Winter 2011 Small Town South Editorials
For real-time news on business, politics and economic development in the South go to www.RandleReport.com. For complete coverage of economic development news in the South, go to www.sb-d.com. The following editorials were published in Southern Business & Development magazine, the parent company of SmallTownSouth.com.
The Automotive Industry is Back Big Time in Small Town South
Mike Randle, Editor
The timing couldn't have been better. No place was affected more by The Great Recession than the rural American South. Hundreds of plants closed, gas prices increased dramatically (still are) and therefore tens of thousands of folks that live and work in the South's rural areas were not only out of work, they had to spend a fortune driving 80 miles or so round trip just to interview for a job.
Re-enter the rural South's most important industrial sector: the automotive industry. Not only is the automotive industry the South's No. 1 industrial sector in terms of average projects announced each year of 100 jobs or more over the last 20 years, it is THE economic savior for the region's rural areas. No industry loves Small Town South more than automotive and after this winter quarter, we can say that it is back in a big way.
Of the rural South's 48 significant job generating projects that were announced in the winter 2011 quarter, 23 came from the automotive industry. Just two years ago in the winter quarter of 2009, there were five automotive projects announced in the rural South. Of those five, two didn’t even pan out. Even worse, there were 18 automotive-related closures -- not in the South, but in its rural areas in the winter of 2009. This winter there were two closures and only one was located in Small Town South. But it was a biggie; Goodyear announced the closure of its plant in Union City, Tenn. That closure will put 1,900 people out of work in a town with a population of only 10,500.
Regardless, the automotive industry's performance in the winter 2011 quarter is something I am sure the people of the rural South appreciate. Thanks automotive industry for your trust in Small Town South.
mike@sb-d.com
Sawing Off the Hands that Feed Us
Mike Randle, Editor
In early 2008 Southern Business & Development hosted its first and only seminar in Birmingham, Ala. designed to educate elected and appointed officials on what exactly economic development really is. One of the sessions described how a city, county or state’s economic development agency is essentially its sales department. We showed to the dollar how much certain projects -- specifically the larger ones -- earned for a city, county and state. While we can't recreate that session here, let's just summarize by writing that a large project of say 1,000 jobs infuses about $60 million in payroll into a locality and state in just one year. That ain't chump change.
Since our seminar back in ‘08, we have experienced the worst economic catastrophe in 80 years in this country, or so we have been told. We have also been told that economic development has changed dramatically as a result of the “catastrophe.” But I have only seen economic development change in two ways during and after the recession; one is a 26 percent drop in the number of significant projects in the pipeline over the last three years in the region. That’s right, not 50 percent, not 75 percent; Just 26 percent at the height of the recession.
The other way economic development has changed during and after the recession (more specifically, right now) centers on the budget cuts put on economic development agencies in the South, on both the state and the local levels.
The salespeople -- or more specifically, the economic development department -- represent the only department that makes real revenue for any government other than their departments of revenue. I take that back. The revenue department doesn’t make money. It simply collects it and much of that comes from the various taxes generated by the economic development department.
More than that, the economic development department magically increases payrolls when a deal is struck. So those in the area served who were unemployed and costing a state money are now in wages and again paying taxes to the revenue department.
But of late, some Southern politicos have decided to cut what costs money and what makes money equally, if not cutting more from the moneymakers.
For example, in February, the GOP-controlled legislature in North Carolina passed a bill that essentially was a cash grab in an effort to address that state’s fiscal crisis. The Balanced Budget Act of 2011 was passed by the legislature as part of an effort to address what is projected to be a $2.4 billion budget shortfall for North Carolina in the fiscal year that begins July 1. A component of the bill was to collect about $140 million in reserves that are not part of the North Carolina General Fund. A large part of those reserves are the incentives North Carolina uses to attract business and industry.
In other words, Republicans in North Carolina wanted to strip the state entirely of incentive money for locating companies. Sounds like a certain conservative think tank I have had some dealings with in N.C. over the years, the Raleigh-based John Locke Foundation.
Some of you may have heard or read this before. Some time back, an editor for a John Locke publication and I got into it on the phone and he said to me (paraphrase), “Our belief is we should outlaw all incentives to new and expanding industry and put that money into education and public safety” (two departments, I might add, that cost money).
My response to the John Locke guy was, “Well, if you do that North Carolina will be the safest, smartest, 20 percent unemployment state in the South.”
North Carolina Gov. Bev Perdue vetoed the bill and good for her. Yes, it is impossible to avoid budget cuts in an environment like this. But is it wise to eliminate funding for the only government entity that generates revenue for a city, county or state in an age when raising taxes is political suicide? If anything, now is the time to double our economic development efforts.
Look folks, if we are going to get out of this, we must grow our way out of it. And that means investments by both the public and private domains. And many of you reading this -- listen up CEOs – it is up to you to do it. On the other hand, the economic development departments must sell more and they can't do that with empty pockets.
The American South is the most attractive region on the planet to operate a business. If any of you have forgotten that, well I guess it is time for another seminar.
mike@sb-d.com
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