Louisiana can learn how to improve from steel manufacturer’s decision

Disappointment was the prevailing mood when the German steel manufacturer, ThyssenKrupp AG, announced that it was locating its new, massive North American venture in Alabama, not Louisiana.

Beyond the disappointment, there is a need for action. Now we need to work even harder to determine what factors must be overcome to make us more competitive not only for mega projects such as this one, but also for the run-of-the-mill start-ups that are the major source of new jobs in Louisiana or any other state.

Entities inside state government, as well as in the private sector, need to do a postmortem of sorts on the entire ThyssenKrupp opportunity to learn from the experience and come up with plans and policies that can enhance our economic development potential.

International conglomerates like ThyssenKrupp do not give public reasons why they don’t choose a specific site. Even so, there is much that can be learned from exploring factors that made a difference in this particular site selection.

Some of the factors — including some of the major ones — would be specific to this project and might not have more general applications when it comes to exploring weaknesses that need to be shored up in Louisiana. Sometimes, however, secondary or even tertiary factors that influence a major location decision can give a state a good indication of things that need to be changed in order to have a better chance for success.

The Alabama incentive package quite likely contained a higher dollar value than what Louisiana offered.

That does not mean that Louisiana should simply outbid other states when competition for major projects arises. Louisiana drew a line at some point in the negotiations when it felt that additional incentives could not be justified based on what a reasonable return on investment in a reasonable amount of time should be. Our officials should do the same in the future if they can’t fully justify the costs to our taxpayers.

Beyond the incentive packages, there are other areas in the steel mill competition that should be reviewed. Transportation costs are one.

Much was made of the fact that the raw and finished products shipments in Alabama had to be off-loaded in Mobile Bay and then shipped by barge to the site north of Mobile. How much — if any — transportation cost advantage did the Louisiana site have in the competition? †

Workforce quality and labor force supply are huge factors in any major economic development project.

Is the Alabama system for workforce development and worker training superior to the Louisiana system? If it is, what does Louisiana need to do to get its act together in this crucial component for economic development?

What about utility costs? Existing industries in Louisiana have complained for years about the high cost of utilities and some have cited it as the reason why their expansions have gone to other states. ThyssenKrupp cited utility costs as a major consideration in its site selection criteria. Was it a disadvantage for Louisiana, and if so, how much?

Significant local government incentives were also offered in Alabama. What incentives — if any — were offered by local governments in Louisiana and how did they compare? If little was offered, is it due to our archaic tax system that results in the state being the major funding source for projects that locals finance in other states?

Louisiana should neither pout over not winning the project nor be happy with coming in second. We should learn from the ThyssenKrupp experience, and be willing to change the things that put us at a disadvantage.