Arkansas Responds to Criticism of Workforce with Action, LEGOs

That's right, LEGOs...

The exercise that one training site under the auspices of the state's Dept. of Economic Development is using to screen potential employees for assembly positions was developed in response to employer complaints about the quality of some of the workers being funneled to them through the state's training programs. No one is saying who those employers are, but there is evidence to suggest they could include Denso Corp. in Osceola, AR and Hino Motors Ltd. in Marion, AR--both Toyota subsidiaries.

There was considerable speculation as to why Toyota itself chose Tupelo, MS over a site near Marion, AR back in February for its latest vehicle assembly plant. Although Toyota cites "poor air quality in the Crittenden County city and a federal lawsuit" (I'm quoting from this article appearing in the Sunday's online version of the Arkansas Democrat Gazette) as its reasons for avoiding Arkansas, one wonders if perhaps it based its decision partly on negative feedback from Denso and Hino.

Regardless, it's nice to see that the state, rather than spend resources defending its workforce and image, acknowledged the concerns and made a concentrated effort to revamp. In April, the state Dept. of Economic Development hired a new deputy director, Randy Zook, who put new training procedures into place by the middle of that month. The use of LEGOs to simulate the assembly line and quality control process (detailed in the article cited) is an interesting lede, but actually it seems that one of the main changes was formalizing the usage of standard employee screening tools the state already had purchased in many cases. (The tool is called WorkKeys, made by the company that produces the ACT college entrance exam. Incidentally, one of the educational sessions at Business Facilities LiveXchange this year covers WorkKeys--follow this link and scroll down to the seminar led by Ed Andrews titled, "Does Your Community REALLY Have the Skilled Labor I Need?")

Sources: "Legos helping state build on preparing work force" --Arkansas Democrat Gazette

Selling South Africa

Two incentive programs are being re-introduced by the South African National Treasury to lure foreign direct investment. After two years hiatus, the Strategic Investment Programme (SIP), which gives tax deductions to capital investments over 50 million Rand (roughly $7 million), and the Small and Medium Enterprise Development Programme (SMEDP), which targets manufacturing, tourism, and agricultural industries, are returning to lure industry to the country. The country's Industrial Development Zones (such as Coega IDZ), which allows investors free import duties, is also used as an incentive.

The South African Department of Trade and Industry has chosen 4 leading industrial sectors that will anchor the S.A. economy: capital/transport equipment and metals; automotives and components; chemicals, plastics fabrication, and pharmaceuticals, and forestry, pulp and paper, and furniture.

Sources: City Press (South Africa), All Africa, The South African Department of Trade and Industry

Kentucky: Alternative Energy Pioneer or Corporate Lackey?

The AP reported that:

An energy bill loaded with hundreds of millions of dollars in tax incentives for coal and power companies breezed through the Kentucky House Wednesday.

Legislative leaders, who developed the bill behind closed doors this summer, hailed the proposal as a "visionary" plan designed to help reduce both Kentucky's and the nation's reliance on foreign oil. It includes incentives for companies to build coal gasification plants in Kentucky.

Gov. Ernie Fletcher called a special legislative session, which began Monday, for the sole purpose of passing the energy plan. The measure is directed at St. Louis-based Peabody Energy, which is considering building a $3 billion coal gasification plant in Kentucky, but it would provide incentives for any qualifying company. Early estimates put the value of the proposed Peabody incentives at $300 million.

The bill, however, is not rosy for all:

State Rep. Jim Wayne, D-Louisville, voted "no" and called it a "deeply flawed bill." Wayne said the energy bill would give coal companies "unprecedented and excessive tax breaks" and doesn't do enough to limit the release of carbon dioxide and other pollutants.

"How can we ask a Kentucky worker to pay their state sales and income taxes if we are going to turn around and give Peabody back all of their own taxes and the taxes of their suppliers and the taxes of their own employees?" Wayne said during a floor speech.

Source: The Cincinnati Post, via AP

Where there is sea, there are pirates, Part 4

The crew of a Danish cargo ship was finally released today, after being hijacked and held hostage by Somali pirates since early June. The ship, called the Danica White, was pursued by a U.S. Navy warship. However, the pirates navigated out of international waters and into Somalian waters. The pirates had demanded $1.5 million, however it is unclear whether the ransom was exchanged.

The Danica White had been carrying shipping supplies (1,000 tons) from Dubai to the Kenyan port of Mombasa. Somalia, which is located in the horn of Eastern Africa, has had no official government since 1991, and most of the ransom funds are thought to arm local militias. The International Maritime Bureau has declared the Somalia coast to be one one of the most dangerous stretches of water in the world.

Sources: BBC, Hunt of the Sea Wolves (blog), Reuters,
Also See: Where there is sea, there are pirates, parts 1, 2, and 3

$ The Most Expensive States for Business $

For the second year in a row, Hawaii, New York, and Alaska (consecutively) are the most expensive states for businesses. According to the Milken Institute Cost of Doing Business Index--which measures wage costs, taxes, electricity costs, and real estate costs for industrial and office space--all three states increased their overall costs, especially electric.

South Dakota maintained its position as the least expensive state for business, followed by Iowa, North Dakota, and Nebraska.

Click for the official press release: PressRelease_CODB_FINAL.doc

Hire Local, Cash In

According to the Michigan Department of Labor & economic growth, the state's labor force has continued to shrink--falling by 64,000 (1.3%) from January to July. Since July 2006, the state has lost 27,000 payroll jobs in manufacturing, 17,000 in construction, 14,000 in government, and 13,000 in trade, transport, and utilities.

A new economic development bill proposed by Democrats hopes to address this issue-- giving extra incentives for hiring Michigan workers. Hire Michigan First would create a sliding scale in which a company employing 100% Michigan workers is more likely to get a tax break than one employing 80% local workers. The bill would also make sure that companies hiring illegal immigrants would not receive contracts or incentives.

State Rep. Robert Dean summed up the proposal at a news conference on Monday: "Tax incentives and other benefits that come with economic development projects should be awarded only to companies that put Michigan workers first."

Sources: Grand Rapids Press, Lansing State Journal, Forbes via AP

Louisville Grand Slam

The largest economic development project in Louisville, KY history will be the expansion of the University of Louisville's Health Science Center, expected to be competed over the next twenty years. The $2.5 billion, 3.2 million-square-foot expansion will create 2,200 jobs.

Plans include six combined lab and office buildings, research facilities, and labs, and will be funded by $1.8 billion in public funds and $700 million in private investments. The state's tax increment financing incentive, which allows investors to recoup money from various taxes to help offset construction costs, was said to be "key to the project."

Sources: The Houston Chronicle, Forbes via AP

High-Tech Not So Clean After All

MANY ECONOMIC DEVELOPERS have told me that their locations are enamored of high-tech industries and electronics manufacturing, because those industries are "clean." On the face of it, that's true: you don't see thick columns of smoke rising from a chip fab, and a data center just sits there and processes without any waste product. No special environmental permits are needed, and no NIMBY issues bound to arise.

Just because it can't be seen or smelled doesn't mean that environmental damage isn't being done, though. This article, courtesy of WIRED magazine and the Associated Press, explains that facilities with a lot of computing horsepower under the (often inconspicuous) hood are flat-out energy hogs. This is especially true of data centers, which cram as many teraflops of processing power as possible into the space available, limited only by power and cooling capacity and the need for humans to occasionally be able to walk between the computer racks to swap out and upgrade hardware.

“Depending on the configuration and the equipment involved, as little as 30 to 40 percent of the juice flowing into a data center is used to run computers. Most of the rest goes to keeping the hardware cool, since heat saps performance.

"Unlike in other office space, that A/C cranks year-round, to overcome the 100-degree-plus air that the computers themselves throw off. That challenge has increased in recent years with the rise of compact 'blade' servers that are crammed into server racks."

"But," you may ask, "Doesn't the inevitable march of progress produce more energy-efficient computers all the time?" Yes it does (thank you for asking) -- but the economic interest in energy efficiency is to cram more computers in, not to reduce overall energy consumption. There's essentially no such thing as too much computing power. It's kind of like how automobile engines have become vastly more efficient since the 1970s, yet miles-per-gallon figures have risen only modestly overall. It's because we chose to use the efficiency gains for horsepower. There are many commuter cars today whose base engine generates more horsepower than a Corvette purchased during the first years of the 1970s oil embargo.

The EPA has joined in chastising the computing industry:

“A new report from the Environmental Protection Agency estimates that the easiest, least inexpensive changes to data center operations - involving tweaks to software, layout and air conditioning - could boost efficiency by 20 percent.

"But even that level of improvement would still lead to higher overall electric use in the coming years. Going further, and actually reducing information-technology's strain on the electric grid, will require a more aggressive commitment. The EPA says 45 percent improvement - enough to lower electricity usage by 2011 - can be achieved with existing technologies.)"

I'm personally skeptical that there will be enough incentive for data centers to comply with any energy use limits. If I remember the future correctly, the machines will be so hungry for power that the only choice will be to breed us in captivity and tap our metabolisms to create the ultimate renewable energy resource...

Chasing the Film Industry

As with other industries, the film industry has its share of states, regions, and cities courting it.

And ... according to a recent op-ed piece in the Los Angeles Times this has some economic officials in Southern California quite concerned. They believe California needs to start following the examples set by states such as New Mexico and Connecticut (both of which offer attractive incentives to the film industry and both of which have seen a dramatic increase in economic activity in this industry over the past few years) if the state wants to keep its financial foothold in the industry, and these officials want to see action taken.
With the backing of by Gov. Arnold Schwarzenegger, the Assembly included more than $145 million in tax breaks over three years in its proposed budget for this fiscal year. It also passed a bill to aid filmmakers with cash grants.
According this op-ed piece:

"One problem with such proposals is that they can't distinguish between productions at risk of leaving California and those sure to be shot here. A state such as New Mexico that's starting virtually from scratch doesn't have to worry about that; almost every dollar it sacrifices in tax revenue is going to a film that would have been shot elsewhere. But in California, the tax breaks would subsidize thousands of productions that have both feet firmly planted in the state."

The article went on to say:

"Granted, California needs the high-paying jobs that the film industry provides. A disturbing number have left the state as producers have sought cheaper locations around the globe. But backers of targeted tax breaks and grants need to make a better case that filmmakers are uniquely deserving of the taxpayers' help, and that a large percentage of the subsidies won't flow to those who don't need the help. They should also explain why financial handouts are the best way to welcome filmmakers to the entertainment capital of the world."

And, New Mexico and Connecticut aren't the only states leveraging these incentives and touting cost savings to lure the film industry, North Carolina, Arizona, and Louisiana are among several states that are waving their assets in front of businesses in this industry. (Incidentally, a former state official filed a whistle-blower lawsuit this past spring alleging that his former boss at the Department of Economic Development took bribes from a New Orleans film production firm in exchange for giving more tax credits to the company.) It will be interesting to see how and where the film industry evolves over the next few years, and if Southern California can keep it's hold on the industry that it is famous for.

Here is a list of what each state has to offer businesses in the film industry as of January 2007.