OBSERVATIONS BASED ON 25 YEARS OF ECONOMIC DEVELOPMENT

The rush to attract manufacturing jobs coming back from outside the U.S. as a result of the pandemic is a natural reaction by state economic developers. Nothing wrong with that. But the real competition for high-tech manufacturing jobs lies in how the states compete among themselves to retain the manufacturing bases they already have.

Virtually the entire U.S. manufacturing industry strives toward a future that depends ever more heavily on robotics, AI-enabled infrastructure and IoT to produce the trillions of parts and artifacts with the precision and speed demanded by their customers. At the same time, most state economic development policies are focused on subsidizing incremental headcount in manufacturing facilities. As usual, government policy is backward-looking, having been devised for a 20th century reality that no longer exists.

The states that will win the tug-of-war for the U.S. manufacturing base will be those that contribute most to the retooling and retraining that manufacturers will be undertaking to remain cost-competitive internationally. This is not to say states shouldn’t reward companies that are adding jobs. Rather, they all need to broaden their definition of economic development to include retention.

Policies that increase the after-tax ROI of a comprehensive plant retooling should be incentivized, regardless of the fact that some lower-skilled positions may be lost.

The choice for State Economic Developers is no longer between more manufacturing jobs versus fewer; but rather, fewer manufacturing jobs as technology raises productivity, versus no manufacturing jobs, as the business relocates to take advantage of lower total costs in a different state.

Michael Press is the former U.S. Practice Leader of the Ernst & Young Business Incentives Advisory Group, and former Chief Economist for the City of New York.

Manufacturing Comes Back to the Erie Canal

SCOUT Economics client, DUTCHLAND PLASTICS, opened its new plant on a legacy manufacturing site along the Erie Canal in Canastota New York this past October. Dutchland is the premier rotational molded plastics manufacturer in the U.S. today. Rotomolding, using state-of-the-art equipment, allows Dutchland to manufacture in comparable quantities to "blow molding" with fewer design constraints, ensuring products meet the highest quality standards. The Company will be staffing the new facility with 68 employees over the next several years, as it outfits the new building with molding and ancillary equipment valued at more than $4 million. SCOUT Economics assisted with site selection and incentives advice. We are proud to have had a hand in the process of bringing this vital and growing new industrial business to the Village of Canastota, with its long history as a vibrant manufacturing hub.

View local coverage: (https://www.localsyr.com/news/local-news/dutchland-plastics-opens-50-000-square-foot-canastota-facility/1530945193)

How One Software Company Benefited from Scout Economics’ Site Selection Services

Dealertrack Technologies, a leader in the development and production of web-based software products and tools for auto dealers, will open its new corporate headquarters and expand its operations in a new 233,000 square foot state-of-the-art office facility in North Hills, Long Island this summer. The $100 million project will result in the creation of more than 350 new jobs in Nassau County and represents one of the largest State-supported projects ever on Long Island, both in terms of job creation and State and County investment.

Dealertrack Technologies, founded in 2001, is a publicly traded company that develops and provides web based software products and tools for the automotive dealership industry, third party automotive lenders and original equipment manufacturers (OEMs). Dealertrack’s growth on Long Island and across the country has been explosive; and the company is a major high wage employer in Nassau County, with its workforce consisting primarily of highly compensated software engineers. The company, now a subsidiary of COX Automotive, currently operates the largest online credit application network in the country and employs over 2,400 nationwide.

Mike Press, President of SCOUT Economics, a firm that specializes in state-of-the-art site selection services, provided a short-list of viable locations in North Carolina, Texas, Utah, and New Jersey and represented Dealertrack in the economic incentive negotiations achieving an unprecedented $47 million in combined New York State and Nassau County IDA benefits.

In order to keep Dealertrack and its expansion on Long Island, the State has committed a total of up to $12 million in performance-based incentives from ESD – $10.5 million in tax credits through the Excelsior Jobs Program and a $1.5M capital grant, both of which are tied directly to job creation and investment commitments, including 357 net new jobs, the retention of 535 current jobs and capital investment of $10 million. The Nassau County IDA is providing property tax, sales tax and mortgage recording tax abatements.

Our Approach to Site Selection

Nothing can tank a business strategy faster than a site selection error. So much of a business’s operational success is affected by location. If you’re a manufacturer, proximity to markets and suppliers are key. Office operations need to find an adequate and appropriately skilled labor force. These are critical location factors. But, the relative importance of critical location factors will vary for each business operation. This is why, at SCOUT Economics, we start the site selection process with a thorough analysis of your Company’s current operation and its go-forward business strategy.

Your senior management has a wealth of knowledge of your business, trends in its industry, its competitors, past successful strategies and failures. All of that knowledge is brought to bear on this vital site selection process. SCOUT Economics provides a rigorous framework for applying this knowledge with the support of detailed proprietary geographic data to support the site selection decision.

Senior management is asked to step away from their day-to-day responsibilities for a few hours, to consider what is most important about a location to their business success. We perform an in-depth survey of key operations staff to determine what is important, and then we ask them to rank the most important location factors. Every possible location represents a unique set of trade-offs among the critical location factors for your business operation.

No one location will offer everything at its optimal level. For instance, proximity to agricultural feedstocks will not correlate well with pools of high-skilled biotech engineers. Just as cheap electricity does not correlate well with proximity to international airports. Your company’s operation will thrive under certain trade-offs and fail under others. The “right” location for your company will depend on your finding the best trade-offs among its unique location factors.

Occasionally we are approached by a company that has already come up with a candidate for their new location based on anecdotal evidence and their senior management’s collective knowledge and experience. They ask SCOUT Economics to test their candidate against all the other possibilities. They want to be certain there isn’t a better “fit” somewhere out there that has been overlooked by their internal team.

SCOUT Economics avoids overlooking optimal locations by casting a wide geographic net. Then, we use the company’s unique business strategic and cost factor profile to boil down the full candidate list to a handful of the “best” sites. Most often we find that their favored candidate ranks quite high among all the possibilities, but we are able to present them with a handful of others that are just as good, or even better.

Our analysis is valuable to the company, even if they go with their initial candidate, since it provides them with a solid quantitative analysis that supports their decision. They can go to their shareholders with an iron-clad rationale for selecting the site they chose, knowing its strengths and weaknesses and exactly how it stacks up against other high-ranking candidates.

SCOUT Economics (DBA/ M. R. Press Consulting) authors report for Global Automakers, "Here for America, State Economic Impact Study: ALABAMA"

Global Automakers released the first in a new series of reports, "Here for America: State Economic Impact Study: ALABAMA".  Michael R. Press, President of SCOUT Economics was a chief author and the econometrician behind the study.  

Key findings include:

• International Automakers contribute:
  • More than 79,000 jobs to the Alabama economy;
  • More than $9.6 Billion in Gross State Product;
  • More than $4.5 Billion to Household Incomes

See the Entire Report http://hereforamerica.com/2016/03/22/report-shows-international-automakers-make-major-economic-impact-in-alabama/

Georgia Quail Hunt with Governor Deal

Mike attended the 27th Annual Georgia Quail Hunt last week where he met with Governor Deal to discuss his economic development initiatives and to have some fun in Georgia’s beautiful pine woods. After the event, Chris Carr, Commissioner of Economic Development, sent Mike the following note:

“On behalf of the Georgia Department of Economic Development and the Georgia Allies, I want to thank you for attending the 27th Annual Georgia Quail Hunt last week…we were also honored to have both Governor Nathan Deal and Lieutenant Governor Casey Cagle travel to Albany during the legislative session to spend time with you. They recognize the value of the work you do, and their support has been tremendous in making Georgia the #1 state for business….. This was the first year that the Georgia Quail Hunt focused on site location consultants, and I believe it was the best one in 27 years of hosting the event. I look forward to seeing you and working with you again soon. In the meantime, please feel free to call on me, any of the Allies partners, or our project managers whenever we can be of assistance.