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.