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From Site Selection magazine, March 2015

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A League of Their Own

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Illustrations by Bob Gravlee

The 2014 Governors Cups recognize the top performing states for capital investment attraction in a season that lasts all year.

by MARK AREND
L

ast year’s inclusion of a Governor’s Cup for total projects per capita in Site Selection’s annual recognition of new plant announcements doubled the already keen interest in this annual facilities race. Kentucky’s Gov. Steve Beshear claims that trophy for 2014 activity with 258 qualifying projects. Kansas made the Top Ten list on the per capita side, placing fourth with 109 projects, and South Dakota finished fifth with just 27 projects. Ohio and Louisiana placed second and third, respectively, completing the top five per capita winners.

Texas claims another Governor’s Cup for 2014 total project activity with a 689-project finish, up from its 657-project, first place finish last year. The Lone Star State’s new governor, Greg Abbott, is well aware of his state’s history with the Governor’s Cup under the leadership of his predecessor, Rick Perry, and he intends to keep Texas atop the total projects ranking. Ohio and Illinois repeat their second and third place finishes this year, with 582 and 394 projects respectively — both totals are increases over 2013 project totals. North Carolina (313) and Georgia (311) round out the top five. Per capita winner Kentucky places sixth by the total projects measure.

Note that Ohio has finished in second place in both categories both years Site Selection has awarded two Governor’s Cups. That’s not a coincidence. It’s confirmation that by two different project measures Ohio’s business-attraction strategy is working effectively.

By More Than a Nose

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Governor’s Cup Total Projects Top Five: Gov. Greg Abbott, Texas; Gov. John Kasich, Ohio ; Gov. Bruce Rauner, Illinois; Gov. Pat McCrory, North Carolina; and Gov. Nathan Deal, Georgia

The Commonwealth of Kentucky jumped three spots from last year’s ranking to claim the per capita Governor’s Cup. How? Strong business expansion performance in key industries, especially aerospace components; automotive vehicles and parts; resin, rubber, fibers & filaments; pharmaceuticals; and chemicals — its top five export sectors — is one part of the reason. A second is a state and local economic development infrastructure that is short on bureaucracy and long on getting businesses operational quickly. Gov. Steve Beshear is the third.

“It’s a very exciting time for Kentucky’s economy — more and more companies are seeing the value of doing business in the Commonwealth,” the governor tells Site Selection. More than $3.7 billion was invested in Kentucky in 2014, he points out, which should result in almost 15,000 new jobs. “That’s the most business investment in Kentucky since we started tracking that information almost 30 years ago. And it’s the highest jobs projection in almost a decade.”

Small business growth is booming right along with large and mid-sized companies, says the governor, though much of their capital investment would not be reflected in Site Selection project rankings. Qualifying projects involve a capital investment of at least $1 million, create 20 or more new jobs or involve 20,000 sq. ft. or more of new construction. But successful small businesses turn into larger companies with more substantial facility requirements and job creation potential, so helping them succeed is a core economic development priority, says Gov. Beshear.

“An Office of Entrepreneurship manages the Kentucky Innovation Network, which makes available to entrepreneurs a lot of the tools they need to start or grow a business. And investors have more incentive to support those companies. We are seeing strong results in this area, and we’re gaining national recognition for our small business climate.” The Bureau of Labor Statistics ranks Kentucky first in the US for the percentage growth of business establishments, the governor illustrates.

The State Entrepreneurship Index, from the University of Nebraska-Lincoln Bureau of Business Research, ranked Kentucky fourth in the US in August 2014. Index components are percent growth in employer establishments, percent growth in employer establishments per person, business formation rate (establishment births per person), patents per thousand persons and average income per non-farm proprietor.

Supply and Demand

Part of the trick to attracting investors to sites is having available sites, and the governor says his team understands that the right site and building inventory are “critical components in the site selection process, because companies want to find that perfect site, they want to eliminate red tape, and they want to be up and operating quickly.”

Kentucky’s new Build-Ready program fast tracks permitting, building design work, project costs and construction timeframes, utility and transportation infrastructure. “It helps companies and site selectors choose new sites that are ready for immediate construction, reducing the time it takes for them to be operational,” says the governor.

Gov. Beshear says some of the credit for the Commonwealth’s project activity in 2014 can be traced to legislation passed in 2009, specifically a program called Incentives for a New Kentucky (INK). “We streamlined and modernized Kentucky’s incentives program,” says the governor. “It revamped all our existing programs and created several new programs to encourage new investment and job creation in the Commonwealth. It allowed us to be very flexible in devising incentive programs for both new companies that were moving to Kentucky and existing Kentucky companies that want to expand and grow. Since we enacted those changes in our programs, companies have announced plans to invest more than $10 billion in Kentucky and have created almost 50,000 new jobs.”

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Governor’s Cup Per Capita Projects Top Five: Gov. Steve Beshear, Kentucky; Gov. John Kasich, Ohio; Gov. Bobby Jindal, Louisiana; Gov. Sam Brownback, Kansas; and Gov. Dennis Daugaard, South Dakota

The Kentucky Jobs Retention Act was originally designed to help Ford Motor Co. reinvest in its two plants in Louisville, which it has done significantly — the one that produces F-Series Super Duty trucks and SUVs is in the midst of an $80-million, 350-job expansion. The other Louisville plant recently saw a $130-million investment for production of the Lincoln MKC SUV. The Act has since been expanded to apply to other Kentucky companies wishing to reinvest in their Kentucky facilities. Toyota has taken advantage of that, allowing them to produce Lexus ES 350 sedans at its plant in Georgetown, which is the first time they have been produced in the US. And General Electric is expanding its appliance manufacturing operation with a $280-million investment, retaining 5,200 jobs.

One 2014 project was a win on multiple levels, says Gov. Beshear. Champion Petfoods is a Canadian company that is investing $85 million to build a plant in Auburn, in western Kentucky. “In addition to the capital investment, Champion is creating 147 jobs. The other exciting part of this project is that they will buy all the ingredients for their pet food locally. This is an additional success story for our agricultural community in Kentucky. It allows us to turn that agricultural dollar several times — not only from the growing and the selling, but also the processing.” This project came from a trade mission to Canada in 2013, where the governor met with Champion Petfoods management.

“Our success is based on the personal approach we take to economic development,” says Gov. Beshear. “Here in Kentucky, economic development is a personal relationship process. I am involved in virtually every project we’re working on in Kentucky. Our team comes together and builds a personal relationship with company officials so that there is mutual trust. We build a partnership that will last not just as they locate here but as they expand and grow here. That is an integral part of our success here in Kentucky.”

Texas Trophy

Greg Abbott was Attorney General of Texas and the Republican candidate for governor in 2014. A key priority now, as the new governor of Texas, is on how to maintain his state’s job creation and business expansion momentum in 2015 and beyond. The first step is assembling the right economic development team. In February, the governor responded to questions from Site Selection seeking his views on how to go about doing that, and how he and that department will keep Texas atop Site Selection rankings and other measures of business attraction success.

Site Selection: How are you going about assembling a new business recruitment team? How will it be different philosophically and/or structurally from the previous team?

Gov. Abbott: I made a promise to the people of Texas to begin work immediately to keep Texas a beacon of opportunity and the best state in the nation,” says Gov. Abbott. “A promise is worth little without the right plan and the right people to turn that plan into action. During my campaign for governor, I outlined a Blueprint for an even better Texas of tomorrow, and even before taking office I went about recruiting top talent and putting an experienced leadership team in place with the proven skills and the deep commitment needed to make my vision for this great state a reality.

By “top talent” I mean people like Tracye McDaniel, my pick to serve as President of the Texas Economic Development Corporation. My team persuaded Tracye to come back to her native Texas from New Jersey, where she was recruited by Gov. Chris Christie and top business leaders to head the state’s private business recruitment and investment efforts due to her extensive experience and track record of success in economic development. With extraordinarily talented individuals like Tracye at the helm, and a clear economic development policy agenda focused on creating jobs and expanding opportunity, my team will take Texas to the next level for business recruitment.

SS: What is your plan for maintaining and building on the state’s business climate momentum?

Gov. Abbott: Texas is the national leader in economic development and job creation, but there is more we can do and ways we must improve. As governor, I have acted swiftly to ensure that we are evaluating all economic development programs to ensure they are running efficiently, effectively and that Texans see a clear return on investment for every dollar of taxpayer money we spend.

In this vein, shortly after taking office I announced a restructuring of key Governor’s Office divisions to increase the agency’s focus on economic development and job creation. Under my restructured Economic Development and Tourism Division the Texas Film Commission, the Texas Music Office, the Women’s Commission and the Workforce Investment Council will report directly to the Director of Economic Development, aligning these divisions under the Economic Development Director so that each of the agencies is sharply focused on creating jobs.

SS: Do you have a legislative agenda in mind that, if passed, would keep Texas at the top of our rankings and similar ones?

Gov. Abbott: I have an extensive economic development agenda that includes evaluating and restructuring existing programs, reducing the tax burden on citizens and businesses, reducing regulatory burdens that stifle job creation and improving our roads so goods and commerce can more efficiently move across our great state.

SS: What are the potential roadblocks you expect to have to deal with on the economic development front?

Gov. Abbott: One of my priorities as governor is to ensure Texas does not get complacent due to our lofty economic standing, and one of the key areas in which we can do better is to rein in a regulatory environment that is beginning to expand its tentacles too far and wide. Speeding up permitting processes, reducing unnecessarily burdensome business licensing requirements and creating a Citizen Commission on Government Waste to eliminate unnecessary government agencies and programs are just a few of the reforms I’ve proposed to ensure that our regulatory environment does not act as a roadblock to business and job growth in Texas.

SS: Are there any industry sectors you are particularly interested in growing in Texas?

Gov. Abbott: First, Texas has many No. 1 rankings — job creation, energy, exports — but we are currently No. 2 in the nation for women-owned businesses and No. 2 in the nation for Hispanic women-owned businesses. In Texas, we don’t accept No. 2 rankings — I want Texas to be No. 1 in the nation for women-owned businesses. As governor, I am focusing on growing the number of women-owned businesses in Texas by putting the Women’s Commission under the Economic Development Division so the Commission is sharply focused on promoting and expanding our women-owned businesses and the jobs that they create.

Second, Texas will continue to make meaningful and effective investments in job creation. Now we must also harness our resources to elevate Texas’ higher education institutions as integral participants in our economic advancement. I’ve put forth a plan to establish the Governor’s University Research Initiative, which will enhance Texas’ ability to recruit nationally-recognized researchers, promote economic development, and serve as a significant step toward ensuring Texas is home to five of the top ten public universities in the nation. My University Research Initiative will provide matching funds to help Texas institutions of higher education recruit top researchers and Nobel laureates to their faculty, which will simultaneously elevate Texas’ public universities and serve as a catalyst for economic development.

SS: What are you hearing from business leaders in the state about their priorities for 2015?

Gov. Abbott: During my campaign for governor and in the months since I was elected and sworn into office, I’ve met with thousands of business leaders across the state, and the message they’ve sent is clear. They want Texas to maintain its business-friendly environment, while working to reduce regulations, improve transportation infrastructure and consider reducing or eliminating the business franchise tax, all of which I will work to do as governor.

SS: Business executives mainly want predictability as they consider long-term capital investment location options. How will Texas offer that in the years ahead?

Gov. Abbott: Streamlining our regulatory environment and building the transportation infrastructure and water projects that are necessary to support Texas’ growing population and booming economy are two key components of creating and maintaining long-term predictability for our business climate. Two additional priorities of mine that will nurture a strong and predictable economic environment are passing a constitutional amendment that caps state government spending at the rate of population growth and inflation to keep government small, spending in check, and taxes low, and finally, preventing a patchwork quilt of bans, rules and regulations from being imposed at the city level and injecting unpredictability into our business climate.




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