BUSINESS REPORT: Job Creation Efforts are Buzzing in the Beehive State
By Donna Clapp
From the May/June 2012 issue
In January 2012, Business Facilities named Utah “State of the Year” for its aggressive economic development strategy. Apparently we aren’t the only ones who noticed Utah’s stellar economic performance in the past few years. In April, the American Legislative Exchange Council (ALEC), released it’s annual “Rich States, Poor States” economic outlook and once again, for the fifth year in a row, Utah was named the Top State For Economic Outlook.
“I’m absolutely thrilled,” says Gov. Gary Herbert. “My vision statement for the State is ‘Utah will lead the nation as the best performing economy and be recognized as a premier global business destination.’ When we are ranked at the top in studies like ‘Rich States, Poor States,’ I am confident we are well on our way to accomplishing that goal. It’s great to know we are on the right road, headed in the right direction, and that others are noticing”.
UTAH FAST FACTS
- Population (2010): 2,763,885
- Largest Cities (2010): Salt Lake City, 186,440; West Valley City, 129,480; Provo, 112,488; West Jordan, 103,712; Orem, 88,328
- Targeted Industries: Aerospace & Aviation, IT, Defense & Homeland Security, Energy/Natural Resources, Outdoor Products & Recreation
- Key Incentives: Rural Fast Track, Industrial Assistance Fund, Energy Development, Motion Picture
- Incentives, Economic Development Tax Increment Financing
- GDP (All Industry 2010): $114 billion*
*Bureau of Economic Analysis, U.S. Department of Commerce
The “Rich States, Poor States” analysis uses 15 variables to evaluate the State’s potential economic outlook, including tax rates, tax burdens, number of public employees, minimum wage and more.
Utah’s economy is performing well overall, with the unemployment rate dropping to 5.7% after the state added 30,300 jobs in January, raising the total wage and salary employment to 1,207,400, according to a report from the Utah Department of Workforce Services released March 2, 2012. That rate has fallen each month since August, when it was 7.6 percent.
High Speed, High Tech
Utah has a long and distinguished history in the high-tech industry, especially in the burgeoning data center, software, IT cluster. The technology industry employs over 76,000 Utahns with an average annual salary that is 62% higher than the statewide average nonagricultural wage. Utah’s well-developed information technology industry includes such major employers as Intel, Iomega, IM Flash, Twitter, Microsoft, Micron, Novell and L3 Communications. Oracle, another major player in Utah’s high-tech industry, operates a 4,000-server data center for world-wide product and operations support. Siebel Systems, a recent relocation to the state, has successfully relocated many of its senior IT staff from California to Utah. In fact, in the past year Adobe and e-Bay both announced major expansions that will create 1,000 new jobs for Adobe and 2,200 jobs for E-bay!
When it comes to data centers in particular, one of the factors that puts Utah ahead of the pack is its Internet speed. The Beehive State was recently ranked forth in the nation for Internet speed, above all other Western States, according to Akamai Technologies’ most recent “State of the Internet” report, a quarterly comparison of average internet speeds of states across the U.S.
Internet speed and infrastructure are crucial components of Utah’s position in economic development, technology, and education climates. Several studies even suggest a correlation between broadband access and lower unemployment rates.
“Utah was the only inland western state to be highly ranked,” says Tara Thue, manager of the Utah Broadband Project at the Governor’s Office of Economic Development (GOED). “Given Utah’s large concentration of rural land, this ranking says something significant about our progress in distributing high-speed access throughout the entire state.”
The Utah Broadband Project launched in 2010 and aims to map available broadband services in the State. The mapping data is used to identify gaps in service and will be used by policymakers and leaders to develop a statewide plan to make broadband access available to all Utahns. Over 45 broadband service providers have willingly partnered with the Project to supply data and information for the map. Utah sits astride a major east-west line of the Internet “backbone,” with 10 major service providers delivering high-speed services to the area.
“Twenty-first century business runs on high-speed Internet, and we appreciate the support and cooperation of broadband service providers throughout Utah, which has been critical to the success of the Project. This kind of partnership with teamwork and collaboration between government and the private sector is why Utah continues to be recognized as the best place for business and careers,” says Spencer Eccles, executive director of GOED.
Onward and Upward
Utah continues to attract the interest of the world’s leading high-technology companies, as is proven by some of these recent expansions. In December, the GOED, announced plans to help support Hexcel’s plans to expand its existing Utah operation in several increments over the next decade, resulting in a potential of up to a 100% increase in its West Valley City workforce.
“I am very pleased Hexcel has chosen to undertake this major expansion of its already considerable presence in our state,” said Gov. Herbert at the announcement. “This expansion is a testament to Utah’s position on the leading edge of the advanced composites industry, and it will be a major boost to our efforts to accelerate private sector job creation.”
Hexcel has advanced composite facilities around the world and is one of the country’s largest producers of carbon fiber and carbon fiber prepregs. The company’s current facility in West Valley City is one of its largest U.S. operations.
Advanced composite materials are currently a big focus in Utah’s aerospace and defense sector. Carbon fiber and similar materials are used in products ranging from lightweight, high-impact body armor and rockets to high-end sports cars and recreational products. As an example of Utah’s critical mass of companies working in the industry, Hexcel products are the first step in a local supply chain that ultimately produces structures for large and small commercial airplanes, as well as key space and defense programs like the V-22, the F-35 and the C-17.
“Utah’s strength in the composite engineering cluster has resulted in industry leading, world-class companies choosing our state over competitive global cities in Europe and Asia,” said Jeff Edwards, president & CEO of the Economic Development Corporation of Utah (EDCUtah), who has worked with Hexcel to facilitate several expansions over the last 20 years.
The GOED board of directors approved a one-time, post-performance EDTIF refundable tax credit of $7,767,961 over the 10-year life of the project. Hexcel Corporation expects to hire as many as 600 new employees during that time, with wages above 125% of the Salt Lake County average salary including benefits. Hexcel plans to make significant capital investments for the expansion over the life of the incentive and the State is expected to gain as much as $30 million in new state revenue.
L-3 Communications, a high-tech multinational corporation with operations in Utah, also announced major expansion plans in December.
“I cannot think of a better place to do business,” said Susan D. Opp, President of L-3’s Communication Systems-West during the announcement. “Utah has the combination of a skilled, well educated work force, excellent quality of life options, and state and local governments that promote business growth. That is why our operation has continued doing business in Utah for over 50 years.”
L-3 Communications, which has operations in eight countries and 20 U.S. states, is a prime contractor in command, control, communications, intelligence, surveillance and reconnaissance (C3ISR) systems, aircraft modernization and maintenance, and government services. Its Utah division, Communication Systems West, provides network engineering, software integration, hardware manufacturing, and test support services for the Defense market.
L-3 began the process of hiring up to 500 new workers as it expands its current facility in Salt Lake City at the beginning of this year. Those workers are paid salaries that exceed 125% of the Salt Lake County average wage. The company expects to pay nearly $390 million in new state wages over the 10-year life of the expansion project.
The GOED board of directors approved a one-time, post-performance EDTIF refundable tax credit of $5,526,682 over the 10-year life of the project. L-3 Communications has committed to hire up to 500 new employees at 125% of the Salt Lake County average wage, and will pay nearly $390 million in wages, while the State will gain over $22 million in new state revenue over the same period. L-3 estimates that it will invest approximately $6 million in capital for improvements related to the expansion in the near term.
And in the past month Xactware Solutions Inc. announced plans for a major expansion of its headquarters and operations in Utah. The company and GOED revealed plans for 859 new full-time positions with full benefits to be created over a 20-year agreement.
Xactware Solutions provides software and services for professionals involved in estimating all phases of building and repair. Insurance companies use Xactware products
to estimate the replacement cost of insured buildings, to immediately send assignments to professionals when a building needs repair, to estimate the cost of repairs, to analyze performance and improve customer service. Contractors, specialty service providers and other professionals use Xactware products to estimate, document, analyze and manage rebuilding work.
“Xactware has experienced phenomenal growth by tapping into Utah’s hard-working and intelligent high-tech workforce,” says Jim Loveland, Xactware’s president and CEO. “We’re pleased to be able to continue our growth and build on the strength of our Utah roots.”
The company will make a $130 million capital investment in a new facility and infrastructure to house its Utah employees. Over the life of the agreement the company will pay over $756 million in new State wages and $129 million in new Utah tax revenue. As the company completes this expansion, over the years, it will qualify for a maximum post-performance EDTIF tax credit of up to $32,262,990 over the life of the agreement.
Growth Across the Board
Xactware was just one of four companies that announced new expansions in May. The GOED approved four companies’ business growth incentives expected to bring 1,133 new jobs and more than $160 million of capital investment to the Beehive state over the coming years. Each company plans to pay wages in excess of 125% of the county average wage in which it eventually locates.
The successful effort to secure the growth of the companies announcing expansion in Utah was brought about through the close collaboration of GOED, The Economic Development Corporation of Utah (EDCU) and local community leaders.
“Collaboration and cooperation is a part of our ‘secret sauce.’ Each of these companies is a leader in its industry, and Utah is stronger today because each one has made the commitment to grow its workforce well into the future,” says GOED Executive Director Spencer Eccles.
Peterbilt of Utah will be adding 50 new full time employees over the next five years and each position will include full benefits. The company, which sells Peterbilt trucks, parts, and services from its dealership locations in Utah, Idaho, Colorado, and Nevada, will be paying out $43.6 million in wages during that time.
“After 35 years on 3rd West, the Jackson Peterbilt Group of Companies is excited to move its headquarters to 2100 South in Salt Lake City in 2013. The new flagship store will double the size of our current facility and office all support staff for our 10 other dealerships in Utah, Idaho, Nevada and Colorado. We express our sincere thanks to the State and city leaders that have the vision and forethought to encourage this type of growth. Their support has been pivotal in our decision to expand.”
In order to support its expansion Peterbilt of Utah will invest $12 million in capital improvements and will pay $2.5 million in new state tax revenue. The agreement with GOED as approved will offer the company a post-performance tax credit of $518,138 based on the company payment of its corporate income, payroll and sales taxes paid over the five year period of the agreement.
Schiff Nutrition International, Inc., a leading nutritional supplement company with headquarters, and manufacturing and distribution facility are based in Salt Lake City, expects to invest approximately $1.5 million in growth capital in Salt Lake City over the next several years.
During its six-year agreement with the State, Schiff will receive a $308,186 blended EDTIF post-performance tax credit for adding up to 100 new employees with full benefits. These new positions would add approximately $17.6 million in new state wages. Additionally, Schiff will receive post-performance training funds of up to $300,000 in a joint agreement with the Department of Workforce Services and GOED to extend job training for up to 300 of its current employees.
Data Cluster Grows Out West
• Utah has 13 data centers in operation for regional and national companies including disaster relief and hot back-up sites.
• The Wasatch Front sits astride a major east-west line of the Internet “backbone,” with 10 major service providers delivering high-speed services to the area.
• Isolated geographically, Utah provides higher overall security and less vulnerability to natural disasters. Utah has a low incidence of tornadoes and floods. The Wasatch Front is in Seismic Zone 3, which has a low frequency of earthquake activity.
• Utah’s growing information technology industry features major employers including IM Flash, Twitter, Microsoft, Micron, Novell, Oracle and L3 Communications. Oracle is developing a 4,000-server data center for worldwide product and operations support near Salt Lake City.