BBA Economic Digest

September 1, 2019

 

The Dallas Sessions

 

It started over craft beers early evening, continued over Thai food later in the night, resumed the next morning over coffee and ended about noon. About seven hours in all.

 

These were the Dallas Sessions, a follow up to me spending four days in Washington County, Mississippi, as part of our BBA Community Assessment/Resource Mapping for the Washington County Economic Alliance, based in Greenville, heart of the Mississippi Delta.

 

This time around, Will Coppage, executive director of WCEA and Ed Gardner, Jr., director of business and economic development for Entergy Mississippi, came to Dallas for the expressed purpose of discussing the findings/recommendations from my report and developing solutions. Here in Texas, we call it “strategery.”

 

We spent much of our time talking about how to build a more entrepreneurial community, which is a challenge in many rural places, and reviving the downtown. We came away from our sessions believing we had charted some new paths forward, which was exciting.

 

 “It was not just the visit, it was the knowledge I departed with,”  Will posted on LinkedIn.

 

As a result of their trip to Dallas, I trust that Will and Ed, who I’ve known for 20 years, know that I'll be there for them, that I don't just do a report and walk away. We’re going to stay involved, because it's what we do.

 

Props to my friend Laith Wardi at ExecutivePulse for his contribution with the resource mapping. Laith wasn’t in Dallas for our sessions, but he didn’t need to be for purposes of what he did. His work made our work in Washington County all the better.

 

 

A Golden Goose

 

Soon after joining the Economic Development Partnership of Alabama in 1998, I learned that Honda was poking around the state looking for a site for a future $450 million automotive assembly plant.

 

The following year, Honda announced that it had chosen Lincoln, Ala., as the place where it would build its massive factory. I subsequently worked with many Tier 1 Japanese suppliers in finding them suitable locations to build their own plants to supply parts to Honda.

 

A frequent question asked by some is why states offer automakers incentive packages valued at hundreds of millions of dollars to build assembly plants in their jurisdictions. The answer: The economic impact of an assembly plants is typically in the billions of dollars every year. It is why states view them as a golden goose.

 

In the case of Honda in Alabama, the economic impact was $12 billion last year. Honda and suppliers were responsible for 45,647 jobs in the state, according to the University of Alabama’s Center for Business and Economic Research.

 

In addition to the Honda plant, Mercedes Benz has an assembly plant in Vance, and Hyundai has one in Montgomery. A fourth, a $1.6 billion Mazda-Toyota assembly plant, is now being built in Huntsville. (Five automotive suppliers have recently their intention of building new factories in association with that assembly plant.) Toyota also has an engine plant in Huntsville.

 

That's a flock.

 

The Client Comes First

 

One of the first things that I learned in real estate school is that an agent has a fiduciary responsibility to his or her client. It means placing the interests of the client first and foremost.

 

The client counts on the agent for specific professional advice and to be the "expert." I believe site selection consultants have a fiduciary duty to work in the best financial interests of their clients at all times and be totally transparent.

 

Which leads me to a business practice not uncommon in corporate site selection -- basing fees in part or in total on a percentage of incentives awarded and/or accessed. We've heard ranges from 30 to even 50 percent.

 

Such an arrangement gives a consultant the ability to steer a client to a location where the financial interest of the consultant, rather than that of the client, would best be served. That is a clear breach of fiduciary responsibility, a clear conflict of interest.

 

Some consultants may plead that they would never do such a thing, but how is a client company, with little knowledge of the site selection process, supposed to know?

 

The best remedy: A flat fee or a variation with total transparency.

 

An Imminent Danger to Workforce

 

About two years ago, I spoke with an economic developer who viewed opioid use in his community as a crisis that was negatively affecting the local workforce.

 

I mention this because of an Oklahoma judge's recent ruling against Johnson & Johnson in what is being called a landmark case. How this all plays out in the courts should be of great interest to economic developers in communities ravished by the powerful painkillers.

 

The reason: A study by the Cleveland Fed concluded that “prescription opioids can account for 44 percent of the realized national decrease in men's labor force participation between 2001 and 2015” and a 17 percent decline for prime age women."

 

West Virginia, a state with one of the highest opioid prescription rates in the count in 2015, had the lowest labor force participation rate in 2018 at 54 percent.

 

Alabama, the state with the highest prescription rate, has a participation rate of 57 percent — which is also one of the lowest.

 

“When you have people who are not taking part in the economic life of the country in a meaningful way, who don’t have the skills and aptitudes to play a role — or are not doing so because they’re addicted to drugs or are in jail — then, in a sense, they are being left behind,” Fed Chair Jerome Powell said.

 

Calling the opioid crisis an “imminent danger and menace,” District Judge Thad Balkman ordered J&J to pay the state $572 million in damages, which represents less than 4 percent of J&J's net profit from 2018.

 

 

Talkin' Bout My Generation

 

The very notion of pinning blame for most of what's wrong in America on my generation -- the Baby Boomers --  sounds far fetched, and one that I'm not inclined to agree with.

 

That said, Lyman Stone's premise in a report to the American Enterprise Institute is worth considering.

 

Stone, a research fellow at the Institute for Family Studies, holds that Boomers, those born between 1946 and 1964, are responsible for policies that have made American institutions less dynamic. This lack of dynamism largely hasn’t hurt Boomers, but the mistakes of the past are fast becoming a crisis for younger Americans.

 

Stone looked at issues including housing, work rules, higher education, law enforcement, and public budgeting, and found a consistent pattern: The political ascendancy of the Boomers brought with it tightening controls and stricter regulations, making it harder to succeed in America. 

 

Stone points out that older voters have divergent interests than their younger counterparts. They are most concerned about cuts to retiree-focused benefits, but largely ignore long-term problems like excessive student debt, climate change, and low birth rates.

 

Mea Culpa

 

The truth is, sometimes I get it wrong. (How many times have you heard a consultant say that?)

 

Background: I frequently get marketing emails from economic development organizations that fall short. I ignore most. Some I will call out for the purposes of instruction. But never do I identify the community.

 

The emails are often invitations to a two-hour event that is 1,000 miles away from me. Some come from counties named Washington, Jefferson, Monroe, Johnson, and such, leaving me wonder “where the heck are they?”  (The state is usually buried deep in the text.)

 

One such recent email left me perplexed not only as to where it came from but also its purpose. A subsequent click revealed that it was a “fam tour” that would it would have proved quite costly for me had I accepted.

 

The whole notion struck me as absurd, and I wrongly belittled the community for its  ham-fisted attempt. Several readers rightly called me out for my arrogance. El Jerko (that would be me) deleted the post a day later.

 

I told my friend Ed Gardner, from Entergy Mississippi, about it over craft beers in Dallas. He agreed that I was a bit "over the top" in my tone, which has led me to write this mea culpa.

 

Again, I never identified the community, but I can tell you there are 31 Washington counties in the U.S., and it wasn't the one in Mississippi, which was why Ed and Will Coppage were in Dallas for our previously mentioned "sessions."

 

Incredibly, I got another email from the other Washington County. Nothing that I previously said had registered. Deep down in the text was it revealed where, what state, this particular Washington County was located. And so it goes.

 

 

It's About Us

 

In "The Grapes of Wrath," John Steinbeck called Route 66 the "Mother Road" because it beckoned to desperate migrants fleeing the Dust Bowl as they moved west in search of jobs in the 1930s.

 

Route 66 also beckoned me -- I wanted to see the country with no itinerary except being on the road. Not any road, mind you, but the road, one of the original U.S. highways.  The lure was set early. As a boy, I watched the Route 66 television series that ran from 1960 to 1964.

 

I did the Mother Road twice in its entirety -- from Chicago to Santa Monica, about 2,400 miles. The first time was in 1994. I was alone in 1969 Cadillac convertible. I made it a point to drive shirtless with the top down, not shave, and whenever possible to camp for free in remote places, mostly on BLM land.

 

The second time, I rode a motorcycle along with two Germans who worked for BMW in South Carolina. We were in Southern California on Sept. 11, 2001 when the U.S. was attacked by al-Queda.

 

I didn't think much about it at the time, but I was engaged in heritage tourism. The same was true when I rode horseback on the Gettysburg battlefield in Pennsylvania, spent the night alone in Fort Gaines on Dauphin Island in Alabama, camped in Palo Duro Canyon State Park in Texas, and walked the Little Big Horn Battlefield in Montana. And, of course, I was spending money along the way.

 

Since then, I have learned that heritage tourism, traveling to places that represent the stories and people of the past and present, is a really big deal.  Economic developers should know that it represents a big spend -- $171 billion -- in a big country.

 

Bottom line: Heritage tourism in this country is not only big business for mostly small businesses, but it speaks to who we are as a people. Heritage R Us. 

 

What We're Reading

 

How Ken Burns Connected Every Dot of Country Music's Rich History in New Film  Rolling Stone 

 

Teaching America's Truth  Washington Post

 

More People Are Leaving NYC Than Any Other U.S. City  Bloomberg

 

The Next Recession Will Destroy Millennials  CITYLAB

 

What Draws Hundreds to This Lake Bed? Spellbinding Crystals  New York Times

 

Addicted to Fines  Governing Magazine

 

Inside the Search for Amelia Earhart's Airplane  National Geographic

 

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