"Green Shoots" In The Southeast Region

Monday, April 5, 2010 - 01:00

The Editor interviews Kenneth C. Stewart, Commissioner, Georgia Department of Economic Development.

Editor: On a regional basis, what is the business composition of the Southeast? Are there new industries developing?

Stewart: Agriculture will always be a staple, but growing industries in the Southeast have included automotive, aerospace, telecommunications and technology and, until the recent economic downturn, banking. Tourism is also strong.

Editor: Selected areas within the United States are beginning to improve somewhat. Has the Southeast region been as hard hit as other regions of the U.S.? Do you expect that the economy of the Southeast region will improve this year?

Stewart: Automotive production declined in the Southeast as it did elsewhere, due to weak car sales. As one of the fastest-growing areas in the nation, the South was hit hard when the residential and commercial real estate markets contracted, causing a downturn in construction and other related industries. We are already seeing signs of improvement as automotive and other manufacturing companies ramp up production. The real estate market will be slower to recover but the same qualities that have always made the Southeast competitive - workforce, transportation network, availability of land, and low operating & living costs - remain in place and will attract business once again when the economy turns.

Editor: What are the competitive advantages that the Southeast offers to business and industry?

Stewart: The items I mentioned previously: workforce, transportation network, availability of land, and low operating & living costs, plus a high quality of life. We have a very large pool of available, skilled labor; a comprehensive logistics network that connects companies to the rest of the U.S. and the world through major interstates, trains, and flourishing ports on the East and Gulf coasts. Land is abundant and less expensive than other parts of the country, and the Southeast continues to see an influx of people from higher-cost portions of the countries such as the Northeast and West Coast. We have all the advantages of the rest of the U.S. - and more, actually - for less cost.

Editor: Much of the Southeast region has an international orientation in attracting international companies and international business generally. In addition to your 10 international offices, last year you hired an international business liaison. Can you tell our readers what this position entails and about its success?

Stewart: Basically, Georgia's International Business Liaison works with business executives of newly located companies to help them surmount challenges in the relocation process, which includes assisting them with driver's licenses, banking options, housing and real estate, schools, business networking and cultural opportunities. When a company relocates, its leaders are often tied up in the details of the business move, and so it's a competitive advantage for us to offer these kinds of services to their families when our project managers are negotiating with companies. As far as we know, Georgia is the only state that employs a person dedicated to these services. Nico Wijnberg, who is in the position, came to us from the Netherlands and has been through the international relocation process himself, which gave him great insight into the process and the needs to be met. Nico has a Master's in international affairs, a background in economic development and speaks seven languages, which have stood him in good stead with the over 70 companies he has assisted thus far.

Editor: Has there been any state level legislation proposed or passed recently to encourage business and the creation of jobs?

Stewart: In 2009 Governor Perdue signed into law several enhancements to the Business Expansion Support Act (BEST) legislation that will help give the state a competitive edge by providing long-term economic benefit for companies who locate or expand in the state. Highlights of this legislation include:

Quality jobs tax credit: Companies get a benefit, using a scaled system, for establishing jobs paying higher than a county's average. A minimum of 50 jobs must be created.

R&D tax credit: The existing credit was made stronger: it will increase support to small, innovative companies by removing a current requirement that a company have positive net income for the previous three years - a challenge for most emerging technology companies. It also allows emerging companies to use the credit against payroll withholding for their first five years. The Georgia tax credit is also now tied to the standard federal calculation, which is measured by gross receipts, rather than the current formula, based on taxable income.

Mega tax credit: This expands current code for large, high-impact economic development projects. By adding a qualification mechanism based on payroll, the credit expands eligibility to projects other than manufacturing. Companies must provide a minimum of 1,800 jobs and either $450 million investment or $150 million in annual payroll.

Port tax credit: This revision provides that base port usage figures will be calculated annually instead of on a fixed 1997 figure, and the credit will apply to imports as well as exports.

Retraining tax credit: The language of this existing tax credit was clarified to establish a stronger eligibility definition of technology, and the credit now places a $1250 cap per year per employee for all eligible retraining.

Editor: A bill to maintain a number of tax breaks for business just passed Congress (and will be signed by the President by the time of publication of this issue). Will maintaining existing tax breaks for business be of particular assistance to commerce in the Southeast?

Stewart: If a bill that gives tax breaks is signed into law on the federal level, it will assist companies all over the country, not just those in the Southeast. Each of the Southeastern states has state and local tax credits and other incentives that help them compete against each other as well as states outside the region and countries all over the world.

Editor: We understand that the governor is pushing for tort reform, which is viewed favorably by business. What is the status of this proposal?

Stewart: Major tort reform was passed in Georgia in 2005, but to my knowledge there isn't major tort legislation proposed by the Governor this year. I can't answer for other states in the Southeast, but in general the tort environment is always changing because of the number of cases in the system and the complexities of those cases. In fact, just in the last two weeks, the Georgia's Supreme Court has upheld a major piece of the 2005 legislation and struck down another.

Editor: Please tell our readers about Red Carpet Tour ® and the Georgia Quail Hunt?

Stewart: These events are sponsored by the Georgia Chamber of Commerce and the Georgia Allies, a public-private partnership formed in 1997 to build on business relationships fostered during the Olympic Games. The Red Carpet Tour and the Quail Hunt are two of the state's signature marketing events, during which prospects are introduced to Georgia business and cultural assets through a series of visits to strategic sites around the state. The Red Carpet tour is topped off by two days at the renowned Masters golf tournament in Augusta. The Quail Hunt typically takes place at several quail plantations around Albany, Georgia. During the past 13 years, these events have helped create more than 23,000 jobs and inject $5.8 billion into Georgia's economy.

Editor: What do you see as the long-term prospects for the Southeast Regions?

Stewart: I am not an economic forecaster, but those forecasters I know of seem to agree that we've seen the worst of the recession and are starting to recover. We still have a long way to go, but I believe the business advantages offered by the Southeast - workforce, logistics, land and cost efficiencies - will continue to offer the good value companies seek, and that the region markets those assets well, collectively and individually.