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The usual suspects: Existing businesses spur state’s economic development

September 7th, 2013 6:05 pm by Hank Hayes

The usual suspects: Existing businesses spur state’s economic development

KINGSPORT — While industry recruiters in other states spend a lot of time and energy courting big name prospects, Tennessee appears to be winning the economic development game by rounding up the usual suspects.

A majority of Tennessee’s economic development announcements this year — and it seems a big one is happening every week — has come from existing businesses.

The foundation for that strategy to grow in-state businesses was laid in 2011 when the Tennessee Department of Economic and Community Development (ECD) unveiled its “Jobs4TN” plan.

A centerpiece of the plan was to focus recruitment efforts on six target clusters where the state thought it has a clear competitive advantage: Automotive; chemicals and plastics; transportation, logistics and distribution services; business services; health care; and advanced manufacturing and energy technologies.

 The state ties tax credits to job creation, and during Gov. Bill Haslam’s first term, lawmakers have reduced business regulation by enacting monetary caps on lawsuits and passing workers’ compensation reform taking cases out of the court system and putting them under a state administrative system.

 As a result, here’s a sampling of what’s happened:

• Earlier this year, Kingsport-based Eastman Chemical Co. announced its $1.6 billion “Project Inspire” expansion of its corporate campus and plant upgrade, plus 300 additional jobs.

• On Tuesday, Nissan supplier Calsonic Kansei North America Inc. announced the company will invest $109 million and add 1,200 new manufacturing jobs across its facilities in Lewisburg, Shelbyville and Smyrna.

• On a smaller scale, air bag producer ARC Automotive announced Wednesday the company will invest $3 million and create 115 new jobs in expanding its Knox County facilities.

Year to date, ECD says the state has nailed down 147 projects totaling 16,551 jobs with capital investment of $3.7 billion. The department notes more than 85 percent of those projects and about 73 percent of those jobs came from existing Tennessee companies.

“I wish I could say we started trying harder,” Haslam, a Republican, said of the announcements during a recent meeting with members of the Times-News Editorial Board. “Some of that is just things we’ve been working on for a long time and has come to fruition ... Of those announcements, [most] of them have been like Eastman, an existing business who decided to commit and stay here. That strategy is really paying off. ... Three or four other [project announcements] are really close. We’ve had a good geographic spread across the state.” 

Tennessee’s larger employers, said Haslam, are doing well and have apparently put the 2008 financial crisis in the rear view mirror.

“But our smaller employers, the people with one to 60 employees, they’re not quite feeling that confidence that they’re going to go out and hire somebody new,” Haslam said.

Nationally, the National Federal of Independent Business (NFIB) has reported four consecutive months of negative job creation for small businesses.

“In plain English, this means that a majority of small-business owners did not hire new workers this summer,” said an NFIB survey. “Of the 47 percent of owners who did hire or tried to hire in the last three months, 36 percent reported few or no qualified applicants for open positions.” 

Haslam noted there also is “some fear” primarily among small employers about how Obamacare will affect the economy when the bulk of health-care reform measure takes effect next year.

“If you’ve got 20 employees and the recession hit on 2008 or 2009, it was hard to make cuts and then you’re saying ‘Am I going to do that again? I’d rather pay my existing people overtime,’” Haslam said. “There’s a sense of vulnerability in our small businesses who have been around. Some of it is fear about the health-care law. Some of it is fear about being burned three years ago.” 

Workforce readiness also remains a challenge, and the Haslam administration threw a spotlight on the issue recently by launching its “Drive To 55” initiative to develop more college graduates and make strategic investments in the state’s community colleges.

Only 32 percent of Tennesseans have a certificate or degree beyond high school, and studies show that by the year 2025, the number needs to be at least 55 percent for the state to keep up with job demand, said Haslam.

Nearly half a million state residents need a degree to reach the 55 percent goal.

“We’re at a real critical point in higher education,” he said. “Every percent you miss means another percentage of Tennesseans who are unemployed and that many jobs are going out of state. ... As governor, you are hit every day with 50 big issues that have to get solved ... [but] it’s hard for me to think there’s one bigger than this.”


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