H&A Media Contribution: Metalworking – An Ancient Industry in a Modern Economy

TID_HA_Article_Metalworking

Jason Hickey, President & CEO of H&A, was featured in a recent article in Trade & Industry Development magazine, a global publication serving executives within specific vertical industries to provide insight into the challenge of site selection and facility planning.  Titled, “Metalworking – An Ancient Industry in a Modern Economy”, Hickey writes about the metalworking industry in the United States, a sector that was critical to building America into the economic powerhouse it is today. Going forward, the industry will continue to play a significant role in the country’s future. As a globally recognized site selector, Hickey discusses the requirements executives must understand and explore when locating a metalworking facility.

The full article is below. To view the article on the Trade & Industry Developmentmagazine website, please click the following link: Metalworking – An Ancient Industry in a Modern Economy.


Metalworking – An Ancient Industry in a Modern Economy
12 November, 2015
By: Jason Hickey

For thousands of years, metalworking has been a key component of the development and assembly of goods and structures.  Metalwork is the basic process of shaping metal into different parts and assembling or creating metal structures. This could include working with transportation vehicles, such as ships, airplanes and automobiles, as well as large structures such as bridges and buildings. The fabrication involves building large metal objects through cutting, bending and other processes.

As humans have advanced over time, innovations and discoveries in metalworking have been vital. Today, metalworking, while maybe not on the forefront as other sectors, is still a critical industry around the world. In the United States, metal, particularly steel, is utilized and relied upon to continue the nation’s economic growth.

U.S. Steel Industry

In manufacturing, the U.S. steel industry is still a critical component to the industry’s success. Many sectors depend on steel for their operations, such as construction and automotive – two sectors primed for the nation’s growth. In 2015, the U.S. steel industry operates over 100 production facilities and factories across the country. The industry produced close to 100 million tons in 2014 with a total value of approximately $75 billion. Currently, the industry employs 150,000 people across a number of states and supports more than one million jobs nationwide. One of the aspects that propels the growth of the steel industry is the success of the end users. The construction sector is a perfect example because it’s considered the biggest steel consumer in the U.S. market.

Chemically, steel is defined as an alloy that contains a high proportion of iron combined with a certain amount of carbon. The properties of steel such as formability, durability, strengths, thermal conductivity and others depend on varying proportion of the elements added during its manufacturing. Steel is considered the most important metal in today’s market and its high strength makes it an essential part of infrastructure and machinery.

The manufacturing of steel is the basic process of converting iron ore to steel through two steps: producing molten iron and manufacturing the actual steel. The production of molten iron involved mixing with limestone and coal then the mixture is headed (a metalworking process). The result is reduced to metallic iron that melts and impurities are removed. The molten iron goes through a vanadium recovery and a process called KOBM, the acronym for Klockner Oxygen Blown Maxhutte (steel-making furnace). The process oxidizes dissolved impurities by blowing oxygen through the molten metal. Last, fine adjustments are made to bring the molten steel to the required composition.

Metal and the Automotive Industry

The automotive industry depends heavily on metal and its availability in the market as it plays a crucial role in the manufacturing process of vehicles. Steel is one type of metal used in the creation of vehicles, and it brings many benefits to the vehicle lifecycle. Specifically, steel benefits a vehicle in three key ways: manufacturing, driving and end-of-life recycling.

Modern car manufacturers depend heavily on steel to protect the passengers due to the metal’s strength, durability and dependability. Cars are still the most relied-upon mode of transportation, and owners trust in the strength and toughness of the vehicle. Steel is being used increasingly in new vehicles, partly because it is easily accessible and available to manufacturers. Additionally, it has the highest strength to weight ratio of any building material with consistent quality.

With a focus on sustainability, steel is also recyclable, thus reducing the carbon footprint of future manufacturing. Each year, the steel industry recycles enough to power more than 18 million homes for 12 months. In today’s passenger car, 60 percent of the vehicle is steel, and more than 25 percent of that is recycled. Going forward, the industry is expected to provide further sustainability benefits and climate solutions.

Supply Chain of Steel

The supply chain of steel manufacturing still depends heavily on access to raw materials. In most cases, one will find steel manufacturers more proximate to the raw materials than to the consumers. For steel, the primary raw material is iron ore, which is now produced at sites around the world. Close proximity to suppliers not only ensures a reliable source, but also significantly reduces time and transportation costs.

In many industries, supply chain managers prefer to keep inventory low. However, the steel industry functions in a different manner as the product is produced over several stages and the supply chain is part of an ongoing process. Iron ore is initially formed before moving to further processing and completed into the finished product. It’s important for managers to keep additional inventory in case a shutdown or an operation break occurs. With the additional inventory, the company can continue operating through a variety of disruptions.

Being considered a commodity throughout the entire process, today’s steel supply chain managers need to utilize sophisticated logistics tools and best practices. For example, supply chain concepts such as contract management, commodity pricing and hedging are critical to an effective and fluid logistics process.

Finally, the supply chain management of steel manufacturing operations requires continuous innovation and improvements. The biggest challenges are faced in the storage and transportation of the raw materials, as well as the finished goods. Weighing between one and 25 tons, steel can present a number of challenges, not to mention the inefficiency of treating all goods in a similar fashion.  Around the world, engineers, scientists and supply chain experts are investing in and studying new methods and practices to make the process more efficient and cost-friendly.

Changing the Future: Innovative Processes

Metal Laser Cutting

Laser cutting is the process of cutting certain types of metal and is being used largely in the manufacturing industry. The process of cutting may be done through burning, melting or blowing and works for different types and shapes such as flat sheet, structural or piping metals.  Standing for “Light Amplification by Stimulated Emission of Radiation,” the laser beam is generated by stimulating a lasing material by electrical discharges, while all being contained in a closed environment. There are many discovered methods to do so such as thermal stress cracking, melt and blow, scribing, cold cutting and vaporization.

From a manufacturing perspective, laser cutting has many benefits and few drawbacks when used in mechanical cutting. Overall, the process produces cleaner and more precise cuts, as well as quicker production, which ensures minimum interference in operation. The main benefit of laser cutting is that it can duplicate the same pieces and parts with great consistency and precision.

One drawback is the possible contamination of the machines by cutting certain materials, which could ultimately affect the life of the machine. An additional challenge can be on the energy side, as laser cutting may require a significant power source and involves a cooling mechanism.

3D Printing

3D printing technology has seen incredible development over recent years and now works with many materials and surfaces. However, 3D printing on metal wasn’t always a real solution as it was a challenging task for the manufacturing industry at the outset. In fact, the first attempt of 3D printing on metal goes back to the late 19th century when welders used electrode arcs to blend metal together. Eventually, the introduction of electron beams and vacuum chambers made 3D printing more sophisticated and possible on metal. Today, the most important technology that has enabled further development in 3D printing on metal is laser. Lasers enable the process to be more precise, detailed and timely.

The method of 3D printing on metals varies depending on the size, shape and details of the object printed. The basic process is dumping a powder metal matrix that contains binders, which creates layers. The outcome is melted and the metal is temporarily held together until it is baked in an oven. The object that’s required could be printed as a whole or a shell could be printed and used to shape metals of a lower melting degree. The development of 3D printing is still in its earliest stages, as the true uses of the technology are only beginning to be realized.

Help Wanted

Throughout the metalworking industries, there is a sharp need for trained and skilled employees to enter the workforce.  According to a study conducted earlier this year by the National Tooling and Machining Association (NTMA), 84 percent of its member companies report having skilled positions open at their facilities, with a great shortage of engineers. Meanwhile, a similar organization, the Precision Metalworking Association (PMA), found that nearly 70 percent of its member companies have a workforce with an average age of 41 to 60 years old. When it comes to recruitment, those same companies almost unanimously reported moderate to severe trouble finding new workers.

There are ongoing efforts around the country to offset this problem and encourage more individuals to enter the industry. Through community colleges and technical schools, the American workforce is finding more opportunities for education programs and apprenticeship opportunities. At the engineer level, there is a push for the establishment of more university-level programs. Earlier this year, a bipartisan bill was introduced in the U.S. Senate, the “Manufacturing Universities Act,” calling upon the National Institute of Standards and Technology (NIST) to designate up to 25 academic institutions as U.S. manufacturing universities. Federal funds will then directly assist in the development of engineering programs alongside the manufacturing industry.

Location Strategy

When determining where best to locate a metalworking facility, there are a number of key factors that must be considered in the site decision. At the outset, these factors include access to and availability of raw materials, particularly products such as iron ore. While the proximity to the materials can vastly impact the time and costs for procurement, transportation requirements are critical to the site needs, especially freight rail. Throughout the U.S., rail is still a key component in the nation’s infrastructure, and can be essential for a facility’s ultimate success.

As previously mentioned, the ability to find and recruit the necessary workforce for a facility is important in the site selection process. Certain regions will present both opportunities and challenges in discovering the employees needed for a facility, particularly when it comes to engineers and skilled metalworkers. An in-depth labor analytical study needs to be conducted to ensure the site will have the skills available immediately, as well as for the long term.

Another critical aspect to be reviewed is utilities. With energy being a significant driver in the metalworking process, a site strategy must take into consideration the type of energy, expected rates and reliability of the source. Additionally, all of the environmental ordinances that may be in place at the federal, regional, state and local levels must be reviewed per the specific use of the facility. These regulations can vary greatly dependent on the actual location of the site.

In the end, the proximity to the customer should be considered in the final site decision. However, among all the other factors, the customer location may not be as vital if the logistics, labor, environmental and operational costs are all understood and meet the facility’s needs.

Looking Ahead

As the global economy evolves toward the future, metalworking is still a critical industry and vital to the American economy. In an age of technological innovation, new methods utilizing lasers and 3D printing are set to revolutionize the industry. Unfortunately, there are a number of challenges yet to be overcome to ensure the industry’s success, with the future workforce on the forefront.

H&A Principals Lead International Credits and Incentives Conference

IPT Conference November 2015_2H&A’s Juan Gallardo and Steve Bonine spoke today at the Institute for Professionals in Taxation’s (IPT) Credit and Incentives Symposium. As an international, non-profit association of taxation professionals, IPT hosted this week’s conference to focus on the trends facing those dealing directly with credits and incentives on a daily basis. Hosted in Austin, Texas, the conference is being held at the JW Marriott from November 3-6.

Gallardo, an H&A principal based in Miami, headlined a panel on incentive opportunities and challenges in Latin America. As the leader of H&A’s Latin American practice, Gallardo spoke on his decades of experience in the dynamic market. During the discussion, Gallardo highlighted incentives in major Latin American markets, including Brazil, Mexico, Chile, Peru and Columbia, as well as, Central America, including Costa Rica and Panama. Gallardo also spoke on the challenges US and Canadian companies face in countries like Venezuela and Argentina.

Bonine, an H&A principal based Philadelphia, lead a panel discussion on the trends around retention incentives. While many economic developers focus on attracting new business, others are interested in retaining the jobs and investment already in place. Bonine, with decades of experience in credits and incentives, spoke at length on those programs that currently exist around the US being utilized for retention, including discretionary opportunities.

For more information on the IPT’s Credits and Incentives Symposium, visit the website at www.ipt.org.

SiteTrends State Update: North Carolina Legislature Approves New Era of Public Incentives



On September 30, 2015, North Carolina Governor Pat McCrory signed into law the NC Competes Act.  This legislation completes an extended debate in the state regardingpublic incentives and sets a path going forward to attracting businesses and creating jobs.  Over recent months, company executives and industry experts have been tracking the progress, orlack thereof, of the legislation as it navigated through the legislature, particularly as it positions North Carolina competitively against neighboring states.

The following is a brief review of the NC Competes Act:

Job Development Investment Grant (JDIG)
Discretionary program that provides funds to incentivize new or expanding business to create jobs.

  • Increases statutory annual cap to $20M on an on-going basis, with a potential increase for high-yield projects to $35M.  High-yield projects are defined as being at least an investment of $550M and creation of at least 1,750 jobs;
  • Extends the program for three years through 1/1/2019;
  • Modifies the maximum withholding percentage to incentivize growth in high-unemployment areas by allowing up to 80% in Tier 1 counties;
  • Requires an increased job creation requirement for Tier 3 counties of 50 jobs, an increase from the previous minimum threshold of 20 jobs;
  • Splits the funding commitment caps into 2 equal semiannual installments of $10M;
  • Adds new reporting functions and benchmarking reviews for the program; and,
  • Strengthens clawbacks for failure to maintain operations for 150% of the grant term.

One NC Fund
Discretionary fund to provide funding to local governments to secure commitments for recruitment, expansion, or retention of new or existing businesses.

  • Modifies the local match obligations to a tiered requirement: $3 state => $1 local for Tier 1, $2 state => $1 local for Tier 2, and $1 state => $1 local for Tier 3.

Datacenter Infrastructure Act
Sales tax exemption for electricity and eligible business property that is located and utilized at a datacenter.

  • Requires an investment of at least $75M within 5 years;
  • Allows an initial investment made on or after 1/1/2012 to be included in calculation; and,
  • Creates new exemption effective for purchases made on or after 1/1/2016.

Aviation Sales Tax
Sales tax refund for interstate passenger air carrier with a hub in NC.

  • Replaces expiring sales tax refund with a sales tax exemption for aviation gasoline and jet fuel sold to an interstate airline for use in a commercial aircraft; and,
  • Exempts sales taxes for service contracts on qualified aircraft and jet engines, along with sales taxes on repair parts and repair, maintenance, and installation services.

Motorsports Sales Tax Preferences
Sales tax preferences for motorsports parts and fuel.

  • Codifies and clarifies the law regarding current administrative practices for exemption of sales tax on service contracts and the lease or rental of parts;
  • Extends refund on sales tax paid on aviation fuel for travel to or from a motorsports event in North Carolina or another state; and,
  • Continues a refund equal to 50% of sales tax paid on tangible personal property related to a professional motorsports vehicle, aside from tires or accessories.

 

H&A tees it up for families in the Twin Cities

RaisetheRoof 2015 1For the fourth consecutive year, H&A was proud to be a sponsor of the Raise the Roof Golf Tournament, an annual event supporting the Twin Cities Habitat for Humanity (TCHFH) organization. TCHFH programs assist families across the seven-county region making up the Twin Cities metropolitan area.  Since 1985, nearly 10,000 families have been served by TCHFH volunteers to have the opportunity of being a homeowner and realize housing and financial stability. This year’s tournament was once again hosted at the Minneapolis Golf Club in St. Louis Park, MN, an historic course dating back to its first golfers in 1917.

“I’m excited to be back here again at the annual Raise the Roof Golf Tournament.  As a sponsor of this event, we’re proud to see the continued success and participation,” H&A Principal Mark Beattie said following the tournament.  “I can’t think of a better reason to tee it up than to support local families in the Twin Cities.”

While it is a day of fun to support TCHFH, the tournament does have a competitive scramble format.  With a strong team of local corporate real estate leaders, the H&A group finished with an impressive score of -5 (5 under par).

To learn more about the annual tournament, please visit the official Raise the Roof Golf Tournament website. For more information on the TCHFH, please visit www.tchabitat.org.

 

H&A leads U.S. investment roundtable in Israel

Alongside SelectUSA, the Federation of Israeli Chambers of Commerce, and the Israel-America Chamber of Commerce, H&A’s David Hickey and Iris Golani hosted an investment roundtable for Israeli business leaders interested in locating or expanding operations in the United States. With several dozen businesses in attendance, the H&A team focused the discussion on site selection and public incentive opportunities in America.

US-Israel Investment Roundtable 2015
US-Israel Investment Roundtable 2015

“When businesses make the decision to invest in the United States, it is critical to understand how to choose the best location for the operations. America continues to be a great place for Israeli businesses to invest and thrive, but it is vital to do the due diligence to discover the best community for their business,” H&A’s Hickey remarked after the roundtable. “I’m excited to see the turnout today and the enthusiasm for investment in the USA. With the right approach, business leaders will be prepared to realize incredible success in America.”

Presenting ahead of H&A was Steve Miller, a Senior Investment Specialist from SelectUSA. Miller, based in Washington, DC, delivered an expansive breakdown of the current situation of the American economy and the increased level of foreign direct investment. With an office in Tel Aviv, SelectUSA’s Sigal Mendelovich provides direct support and counseling for businesses considering an investment in the United States.

The investment roundtable was held at the Federation of Israeli Chambers of Commerce office in Tel Aviv. Additionally, the Israel-America Chamber of Commerce participated in the event.

The event also marked the opening of the H&A office in Tel Aviv, which is led by Golani. With dynamic investment opportunities in the United States and Israel, H&A has laid the foundation to support businesses as they make the next critical decision for the future of their company.

 

 

About the Participating Organizations

Hickey & Associates – H&A is a global site selection, public incentive advisory and workforce solutions firm. For the past 30 years, H&A has provided their diverse array of clients first-class support. Utilizing state of the art tools and approaches, the firm assists businesses in determining the best location to expand, relocate, or consolidate anywhere in the world. H&A has active projects in the Americas, Asia, Europe, and Africa.

SelectUSA – Recognizing that the competitiveness and job-generating ability of a nation is determined by its desirability as a place for businesses to operate, SelectUSA was created at the federal level to showcase the United States as the world’s premier business location and to provide easy access to federal-level programs and services related to business investment. SelectUSA is designed to complement the activities of our states—the primary drivers of economic development in the United States.

Federation of Israeli Chambers of Commerce – The FICC is one of Israel’s largest business organizations, and is regarded as one of the most influential and most dynamic organizations of its kind in Israel. Strictly non-profit, non-political and non-partisan, FICC is dedicated to a market economy and free enterprise. As the country’s largest employers association, FICC is one of the leading members of the coordinating council of Israel’s economic organization, and represents the interests of Israel’s business sector, including exporters and importers, wholesale and retail, services and manufacturers.

Israel-America Chamber of Commerce – The Israel-America Chamber of Commerce (AmCham Israel) established in 1965, is a voluntary organization of companies and individuals dedicated to the promotion and enhancement of two-way trade and investment between Israel and the United States of America. The U.S. Ambassador to Israel serves as Honorary Chairman of the AmCham.

H&A’s Jason Hickey featured in energy financing and incentives article

TID Magazine - H&A Energy ArticleJason Hickey, President & CEO of H&A, was featured in a recent article in Trade & Industry Development magazine, a global publication serving executives within specific vertical industries to provide insight into the challenge of site selection and facility planning.  Titled, “Driving Renewable Energy Development with Public Incentives”, Hickey discussed the dynamic history of government support in the U.S. for energy development.  For nearly a century, the American government has provided financing tools and mechanisms, such as tax incentives and grant programs, to drive the development of certain types of energy, including renewables.

The full article is below. To view the article on the Trade & Industry Development magazine website, please click the following link: Driving Renewable Energy Development with Public Incentives.



Driving Renewable Energy Development with Public Incentives
10 Jul, 2015
By: Jason Hickey

Since the beginning of the 20th century, the federal government has been supporting energy development in the United States. From the oil and gas production expensing policies of 1916 to the grant programs created as part of the American Recovery and Reinvestment Act of 2009, America has provided financial assistance for the promotion and growth of the energy industry. The objectives of this support have been dynamic over the years, which have included policies to make certain the nation maintains a secure supply of energy, ensuring energy is available at a low cost for domestic consumers and to meet long-term environmental goals.

Today, government incentives to promote and produce domestic energy still exist for investors. However, instead of solely being an initiative driven at the federal level, state and local governments are developing programs to induce the investment in certain energy sources, as well as encourage the implementation and utilization of energy-efficient technologies. In addition to the energy goals previously stated, many political leaders are developing energy incentives for another critical reason: economic development and job creation.

Through corporate and personal tax incentives, loan financing, bonding, rebates and tariffs, among many other program types, state governments have induced businesses and investors in energy production and energy efficiencies within their jurisdictions. Additionally, a number of counties and municipalities have also established policies to encourage the development and use of certain types of energy. Since the renewable energy industry has already created over 600,000 American jobs, it is no surprise economic developers are clamoring for renewable energy investments. Furthermore, regional authorities, like the Tennessee Valley Authority, have developed unique programs to promote energy development and boost energy-efficiency.

One of the most common incentives for energy production and development is through the exemption of property taxes. According to the Solar Energy Industries Association (SEIA), a national trade association promoting the U.S. solar industry, 38 states now offer property tax exemptions for the development of renewable energy. Since property taxes are levied by different jurisdictions depending upon state law, the exemptions for renewable energy are developed in a various ways, including municipal opt-in and opt-out policies.

An example of a state program developed specifically for energy production is Kentucky’s Incentives for Energy Independence Act (IEIA) program. Beginning in 2008, the IEIA program aims to promote the investment in renewable energy, alternative fuels and energy efficiency through tax incentives worth up to 50 percent of the capital expenditures. For up to 25 years, an eligible company may capture up to 100 percent of state income tax liability, an exemption of all sales and use taxes on project materials, and a wage assessment equal to four percent of the jobs created from the project. Additionally, a company may be eligible to receive an advanced disbursement, which can be beneficial to getting a project off of the ground.

Alongside incentives developed specifically for energy purposes, companies may also be eligible to utilize traditional programs to discover critical financial assistance. Energy projects often bring along a significant capital investment and can lead to job creation – the key tenets to a successful economic development policy. Therefore, traditional incentive programs geared to incentivize attractive businesses such as corporate headquarters and automotive assembly facilities, may also be utilized for energy projects. Energy projects may also find more complex incentives to assist in meeting critical financing needs. These programs often include Tax Increment Financing (TIF), New Markets Tax Credits (NMTC) and bonding.

Moving forward, more state and local governments are expected to utilize public incentives to entice energy investors to their communities. These incentives will not only be in support of certain policies, such as renewable portfolio standards and environmental initiatives, but will drive economic development for the future.

IAMC forum participants volunteer to support the Coachella Valley community

IAMC Volunteer Pic - Spring 2015
IAMC Volunteer Service Project Team at the Coachella Valley Rescue Mission.

Over the weekend, participants at the IAMC Spring 2015 Professional Forum volunteered their time at the Coachella Valley Rescue Mission.

As the IAMC forums are always an educational and memorable experience for attendees, there is never a more fulfilling experience than the IAMC Volunteer Service Projects.  Over the years, forum attendees have planted trees, built homes, and directly delivered support to those who need it the most.  This year, the service project volunteers cleaned offices, organized food and supply storage, and assisted with food preparations at the Coachella Valley Rescue Mission.

Founded in 1971, the Coachella Valley Rescue Mission has provided food, clothing, and showers to thousands of families in the valley.  On an annual basis, the mission provides more than 175,000 hot meals to individuals that are homeless and needy.  For more information about the Coachella Valley Rescue Mission, please take the time to visit their website.

With another successful IAMC Volunteer Service Project in the books, many of the attendees are already looking forward to the next opportunity to give back to their own communities.  Whether on a grand scale, or on the individual level, any and all volunteer work is vital.  As the ancient Greek fabulist, Aesop, wrote, “No act of kindness, no matter how small, is ever wasted.”

SiteTrends: H&A releases report on new economic development policies and incentives in 2015

HA-Legislative-Update-2015

Hickey & Associates, a global site location, incentive advisory, and workplace solutions firm, released the firm’s new report on the changes to economic development policies and public incentives in the U.S. over the initial months of 2015.  The report, H&A Legislative and Incentive Update – Spring 2015, is a comprehensive study of legislative activities related to business incentives and economic development initiatives across all U.S. states.

With every state legislature in session this year, lawmakers have been active in dealing with legislation directly tied to economic development.  Several states have seen expansions and growth to existing incentive programs, while others have eliminated or significantly limited economic development policies.  As the economy improves, and competition between the states becomes even more prevalent, economic development measures and incentives are often a key factor in the decision making process for business site decisions.

For a complimentary copy of the H&A Legislative and Incentive Update – Spring 2015, please download your copy now.

To learn more about the trends and actions around the U.S. dealing with economic development policies and public incentives, you are invited to join H&A experts for a complimentary webinar covering the new report. Participants will have the opportunity to discuss with H&A experts the changes that are taking place or being considered, as well as, hear about best practices for analyzing and capturing these incentives around the country, particularly in light of the new policies and laws now in place.

Following a brief presentation on the report, the H&A experts will open up the webinar for an extensive question and answer session with participants for more detailed policy insight.  To join this exciting webinar, please Register Here.

H&A Legislative & Incentive Update – Spring 2015 Webinar

Thursday, May 7
2:00PM ET / 11:00AM PT
Register Here

H&A’s Kerr discusses need for clear and consistent economic development policies

In a recent article featured in the Detroit Free Press, H&A’s John Kerr speaks about what helps attract companies to invest in a location. In this case, Kerr discusses the critical need for a state like Michigan to have a clear and consistent message and economic development philosophy to showcase its advantages. Kerr leads the Detroit office for H&A, which has been providing companies with site selection and public incentive advisory services for 30 years.

The full article is below. To view the article on the Detroit Free Press website, please click the following link: Michigan needs to stick to coherent economic growth plan.

 

Michigan needs to stick to coherent economic growth plan
Tom Walsh, twalsh@freepress.com
11:56 p.m. EDT March 28, 2015
freep.com

Last year Michiganders came together from east and west, city and suburbs, raising vast amounts of private and public and philanthropic cash, to fast-track the fiscal rescue of Detroit via Chapter 9 bankruptcy.

Now we need to forge another “grand bargain” of sorts — across political party lines with broad public-private-philanthropic support — to create a coherent economic growth agenda for the state.

Otherwise, Michigan risks squandering its recent gains in jobs, economic activity and fiscal stability.

We can’t seem to settle on a consistent, reliable set of economic policies and incentives for persuading companies to invest and to locate and stay in Michigan.

The was clear last Thursday at the Business Leaders for Michigan’s 2015 leadership summit in Lansing, where a morning panel discussion devolved into lamenting Michigan’s herky-jerky economic policy detours during the past 10 to 15 years.

If Michigan is ever to regain its long-lost status as one of the top U.S. states for economic growth, jobs and incomes, it must persuade investors from around the globe that it is a place with solid, consistent pro-growth economic policies. Not a grab bag of goodies for flavor-of-the-month industries or companies.

As site selector Brian Pollina of Chicago told me in 2012, “Competing states say Michigan isn’t going to help you out anymore, with no incentives — or they say Michigan has these cash incentives instead of tax credits, but only big companies can get them.”

If all of this sounds like Michigan is a fickle state that can’t stick to a plan, well, now you know why site selection consultants around the nation sometimes scratch their heads at us.

Here’s the quick history.

Back in 1999, then Gov. John Engler hatched a $1-billion plan to fund a “life sciences corridor” of medical and biotech innovation in Michigan.

In 2003, Gov. Jennifer Granholm widened the concept to a “technology tri-corridor” by adding homeland security and emerging automotive industries as priority targets. At the same time, with Michigan’s economy tanking several years before the rest of the nation, the state created Venture Michigan and other attempts to jump-start growth in a feeble venture capital sector.

In 2008, with Detroit’s auto companies pleading for a federal rescue, Michigan’s Legislature overwhelmingly supported creation of generous new film incentives to make the Mitten Sate a destination for making movies.

Two years later, Michigan elected as its governor former venture capitalist Rick Snyder, who had openly expressed his dislike of the film incentives — and he quickly scaled back on the use of tax credits for economic development incentives, although they had been widely used in both the Engler and Granholm eras.

I don’t mean any of this as a specific slap at Engler or Granholm or Snyder or the legislators who are gamely trying to plug budget holes created by revenue shortfalls.

Granholm did not cause the free fall of Michigan’s economy in the early 2000s — indeed, the generous tax credits doled out on her watch to Ford, Chrysler and General Motors probably saved Michigan from a much worse fate by persuading the Detroit automakers to keep Michigan factories open while closing others elsewhere.

And Snyder deserves great credit — as previously noted in the column — for balancing Michigan’s budget, cutting and simplifying business taxes and approving the state’s credit rating.

But today, with Michigan facing a budget pinch, the GOP-dominated House appropriations committee — against the wishes of Republican Gov. Snyder — is proposing to do away with film incentives altogether in 2016.

And legislation has been introduced to stop future state funding for Venture Michigan and other such investment programs.

And even as the BLM panel was in session Thursday, there was chatter on the sidelines about a proposed cut to next year’s business attraction budget for the Michigan Economic Development Corp.

Some BLM members also groused that term-limited legislators weren’t around at the creation of programs like Venture Michigan, which helped kick-start a venture capital community in the state that is now much larger and has helped launch successful companies like Esperion Therapeutics, of Plymouth, which went public in 2013 at $14 a share. It closed Friday at $90.65 a share and now has a market value of $1.8 billion.

John Kerr, of the site location consulting firm Hickey & Associates in Detroit, who attended the BLM summit Thursday, acknowledged that Michigan’s mixed messaging can be a problem.

“Clearly, having a consistent message and economic development philosophy would help companies remember your strengths and the tools you’ve developed to achieve them,” he said, citing a classic Michigan example of doing this right.

“Look at what Pure Michigan has done for tourism,” he said. “Clear and consistent message. Started to take root, and now that’s the first thing everyone thinks of when it comes to travel in Michigan.”

We’ve done it with Pure Michigan. And the public and private sectors and politicians of both parties did it with the “grand bargain” that saved the Detroit Institute of Art s and a significant chunk of retiree pensions during the city’s bankruptcy.

There’s no good reason why Michigan can’t do a better job of forging a set of consistent pro-growth economic policies that need not be tossed aside and reinvented with each shift of the political winds.

Contact Tom Walsh: twalsh@freepress.com, also follow him on Twitter @TomWalsh_freep.

Next round of the California Competes Tax Credit program set to begin in March

Cal-Competes

The California Governor’s Office of Business and Economic Development (GO-Biz) will begin accepting applications for the 3rd round of the FY 2014-2015 California Competes Tax Credit Program on March 09, 2015. This is the last round of funding for FY 2014/15, and has been allocated $31.1 million, plus approximately $14 million in funds that were not awarded in Round 1 at the January 15th Committee Meeting.

Depending on the final award amount of Round 2 FY 2014/15, there could be additional funds for Round 3. However, as of February 2015, there is approximately $45 million allocated for this current round. Applications for this round will be accepted through 11:59 PM Pacific Time on April 06, 2015.

The California Competes Tax Credit is a discretionary fund capped at $151.1 million for the 2014-2015 fiscal year and $200 million annually for the 2015-2016 fiscal year through the 2018- 2019 fiscal year. No more than 20% of total funding may be allocated to any one taxpayer and 25% of the total funding is allotted for small businesses.

To learn more about the new round, download our brief report on the funding available, program dynamics, and key milestones.

Join H&A experts for a complimentary webinar on how to capture the California Competes Tax Credit for your business. During a brief presentation, participants will learn more about the dynamics of the program, as well as, best practices for submitting a successful application. Following the presentation, the experts will open up the webinar for an interactive Q&A session with attendees. Register for the webinar here: California Competes Tax Credit – New Funding Announcement Webinar Registration

California Competes Tax Credit – New Funding Announcement Webinar
Tuesday, March 3, 2015
2:00 PM EST / 11:00 AM PST
Complimentary
Register Now
California Competes Tax Credit Program
BackgroundIn July 2013, Governor Jerry Brown signed Assembly Bill No. 93 to replace California’s existing incentive programs with a new Economic Development Initiative. The California Competes program is the centerpiece of this initiative and provides for a location agnostic tax incentive program for new and retained businesses. California Competes is a deal closing credit which is administered by the California Franchise Tax Board.

Availability

California Competes is a discretionary fund capped at $151.1 million for the 2014-2015 fiscal year and $200 million annually for the 2015-2016 fiscal year through the 2018- 2019 fiscal year. Total funding for this round is $45 million. No more than 20% of total funding may be allocated to any one taxpayer and 25% of the total funding is allotted for small businesses.

Structure

California Competes tax credits may be realized in full or phased-in upon reaching negotiated milestones. The credits can be applied to corporate income taxes only and they may be carried forward for up to 6 years. Credits will be allocated to taxpayers as set forth in a written agreement between the company and GO-Biz. The agreement process provides flexibility in the ability to negotiate potential transfers of credits.

Process

Applications for this round of funding for FY 2014-2015 will be evaluated following the April 6th deadline for submission. The evaluation process occurs in multiple phases and culminates in a public committee meeting. The anticipated time from application to award is 45 – 90 days. Evaluation of applications will occur in two phases.

Phase I: Projects are scored on a cost/benefit ratio determined by the project’s investment and total compensation paid to new employees. This economic impact is weighed against the amount of the credit sought. The top applications requesting an aggregate of 200% of the available amount will move to Phase II.

Phase II: In Phase II GO-Biz will examine a broad range of project-specific factors, both qualitative and quantitative, including:

  • Job retention
  • Other incentives available
  • Opportunities for future growth
  • Economic impact in California
  • Extent of unemployment or poverty in the area
  • Strategic importance
  • Fringe benefits

Negotiation & Award

After passing Phase II evaluation, applicants negotiate contracts with the state. The state is willing to negotiate certain aspects of the California Competes Tax Credit Agreement, which include the minimum annual and cumulative average annual salary of full-time employees hired, as well as the allocation of tax credits. However, it should be known that the state is reluctant to allocate more than 50% of the tax credits in year 1. Upon arriving at a recommendation, all credit agreements are made public, including the following terms:

  • Minimum employee compensation
  • Minimum retention period
  • Credit distribution period / milestones
  • Recapture provision

All award information including company name, location, details of award will be made public prior to committee meeting. The five-person California Competes Committee will accept or reject a project credit application based on the recommendation from GO-Biz.