BBA Economic Digest: Rocket Town

February 2, 2020

 

The Rocket City Rocks

 

I joked that the photo above was a "Chamber of Commerce" photo. Incredibly, I took it from my hotel room with my smartphone through the glass window no less. You're looking at Huntsville, Alabama, long known for its knowledged-based economy.

 

Redstone Arsenal, truly a misnomer today as it is home to more than 70 federal agencies employing about some 40,000, of which less than 1,000 are active Army. It is here where NASA's Marshall Space Flight Center is located. So, too, the Army's Aviation and Missile Command, and the Missile Defense Agency of the Department of Defense.

 

The FBI is currently building what is essentially its "HQ2" on Redstone that will employ about 4,000. 

 

Leave it to say, the city has one of the most educated workforces in the nation, with a slew of engineers and PhDs. When I worked at the Economic Development Partnership 20 years ago, we joked back then that Huntsville was its own world, technically a part of Alabama but of another realm. 

 

One of the big differences between the Huntsville then and the Huntsville now is quality of life. The city's downtown is far more vibrant with more offerings than just a few years ago. There is a coolness factor here. Like any civilized place, it has a craft beer trail in addition to hiking trails of Monte Sano Mountain, which is in the city limits.

 

I got a tour of the Mars Music Hall, a newly opened music venue that has been added to the Von Braun Center in the city' downtown, where there is a spate of well-planned residential building taking place.

 

Not Your Typical Business Park

 

But it was Cummings Research Park, within minutes of the downtown, that really took my breath away. Cummings is the second largest research park in the country and the fourth largest in the world. That in itself should tell you something.

 

Established in 1962, the park was the brainchild of Dr. Wernher von Braun and others who wanted to create a collaborative environment for companies to support  governmental research on Redstone Arsenal. Brown Engineering, now Teledyne Brown Engineering, was the first business to move into the park.

 

Today, the park encompasses 3,843 acres and hosts nearly 300 companies with 26,500 employees. It's a who's who of the defense/aerospace contracting world. All the big boys are there, like Raytheon. BAE Systems, Northrop Grumman, Lockheed Martin, and General Dynamics. But so, too, are smaller companies with government contracts that very much may grow into a larger presence.

 

Anchor tenants in the Park include the University of Alabama in Huntsville (UAH) and Calhoun Community College, ADTRAN, Dynetics and HudsonAlpha. 

 

 

The Power of a Feather

 

True story: I'm riding in a vehicle with three economic developers in the western section of Cummings Research Park, aka CRP West, when they suddenly simultaneously erupt in a shout.

 

The cause: They see a large feather that is part of the Blue Origin logo being erected on the side of the soon-to-open $200 million rocket-engine production facility.

 

"You do know that I'm going to report how you all just went apesh*t over this," I said to my group. They approved.

 

The 400,000-square-foot plant, expected to open in March and eventually employ about 350 people, will build BE-3 and BE-4 engines for the next generation of United Launch Alliance rockets. Blue Origin is owned by Amazon founder Jeff Bezos, purported to be the richest man in the world and son of a Cuban immigrant who came to this country at the age of 16.

 

 

For All Your Genomic Needs

 

Visiting the HudsonAlpha Institute for Biotechnology, you soon learn that you are visiting a campus within a campus -- a 152-acre complex within the Cummings Research Park, CRP West to be exact. 

 

The nonprofit Institute was founded by serial business businessmen James R. Hudson, Jr. and Lonnie S. McMillian who recognized there was a gap in implementing genomic medicine and nurturing the next generation of biotech researchers and entrepreneurs.

 

In truth, the two had given money to academic institutions for purposes of biotech research and commercialization and were not satisfied with the results. And so they formed their own. 

 

Since the doors opened in 2008, HudsonAlpha has generated major discoveries that impact disease diagnosis and treatment. It has created intellectual property, a clinical genomic medicine program, and fosters, supports, and serves as a landlord to 40 biotechnology companies.

 

The HudsonAlpha Genome Sequencing Center specializes in performing original genomic sequencing to understand how plants function in response to environmental changes. In the cases of crop species such as sorghum, soybean, cotton, switchgrass and millet, these genomic references form the basis for genomics-enabled crop breeding to increase yields.

 

Pretty brainy stuff in a pretty brainy research park in a pretty brainy city in North Alabama. I won't say that I felt stupid at HudsonAlpha, but I felt kinda stupid there. Oh well.

 

The Big One (And Another Nearby)

 

You are looking at a photograph that I took of the $1.6 billion Mazda-Toyota assembly plant, now under construction in Huntsville, Alabama.

 

I learned that the plant is not being built on the original 1,500-acre mega-site submitted by the state, but rather an adjacent property of about the same size that was acquired literally at the 11th hour from different owners over an 8-day span. It means Mazda-Toyota owns about 3,000 acres total.

 

This summer we will learn what vehicles will be produced, probably two SUVs. Will these vehicles be powered by engines made at a Toyota engine plant 12 miles away? The company says that decision has yet to be made. Production is expected to begin in the spring of 2021.

 

About Mazda-Toyota 4,000 workers will be employed onsite, and another 1,600 workers will be employed by four suppliers with production facilities to be onsite. A fifth supplier plant is being built just offsite, and more, no doubt, are in the wings.

 

A very short distance away is a Polaris Industries plant, that opened in 2016, which employs 1,700 and to which I got to tour. The plant produces all-terrain vehicles and a three-wheel road vehicle called the "Slingshot," which I also got to ride in.

 

Polaris execs recognize they will be competing for labor with their soon-to-be next door neighbor in Limestone County. (Mazda-Toyota began hiring production workers on Jan. 13.) And while Mazda-Toyota will ostensibly pay production workers a higher starting hourly wage than Polaris, Polaris execs cite their profit sharing, bonuses, and other perks to even the playing field.

 

Similar to the Mazda-Toyota site story, Polaris did not choose the original site shown, but rather an adjacent property that had some low, frequently muddy portions to it. The fact that the property had terrain issues was what attracted the company to it. Of the five production lines at the Polaris plant in Huntsville, four are dedicated to the Ranger line of ATVs.

 

You Cannot Do Anything Without a Customer

 

Before spending time in Huntsville, I attended the three-day Winter Conference of the Economic Development Association of Alabama's and then stayed afterward for a portion of the EDAA Rural Development Conference.

 

As most of my consulting work takes me to rural communities, I wanted to stay and listen. I heard many knowledgeable speakers, but it was remarks by a small town mayor that really caught my attention.

 

John Laney, the mayor of Demopolis, Ala., may have stated the obvious for some, but his comments went to the very heart of what is ailing much of rural America -- people go where the jobs are. Increasingly, that’s been to metro areas.

 

The truth is that population loss is an insidious cancer on a community, especially so in rural America. It builds on itself by removing commerce and the very reason for jobs. It's why hospitals and schools close. It's why there are a lack of grocery stores in farming communities.

 

“People don't realize when you lose your population, you cannot tax people enough to keep those entities open,” Laney said. “You turn the rural counties into a wasteland and destroy the hospitals because there's no population. You destroyed the schools because there's no taxpayers.”

 

Laney said something that all economic developers should take to heart -- that an economic developer's primary customer is the citizenry of his or her community.

 

“You cannot do anything without a customer. The customer base in the rural counties are the people that live in the counties. We have to do things to enable people to stay in the counties, and that is going to be jobs.”

 

Whether Laney knows it or not, he is repeating that which famed management consultant Peter Drucker once wrote -- "The primary customer is the person whose life is changed through your work.” 

 

That Which Touches Us All

 

Four big subjects that I spoke about last week at Economic Development Association of Alabama:

 

First, the Fourth Industrial Revolution, which has no historical precedent and the basis of which is artificial intelligence, an amalgam of evolving technologies that will change not only how we work but the workforce and the workplace. It will affect all communities.

 

Second, I talked about of how skilled entrepreneurial immigrants grow local economies. Over 27 percent of U.S. entrepreneurs are immigrants despite being only 13.5 percent of the population. What's more, immigrants and the children of immigrants founded 45 percent of U.S. Fortune 500 companies, amassing $6.1 trillion in annual revenue last year. Rural places should court immigrants to stem population loss.

 

Third, the "other America," the one across the tracks, where economic developers will not take me unless I ask. There are 53 million U.S. workers, about 44 percent of the total workforce, who work in jobs with a median hourly wage of $10.22 and median yearly earnings of $18,000, according to a November Brookings study. Around a quarter of low-wage workers are the only earners in their households.

 

I recently spent time in an Alabama county where multiple Korean automotive suppliers were starting workers off at less than $10 an hour. You may want to read that again. Mind you, these are manufacturing jobs.

 

These same Korean companies that supply parts to the Hyundai assembly plant in Montgomery wonder why they have high turnover. Unconsionable in my book. 

 

Finally, I talked about the steps that economic developers can take to ensure that no person, no community is left behind. Much of my talk was centered on rural America, where I do most of my consulting work. It's here where investment in human resources, specifically digital literacy, and infrastructure (broadband) is vitally essential for communities to remain relevant, much less hold their own.

 

If you want me to speak to your community, let's talk.

 

 

 

 

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