ississippi Governor Haley Barbour sat down with Site Selection Editor in Chief Mark Arend at the Republican Governors Association Annual Conference in November to discuss how the Magnolia State is transforming itself into an industrial powerhouse.
   The automotive, aerospace, energy and defense sectors are firing on all cylinders, he notes, due in part to the highly favorable impression Mississippians made on the world at large in the wake of Hurricane Katrina. Following are excerpts of their conversation.
   Site Selection: Is there something the presidential candidates could be doing to emphasize the importance of a sound national economic development policy such that that message would resonate with voters?
   Gov. Barbour: Well, we have record employment in my state, and I expect there's record employment in the country. The national unemployment rate is about 4.6 or 4.7 percent, which by historical standards since World War II is extremely low. But costs are up – fuel, energy. We need more energy. If you want to get the price of something down, then get the supply up. It's basic supply and demand economics. To control or reduce fuel prices, we need to have more energy. At the state level, we spend a lot more time focusing on work-force development and job training than the federal people do. The federal people supply a significant amount of money, but it is not an issue that is prominent in federal campaigns as it is in state campaigns. A driving factor behind our economic development successes in the last couple of years has been the improved quality of our work force and particularly the improvements we've made in the provision of work force development and job training.

   SS: How would you characterize Mississippi's efforts at bringing businesses back to the parts of the state affected by Katrina?
   Gov. Barbour: Mississippi has made a tremendous amount of progress. We've had a labor shortage on the coast since just a few months after the storm. On the Mississippi Gulf Coast today, anybody who wants a job has one. Whether it's McDonalds or the shipyards with highly skilled jobs, everybody is looking for workers. The business community – whether it's industries like Chevron or Northrop Grumman, or small businesses – they all have worked very hard to get back open as quickly as possible. One difference in terms of our state is that our citizens came home as soon as they could, as soon as they had a place to stay. And we got our schools back open in record time. By the end of the school year in 2006, the number of students in the public schools in the six most southern counties was about 90 percent of what it had been. Every public school in Mississippi was back open by the first week in November. Almost all of them were open by the first week in October. The most crucial element to the communities was for the citizens to come home. The population today is about what it was before the storm.
   Having said that, things are not back to normal. Having 10,000 families in FEMA trailers is a very difficult thing. A lot of progress has been made in 2007. I think it's fair to say it was the fastest pace of recovery after any major disaster in recent history, but it's not fast enough.

   SS: What is the silver lining of that experience?
   Gov. Barbour: It spawned gigantic economic growth because of reconstruction. The coast is coming back bigger and better than ever. The quality of the construction is greatly improved. The casino industry there is building back a much higher quality product. The federal government has given us about $25 billion to help rebuild. The coast will clearly be a much better place to live in a few years than it was before the storm.
   The biggest silver lining by far is that the response of Mississippians was seen by people around the country and around the world, and they liked what they saw. This has done more to improve the image of Mississippi than anything that's happened in my lifetime. The world and the country saw that we bore the brunt of the worst natural disaster in American history, got knocked down flat, and got right back up and went to work. The world saw strong, resilient, self-reliant people who are compassionate as well as courageous. A lot of companies have come to Mississippi in the past two years that would not have given us a second look except for liking what they saw – the spirit and character of Mississippians as it was revealed after the storm. I've had CEOs and site consultants tell me that. That's a silver lining I never dreamed of. It has created gigantic opportunities all over the state, because it didn't just change the opinion of thought leaders about the coast, but rather of the people of the state in its entirety.

   SS: Still, some companies have left the affected area, citing high insurance premiums as one of the reasons. Oreck Corp., the vacuum cleaner maker, comes to mind.
   Gov. Barbour: The first problem Oreck had was labor. When the storm happened, there was a labor shortage, wage rates went up significantly, and their labor costs skyrocketed. My impression is they couldn't find enough people that they could hire at the rates they had been paying to stay profitable. They figured the labor costs were never going to get back down to where they had been and that they could be more profitable by moving than by having to absorb increased labor costs. Companies throughout the area can't find enough labor.
   As for insurance rates, they are a problem for residential and a significant problem for commercial insurance. The state is using federal and state money to buy down reinsurance costs in an effort to give people time for these insurance rates to subside. The end of November was the end of hurricane season, and by God's grace, we have had two years without a hurricane coming onshore in Mississippi. If we had had one, with so many families still in FEMA trailers, the risk would have been unbelievable. Not having them should result in our insurance costs coming down. It's worse for commercial lenders because you build a middle-income apartment complex, and the cost of the insurance is about $250 to $300 per month just to pay the insurance premium. We're trying to rebuild affordable housing, and we've found some ways through low income housing tax credits and other programs that are helping with that, but that's clearly an issue. Small business is an issue, and candidly, part of the problem was under-insurance to start with. The insurance issue should get better. We've put up $160 million over four years to buy down the reinsurance rates to keep the rates from rising more. But it is a serious issue.
   But it has not stopped a number of companies from rebuilding at ground zero – two pipe manufacturers come to mind. What I hear more from businesses is there is not enough labor. Chevron has announced an expansion of its refinery to increase gasoline output by about 15 percent. They had previously announced they were going to do more than that, but they want to make sure they have enough labor. They'll take what they were going to do over two years and stretch that out over five or six years. Labor is a bigger issue right now. Insurance rates have skyrocketed along the water all the way from Brownsville to Boston. Having said that, in Mississippi we're only talking about six counties. For the Toyotas and General Electrics and the PACCARs and others who prefer the northern end of the state, that's not an issue. In fact, those premiums have gone down.

   SS: The state has had some impressive project announcements in 2007.
   Gov. Barbour: The Toyota project was the most sought after economic development project in the United States in 2007. For Mississippi to win that certainly made the biggest impact. It's the premier automobile manufacturer in the world that is renowned for the quality of its work. They could go anywhere in the U.S., and they decided they wanted to come to Mississippi. That's the biggest splash. And it will be critically important to a whole area of Mississippi. It appears now that a number of Toyota suppliers will also choose to locate in northeast and east Mississippi. Winning the supplier facilities was a big part of our strategy from the beginning. In fact, Toyota is letting us use some of the incentives that Toyota could have used itself to offer to its suppliers – about $30 million worth. PACCAR, like Toyota, is very important because of the growth of the southern automotive manufacturing zone. When Nissan came to Mississippi, that extended the zone to I-55 and gave us a major player. Now, with Toyota we have two very large, well regarded auto plants. But PACCAR put us in the trucking world. Associated with all of this is SeverCorr, the most modern mini steel mill in North America. No other mill in America makes exterior-grade steel for the automotive industry, and we believe they will succeed. That will be a huge resource for all the auto companies, and it will make Mississippi an even more important part of the southern automotive manufacturing zone. They fit with a sector where we see great growth and that is one of our target sectors. And General Electric is building a plant in Batesville to make composite jet engine fan blades. Part of our strategy is aerospace, so that's a good fit, too. We have a large and growing aerospace industry. So while Toyota is clearly the crown jewel, all of this going on fits our economic development strategy.

   SS: The energy sector in Mississippi also seems to be ramping up.
   Gov. Barbour: Yes, we have an enormous energy sector. This state's energy policy, with me as governor, is more energy. You want to bring down the price of something, increase the supply. We have an LNG terminal getting under way at Pascagoula. They're dredging the channel right now. We've talked about Chevron's expansion, and ultimately they will increase their throughput from 330,000 barrels per day to 550,000 barrels of crude oil. That's about a $5-billion project; the LNG terminal is about $750 million. The federal government has announced a strategic petroleum reserve site at Richton. Southern Company has announced a coal gasification plant in Kemper County, which is a $1.8 billion project. Entergy has received its early site permit for a new nuclear power plant at Grand Gulf. And there are others. There are about $2 billion in pipeline projects in the works. And all together, there is $20 billion or more of potential energy construction projects before you ever even look at full-time jobs created. We've been pretty lucky in energy, aerospace, shipbuilding, automotive and defense contracting. But we're not ignoring timber and agriculture. Given the geography of our state, agriculture and forest products are going to be important to us long after I'm gone. We have a much more diversified economy than many realize. And then there are the information technology and service industries which are growing as well. ADP is announcing a new service center in Jackson, for example. That's an area where we think we are underemployed, where people could be making a few dollars more per hour, working in places driven by intellectual capital.

   SS: You have not been in favor of the state purchasing large tracts of land and preparing them for use by automotive or other industries, which some would say puts Mississippi at a disadvantage. Nevertheless, Toyota selected a site in northeast Mississippi without the state preparing the site.
   Gov. Barbour: The issue is, should the state invest millions or tens of millions of dollars in a site before there is an industry or company that has chosen that site? When some wanted to do that before Toyota came along, I refused and it wasn't done. My feeling was these companies don't need you to go and spend millions on the site. They need you to have control of the site and then they can look at it and ask if the state can do this and this to get it like they want it. But as long as you have control of the site, you don't have to invest $25 million or $30 million before you have a customer. And I turned out to be right. If you look at Georgia's experience when they thought they were going to get the DaimlerChrysler plant [in Pooler] and they spent all that money, well that white elephant is still sitting there. The more important thing is we are willing to invest, but we don't see any need to make that investment before there is someone who has chosen that site. That hasn't changed. Toyota didn't need us to clear that site for them to understand what the site would look like. That's what they do for a living. I feel totally vindicated in the sense that it is an unnecessary risk with the taxpayers' money.

   SS: Madison County is a finalist site for the Department of Homeland Security's (DHS) National Bio and Agro-Defense Facility (NBAF). How involved are you in landing that facility, and what impact would it have on the state?
   Gov. Barbour: We've been very involved – the governor's office, the Mississippi Development Authority. In the process, we decided to offer DHS three different sites, each a little different – a rural site, an edge of the suburbs site and an in the suburbs site. In the end, they picked our rural site as a finalist in the small town of Flora. The only questions raised on the local level had to do with traffic. That is a good meeting, when the biggest concern is extra traffic from all the jobs that will come.
   Mississippi is leading the coalition here. In addition to the University of Mississippi Medical Center and the university's school of pharmacy, we have Mississippi State University, which has a veterinary school, Jackson State University with its advanced computing resources, the Tulane Primate Research Center, which is the top such center in the U.S., and other university resources in the Gulf region. Battelle Memorial Laboratories is our management, which is important, because they manage a lot of laboratories for the U.S, and they chose us. They could have been the partner on any one of the teams, and they chose us. The state is committed to it, we have the land tied up and will put in the infrastructure they want, and we think the uniqueness of our having the medical, veterinary and pharmacy schools is a very strong factor in our favor. And our people want it. A major consideration of the federal government is that they want to go somewhere where they are wanted, and our people want it.
   It will create a lot of high-tech jobs – pharmaceutical companies will want to be near the lab, companies in this line of work will come. It will be a great thing for our economy and for advancing the health care technologies we already work on here. These are high-end, high-paying, high-tech jobs. Like NASA's Stennis Space Center [in Hancock County], the NBAF will attract lots of other companies and agencies that want to be near that research. The economic impact will be in the billions of dollars. It will entail a $500-million construction project. When I was growing up, companies came to Mississippi looking for strong backs and low wages. Now, they are coming to Mississippi looking for strong minds, and they are willing to pay for it. Toyota and General Electric are great examples of that. The NBAF would be as well.