< Previous86 JANUARY 2024 SITE SELECTION “Jackson was proactive about mapping out what that was going to take to move that line fom diagonally through the site to along the corners of the site,” Chaff ee explains. “ at was a big hurdle and less than a year ago. ey are all the way in now and will be operational in a couple months.” A sector TVA territory still has yet to tap (other than some aspects of leading-edge research at Oak Ridge National Laboratory) is semiconductor manufacturing. Will West explains that the TVA Economic Development team chose to add the sector to its targets just before federal CHIPS Act funding came into existence. “We are working more on the supply chain development from the materials side, as well as the actual equipment used to manufacture semiconductors,” he says. In addition to being a power source, TVA territory can contribute from a workforce perspective. “With the crossover skills from automotive and engineering, we have some hotbeds that could be easily transferred to semiconductors,” West says, citing a recent Lightcase study that ranked the Huntsville region as No. for semiconductor skills transition. On a Roll North Alabama has some momentum already. At a December luncheon in Atlanta hosted by the North Alabama Industrial Development Association (NAIDA), I heard the numbers associated with the counties in TVA territory located in that hopping portion of the state. “Mazda-Toyota could have gone anywhere. First Solar could have gone anywhere. ey chose to come to North Alabama,” said Brooks Kracke, NAIDA president and CEO. Over the past decade (-), northern Alabama has welcomed $. billion of the more than $ billion of corporate facility project investment to land in the state and accounted for , jobs over that time, .% of the state total. e region boasts automotive-related companies, enough to soon make it the No. region in automotive production, said Kracke. In the meantime, people are coming too. With about % of the state’s land mass, the region attracted % of the state’s population growth in and can still boast a mean commute time of under minutes. “Huntsville says they have around people a week moving into the area,” Kracke said. “ ere are over million square feet of available space currently on the market or under construction. ere are over , apartments under construction — , to , in Limestone and Madison counties alone. ere are over , jobs available. is TVA FACTS • The Tennessee Valley Authority’s power service area covers 80,000 square miles in the southeastern United States including most of Tennessee and parts of Mississippi, Alabama, Kentucky, Georgia, North Carolina, and Virginia. • TVA directly provides power to 58 large directly-served customers and 153 local power companies. The population of its service territory is approximately 10 million. • In 2022, the TVA Economic Development team helped attract projects amounting to $10 billion in capital investment creating 26,500 new jobs and retaining 40,000 other jobs. • The TVA Board of Directors in August 2023 approved $15 billion in investments over the next three years to build additional generation and upgrade the existing system to ensure the region continues to benefi t from aff ordable, reliable power. Around $25 billion has been invested in TVA’s existing system and new generation in the past 10 years. In addition to demand-response and energy effi ciency programs, TVA will be building about 3,800 megawatts of new generation by 2028 to meet growing demand and adding 10,000 megawatts of solar energy by 2035. SITE SELECTION JANUARY 2024 87 is also bringing up the wage rates. at’s not a bad thing. Companies coming in will have to understand they need to pay top dollar to get top talent.” North Alabama isn’t the only TVA region seeing high population growth. In seeking public input in October for transmission and distribution improvements in western Tennessee, TVA reported the region’s population growth is three times higher than the national average. “To help ensure power reliability in the three-county area, in October , TVA will commission the new Stanton -kV Substation, which is one of the largest in the TVA system,” TVA announced, noting that it’s also building , megawatts of new generation by and investing $. billion in transmission system improvements across its service area through . TVA’s mission, after all, is to harness the potential of the rich resources in the Tennessee Valley region to make life better for the people who call it home. “From the beginning, TVA was charged with giving the people of the Tennessee Valley region a better opportunity to prosper,” the organization say of its economic development focus. More broadly, “Let’s just say it plainly,” the organization says of its service commitment. “TVA exists to make our region the best place in the country to live, work and play.” Will West, Target Market Specialist, Technology Systems & Security, TVA Economic Development90 JANUARY 2024 SITE SELECTION AI IN SITE SELECTION I ’m halfway through my seventh decade, and I’ve spent my life in aerospace.During that time, I’ve learned at least two things: 1) Tip-of-the-spear technology doesn’t lie in university and commer- cial R&D centers, it lies in the design shops of the U.S. military’s/NASA’s contractors; and 2) to be funded to build the next generation of technology, you need to be able to bid projects with a competitive cost structure. When you speak of artificial intelligence as it relates to aerospace, fields like cyber warfare, cybersecurity, and autonomous weapons systems and drones come to mind. But AI also relates to the more mundane disciplines in the sector. To develop next-generation tech, first you have to win the funding to do so, and that’s gotten significantly more difficult with industry consolidation and a cost-conscious customer. There’s always someone else out there with an excellent technical solution and a stout performance history, so even the most technically robust projects come down largely to cost. Before it plays a role in developing tech, AI also has a place in business development. Take MEV-II for example, a second-generation “satellite repair-refuel- ing-and-upgrade spacecraft” contemplated by NASA and the USAF. Using heritage business development practices, our fictional client would select its half-empty San Jose, California, unit for the project based on technical acumen, with a portion of the work likely shifted to its Huntsville, Alabama, subsidiary in a late, desperate attempt to control cost. They would then predictably lose the work to a Houston-based competitor with a full plant (lower overheads), lower labor costs and a lower-cost business climate. Along the way, we and they would convince ourselves we had a winning bid, based on a poorly defined Price-To-Win (PTW), and a self-reassurance that technical promise would win the day (aka “drinking one’s own bathwater” in aerospace speak). Now let’s try applying a combination of AI and big data to the proposal. The first step is to improve the quality of the PTW. By combining cellphone geography data, census data and various financial databases, we can determine who goes to the competitor’s Houston plant regularly, and back out average labor rates for the facility. Overheads can be derived from FOIA’d heritage proposals or empirically, by analyzing public project and capacity documents. by GEOFFREY TROAN, VISTA SITE SELECTION LLC editor@siteselection.com AI and the Art of Avoiding Drinking Your Own Bathwater Image by GettyImages.com SITE SELECTION JANUARY 2024 91 Then procurement can be derived from internal bids adjusted for the make-buy differential, and incorporating the same analysis techniques to major subcontracts as was done with the prime contractor. Now, before we commit the bid to a heritage facility, we incorporate Analytic Site Selection into the process. We look at the client’s two preferred heritage locations, the competitor’s location (adjusted- our PTW), and a number of greenfield sites. The greenfield sites are determined using additional AI algorithms that scan financial databases throughout the United States looking for localities with detailed labor demographics that match the project requirements, and a significant cost advantage. AI Works Without Fatigue or Boredom For MEV-II, the results came back that Pittsburgh, Kansas City, Cincinnati and Indianapolis all offered the required technical skillsets at a reduced cost. However, cross-referencing that data with business climate and incentives records, we determined that a Kansas/Missouri or Ohio/Kentucky partnership would provide a better “incentives-net-business- climate” than Pennsylvania or Indiana. Thus, we kept Cincinnati and Kansas City as the prime greenfield site candidates. Incentives are often referenced as the “icing on the cake” of a good business deal. In aerospace, they are best considered part of the “cake batter.” Aerospace is a “Core/Base” business engine with significant direct job generation, very high average salaries and a high jobs multiplier. Business incentives are used to enhance the cost savings associated with reduced labor costs by cutting investment requirements and overhead rates, further reducing the bid. And since federal regulation requires such savings be incorporated into the bid, there’s no corporate welfare argument. So, what do big data parsed and defined by AI tell us? Well, it confirms that a San Jose bid is a likely loss based on the cost premium, and that the Huntsville content merely generates some parity with the com- petitor’s Houston location. To win on cost by 10%-15% and technical, we might want to look at a new, heavily incentivized location in Cincinnati or Kansas City, bringing some of the San Jose heritage expertise to the bid in the form of relocated or virtual key personnel, or a virtual project office. But what about fixed overhead coverage at the heri- tage facilities if we keep breaking out greenfield sites? While we’d argue that workforce constraints are going to force the aerospace sector into a more diversified structure in the future, heritage facilities can still be addressed. It could be that this is just not a good bid for San Jose, and that there is other work better suited to their cost structure. However, it has been my experi- ence that half-empty plants are that way for good rea- son. It could be that San Jose should change its raison d’etre by disposing of most of its physical plant and consolidating the remaining assets into a smaller, more efficient engineering center of excellence. Such a move would be in line with the principles of total quality management, ensuring that the company’s physical plant structure remains both efficient and effective. Without an analysis defining the plant’s competitive position however, there is no trigger around which to organize change, and you wind up perpetuating inefficiency, resulting in a slow bleed to the plant’s extinction. The beauty of the AI process is that it isn’t just limited to aerospace. At its core, AI is simply a means of turning a large amount of data reduction over to a series of microprocessors that use self-improving algorithms to sift through mountains of information at incredible speed, without fatigue or boredom, making intelligent decisions and drawing relationships that we are otherwise missing. The process has equal promise in fields ranging from aerospace to distribution and retail. Want to find a 10% labor advantage in forklift drivers? AI can find them for you. Want to define the demographic infor- mation that determines your most successful retail lo- cations and find similar retail locations for expansion? AI can do that for you. Want to find all the locations in the country with the optimum demographics for a data center? AI can do that for you too. Good fortune and good hunting to you in all your business endeavors. Geoffrey (Jeff) Troan is a Managing Director at Vista Site Selection LLC, an ancillary company of Vorys, Sater, Seymour and Pease LLP, one of the nation’s largest and oldest law firms. He brings nearly 40 years of business experience to the table, spending more than three decades working in finance, business development and corporate real estate for Lockheed Martin before devoting the last eight years of his career to business and incentives consulting. Contact him at GJTroan@ VistaSiteSelection.com.A mong the economic development themes to emerge across the 50 state legislatures and governor’s offices over the past year are hundreds of billions of dollars in federal funds connected to infrastructure, Tech Hubs, CHIPs Act and other programs; rising minimum wages; a lack of housing; increased attention to child care; and increased attention to protecting American land from ownership by entities connected to adversarial nations (read: China). But the building blocks of growth and prosperity are also being addressed by state leaders, with career and technical education, shovel-ready site development, tax policy, project incentives and transportation improvements among them. Sources: Standard & Poor’s (state credit ratings); ESRI (2021 state populations, population growth, median household incomes, and median ages); The Pew Charitable Trusts Fiscal 50 resource, based on data from state comprehensive annual financial reports; National Science Foundation; ACT; U.S. Energy Information Administration; U.S. Bureau of Labor Statistics; Tax Foundation; C2ER; National Bureau of Economic Research; U.S. Census Bureau; Oregon Department of Consumer and Business Services (workers’ comp rates); Conway Analytics’ Conway Projects Database; state chambers of commerce, economic development agencies and business/industry associations; press reports; governors’ and corporate press rooms; law firms; Ballotpedia.org; and legislative research services. *A note about the layout: States supported by a full page of advertising have full data pages including a Project Watch spotlight. Therefore, states do not always appear in alphabetical order. 92 JANUARY 2024 SITE SELECTION STATE OF THE STATES 2024In the following pages, you’ll fi nd demographic, GDP and credit rating data insights, legislative updates, agency information, governor quotes and, in some cases, “Project Watch” spotlights* assembled by the Conway Data research team and our team of journalists that shed light on the economies, workforce and business climates of all states. You’ll also fi nd our annual collection of “Rankings that Matter,” which include each state’s rank in the following economic development yardsticks: e Tax Foundation State Business Tax Climate Index (Oct. ) Higher Education R&D Expenditure (Dollars in thousands), according to the National Center for Science and Engineering Statistics, Higher Education Research and Development Survey Percent improvement in ACT National Career Readiness Certifi cates earned by working-age adults between Dec. and Nov. Workers’ Compensation Premium Rate State Ranking by Information Technology and Research Section, Central Services Division, Oregon Department of Consumer and Business Services (October ) U.S. Energy Information Administration, Lowest Industrial Electric Power Cost (¢/ kWh, ) Fiscal Health (based on data from Pew Charitable Trusts’ Fiscal resource, Dec. ) is report was compiled, edited and designed by Mark Arend, Adam Bruns, Gary Daughters, Alexis Elmore, Lindsay Lopp, Karen Medernach, Daniel Boyer, McKenzie Wright, Brian Espinoza and Richard Nenoff . SITE SELECTION JANUARY 2024 93 Alaska Dept. of Commerce Community & Econ. Dev. 550 W 7th Ave., Suite 1535 Anchorage, AK 99501 Julie Sande C OMMISSIONER 907-465-2500 commerce.alaska.gov “In Alaska, we have to take advantage of every opportunity we have. We are not California, and we are not Texas. We can no longer aff ord to say ‘no’ to any project that creates jobs and wealth.” —Gov. Mike Dunleavy, addressing the annual conference of the Resource Development Council, Nov. 15, 2023 GDP GDP Growth Rate Trend 48 th 2022 GDP (in millions of current US$) $50,315 -6 -5 -4 -3 -2 -1 0 1 20222021202020192018 Alaska Pop. (2023): 732,320 Pop. growth 2023–2028: -0.10% Median household income (2023): $80,114 Median age (2023): 36.1 Credit Rating: AA- / Positive Right-to-work state: No LEGISLATIVE UPDATE SB 48, signed into law by Gov. Dunleavy in May, gives the state the authority to develop carbon management projects on state lands, sell carbon off set credits and lease state lands for carbon management purposes. The law gives the Alaska Oil and Gas Conservation Commission authority to pursue primary authority over underground carbon injection wells used for geologic sequestration of carbon dioxide. HB 62 extends Alaska’s Renewable Energy Fund, which was nearing expiration, with no sunset date. According to state Rep. Bryce Edgemon, the fund, established in 2012, has secured some $299 million in state funds, leveraging over $300 million in federal and local funds, “benefi ting communities both big and small across the state.” The annual dividend from Alaska’s petroleum-driven Permanent Fund was set at $1,300 per resident. Offi cials said the payout would inject nearly $1 billion into the state economy. The 2024 operating and capital budgets commit $5 million to a Statewide Marketing and Economic Development Initiative, $5 million for the Alaska Seafood Marketing Institute and $2.5 million for Tourism Marketing. Higher Ed. R&D Expenditure in $000s: 226,717 Number of NCRCs: 49,021 | Percent Improvement 2022–2023: 0.88% Business Tax Climate Rank Change 2023–2024: 0 Industrial power cost per kWh: $18.43 Total Revenue as Share of Total Expenses, FY 2007-2021: 136.1% 2023 Workers’ Comp Index Rate: 1.3794 JANUARY 2024 SITE SELECTION LEGISLATIVE UPDATE In April, Gov. Ivey signed into law “The Game Plan,” a four-pronged legislative package of grants and tax credits for qualifying organizations that promote economic development in Alabama. The Enhancing Alabama’s Economic Progress Act extends and bolsters the existing Alabama Jobs Act and the Growing Alabama program, which provides tax credits to groups that contribute to economic development organizations. Both programs are extended to 2028 with cap increases. The Site Evaluation and Economic Development Strategy Act (SEEDS) is intended to accelerate site development. Under a new grant program, the State Industrial Development Authority will distribute site assessment and development grants to qualifying local economic development organizations. The Innovation and Small Business Act creates a tax credit program for technology accelerator projects, small businesses owned by underrepresented populations and programs that support workforce development, especially in rural areas. The Enhancing Transparency Act requires the Alabama Department of Commerce to post relevant information about organizations receiving incentive awards on its website and authorizes the Joint Legislative Advisory Committee on Economic Incentives to request third-party evaluations of the impacts of state economic development incentives. Alabama Dept. of Commerce 401 Adams Ave., 6th Floor Montgomery, AL 36130 Ellen McNair S ECY . OF C OMMERCE 334-242-0400 madeinalabama.com “Throughout my time as governor, we have proudly solidifi ed Alabama as a top state for doing business, and no doubt, Greg has been a key part of that process.” — Gov. Kay Ivey, announcing the departure of Alabama’s longtime Commerce Secretary Greg Canfield in a statement released Oct. 20, 2023 Higher Ed. R&D Expenditure in $000s: 1,434,118 Number of NCRCs: 357,079 | Percent Improvement 2022–2023: 11.90% Business Tax Climate Rank Change 2023–2024: +2 Industrial power cost per kWh: $7.72 Total Revenue as Share of Total Expenses, FY 2007-2021: 102.8% 2023 Workers’ Comp Index Rate: 1.38 GDP 26 th 2022 GDP (in millions of current US$) $235,807 -4 -3 -2 -1 0 1 2 3 4 5 6 20222021202020192018 Alabama Pop. (2023): 5,098,606 Pop. growth 2023–2028: 0.22% Median household income (2023): $56,129 Median age (2023): 40.1 Credit Rating: AA / Stable Right-to-work state: Yes PROJECT WATCH N ucor, one of the largest steel and steel products producers in the country, announced plans in mid-November to invest $280 million to expand its Tuscaloosa County rolling mill. Nucor said the expansion will include the addition of a new product line to make thinner, stronger, higher quality steel plate. A $16.8 million tax abatement package is to support the retention of more than 400 jobs at the plant, according to the Tuscaloosa County Economic Development Authority. In February, Nucor announced plans to invest $125 million to produce transmission towers in Decatur, Alabama, under the aegis of its Nucor Towers & Structures unit. That project is expected to create 200 full-time jobs that pay an average of $75,000 a year. A classic train bridge spans the Black Warrior River in Tuscaloosa at sunset. Photo: Getty Images GDP Growth Rate TrendNext >