COVER STORY, AUGUST/SEPTEMBER 2012

ECONOMIC DEVELOPMENT FOR THE NEW ECONOMY
Incentives, rebates and growing reputations enable Northeast states to lure jobs and fill space.
By Liz Burlingame

Even before the economic downturn, local governments offered low-interest loans, tax breaks and other incentives to entice companies to set up shop within their borders. Now, with private investment sparse, cities have been deploying aggressive and creative new tactics to attract businesses to the region, along with the jobs and tax revenue they can bring.

In Central Connecticut, public and private entities have come together to maximize development around Bradley International Airport. One such effort is through the expansion of Foreign Trade Zone 71 (FTZ 71).

FTZ 71 was recently expanded to include 400 acres within the 600-acre New England Tradeport industrial park as part of the FTZ. The designation provides economic incentives to companies that are located within the FTZ and that engage in international business.

Officials say the designation could be a game changer in generating more commercial activity near Bradley Airport and the New England Tradeport development.

"The increased size of FTZ 71 and easy access to major transportation channels will no doubt attract larger players to the region and facilitate growth of existing businesses," says Thomas Lescalleet, the senior vice president of Griffin Land, the developer of the New England Tradeport. "We've already received inquiries without any formal promotion."

Nearly 400 miles away in Pittsburgh, economic development agencies are calling attention to the region's high performing sectors, such as information technology, healthcare and advanced manufacturing. Recently, Bloomberg reported that natural gas could also be fuel for the city's recovery. The Pennsylvania Department of Labor and Industry reports that the first quarter of 2012 supported 2,028 new hires in core industries related to the Marcellus Shale, including natural gas extraction, drilling wells and support activities for oil and gas operations. This is an increase of 422.7 percent over the 388 new hires in Marcellus Shale-related core industries in first quarter 2009.

"Pittsburgh rankings have been very strong in terms of quality of life and I think that's a factor that has really benefitted us in recent history," says Dewitt Peart, president of the Pittsburgh Regional Alliance. "We have a region that is both strong in workforce and in terms of real estate that is available to companies."

To find out the different approaches economic development departments are taking — and how they've come out ahead — Northeast Real Estate Business spoke with experts in areas of Connecticut, Pennsylvania and New Jersey.

Connecticut

The newly expanded Foreign Trade Zone 71, adjacent to Bradley International Airport in Windsor Locks, Connecticut, is expected to generate more commercial activity around the airport.

Lescalleet explains that the mix of tax benefits available near the Bradley International Airport in Windsor Locks, Connecticut, could offer a "potent cocktail" for qualified business owners. "You could get up to an 80 percent reduction in real estate taxes, in addition to receiving FTZ benefits," he says.

Griffin Land, one of the largest private landowners in Connecticut, put together the application to expand FTZ 71 from its existing 17 acres to 405 acres, in an effort to attract jobs to the region, provide opportunities for larger users and help existing businesses grow. The designation, for instance, allows manufacturing and distribution companies to import goods duty-free and avoid other customs fees.

The newly expanded site also falls within the Bradley Airport Development Zone, which offers tax credits and property tax exemptions to manufacturers, or other companies that rely on airport location, that expand or move in the four towns surrounding the airport. The towns include East Granby, Suffield, Windsor Locks and Windsor. The Bradley Airport Development Zone was legislated in 2010.

One of the first companies to take advantage of the tax breaks is Nufern, an optical fiber and fiber laser manufacturer in East Granby. The Connecticut Airport Authority has approved Nufern's final application to be eligible for a host of tax incentives. The benefits will help the company finance its 30,000-square-foot expansion to its 65,000-square-foot facility on Airport Park Road.

Transportation projects and increased rail service will likely be another catalyst for growth in the region, says Sandra Johnson, vice president and director of business development for MetroHartford Alliance. MetroHartford Alliance, the region's economic development leader with more than 1,000 investors, also supported the efforts to expand the FTZ.

Funding is in place for the New Haven-Hartford-Springfield high-speed rail project, which will increase the number of daily trains between New Haven and Hartford from six to 17. It will connect bus shuttle service to Bradley International Airport. The DOT plans to begin service in 2016, and Johnson says the project is expected to result in better commuter prices, and faster and more frequent service between important job centers.

A committee of MetroHartford Alliance, called the International Business Council (IBC), has stepped up its efforts to woo foreign businesses to the state. One strategy is touting the region's positive characteristics, such as the high quality of life, educated workforce and Hartford's strategic location between Boston and New York, says Johnson. "Executives of companies that come here have said they particularly like the fact that they can have business in Boston or New York and be in their own bed at night. For foreign companies, they find this region inexpensive to do business," says Johnson.

The IBC also provides a low-cost way for international companies to quickly assimilate and get their operations up and running. The center provides short-term, complimentary Class A office space, a U.S. mailing address and access to resources while companies investigate opportunities and establish permanent office space. Today, foreign-based corporations employ more than 100,000 people in Connecticut, according to the state Department of Economic and Community Development. Major foreign firms with operations in the state include Assa Abloy, ING and Royal Bank of Scotland.

Life science, healthcare and medical devices are also driving economic growth. In 2012, Governor Dan Malloy officially formed BioScience Connecticut, investing $900 million in merging and leveraging the state's collective research and bioscience assets. Officials say the initiative laid the foundation for The Jackson Laboratory, a nonprofit research organization, to locate its new Genomic Research Center in Connecticut.

The 173,000-square-foot center will be located next to the University of Connecticut Health Center in Farmington, and is expected to create more than 600 research-related jobs. The facility is set to open in 2014.

Pennsylvania

The collapse of the steel industry in the 1980s had many questioning Pittsburgh's economic survival, as many of the city's steel mills fell silent. However, over the decades, Pittsburgh has remade itself into an acknowledged hub for sectors such as life sciences, energy, advanced manufacturing and financial and business services, says Dewitt Peart of the Pittsburgh Regional Alliance, an organization that markets the entire 10-county Pittsburgh region for capital investment and job creation.

Some of the region's biggest employers now include names such as Bayer, PNC Financial Services Group and the University of Pittsburgh Medical Center. "In the ’80s, there was a concerted effort to make sure that we had a diverse and balanced economy," says Peart. "It was a strategic decision that our economy would no longer be based on a singular industry."

Today, the major industries in Pittsburgh include advanced manufacturing, financial business services, information technology, energy and life sciences.

Today, the positive changes are evident. For instance, Forbes has ranked Pittsburgh a "top 10 comeback city," and Pittsburgh's unemployment is 7.3 percent, below the national average of 8.4 percent. In 2011, businesses and developers in the region announced 286 projects in the pipeline representing nearly $1.5 billion in capital investment and a total impact of 17,000 new and retained jobs.

One project that has aided job producers is Pittsburgh Regional Alliance's Pittsburgh Impact Initiative, which ensures resources are funneled to companies that have a track record of growth, including job creation and retention. The program, sponsored by the Team Pennsylvania Foundation and Pennsylvania Department of Community and Economic Development, tracks all businesses statewide and selects those companies that have experienced growth over the previous five years.

"The analysis found that fewer than 1 percent of companies are creating 74 percent of the jobs throughout the state," says Peart. "We're concentrating on helping those companies, which include women- and minority-owned enterprises, grow and find additional real estate."

The organization is also marketing to businesses abroad that share similar strengths or industry concentrations as Pittsburgh, including parts of France, Germany and the United Kingdom. "That's what sets us apart from our competitor regions," says Peart. "If we're promoting Pittsburgh, we're going to places that are strong in manufacturing or that share our technology and innovation mindset. We approach it in a strategic way."

Pittsburgh is strongly aligned with Germany, which is the region's largest foreign investor. Eighty German-owned companies operate 170 businesses, according to the Pittsburgh Regional Alliance's market research team. Several recent multi-million dollar investments from Germany are adding to the region’s manufacturing capacity. They include Ardex, Auma Actuators, Hormann Flexon and Spreadshirt.

The market has also continued to experience a rise in shale gas exploration and production, which has been a major engine for economic growth in the past few years. The Marcellus Shale exploration is part of the reason Pittsburgh was named the 10th fastest growing economy in the U.S. in 2011, with a growth rate of 1.6 percent. The region is believed to hold one of the largest natural gas deposits on the continent.

Peart notes that Shell Chemical recently signed a land-option agreement to evaluate a 300-acre site in Monaca, for the construction a proposed petrochemical plant. Peart says that in addition to creating hundreds of jobs, the facility should unlock opportunities for associated petrochemical industry development and a resurgence of manufacturing in the area. "If an investment decision is made, we expect there will be billions of dollars in investment in this one plant," says Peart. "It would be a significant opportunity for industrial development throughout the region."

New Jersey

New Jersey economic development agencies are aiming to redevelop the 1,126-acre Fort Monmouth property, which spans parts of Eatontown, Oceanport and Tinton Falls, New Jersey.

Under the leadership of Gov. Chris Christie, New Jersey has redesigned its approach to economic development in the past several years, as the administration works to improve the business climate in the state by reducing spending and providing regulatory relief.

The centerpiece of the administration's plan is the three-part New Jersey Partnership for Action. One component is the state's Business Action Center, which helps businesses stay in New Jersey by matching a company's specific need with an available incentive program. The program is designed to remove administrative hurdles and assist New Jersey businesses with easy-to-find information.

The New Jersey Economic Development Authority serves as the state's "bank for business," by financing small and mid-sized businesses and launching redevelopment initiatives to revitalize communities.

Finally there is Choose New Jersey, a privately funded nonprofit that seeks to attract businesses to New Jersey by marketing the state's strengths at home and abroad.

"Our strengthening economy, coupled with Gov. Christie’s aggressive actions related to economic development, have led to growing optimism from our business community and increasing interest from companies across the globe," says New Jersey Lt. Gov. Kim Guadagno.

The strategy has produced some promising results. In recent years, major corporations such as Panasonic and Honeywell have decided to expand operations in New Jersey.

Many businesses have also taken advantage of state incentives, which has given rise to a number of new development projects in the Port submarket of New Jersey. For example, last May, Global Terminal & Container Services announced it would develop a more technologically advanced container terminal on the Port Jersey Peninsula. The new terminal will be able to handle 1.7 million TEUs (twenty-foot equivalent units) per year in volume, which will make it amongst the most efficient container terminals in the world.

The incentives, namely the Urban Transit Hub Tax Credit Program (UTHTC) and the Grow New Jersey Assistance Program have also allowed tenants to afford the move into Class A facilities throughout the Port, according to a Port of New York/New Jersey report by Jones Lang LaSalle.

To qualify for incentives, companies must create and retain jobs. For instance, the Grow New Jersey program reimburses companies via tax credits on a per-employee basis ranging between $5,000 and $8,000 per employee per year for a period of 10 years, given the company employs a minimum of 100 people and at least $20 million is invested in a project.

New Jersey has also made strides in the last 30 years in creating a transportation network that links residents to employment opportunities, says Tim Lizura, vice president of finance and development for the New Jersey Economic Development Authority (EDA). The New Jersey Transit is the nation's largest statewide public transportation system, providing 895,000 weekday trips on 12 commuter rail lines, three light rail lines and 240 bus routes.

"Gov. Christie recognizes that transportation is the lifeblood of New Jersey's economy and we are seeing a growing interest in utilizing transit as a catalyst to revitalize older urban and suburban areas," says Lizura.

A recent effort is the Transit Village program, which encourages municipalities that have public transportation hubs to develop zoning laws and other regulations to support dense, mixed-use development near the transit facilities. So far, 24 municipalities have been designated as Transit Villages, with other applications pending.

Another project that could have a significant impact on the region in the coming years is the redevelopment of the 1,126-acre Fort Monmouth, which spans part of Eatontown, Oceanport and Tinton Falls, New Jersey. In 2005, the Base Realignment and Closure Commission included the base in a list of military facilities it would close to save money.

Over the last year, the Fort Monmouth Economic Revitalization Authority and EDA have been marketing the property to companies and investors. Lizura says the main portion of the base in Eatontown could emerge as a "live-work" environment with a mix of office, residential and retail. "Rows of historically protected officers housing would provide the basis for a residential community once interior upgrades are made," he says.

In terms of office space, Mallette Hall offers 57,000 square feet of space and the 60,000-square-foot McAfee Center, with its anechoic chamber and high security system, includes the infrastructure for high-tech companies.

Lizura adds that New Jersey has a high concentration of scientists and engineers, which could prove attractive to companies interested in locating in the region. "The departure of the Army has left a wealth of engineering expertise with a number of firms that had provided contracted services to the Army remaining in the area."

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