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Regional Report: Mid-Atlantic States Thrive on Diversity of Industry

July 2011
Business expansion is picking up across the Mid-Atlantic region as the economy rebounds, and the region's states are busy positioning themselves for even more growth in the future.

All five Mid-Atlantic States are touting major economic development announcements. That surge of activity is coming from a diverse mix of industries - from technology and life sciences to manufacturing and agribusiness. For instance, Pennsylvania's reputation as a bio-pharmaceutical leader has helped it to attract the attention of global firms, while New York continues to prove that it is a powerhouse in growing its thriving financial services sector.

Buffalo, N.Y.-based First Niagara Financial Group Inc. plans to create an additional 500 high-paying jobs throughout its growing Upstate New York operations area over the next five years - bringing its total employment base in the state to more than 3,000 people by 2016. Meanwhile, Daiichi Sankyo, Inc. recently announced that it would create more than 80 jobs in Pennsylvania's Lehigh Valley with the establishment of its first U.S. manufacturing and packaging operation. The global pharmaceutical company is planning to buy and renovate the 140,000-square-foot former Amcor packaging facility and have it fully operational this fall.

Activity Is Up
Economic development activity has increased significantly during the first half of 2011 compared to 2010, notes Timothy Lizura, senior vice president at the New Jersey Economic Development Authority (EDA). "On every metric across the board, we are more than double the activity of job creation and retention and investment than we saw during the same period last year," Lizura says.

The New Jersey EDA finalized over $567.3 million in financing assistance, business incentives, and tax credits last year that went to support a variety of New Jersey-based businesses, not-for-profit organizations, and municipalities. That assistance served as a catalyst for more than $1.4 billion in new public/private investment in New Jersey's economy and is expected to lead to the creation of an estimated 5,200 new, permanent jobs and the retention of 12,200 existing jobs.

New Jersey is hopeful that it can not only meet, but also exceed that number this year. The state is off to a good start with major announcements that include a new North American headquarters for Panasonic. The global electronics firm had been looking at relocation options that included Chicago, Atlanta, and Brooklyn, N.Y. The company plans to remain in New Jersey, relocating from Secaucus to Newark, thanks in large part to $102.4 million in state and city tax credits. Panasonic expects to move into its new 250,000-square-foot facility in 2013.

"We are optimistic at this point. We have seen a significant increase in our economic activity - even from companies who are looking to relocate without incentives," Lizura says.

Promoting "New Economy" Industries

Although the surge in activity can be credited in part to the improving economy, states throughout the region have also been working hard to encourage expansion among existing and new businesses. The focal point for many states is on promoting "New Economy" or innovation-focused industry clusters such as life sciences, aerospace, national security, and renewable technology, as well as continuing to foster growth among traditional staples such as financial services, manufacturing, and distribution.

Government contracts have also helped fuel activity in the region throughout the downturn, and now the Mid-Atlantic is poised for even more growth as private-sector companies shift into expansion mode. For example, Maryland has continued to cultivate its growing cyber-security niche. The sector benefited from continued and growing demand for cyber-security related services from the military and federal government, and targeted efforts - such as the CyberMaryland initiative - will help to further expand that sector.

Cyber security is rapidly growing. But it is also a sector that does not rely on traditional economic development tools, i.e., land and buildings. "These are companies that are coming here because it makes sense from a market standpoint to be here," says Ursula Powidzki, director of business development at CyberMaryland. Maryland has a strong IT sector and a growing cluster for cyber security thanks to a strong infrastructure that includes 50 federal agencies and research facilities ranging from Johns Hopkins University to federal agencies including the National Security Agency and the National Institute of Standards and Technology.

Looking at the energy sector, one notable activity that has a potential to impact the entire Mid-Atlantic region is the development of the Marcellus Shale natural gas deposits. The Marcellus shale stretches from West Virginia and Ohio through much of Pennsylvania, and covers a substantial portion of the lower half of New York State. It is estimated to contain up to 500 trillion cubic feet of natural gas, making it, potentially, the second-largest gas field in the world.

"The proper development of this major low-cost source of energy will be an incredible benefit to both Marcellus and non-Marcellus related industries that are looking to locate and thrive in Pennsylvania," says Steve Kratz, a spokesperson for Pennsylvania's Department of Community & Economic Development. Drilling the Marcellus in Pennsylvania during a two-year period ending in 2010 created 44,000 jobs.

Incentives Remain Vital
Despite the economic challenges that persist, states are continuing to use existing and new programs to boost economic development - ultimately creating additional jobs, building the tax base, and encouraging additional investments in their communities.

In Delaware, for example, Fisker Automotive is converting a former General Motors auto assembly plant into a manufacturing facility of affordable, hybrid sedans - and a source of more than 2,000 jobs. Delaware's Governor Markell called Fisker's decision a major part of "the story of an economy that will expand on our legacy of innovation," and credited the Delaware Economic Development Office (DEDO) and other state agencies as having "moved mountains for this deal," which included funds from DEDO totaling more than $21.5 million.

One of the new programs that DEDO has launched this year is the Business Finder's Fee (BFF). The BFF is designed to "incentivize" existing Delaware businesses to leverage their relationships with suppliers, customers, and other businesses to relocate to Delaware, resulting in strengthened supply networks, as well as job creation and increased tax revenues. The existing Delaware business and the new relocating business would both be eligible for a tax credit. Each company would receive a $500 tax credit for three years following the relocation for each full-time Delaware employee that the new firm brings to the state.

New York is creating 10 regional economic development councils, which will be responsible for developing long-term strategic plans to guide economic development efforts and spending within the state's 10 designated development regions. The economic development councils will redesign the way the state allocates its economic development resources, as well as tap local expertise to meet the needs of their individual regions.

States are clearly working harder to retain and attract companies in today's competitive market. States also are tailoring economic development efforts to meet the different needs of individual companies.

"We have to make sure that we get the right program and `incent' a company's decision in the correct way," Lizura says. Some companies don't need incentives to make their decisions, while others require a very competitive proposal in order to capture that growth, he adds.

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