at least the 1940s in the second quarter. u Gross domestic product shrank 9.5% in the second quarter from the first, a drop that equals an annualized pace of 32.9%. u Personal spending, which makes up about two-thirds of GDP, slumped an annualized 34.6%, also the most on record. u The Covid-19 recession is predicted to be the deepest since the Great Depression. The longer the pandemic lasts without a vaccine, the longer economic output will remain below pre-crisis levels. Current Status: Recession
We have not yet hit the main white-collar layoff period. Unemployment Rates 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% January February March Aprl May June U.S. Unemployment Rate 2019 vs. 2020 2020 2019 State Unemployment Rates June 2020
Poor Performance, you’ll hate the Main Street Lending Program. u Main Street Loan Program is targeted at U.S. companies with no more than 15,000 employees or a maximum of $5 billion in 2019 annual revenues. u Not accessible/usable by businesses that need it most. - Companies most in need of aid won’t qualify, while strong companies can find better terms elsewhere - Businesses aren’t happy with interest rates (about 3.1% to 3.3%) and quick repayment terms - No principal for two years interest free for one year; but maximum term is 5 years - Government is looking to support no-risk businesses. The program’s EBITDA restrictions favor companies with no debt, leaving out hospitality retail and corporate real estate -– industries that commonly rely on leverage to operate Main Street Lending Woes
trade war with China, pandemic, closed factories, stalled international travel. u The just in time model -- and its reliance on Chinese facilities -- has failed many companies. - Shortages: toilet paper, meat, laptops and other products u The conditions seem ripe for bringing back jobs; yet that hasn’t happened yet. - Movement has been to Mexico and Vietnam (wages) - Others are spreading risk around the globe rather than concentrate in the U.S. - Others will stay put in China – the market is too large to abandon (consumer products, automotive) - Companies that were thinking of reshoring are now stalled by the pandemic, cutting jobs as a result of declining revenues u But all hope in reshoring is not lost. There’s potential to capitalize on rising wages, security concerns and the consumers’ desire for products not made in China: - Incentives - Reshoring subsidies - Workforce training Reshoring: Are the Jobs Coming Back?
Corporate America will not incur the full cost of real estate going forward. Does that translate to higher wages jobs, more flexibility in positions? u What does work look like? End of the open office, cafeterias, common spaces? Gyms? Shift work in offices? u We will see a decrease in office size? Certainly, in dense high priced urban areas. u Corporate real estate/ landlord/ rent issues. u We will see an increase for Inventory. From “Just in Time” to “Some on Hand.” u Lower direct economic impact of office projects might mean EDOs should dedicate fewer resources to chasing them. Return to Work
side: the ability to work remotely with the full support of employers. u Google has announced that employees will work remotely until July 2021. Employers are increasingly receptive to remote work for the long haul. u Glassdoor, the job posting site, says its remote job openings are up 28.3% from a year ago, even while overall listings are down 23%. u Staffing firm Manpower estimates that more than one in four jobs posted in the U.S. specify no location, up from 1 in 10 in January. u Recruit workers, not companies: - Creative Incentives - Marketing / Social media Remote Work Is Here to Stay and Growing
Savannah Technology Workforce Incentive, a Covid-era creation, offers $2,000 grants to cover moving expenses for remote tech employees who choose to relocate to the city this year. Employees are not required to work for Georgia companies. Choose Topeka Created to lure office-bound workers; will be expanded to target remote workers. Benefits can reach $15,000. The recruited workers’ average salary is $85,000, almost double the city’s median wage. Tulsa Remote offers $10,000 and work space to self- employed individuals who live outside Oklahoma to relocate for one year. Goal was to recruit 25 remote workers in 2019 but expanded to 100. Goal for 2020 is 250. Newtown offers $10,000 cash to new home buyers through its Housing Initiative, plus a “welcome” package worth $2,500. Available for new single-family home construction worth more than $160,000. North Platte’s WORK NP program matches sign-up bonuses for new hires up to $5,000, which means a potential $10,000 signing bonus for workers. The money can be used for things like relocation expenses, down payments or deposits, student loan repayment and more. New Worker Relocation Grant pays workers up to $10K to move to Vermont. Must be W-2 employees not contractors. VT NE OK IA GA KS
Commitments Real Estate / Infrastructure Labor u Updated, accurate, thorough information u Fast action with incentives (911 response model) u Stronger business retention efforts u Solid commitments to pay previously approved incentives u Flexibility to allow increased support for start-ups and Main Street/small business u New industrial parks u Infrastructure in place u Spec sites u Ready workforce u Steady pipeline of talent u Flexible training programs u Technical training Site visit are happening again. However, more sites are being reviewed and eliminated at a desktop level before visits occur. The window of opportunity to make impression is narrowing. Economic developers must find a way to make an impact earlier in the process: answer the questions in the RFP and provide drone footage of sites.
Tech, Food and Beverage, Defense, and Mid-Tier Manufacturing, Med Device and Pharma). u Everyone wants to get repatriation projects and a return of supply chains (Pharma and Medical Devices and IP related projects). Create targeted incentives to recapture this (PR). u Non-secure supply chains have left the U.S. vulnerable. The consumer market is going to demand products no longer be made in China. u National security/economic development - We have been caught unprepared. We need a national industrial policy to commit to produce what we need here. u Federal government is getting significantly more involved in economic development: - Kodak (Development Finance Corp.) - CHIPS for America Act Longer Term View
York, NY 10017 www.bdo.com Thomas J. Stringer, ESQ. Managing Director, Site Selection & Incentives EXPERIENCE Tom Stringer is one of the top site selection and incentives professionals in the country having secured his clients over $2.2 billion in some of the most high profile economic development projects of the last decade. Tom leads BDO’s Site Selection & Incentives practice and has over 20 years of in-depth industry experience in all phases of the site search and incentives negotiation process for a wide range of clients such as major defense contractors, professional sports leagues, privately held manufacturing companies and start-ups pushing ground breaking new technologies into commercialization. Prior to joining BDO, Tom was a Principal and National Practice Leader for a global consulting firm and served in various leadership roles in investment banking and public accounting firms specializing in providing global site selection and business incentives services. Tom has authored numerous articles and sits on the editorial board of Area Development magazine. He serves as a resource in the business incentives and site selection fields for senior elected officials and state agencies. He has been quoted in hundreds of well-known publications on various real estate, tax and corporate location decision making topics. PROFESSIONAL AFFILIATIONS Licensed Attorney & Real Estate Broker in New York EDUCATION J.D., St. John’s University B.S., Economics, Villanova University