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COVER STORY: State of the Year – Tennessee

Gov. Bill Haslam announcing Eastman Chemical’s $1.6-billion expansion in Kingsport, TN.

By Business Facilities Staff
From the January/February 2014 issue

Tennessee has been named Business Facilities’ 2013 State of the Year. The Volunteer State, which also won our top honor in 2009, joins Texas as the only multiple winner in the annual competition since the award was created in 2007 (the Lone Star State won in 2012 and 2007). Runners-up in the 2013 competition included Utah, Texas, Louisiana, Georgia and Pennsylvania.

“Tennessee continues to impress us with its aggressive execution of a diversified growth strategy,” said BF Editor in Chief Jack Rogers. “The state has put in place a solid foundation for robust job creation for years to come.”

Tennessee nailed down the 2013 crown with a solid mix of top projects that created 6,900 jobs and lured millions in investments from overseas producers for new and expanded U.S. manufacturing facilities. The state snared the top prize from South Korea, tire producer Hankook’s first U.S. plant [the Silver Award winner in our 2013 Economic Development Deal of the Year competition], an $800-million investment that will bring 1,850 jobs to Clarksville-Montgomery County over the next five years.

The Hankook Tire plant is one of a series of recent developments that have reinforced Tennessee’s status as BF‘s top-ranked state for Automotive Manufacturing Strength, a crown it’s held for four consecutive years. Nissan added 900 workers in Smyrna, TN to produce the popular Rogue SUV crossover, and Alcoa is pouring $276 million to double capacity at its Blount County facility to meet growing demand for aluminum sheet in the automotive sector.

Tennessee’s burgeoning automotive industry includes 910 companies, employs more than 113,000 workers and has an economic impact of more than $31 billion. “The Hankook and Alcoa commitments show that Tennessee is building a world-class supplier network to fuel the steady growth of its automotive assembly operations,” Rogers noted.

Other recent developments point to Tennessee’s success in diversifying and expanding its growth sectors: Eastman Chemicals is doubling down on its Kingsport, TN operation with a $1.6-billion investment; in Nashville, ARAMARK is opening a new facility that will create 1,500 jobs, while Swiss-based UBS is adding 1,000 jobs to its existing operation.

The Volunteer State’s strong across-the-board showing in BF‘s 2013 Rankings Report also factored into its State of the Year triumph. In addition to retaining its automotive crown, Tennessee notched top 10 finishes in Best Business Climate, Best Infrastructure, Renewable Energy Leaders (Power Generation) and Best Education Climate. Memphis, TN was our top-ranked air-cargo hub and finished in the top 10 for Lowest Cost of Living.

Tennessee earned BF‘s 2009 State of the Year honors after landing some of the most hotly contested economic development projects of the past decade, including Volkswagen’s decision to put its new North American assembly facility in Chattanooga, and $3 billion worth of investments in plants to produce polysilicon, the raw material for solar panels and semiconductors.

Becoming the largest tenant at the Clarksville Corporate Business Park, Hankook Tire plans to build its facility on 469 acres. Construction is scheduled to begin in 2014 and will result in a 1.5-million-square-foot advanced manufacturing facility which will produce high-end performance tires.

“This is a perfect example of the extraordinary opportunities that are created when all levels of government—state, city and county—work together in collaboration with the private sector and economic development agencies. I appreciate the support we’ve received from the governor and his team, and we look forward to creating more of these opportunities for our community,” Clarksville Mayor Kim McMillan said.

Tennessee also has aggressively pursued growth in its auto parts and supplier sector. HP Pelzer Automotive Systems recently announced the company will locate a new 185,000-square-foot manufacturing facility at the Mt. Verd Industrial Park in Athens, TN. HP Pelzer, a supplier of automotive acoustic and interior trim parts, will create 200 jobs and invest $28 million at the McMinn County facility.

Automotive components supplier Meiwa Industry announced last summer it will open its first U.S. plant in Lewisburg, TN, an investment of $6.1 million that will create 98 new jobs in Marshall County.

“Tennessee continues to prove it’s a great place for a global company’s operations, with our central location, strong transportation infrastructure and business-friendly climate,” TN Economic and Community Development Commissioner Bill Hagerty said.

Meiwa Industry President Toshihiko Shimizu said the company “looks forward to providing lightweight, high-rigidity and eco-friendly interior parts for car manufacturers throughout North America” from its new Tennessee production facility. The company is a supplier to Nissan, Toyota and Honda, among others. Along with establishing a base for North American operations, the Lewisburg facility will allow Meiwa Industry to eventually extend its services to other carmakers in the future. The new plant is projected to begin operations in April.

DIVERSIFIED SERVICES AND MANUFACTURING SIDE BY SIDE

The new ARAMARK Business Services Center in Nashville represents an investment of approximately $20 million in Davidson County.

“ARAMARK’s decision to launch a new business services center in Middle Tennessee underscores Tennessee’s momentum in job recruitment that is unmatched in the Southeast,” Commissioner Hagerty said in a statement announcing the project.

The Volunteer State is always on the lookout for opportunities to diversify its manufacturing base, as evidenced by Gov. Bill Haslam’s recent announcement that Beretta U.S.A. will expand its U.S. operations by building a new firearms manufacturing plant in the Gallatin Industrial Park. Beretta, a global manufacturer of firearms, will invest $45 million in a production and research facility, creating 300 new jobs in Sumner County. Beretta is the world’s oldest manufacturing dynasty, operating since 1526 in Italy. The company is privately owned and operated by members of the 15th and 16th generations of the Beretta family.

“From the moment when we started to consider a location outside of Maryland for our manufacturing expansion, Gov. Haslam and his economic development team did an excellent job demonstrating the benefits of doing business in Tennessee,” said Franco Gussalli Beretta, executive vice president Beretta U.S.A. Corp.

The company is expected to complete construction on the facility this year and will make firearms at the new Gallatin plant for both their sporting and tactical product lines.

RACING TO THE TOP IN EDUCATION

Tennessee was awarded $501 million in education funding in the first round of the federal Race to the Top (RTTT) program—the first of two states selected to receive RTTT funding, with an allocation that puts it in the top tier of states (getting more than $300 million in funding) in the fiercely competitive U.S. initiative. RTTT is a competitive grant program intended to encourage and reward states that are “creating conditions for innovation and reform.” Qualifying states must adopt standards and assessments that prepare students to succeed in college and the workplace so they can compete in the global economy; build data systems that measure student growth and success; and recruit, develop, rewards and retain effective teachers and principals, especially where they are needed most.

One year after the initial RTTT grant, Gov. Haslam and the TN Department of Education chaired a roundtable assessing the state’s benchmarks for progress in what TN calls “First to the Top.”

“Race to the Top has made Tennessee the focal point of education reform in the nation, and I am thankful to those who worked so hard for this incredible opportunity,” Gov. Haslam said. “We are in a position to bring real reform to our schools, and I am very encouraged about where we are and where we are going.”

Since being awarded $501 million, the state and local school districts have begun executing a dramatic set of school reforms. At the heart of improving student achievement is a focus on three main student performance goals: young students’ academic readiness, high school graduates’ readiness for college and careers, and higher rates of graduates enrolling and succeeding in post-secondary education.

Key action points in TN’s First to the Top plan have included:

  • Re-engineering Tennessee’s accountability system, revamping tenure expectations in connection with a new teacher and principal evaluation system, and refocusing education opportunities through changes to charter school laws.
  • Establishing and emphasizing STEM (science, technology, engineering and math) education across the state through the focus of the STEM Innovation Network.
  • Renewing the focus on the classroom teacher and a more dedicated focus on encouraging student achievement.
  • Building support and creating success for students through increased professional development opportunities for educators such as Value-Added Data Specialists, formative assessment practices training, and online course availability.

“We all understand that it is our responsibility to make certain we are moving toward better outcomes for students,” Haslam said. “Tennessee’s best long-term job growth strategy is to improve the education we offer Tennesseans and ensure they are prepared to compete in the 21st Century workforce.”

The TN Department of Education also has launched TNLEAD Leadership Grants. The purpose of these Leadership Grants is to fund partnerships that develop or replicate innovative and high-impact programs aimed at increasing leader effectiveness and improving student outcomes. These programs can target pre-service or current educators.

The TN Department of Education will fund Development and Replication grants between a range of $250,000 and $1 million per grant depending on the number and quality of proposals.

WORLD-CLASS INFRASTRUCTURE

Chattanooga, TN is proud to call itself America’s first “Gig City,” a title it secured with an ambitious initiative to provide everyone in the city with access to world-class high-speed broadband of one gigabyte per second.

As we recently reported in the BF Blog, technology experts are warning the U.S. is falling dangerously behind in making high-speed broadband available to a majority of American consumers and businesses. Even developing nations like Romania, Moldova and Latvia are far outpacing America, according to Ookla, the most widely cited indexer of download speeds around the globe.

Hong Kong leads the field with an average speed of 68.94 megabits per second (Mbps). Singapore (59.29), Romania (56.94), South Korea (48.64), Japan (41.78), Macau (40.76), Lithuania (39.85), Sweden (39.46), Netherlands (38.92) and Taiwan (36.96) round out the top ten Net speedsters. America does not take a bow until 32nd place on the index, averaging 20.55 Mbps, a relative snail’s pace compared to the fastest services available globally. Ookla’s index is a rolling mean throughput in Mbps over the past 30 days where the mean distance between the user and the server is less than 300 miles.

But three metropolitan areas are showing the rest of the country how it’s done:  in addition to Chattanooga, Bristol, VA and Lafayette, LA now offer the fastest broadband speeds in the nation.

Chattanooga residents can get 1 gigabit per second service for about $70 per month. That is 50 times the average speed for homes in the rest of the country and as fast as world-leader Hong Kong. It takes 33 seconds to download a two-hour, high-definition movie in Chattanooga, compared with 25 minutes for those with an average high-speed broadband connection in the rest of the country. Chattanooga took a unique approach to building a high-speed Internet network: the city council formed a joint venture with a local power company.

According to a recent report in The New York Times, “the Gig” (as the taxpayer-owned fiber-optic network is known in Chattanooga) is driving the development of tech start-ups in the city. It is allowing tech entrepreneurs to attract new capital and talent to the region. Since the fiber-optic network switched on, former factory buildings on Main Street and Warehouse Row on Market Street have been converted to loft apartments, open-space offices, restaurants and shops and the city has welcomed a new population of computer programmers, entrepreneurs and investors, the Times reports. City officials credit the Gig with creating at least 1,000 new jobs.

EPB, the city-owned utility formerly named Electric Power Board of Chattanooga, said that about 3,640 residences are signed up for the gigabit service offered over the fiber-optic network, as well as 55 businesses. Industry analysts said the adoption of gigabyte service usually is incremental until the price point drops [in Seoul, a gigabit can be had for as low as $31 per month, primarily due to government subsidies).

While Chattanooga is forging a leadership position in 21st century infrastructure needs like high-speed broadband, Memphis, TN remains second to none as the nation’s overall logistics leader.

Memphis has consistently scored an impressive double play in BF’s annual Rankings Report, grabbing the top slot in both our Metro and Global Logistics Leaders (Air Cargo Hubs) rankings.

The FedEx global hub was placed in Memphis because of the city’s central location, the availability of the workforce, a strong relationship with the local airport authorities and generous economic incentive programs. These qualities have fueled major FedEx expansions in the Memphis area, including a facility in Collierville, TN.

Memphis has rebranded itself from America’s Distribution Center to America’s Aerotropolis™. The Greater Memphis Chamber has trademarked the name. The Aerotropolis Steering Committee has taken steps to set the city on a strategic path to redevelop the area around Memphis International Airport and other areas in the business community. John Moore, who recently stepped down after nearly 10 years as president and CEO of the Greater Memphis Chamber, says, “About 75 percent of Memphis’ gross revenue comes from the 50-square mile area around the airport. If we want to grow our economy, we need to focus on developing the areas that strengthen our business community.”

The term Aerotropolis or “airport city” was coined by UNC professor Dr. John Kasarda. But the Aerotropolis strategy in Memphis doesn’t just include the development around the airport. Memphis touts all four modes of transportation. In addition to boasting the number one cargo airport in North America, Greater Memphis has five Class-I railroads and the 4th-largest inland port.

Memphis also is a leading healthcare hub. The University of Tennessee Health Science Center (UTHSC), St. Jude Children’s Research Hospital and the region’s medical centers provide research and training at the bio-med health science research facility created by UTHSC.

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