Industry Roundtable: Downstate Delaware Economic Development
What are the biggest challenges and economic drivers in Kent and Sussex counties? Delaware Business Times gathered three downstate business leaders to talk about incentives for economic growth.From infrastructure improvements to business-friendly regulations, moderator Judy Diogo, executive director of the Central Delaware Chamber of Commerce probed panelists on their thoughts about the area’s best bets for a growing workforce, and how the area’s rural footprint is both a hindrance and an opportunity to growing business in Delaware.
Judy Diogo: As Delaware faces growing uncertainty over its budget, are there concerns about eventual impacts to your industries?
Bill Andrew: Absolutely. The government needs funding, and a lot of times it’s easier to get funding from a business arena or a business enterprise versus an individual, because a business doesn’t necessarily vote. We’re concerned with any type of tax – that would be gross receipt tax, compliance issues, regulations that come back on – that adds revenue to the state.
Lisa Hastings: My concern, I think, is more with the tax structure. Our tax structure really is not well-designed for sustainability; a lot of it relies on out-of-state businesses. And then it seems like whenever there’s a need to raise taxes, it falls on the business community, because businesses are not technically the voters. A tax structure attracts what you design it for. And right now, it’s attracting a lot of retirees, which is a retail community, a consumer community. It’s not really built to attract business, and that’s a concern for us because those are our clients.
Dean Holden: We see stability and consistency in the state budget as a very important piece of bringing new business into Delaware. And so that stability and consistency, both in the tax structure and the expectations of the future, are key to developing the climate we would like to see.
Judy Diogo: That actually leads into the second question: What do you see as the biggest barrier or incentive for economic development in Delaware?
Dean Holden: One of the biggest barriers we see is the lack of sites that have both appropriate zoning and the necessary infrastructure in place to support new and expanding businesses. This is especially true for larger projects and the manufacturing, education and health care sectors. Ensuring wehave identified sites with adequate electrical, transportation, natural gas, data and communication infrastructure along with existing zoning that will support new economic development is extremely needed. It provides businesses with some certainty that their projects can get approval. And that really takes partnerships across a lot of different entities, from the regulators to the municipal and county entities, and on down to the utilities.
Lisa Hastings: I think our biggest barrier for economic development is our geography, and that’s not something we can change. We’re outside of a metro market, so that’s a challenge for talent recruitment for development of larger-scale projects. And I’m speaking specifically for downstate. We have this reputation as a business-friendly state, but what we hear from our clients sometimes is if you can get to the right person, you can get things done. But folks that are startup, or if they’re not an Amazon coming here, if they’re just a regular size, it’s a little harder for them to navigate. We can’t change where we are, but maybe we need to work a little harder on the business-friendly side.
Bill Andrew: I think our biggest incentive is our geographical area. Everybody wants to come and visit us on the weekend, why don’t they want to come and work every day? It’s a great place to live. Our workforce is very talented, and we work very closely with the higher education folks to provide that level of technology and business acumen for us. When I consider the biggest barrier, one thing I see is that we don’t have a shovel-ready site in Kent and Sussex counties that really will meet the needs of our business. And today business is looking for speed. Everything needs to happen in a much shorter timeframe.
Judy Diogo: How have you recruited talent? Is it harder to attract qualified employees because we are not in a metropolitan area?
Lisa Hastings: I see that as both the blessing and the curse of living here. I’ve lived here my whole life. When Bill talks about it being a great place to live, I absolutely agree. But it doesn’t fit the metric sometimes of what a metro market does, so recruiting talent can be a challenge. A lot of the better institutions for higher education, the students don’t stay here. Then we have these success stories where they come in, go away for a few years and come back. And that’s great. So, we work hard at consistently recruiting the best talent so we’re known in the market when folks are coming back.
Bill Andrew: One of the most important decisions we make as business leaders is who we hire. A lot of our folks, and I have a lot of local folks, they might have gone away to college but they come back because it’s a great place to live. When they start to understand the culture we provide in our business climate, it really makes a difference. We empower them to do their job and we reward them properly -it makes for a very successful business. That’s the formula we use at the cooperative, and it’s worked for us. We’ve been very lucky to hire a lot of great local people. Even the people we hire from away who come here, it’s all about the culture we have at the workplace and the great area we live in.
Dean Holden: As it’s been stated, the geography of the peninsula and having more of a rural footprint can be a challenge at times, especially in some specific roles at Chesapeake. We are working with the schools and the tech programs that help those who are going to move into the workplace. But it is a challenge we see with the way the economy is, which is tight, and having enough external contractors and internal employees. We also work hard to continue the culture that has supported the company to date. Just recently, we celebrated 50 years for one employee. Folks tend to come to Chesapeake and stay at Chesapeake, so we’ve had great success there, but it is a challenge.
Judy Diogo:What can Delaware do to encourage or support economic development? And when you’re getting ready to answer that question, if you could think about the state regulations or red tape possibly being a hindrance.
Bill Andrew: Like I said earlier, we have to look at our advantages and opportunities, and we have to expand on them. As businesses, we’re the leaders. We’re probably the biggest economic development folks encouraging businesses to come here when they see how we work with people and help them do their job, whether it’s helping them meet the right people, get the right approvals or even have the right design in the right location. At the cooperative, we’re not looking for a lot of help from the state. We would love for them to give us the leads; we’ll make the sales. Are state regulations and red tape a hindrance? Absolutely. You have to have 100 percent compliance before you can get anywhere. Sometimes regulations are needed. It’s when you have to do the regulations two, three and four times, and actually when the regulations become inconsistent because of different interpretations. That’s frustrating. We need to be smarter from a business standpoint.
Dean Holden: Regulations are a challenge, and we see that in our customer base, more often in small business up through large industry. As Bill said, consistency in the application of regulations is very important, and we don’t always see that. Predictability and what the requirements are going to be is important, and we don’t always see that. Then there’s the timeline for the process. There needs to be an allocation or understanding thatbusinesses have a faster timeline on which they evaluate projects, and if we are going to attract those businesses, we need to be able to accommodate that timeline. We can do that and still meet the intent of the regulations, but we need all our regulators to work with us to recognize the beneficial impact of bringing new business in and allocate some additional resources to process those projects and those permits a little more efficiently.
Judy Diogo: There is a feeling, and it has been around forever, that most of the economic development dollars and energy go to upstate rather than downstate. Do you see that as a real issue here in southern Delaware that we’re still fighting?
Lisa Hastings: It definitely is. People tend to gravitate where can they make the most impact with their funds, time, energy and resources. There’s more people in New Castle County, so there’smore input and output happening; it’s easier to get attracted to just upstate. What we lose as a state by doing that, though, is the fact that there’s more available land downstate and a workforce downstate. More communities, municipalities, counties that are willing to welcome new businesses. And we actually don’t have some of the issues New Castle County has that could be to their advantage. But it takes a fresh eye, and it takes resources and someone willing to kind of break out of the mold.
Bill Andrew: It’s a major inequity, but it’s not all bad. Over the past nine years, we have not had any economic development opportunities come to the cooperative from the state – zero. But that’s OK. We are prospering, we are growing. We have decided we need to take that bull by the horns, and make a difference in that arena. And we’re going to continue to do that. We hope the state can bring us some opportunities, because that’s really the hardest part, making sure new businesses understand what is available to them in Kent and Sussex, what infrastructure is available, what type of workforce. We have really good things, we just need to make sure businesses know that.
Dean Holden: We’d like to see a greater focus on Kent and Sussex for economic development. There’s the mushroom industry in Kennett Square which is looking for a new landing pad. The state of Maryland has done a great amount of work, and there are two entities that have moved operations, and these are large, about a half-million a year noincluding the ancillary. That’s one opportunity we would like to see some increased energy on. Another is transportation in Delaware. We’ve got another footprint that’s outside of Delaware where new natural gas is going in. It’s not even gassed up yet and has triggered 4 million square feet of distribution space because of the transportation infrastructure that exists. In Kent and Sussex counties, our east and west corridors are lacking. Those are footprints that the co-op provides service in, very attractive electric rates, which is another component if you’re looking at the mushroom industry. So, we’d like to see a greater focus on those aspects.
Judy Diogo:How has the lack of infrastructure impacted southern Delaware, things like broadband, transportation, roads, natural gas?
Dean Holden: I would start there and say that in specific conversations with someone in the mushroom industry, that’s the one piece we lack. It’s not electric service, it’s not natural gas, and Delaware Electric has gone to great lengths to bring broadband down to Sussex. It’s transportation that is a hindrance. They look at the land availability, the comfort with the agricultural industry, the access to energy and data, and it’s all there, but we don’t have the transportation they need. They need to be able to get the product out and into the market very quickly, and they see southern Delaware as challenged in that fashion.
Judy Diogo:What do you think the impact would be on the local economy if Delaware were to increase the minimum wage that has been proposed in the recent legislation?
Bill Andrew: We’re a very high-tech company, so the minimum wage doesn’t necessarily affect our workforce as much as it does all of the service companies. We have a service economy in Kent and Sussex much more than a technical economy, and it’s going to have a big impact. As Lisa said earlier, we really welcome retirees to the area, and they need a lot of services. Being able to provide those services at a price they can afford on fixed incomes is difficult. Increasing the minimum wage is going to have a positive impact on some and a negative impact on others. And how do you get the balance? Do people lose jobs? Do businesses decrease services or figure out how to increase services with less people? It’s Newton’s second law in spades – for every action there’s an equal and opposite reaction.
Lisa Hastings: Everything I’ve read, and I’ve studied this quite a bit over the years, shows that increasing minimum wage pushes businesses to evaluate their head count, considering whether and when technology can take the place of a person. So, think about some of the jobs we did when we were kids, are those even jobs anymore? If you bagged groceries and now there’s a self-checkout line, you scan items in a store yourself and nobody checks you out. Some of those jobs we don’t have today because technology is easier. You go into a Wawa and make your order at a kiosk, and that’s less people that are being hired. So, is it better to have a higher wage but make it harder for people to get into the job market? I personally don’t believe it is. The other issue you run into is that raising the minimum wage then incrementally increases other workers’ pay. The increase is applied across the spectrum of wages, because the worker making 50 cents more than minimum wage now also wants a raise, and so on. We anticipate a big impact on our clients, and we’re concerned for what it means for the workforce as a whole.
Dean Holden: I don’t have a lot to say on this since it’s not going to be truly impactful for Chesapeake and Chesapeake’s own workforce. But I think as a general statement, we certainly want to ensure that our legislators are moving forward on sound policy. As we discussed earlier, having a predictable and stable budget and sound economic decisions are very important for the health of Delaware, so we hope decisions are made based upon very sound reasoning.
Judy Diogo: I will add that what we see at the chamber is a lack of people understanding that there’s going to be a result of that action. People aren’t aware that when you increase minimum wage, you’re also increasing unemployment insurance and workers’ compensation, and that is another reason why people begin to lose their jobs. And you see more industries turning to technology, because that increase is incremental, but it has a huge impact on the bottom line for a company, especially a small business.
Lisa Hastings: If I can go back to economic development for a minute, one of the key aspects is site selection. Will a company choose Delaware versus Maryland versus Pennsylvania or New Jersey? We’re in this great Mid-Atlantic corridor with lots of options, and they don’t have to pick us. Everytime we make Delaware harder, every time we do something that puts us at a disadvantage to our neighbors, it’s a problem. Things like minimum wage. If our minimum wage is higher than the states around us, if the utility rates are higher than the states around us, if the infrastructure isn’t as good as the states around us, that’s a list that they go down. We’re a very small state, and it’s very easy not to choose Delaware.
Bill Andrew: That’s a real issue. Everybody thinks Kent and Sussex are only competing with New Castle County. That’s completely wrong. We’re competing with Maryland, which has one-stop shopping. If you’re a business and you want to go there, they will assign someone who works with you through it. And I know that for a fact because we’re building an $850 million facility just across the Delaware line. The infrastructure is there, the business acumen is there. Our ability to come to market much quicker is there. When I look at the data center industry, for example, which is a great business, and look at Kent and Sussex counties, data centers are something of the future. We have low-cost power. We have good water; water is used to cool data centers. We have broadband capabilities. We have an area that’s not as congested; data centers like to be by themselves. We need to be able to bringthem to market much quicker.
Judy Diogo: Take a minute and tell us why a company should come to southern Delaware. What would you tell them?
Dean Holden: We have a beautiful state, a wonderful history, and Sussex County epitomizes the rural character, the coastline, the farmland. We’ve also got something I think we’ve been touching on: a lot of skilled workers who get overlooked at times, a geography that provides a lot of opportunities, and a foundation of infrastructure to really support the coming generations. Where we are on the East Coast, where we are relative to some of the greaterurban centers, we’re just in a wonderful location. And we really have all the ingredients for a successful future.
Lisa Hastings: I would agree. Having been born and raised here, I think it’s a wonderful place to live and a wonderful place to do business. Because we’re not a metro market, we have to work harder to get the message out. But given how much technology is advancing, if someone wants this kind of lifestyle, a slower pace, a resort place, the open space, there’s no reason why they cannot come here and do everything. Because we are virtually connected to the whole world nowadays. Again, we have that opportunity to break the mold.
MEET THE PANELISTS
Bill Andrew is the president and CEO of Delaware Electric Cooperative, located in Greenwood. His utility experience covers 40 years and he has been associated with all aspects of the utility business from gas to electric, operations to design, and core business to subsidiary operations. Andrew joined Delaware Electric Cooperative in 1998 as vice president of engineering and operations and was promoted to his present position in January 2005. In addition, he is the chairman of the Board of Directors for Old Dominion Electric Cooperative. He is a board member of The Virginia, Maryland, and Delaware Association of Cooperatives, ACES Power Marketing, The Federated Rural Insurance Company, The Harrington Raceway and Casino and the Delaware State Fair Inc.
As a CPA and managing partner of Faw Casson, Lisa Hastings works to ensure that the fi rm consistently executes its mission: To serve as clients’ most trusted advisors and earn its reputation as the fi rm of choice in its markets. She primarily works with larger privately owned companies, the owners and their families, specializing in business and tax consulting, estates and trusts. She also originated and developed the employee benefi t plan audit niche within the fi rm. Hastings has served in many leadership roles within the local and business community. Currently she serves on the executive committee of AGN North America, the board of Pecometh Camp and Retreat Ministries, the Greater Kent Committee and the Legislative Committee of the Central Delaware Chamber of Commerce.
As the manager of business development for Chesapeake Utilities, Dean Holden’s responsibilities include working with government, commercial and industrial customers to bring economic development opportunities to the community. His experience with state and local government in concert with his engineering background brings a unique and constructive perspective to developing projects on the Delmarva Peninsula. Before coming to Chesapeake Utilities, Holden worked for Becker Morgan Group as a licensed civil engineer and project manager. Project management roles have included project team oversight, regulatory and public hearing project administration, and construction management duties. He has worked on re-development projects and environmental stewardship projects designed to improve the ecology and community.Holden brought his knowledge of local rules and regulations, along with his lifelong familiarity of the region to Chesapeake Utilities. He has worked on and le d teams to develop the expansion of the company’s distribution system to serve growing parts of our service territory in Delaware and Maryland’s Eastern Shore