16 Jun Wisconsin Leaders Discuss Economic Development
MADISON, WI – A coalition of Wisconsin’s economic development leaders met last week to reassess the state’s efforts to attract businesses and discuss strategies and tactics to fuel economic growth from within.
The Governor, along with Secretary of Commerce Cory Nettles and board members of Forward Wisconsin, met with local experts and Dennis Donovan, director of global site selection for Wadley-Donovan, a division of Grubb and Ellis Company. Donovan offered his opinions and research on how Wisconsin can get on corporations’ site location and economic development radar.
The competition among states and cities for new development is more intense than ever due to current political and economic trends and activity. Wisconsin needs to highlight its economic assets and find more money for the severely under-funded efforts of Forward Wisconsin, the state’s economic development partner. With a 2003 budget of $1 million for Forward Wisconsin, and less predicted for 2004, Wisconsin is near the bottom of the pack when it comes to marketing economic development. Wisconsin’s small budget does not compare to most other states or even cities. Richmond, Va., with a budget of $2 million, Buffalo, N.Y., with $5 million and Jacksonville, Fla., with $3.5 million, makes Wisconsin’s efforts seem trivial.
There is evidence of increased corporate site selection inquiries that suggests companies are starting to focus on growth again, according to Donovan. The hot spots are in the Atlantic Sun Belt where there is a good business climate, moderate costs, quality of life, and trained workers. Following the Sun Belt is the Inter-Mountain states ranging from Idaho to Arizona. Donavan believes that Wisconsin can be attractive and competitive with other states and that is has a great story that needs to be told.
Businesses are looking to diversify their risks and to set up new locations that will allow them to further regionalize their supply chains, call centers, data backup and recovery, while offering more secure surroundings. The cost of terrorism insurance in New York City, according to Donovan, is approximately $4 per square foot compared to a fraction of that in cities and towns in Wisconsin. Corporations are not just looking at cities; they are focusing more attention on rural areas in good transportation corridors as long as they have a solid telecommunications and broadband infrastructure. They are in search of good labor and lower costs.
Wisconsin not only faces competition from other states, but from developed nations such as India where there is a trained workforce and much lower costs than in the U.S. Donavan pointed out that both old economy companies and high-tech companies are losing out to offshore markets. Oracle is moving almost all of its programming efforts to India, Dell and Motorola have major operations and call centers located there as well. AOL has a significant operation on the Philippines.
“We have a global economy,” Donovan said. “Just because you have a high-end business concentration does not mean your workforce won’t be displaced overseas.”
Wisconsin has some very strong assets with an outstanding pool of hard-working employees with a strong work ethic. There is a great base in forestry, agriculture, marine products, and manufacturing, according to Donavan. He recommends that Wisconsin needs a strong alignment of business, government and education to provide proper guidance and training to students at a much earlier age and to make tax and economic incentives more competitive with other states. He suggested that Wisconsin should shift some of its tax burden to sales tax and lower its income tax as others states have successfully done.
“35% of Wisconsin workers are in dead end jobs,” noted Donovan. There is significant underemployment in cites like Madison while other areas of the state will need to retrain workers. Donavan called for a statewide effort to align “public education with the needs of business,” to minimize this problem and to create new opportunities.
Wisconsin has significant strengths that need to be built on, according to Donovan. Good transportation, power and utility service, telecommunications infrastructure, and quality of life are important site criteria that Wisconsin does well on.
However, because of a pending labor shortage in coming years due to an stagnant, aging population that is not growing, especially in lower age demographic brackets, and a minority population that is way below national averages, Wisconsin may not be that appealing to some businesses. Donavan noted that Wisconsin’s lack of workforce diversity would almost instantly disqualify it for consideration by out-of-state technology employers. In addition the state has a reputation for strong unions, high taxes especially in the service industries, offers few tax incentives, and is perceived as a state that is costly to do business in.
Donovan recommends that the state focus its technology development efforts. Instead of promoting biotech in a broad sense he suggested focusing on Nanotechnology and robotics, as this would be complimentary with the significant manufacturing base in the state. Fish, crops, lumber and waste products are areas that he thinks Wisconsin biotech efforts should be directed to be complimentary to an existing market and workforce.
“Wisconsin needs to stop using the term ’clusters’ for economic development, as it is an overused term that is 50 years old,” said Donavan. “Don’t spend an enormous amount of time and money on clusters.” He recommends that Wisconsin narrow its focus on target industries and initiatives. “Look at what’s prominent and exploit those sectors,” he said. An example he cited is collaboration across industries such as manufacturing, paper for packaging, plastics, graphics, and factory automation. All of these could come together for today’s sophisticated food processing industry.
Donovan’s final recommendations included no tax hikes, more competitive tax incentives, continued expansion of broadband services, certified economic development zones, improved four-lane highway access for rural towns, and improved regional economic development and cooperation as Midwestern states cannot afford the time, money or effort to compete with each other. Donavan was not short or shy in his message to the Governor and Secretary of Commerce that Forward Wisconsin needs a minimum budget of $2 million coupled with more regional collaboration.