Fall 2004

QUIZ

Name five of the top 10 Southern metropolitan areas, regardless of size, that have experienced the highest annual increase in vehicular hours of delay per traveler from 1982 to 2002?

(Scroll down for answer)

Editorial

Okay, Hell has Frozen Over. North Carolina Forks Out $250 Million for Dell

In just this past fall quarter there were a slew of deals coming out of North Carolina, the state we have deemed over the years as the Grande Dame of economic development in the South. Those deals were highlighted by Round Rock, Tex.-based Dell's decision to locate a large computer assembly and distribution center in the Piedmont Triad region of the state. If you turn to our Relocations and Expansions section in this issue, you can read about all of those deals.

We have labeled North Carolina the Grande Dame of economic development in the South because of its history in the industry. While North Carolina didn't invent economic development as we know it today (Mississippi did), they did perfect it in the 1950s and 1960s with how they went about the recruitment of industry and the development of the Research Triangle Park, certainly a forward-thinking patch of speculative land at the time.

Over the last several years we have disagreed with several other magazines on how the Grande Dame has fared in economic development. While some of our competitors were giving North Carolina first place in this study, or top state in another survey, we have, for the most part, been unkind in our assessment of the state's recent performance. Our numbers just did not support the accolades given the Tar Heel State. In fact, over the past four or five years, we've seen a decline in North Carolina's recruitment of industry. Backing our claim were many of the state's own lawmakers and economic developers. They, too, have admitted that the Tar Heel State has slipped in recent years.

Our argument centered on the fact that North Carolina was practicing the recruitment of your company as if it was still the 1960s. In other words, they wouldn't "write a check" big enough for your deal, while Alabama, neighboring South Carolina and a handful of other Southern states were more than willing to pony up huge incentives for major industrial announcements.

Now we hear that a North Carolina state incentive package totaling about $250 million was won by Dell for what will ultimately be a $190 million facility housing about 1,500 workers by 2009. Spin off jobs created by Dell vendors are speculated to eventually total 6,000 to 8,000, though numbers nowhere near that have been seen in middle Tennessee, where Dell announced a similar computer assembly project in 1999.

It's ironic that many of the same North Carolina officials approving the Dell incentives have publicly hammered large incentive packages given out, particularly by Alabama -- but other Southern states, too -- over the last several years, including about $250 million for Mercedes in 1993, less for Honda in 1998 and approximately $160 million for Hyundai in 2002. Those three automotive deals are three of the top five deals announced in the South over the last dozen years or so.

In the case of Mercedes and Honda, almost $2 billion has been invested in Alabama directly by the automakers and almost 10,000 workers are employed at the two plants. In Hyundai's case, about $1 billion will have been invested by the Korean company and 2,000 jobs created by the end of next year. None of those totals includes spin off jobs.

While we don't know exactly how the incentive package North Carolina offered Dell is set up, we do know exactly the history of large incentive packages given out to companies that have announced big deals in the South since 1992. That being the case, North Carolina paid too much for the Dell deal. Again, it's ironic given the state's fiscal conservatism and its outspoken history against large incentive packages given out to industry.

Regardless of the price tag, we applaud North Carolina officials for making sure they did not lose the Dell deal by offering the $250 million incentive package. It is a signature deal, one that North Carolina needed and has needed for many years. Sure, N.C. may be one of the nation's greatest deal turners of projects with 100 to 200 jobs, but for the most part, the state has missed out on the crown jewels announced in the South over the last dozen years. And then there's the sobering fact that per capita, the state of North Carolina has lost more manufacturing jobs than any state in the South over the last five years. That in itself is why the Dell deal was so important to the state.

Recent economic development history in the South has proven that big corporate or industrial deals earn the state in which they are turned many times over what that state paid in incentives. It's about time the folks of North Carolina took a $250 million chance with a signature corporate citizen so they can learn that themselves.

Mike Randle (mike@sb-d.com)

11,000 New Jobs for Virginia

In the 13 years this publication has been in existence, we've never seen a day when 11,000 jobs were announced on the same day and in the same state. That's exactly what occurred in Virginia on November 17. Virginia Gov. Mark Warner announced that 11,115 jobs will be created by four major companies already doing business in Virginia that provide services to the federal government. The total investment will exceed $351 million, an astonishing amount considering none of the deals are of the manufacturing variety. Science Applications International Corp. will create 4,515 jobs, SRA International will hire 1,400, PricewaterhouseCoopers will create 600 jobs and Booz Allen Hamilton will create up to 4,600 jobs in Virginia. All of the jobs are the result of new homeland security, defense and information technology deals struck by the four companies and the federal government.

Survey Shows Southern Sweep

Plants, Sites & Parks magazine's annual survey of executive readers showed that the top five states in the U.S. for expansion and relocation are North Carolina, Texas, Virginia, South Carolina and Tennessee, giving the South a sweep of the top five locations in the U.S. The survey includes such factors as operating costs, quality of work force, location and cooperation among state and local governments.

Study Cites Southern Markets

Boston-based Torto Wheaton Research recently completed a study that showed four Southern markets in the top five U.S. markets for job growth over the next five years. According to the study, Las Vegas will add more jobs at a higher rate than any other market in the country in the next five years. Rounding out the top five are Southern markets' Austin, Orlando, West Palm Beach and Fort Lauderdale.

Top Two Job Markets: Prince William, Va. and Rutherford County, Tenn.

Data from the Bureau of Labor Statistics shows that the top two markets recording the largest increase in job creation for the 2003-2004 fiscal year are located in the South. Prince William County, Va., led all markets in the U.S. with an 8.0 percent increase in jobs created during the period with Rutherford County, Tenn., placing second with a 7.3 percent increase.

Milken Institute's Top 10 Loaded With Southern Markets

The nonprofit independent think tank Milken Institute's annual Best Performing Cities ranking features six Southern markets in its 2004 top 10. Fort Myers-Cape Coral, Fla. is the institute's No. 1 market with West Palm Beach-Boca Raton, Daytona Beach, Sarasota-Bradenton, Fayetteville-Springdale-Rogers, Ark., and Fort Lauderdale making it in the top 10. Las Vegas, Phoenix and Riverside-San Bernardino, Calif., were markets outside the South ranked in the top 10. The Milken Institute Best Performing Cities Index ranks U.S. metro areas based upon their economic performance and their ability to create, as well as retain, the greatest number of jobs.

"Big Deal" Amendment Passes in Arkansas

A bill allowing Arkansas' state legislature to issue general obligation bonds for "super projects" that create at least 500 jobs and include a minimum of $500 million in investment passed in November. The amendment is designed to attract major job and investment deals in the state and could pave the way for Arkansas' first automotive assembly plant. Jim Pickens, the former director of the Arkansas Dept. of Economic Development led the efforts to get Amendment 2 passed.

Scripps Showdown in South Florida

When it was announced just over a year ago, the California-based Scripps Research Institute's decision to locate its East Coast operation in Palm Beach County, Fla., was seen as an economy-transforming deal for the Sunshine State. The bio industry, while present in Florida, certainly does not currently boast the infrastructure seen in other U.S. markets, many of which are located in the South.

But with Scripps, the state had visions of a massive bio industry cluster and as many as 50,000 bio-related jobs ultimately being created. While that may still be the case, recent developments in Palm Beach say it is going to be a tough road to hoe.

As of late November, Scripps' preferred location, the former Mecca Farms site in western Palm Beach County, had not been secured. Palm Beach County Commissioner Karen Marcus met with Florida Gov. Jeb Bush on November 17 in Tallahassee and Bush urged her, according to several Florida daily newspapers, to go ahead and issue permits and start construction on Scripps' first phase, estimated to cost $137 million. The facilities are part of Florida's and Palm Beach's $450 million incentive package to Scripps.

But standing in the way of the entire deal are several legal challenges, including a significant one from an organization called the 1000 Friends of Florida. That group, along with several others including the local Audubon Society, the Florida Wildlife Federation, Sierra Club and other environmentalists, maintain that the 1,920-acre project will threaten the Everglades restoration efforts. In fact, a spokesperson for the 1000 Friends of Florida said in the fall quarter that the Scripps project is one of the greatest environmental and growth management threats in Florida history (hard to believe considering what the Army Corps of Engineers did to the state of Florida through water diversion from the 1950s through the 1970s).

Worse yet for Scripps and for Bush is Richard Grosso, a high-profile attorney from Fort Lauderdale, who now seems to be calling many of the shots for 1000 Friends. Grosso, it should be noted, led a legal challenge against the building of a certain condominium in Martin County. Construction of the condos began and Grosso's lawsuit was a success, prompting a South Florida judge to order them to be torn down.

Will the state of Florida and counties in South Florida putting up incentives for Scripps risk going ahead with construction? With Bush giving the green light for the first Scripps phase at the Mecca Farms site, which is not officially secured, combined with lawsuits flying from environmental groups and the attorneys representing them, it looks as if we have a showdown for Scripps in South Florida.

Lee Burlett (lee@sb-d.com)

Publication Taps Texas with Best Business Climate

Site Selection magazine has named Texas in a recent edition as having the No. 1 business climate in the country. The magazine cited the recent passage of tort reform legislation in the state, the Texas Enterprise Fund, a significant source of money designed to lure large projects to the state, as well as the state's economic turnaround in the last year. The rest of the top 10 best state business climates according to the magazine are New York, Illinois, Georgia, North Carolina, Florida, Tennessee, South Carolina, Ohio and Alabama. Other states from the South earning a top 20 ranking are Kentucky, Mississippi, Virginia and Louisiana.

Austin, Tex. Top Market for Singles

According to a survey conducted by Primacy Relocation LLC and Worldwide ERC, Austin, Tex., is the best city in the U.S. for relocating, young, professional, single people. The same source named Austin the top U.S. market for relocating families in May of this year. As for the singles designation, the study measured the area's activity in volunteerism, variety of restaurants, general nightlife, health clubs, monthly rental costs and the number of migrating single people between the ages of 24 and 35. Following Austin was San Francisco, Portland, Seattle and Jersey City, N.J.

State of Tennessee Web Site Named Best

The official Tennessee Web site, www.Tennessee.gov , was named the best state government Web site in the U.S. by researchers at Rhode Island's Brown University. Researchers at the Taubman Center for Public Policy & American Institutions at Brown studied more than 1,500 state affiliated Web sites and judged them on quality control, ease of use, service availability, content and foreign language access.

Texas Foreign Trade Zones Generate Billions

Texas' Foreign Trade Zones led all U.S. state FTZs with over $3.5 billion in exports in 2003. Over 71,000 people are employed by companies operating in FTZs in Texas, a total that dwarfs second-place Ohio, where 29,000 people work in its FTZs. Over $245 billion worth of product entered FTZs in the U.S., an increase of 27 percent over 2002.

New Round of HQ Relocations Scouting the South

Calendar year 2003 saw more large headquarter relocations to the South from states such as New York, California, Illinois and New Jersey than any year in memory. That trend slowed in the first two quarters of this year, however, significant headquarter relocations to the South apparently are back on track. Officials with K-Mart, Novelis, Calphalon and other corporations with headquarters located outside the South were spotted checking out sites in the South during the fall quarter.

Study Shows South Dominates New Business Establishments

The top five states with the highest number of new business establishments between 1998 and 2003 were led by California. However, after that, the rest of the top five were Florida, Texas, Georgia and North Carolina, so says infoUSA, a Nebraska-based business database company. States with the lowest increase in business establishments during the period included Massachusetts, New York and Illinois.

Kentucky Governor Announces Statewide Broadband Service by 2007

Kentucky Gov. Ernie Fletcher announced in the fall quarter that broadband Internet and telecommunications service will be available throughout the state by 2007. Wiring Kentucky's rural areas is at the forefront of the initiative, which is being led by The Center for Information Technology Enterprise, based in Bowling Green, Ky. Called ConnectKentucky, the program is designed to work with Kentucky communities in grass-roots style efforts to expand high-speed Internet service. Gov. Fletcher said that the public-private initiative will be funded by state and federal dollars.

Looking to Locate in Innovative Cities?

The Ideas Happen Innovation Index, done by Visa, has named its Top 10 Innovative Cities. The Index measures a variety of items including per-capita support for entrepreneurialism, creativity (number of artist, architects, designers, writers, musicians) and community support through social organization memberships. Southern markets making the top 10 most innovative cities are Austin (No. 2), Nashville (No. 3), Washington, D.C. (No. 5), and West Palm Beach (No. 9).

Another Florida/North Carolina Utility Merger?

A few years back, we saw Raleigh-based Carolina Power & Light acquire St. Pete-based Florida Power to form Progress Energy. In the fall quarter, talks began that could set up another North Carolina/Florida utility merger. Officials with Duke Energy have been involved in talks with South Florida-based FPL Group, or the old Florida Power & Light. FPL has already pursued Entergy, an utility in western South states such as Louisiana, Texas and Arkansas, to no avail.

Office Depot Delays New Headquarters

Delray Beach, Fla.-based Office Depot has postponed plans to build a new world headquarters in Boca Raton, Fla. The company instead will look at upgrading its current facilities in Delray Beach.

Texas Benefiting from California Out-Migration

A report done by Bain & Co., a Massachusetts-based global business consulting firm, shows that nearly 40 percent of California companies are planning to move jobs out of the state in the next three years. Of those, 35 percent say they are moving at least some jobs to Texas. ChartOne, a 20-year-old medical records company, is the latest company to pick up and move from California to Texas. The company was based in San Jose and has moved its operations to Irving, Tex. The company cited high labor costs in San Jose as one of the reasons behind the move.

Florida Forever Nearing 1 Million Acres

In the fall quarter Gov. Jeb Bush and Florida lawmakers voted to purchase more than 197,000 acres at five different locations in the state for the Florida Forever program. The five new projects bring the total number of acres in the land preservation program to almost 1 million. The Florida Forever project is a $3 billion program designed to conserve environmentally sensitive land in the Sunshine State.

Missouri Opening China Trade Office

Gov. Bob Holden announced in the fall that the State of Missouri is opening a new state marketing office in China. China is Missouri's fifth-largest trading partner with trade with the nation increasing 100 percent from 2002 to 2003.

QUIZ ANSWER

The 10 Southern metros with the largest increase in annual vehicular hours of delay on their roadways are:

Annual Hours of Delay

Market 1982 2002
1. Dallas/Fort Worth 13 61
2. Washington D.C.-VA-MD 21 67
3. Atlanta 14 60
4. Miami 11 52
5. Orlando 12 51
6. Baltimore 9 48
7. Austin 11 49
8. Charlotte NC-SC 10 45
9. San Antonio 7 36
10. Louisville 10 38
     Memphis 3 31

Source: Texas Transportation Institute's 2004 Urban Mobility Report