The SLC Economic Development, Transportation & Cultural Affairs Committee convened on Saturday, July 12, for a program session, Sunday, July 13, for a business session and on Monday, July 14, for a technical tour during the 62^nd SLC Annual Meeting.  The following is a summary of the speaker presentations and Committee activities from each of these programs.  An attendance list is attached.

Program Session, July 12, 2008

I.          Emerging Role of Rail in SLC State Transportation and Economic Development Plans

             Representative Vance Smith, Georgia

             Mike O'Malley, Vice President for State Government Relations, CSX Transportation, Florida

Background

An increasing number of states are exploring ways to leverage the role of the railway industry, encompassing both passenger and cargo, to secure their economic development and transportation priorities.  Georgia is one such state, and this session provided legislative perspectives on this effort along with details—by a major North American railroad company, CSX—on the expansive role played by railroads in the nation’s transportation network.

Representative Smith’s Presentation

Representative Smith began by suggesting that members read the executive summary of the Georgia Joint Study Committee on Transportation Funding that was released earlier this year.  According to Representative Smith, this bi-partisan Committee included members from both chambers of the Georgia General Assembly.  Established in 2007 by Senate Resolution 365, the mandate of the Committee was to study the state’s transportation funding needs and then recommend any actions or legislation necessary for alternative funding mechanisms, including special funding sources to overcome funding shortfalls.

In order to gain a balanced perspective of both rural and urban transportation needs in Georgia, Representative Smith noted that the Committee held meetings throughout the state and agreed that the final report would comprise three phases: Phase One: identify transportation funding challenges in Georgia; Phase Two: consider potential funding solutions; and Phase Three: provide recommendations.

In terms of rail as an option, Representative Smith noted that the final report recommended that state funds be dedicated in a phased-in approach to provide appropriate funding for a statewide rail system.  In addition, the Committee recommended a resolution supporting the construction of a Magnetically Levitated (MagLev) transit line, using Transrapid technology, connecting Hartsfield - Jackson International Airport in Atlanta, Georgia, with Chattanooga Metropolitan Airport in Chattanooga, Tennessee.  Representative Smith noted that the importance of rail in helping resolve some of the state’s transportation challenges loomed large in the discussions and presentations leading up to the final report.

Mr. O’Malley’s Presentation

Mr. O’Malley noted that freight railroads are a critical component of the nation’s transportation network and hauls an enormous amount of freight every day.  CSX alone maintains 21,000-route miles, operates over 1,700 trains (with more than 5 million carloads), 4,500 locomotives and 120,000 freight cars every day alongside providing jobs to 34,000 employees and serving 70 ocean, lake and river ports.  Given that population growth in the United States will drive future consumption, railroads are uniquely positioned to be an integral player in meeting the inevitable rise in the nation’s transportation demands.  He also stressed that the Southeastern United States is at the heart of growth in both population and demand, as well as the fact that CSX is dominant in the region, has resulted in the company paying a great deal of attention to this evolving trend.

According to Mr. O’Malley, alongside this expectation of a huge surge in demand is the fact that congestion across the country continues to rise to unprecedented levels.  Since a substantial amount of this congestion will occur on the nation’s eastern seaboard, an area where CSX maintains its dominance, the onus will be on his company to initiate measures to alleviate some of this congestion.  He stated that since highway infrastructure enhancements have not kept pace with current demand—in fact, lagging actual demand—the required investments in rail enhancements remain much more appealing.  Specifically, he estimated that by 2035, freight rail will need $135 billion in investments while passenger rail will require $198 billion.  In contrast, highways will require $5 trillion in investments.  Consequently, he added, relatively small public investments in the nation’s freight railroads can be leveraged into relatively large benefits for the nation’s highway infrastructure, highway users, and freight shippers.

Mr. O’Malley continued by citing further benefits associated with moving goods by rail.  For instance, rail is the most environmentally friendly way to move goods over land, given that hauling goods with rail is three to five times more efficient than the use of trucks: rail can move a ton of freight 423 miles on a single gallon of fuel, the distance from Baltimore to Cleveland.  Furthermore, shifting just 10 percent of long-haul freight from the highway to rail would reduce annual greenhouse gas emissions by more than 12 million tons, provide significant safety benefits and drastically reduce highway maintenance expenses.

According to Mr. O’Malley, given the huge interest in many parts of the country in expanding passenger rail access, there were four pillars from which CSX made its determination regarding the expansion of passenger rail on its tracks.  Specifically,

• Safety – Can freight and commuter operations safely co-exist?

• Liability – Is CSX appropriately protected against potential liability from injuries to passengers?

• Capacity – Does sufficient capacity exist to accommodate growing commuter and freight demands?

• Compensation – Are the financial terms appropriate?

He also stressed that CSX is fully committed to investing in rail infrastructure to generate benefits for both the company and the public good.  For instance, CSX intends to invest heavily in its network, approximately $5 billion between now and 2010, including areas on the Southeast Corridor (Chicago-to-Jacksonville) and at its Winter Haven, Florida, Integrated Logistics Center.  In 2007, CSX spent $1.7 billion, or 15 percent of its revenues, on capital expenditures to meet future transportation needs.  According to Mr. O’Malley, CSX will support public-private partnerships to help fund the National Gateway, the plan to create a more efficient rail route linking Mid-Atlantic ports with Midwestern markets in the upcoming federal authorization bill.  Once the National Gateway is fully-functional, it has the potential to significantly reduce highway congestion (a single train can carry the load of more than 280 trucks); lower highway maintenance; and improve highway safety by removing approximately 20 million trucks from the nation’s highways over 10 years.  He also cited the huge economic development potential stemming from the transportation improvements envisaged under the National Gateway.

In concluding, Mr. O’Malley stressed that in order to continue prospering economically, America needs a robust and efficient transportation system; failure to meet our future transportation needs will limit job creation and result in lower productivity.  He called for the greater use of public private partnerships in these investments and added that freight rail has tremendous potential but policymakers at every level need to adjust their mindset to match today’s realities, citing $4 per gallon gasoline and severely congested highways as two examples.

II.        Secure, Smart and Swift Flows of Commerce at the Southern Border

             Senator Elliot Shapleigh, Texas

Background

Texas is monumentally important in our international trade calculations given that the state has six of the top 12 busiest land ports, including the second busiest land port on the U.S.-Mexico border.  This session focused on what actions policymakers at every level of government can initiate to ensure the secure, smart and swift flow of commerce at our Southern border.

Senator Shapleigh’s Presentation

Senator Shapleigh began by noting that it is crucial for policymakers at every level of government to explore strategies to ensure the secure, smart and swift flow of commerce at our Southern border and stressing the importance of having such a plan fully in place by 2020.  Half of the top 12 busiest land ports, including the second busiest land port on the U.S.-Mexico border, are located in Texas.  These ports comprise El Paso, Brownsville, Laredo, Hidalgo, Eagle Pass and Calexico East.  Alongside the expected boom in Texas’ population (an estimated 43.6 million to 51.7 million by 2040), he noted the estimated increase in trucks carrying North American Free Trade Agreement (NAFTA) trade products on United States highway corridors in the coming years.  The ‘Ports to Plains’ trade traffic, NAFTA trade between the ports in Texas, the Plains states in the United States and all the way north to the Canadian provinces as a region that has seen an explosion in trade.  For instance, he indicated that Alberta’s exports to ports and Plains states have more than tripled in the past five years, from $1.4 billion in 2002 to $4.3 billion in 2006.

Notwithstanding these impressive increases in trade, Senator Shapleigh indicated that waiting times at bridges at the Texas border were extremely long and frustrating to all parties concerned.  Senator Shapleigh commented that there are lines with wait times of three, four and five hours at several border crossings with Mexico.  This is a huge impediment to a flourishing economy given the major productivity setbacks caused by these inefficiencies at the border.  According to Senator Shapleigh, the U.S. border region with Mexico can compete very effectively with China if inefficiencies such as the lengthy delays at the border are minimized.

In terms of crafting a vision for 2020, Senator Shapleigh stressed the following: fully staffing existing ports; building additional ports and bridges; establishing model border ports; introducing enhanced driver's licenses; deploying 21^st century technology pilot projects; and creating secure manufacturing operations.

Senator Shapleigh elaborated on these different elements by laying out the importance and necessity of one-stop border inspection facilities to increase productivity, save time and save money.  In this context, the need to harmonize ports-of-entry operations on both sides of the border, improve port management standards and develop common biometric identifiers is critical.  He also emphasized the need to integrate 21^st century technologies into the process and cited a Federal Highway Administration pilot project currently in progress in El Paso County, Texas, as one such example of this technological integration.

Senator Shapleigh noted Washington state’s impressive performance in issuing enhanced driver’s licenses (EDL) to ease border crossings at the Canada-U.S. border.  These EDLs permit the federal Department of Homeland Security to verify the authenticity of the document along with the citizenship status of the individual.  Finally, he commented on the importance of establishing secure manufacturing zones on both sides of the border, which would shorten supply lines, increase trade between the two countries and entice manufactures to increase their production at border towns.

III.       Update on the Southeast U.S. - Canada (SEUS-Canada) Trade Association

             Senator Mark Norris, Tennessee

             Norris Pettis, Consul General of Canada in Dallas, Texas

Background

The Southeast U.S. - Canada Trade Association includes six Southeastern states (Alabama, Georgia, Mississippi, North Carolina, South Carolina and Tennessee) and seven Canadian provinces (Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island and Québec).  The Association was formed in November 2007 to promote trade, investment, tourism, education and ties of friendship between these Southeastern states and Canadian provinces.

Senator Norris and Mr. Pettis’ Presentation

Senator Norris commented on the recently concluded Southeast U.S. - Canada Trade Association conference in Savannah, Georgia, where Georgia Governor Sonny Perdue hosted representatives from six SLC states and seven Canadian provinces to present opportunities for businesses to enhance commercial exchanges, promote two-way investment, and encourage technological and scientific exchanges between and among the states and provinces.  The conference included the following sessions on several key issue areas: manufacturing (improving performance through advance manufacturing); aeronautics (challenges facing the U.S.-Canadian aerospace industry base; capitalizing on the growth of the aerospace and aeronautics industries); energy (partnering for a secure and reliable energy future; green energy – new opportunities in energy innovation); transportation (security and trade: maintaining a streamlined process; public infrastructure redeployed for economic development gain); workforce development (human capital); economic development (innovative strategies to sustaining growth in an uncertain economy; international supply chains); tourism (innovation in tourism marketing and product development; new technologies in tourism promotion).

Senator Norris stressed the importance of Canada as a trading partner to the United States, in general, and to the SLC states in particular.  The work of groups like the SEUS-Canada Trade Association would ensure that trade relations between the SLC states and the Canadian provinces continues to flourish.

Continuing in that vein, Consul General Pettis acknowledged Senator Norris’ leadership in looking northward and tirelessly pointing out the key role Canada plays in the economy of this vibrant [SLC] region.  Consul General Pettis indicated that it was impossible to overstate the importance of the SLC region and Canada to each other’s economies given the fact that with a combined population of nearly 115 million, the 16 SLC states would rank as the 11th biggest country in the world, behind Japan but ahead of Mexico.  He also noted that the combined GDP of the SLC states total almost $4 trillion, making the SLC region the third largest economy in the world, after Japan and ahead of Germany.  In terms of trade with Canada, the SLC states are a vital market for Canada, as well as a major supplier of goods and services, with annual exchanges close to $113 billion.  He added that trade between the SLC states and Canada is well-balanced with SLC exports to Canada totaling $52.9 billion and SLC imports from Canada totaling $59.9 billion.

Business Session, July 13, 2008

IV.       Oklahoma's Economic Development Efforts

             Natalie Shirley, Secretary, Department of Commerce and Tourism, Oklahoma

Background

At a time when state budgets are under great fiscal strain, states such as Oklahoma must promote innovative concepts in advancing economic development projects.  Oklahoma, like other states, has devised a plan that plays to its strengths in an effort to forge broad-based economic development in all corners of the state.

Secretary Shirley’s Presentation

Secretary Shirley indicated that her presentation on Oklahoma’s economic development efforts would cover the state’s strengths; challenges faced; specific steps initiated to meet those challenges; and, finally, where the state is headed.

In terms of the state’s strengths, Secretary Shirley announced that despite a tight budget at home and tough economic times across the country, Oklahoma continues to offer a strong housing market, competitive business costs, affordable living, and one of the lowest tax burdens in the nation.  She noted that the state’s greatest successes were discovered in the momentum of partnerships established between different groups across the state.  For instance, the cities of Oklahoma City and Tulsa coalesced to convince a National Basketball Association (NBA) team to locate in Oklahoma.  As another example, Oklahoma University (OU) and Oklahoma State University (OSU), fierce competitors under normal circumstances, combined to support the newly reconstituted Oklahoma Aeronautics Institute.

Nevertheless, she noted, the state faced numerous challenges and her agency, as the lead economic development agency in the state, has taken the reins in developing a comprehensive strategy in the areas of workforce recruitment, image, and business development.  Given the limited resources available to pursue different economic development strategies, the agency decided to focus on these specific areas and then excel in them.

One such area was workforce recruitment.  Today, and in the foreseeable future, the key to economic development in Oklahoma is workforce recruitment and training.  In Oklahoma, given that the unemployment rate currently is running two to three percentage points below the national average, these two strategies remain important considerations in alleviating the state’s worker shortage.  An important pillar of resolving the current worker shortage was bringing the expatriate talent home, i.e., persuading talented Oklahomans who have moved to other parts of the country to return home.  As a result, her agency devised an initiative called Project Boomerang, a program that targets selected, skilled individuals in different fields with ties to Oklahoma who currently live out of state.

Another area, according to Secretary Shirley, involved enhancing the image of the state and informing people around the country about the state and what it has to offer.  She noted that especially in terms of the young professional, or the "creative class," every individual wants a superior quality of life; people often look for a place to live first and then they find work.  In this regard, her agency had retained a public relations and marketing firms to help sell the state and the benefits of living and working in Oklahoma.

Business development is another area that is an important component of her agency’s focus and she reported that after talking to site selection consultants across the country and the globe, Oklahoma is now considered a top-tier state.  In this area, Secretary Shirley stated that her agency had a sector strategy that had worked well in the past and that she was in the process of refining and focusing it further.  For example, advanced manufacturing, energy, and aerospace have long been vital sectors in Oklahoma, with the aerospace sector being one of the most important workhorses of the state economy.  In fact, more than one in 10 Oklahomans receive their incomes from the aerospace industry, and the average annual salary for those workers in aerospace is 89 percent above the state average.

In this context, given the state’s preeminent position in the aerospace industry, the state believes that it has a tremendous opportunity to lead the nation on another exciting chapter of the energy story – wind.  The National Renewable Energy Laboratory (NREL) predicts that Oklahoma will be the second-largest generator of wind power in the nation by 2030, and Oklahoma already ranks among the top 10 wind energy producers in the nation.  Considering this formidable relationship with wind energy, Secretary Shirley stated that her agency and its statewide network of partners are developing a complete vertical and horizontal strategy around the emerging wind industry that includes:

• Recruiting tower, turbine, nacelle, and blade manufacturers along with maintenance and repair operations;

• Working with CareerTech, Oklahoma’s system of technology centers, to develop curriculums for certified wind energy technicians;

• Partnering with the state’s universities to further develop research and development capabilities; and

• Seeking synergies with the state’s aerospace industry given the fact that many of the skill sets needed for one field transfer to the next.

Another area that Oklahoma is focusing on is developing the enhancement of global trading relationships.  Given that, on average, about two in five jobs across the state are supported by the export sector, an important component of the state’s overall economic development strategy.  Oklahoma maintains trade offices in Mexico, Vietnam, China, and Israel to promote international trade.  In addition, her agency sponsored delegations comprising the business, community, and education sectors to travel regularly to other nations to expand Oklahoma’s exports and recruit foreign direct investment.

The final area mentioned by Secretary Shirley involved supporting the state’s innovative entrepreneurs with assistance ranging from making connections to establishing legal partnerships.  Partnerships have been established with several other public entities to create an $8 million venture capital fund to provide funds to existing businesses for expansion.  She concluded by noting that her agency is forging ahead with innovative, yet realistic programs with the important mandate of increasing the quantity and quality of jobs in Oklahoma in order to raise the quality of life for all Oklahomans.

V.        State Economic Development Strategies: Perspectives of a Site Selector

             Mike Mullis, President & CEO, JM Mullis, Inc., Tennessee

Background

In a fiscal environment with complex challenges, states continue to compete aggressively with each other to secure economic development projects.  Site selectors play an important role, and this session discussed the critical ingredients state economic development officials need to focus on to both retain and attract major and minor economic development projects.

Mr. Mullis’ Presentation

Mr. Mullis acknowledged that the American economy faces ongoing difficulties, particularly since the continuing volatility in the financial and credit markets is now causing hiccups in the economy beyond the already troubled housing market.  The manufacturing sector is expanding at a slower than expected—and desired—rate and the recent rate cuts by the Federal Reserve Bank have not rejuvenated the economy.  Even the service sector, an area that experienced significant growth in the last 10 years, continues to see slower growth rates.

In his role as a site selector for various corporations, both domestic and international, Mr. Mullis noted that he often has to assess the competitiveness of the United States vis-à-vis other countries.  Even though the United States now faces increased competition from a number of locations—India, China, Mexico, East Asia, South America, Central America, Eastern Europe and Canada—the U.S. still leads the world by a significant margin in just about every measure of intellectual and technological achievement along with having the most risk-taking, most laissez-faire, least regulated economy in the advanced Western world.

Along with the pressures placed on the economy by the exploding energy sector, Mr. Mullis described several measures that need to be enacted in order to further strengthen America’s weakening manufacturing sector.  The United States must maintain the robustness of its manufacturing sector to retain its status as a world power.  He estimated there would be more capital intensive industries with small, more advanced technology workforces in the future.  Also, the corporate distribution centers, crucial to the functioning of retailers, manufacturers, and other businesses, along with companies investing in bio-medical, bio-technology and nano-technology sectors are critical components of the nation’s manufacturing performance.

Mr. Mullis also enumerated the following criteria as essential in the location analysis of corporations:

• Logistics and supply chain issues;

• Demographics;

• Workforce, including availability and quality;

• Education;

• Transportation, including access to highways, airports, rail, deepwater ports and inter-modal capabilities;

• Overall operating costs, particularly healthcare costs;

• Energy;

• Water and wastewater services;

• Role of different levels of government;

• Permitting requirements, specifically as it relates to environmental and project development;

• Properties, including availability, cost and quality;

• Attention to retaining existing businesses;

• Image;

• Incentives, including statutory and discretionary; and

• Quality of life factors.

In conclusion, Mr. Mullis provided members with the specific steps involved in the site selection and location process, as practiced by a site selector like himself, and ended with a case study of a recent project.

VI.       Oklahoma's Efforts to Boost the Motion Picture Industry

             Jill Simpson, Director, Oklahoma Film & Music Office

Background

Inspired by Louisiana’s 2002 path-breaking legislation, numerous states, including many Southern states, have enacted legislation and other steps to enhance the activities of the motion picture industry within their borders.  Oklahoma is one such SLC state.

Ms. Simpson’s Presentation

According to Ms. Simpson, with the assistance and leadership of several members of the Oklahoma Legislature, the state has made a renewed effort in recent years to attract the film, television, video, and music industries to operate in the state in greater numbers.  Special attention has been paid to the film industry and, effective August 2007, The Oklahoma Film Enhancement Rebate offers up to a 15 percent rebate—capped at $5 million per year—on Oklahoma expenditures to qualifying companies filming in the state.  Although the Oklahoma Film & Music Office was created in 1979, the office has been rejuvenated in recent years and has become much more proactive in promoting film, television, video, and music projects both from within the state and outside.

Along with the 15 percent rebate on expenditures, Ms. Simpson added that her office also provides a range of additional incentives, including tax credits for construction, reinvestment for film and music projects and a point-of-purchase tax exemption to qualified productions on sales taxes paid for property or services to be used in productions.  In addition, Ms. Simpson stated that the Oklahoma Film & Music Office provides the following free of charge:

• Preliminary research, scouting, and evaluation of locations;

• Use of location library and production resource information files;

• Photographs shot to match individual specifications;

• Detailed information on state and local film regulations;

• Accompanying filmmakers to locations;

• Arrangement of clearances;

• Liaison service for production by offering assistance with federal, state, and local officials, institutions, businesses, and individuals;

• Liaison with the hotel/motel/restaurant industries;

• Liaison with local meteorologists to obtain up-to-date weather information;

• Access to media representatives; and

• Support and assistance throughout production.

Ms. Simpson indicated that the recent focus of her office has revolved around attracting and promoting the filming of smaller, independent productions, and this strategy has been quite successful.  She cited the recent success of the movie, Four Sheets to the Wind, at several movie festivals and noted that the movie was filmed locally and directed by an Oklahoman, Sterlin Harjo.  Similarly, Oklahoma had a very rich tradition and history in a number of musical genres (such as country, bluegrass, jazz and the blues) and her office has made a concerted effort to highlight both the historical significance of this attribute along with creating incentives to promote the music industry in the state.  Finally, she indicated that her office was very interested in convincing Oklahomans active in the film, television, video, and music industries now living in other parts of the country to return to live and work in the state.  At the conclusion, Ms. Simpson showed the Committee a short film containing a montage of scenes from recent independent films and music videos produced in the state.

TECHNICAL TOUR, JULY 14, 2008

Committee members, other SLC legislators and legislative staff toured the Federal Aviation Administration (FAA) Training Academy, the FAA's premier training facility for air traffic controllers and other technicians in the aviation community.  On the way to the FAA, participants took a boat ride on the Oklahoma River and were briefed by Mr. Brett Hamm, president of Downtown OKC Inc., about a number of key economic development projects, including a Dell facility, recently initiated in downtown Oklahoma City.  While at the FAA, participants were briefed by FAA officials on the history and economic impact of the facility along with a demonstration of various aviation safety tests and procedures by senior officials with the FAA’s Office of Aerospace Medicine.

Nominating Committee Report

The Nominating Committee, comprising Delegate Ruth Kirk, Maryland; Representative Bill Dukes, Alabama; and Representative Brent Yonts, Kentucky, presented its recommendations for Committee chair and vice chair for 2008-2009.  Delegate Kirk announced that there was a single name submitted for chair and a single name submitted for vice chair.  Consequently, Representative Vance Smith, Georgia, was elected chair, and Senator John Unger, West Virginia, was elected vice chair for the upcoming year.

Southern Legislative Conference 63^rd Annual Meeting

Winston-Salem, North Carolina

The SLC will meet for the 63^rd Annual Meeting in Winston-Salem, North Carolina, August 15-19, 2009.  In keeping with the wishes of the SLC presiding officers, please note that meeting notification does not authorize travel.

SLC Staff Contact

If you have any questions regarding this report or the 2008 SLC Annual Meeting, please contact Mr. Sujit CanagaRetna in the Atlanta office at (404) 633-1866 or scanagaretna@csg.org.