Tag: Eco devo

The Perception of Colorado – From a Group of Site Selectors

horvath

This past fall a group of site selectors presented a panel discussion to a packed house of metro area business leaders about their perception of Colorado as a place to do business. Their comments included a mixture of praise and criticism for the state and its economic development efforts. At times the panelists were in agreement and other times they provided contradicting information. The following is a summary of their comments.

Company Trends
The site selectors identified the following as trends within companies:
• Companies are investing in infrastructure, i.e. IT.
• Companies outside the U.S. are paying more attention to sustainability and green manufacturing.
• Companies are paying close attention to labor costs.
• Consumers are expecting improved customer service skills.
• Employee retention will become more important as workers are again viewed as more than a disposable asset.
• Labor availability is a key issue when companies think about relocating.
• Quality of service will become more important.
• Some companies are sharing services such as IT, HR, and accounting.
• There is greater speed to market in merger and acquisition activity.

Industry Trends
The panelists identified the following as industry trends:
• Aerospace will remain important.
• Biofuels will be volatile.
• Data centers are locating in Texas and North Carolina.
• Distribution centers are locating in the south.
• Energy is important in Texas, Arizona, and Colorado.
• Greater demand for third party call centers (chat, email, and video).
• Growth is expected in smaller life sciences such as Washington, San Diego, Indiana, and Florida.
• In 2010, foreign labor costs went up 9%; in 2011 they were up 24%. As a result there is increased on shoring or back shoring.
• Oil and gas services will remain important.
• Renewable energy is driven by incentives and some of those incentives are expected to expire in the near-term.
• Solar will be volatile.
• Waste recovery may be an industry of the future. For example in Denmark it is about 86%, while it is about 20% in the U.S.

Top States
The group identified the following states that are viewed most favorably by companies seeking to relocate:
• Arizona.
• District of Columbia.
• North Carolina.
• Oklahoma.
• South Carolina.
• Texas.
• Virginia.
Arizona and Texas have strong incentive programs. Colorado was perceived in a positive light, but it was not regarded as a top state for company relocation.

Things that are Important to Companies
Companies are attracted to a region for a variety of reasons. The reasons cited by the panelists were:
• Local economic developers have to be in touch with their local businesses. Site selectors indicated they would interview local companies to gauge the level at which state and local eco devo organizations were engaged with the community. They would not recommend companies to states where the eco devo staff did not visit local companies.
• Companies value support from public officials.
• Infrastructure.
• Job training funds are essential to many companies.
• Location – advantages derived from location differ based on the industry. For example, Colorado will unlikely be a focal point for manufacturing ocean liners.
• Manner in which states and communities educate the low income.
• Operating costs are important, but if operating costs were important then New York or Silicon Valley would never attract business.
• Some industries want suppliers in place and nearby, i.e. plug and play.
• Support of the community for eco devo efforts.

Incentives
For many companies, incentives are only part of the picture. The following ideas were discussed relating to incentives and other factors that influence relocation decisions:
• About 60% of companies who receive incentives are out of compliance within a year.
• Colorado incentives are not viewed well, they are a D+. Colorado will never win a project based on its incentives.
• Corporate or personal taxes can be an issue.
• For certain industries the cost of fuel is critical, i.e. fuel is a major operational cost.
• In most cases the states that can offset costs most effectively will win the battle for relocation.
• Incentives can get you on the long list.
• Right to work legislation is important to many companies.
• Some governors have been given discretionary funds for economic development purposes.
• Some states are swapping out incentives and tax credits.
• Some states have had to cut back on incentives because their economies have performed poorly.
• When considering relocation – costs are critical, in particular operating costs.

What Colorado Has Going for It
The site selectors identified some of the strengths they saw in their visits to the state:
• Conoco Phillips was attracted to the state because of the Colorado School of Mines.
• Creativity.
• Cultural aspects of the state such as museums, art galleries, and performing arts.
• Denver’s location is considered both an advantage and a disadvantage.
• Eco devo groups work together at a regional level.
• Governor Hickenlooper is viewed as a visionary and is recognized for his strengths in collaboration.
• Growth of natural gas for electricity production could benefit Colorado.
• Healthcare.
• NREL is a plus for renewable energy.
• Pride of living in a state with solid business activity.
• Talent.
• The workforce analysis of Vestas was key in having them come to Colorado.

Words of Caution or Advice
The site selectors also had words of caution and advice for state leaders:
• Colorado has to articulate the strength of its workforce.
• Colorado does not understand its strengths.
• Colorado is weak in job training funds.
• Denver does a poor job marketing itself – study what Austin has done.
• Don’t rely on NREL too much – it is a federal facility with obligations to the U.S. not Colorado. As well its funding is sporadic.
• Focus on talent you have within the state.
• It is necessary to pay attention to the strengths of the area; for example, Kansas lost aviation jobs.
• Public-private partnerships are the key to future development.
• Some day Fitzsimons will develop.

The discussion was lively and in many cases it was eye-opening, particularly for those who look at the state through lens other than those of a site selector.

©Copyright 2011 by CBER.

Governor’s Office Kicks Off Manufacturing Initiative

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In early December the Governor’s Office of Economic Development and International Trade (OEDIT) convened a Working Group to develop a State-wide Strategic Plan and Implementation Plan for the state’s manufacturing sector. The following information describing the process is either taken directly or paraphrased slightly from OEDIT communications about that effort.

The Strategic Plan will be created by chief executives from businesses across the state (Steering Committee) and the Implementation Plan will be created by government, economic development organizations, academia, non-profits and trade associations (Tactical Team).

In mid-December the Steering Committee met for 3 hours with a facilitator to create the vision, mission statement, and the major goals for the core objectives in the Colorado Blueprint. A follow up meeting may be needed in January.

The Tactical Team met for 5 hours to identify the tactics and action items necessary to achieve each of the goals identified by the Steering Committee in order to create a 1, 2 and 3 year Implementation Plan.

The work of the Steering Committee and the Tactical Team will provide a basis for retaining and growing existing Colorado companies and increasing the global competitiveness of Colorado’s industries.

The six core objectives are included below.

Business Environment refers to the government-driven factors that affect a company’s operations, including:
[1] local, state, and federal government regulations;
[2] local, state, and federal tax environment (sales and use, property tax, tax exemptions, and incentives); and
[3] any other Colorado business environment issues, such as utility or labor costs.

Business Development refers to the retention and expansion of existing Colorado operations and the recruitment and attraction of business prospects that:
[1] consist of national and global companies that are primary competitors and/or collaborators within the industry and would deepen the industry if brought to Colorado;
[2] consist of national and global companies critical to the value chain, supply chain and/or distribution chain for the industry in Colorado and would increase competitiveness if brought to Colorado; and
[3] provide access to international markets for export of products or services provided by companies within the industry.

Business Funding refers to:
[1] the lending climate between banks and companies in the industry in Colorado;
[2] activity level of private investors (angel and venture) with companies in the industry in Colorado; and
[3] access to other types of financing, including foreign direct investment.

Industry Branding refers to:
[1] the reputation that the industry in Colorado has on a national and global level—what level of “awareness in the marketplace” does the industry posses;
[2] the awareness of the industry locally and the affect on the ability of companies to attract potential employees, entrepreneurs or investors;
[3] the reputation that the industry has among the general public and policy-makers in Colorado and the associated effect on policy.

Education & Workforce refers to:
[1] the current talent pool—availability of qualified and high quality talent to grow the companies in the industry;
[2] the development of the future talent pool—availability of high quality and dynamic post secondary programs (universities, colleges, applied technical colleges, workforce centers) preparing and/or retraining students and workers to participate in the industry workforce;
[3] entrepreneurial training focused on developing new ventures within the industry.

Innovation & Technology will be addressed uniquely by all industry, but in general refers to:
[1] research and development activity within the industry within Colorado at universities, private research labs, or federal labs;
[2] activity in technology transfer and commercialization of products within the industry in Colorado and associated entrepreneurial activity;
[3] the impact of technology on increasing productivity of companies within the industry in Colorado.

Updates will be available on the OEDIT website.

 

©Copyright 2011 by CBER.

U.S. 36 Project Paves Way for Economic Development

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The U.S. 36 corridor between Denver and Boulder is on the cusp of significant transportation investments. The $310 million Managed Lanes/Bus Rapid Transit Project begins in the spring of 2012 and will be the largest Colorado Department of Transportation project in the state for the next few years. It is expected to generate 2,400 direct jobs.

The first phase of funding will add multimodal elements to 10 miles of U.S. 36 from Pecos Street to Interlocken Loop, including:
• HOV/HOT lane in each direction;
• Bus rapid-transit service;
• Corridor-wide bikeway: and
• Replacement of Lowell Boulevard, 112th Avenue, and Wadsworth bridges.

The Colorado High Performance Transportation Enterprise is concurrently defining developer interest to complete the second phase of the project to Table Mesa in Boulder. Potentially, the entire corridor project could be completed by July 2015.

Over the next 24 years, employment is expected to increase by 53% and population will grow by 28%. As anyone who has traveled 36 can testify, improvement of the corridor is essential for better access to commerce in the northwest metro region.

The above information has been provided by 36 Commuting Solutions in a  recent press release.

©Copyright 2011 by CBER.

Economic Development 101 – Basics Concepts of Economic Activity

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Over the past two months there have been a variety of reports about companies coming to Colorado and possible incentives offered to bring them to the state. These incentives are typically based on an estimate of the magnitude of fiscal and economic activity that will be derived by the company relocating, expanding, or staying in state.

There are many different models that can be used to measure economic impact. Impact studies can be conducted for companies, industries, or special events. One of the models frequently used in the state looks at five factors: payroll, construction, purchases, multiplier effect or secondary benefits, and visitor impacts. Economic activity is the sum these factors.

• Total payroll is a function of the number of employees and wages. In most cases, payroll is the largest
contributor to economic activity.
• Construction contributes to economic activity if new facilities are being added or if existing facilities have major or ongoing renovations.
• Purchases are a measure of the company’s local supply chain. For example, a company may purchase office supplies, cleaning services, or advertising expertise from local companies. As well, purchases may indicate the company’s contribution to the local tax base. Some incentives are based on the amount of taxes paid locally and may be granted to offset a portion of those taxes.
• Secondary benefits, or the multiplier effect, are an attempt to measure the indirect impact of the company.
Depending on the industry and company, the multiplier effect is often a significant portion of total activity. In
some cases they are considered to be “fuzzy” and some state agencies do not include them when calculating economic activity.
• Visitor impacts measure the spending of overnight visitors. They may include vendors, visiting experts,
attendees at conferences or meetings, or out of town employees. Typically, the visitor impacts are the smallest portion of economic activity; however, hotels or special events (bike races, stock shows, Super Bowls, World Series) will derive a majority of their economic activity from visitors.

There is also fiscal activity or taxes paid by the company and taxes paid by its employees. Fiscal activity is
almost always a subset of the economic activity. City, state, and local governments are particularly interested in how their bottom line will change as a result of a new company or event. Many incentives are based on a company’s fical activity.

Some impact analyses describe only the impact of a company or an event from the fiscal or economic activity
generated. It is more appropriate to also include the cost of government associated with services provided to the company or eent.

Finally, there are intangible benefits. This may include company or employee contributions to charities, donation of facilities for public meetings, or attraction of intellectual firepower that benefits the overall community.

There is merit in using a common model, such as the one described above, in evaluating economic activity; however, every project contributes to the economy in a different way and comparisons between projects and incentives are often difficult. The challenge comes in communicating the impacts of a company or event in a way that can be comprehended by decision makers.

©Copyright 2011 by CBER.

State Economic Blueprint Released

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On July 22, Governor Hickenlooper’s Office of Economic Development and International Trade released its business development blueprint for the state. The document is the culmination of seven months of surveys, meetings, and information gathering.

Reaction to the blueprint is mixed. Coloradans feel the strengths of the plan are:
• It has received input from people in all parts of the state and all walks of life. As such it allows various regions to have customzied plans focused on their unique strengths.
• Various groups have openly provided support for the “bottom-up” approach.
• The plan focuses on what some think are some of the state’s natural strengths, such as tourism.
• The plan gives OEDIT staff an opportunity to take actions that they feel are appropriate because it has been mandated by the people.

As well, there is trepidation about parts of the plan. A sampling of some of the concerns are:
• There is not enough attention given to innovation.
• While there is talk about innovation, there is no clear-cut definition of what it is.
• There is a lack of attention given to strengthening the infrastructure.
• Lack of sufficient attention given to the development of primary jobs.
• Input from the masses lacks the vision gained from the expertise of strong leaders.

As with any plan there are a multitude of questions and opinions. An example of these questions follows:
• Who will be accountable for achieving the various goals within the plan – state or local government?
• Since the planning process involved significant local input, will the local organizations be responsible for funding its strategic initiatives or will that responsibility fall on state government?
• What is the proposed economic impact of the plan? How many jobs will it create? What types of jobs will be created?
The good news is that there is now a plan and the state will have a direction for moving forward.

For information about the blueprint go to the OEDIT website or call 303 892 3840.

©Copyright 2011 by CBER.

Colorado’s Bottom-Up Economic Development Strategy

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The first week in February Governor Hickenlooper (call me “John”) hosted the ninth stop in his Bottom-Up Economic Development tour across Colorado. For about two hours, the region’s top economic developers discussed job creation, economic development, and steps for increasing government efficiencies.

The most frequently discussed topic was transportation and the top priority was to complete FasTracks in a timely and cost effective manner. In addition leaders made a case for completion of the final leg of the beltway (between Broomfield and Golden) around the city, expansion of commercial air, maintenance of our bridges and highways, and reduction of congestion along I-70 into ski country.

Panelists felt that innovation and the attraction/retention of primary jobs was critical if we are to maintain our regional and national competitiveness. They also cited the need to have a well-trained workforce and an efficient, accountable, and adequately funded education system. As well, it is imperative that Coloradans work together to maintain the quality of life that makes the state so attractive. This will require leaders to address issues related to our water supplies, develop parks and recreation areas, invest in infrastructure, and utilize the state’s unique assets to attract commerce.

The metro area’s economic diversity was evident as leaders spoke in support of industries and clusters endemic to their region. For example, they addressed the need for the state to be more “military-friendly”, consider construction of nuclear power plants, understand the importance of refineries, realize the value of our construction and extractive industries, and support gaming and tourism.

As the Bottom-Up discussions continue, it would be beneficial to reflect on past economic-development successes. For example, consider the public-private partnership, the former Colorado Advanced Technology Institute (CATI). During the late 1980s, CATI was established to guide the development of science and technology and the growth of select high-tech clusters. Specifically, the group’s work laid the groundwork for the state’s photonics, materials, hardware, software, telecommunications, and bioscience clusters. While it may not be appropriate to resurrect CATI as it existed, there is merit in having the an organization that would fill many of CATI’s roles in fostering long-term growth.

Four years ago, a state job cabinet was formed, town meetings were held across the state to gather input, and plans were put in place. While that effort was well intended, it did not have the desired impact. Hopefully this Bottom-Up Planning approach with be more successful.

A well-thought out economic development plan couldn’t come at a better time. Colorado employment remains below the 2001 peak and it will be years before state payrolls return to the pre-Great Recession high mark.

©Copyright 2011 by CBER.