Louisiana: State of the Year
Refusing to bow to a plague of disasters—including a hurricane, a huge oil spill and a national economic downturn—Louisiana responds with a diverse, innovative growth strategy.
Louisiana has had more than its share of disasters in recent years. In 2005, New Orleans and surrounding environs were devastated by Hurricane Katrina; in 2009, a fiscal tsunami ripped across the U.S. in the wake of an historic economic collapse engineered by the high rollers on Wall Street; last year, Louisiana had to cope with the dual disasters of the explosion of BP’s Deepwater Horizon drilling platform (which produced the largest oil spill on record) and a federal moratorium on offshore drilling in the Gulf of Mexico that temporarily put workers in one of the state’s largest industries on the unemployment line.
Any one of these catastrophes had the potential to bring the state to its knees. But Louisiana refused to bow in the face of unparalleled adversity. The Bayou State did more than just remain standing—it continued to surge forward with a diverse and innovative economic development strategy that has earned it Business Facilities’ top honor in our 2010 awards: Louisiana is our State of the Year. Runners-up included Texas, Tennessee, Utah and South Carolina.
To winnow the candidates for our State of the Year selection, we ask each state to list its top projects in the past 12 months, in terms of maximum job-creation potential and largest investment.
Louisiana’s submission was an impressive mix of traditional and high-tech manufacturing, exhibiting a diversity that underscores the state’s highly successful strategy and the creativity being deployed to secure that success, including an aggressive program of innovative incentives.
NUCOR BRINGS A BOUNTY OF NEW JOBS TO ST. JAMES
Leading off was one of the biggest projects in the U.S. last year, Nucor Corp.’s decision to build its new $3.4-billion multi-phase iron and steel plant in St. James Parish. The project, which snared the Bronze award in our 2010 Economic Development Deal of the Year contest [see page 14], is expected to create more than 6,000 jobs for the region that took a direct hit from Hurricane Katrina.
According to Louisiana Economic Development Secretary Stephen Moret, the Nucor project is one of the most significant developments in Louisiana’s history. The new iron and steel plant is expected to generate an overall economic impact in the region of $7.9 billion in the next two decades. “In terms of capital investment, jobs, tax revenues and the overall signal it sends about Louisiana’s economic momentum, Nucor’s decision is one of the most significant wins in our state’s history,” Moret said.
Nucor has secured 4,000 acres along the Mississippi River in St. James Parish for the project, including 172 riverfront acres it purchased from the Port of South Louisiana.
LED developed an incentive package for the project that includes $160 million in performance-based grants and loans for land, infrastructure and equipment; a 20-year local property tax exemption; cash rebates for each new hire from Louisiana Quality Jobs Incentive; rebates on sales tax relating to construction costs; and a $600 million tax-exempt Gulf Opportunity Zone bond allocation from the State Bond Commission.
Other big job-creating initiatives in Louisiana’s State of the Year submission included a wind-turbine manufacturing facility; the relocation of the headquarters of a satellite/telecom giant; a marine fabrication installation; and an aircraft maintenance facility.
The Blade Dynamics deal was the result of quick action by the state in finding a new use for Michoud when Lockheed Martin Corp. ended its production of external fuel tanks for the space shuttle program [the last shuttle mission will take place later this year, after which NASA will retire the shuttle fleet]. At the height of the shuttle program, about 5,000 people were employed at the NASA site in New Orleans building tanks. Michoud was expected to play a major role in Constellation, a program to carry astronauts back to the moon and perhaps eventually Mars, but the Obama Administration scrubbed that plan.
Shortly after Devens, MA-based American Superconductor Corp., which builds equipment for power generators and utilities, acquired 25 percent of Blade Dynamics for $8 million last year, American Superconductor accepted Louisiana’s offer of space at the NASA Michoud complex. Dow Chemical Co., through its venture capital unit, also made a small equity investment in Blade Dynamics, which was founded in Great Britain in 2007. Blade Dynamics has developed designs to increase the efficiency and performance of high power wind turbines to generate power on a larger scale.
The advanced wind turbine facility is expected create up to 600 new jobs. The state is providing an incentive package of up to $30 million that will be based upon meeting capital investments and job creation standards. Gov. Bobby Jindal called the turbine blades plan “a huge economic win for New Orleans and our whole state.”
Globalstar, the satellite telecom player, will relocate its headquarters from Silicon Valley to Covington, LA, bringing more than 560 jobs to the state. Performance Energy Service plans to construct a five-acre topside deck and marine repair yard at the Port of Terrebonne. Aeroframe Services, one of the state’s largest private-sector employers, will expand its aircraft maintenance, repair and overhaul facilities.
Among the major capital investments that helped propel Louisiana to the top of our state honors were Valero Energy’s plan to undertake a $700-million expansion of its Norco refinery in St. Charles; Exxon Capital Venture’s $1-billion investment in an expansion of its Baton Rouge refinery and chemical facility; a $300-million upgrade of the Georgia-Pacific paper mill at Port Hudson; and a $700-million expansion of Westlake Chemical’s petrochemical manufacturing facilities, including construction of a new chlor-alkali plant.
STATE STRATEGY TARGETS FOUR HIGH-TECH GROWTH SECTORS
In addition to impressive job creation and capital investment, the growth potential and diversity of Louisiana’s economic development strategy were key factors in our 2010 State of the Year selection.
While Louisiana scored a major coup by securing the Nucor steel plant and continues to expand its leadership position in the oil and gas sector, the state has tied its overall strategy to major initiatives in four high-tech growth sectors, including alternative energy, components for a resurgent nuclear power industry, digital media and advanced manufacturing (which the state defines as “sustainable manufacturing”).
The nationwide push for renewable energy has reactivated the dormant U.S. nuclear power industry, spurring a race to lower the cost of new nuclear power plants and speed the construction process. Many utilities are planning to build new nuclear plants utilizing a modular construction pioneered by Westinghouse Electric.
Louisiana is already well ahead of the curve in garnering business from the revived nuclear industry. Global Modular Solutions, a joint venture between Baton-Rouge-based Shaw Group and Westinghouse, is constructing a first-in-the-nation modular nuclear component plant at the Port of Lake Charles, LA. Shaw, a leading structural steel fabricator and the largest pipe fabricator in the U.S., will produce structural, piping and equipment for nuclear plants in a 600,000 square-foot module fabrication facility on a 300-acre site in Lake Charles. The Lake Charles facility, expected to employ more than 1,400 workers, also is being configured to build modules for the petrochemical industry.
“After an extensive search of potential sites, the Port of Lake Charles was chosen because of its deep water access, its proximity to other important modes of transportation and the availability of a skilled workforce. The state of Louisiana also offered a very competitive incentive package that will help us continue to create value for our shareholders,” said J.M. Bernhard Jr., Shaw’s chairman, president and CEO.
Based on current estimated requirements for these modules, the facility will employ more than 1,400 workers when it achieves full capacity.
The Greater New Orleans area has established itself as a hub for advanced manufacturing. Within hailing distance of Michoud are Northrop Grumman’s Avondale shipyard, Bollinger’s ship building and repair facilities and two of Textron’s manufacturing operations, including a Marine & Land unit based in Slidell which produces a variety of armored vehicles for the U.S. Army. Nearby in New Iberia, Dynamic Industries designs and fabricates drilling technologies the company says have reached depths 400 feet deeper than competing technologies.
The Louisiana Optic Network Initiative (LONI) is a state-funded fiber optics network that is connecting Louisiana-based research institutions (including NASA operations at Michoud) with local universities through National LambdaRail and Internet2 connections. With LONI, researchers have access to one of the most advanced optical networks in the U.S. and some of the most powerful distributed supercomputer resources available (more than 85 teraflops of computational capacity).
In Shreveport, Dr. Reddy’s Pharmaceutical Co., the second largest producer of Ibuprofen for the North American market, is undertaking a $16.5-million expansion of its manufacturing facility.
BIG PLANS FOR DIGITAL MEDIA
Building on Shreveport’s success as one of the nation’s leading motion picture hubs, the state is now setting its sights on the burgeoning digital media sector.
Since 2006, Louisiana has produced more than 300 motion pictures in a variety of genres—major and independent feature films, television series, commercials and documentaries. Total program applications increased from 88 in 2008 to 105 in 2009; local companies produced 65 percent of the films shot in Louisiana in 2009, up from 35 percent in 2008. Among the films produced in Louisiana were 2009’s Oscar contender “The Curious Case of Benjamin Button,” and two Sundance Film Festival entries, “I Love You Phillip Morris” and “The Killing Room.”
To jumpstart its efforts in the exploding digital entertainment sector, Louisiana has established a Digital Media Incentive providing a tax credit of 25 percent of qualified production expenditures for state-certified digital interactive productions in the state, and a 35 percent tax credit for payroll expenditures for Louisiana residents.
There is no annual cap on the tax incentives available through the digital media program, and these tax credits can be sold or applied against Louisiana tax liability. Louisiana’s Digital Media Incentive is available to businesses in the digital media industry that develop products including video games, simulation/ training software and social media applications. The credit does not apply to software developed for institutional, private or internal purposes; largely static Internet sites designed to provide information about a person, business, company or firm; or to products regulated under the Louisiana Gaming Control Law.
TurboSquid™, a world-renowned 3-D graphic content supplier, was the first to take advantage of Louisiana’s digital media incentive. Since then, a growing community of game developers have set up shop in Louisiana, including Yatec Games, Nerjyzed Entertainment Inc. and Dream Forge. Louisiana was ranked third in the nation for high-tech job wage growth by TechAmerica’s 2010 Cyberstates Report.
LOUISIANA: GOLD STANDARD FOR WORKFORCE TRAINING
In addition to the cultivation of new growth industries, Secretary Moret has established a list of priorities for Louisiana Economic Development (LED) including business retention, small business development, relocation of corporate headquarters to the state and customized work force development solutions, including improving linkages with higher education.
In our 2010 State Rankings Report, Louisiana grabbed the top ranking in our new Workforce Training Leaders category with its FastStart workforce development program, which provides workforce recruitment, screening and training to new and expanding companies—all at no cost.
Louisiana’s innovative and customized programs are available to companies that meet eligibility requirements and are aligned with the state’s economic development targets, including digital media, headquarters and business operations, service industries, advanced and traditional manufacturing, warehouse and distribution and research and development.
To qualify, a facility must first commit to creating a net of at least 15 new, permanent manufacturing jobs, or a net of at least 50 new, permanent service-related jobs. Service industries, headquarters and business operations, and warehouse and distribution companies also must have a majority of sales out of state. Each request is evaluated prior to project commencement to ensure all eligibility requirements are met.
Louisiana FastStart’s partners include the Louisiana Workforce Commission, the Louisiana Community and local colleges and universities—a unique model that enables streamlined, efficient pre-employment training, and access to a network of adult education resources.
THE FUTURE LOOKS BRIGHT
Louisiana’s diverse and innovative growth strategy has moved it to the front ranks of states that have defied the national economic downturn.
In December, LED announced that Manpower Inc.’s Employment Outlook Survey indicated Louisiana employers expect to hire at an “active pace” during the first quarter of 2011. In fact, Manpower stated Louisiana’s statewide employment outlook is the nation’s best for the first quarter of 2011, and the Baton Rouge metro area’s employment outlook is the best in the country for a metropolitan statistical area, or MSA.
Specifically, about 21 percent of Louisiana employers expect to hire more employees, compared to the U.S. average of 14 percent. In addition, seven percent expect to reduce their payrolls significantly less than the U.S. average of 10 percent. Louisiana’s Net Employment Outlook, as estimated by the Manpower survey, is +14 percent, which is significantly better than the national outlook of +4 percent.
“Since the beginning of the national recession, Louisiana’s economy has outperformed the South and U.S. by any reasonable measure,” said Louisiana Economic Development’s Moret.