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  May 29th, 2013 | Written by

Flocking to Florida

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With its first-class infrastructure, job-creation incentives and enticing relocation packages, Florida has America’s manufacturers thinking, “It’s time for a tan!”

Five days into March, Florida Gov. Rick Scott approached the podium of the Tallahassee statehouse for his third state of the state address, prepared—as he invariably is—with numerical evidence of job creation. After name-checking several local guests he paused to single out Wes Bush, chairman of Northrop Grumman in California. The defense contracting chief had hours before signed off on plans to upgrade the Northrop Grumman facilities in Melbourne and St. Augustine, with expansion slated to bring nearly 1,000 jobs to Florida.

The announcement was big news even in a state that has made job creation its top priority, highlighting Florida’s successful and ongoing transition from beacon for heat-seeking retirees and vacationing sun-worshippers to magnet for cost-squeezing employers and growth-hungry entrepreneurs. Acting as the state’s top corporate ambassador, Gov. Scott has relentlessly talked up Florida’s sunny climate and business advantages to business owners, senior executives and corporate investors around the nation. Cold-calling one chieftain after another, the governor ticks off the Florida advantages: Well-educated labor force, check. Multimodal access to Latin American markets, check. Sunny climate and leisure lifestyle, check. And—last but hardly least—tax incentives. Check.

Make that “checks.” Lots of them.

Florida deployed nearly $4 billion in tax cuts, write-offs, obligation deferrals, financial incentives and other financial benefits to companies that agreed to relocate or stay in the state last year, according to a New York Times database. Florida says its efforts have paid off to the tune of 100,000 new jobs a year for the past two years, and counting.

“No other governor has cut as many checks to corporations or used this program as vigorously as Scott,” declares the Florida Center for Investigative Reporting. Gregory Burkart, managing director of relocation advisor in Duff & Phelps’ Detroit office and long-time member of its Business Incentives Advisory practice, concurs. “Governor Scott,” he says, “has really put Florida on the map for manufacturers.”

TIME FOR SOME REEL FUN With its natural beauty and wealth of leisure options, Florida has great appeal for attracting manufacturers who value quality of life.
TIME FOR SOME REEL FUN With its natural beauty and wealth of leisure options, Florida has great appeal for attracting manufacturers who value quality of life.

That most of these manufacturers are export-minded comes as no surprise in a state that’s been promoting its enviable geographic advantages among its various attributes. Preceding Northrop Grumman, itself a ranking exporter, in this winter’s relocation parade was Total Quality Logistics (TQL); the Cincinnati-based freight brokerage giant announced plans in Florida to open an Orange County office. Enterprise Florida, the public-private economic-development partnership that’s been spreading the governor’s message around the country, coordinated governmental responses between Tallahassee, the Orange County government and the Metro Orlando Economic Development Commission for a $225,000 tax refund under the state’s Qualified Target Industry program, based on attaining job-creation goals.

“TQL is aggressively expanding nationwide and we have strategically chosen Metro Orlando as our next location,” says Kerry Byrne, executive vice president of the brokerage, the country’s second-largest. “This is a region where our people have told us they will enjoy the quality of life and amenities. It is also an area where we can attract motivated individuals from surrounding colleges and universities to a challenging and rewarding sales career with our company.”

Location, climate, incentives and lifestyle—add to the package a highly competitive labor market and what’s generally ranked as a strong pro-business environment, and it adds up to one of the more compelling relocation packages in the country. “Most executives won’t say this publicly, but they’re all aware Florida is a right-to-work state,” adds Burkart. In addition to its less unionized work force, he adds, such labor-pool qualities as size, skill set and attitude make Florida’s hourly workers, as well as management trainees, a singularly attractive workforce in the Southeast.

“I would rank Florida number one in terms of labor pipeline,” says Burkart in reference to the computer skills needed by line workers staffing today’s highly automated factories. That’s high praise coming from a relocation specialist. “There is enormous excess capacity in the manufacturing workforce, and this constricts labor costs.”

Of course, another big factor in Florida’s appeal is its advantageous geophysical location. About 40 percent of all U.S. exports to Latin and South America pass through the state. Florida’s single biggest trade partner is Switzerland, an anomaly attributed to a tightly controlled market in precious metal exports. After Switzerland, the state’s trading partners take on a more Latinate complexion: Venezuela, Brazil, Colombia, Chile and Mexico. Other top foreign customers include Canada and the United Arab Emirates.

The state’s largest merchandise export category is computer and electronic products, accounting for $14.5 billion of merchandise exports in 2012. Other leading categories include transportation equipment, primary metal manufactures, chemicals and machinery. Agriculture is also an important export, especially value-added food products, says Jerry Hingle, executive director of the Southern United States Trade Association.

“Florida exporters enjoy access to one of the best, if not the best, infrastructures in the nation,” says Eric Silagy, president of Florida Power and Light and a board member of Enterprise Florida.

FIRM GRIP ON THE ECONOMY Gov. Rick Scott (right) greets Wesley G. Bush (center), chairman, chief executive officer and president of Northrop Grumman Corp.
FIRM GRIP ON THE ECONOMY Gov. Rick Scott (right) greets Wesley G. Bush (center), chairman, chief executive officer and president of Northrop Grumman Corp.

The state’s multimodal transportation system continues to modernize and expand, even as federal projects and reimbursement policies in other regions wane. Its planned $180 million dredging of Port Miami earns big points from the local business community, which anticipates increased business with Latin America and Asia—and global markets beyond that—with the planned Panama Canal widening and the onset of trade agreements with Colombia. Other logistical advantages include ready access to 13 international airports, 15 deep-water ports, three spaceports, and two federal roads connecting north and south of the panhandle-shaped peninsula.

“Manufacturers who export are especially attracted to Florida,” says Burkart, who’s recommended many Sunshine State locations since joining the relocation advisory firm in 2007. “South Florida is the gateway to Latin America, despite competition from Texas. This is a peninsula state. If you’re shipping, you’re never far from the ports. And the infrastructure is the best in the Southeast in terms of roads, rail and air channels serving the ports. This is a boon for logistics, in terms of quality, capacity and cost controls.”

Multimodal rail plays a major role. “Florida—in particular South Florida—is noted as the primary gateway between Latin America and South America, and lots of U.S. exports flow south,” says James R. Hertwig, president and chief executive of Florida East Coast Railway, whose 77 percent intermodal cargo volume purportedly tops U.S. railways. “The trade future is bigger ships able to carry larger quantities of cargo from South Florida through the Panama Canal and on to Asia,” Hertwig says.

In January, the railway company and officials from Port Everglades in Broward County jointly broke ground on a new 42.5-acre, $73 million intermodal container transfer facility. Relocated two miles nearer the port, the new facility looks to become the region’s next major freight hub—internationally and domestically. Officials predict reduced traffic congestion, faster transfers and, ultimately, lower shipping costs. A second project, a $50 million on-dock rail service at Port Miami, is also moving forward. Already completed are a rail line leading to the port and a rehabilitation project for Bascule Bridge. Both projects are scheduled for year-end completion.

Utility costs are a major concern to exporters. Florida Power and Light, which serves over half the state, seeks to offset electric costs by offering users commercial discounts of upwards of 20 percent, plus additional rebates to those who move into manufacturing facilities that had been vacant six months or more, Silagy says.

After several years of aggressively courting manufacturers, Florida has bolstered its export footprint, ranking fifth last year (tied with Washington state) for manufactured exports, shipping $52.7 billion. Foreign investment in Florida, much of it centered in greater Miami, also contributes to export-related jobs. Companies headquartered in the U.K., Canada, Germany and Japan controlled companies that employed more than 220,000 Florida workers in 2010, employing nearly 4 percent of the state’s private-sector workforce, according to the U.S. Census Bureau.

Gray Swoope, who heads Enterprise Florida, attributes much of the Sunshine State’s recent job-creation success to its export positioning, including its connections—intrinsic and strategic—to the burgeoning markets in Latin America and the Caribbean. “What’s interesting about Florida’s economy,” Swoope muses, “is that there are 55,000 businesses that export. That’s the second-largest number outside California. Of that 55,000, 95 percent are small and medium-sized enterprises—under 500 employees. One of the things we do to help them is subsidizing the cost of Gold Key,” the federal program that connects smaller exporters with distributors and buyers in overseas markets. A network of 14 offices overseas, staffed in conjunction with local marketing professionals and export promoters, serves Florida’s next-generation exporters. Enterprise Florida offers state companies grants and travel discounts to offset the cost of traveling overseas to attend trade shows or meet local buyers and distributors.

One company benefiting from both federal and state programs is Concept II Cosmetics, a Miami-based manufacturer of skincare products and regular trade mission attendee whose exports now account for 15 percent of total revenues. “State export promotions officials have directed us to work with other institutions to secure trade grants, nominated us for industry awards and provided insight as to what trade activities and services” are available, says Maxim Weitzman, managing director. “They have validated our credentials as a trusted U.S. manufacturer, which goes a long way in the cosmetics industry as more and more users search for U.S.-made products.”

State grants have also helped Armstrong Nautical Products, which sells marine navigation equipment to the boating industry. “We’ve attended a number of international trade shows through these grants,” says Rusty Sedlack, co-founder of the Stuart-based manufacturer. “Our business is one where it is of primary importance that we show our products face to face. Enterprise Florida has helped us to do that and that’s guided our entry into the export market.”

Monica Richardson-Morley, vice president for international business development at the Palladio Beauty Group in Hollywood, Florida, attributes the company’s growing international marketing success in large part to support and encouragement from Enterprise Florida. “They’ve opened our eyes to how business is done in other markets, which may not be how we do business here at all,” she says. Citing advice from the agency’s staff, as well as lessons learned during trade missions, Richardson-Morley has scrutinized regulations governing acceptable ingredients and other import requirements that can restrict product sales or leave companies open to harsh regulatory action. At the same time, she said, she’s learned to spot cultural cues that can impact sales, such as using the domestic language on packaging and featuring hues in display materials which might appeal to U.S. customers but alienate those in Latin American markets.

“They take the time to listen to us and understand what we’re trying to do as exporters, and they’ve opened markets for us,” she says of the state’s export promotion staff. Palladio now exports about $5.5 million a year to markets in Mexico, Colombia, Peru, Chile, Trinidad and Brazil; these sales constitute about one-third of the company’s total sales. “This year,” she says, “we’re aiming at $7.5 million in international sales. And I think we can do it.”