2010 Economic Development Deal of the Year Awards

Gold Award

With a $3.6-billion expansion of Samsung’s semiconductor fabrication facility in Austin, TX, the capital of the Lone Star State has put everyone on notice that it intends to remain the top U.S. hub in the burgeoning microchip sector.

Project Title: Samsung Austin Semiconductor Expansion
Entered By: Greater Austin Chamber of Commerce

Our blue-ribbon panel of industry experts had to make some tough choices when assessing the nominees for Business Facilities’ 2010 Economic Development Deal of the Year Awards. This year’s competition—our largest field of contestants to date—featured 24 top-flight projects from 20 states. A bevy of major high-tech initiatives went head-to-head with locations enjoying a robust resurgence in traditional manufacturing, including the largest single investment in steel production in years.

The judges have spoken: this year’s top honors go to Greater Austin Chamber of Commerce, Regional Economic Development, Inc. of Missouri and Louisiana Economic Development.

The $3.6-billion expansion of Samsung Austin Semiconductor (SAS) in Texas has been selected as our 2010 Economic Development Deal of the Year Gold Award winner. The semiconductor fabrication plant project was submitted by Greater Austin Chamber of Commerce, which also credited the Governor’s Office of Economic Development and Tourism and the City of Austin for their help in sealing the deal.

SAS announced in June plans to expand its 12-inch semiconductor fabrication plant in Austin. The project is expected to create up to 7,600 direct and indirect jobs for the Austin Metro Area. The new investment in the Austin fab builds on $5.6 billion the Korean tech giant has previously committed to the SAS facility over the past 14 years, bringing the total investment to approximately $9.2 billion.

The company said it would increase employment at the plant from 1,000 to 1,600 by 2011, with annual payroll rising from $70 million to $112 million during the same period. Annual operations at SAS currently inject more than $800 million into the area economy annually; when ripple effects are included, SAS is responsible for more than $1.4 billion each year in local economic activity and $296 million in total worker earnings. Employment at SAS represents more than 13 percent of the Austin, TX area’s technology production base.

Almost 3,000 construction workers will be employed in the $633-million build-out of the fab expansion.

The expanded semiconductor fab will produced 45-nanometer and below microchips for Samsung’s System LSI business. The plant currently produces a variety of NAND Flash memory chips.

“Forty-five nanometer and below advanced logic applications are in high demand and respective markets are expected to show substantial growth in coming years,” said Dr. Stephen Woo, executive vice president and general manager, System LSI, Samsung Electronics.

The investment in the Austin campus will build out the second phase of the company’s 2.3-million-square-foot semiconductor complex. The first half of the building, known as Fab 2, was started in 2006 and began production a year later. In March of this year, the company established Samsung Austin Semiconductor Research Center (SARC), which will concentrate on the design of Large Scale Integrated circuits.

“This investment, along with the creation of Samsung Austin Semiconductor’s first research and development entity, ensures Austin’s premier status as a center for semiconductor research and manufacturing,” said Dr. W.S. Han, president of SAS.

Samsung arrived in Austin in 1996, when it began construction of its first plant (Fab 1), which produced chips on 8-inch wafers. Fab 1 was closed in 2009 and refurbished for 12-inch fabrication. Samsung’s investment in Austin is by far the Korean company’s largest foreign investment in Texas and one of the largest single foreign investments in the United States.

“With its success in the SAS project, Austin has thrown down a gauntlet declaring that it intends to put up a vigorous fight to maintain and expand its leadership position in the high-growth semiconductor sector,” Business Facilities Editor-in-Chief Jack Rogers said. “We congratulate the Greater Austin Chamber for a well-deserved honor as our Gold Award winner.”

The semiconductor industry has been a constant bright spot in the economic gloom that has gripped the United States since the fall of 2008. Two of Samsung’s major competitors in the U.S., Intel and GlobalFoundries, recently announced major microchip fab expansions. In October, Intel said it would invest up to $8 billion in a new fab in Arizona and the expansion of four existing fabrication facilities in Oregon and Arizona; GlobalFoundries, meanwhile, reached an agreement with state economic officials in New York on a $16 million incentive package that will enable it to add 450 workers at its $4.6 billion fab, now under construction in Malta, NY.

The general contractor for the SAS expansion project is Samsung Texas Construction Inc. Samsung Austin Semiconductor, is owned by Samsung Electronics and is the company’s only semiconductor manufacturing plant located outside South Korea.

Silver Award

Regional Economic Development Inc. grabs a “tiger” by the tail, organizing a public-private team that wins IBM’s new tech service center for Columbia, MO, creating 4,000 jobs for the region.

Project Title: Capturing the Tiger
Entered By: Regional Economic Development, Inc.

Two years ago, when IBM was searching for a site to build a new tech service center, Regional Economic Development, Inc. (REDI) of Missouri joined a queue of locations bidding for the project. REDI submitted a proposal to combine two existing buildings in Columbia, MO, but the market-lease terms weren’t favorable and Columbia did not make the short list of candidate locations. The project was awarded to Dubuque, IA, which earned the Iowa city an Honorable Mention in Business Facilities’ 2009 Economic Development Deal of the Year competition.

REDI absorbed the lessons from this defeat and was determined to have a better outcome the next time a major project materialized. The agency didn’t have to wait long. Last year, IBM decided it needed another technology service center and this time, REDI—as its acronym implies—was ready. Not only did REDI win the site selection competition, it also snared our 2010 Economic Development Deal of the Year Silver award.

When IBM announced its selection in May of Columbia as the site of its new technology service delivery center, it validated the efforts of a public-private partnership between the city, county, state, private business and many of the region’s colleges and universities.

REDI and its development partners, including the Missouri Partnership, the city of Columbia and Boone County, MO, called their hunt for IBM’s high-tech project “Capturing the TIGER.” In terms of the scope of the project, they weren’t exaggerating: the new IBM service center is expected to generate a direct and indirect economic impact in the region of more than $5 billion in the next 10 years.

In addition to the 986 jobs that will be created in the near term by the tech service center, nearly 3,000 indirect or induced jobs will materialize in the coming decade to support the IBM facility. The average annual salary at the center will be $50,000 (compared to the county average of about $36,000), creating about $77 million in new wages. Also, since a majority of revenues in Columbia and the county are generated by sales tax, the facility is expected to create an influx of new operating revenues for the local government in a region with a population of almost 6 million.

“We selected Columbia for our newest facility based on several criteria, including the strong public-private partnership with the state and city, a competitive business model and the talent and skills that Missouri and the Midwest have to offer,” said Tim Shaughnessy, senior vice president, Service Delivery, IBM Global Technology Services.

Business Facilities’ blue-ribbon panel of judges cited the extraordinary level of cooperation exhibited by the public-private partnership as a key factor that elevated the IBM project to the top tier of this year’s award winners.

According to REDI Board Chairman Dave Griggs, the economic development organization first learned of IBM’s interest in January through the Missouri Partnership. A development team was quickly organized to mount a full-court press for the site selection competition.

“There has been an incredible amount of work and extraordinary cooperation between the city, the county, the state, our educational partners, private businesses and IBM to make [this project] possible,” Griggs said.

The project posed numerous challenges for Columbia and its partners. In order to offer an existing building as an incentive, the city needed to purchase a building from a trust, transfer ownership to the recently created Columbia Area Jobs Foundation, and convince IBM that it could convert an aging structure in an industrial/business park into a state-of-the-art tech facility under an extremely aggressive completion schedule—construction was completed in October and the facility began operations in November, barely 10 months after REDI received the first RFI from IBM.

The partnership negotiated a budget with IBM for the build-out based on a state incentive award from the Missouri Build Program, with additional funding from a consortium of local banks. It also arranged for three site visits by IBM in March and April.

A sophisticated search program was undertaken to support assurances to IBM that a skilled workforce would be available by the time the facility was ready to open, including keyword searches for applicants with C++ or SQL programming skills. Additionally, the team offered as a workforce incentive to provide $88,000 to advertise the tech center job opportunities in the local media.

REDI formed a strong partnership with post-secondary educational institutions to work with the company to discuss how they could support the educational needs of the project and ensure that an adequate pool of qualified graduates is maintained. REDI also organized an IT Cluster Workforce Summit to bring together businesses that depend on an IT workforce with colleges and universities to create a consortium to address IT-related workforce needs and opportunities for the Columbia region.

One of the more unique challenges of the project was keeping the 112 individuals that participated in the Project Tiger initiatives from spilling the beans about IBM’s interest in the site before the location decision was made (IBM did not want to divulge the sites under consideration until the announcement was made). The preliminary activity took place within shouting distance of one of the leading journalism schools in the country at the University of Missouri and within range of a number of major television and radio outlets.

In the year between IBM’s Dubuque announcement and the computer giant’s second request for information from Columbia, Boone County’s bond policy was amended to allow a personal property sales tax abatement and the non-profit Columbia Area Jobs Foundation was created. Both of these steps helped facilitate the tech center project. After the initial contact from IBM in January 2010, then-Mayor Darwin Hindman weighed in with an aggressive incentives package that enabled the building to be acquired at below market rate.

Business Facilities congratulates REDI and its partners for its well-deserved honor as our 2010 Economic Development Deal of the Year Silver Award winner.

Bronze Award

A decision by the nation’s largest steel producer, Nucor Corp., to build a $3.4-billion manufacturing facility is a “dream come true” for St. James Parish and Louisiana

Project Title: Nucor Corp.’s Multi-Phase Iron and Steel Facility
Entered By: Louisiana Economic Development

One of the largest industrial projects in the history of Louisiana is the Bronze Award winner of our 2010 Economic Development Deal of the Year Awards competition. In an era when it seems that only ultra-high technology initiatives are laying the foundation for growth, it is good to know that somebody is still building steel plants in the United States.

Nucor Corp.’s decision to locate its $3.4-billion multi-phase iron and steel plant in St. James Parish is expected to create more than 6,000 jobs for a region that is still recovering from the effects of Hurricane Katrina, generating an overall economic impact of $7.9 billion.

“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,” said Louisiana Economic Development Secretary Stephen Moret. “We are focused on positioning Louisiana’s economy to continue to outperform the South and U.S. on a consistent basis. Nucor’s multi-phase project, combined with our state’s many business development successes since 2008, will certainty help us achieve this goal.”

Nucor Corp. had spent more than two years searching for a site for the iron and steel facility, which will directly create 1,250 new jobs with wages averaging at least $75,000 per year. Nucor, headquartered in Charlotte, NC, is the largest producer of steel in the United States. The company, North America’s largest recycler and the foremost steel recycler in the world, says it has “never had a layoff for lack of work.”

Nucor’s agreement with Louisiana Economic Development stipulates that the project will be built in five phases, including a direct reduced iron (DRI) facility that will create 150 jobs in a $750 million capital investment; a second DRI, a $400 million investment creating 100 jobs; a $500-million pellet plant, creating 200 jobs; a $1-billion blast furnace with coke ovens, creating 300 jobs; and a $750-million steel mill that will employ 500 workers. After the completion of phase one, Nucor is given the flexibility to select the order of the remaining four phases. Construction on all phases must begin by 2015 in order for Nucor to receive the full incentive package.

An economic-impact analysis developed by Louisiana State University indicates that the project will generate approximately $563.5 million in new state tax revenues, as well as $122.6 million in new local tax revenues through 2033, if completed on schedule. Additionally LSU’s analysis indicates that about 4,800 indirect jobs would be created by 2019. Overall, the project is expected to generate $6.4 billion in new wages over the next two decades.

Nucor will deploy new direct reduction technology to convert natural gas and iron ore pellets into high-quality direct reduced iron, reducing by one-third the carbon emissions of the traditional blast furnace and coke oven combination.

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 Nucor that includes $160 million in performance-based grants and loans for land, infrastructure and equipment. If all phases are completed on schedule, the company will receive a 20-year local property tax exemption. Under the Louisiana Quality Jobs Incentive, Nucor will receive cash rebates for each new hire, resulting in $40 million over 10 years; the company also will be able to take advantage of rebates on sales tax relating to construction costs, resulting in up to $55 million in the five-year period beginning in 2013. Additionally, the company secured a $600 million tax-exempt Gulf Opportunity Zone bond allocation from the State Bond Commission.

Honorable Mentions

This year, our judges have singled out five projects that deserve to take a bow in a field that was packed with first-rate, job-generating economic development initiatives.

Projects: Adobe Systems (Utah GOED); Hewlett-Packard (Rio Rancho EDC); Nationwide Insurance (San Antonio EDF); Michigan Advanced Battery Initiative (MEDC); First Quality Tissue (SC Dept. of Commerce)

The highly competitive field of entries for our 2010 Economic Development Deal of the Year awards posed a challenge to our judges, so it is not surprising that the panel singled out five projects for Honorable Mentions. The honorees include:

The Utah Governor’s Office of Economic Development (GOED), which was cited for Adobe Systems Inc.’s decision to expand its business operations in the Beehive State. Adobe chose Lehi, UT as the home of a major new technology campus, an initiative that is expected to have a direct economic impact of almost $3.8 billion in the region over the next 20 years, directly generating 1,600 new high-wage jobs.

“This is only the beginning of many more thousands of well-paid, family sustaining jobs in companies not yet created, which will also grow and prosper in this location,” Gov. Gary Herbert said at the Adobe project announcement.

The Adobe facility is the latest success in an aggressive state initiative to develop a thriving IT and Software cluster as one of seven industry sectors targeted by the state as its foundation for sustained long-term growth.

Adobe will build a campus on a 38-acre undeveloped site west of Traverse Mountain. The campus will be similar to Adobe’s corporate offices in San Jose, California with a skywalk between multilevel LEED certified buildings. Adobe is the third computer company to open offices in Lehi and joins Micron, IM Flash and Microsoft at the city’s north border. Additionally, the National Security Agency is building a 65-megawatt data center at Camp Williams north of Lehi.

The Adobe expansion is directly tied to the Utah-based Omniture arm of the company, which now accounts for 10 percent of Adobe’s total revenues. Adobe acquired Omniture, a homegrown Utah company, for $1.8 billion in October 2009. The Omniture unit currently employs 620 people in Utah and 1,100 worldwide.

The GOED Board approved a generous post-performance, refundable economic development tax incentive for the campus project. New state tax revenue is expected to exceed $134 million over a 20-year period as a result of Adobe’s projected expansion, job creation and capital investment in Utah. The maximum value of the tax credit incentive is $40.2 million, or 30 percent of new state revenue for 20 years.

The Lehi project will be built in at least two phases creating at least 250 construction jobs. Construction for Phase 1 of the new 230,000-square-foot campus is expected to begin mid-2011 and to be completed in the fall of 2012, providing facilities for approximately 1,000 employees. When the first phase is completed in 2012, Adobe will be hiring or transferring 670 employees, about 620 from the Omniture offices, to the new campus.

Expected to bring in more than $134 million in taxes over the next 20 years, the project could bring in as much as $1.6 billion in wages paid over that time. Salaries will be 200 percent of the local average.

Rio Rancho (NM) Economic Development Corporation was cited by our judges for its successful effort to lure Hewlett-Packard Co.’s new IT and customer support center. The HP facility, which will create up to 1,350 jobs by 2012, is one of the crown jewels of Rio Rancho’s emerging Central Business District.

To facilitate the project, the City of Rio Rancho enacted a Local Economic Development Act to lease the land to HP for $1 a year for 50 years; impact fees covering the cost of infrastructure hook-ups associated with the project were waived by the city. The city also granted HP fast-track building plan review, permit issuance and an expedited construction schedule. Rio Rancho additionally committed to $5.1 million in infrastructure improvements to support the project.

The Hewlett-Packard IT center is expected to have an overall economic impact on the area of approximately $1.5 billion over the next 10 years, creating more than $60 million in direct personal income (wages).

Our judging panel also was impressed with South Carolina Department of Commerce’s entry, the decision by paper products producer First Quality to build a $1-billion facility in Anderson County, SC. The project, which will create 1,000 new jobs, is the largest in Anderson County’s history.

After an extensive site selection process in which the company considered multiple locations across the country, Anderson County won the prize due to its proximity to the growing Southeastern market, quality infrastructure and low energy costs.

“We really are in competition for jobs, capital and quality of life,” then-Gov. Mark Sanford said when the project was announced last May. “First Quality could have gone anywhere in the world and yet they chose South Carolina.”

First Quality spokesman Frank Ludovina said key factors in the company’s site selection decision included an available pool of skilled labor and the pro-business environment in the Palmetto State.

The Michigan Economic Development Corp. (MEDC) snared an Honorable Mention with its overview of the Wolverine State’s ambitious effort to become the advanced battery capital of the world.

Beginning in 2005, a bevy of economic development agencies (representing Midland, Muskegon, Holland, Battle Creek, Galesburg, Oakland County, Wayne County, Macomb County and Ann Arbor) joined forces to move Michigan to the forefront of development of the lithium-ion batteries now being commercialized on electric cars by several major automakers.

The state’s enactment of first-in-the-nation advanced battery tax credits in 2009 enabled Michigan companies to move to the head of the line for federal advanced battery grants that were issued by the Department of Energy and funded in part by the American Recovery and Investment Act. In the past 18 months, more than $1.3 billion has been secured for Michigan-based projects—more than all other states combined.

The state has issued nearly $1 billion in advanced battery tax credits to projects covering the entire advanced battery and electric vehicle supply chain, including manufacturing of plug-in traction and hybrid battery packs; battery integration and prototyping; engineering; and credit covering up to 50 percent of capital investment for cell manufacturing facilities.

More than 17 advanced battery projects have been initiated across the state, representing an investment of more than $5.8 billion. These initiatives are expected to create 61,000 jobs and generate an overall economic impact of $18 billion.

Nationwide Insurance’s selection of San Antonio, TX as the site of its regional corporate campus is expected to directly create more than 2,000 jobs and generate an overall economic impact of more than $3.4 billion for the region in the next four years.

The stakes were high for the Texas city in this site selection contest—losing the corporate campus project most likely would have resulted in the relocation of 900 employees already employed in San Antonio by the insurance giant.

The deal was sealed with a $2.5-million grant from the Texas Enterprise Fund and a 10-year property tax abatement from the city and Bexar County.

Business Facilities congratulates all of the 2010 Honorable Mention Award winners.