10 May The Economics of the South Alabama Mega Site
“Persistence. Nothing in the world can take the place of persistence. Talent will not. The world is full of unsuccessful men with talent. Genius will not. Unrewarded genius is almost a proverb. Education will not. The world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan ‘press on’ has solved and always will solve the problems of the human race.” Calvin E. Coolidge
Baldwin County and our Coastal Alabama community are positioned for a strong diverse economy beyond living generations. Educational expansion is happening at the University of South Alabama, Coastal Alabama Community College, and now we have a presence by both Auburn and Alabama. The healthcare industry is excelling around us with the USA Cancer Center in Fairhope, Thomas Hospital has increased its birthing center (which is outstanding), South Baldwin Regional Center is looking at expansion options, new freestanding emergency facilities, and a terrific ambulance and life flight system is in place. Our region, Austal USA in particular, is building ships better and more efficiently than anyone else in the world. Airbus is currently delivering 4-A320 platforms per month with the Bombardier C-series line about to do the same. In no time, there will be 12 airplanes each month leaving Brookley Field for passenger air service. Our aerospace industry is thriving, as Baldwin County is second in aerospace employment in Alabama. The manufacturing ability of our workforce, health care, education and job training are key components for developing quality job opportunities.
In 2008, the Baldwin County Commission assembled, optioned and certified the roughly 3,000 acre property that is known as the South Alabama Mega Site in Bay Minette pursing a company called HK Motors. That was before my time, and HK Motors did not become a reality, but the exercise did move Baldwin County forward towards advanced manufacturing. The certification ‘Mega Site’ is a registered term indicating due diligence has been performed with regard to environmental, historical, soils, title, transportation (highway and rail), utilities and workforce. The purchase options expired in 2011 and 2012, and we had to decide whether to press on or not. The plan at that time was to go to Wall Street to bond the $35M purchase money over 40 years. I felt that we could come up with better solutions, and we successfully passed legislation to borrow from our own Baldwin County Oil and Gas Trust Fund, used our BP settlement funds, some of our own funds and a $10M 25 year bond issue. We also negotiated price reductions due to changing capital gains taxes occurring at the time. These solutions saved over $30M in costs and long-term financing for the Commission. Owning the property outright significantly improved our marketability because it illustrated complete commitment, eliminated closing risk, and reduced ramp up times by being ‘shovel ready.’
Our international marketing effort for the Mega Site is outstanding, and Lee Lawson with his team at the Baldwin County Economic Development Alliance has helped to make Baldwin County known worldwide across many industries. Corporate strategy and confidence in the industry does not allow public discussion of potential tenants while they are happening. It can be frustrating because we want you to know there is activity and feedback from potential Mega Site partners. We have spoken with several automotive manufacturers over the last several years. Fiat/Jeep/Dodge and Land Rover/Jaguar never built their project. Volvo landed near Charleston, and although Alabama wasn’t ever really in the hunt, they liked our site. Toyota/Mazda needed their workforce in a shorter radius than we could immediately handle, plus many of their suppliers are already in North Alabama. We were close with Continental Tires a couple of years ago, but we learned a tremendous amount about the process and making ourselves more competitive. We’ve had quality looks and placed well with other industries, including aerospace, and we have turned down a couple of companies that weren’t a solid longterm partner for our site.
There is not a question of if, only when. The Huntsville site took more than 11 years to come to fruition, Clarksville, Tenn. took 10 years, and West Memphis has been waiting for more than 10 years too. These projects take a long time to develop, but with the right partner, they return the investment for a long time too. We can immediately handle a lead off partner with employment around 1,500 employees. The average company that has looked at the Mega Site is a 300-400 acre tenant with an initial investment of $400-500M in building and equipment. We can diversify further by allowing up to five different companies on site over time. This matches our workforce development capability over the years as we grow, train and employ a workforce for the Mega Site of over 4,500 employees some day.
The average payroll expectation from each prospect per employee has been around $50,000— some more, some less. For every thousand employees, payroll is $50M to our area. Some will commute from our neighboring counties, but this is money from somewhere else in the world creating wealth to the Baldwin County community. They will build and buy houses, cars and trucks, groceries, insurance, boats, etc. which will in turn create more jobs and further opportunities for our citizens and children as they grow and live here at home. This also results in increased revenue in Ad Valorem tax, sales and use tax, gas tax, tag fees, etc. to the Baldwin County Commission, the Board of Education, and local municipalities to allow us to continue providing efficient services and infrastructure as we grow on the same level of taxation as today. The potential of 4,500 employees receiving roughly $225 Million in payroll from quality Mega Site tenants for the next 50 years equals $11.25 Billion in payroll on top of over $2 Billion in plant and equipment investments. Not a bad return on our investment over time, plus it expands and diversifies our economy beyond tourism which can blink at the drop of a tropical or environmental event.