The LABI Report: Failing the economic development test

Published 12:00 am Friday, March 29, 2002


Site Selection magazine recently released its annual ranking of winners and losers in the economic development wars.

Unfortunately – and not surprisingly – Louisiana continues to suck mud compared to other southern states when it comes to attracting the facilities and investments that make a state’s economy strong.

What makes the Site Selection rankings important is the fact that this journal is the Bible of economic developers across the country.

Site Selection uses very objective standards for compiling its economic development profile of the states. Its index includes: new facility locations, expansion of existing facilities, and a business climate barometer that measures the incentives states offer, their disincentives for investment, and how the state is perceived as a good place to do business.

For the year 2001, Louisiana ranked 10th out of the 12 southern states for locating new manufacturing facilities.

Only Arkansas and Tennessee ranked lower, while North Carolina, Georgia, and Texas soared. Site Selection also measures a three-year trend in its annual survey.

For the 1999-2001 period, Louisiana tied for 10th lowest in new manufacturing facility locations.

Expansions of existing manufacturing facilities are also a key factor in Site Selection’s report card on the winners and losers in the race for jobs and investment.

In 2001, Louisiana ranked 10th in the number of manufacturing facility expansions. That figure is particularly disturbing.

Louisiana’s major manufacturing industries include chemicals, petrochemicals, oil and gas refining, and forest products.

For years, Louisiana was one of the leaders in the South in manufacturing expansions due to the on-going trend within these industries of expanding their operations or refurbishing their facilities.

For the period 1999-2001, Louisiana dropped to the middle of the pack among southern states in expansions. This downward trend may mean Louisiana’s core industries have decided that the business climate in Louisiana makes other states more favorable from a location and expansion standpoint.

The huge expansion figures for Texas, Michigan, and Illinois in the chemical and refining categories may well be confirmation that such a trend is afoot.

The other major factor Site Selection uses to assess performance in economic development is its annual survey of the business climate of the states.

The survey combines a measure of how business-friendly a state’s tax policies are with a ranking (compiled by corporate officials who make the location and expansion decisions) of how easy it is to do business there.

In this crucial category, Louisiana ranks dead last in the South and 36th in the nation.

Site Selection’s annual rankings have arrived almost concurrently with Governor Mike Foster’s call for a special session of the Legislature to address economic development issues.

While the governor’s package includes some mild attempts to shore up Louisiana’s economic development incentive package, it does nothing to remove some of the major disincentives (debt in the base of the corporate franchise tax, and sales and use taxes on business machinery and equipment).

Legislation will be filed to address those disincentives in the regular session that begins in late April, but the Foster administration appears to be indifferent at best toward those proposals.

Documented job losses, a significant drop in manufacturing employment, and near zero overall job growth in Louisiana confirm the negative trends that the new Site Selection survey points out. What the next few months will tell is whether or not the workers and entrepreneurs in Louisiana can get their government to take a few modest steps that would make this state more competitive.

The jury is still out on that one.

DAN JUNEAU is the president of the Louisiana Association of Business and Industry.