FEATURE STORY: 2013 Economic Development Deal of the Year Awards
By Business Facilities Editorial Staff
From the January/February 2014 issue
Project Title: Apple Manufacturing Facility
Entered By: Greater Phoenix Economic Council
A huge solar panel plant in Mesa, AZ that did not survive the slump in global panel prices will be transformed into an advanced manufacturing facility for tech-giant Apple in a $1.5-billion project that has earned our 2013 Economic Development Deal of the Year Gold Award.
The winner of our top award emerged from a collaborative effort between Greater Phoenix Economic Council (GPEC), the Arizona Commerce Authority (ACA), DMB Associates, Salt River Project (SRP), Maricopa County and the City of Mesa.
This highly cooperative team worked with Apple on their purchase of the former First Solar facility, a 1.2-million-square-foot building located on 83 acres near Phoenix-Mesa Gateway Airport. The Apple manufacturing facility will create 700 jobs with average salaries of $45,000 as well as 1,300 construction jobs, creating an overall economic impact for the region of $1.33 billion.
“Our Deal of the Year Gold Award winner is a game-changer for Apple and Arizona,” said Business Facilities Editor in Chief Jack Rogers. “Arizona’s team moved quickly to put together an attractive package that put the Mesa site front and center as Apple considered locations for its renewed commitment to U.S. manufacturing.”
“This deal puts Greater Phoenix on the map as a leading high-tech hub,” Rogers added.
Team members credited the newly formed Arizona Commerce Authority, created by Gov. Jan Brewer, with providing expertise on state policies and regulations that proved pivotal to Apple’s decision. Working under strict confidentiality requirements endemic to the highly competitive device market, the deal required the highest level of coordination from the team, which worked at a record pace to deliver the winning package.
The Arizona team worked closely with Maricopa County’s air-quality department to obtain the required permits for Apple. SRP, one of the nation’s largest utilities and an original founder of GPEC, was able to deliver an unprecedented level of speed and service to meet Apple’s energy needs. SRP executed on substantial load requirements while working in concert with Eastmark Developer DMB and the City of Mesa infrastructure needed for the project. Mesa also processed the required permits expeditiously.
Mesa Mayor Scott Smith, City Manager Chris Brady and Economic Development Director Bill Jabjiniak assisted Apple with its Foreign Trade Zone application to provide real and personal property tax relief for Apple’s investment in the Mesa site.
The ACA showcased the Arizona Competes Fund, the state’s Qualified Facility Tax Program and job training programs for Apple. The tech giant eventually was awarded $10 million from the Arizona Competes Fund.
“We are proud to expand our domestic manufacturing initiative with a new facility in Arizona, creating more than 2,000 jobs in engineering, manufacturing and construction,” said Apple spokeswoman Kristin Huguet. “This new plant will make components for Apple products and it will run on 100 percent renewable energy from day one.”
GPEC President and CEO Barry Broome credited the successful consummation of the project to “years of work on infrastructure, permitting and crafting performance-based incentives.” He also cited the ability to offer a “turnkey real estate option”—the reuse of the First Solar facility—as a key factor in sealing the deal.
Project Impact Estimates
- Direct economic impact of $1.33 billion over the next 10 years.
- 700 new jobs created directly, 278 indirect jobs, 262 induced jobs.
- $315 million in new wages directly created over 10 years.
The GPEC chief added that he expects the Apple development in Mesa to draw other high-tech enterprises to the region.
The quick turnaround of the Mesa facility from a major solar panel production hub to a manufacturing facility for was underlined by the fact that this year’s Gold Award winner emerged from what just two years earlier had been BF‘s Bronze Award recipient in Business Facilities‘ 2011 Economic Development Deal of the Year competition, Rogers noted.
The prospects for success were bright when First Solar decided to invest $323 million in a thin-film photovoltaic module manufacturing center in Mesa. However, within months of the project’s initiation, the bottom fell out of the solar energy manufacturing sector.
“Innovative thinking, quick action and impressive regional cooperation enabled Arizona to snatch victory from the jaws of defeat in creating a bold new opportunity for the First Solar site in Mesa,” Rogers said.
Project Title: Hankook Tire’s First U.S Manufacturing Facility
Entered By: Clarksville-Montgomery County IDB/State of Tennessee
Hankook Tire’s decision to put its first U.S. manufacturing facility in Clarksville-Montgomery County, TN is our 2013 Economic Development Deal of the Year Silver Award winner.
The Seoul, South Korea-based tire giant will invest $800 million in the new plant and directly create 1,850 jobs over the next five years. According to an impact analysis conducted by Tennessee Valley Authority (TVA), the project also will yield 1,200 indirect jobs as well as direct annual payroll of over $660 million and indirect annual payroll of over $54 million. The company expects to break ground on the new facility by the end of this year and begin tire production by 2016.
As part of its portion of $72 million in state incentives for Hankook, the Tennessee Department of Transportation has pledged infrastructure improvements including widening interstate exit ramps and creating a five-lane access road to the Corporate Business Park’s southern entrance near the site of the new plant. Local officials also offered $60 million in tax incentives and available land.
Seung Hwa Suh, vice chairman and CEO of Hankook Tire cited these incentives, Tennessee’s central location (which he termed “an excellent launching pad for a national distribution network), and the availability of a skilled workforce as key factors that influenced the company’s site selection.
“The decision by one of the world’s largest tire producers to put its first U.S. plant in Tennessee shows that the Volunteer State is building a world-class supplier network to support the steady growth of its burgeoning automotive assembly operations,” said Business Facilities Editor in Chief Jack Rogers.
Tennessee has been the top-ranked state for Automotive Manufacturing Strength in BF‘s annual State Rankings Report for four consecutive years.
Becoming the largest tenant at the expanded portion of the Clarksville-Montgomery County Corporate Business Park, Hankook Tire plans to build its facility on 469 acres over the next five years. The company’s new 1.5-million-square-foot advanced manufacturing facility will produce high-end performance tires, officials said.
Project Impact Estimates
- $800-million investment in a new 1.5-million-square-foot facility.
- 1,850 direct jobs, 1,203 indirect jobs, and 1,203 induced jobs.
- $66.6 million in direct new wages and $54.2 million in indirect wages.
Tennessee’s success in landing Hankook was a state and local governments, as well as TVA. According to Mike Evans, executive director of the Clarksville-Montgomery County Industrial Development Board (IDB), state officials began the project recruitment about 18 months ago, with multiple locations throughout the state under consideration by Hankook. In February 2013, Clarksville-Montgomery County officials were invited to go to Atlanta to meet with the company’s site-selection team. At that time, the search had been narrowed down to four sites; three in Middle Tennessee and one in West Tennessee. By April, Clarksville-Montgomery was identified as the finalist for the new tire plant, with the focus shifting to workforce and training capabilities. TVA provided helicopters for an aerial tour of the proposed plant site.
“We showed them that this is a great place to live, work and raise a family,” IDB Chairman Don Jenkins said.
Project Title: General Motors Technology Innovation Center
Entered By: Georgia Department of Economic Development
Early last year, General Motors purchased a 228,000-square-foot former UPS facility on Warsaw Road in Roswell, GA, with plans to convert the site into its newest Innovation Center. The auto giant’s decision to put the $26-million center in Roswell has earned the Georgia Department of Economic Development our Economic Development Deal of the Year Bronze Award.
The new Innovation Center in Roswell will be the third of four such centers the automaker is opening in the United States to strengthen its internal capabilities as part of the company’s transformation to improve performance, reduce the cost of on-going operations and increase its delivery of innovation.
GM is hiring software developers, project managers, database experts, business analysts and other IT professionals for the Innovation Center in Roswell. The company currently is recruiting and anticipates adding approximately 1,000 new employees, recent college graduates as well as seasoned professionals, over the next three to five years.
“I am immensely proud that our bright university students as well as our skilled veteran workforce are attracting innovative multinational companies such as General Motors to Georgia,” said Gov. Nathan Deal at the project announcement. “As a workforce-rich, technology-focused state, Georgia has attracted a cluster of such global innovation centers, and is ideally suited to helping GM achieve its business goals.”
“Locating this Innovation Center in [the Atlanta area] makes good business sense because we can draw from a deep pool of local talent,” said Randy Mott, GM’s chief information officer. “These Innovation Centers will design and deliver IT that drives down the cost of ongoing operations while continuously increasing the level and speed at which innovative products and services are available to our GM customers.”
Gov. Deal said the Innovation Center is “is exactly the kind of employer we want in the state.” He added: “The information age will be with us for a long time, and attracting companies such as GM that are on the cutting edge of manufacturing and technology is a huge win for Georgia.”
Project Impact Estimates
- Direct economic impact of $1.6 billion over the next 10 years.
- $601 million in new wages directly created over 10 years.
- 838 new jobs directly created in the first year; 1,237 indirect jobs.
Mott is leading a rebalancing of information technology at GM under which the majority of IT work will be done by GM employees instead of being outsourced, which has been the GM model for most of the last three decades.
“We look to the Innovation Centers to design and deliver IT that drives down the cost of ongoing operations while continuously increasing the level and speed at which innovative products and services are available to GM customers,” he said. “The IT Innovation Centers are critical to our overall GM business strategy and IT transformation.”
General Motors’ project in Georgia will generate an estimated direct economic impact of $1.6 billion over the next 10 years (with an indirect impact of $1.4 billion), producing $601 million in new wages.
GM is expected to announce the site for its fourth and final Innovation Center later this year.
Projects: IBM Tech Center (Louisiana Economic Development), Pinewood Atlanta Studios (Fayette County Development Auth.), Urban Outfitters (PA Dept. of Community/Economic Development), Toyota/Lexus (KY Cabinet for Economic Development), Subaru/Impreza (Greater Lafayette Commerce)
Every year, we get submissions from across the country for our Economic Development Deal of the Year competition. Most of these are worthy for consideration for our Gold, Silver and Bronze awards, but since there can be only three top winners on our podium, we always make space to showcase the leading contenders. Without further ado, here are the five projects our judges selected for Honorable Mention Awards in our 2013 contest.
IBM’s new technology center in downtown Baton Rouge, LA is expected to generate a direct economic impact of nearly $1 billion and create 800 new jobs. Louisiana’s thriving capital landed this jewel with an unprecedented partnership which marshalled the resources of Louisiana Economic Development, the Baton Rouge Area Foundation (BRAF), Baton Rouge Area Chamber (BRAC), Louisiana State University and the City of Baton Rouge/East Baton Rouge Parish.
“The new technology center in the Baton Rouge area has the potential to transform the region into a software development hub, which is one of our region’s targeted sectors,” said Baton Rouge Area Chamber CEO Adam Knapp. “There are so many positives to this story. The company will help strengthen our competitiveness for talent, help diversify our region’s economy, and work in a close relationship with our key partner, Louisiana State University.”
The new tech center will provide software development and software maintenance services to clients in the U.S., addressing the increasing demand for flexible software to keep up with Big Data, cloud and mobile requirements. IBM Services Center: Baton Rouge will deliver technology services including application development, application management and system integration.
A central element of the public-private partnership that secured the IBM center is the construction of a mixed-use, $55-million riverfront complex that will be developed by Commercial Properties Realty Trust (CPRT), a real estate investment trust that manages and develops property holdings of BRAF. The riverfront complex is being built on the old Advocate newspaper site.
Other key elements that sealed the deal: LSU will lead a $14-million higher ed consortium that will triple the number of computer science undergraduate degrees awarded annually; a contribution of $4.5 million from the City of Baton Rouge/East Baton Rouge Parish to support infrastructure and operating costs of the IBM facility; $29.5 million in state and local performance-based grants (to assist IBM with facility lease costs, building operating costs; workforce recruitment, relocation and internal training costs; and payroll incentives).
The burgeoning downtown development was a key factor which helped make Baton Rouge the top-ranked metro for Economic Growth Potential in Business Facilities‘ 9th Annual Rankings Report last summer.
“Louisiana’s capital has had great success in executing its strategy of bringing together business and higher education in innovative public-private partnerships that spur initiatives in new high-growth sectors,” said BF Editor in Chief Jack Rogers.
FILM INDUSTRY GROWS IN GA
Fayetteville, GA soon will be the home to a 288-acre, full-service film and entertainment studio complex. The new Pinewood Atlanta Studios resulted from a cooperative effort including Fayette County Development Authority (FCDA), Georgia Department of Economic Development, Georgia Power and Coweta-Fayette EMC.
Phase 1 of the project will consist of 100,000 square feet of purpose-built sound states, 100,000 square feet of production offices and 200,000 square feet of workshops and service provider spaces. Additional phases over the next five years will add 600,000 square feet of sound stages as well as more workshop/office space for production companies.
The Pinewood Atlanta Studios project was the culmination of more than five years of efforts to grow the footprint of the film industry in Fayette County. In 2008, the state enacted the Georgia Film Tax Credit, which provides a tax credit equal to 30 percent of in-state expenditures on film productions that spend at least $500,000 in Georgia. The tax credit (which can be monetized and sold to companies and individuals) has spurred the statewide growth of the film production in Georgia. In 2007, the statewide economic impact from film was estimated at $242 million; by 2013 this had grown to $3.5 billion.
After learning in the summer of 2012 that U.K.-based Pinewood Studios was interested in establishing a U.S. studio presence, FCDA President Matt Forshee encouraged execs from the British company to tour a 300-acre site on the west side of Fayetteville. Noting that the rolling pasture land was less than 20 miles from Atlanta’s international airport, the Pinewood team indicated it was a feasible location for their new studio complex.
Ground was broken in May and the project has proceeded ahead of schedule: Phase 1 is scheduled to be completed this month and will commence operations as home to a $200-million film production which has signed a lease for the facility. The studio currently is in talks with more than 600 potential vendors interested in locating in the complex.
Based on an economic impact study using Georgia Tech LOCI software and IMPLAN models, the Pinewood Atlanta Studios project is anticipated to create a direct economic impact of $391 million over its first five years of operation. The project will directly create 3,324 new jobs with $216 million in wages.
URBAN OUTFITTERS DECIDES TO DOUBLE DOWN IN PENNSYLVANIA
When Urban Outfitters was considering a relocation, a full-court press by an “Action Team” including the Pennsylvania Governor’s office and the PA Department of Community and Economic Development convinced the specialty retail giant to double down on its investment in the Commonwealth.
The result was a deal that not only keeps Urban Outfitters in Pennsylvania, but secures a commitment to build two new facilities—a $100-million headquarters expansion at its Philadelphia site and a new $110—million fulfillment center in Gap, PA in Lancaster County.
Putting this package together required extensive intergovernmental collaboration, as well as aggressive and innovative use of incentive programs. The project will have a direct economic impact of $210 million and directly create 2,500 jobs over the next 10 years.
A key component of the Urban Outfitters deal was the use of Pennsylvania’s Keystone Opportunity Zone (KOZ) incentive program, created in the 1990s to lure new and expanding businesses to the state. The KOZ incentive program provides tax abatements for county and township property taxes, corporate net income taxes, and school taxes for a period of 10 years.
The Urban Outfitters headquarters, in the Philadelphia Navy Yard section of the city, will expand its operations by 250,000 square feet and bring more than 2,000 creative jobs to the City of Brotherly Love. The headquarters expansion is also expected to create approximately 1,000 construction jobs.
The design of the Philadelphia headquarters expansion will begin in this year, with groundbreaking expected in 2017. The company will occupy the new building in early 2019. Upon completion, between 600 and 1,000 new employees will be hired.
A new KOZ was created to facilitate the Lancaster County project. The first phase of the project consists of a $110-million private capital investment in the new fulfillment center on a 54-acre site in Gap. The center will more than 500 direct jobs. Urban Outfitters broke ground on the 900,000 square-foot facility in November. Completion of the fulfillment center is expected in August 2015, at which time 500 employees will be hired. Within 10 years, Urban plans to construct another 1.1 million square feet of space and hire another 1,000 employees at the location.
Also drawing an Honorable Mention Award from our judges was a $530-million expansion at Toyota Motor Manufacturing’s mammoth automotive assembly plant in Georgetown, KY.
Gov. Steve Beshear and Toyota officials announced in April that the Georgetown plant would be the site of the first-ever U.S. production of a Lexus. The ES 350 is the Lexus brand’s top-selling sedan worldwide.
The Georgetown facility will produce about 50,000 Lexus vehicles a year starting in 2015. The expansion for Lexus entails a $360 million investment and will create 750 new jobs. Toyota is investing an additional $171.2 million in other plant refurbishments. The investment is the second largest ever made by Toyota in its Georgetown plant, and the largest since the $800 million addition of Plant 2 in 1991. The Kentucky site, which opened in 1986 and is Toyota’s largest plant outside of Japan, already makes Camry, Camry Hybrid, Avalon, Avalon Hybrid and Venza models and employs more than 6,500 people.
The state pursued the project from multiple fronts. A key component was legislation that Gov. Beshear’s administration developed to lure Lexus ES production from Japan to the Commonwealth: the Kentucky Jobs Retention Act (KJRA) is an incentive program designed to spur job creation and significant investments in Kentucky’s automotive and parts-manufacturing facilities. The program originally was designed to encourage a huge investment and job growth by Ford in Louisville, but Gov. Beshear and the state legislature expanded the KJRA to make it accessible to companies like Toyota. All told, the Kentucky Economic Development Finance Authority preliminarily approved the company for tax incentives up to $146.5 million through the KJRA.
Gov. Beshear then met with top Toyota officials during an economic development visit to Japan in November and urged them to add Lexus production to Georgetown. Kentucky officials knew the Georgetown facility would have to meet some of the most exacting quality-control standards in the industry to win the Lexus line. “Toyota separates Lexus production from its other production,” said Larry Hayes, Secretary of the Kentucky Cabinet for Economic Development. “So all the Lexus employees have to be trained to higher standards. And all their suppliers have to go on the same basis.”
With that in mind, the Cabinet worked with the Bluegrass Community and Technical College to develop a new satellite campus, where the new Lexus employees will receive specialized training. The new campus, just down the road from the Toyota plant, also will be available for other Toyota training, supplier training, and more generalized classroom work in manufacturing.
LAFAYETTE LANDS IMPREZA LINE
A joint effort by Greater Lafayette (IN) Commerce, the City of Lafayette, Tippecanoe County and the Indiana Economic Development Corp. garnered an Honorable Mention Award for its success in persuading Subaru of Indiana Automotive (SIA) to invest $400 million to build the Subaru Impreza at its Lafayette facility. The project will create 500 new jobs and yield an estimated direct economic impact of more than $1.8 billion over the next 10 years.
“We are proud that Indiana will be home to the continued investment of a world-class company like Subaru,” Gov. Mike Pence said. “With our competitive tax climate, strong workforce and unmatched infrastructure, the world recognizes that the Hoosier State is open for business.”
The SIA expansion announcement spurred a series of supplier expansions in the Greater Lafayette area, including the expansion of Heartland Automotive, which makes interior parts for Subaru. Heartland will be doubling the capacity of its Lafayette facility to meet demand from the Impreza line. Heartland’s $19-million investment will create 225 new positions. Construction of the planned expansion at Subaru’s Lafayette plant is slated to begin this spring and is expected to be completed by the end of 2016. Construction continues on a $75-million expansion project announced in May of 2012, which is increasing SIA’s capacity from 156,000 to 180,000 Subaru units annually without overtime. Therefore, SIA will be investing close to $500 million since 2012 the Lafayette plant.
Ivy Tech Community College, Greater Lafayette Commerce and WorkOne have established an Advancing Manufacturing Program in 2012 to assist in workforce training. The program offers scholarships to individuals to achieve their Certified Production Technician Certification, a qualification that most manufacturing employers in
Business Facilities congratulates all of the winners in our 2013 Deal of the Year competition. Nominations are now being accepted for future consideration here.
Picking The Winner
The 2013 Economic Development Deal of the Year recognizes the locations and economic development agencies that landed the highest-impact projects announced between July 1, 2012 and the entry deadline of December 1, 2013.
For the purposes of this award, an “economic development deal” is defined as:
- A project or effort that resulted in the relocation/expansion of a company to a location served by the entering organization;
- A project resulting in the expansion of a company already within the territory served by the entering organization;
- A project or effort that resulted in the demonstrable retention of a company that would have otherwise left, in whole or in part, the territory served by the entering organization;
- Any combination of the above.
Nominees were required to provide official economic impact numbers produced by the RIMS II, IMPLAN or REMI certified analysis methods, including direct, indirect, and induced figures for economic output, job creation and capital investment when available, as well as anticipated new wages; and a narrative explaining how the deal came together, including details on regional cooperation, innovative incentives and training programs in partnership with higher education resources, where applicable.
Judges evaluated the narrative and the economic impact numbers and gave each project a score ranging from zero to 100. The highest rated entry is our Gold winner and is considered our official Economic Development Deal of the Year; the second, third and fourth place entries win the Silver, Bronze and Honorable Mention awards, respectively. The awards were announced on our website, www.businessfacilities.com, in January.
Philip Anderson, PhD
President and CEO
P.W. Anderson & Partners
Hickey & Associates
Dickinson Consulting Group
Strategic Development Group
Deloitte Consulting LLP