From new job commitments, to existing company expansions to businesses moving to the state, to hundreds of entrepreneurs starting new businesses, to dozens of communities making important strategic investments in themselves, 2016 was a great year for Tennessee! These are the key metrics we are tasked to achieve, and the team has had outstanding success. However, when I was recently asked by a teammate what I’m most proud of from these past two years, my spontaneous but sincerely held belief is that our greatest accomplishment is having built a team and culture that will continue long after my tenure and those in the room that day. There is an energy, passion, openness, transparency and desire to make a lasting impact that defines our new culture. From our new INSPIRE values visible not just on our walls and coffee mugs, but in our actions and our hearts, to the new open offices that not only are 55 percent more space efficient, but symbolize the collaborative open transparency we strive for internally and externally. This will be what sets our state on a path of continued success for the next decade.
A list of accolades follows but the one I believe is most important is one by The Pew Charitable Trusts in a report released in September. Tennessee’s median household income grew 6.4 percent in 2015, which ranks as the No. 2 greatest rate of growth in the nation after Montana’s growth of 6.7 percent. Not only has unemployment dropped, but more Tennesseans are working in our state’s history and they are making more money than ever before.
Accolades and Awards
Tennessee had many accolades in 2016. We were ranked No. 1 for foreign direct investment (FDI) job commitments in 2015, according to the 2016 IBM Global Location Trends report. Foreign companies can choose any state in the country to locate and by showing preference to Tennessee, it speaks volumes to the positive environment in our state, from skilled workers, to efficient government, to a business friendly culture.
The Brookings Institution ranked Tennessee No. 1 among U.S. states for advanced industry job growth. From 2013 to 2015, Tennessee’s advanced industry jobs increased by an average of 4.6 percent annually, which outpaced the national average of 2.46 percent.
Also this year, Southern Business and Development magazine named Tennessee the 2016 State of the Year for Economic Development based on its project totals and the variety of the industry sectors that invested in the state and created jobs. Nashville was also named “Co-Major Market of the Year” by SB&D with honorable mentions to Knoxville and Chattanooga.
In June, Tennessee was named recipient of Area Development’s 2016 Gold Shovel Award in recognition of projects undertaken in 2015, which created a significant number of high-value-added new jobs as well as investment. This is the second consecutive year Tennessee has received a Gold Shovel Award. In addition to 2015, the state also received Gold Shovels in 2012 and 2009.
There are so many accomplishments in 2016 that in spite of serious editing, I will have to apologize for the length of this summary. Hopefully, you will, as I do, feel proud and thankful for all the men and women on the team that have worked so hard to make our state great for everyone. We are excited about the past year, but even more excited about the future.
The primary job of business development is job creation, and this team delivered effectively and efficiently thanks to the great leadership of Allen Borden and the truly 24/7 team of professionals in the department. Business Facilities magazine ranked the General Motors expansion, which resulted in 1,431 new jobs and a $1.02 billion investment, as the second largest project in the country. We had 21,063 new job commitments in 2016 for a total of $5.311 billion dollars in capital investment. Neither are records; those were set in 2015. Businesses don’t always commit to our calendar year, but the good news is we finished the year with a record possible jobs in our pipeline, 41,197, and on a rolling 12-month basis we have closed on 73.9 percent of our pipeline projects! However, for each of the 21,063 families with great new jobs and better lives as a result, it was great year for them and their families.
This past year we were the most effective and efficient than ever. The cost per job dropped to a super-efficient $3,006, the lowest that we have recorded.
We measure fiscal effectiveness and return on investment by projecting the tax revenues that will be returned back to the state as a result of the direct project activity we incentivize and the supporting indirect and induced economic activity that results. We forecast that 2016 projects that have received FastTrack or Capital grants will have a payback period of 2.2 years with a 47.2 percent annual rate of return. I don’t know about you, but this is much better than I did on my personal 401k! If we were just investing the state’s reserves this would have been a great investment, but the best return is on the impact in the lives of the nearly 21,000 people that have the opportunity for new jobs.
Our philosophy has evolved from any jobs anywhere to “the right jobs in the right places,” meaning where we have close to full employment we only want to bring in higher paying jobs and then really focus on attracting more jobs to those places with high unemployment. To do the latter, we have to invest more proactively in site and community development, but more on that later. One key measure is the percentage of jobs committed that will pay over the county median wage. Our target for the year was 55 percent, but we exceeded it by finishing the year at 55.3 percent. In 2015, 28.1 percent of the jobs were in rural communities, but in 2016 this share increased to 40.3 percent. This is not by accident.
The business development team worked 159 projects to get to these totals. Just as any business knows, our best return on investment comes from working with the customers we already have and they contributed 123, or 77.4 percent, of all projects for a total of 15,836 jobs. Our team made nearly 4,200 existing company visits in 2016. We are also excited to see so many new companies start in our state. This year, the business development team supported the creation of 10 new companies, which committed 806 jobs and $784 million in capital investment. Our business development team also recruited businesses from around the world to Tennessee, making 76 recruiting trips. There were 26 such companies committing 4,421 new jobs.
Speaking of the right places, one area of focus continues to be the Memphis Regional Megasite (MRM). In 2016, 96 presentations were made to site consultants and prospective companies about the MRM.
When I first came to TNECD, while I knew we worked with companies near and far to create jobs, I wasn’t quite sure what the “community” part of our title was all about. I quickly learned how critical having a livable, sustainable community is not just attracting businesses, but insuring a great quality of life for our citizens.
Our three federal programs contributed significantly to the state’s infrastructure with the Appalachian Regional Commission (ARC) supporting more than 30 projects for $7 million, the Delta Regional Authority (DRA) supporting 10 projects for $1.4 million, and Community Development Block Grants (CDBG) contributing $750,000 for nine projects to improve downtown façades and other CDBG grants supporting 73 projects totaling another $29.4 million.
We are excited that all of our 95 counties are now ThreeStar Communities. More than 70 percent of these counties received ThreeStar grants to assist in achieving the goals set by their community leaders. Also during 2016 we have four new Main Street qualifiers for a total of 34 Main Street communities. We awarded $300,000 for entrepreneurship projects in Main Street communities and 12 additional communities are participating in the Tennessee Downtowns program.
A key metric for our communities is developing our industrial sites – this is where our Select Tennessee suite of programs come into play. This year we had 13 counties participate in our Property Evaluation Program (PEP) to help them determine where the best sites are and how to enhance them. We have five new certified sites and those sites are considered “shovel ready.”