticism that site consultants lodge at economic developers is that they (the economic developers) are not particularly good students of business. Too often, they have no deep understanding of their target industries; hence, they are unable to talk turkey to them. I would also agree with this assessment.

This lack of study, lack of industry knowledge often results in economic development organizations limiting their marketing efforts to only site selection consultants at the exclusion of prospect companies. It’s precisely because of their lack of knowledge that economic developers see the consultants as their default, go-to contacts.

To make matters worse, much of the material sent to the consultants is marginal at best. On almost a daily basis, I will get an email from ED group that should never have been sent to me, but rather should only have been directed to internal stakeholders within the community.

Come to our community breakfast next week and hear animal control officer Bob Jones speak about recent coyote sightings at local craft breweries.

“He walked right in liked he owned the place. But he couldn’t belly up to the bar and ask for a pint, because, you know, they’re short little fellows.”

Do No Harm

I got an email today inviting me to a four-hour jobs fair for hotel and restaurant workers in a city in Virginia. I remember that my first job as a teenager was as a dishwasher in the kitchen of a hotel restaurant, but I no longer have aspirations to work my way up to busboy.

These why-in-hell-are-they-sending-me-this emails used to irritate me as it was apparent that the offending ED group had made no attempt to sort its database for marketing purposes. Now I take it more in stride, knowing full well that I can always unsubscribe if things get too out of hand. (I don’t like to do that but have.)

Just as in the Hippocratic oath, when it comes to email marketing, which is always a bit of precarious undertaking, I would advise economic development organizations to do your best to do no harm, knowing full well that you will always get some unsubscribers. Again, rejection comes with the territory.

Back in Bama

I had a good time in Alabama last week, a place where I lived for 23 years. The state is coming off some big wins of late, the $1.6 billion Toyota-Mazda in Huntsville, gunmaker Kimber to build a $38 million plant in Troy, and strong indications that Canadian-based Bombardier may build a new aircraft assembly line in Mobile.

Then there is that national championship with Nick Saban and the University of Alabama. Intangible but notable nonetheless.

My trip was both for business and recreation. After showing Denise how to build a contact base by identifying prospect companies and decision makers within those companies, I subsequently joined old friends for a two-day deer hunt on a beautiful, remote piece of property that revived my spirits.

Exercises in Pursuit

We stayed in a small farmhouse, where there was no TV, no internet service, not even a cell signal for my phone. After dinner each night, there was chopped wood and a fireplace to enjoy, along with craft beer and whiskey. With that came, good fellowship and meaningful conversation. The hunt was just a backdrop. Just an excuse.

I saw plenty of deer but never took a shot, because it wasn’t the right shot or the right deer to take. But spending time alone in a serene natural setting gave me time to think.

Business development and deer hunting are both exercises in pursuit. In business development, you want to be noticed by your quarry, to even get their full attention. But it is the pursued that largely calls the shots on what eventually happens.

In deer hunting, you want to go unseen, unheard and unscented. You don’t want your quarry to know of your presence or the fact that you even exist. And then, if circumstances permit, you take the shot. Or not.

Pondering on that while sitting in a ground blind, a rifle on my lap, I nodded off asleep.

I’ll see you down the road.

Dean Barber is principal of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. Dean is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com. Visit us at Barberadvisors.com

Alabama Zen: The Ways of Nick Saban and Toyota

In Corporate Site Selection and Economic Development on January 14, 2018 at 9:54 am

There were problems to be overcome. But in the end, the systems were the solutions. Two belief systems, both focused on continuous improvement and with roots in Eastern philosophy, made national headlines last week.

And Alabama was the big winner as a result.

For Nick Saban, the University of Alabama’s football coach, there is “The Process” – a core belief that players should focus solely on execution and the immediate task at hand and not be distracted by past events or future outcomes.

And last Monday night, the Process prevailed. The Crimson Tide, a team utterly void of any superstars, rolled and won its fifth national championship in the 11 years that Saban has been its coach.

Two days later, there was evidence of another, not unsimilar process at work when Alabama edged out North Carolina as the winner in a multi-state contest for a prized Toyota Motor Corp. and Mazda Motor Corp. joint car factory worth $1.6 billion.

The Nature of An Assembly Plant

To understand the problem facing the Japanese automakers and why a 2,400-acre site near Huntsville was chosen, you must understand what an automotive assembly plant is. Add to that backdrop one of the main pillars of the Toyota Production System, which is Just-in-Time production.

It means transporting only what is needed, when it is needed, and in the amount needed.

In some respects, today’s automotive production line is not that much different from when Henry Ford installed the first moving assembly line for auto production in 1913.

Then as now, vehicles are mechanically moved to the workers at individual work stations where parts are added in sequence. Those interchangeable parts have been acquired and shipped in from other companies, which are the suppliers.

By the time a car or truck reaches the end of the production line, all the parts, almost all of which have been manufactured offsite by the suppliers, are fastened and attached, resulting in a brand new ready-to-drive vehicle rolling off the assembly line.

The Toyota Way

The fact that Toyota already has a substantial number of suppliers near the general vicinity of North Alabama, serving its other assembly plants in Blue Springs, Miss., and Georgetown, Kentucky, was probably the difference maker as to why North Carolina was not chosen.

Much of “The Toyota Way” is about conserving resources and eliminating waste. Had North Carolina been chosen for the assembly plant, it would have required building entirely new supply chains and an array of supplier plants. Such a move would not be conserving resources.

Which is probably why at the end of the day, when North Carolina was offering $1.5 billion in incentives, Toyota instead choose Alabama, which offered a state and local incentive package totaling about $700 million.

Of course, I am assuming that Toyota, the largest automotive company in the world, was, in effect, the managing partner with Mazda in choosing the site. The future Huntsville plant will be Toyota’s 11th assembly plant in the United States. Mazda currently does not manufacture in the U.S.

Back to Fundamentals

So what can we learn from this?

In some ways, it should be very reassuring to economic developers everywhere, including North Carolina, that basic business principles trumped (no pun intended) the financial incentives that were offered. While substantial, the Alabama incentive package was less than half that of North Carolina’s.

Two things stand out in my mind. First, incentives cannot make a bad location decision good. That is something that all companies truly should understand.

Second, logistics, the art and science of moving resources and which began as a military precept, is very much a basic business principle and certainly a major cost factor that should be understood by all manufacturers. But curiously it is often not given proper due consideration in the site selection process.

We know, for example, that a relatively short distance between two competing sites can mean millions of dollars in reoccurring transportation costs on an annual basis.

So Toyota’s choice in Alabama was a nod to the fundamentals, something that Saban stresses with his Alabama teams.

Chop Wood, Carry Water

It is interesting to note that both in Saban’s Process and in The Toyota Way, there is a consistent, ongoing emphasis on team, respect and getting the fundamentals right. It’s all about focusing on becoming the best that you can be, knowing that there is always room for improvement.

“The key to the Toyota Way and what makes Toyota stand out is not any of the individual elements…But what is important is having all the elements together as a system. It must be practiced every day in a very consistent manner, not in spurts.” — Taiichi Ohno, Japanese industrial engineer and considered to be the father of the Toyota Production System.

“Eliminate the clutter and all the things that are going on outside and focus on the things that you can control with how you sort of go about and take care of your business. That’s something that’s outgoing, and it can never change.” – Nick Saban.

“Before enlightenment, chop wood, carry water. After enlightenment, chop wood, carry water.” — Zen proverb.

Both Saban and Toyota subscribe to the idea that no matter how big or small the task may seem, the focus should be on the task at hand, which will help you develop a habit of always doing your best. Do your work, do it well, and when you find success, do it again and always strive to improve.

This is very much rooted in Zen doctrine. A worker on the assembly line in the Toyota Production System can stop the entire line if a problem is detected or to introduce change and improvement.

Go to the Source for Facts

At Toyota, as part of its “Chie to Kaizen” continual improvement mindset, there is this concept of “Genchi Genbutsu,” which means “going to the actual source and getting the actual facts” so as to make the correct decisions. Decisions should not be based on data alone, but one must have a deeper understanding of the problem at hand.

For Toyota and Mazda, the problem was picking the right site for the joint assembly plant. It was enshrined by the news media nationwide and opining consultants like myself who were not involved in the project. We voiced our opinions with little knowledge of the facts.

And whether they knew it or not, the Japanese managers and the assisting JLL team practiced Genchi Genbutsu as they did go to the competing megasites in North Carolina and Alabama to get the facts.

I do not know of any site selection consulting firm that would not take corporate client to the finalist sites under consideration to get the facts and gain a deeper understanding. In that sense, we’re all Zen.

Learn from Loss

“The best things come to those who wait” was a slogan used in an advertising campaign by the H. J. Heinz Company in the 1980s to promote its ketchup. However, that is not a truism in business.

What may be a truism is that good things happen to those who prepare. In 2008, Volkswagen passed over the very same Huntsville site in rural Limestone County that Toyota and Mazda chose in favor of a site in Chattanooga.

“When Volkswagen came, we weren’t ready,” Huntsville Mayor Tommy Battle said Wednesday night. “”… We didn’t have the soil compaction, we didn’t have the environmental, we didn’t have the utilities to the site. We didn’t have plans on roadways. We didn’t have everything necessary to make those sites a success. We took a learning lesson off of the loss of Volkswagen.”

But this time around, the Limestone County site was ready. The prerequisite work had been done for it to be certified in 2016 as a TVA megasite, meaning that all the basic infrastructure to accommodate a large manufacturing plant was in place.

At a press conference in Montgomery last week, Toyota President Akio Toyoda, grandson of the company’s founder, said he had fond childhood memories of spending time in Alabama as a Boy Scout.

And we all know the Boy Scout’s Motto, “Be Prepared.”

I’ll see you down road.

Dean Barber is principal of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com. Visit us at Barberadvisors.com

The Times They Are a-Changin’

In Corporate Site Selection and Economic Development on January 6, 2018 at 7:40 pm

On August 16, 1964, Lowell Eggermiers walked into a San Francisco police station, and announced, “I am starting a campaign to legalize marijuana smoking. I wish to be arrested.” Whereupon he fired up a joint, and his wish was granted.

In 1964, possession of marijuana was a felony crime in every state. A first conviction for a minor possession could result in up to a year in prison, which is about what Eggermiers served.

James R. White III, a libertarian attorney who described himself as “to the right of Barry Goldwater,” organized the original marijuana reform advocacy group, LeMar (Legalize Marijuana) in 1964 to support Eggermier’s defense.

Also in 1964, Dr. Raphael Mechoulam, a Bulgarian-born Israeli chemist at Hebrew University in Jerusalem, identified delta-9-tetrahydrocannabinol (THC) as the active psychoactive compound in marijuana.

When asked why he chose to do research on marijuana, Dr. Mechoulam replied, “Well, a scientist should try to find topics of importance.”

New Horizons

About two weeks after Eggermier’s arrest, on Aug. 28, 1964, Bob Dylan introduced the Beatles to marijuana. It was also in 1964 when Dylan wrote and released the title track of an album by the same name, “The Times They Are a-Changin’,” an anthem for change.

Fast forward to today, in doing the research for this blog, I came across the website of the 1964 Supply Company, which describes itself as “a cannabis lifestyle brand run by a collective of craft cannabis artisans and industry pioneers.”

According to the company, 1964 “marked a time of change and new horizons.”

Pot’s Gone Mainstream

Certainly, times and attitudes have changed. A Quinnipiac poll in August found that 94 percent of Americans support legalized medical marijuana and 75 percent oppose the government enforcing marijuana prohibition in states that have chosen to legalize.

That coincides with an October Gallup Poll discovered that 64 percent of Americans favor the legalization of marijuana, and that only 20 percent of support the federal government enforcing federal laws in states that have already legalized the substance.

Certainly, it would appear that legal marijuana has gone mainstream. According to the United Nations Office on Drugs and Crime (UNODC), cannabis is used by 16.2 percent of the population of the United States, the second highest, no pun intended, in the world. (Iceland is the highest at 18.3 percent.)

California was the first state to legalize the use of medical marijuana in 1996 via a ballot initiative. So it was not surprising that it became the eighth state in the nation to allow for legal and regulated recreational marijuana, again approved by a ballot initiative on Nov. 8, 2016.

A Huge Economic Impact

By virtue of the fact that California is the most populous state in the union, approaching 40 million, and has the world’s sixth largest economy, the market for marijuana there will be very large.

A study by the Agricultural Issues Centre at the University of California, Davis predicts that sales from recreational cannabis will eventually reach $5 billion a year. The state already sells marijuana worth more than $2 billion a year for medical purposes. For comparison, Colorado sold $1.3 billion in total, for recreational and medical use, in 2016.

The UC Davis study coincides with forecasts by Green Wave Advisors that California should reach $5.3 billion in retail sales in its first year. But there are plenty of other predictions, all of which agree that this is a big and growing industry.

The recently released Green Market Report forecasts sales in California at $9.1 billion to $11.5 billion to $11.5 billion, with the creation of 160,000 new jobs, while ICF International estimates the California market could reach between $15.9 billion and $20.2 billion per year.

According to cannabis research firm ArcView, the North American legal marijuana industry grew by 34 percent in 2016 to $6.9 billion, and is expected to grow by an average of 26 percent per year through 2021.

“The total economic output from legal cannabis will grow 150% from $16 billion in 2017 to $40 billion by 2021,” Arcview said in a statement. “U.S. consumer spending on legal cannabis in 2021 of $20.8 billion will generate $39.6 billion in overall economic impact, 414,000 jobs, and more than $4 billion in tax receipts.”

In its report, “US Legal Cannabis: Driving $40 Billion Economic Output,” Arcview states that the legalization of adult-use sales in California will lead to the creation of nearly 99,000 cannabis industry jobs and 146,000 indirect jobs in the state by 2021.

About $1 billion dollars in wholesale, excise, and cannabis-specific sales taxes were taken into state treasuries during 2016. Arcview forecasts that number to grow to nearly $2.8 billion by 2021. Adding local sales taxes, the 2021 figure could jump to $4 billion and $4.7 billion.

ICF projects California to earn between $2.4 billion and $3 billion a year in tax receipts from sales of marijuana. The state’s current budget deficit is $1.6 billion.

But Hold On There

By me quoting all these economic impact guesses, and that’s truly all they really are, you might think that I am a proponent of legalization.

Actually, I am quite torn on this subject. Mind you, I view myself as a live and let live kind of fellow. For example, I have no problem with gay marriage. To quote that great Texas icon Kinky Friedman, “I support gay marriage. I believe they have a right to be as miserable as the rest of us.”

But I have qualms about the legalization of marijuana. While I do not want to see a person’s life ruined on a minor possession charge (and therefore favor decriminalization), my reservations about legalization are rooted in the workplace.

Workforce Concerns

In my capacity as a consultant to industry, if I were representing a company in a site search for a location for let us say a future manufacturing plant, and if that site search area were to include a state or states where recreational marijuana was legal, it would behoove me to voice concerns to my client about absenteeism, productivity and workplace safety. As workforce is a primary factor in a corporate site search, those are, in my mind, proper considerations.

I would also advise a corporate client that the possibility exists that they could face legal challenges to drug-free workplace rules in jurisdictions where marijuana is legal. I’m merely saying that this is something to take into account, and I would not be serving my client well unless we did have that conversation.

The bottom line is this: In states where recreational marijuana is legal, is there a greater chance or frequency of some workers being impaired while on the job? I’m not sure we know the answer to this.

But Paul Bittner, partner and vice chair of the Labor and Employment Group at the law firm Ice Miller, contends that that legalization of marijuana can have many ramifications on the workplace, including:

  • It will affect a company’s current drug policy.
  • It may impact the overall safety of a company’s employees, suppliers and customers.
  • It could affect a company’s hiring procedures.
  • It can affect a company’s standing with the federal government.
  • It may affect a company’s insurance policy and rates.

A Possible Indicator?

And while it is by no means a perfect comparison, The Denver Post reported in August 2017 that the number of drivers involved in fatal crashes in Colorado who tested positive for marijuana has risen sharply each year since 2013, more than doubling in that time, federal and state data show. (The legalization of recreational marijuana in Colorado began in late 2012.)

Colorado transportation and public safety officials, however, say the rising number of pot-related traffic fatalities cannot be definitively linked to legalized marijuana. But if more people are hitting the streets impaired, might they be doing the same at work?

An article in the Journal of Occupational and Environmental Medicine in May 2015 concluded that there is a likely statistical association between illicit drug use, including marijuana, and workplace accidents. While some studies suggest that marijuana use may be reasonably safe in some controlled environments, its association with workplace accidents and injuries raises concern.

And therein lies my concern. I believe that data in forthcoming years will give us a better picture of the effects of legalization of marijuana on the workplace. In other words, we shall see.

Jeff the Moralist

Having said all that, I believe decriminalization of marijuana nationwide makes sense and that Congress should act to do just that. Decriminalization means that a given activity no longer qualifies as criminal conduct and can only be treated as a civil infraction, if that.

Criminal convictions can have devastating consequences on a person’s life, making it difficult for them to obtain employment, bank loans and housing. So I have to think that decriminalization is needed to repair the damage done.

But we have an ill-informed attorney general in Jeff Sessions who has made claims that have been dispelled by science, such as cannabis’s gateway effect and the idea that marijuana is “only slightly less awful” than heroin.

Furthermore, having last week rescinded a trio of memos from the Obama administration that had adopted a policy of non-interference with marijuana-friendly state laws, Sessions takes a moral stand, saying “good people don’t smoke marijuana.”

I live in Texas, and anybody who says that Willie Nelson is not a good person is just wrong. To quote former Texas Governor Rick Perry on Nelson’s long-time use of marijuana, “You gotta love Willie.”

I’ll see you down the road.

Dean Barber is principal of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com or at 972-890-3733.

A “Trillion-Dollar Blunder” in the Making

In Corporate Site Selection and Economic Development on December 17, 2017 at 9:48 am

A year ago, I wrote a blog entitled, The Big Business Story to Come, about the incoming Trump administration’s plan to cut corporate taxes in a drastic manner to spur economic growth. At the time, I thought it was a dandy idea.

Celebrated by Republicans and scourged by Democrats, a bill that drops the corporate tax rate from 35 percent to 21 percent, is now expected to be voted on and passed this week.

But I’m not so sure this legislation is the cure-all that it is being billed as. Indeed, it may come back to bite us. Just last month, business leaders attending the Wall Street Journal CEO Council were asked for a show of hands if they planned to increase capital spending in the coming year should corporate tax cuts become a reality.

Few responded, prompting President Trump’s top economic adviser, Gary Cohn, to ask, “Why aren’t the other hands up?”

A surprising number of chief executives have said they will use the extra cash to pay shareholders more, and not grow jobs and wages.

No Talk of Tax Cuts

A little more than a week ago, I attended a conference in New Orleans, bringing corporate site selection consultants, like myself, together with economic developers from around the country. The purpose of Economix 2017 was both educational and networking.

Curiously, there was virtually no talk of massive tax cuts for businesses and how that might affect the economic outlook for communities. Now granted, the final details of the Republican Party’s plan were only hammered out on Friday, but the fact that there was little or no discussion about it had me puzzled.

After all, wasn’t this tax plan going to have broad ramifications on us all? Wasn’t it ostensibly designed to spark more corporate investment, more jobs, and higher pay?

For my part, during short, revolving small group sessions, I told economic developers that cutting the corporate tax rate from 35 percent to 21 percent will make the United States a more attractive place for new business ventures, will stimulate investment and create American jobs.

Most of the economic developers nodded in agreement, and I puffed up like a damned blowfish.

Apparently Not

Soon after I returned home from the conference, the Institute for Supply Management, came out with its semi-annual forecast indicating that capital investment and hiring would grow at a slower pace in 2018.

What’s more, only a small share of the factory purchasing managers surveyed said the proposed tax cuts would be driving their capital-spending decisions.

In hindsight, the ISM forecast was in line with what another consultant told me across the dinner table on my last night at Economix, an event sponsored by my friends at Consultant Connect. This particular consultant, who primarily works with European manufacturers, said a lowering of the U.S. corporate tax rate would mean very little to most of his clients.

In response, I think I said something very deep. “Really?”

I’m All Wet

So let us recap. Though far from being scientific surveys, it would appear that CEOs and factory purchasing managers are saying that a dramatic tax rehaul, the biggest since 1986, will have little impact on capital spending.

Furthermore, the subject of tax cuts were are largely ignored at a conference that I attended of corporate site selection consultants and economic developers. And a fellow consultant said his clients could really care less about the federal corporate tax rate.

Now if I am being totally objective, this would indicate that I might be all wet by holding onto the common belief that reducing marginal tax rates will spur economic growth.

To further my self-humiliation, I have learned that the Bureau of Labor Statistics has collected 25 years of data showing that high income earners spend much less for every tax dollar saved, than low income earners — 86 cents versus 48 cents respectively.

And a study by the Congressional Research Service showed that economic growth over a 65-year span was largely unaffected by how much tax the wealthy pay. Indeed, growth is more likely if lower income earners get a tax cut.

Now that was something to ponder right there. And I did so over a glass of bourbon.

Compared to the Rest of the World

There has been this long-running assumption, certainly I have subscribed to it, that our corporate tax rate of 35 percent has been unreasonably high in comparison to the rest of the world and that doesn’t even include state taxes. Faced with that prospect, companies have been compelled to invest in facilities and jobs in offshore locations with lower taxes.

The United States has the third highest corporate income tax rate in the world, exceeded only by the United Arab Emirates and Puerto Rico, according to the nonpartisan Tax Foundation. We also have the highest corporate income tax rate among the 35 industrialized nations of the Organization for Economic Co-operation and Development (OECD).

“The U.S. tax rate is 16.4 percentage points higher than the worldwide average of 22.5 percent and a little more than 9 percentage points higher than the worldwide GDP-weighted average of 29.5 percent. Over the past ten years, the average worldwide tax rate has been declining, pushing the United States farther from the norm,” according to a Tax Foundation report in August 2016.

Loopholes and Deductions

Clearly, it would seem that the U.S. is out of kilter with the rest of the world. However, the real kicker here is the amount actually paid in taxes relative to taxable income. It varies wildly because of an abundance of loopholes and deductions.

A U.S. Government Accountability Office found in a 2016 study that among large corporations that met that $10 million in assets threshold, 42.3 percent paid no federal income taxes after tax credits in 2012. Among profitable large companies, 19.5 percent paid no federal income taxes. The average effective tax rate among the profitable large corporations was 16.1 percent.

That might be worthy of another glass.

Flush With Cash

Probably the reason why so few CEOs raised their hands at the Wall Street Journalmeeting when asked if lower rates would indeed result in more investment, is that corporations really don’t need the money. In fact, they are flush with cash, sitting on nearly $2.3 trillion of cash reserves, double of what it was in 2001.

Which begs the question (or the answer) as to why they aren’t spending more of their liquid assets on capital improvements, such as building more new factories around the country.

“CEOs aren’t waiting on a tax cut to ‘jump-start the economy’ — a favorite phrase of politicians who have never run a company — or to hand out raises,” wrote former New York Mayor and billionaire chief executive Michael Bloomberg in an op-ed piece. “It’s pure fantasy to think that the tax bill will lead to significantly higher wages and growth, as Republicans have promised.”

A Core Belief

Cutting taxes has been a core belief of the Republican party since Ronald Reagan. The thinking goes that giving corporations and most Americans tax cuts will result in them spending their tax savings on buying stuff and hiring more workers, which generates more economic growth, more jobs, and incomes to rise.

This theory, which I have long subscribed to, has been derisively called “trickle-down economics.” The phrase originates with American humorist Will Rogers, who mocked President Herbert Hoover’s Depression-era recovery efforts, saying that “money was all appropriated for the top in the hopes it would trickle down to the needy.”

Never mind the aforementioned studies by Bureau of Labor Statistics and the Congressional Research Service, if Rogers, who once quipped, “I am not a member of any organized party – I am a Democrat,” were around today, he would have plenty of material to work with. The bill will likely not garner a single Democratic vote.

With the passage of the bill, most impartial observers agree the gap between the haves and have-nots is likely to grow. And while most middle-class families will get sizable benefits (at least until the tax cuts for individuals expire in 2025), they are unlikely to see nearly as large of a benefit as the top.

Makes Problems Worse

Declaring the Republican bill a “trillion-dollar blunder,” Bloomberg says it does nothing to address the nation’s biggest economic problems.

“The largest economic challenges we face include a skills crisis that our public schools are not addressing, crumbling infrastructure that imperils our global competitiveness, wage stagnation coupled with growing wealth inequality, and rising deficits that will worsen as more baby boomers retire.”

Bloomberg says the tax bill makes each of these problems worse, achieving four main things:

  1. It takes money away from schools and students.
  2. It restricts our ability to invest in infrastructure.
  3. It does nothing to boost real wages while making health insurance more expensive.
  4. It makes it harder to control the costs of Medicare and Social Security without cutting defense and other spending — or further exploding the deficit.

It would probably take me four additional blogs to explore each of those points in detail to determine if Bloomberg is right. But if he is, and I suspect that he is, those aren’t much in the way of achievements. Nevermind this bill adds $1 trillion to $1.5 trillion to a $20 trillion deficit. Where are the deficit hawks in the GOP?

Could we see an uptick of corporate investment with lower rates? Probably so, but who will benefit and at what cost? I’m not so sure we are going to like the answers when it’s all said and done.

I’ll see you down the road.

Dean Barber is principal of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. Mr. Barber is available as a keynote speaker and can be reached at dbarber@barberadvisors.com or at 972-890-3733.

Innovation Districts: More Cities Try Their Hand

In Corporate Site Selection and Economic Development on December 4, 2017 at 6:18 am

Economists tell us that productivity growth in the United States has declined sharply since 2004, all the while advances in digital technology have been growing. Now if that is not a head scratcher, I don’t know what is.

These same economists have various explanations for declining productivity growth but there is no consensus, leaving policy makers and supposed economic development gurus like me in a bit of a lurch.

This much we know and can agree upon — our economy depends on productivity improvements for long-term economic growth, and innovation is the fuel to the engine.

For companies, innovation means staying abreast of the digitalization of everything and investing in new technologies that give them a competitive advantage.

For communities, innovation means advancing the skill levels of its people, investing in physical infrastructure (roads, pipe, broadband data transmission) and, yes, betting on and helping young companies that have great potential to grow.

I have to think that innovation makes for damn good economic development. Now the question is how do you bottle and sell that.

A Neighborhood Approach

One strategy being propagated and pushed by the Brookings Institution is that of “innovation districts.” The word “district” implies a small defined geographic area, like a neighborhood.

And that’s precisely what we’re talking about, areas within cities where research universities, medical institutions, and companies cluster and connect with start-ups, accelerators, and incubators.

In a May 2014 paper entitled, “The Rise of Innovation Districts: A New Geography of Innovation in America,” Bruce Katz and Julie Wagner with Brookings wrote:

“In recent years, a rising number of innovative firms and talented workers are choosing to congregate and co-locate in compact, amenity-rich enclaves in the cores of central cities. Rather than building on green-field sites, marquee companies in knowledge-intensive sectors are locating key facilities close to other firms, research labs, and universities so that they can share ideas and practice “open innovation.”

“Instead of inventing on their own in real or metaphorical garages, an array of entrepreneurs are starting their companies in collaborative spaces, where they can mingle with other entrepreneurs and have efficient access to everything from legal advice to sophisticated lab equipment. Rather than submitting to long commutes and daily congestion, a growing share of metropolitan residents are choosing to work and live in places that are walkable, bike-able, and connected by transit and technology.”

Katz and Wagner are speaking to shifting market and demographic dynamics and a reevaluation of the natural strengths of cities, namely proximity, density, walkability, and livability.

Now this won’t work everywhere. It probably only works in urban settings in cities of some size. Essentially, this is clustering but with a new urban twist to essentially attract young people and young companies to create an ecosystem.

Having the Anchor Institutions

Recently, I have spent time in Oklahoma City and Birmingham, Ala., two communities that Brookings says have all the makings for an innovation district. In both cities, there are medical academic centers – the Oklahoma Health Center and the University of Birmingham at Birmingham.

Brookings says these two cities can build an innovation district by connecting their leading-edge anchor institutions to companies, particularly start-ups, in a physically compact, transit-accessible, and technically-wired mixed use area offering housing, office, and retail.

This means remaking the physical landscape, which will be no easy task. Both OHC and UAB have a traditional campus look and feel to them. While their health care institutions are fairly close to one another, they have spread-out physical layouts that are car centric, which hinders people walking to gathering spaces to exchange ideas and build collaborative networks.

So there is a design element that has to be overcome to increase density by bringing in housing, office and retail. The elements are there in Birmingham and OKC, but a lot of planning and execution has to happen if an innovation district, as envisioned by Brookings, is going to become a reality in either city.

So what are the odds? Hell, I don’t know. (How many times have you heard a consultant say that?) I see things in both cities that indicate that they could pull it off. Of course, it will take political will and lots of money being spent for it to happen.

OKC Has MAPS

In Oklahoma City, there is a history of the electorate giving city government the green light to make transformative change. The latest of example of that occurred in September when voters authorized elected leaders to raise and spend an estimated $1.5 billion over the next decade on municipal needs.

The vote provides for a 27-month extension of a 1-cent MAPS sales tax, for street resurfacing and related improvements.

After being told by United Airlines in 1992 that is was in essence an ugly town unworthy of investment, then-Mayor Ron Norick proposed the Metropolitan Area Projects (MAPS) initiative in 1993.

The program featured defined capital projects that would be funded by a penny sales tax. The tax would have a start date and an end date and the projects would be paid for in cash, without incurring debt.

Bricktown, Whitewater and Streetcars

In 1993, the first MAPS vote proposed the construction of a 20,000-seat, indoor sports arena; construction of a 15,000-seat downtown ballpark; construction of a new downtown library; construction of the Bricktown Canal; development of a trolley transit system; development along the North Canadian River; and renovations to the Civic Center Music Hall, Cox Convention Center and Oklahoma State Fairgrounds.

MAPS 2 was approved by voters in 2001. Dubbed “MAPS for Kids,” the $700-million initiative included more than 100 Oklahoma City-area school projects, which included new school construction, extensive renovation to existing schools, technology upgrades, and other improvements.

In 2009, OKC voters approved MAPS 3, an ambitious $777-million plan that continues to change the face of downtown Oklahoma City. MAPS 3 features a 70-acre central park linking the core of downtown with the Oklahoma River; a modern streetcar system; a new convention center; miles of new sidewalks and hike-and-bike trails; river improvements, including a public whitewater kayaking facility; senior health and wellness centers throughout the city; and improvements to the State Fair Park public buildings, meeting halls and exhibit spaces.

All this is happening in Oklahoma City because the vision is there to make things happen, and the voters see the wisdom of that vision.

Can an innovation district happen in OKC? Based on history of making things happen, I would give it a pretty good shot.

Railroad Park, Beer and NIH Funding

Now let’s look at Birmingham, a city that I lived in for more than 20 years. When I left Birmingham in 2007, I thought the city was going nowhere. Since I’ve been gone, great things have happened. (I reject the idea that there is a correlation between the two.)

Railroad Park, a 19-acre green space in downtown Birmingham that celebrates the city’s industrial and artistic heritage, opened in the fall of 2010. In April of 2013, the Birmingham Barons Baseball Club played their first game in their new ballpark, Regions Field. The state-of-the-art 8,500 seat facility in the heart of downtown.

Avondale, what used to be a neighborhood on the skids, is now a hipster haven, featuring cool bars and restaurants and a craft brewery.

Birmingham now has Good People Brewing, Avondale Brewing, Cahaba Brewing, Trim Tab Brewing, Red Hills Brewing, and Ghost Train Brewing, all very good indicators that this is a very civilized place.

More importantly, UAB ranked 25th nationally in 2016 funding from the National Institutes of Health, which is essentially the federal government’s medical research agency. Grants to UAB’s six health- and medical-related schools totaled more than $238 million last year.

Tailor-Made for the 21st Century

Adding to the picture, you have Innovate Birmingham, a $6 million federal grant program to train people for innovation jobs. The program will be administered in the UAB Innovation Lab (UAB iLab) at Innovation Depot, a business incubator that’s home to more than 100 startups. Innovation Depot will connect participants in the program with its tenants and other partner businesses.

Katz said Birmingham has “got the geography that essentially is tailor-made for the 21st century,” in an interview last year with Alabama NewsCenter.

“Proximity, density, vitality, authenticity and you’re beginning to see entrepreneurial startups, scale-ups either off of research from the universities or people just want to be here,” Katz said.

Can an innovation district happen in Birmingham? There is not the voter-approved MAPs tradition as there is in Oklahoma City, but pieces are falling into place, and Birmingham has surprised me as a much-improved city that is very livable.

Of course, I am an aficionado of craft beer, and my views may be colored by that. But it’s a quality of life measure that doesn’t hurt any place. Indeed, I believe craft beer only enhances it.

Real or Hype?

Innovation districts are still an early trend if they are a trend at all. There has yet to be a systematic analysis to prove whether districts characterized by a diversity of institutions, companies, and start-ups can live up to the hype.

That hasn’t stopped a slew of cities from jumping on the innovation district bandwagon. They include Cambridge, Philadelphia, St. Louis, Detroit, Seattle, Boston, and Raleigh-Durham, among others.

The potential for innovative growth appears real, even if most of it is organic rather than planned. One thing is certain. We need ideas, whether they are hatched in universities, startups or mature companies. We need innovation to keep going and growing.

And, of course, we need more craft beer. That’s a given.

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.

Stereotyping Places: We Do That, Too

In Corporate Site Selection and Economic Development on November 20, 2017 at 4:46 pm

It is not just bigoted people who use stereotypes. Psychologists say that we all categorize — or stereotype – pretty much all the time without knowing it, because our brains are wired to do so automatically.

And it goes beyond prejudging people by age, race and gender, which is wrong and dangerous. I also believe we stereotype places.

I kid you not, a few years ago, an economic developer in Ohio told me there were factory workers in Alabama going to work without shoes. My response: “Hmm, you know I lived in Alabama for 23 years and the only places where I saw people going barefoot was at the beach.”

His statement revealed a certain preconceived notion of people and place that he knew nothing about. Again, we all process and categorizes information to make sense of the world. Never mind that many of our assumptions make absolutely no sense at all.

I do economic development consulting for communities and site-selection consulting for companies, and even I catch myself making negative stereotypical judgments on places, even places that I think I know and like. More on that later.

Unnecessary and Discriminatory

Back in July, I wrote a blog was about attempts to pass a “bathroom bill” in Texasregulating which public restrooms transgender people were allowed to use.

The bill failed because of the business community’s opposition to it. The 4,000-member Texas Association of Business called the bill “unnecessary and discriminatory legislation” that could hurt economic development.

Testifying last week before the House Select Committee on Economic Competitiveness, Dallas Mavericks owner Mark Cuban summed up the testimony of several business leaders at the hearing succinctly: “I could care less where you pee.”

For reasons that I don’t fully understand, my blog from July has been getting a lot of hits lately. Just last week, one person posted remarks on LinkedIn which began with, “Texas and Alabama may be the worst.”

I pondered her opening statement. What did she mean by that? Certainly, both states have had a long history of institutional racism. But to categorize them as “the worst,” I wondered if she was unfairly stereotyping them.

Trust me, Texas is not about secede from the union, despite some knuckleheads who make noise on that issue. And not everyone in Alabama wants embattled GOP candidate Roy Moore (what are we up to nine women now?) to become a U.S. senator.

We Call it Walkin’

Texas, where I have lived for the past eight years, exudes an air, a brand of confidence, growth, brashness and braggadocio. In his closing speech at the Republican National Convention in 2004, President George W. Bush said, “Some folks look at me and see a certain swagger. In Texas, we call it walkin’.”

Adding to that mystique, a New York Times writer, living in Houston, wrote, “You don’t just move to Texas. Texas moves into you.” And strangely, there is some truth to that.

Of course, you could rightfully argue that all places where we live influences our beliefs to some degree. But Texas, once an independent country (the Republic of Texas, 1836-1846), does this is spades.

Texas fosters an image of exceptionalism to the degree that some of us actually begin to subscribe to the myth. I have done so by occasionally wearing cowboy boots with a suit while traveling back east. I know. It’s crazy.

I even own a hat and a belt plate the size of a dinner platter, although I do not wear either in public. But the point is that I could. I could play up the stereotype of being a Texan.

History is a Bitch

I left Alabama about 10 years ago, and despite its shortcomings (and all places have them), I have mostly fond memories of the 23 years that I lived there. It’s a physically beautiful state (much prettier than the Dallas-Fort Worth Metroplex where I now live).

The threat of being viewed through the lens of a negative stereotype, or the fear of doing something that would inadvertently confirm that stereotype seems ever present in Alabama.

Fifty years ago, it was the state’s shameful history during the Civil Rights Movement. Today it is GOP senate candidate Roy Moore, an embarrassment if there ever was one. Tomorrow, who knows who or what it will be, but it will be something.

The mere existence of Roy Moore confirms in some people’s minds that Alabama is a backwards place. That is confirmation bias in a nutshell, and we all have it to some degree. Damn the facts. We believe what we want to believe. (Which is precisely why many people will vote for Roy Moore.)

Economic developers in Alabama, those charged with assisting a rising tide that will lift all boats, cringe at the thought of having to explain the indefensible, proving that both current affairs and history can be a real bitch.

Double A: Aerospace and Automotive

And yet despite all that, Alabama has done pretty well in attracting blue-chip companies from all over the world. At least some have not been scared off, although there is no telling as to the number of lost opportunities, companies that might have come to Alabama but did not because of image.

Still, more than 300 aerospace companies operate in the state, including industry giants such as Airbus, which now produces passenger jets at a new $600 million manufacturing facility in Mobile. Boeing, Lockheed Martin, GE Aviation, Raytheon and GKN Aerospace also manufacture in the state.

So far this year, aerospace companies have unveiled plans to invest at least $500 million and bring more than 2,200 jobs to Alabama in new facilities or expansions of existing operations.

Alabama’s automotive industry was effectively born in 1993 when Mercedes-Benz announced plans to open its only U.S. assembly near Tuscaloosa. Since then, Honda, Hyundai and Toyota, as well as about 160 automotive suppliers, have come to the state.

In 2016, Alabama automakers produced more than 1 million cars and light trucks. The automotive sector employs about 40,000.

Back in Bama

Last week, I spent four days in Alabama, three of which were for business purposes, the fourth devoted to craft beer (Birmingham now has six craft breweries) and catching up with old friends.

Ostensibly, I came back to give a speech to stakeholders of the Lake Martin Area Economic Development Alliance, which encompasses Tallapoosa and Coosa counties.

From my time there, I saw a lot of good things and met a lot of good and talented people. I saw a surprising amount of physical infrastructure dedicated to manufacturing, as well as a depth of vocational training in the industrial skilled trades, which I consider the backbone jobs to manufacturing.

I was not so surprised to see a very pretty lake there, Lake Martin, with its million-dollar plus homes. But it’s nice to have.

This Was Russell Country

I will not go into detail, but much of the physical infrastructure that exists is the result of Russell Brands, LLC., now headquartered in Bowling Green, Ky., as a wholly owned subsidiary of Berkshire Hathaway.

Russell was founded in 1902 in Alexander City, the county seat of Tallapoosa County, and rose to become the dominant employer in the region. By 1990, the company, had become the top manufacturer of athletic uniforms in the U.S., and was operating 13 sewing plants outside Alexander City that employed 15,000 workers.

At that time, I was a business reporter, later to become the business editor, at The Birmingham News. I vaguely remember interviewing John Adams, then president and CEO of Russell.

Later, when I worked at the Economic Development Partnership of Alabama, it was understood that you did not take an industrial prospect to Alexander City because it was a company town, Russell Country, lock, stock and barrel.

Those days are long gone. Today, Russell is but a shell of its former self, employing less than 400 people in Alexander City. On September 28, Russell said it would be getting out of the team uniform manufacturing business after 115 years, and would focus on the consumer apparel market.

Back in Alexander City, many of the old sewing plants have been torn down, giving a war-torn, Walking-Dead appearance to certain areas. But the utility infrastructure remains, as does an empty but impressive looking 85,000-square-foot corporate headquarters building, which can be had for a song. (Contact me and I can tell you more.) In short, there are some very good opportunities here.

And Now Automotive

Today, Coosa and Tallapoosa counties continue their legacy in manufacturing, albeit in a different form. There are now five automotive manufacturers, principally Korean, as the region sits midway between the Hyundai assembly plant in Montgomery, Ala., and the Kia assembly plant in West Point, Ga.

Somewhat surprising is that the starting wages for production workers at these Korean supplier plants in Tallapoosa County is only $9 an hour, essentially ensuring those employees to be working poor.

But I am optimistic as to the future of the region, and not just because I was brought there to give a speech. The manufacturing tradition, the extensive physical infrastructure, and robust vocational training offered at Central Alabama Community College, should give this place a competitive advantage.

Shine the Light and See

I did not know this prior to my visit. I was under the mistaken belief that not much was left or happening with the departure of Russell. In short, I had stereotyped this place as being largely dead, another casualty community to an industry going offshore.

Just as it is wrong to stereotype people, the same thing can be said for places. If you give people and the places where they live the proper spotlight, chances are you will be surprised by what you see.

It may not be what you are looking for, but it is still of value.

I’ll see you down the road. (And Happy Thanksgiving and Roll Tide!)

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.

Taking Aerospace to the Next Level: Watch Oklahoma City

In Corporate Site Selection and Economic Development on November 5, 2017 at 7:18 pm

As a consultant to economic development organizations and industry, I have been to many communities, big and small, that have great potential. Or as I used to say when I lived in Alabama, “PO-tential.”

That is, these are places that have the capacity, the power to develop into something bigger and better. More often than not, they reveal glimpses of this power or I would not have recognized it in the first place.

After all, I’m just a consultant who asks a lot of questions. I’m no seer, although I have met a few consultants who consider themselves as such. What I can do is recognize the assets of a community, knowing full well that it takes planning and concerted action to leverage assets and thereby live up to the potential.

For that to happen, there has to be a foundation for success, as well as leadership with vision and buy-in from the community. And it requires a degree of courage and risk taking.

I recently spent time in Oklahoma City, a place that is very much acting upon its potential and in the process transforming itself. I was there at the bequest of the Greater Oklahoma City Chamber to speak to economic developers from the surrounding 10-county region on “the future of work.”

It’s subject that I have frequently tackled in past blogs. (See: The Future of Everything: Four different scenarios for the future of work; A Calm, Stable, Predictable World of Work is Not Happening: Digital technologies will affect us all, and it will get messy;  The Next Big Blue Collar Job: You don’t have to go to a four-year college to learn coding; The Jobs Will Change and So Will We: Artificial intelligence will change how we work.)

While I have only scratched the surface on the future of work, for purposes of this blog, I want to tell you about Oklahoma City, because I think a lot of communities could learn from it.

More Than Energy

When you think of Oklahoma City, or Oklahoma for that matter, you would rightly think of oil and gas. Apparently, there is a working oil well on the grounds of the state capitol. More importantly, the city is a mecca for corporate headquarters for the energy industry.

Devon Energy Corp.; Chesapeake Energy Corp., Continental Resources, Inc.; Chaparral Energy, LLC; Sandridge Energy, Inc.; Gulfport Energy Corp.; Blueknight Energy Partners; Kimray Inc.; and Balon Corp. are all based in OKC and represent historic wealth in the community.

But energy, while important, is not what caught my attention. Two big things stood out to me – the deliberate intention to grow the aerospace industry, the state’s second largest industry generating an annual economic impact of about $43.8 billion, and the continued investment in and transformation of the downtown.

The potential for greater things to happen in both areas is likely because of a concerted effort and action through public and private partnerships. The result will be, actually already has been, economic growth.

A Big Ecosystem

The effort to grow aerospace is already well underway. According to a 2016 report by RegionTrack, an Oklahoma City-based economic research firm specializing in regional economic forecasting and analysis, the aerospace industry in the OKC region is comprised of about 236 public and private sector employers.

They include some blue-chip names in the industry — Boeing, Pratt & Whitney, Lockheed Martin, Northrop Grumman, General Electric Aviation and AAR Aircraft Services.

As a whole, aerospace employers in the OKC region produce an estimated $4.9 billion in goods and services and employ more than 36,600 workers earning $2.7 billion in annual income.

Much of that ecosystem revolves around Tinker Air Force Base, which dates back to World War II when Tinker’s industrial plant repaired B-24 and B-17 bombers and fitted B-29s for combat. Today, Tinker is the headquarters of the Air Force Materiel Command’s Oklahoma City Air Logistics Center, the worldwide manager for a wide range of aircraft, engines, missiles, software and avionics and accessories components.

It’s safe to say that most of the aforementioned companies would not be in the region were it not for Tinker. As such, the base serves as the linchpin, the mothership to these defense contractors, of which Boeing is the largest with 2,600 workers.

In total, Tinker employs about 24,000 workers, of which about 18,000 are civilian. The base generated about $2.2 billion in goods and services while earning about $1.5 billion in wages in 2015.

Within the Air Logistics Center, there are 9,400 military and civilian personnel. They work in 63 buildings covering 8.2 million square feet of industrial floor space, most of which is devoted to maintaining, repairing and overhauling (MRO) military aircraft, including the C/KC-135, B-1B, B-52 and E-3, among others.

Building 9001

One of those buildings stands out as a goliath. A former General Motors plant, it was shut down in 2006. Incredibly, the voters gave Oklahoma County permission to buy the 2.6 million square building for $55 million. It was then promptly gifted to the Air Force for $1 a year.

Today, Building 9001 as it is now called is 75 percent occupied and it’s where a lot of manufacturing of military aircraft replacement parts takes place. Also, a large section is devoted to software engineering.

Shooting For Tier One

With all the jobs, with all the investment, you might think that local economic developers are happy with the state of aerospace in the community. Well, not quite.

Don’t get me wrong, they count their lucky stars that they have Tinker. They fully recognize that Tinker has largely defined the size and scope of aerospace in the local economy. They just want more, but with a twist.

A retired Air Force colonel, Tim Dickinson, now senior business development manager at the Chamber, describes Oklahoma City and the region as a “tier two” community when it comes to aerospace. The goal is to make it a “tier one” community by expanding into commercial work and research and development.

“Let’s create diversity. Let’s grow the commercial side, because the military side is very stable, very solid. Let’s add to our maintenance capabilities by doing commercial manufacturing and let’s go further up the life cycle into R&D,” Dickinson said. “Because if we can get the intellectual capital here, then we really do have something, not just in job stability, but in talent retention.”

Not Great Leaps

What Dickinson is describing is a pivot of sorts, not away from MRO work and Tinker, but ancillary manufacturing that would complement and build upon it. Engine manufacturing in particular would make sense, he said.

“It’s part of the fabric of who we are and what we do. And that would be a great segue from the military to the commercial side, away from MRO and toward manufacturing. Those are not great leaps,” Dickinson said.

“We’re already remaking structural parts for airplanes. Could we not make new structural parts for new airplanes? There are logical steps from where we are now and becoming that tier one community a decade from now.”

Jeff Seymour, director of business development at the Chamber, agrees with Dickinson that expanding into the commercial side is key to building the aerospace industry locally and reaching tier one status.

“A lot of that investment to date has been made to help Tinker directly. I think our challenge is to try to cast a vision in which we say that if we expand the investment out a little bit, it will still be good for Tinker, but also good for diversity and industry in the long term.”

In short, Seymour and Dickinson’s goal is to take aerospace to the next level in the OKC region by going after commercial work.

Talent Pipeline

Both the University of Oklahoma in Norman and Oklahoma State University in Stillwater offer undergraduate and graduate degrees in aerospace engineering. OU is stronger is software applications, whereas OSU concentrates more on airframe.

Both universities have been quite active in research pertaining to unmanned aerial vehicles, the use of which will undoubtedly grow, which will require more manufacturing.

The two universities, plus the fact that military personnel with advanced technical skills can retire in their 40s, provide for an engineering pipeline of talent that would be required if the OKC region is able to go to that next level.

But will it happen? Can the emphasis on the commercial side be realized with manufacturing? I believe so. The potential to become a Tier One aerospace community is there, because the foundation is in place from which to build upon, as is the vision and the will to take it to the next level.

A public/private partnership to create an jet engine test facility, in which companies and the military buy time to use, might be the spark to make bigger things happen. Stay tuned.

In my next blog, I will tell you how the Oklahoma City has exhibited vision and will to build upon the foundation of its downtown and its neighboring environs. It’s quite a story.

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.

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 are 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.