2015 US Investment Monitor - Building a better working …FILE/EY-2015-us-investment-monitor.pdfor retained jobs captured in this year’s USIM, compared to 34% of current private

2015 US Investment MonitorTracking mobile capital investments during 2014

Companies value well-developed supply chains, low input costs, advantageous tax systems and other characteristics when considering where to locate large capital investment projects.

12015 US Investment Monitor Tracking mobile capital investments during 2014

The US Investment Monitor

States along the Gulf Coast continue to attract the greatest amounts of mobile capital investment among project types tracked in the USIM — for the fourth year in a row, Texas and Louisiana received over 30% of all announced investment. As seen in prior years, the top job-creating projects were announced in a varied group of states, led by Texas, Ohio, North Carolina, Tennessee and Kentucky. The Southeast region of the United States continues its trend in attracting the top job-creating mobile projects across a wide range of industries, from financial and professional services to chemical manufacturing.

The USIM focuses on US and foreign companies’ mobile capital investments, which are not tied to specific markets or geographies. Mobile capital investments include headquarters facilities, data and call centers,

manufacturing facilities, distribution centers, and research facilities, which have a wide range of location options. Companies investing in these types of facilities are therefore free to pursue locations with high supply chain potential, low input costs, strong business incentives, growing industry clusters, and advantageous state and local tax systems. Because companies research and analyze the relative merits of different locations before deciding where to invest, these mobile capital investments serve as indicators of a region’s or state’s long-term economic growth potential and competitiveness. The companies’ investment decisions also help inform other investors of investment opportunities and shape the decisions of state policymakers when formulating their economic development strategies.

The nearly 5,800 business investment announcements in 2014 that are analyzed in this 10th edition of the US Investment Monitor (USIM) accounted for more than $150 billion of capital investment in business facilities and more than 410,000 new and retained jobs in the United States.

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• The nearly 5,800 announced projects in 2014 accounted for over $150 billion of mobile capital investment and more than 410,000 new and retained jobs in the United States. Compared to last year this is 800 more project announcements and $5 billion more in capital investment, but nearly 30,000 fewer jobs.

• The states that attracted the most investment were led for the third year in a row by Texas and Louisiana. However, New York ranked third in capital investment — its highest ranking in the last five years.

• The top 10 states by the number of 2014 job announcements accounted for 54% of all new or retained jobs captured in this year’s USIM, compared to 34% of current private sector employment in the United States. The jobs announced due to large mobile capital projects attracted by these states outpaced their current share of US jobs.

• Foreign companies continue to choose the United States for major investment and job creation. Announcements of US projects by these companies represent $36 billion, or 24%, of total USIM mobile capital investment. China came in as the top investing nation, with nearly $12 billion (a third of total foreign investment), followed by Germany and Japan, with $5 billion and $4 billion in capital investment, respectively.

• Two of the top five projects for both capital investment and jobs created are solar/batteries projects, indicating a growing trend in renewable energy. SolarCity (NY) and Tesla Motors (NV) announced a combined $10 billion investment and nearly 10,000 jobs in 2014.

Key findings and insights

Announced projects accounted for $5 billion more in capital investment in 2014 than in 2013 — but nearly 30,000 fewer jobs.


Understanding the United States Investment Monitor (USIM)Project analysis criteria The USIM departs from typical analyses of aggregate business investment trends by analyzing specific projects that meet industry and announcement criteria for mobile capital investment. Mobile capital investment is considered to be any major business investment with a location choice.

The following criteria are used to identify USIM projects:

• Project types — Investments in most production and service facilities are included in the USIM database. Companies are categorized using North American Industry Classification System (NAICS) industry classification, but the project type is determined by the primary business activity occurring within a facility. In many cases, the company industry and project type are the same (e.g., a manufacturing facility expansion by a manufacturer), but in some cases the project type and industry are different (e.g., a headquarters or call center investment by a manufacturer). The analysis specifically excludes retail, entertainment, hospital, retirement home, museum, education, restaurant, hotel, airport and public infrastructure projects because these facilities are not considered to be highly mobile. However, headquarters, general management, back-office, call center, research, manufacturing and distribution facilities for all industries are included because these facilities are generally mobile.

• Announcement or construction date — Projects by large firms involving significant capital investment or job creation are often announced when a site is officially chosen. Other project types (including expansion projects, machinery and equipment upgrades, and smaller projects) may not be publicized until they occur and are captured in the USIM database at that time. This USIM report includes projects that were announced in 2014 or began construction in 2014 without an announcement. Announced projects may have been delayed or canceled.

Data sourcesStatistics on new projects were obtained from Conway Data’s New Plant database, corporate press releases and independent research by Ernst & Young LLP.

Methanol and ethylene: A primerChemical manufacturers announced a number of investments in methanol and ethylene production facilities in 2014. What are these chemicals?

Methanol is used in a variety of products, including plastics, furniture and car parts. It can also be used as a transportation fuel.

Ethylene is widely used in the production of plastics, polyester, packaging, rubber and cleaning agents. It is manufactured from ethane, a natural gas that has experienced a decline in prices due to the US shale gas boom. From 2009 to 2014, ethane production increased by 39%, according to the US Energy Information Administration.

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The largest capital investment announcement in 2014 was a new liquefied natural gas (LNG) export facility. The second- and third-largest investments announced were both related to renewable energy; they were a solar panel manufacturing plant and a battery manufacturing facility.

Of the top 20 capital investment announcements, 10 were related to chemical manufacturing. Many of these projects represent the industry’s desire to take advantage of US natural gas resources and the widespread pipeline infrastructure in states such as Louisiana and Texas. These resources are often converted to petrochemicals like ethylene for use in the manufacturing of plastics, textiles, gasoline additives and other chemical products. Additionally, a portion of the chemical manufacturing announcements are connected with fertilizer, which is crucial as imported fertilizer prices continue to rise faster than domestic prices.

Top chemical manufacturing projects The list of the top 20 mobile capital investment projects announced in 2014 is dominated by chemical manufacturing projects. Ten of the top 20 announced facilities will produce chemicals including ethylene, methanol and fertilizer. These facilities represent total capital investment spending of more than $25 billion and will create more than 4,600 jobs.

Three types of these facilities are described below:

• Fund Connell USA Energy and Chemical Investment announced plans to invest $4.5 billion in a methanol production and export facility in Texas City, TX, near Galveston. The facility would be one of the largest methanol manufacturing plants in the world, with the capacity to produce and export up to 7.2 million metric tons of methanol annually. By comparison, global methanol production capacity was recently reported at 100 million metric tons per year. The related export facility is intended to support so-called “Post-Panamax” tankers — high-capacity vessels that will be able to move through the Panama Canal when modernization of the canal is completed in 2016. Fund Connell is owned by Chinese investment companies.

• Badlands NGL is one of several companies that announced investments in ethylene manufacturing facilities in 2014. Badlands NGL will spend $4.0 billion to build such a facility in North Dakota, the largest private investment project in the state’s history. The facility will employ 500 workers and be able to produce 1.5 million metric tons of polyethylene per year. The facility’s location in North Dakota will bring it easy access to abundant (and cheap) supplies of natural gas.

Top 20 capital investment announcementsEvery year, a large share of the total capital investment of monitored mobile projects is accounted for by the top 20 capital investment announcements. Table 1 (page 9) summarizes these projects, which totaled over $65 billion and accounted for 44% of capital investment announced in this year’s USIM.


• New fertilizer production facility announcements include that of Cronus Chemicals, which will invest $1.4 billion in a new fertilizer plant in Tuscola, IL. The facility will manufacture urea and ammonia fertilizers from natural gas feedstock. Illinois provided an incentives package to attract Cronus’s investment to the state.

In total, chemical manufacturing investments account for one-quarter of all investment spending monitored in this study and 3% of the jobs created or retained by these projects.

Figure 1 demonstrates the relationship between state overall employment location quotient and USIM announced location quotient in the chemical manufacturing sector. Location quotients measure the employment concentration of a certain industry per state compared with the concentration in the US as a whole. States with yellow markers have USIM location quotients that are greater than one, meaning that they have a higher proportion of chemical manufacturing jobs announced than in the nation overall. The size of the marker indicates the number of total jobs announced in the state for 2014.

Historically, the South has been attractive to chemical manufacturers, and this year is no different. Figure 1 shows that states such as Louisiana, West Virginia and Texas, which have above-average (greater than 1.0) concentrations of chemical manufacturing employment, also attracted an above-average proportion of jobs announced in 2014 for the industry. Additionally, we see that the northwestern United States has gained popularity for the sector; Oregon, Montana, Washington and North Dakota all have very high USIM location quotients, despite having low concentration for chemical manufacturing employment overall. This indicates that the industry is branching out of the South, and the northwestern states will have added benefits economically from this new area of investment.

Chemical manufacturing has historically been a key industry in the USIM, and the share of jobs announced has remained nearly constant. However, as displayed in Figure 2, the proportion of investment in this sector has increased dramatically over the last five years, making it an important area where attention should continue to be paid.

USI

M L

Q

Overall employment LQ

1.0

1.0

ND

OR

MT

WA

MN

CA AL

LA

WV

TX

WY

CT

NC TN

AZ

GA

VA

OK NY

FL

AR

IA WI

UT

KY

KS

OH

IL SC

IN

MS

PA

MO

MI

States with a decreasing concentration of chemical

manufacturing employment (USIM LQ < Overall LQ)

States with an increasing concentration of chemical

manufacturing employment (USIM LQ > Overall LQ)

Figure 1. States with an increasing concentration of chemical manufacturing jobs vs. states with a decreasing concentration of chemical manufacturing jobs, 2014

USIM announced employment location quotient (LQ) vs. overall chemical manufacturing employment location quotient, by state

Please note that data points are graphed on logarithmic scales. The figure includes only those states where chemical manufacturing capital investment projects were announced in 2014. The size of the marker indicates the number of total jobs announced in the state for 2014.

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For the fifth straight year, new liquefied natural gas (LNG) export facilities and expansions of existing facilities have a prominent place in the US Investment Monitor as some of the top investment projects. In 2014, three of the top nine projects announced were new LNG export facilities representing combined investment spending of more than $17 billion, equal to more than 11% of all investment tracked in this study.

• SCT&E announced plans to invest more than $9.2 billion in a new LNG export terminal on 246 acres on Monkey Island in Cameron, LA. The site is located at the convergence of several major natural gas pipelines. The facility will be large enough to liquefy approximately 1.6 billion cubic feet of US-produced natural gas per day. This would represent a large portion of the daily LNG exports of 7.0 billion cubic feet that the US Energy Information Administration expects by 2022. The facility will support 200 permanent jobs once operational.

• Less than a mile from the planned SCT&E facility in Cameron, LA, Venture Global LNG intends to build a LNG export facility for more than $4.2 billion. The facility’s export capacity will be nearly 1.4 billion cubic feet of LNG per day. The facility’s liquefaction units will be manufactured in New Iberia, LA. Venture Global expects to employ 100 workers at the facility when it is complete.

• Dominion announced and began construction on a $3.8 billion LNG export facility at Cove Point, MD, on the Chesapeake Bay. The facility is being constructed at a site that already hosts an LNG import terminal. When the facility is completed in late 2017, it is expected to support 75 permanent jobs. In May 2015, the US Energy Department authorized the facility to export nearly 0.8 billion cubic feet of LNG per day.

2010 2011 2012 2013 2014

6.2%

2.2% 3.1% 3.2% 2.4% 3.0%

13.1%

20.4%

32.6%

25.3%

■ Chemical manufacturing as a percent of total investment

■ Chemical manufacturing as a percent of total jobs

Figure 2. Chemical manufacturing as a percent of total investment, 2010–14

10 of the 20 largest capital investment projects announced in 2014 were chemical manufacturing facilities.

Top liquefied natural gas export projects


Top solar/battery-related projectsTwo $5 billion mobile capital investment projects announced in 2014 relate to solar panel and electricity storage technology:

• Tesla announced that it would construct a battery manufacturing facility near Reno, NV, for $5 billion. The so-called “Gigafactory” will produce lithium-ion batteries for use both in Tesla motor vehicles and Tesla “Powerwall” home batteries. (“Gigafactory” denotes that the facility will produce many gigawatt-hours of battery capacity annually.) Tesla plans to produce enough batteries to power 500,000 vehicles by 2020 — at this level, production at the Gigafactory alone would exceed the 2013 global supply of electric vehicle batteries. Tesla says that Powerwall units will enable users to better match their home electricity consumption with electricity supply provided by home-based solar panels. When complete, the Gigafactory is expected to employ 6,500 workers, making it the top job-creating investment monitored in this study.

• SolarCity announced plans for a “Gigafactory” of its own in Buffalo, NY. (Tesla CEO Elon Musk serves as the Chairman of SolarCity.) The $5 billion facility, which will employ 3,000 workers, will produce high-efficiency solar panels. The project is supported by a $750 million equity investment by the state in SolarCity. SolarCity manufactures and installs solar panels for use at homes and businesses. Its services include managing solar panel permit application processes and providing maintenance and repair services.

The US Department of Energy has identified the development of cost-effective, efficient, long-lasting batteries as a key obstacle to wider adoption of electric transportation options. Investments such as the Tesla and SolarCity facilities — and the economies of scale they enable — encourage innovation in battery technology.

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Table 1. Top 20 projects ranked by capital investment, 2014

Company name State Product/facility useInvestment

(in $m)Jobs

SCT&E LA LNG export facility $9,250 200

Tesla Motors NV Battery manufacturing facility 5,000 6,500

SolarCity NY Solar panel manufacturing facility 5,000 3,000

Fund Connell USA Energy and Chemical Investment

TX Methanol production and export facility 4,500 700

Cerner MO Offices and mixed-use development 4,300 1,500

Venture Global LNG LA LNG export facility 4,250 100

Badlands NGL ND Ethylene manufacturing facility 4,000 500

Boeing WA Commercial airplane manufacturing 4,000 2,760

Dominion MD LNG export facility 3,800 75

Chevron TX Ethylene manufacturing facility* 3,000 200

Chevron TX Ethylene manufacturing facility* 3,000 200

Axiall LA Ethylene manufacturing facility 3,000 250

Marathon Petroleum LA Oil refinery 2,200 65

Shandong Tralin Paper VA Paper and fertilizer manufacturing facility 2,000 2,000

Yuhuang Chemical LA Methanol production facility 1,850 400

State Farm TX Offices and mixed-use development 1,500 700

Cronus Chemicals IL Fertilizer production facility 1,400 175

Castleton Commodities International

LA Methanol production facility 1,200 50

AM Agrigen Industries LA Fertilizer production facility 1,200 150

Comcast PA Technology development 1,200 1,500

* Chevron is spending $3 billion each on ethylene manufacturing facilities in Texas: one will be located in Midland and the other in Old Ocean.Source: Ernst & Young LLP research; Conway data.

2015 US Investment Monitor Tracking mobile capital investments during 2014 9

Top 20 job announcements

Transportation equipment manufacturers announced more than 48,000 new or retained jobs in 2013. The industry continues to rebound from the severe contraction it suffered during the recession, when industry employment declined by 27%. The industry employed nearly 1.6 million workers by the end of 2015 — still approximately 11% less than its pre-recession high of nearly 1.8 million in 2005. Major job-creating projects were announced by a variety of transportation equipment manufacturers in 2014.

• For the third straight year, a Boeing investment is among the top 20 job-creating projects. Boeing announced that it will invest up to $4 billion in a new manufacturing facility to build wings for the new 777X commercial aircraft. The facility will employ more than 2,700 workers. The State of Washington provided a large package of incentives to support Boeing’s investment.

• Volkswagen announced a $600 million investment in Chattanooga, TN, to expand its only manufacturing facility in the United States. This expansion will create 2,000 new jobs and produce a new line of midsize sport utility vehicles (SUVs). This announcement comes in the wake of General Motors’ investment last year in a $350 million plant to build midsize SUVs in Spring Hill, TN.

• In a response to new safety regulations related to the transport of combustible substances by rail, Vertex Rail announced that it will invest at least $55 million and hire more than 1,300 workers to open a rail car manufacturing facility in Wilmington, NC. The facility will produce technically advanced oil tanker cars that meet stricter federal safety standards. Rail shipments of oil expanded from 20 million barrels in 2010 to more than 370 million barrels in 2014 in response to the boom in oil production in areas with no access to pipelines.

The projects included in this year’s USIM are expected to create or retain more than 410,000 jobs across the United States. The 20 largest job-creating projects accounted for more than 47,200 jobs across a wide range of industries and facility types. These projects, summarized in Table 2, accounted for 11% of the total jobs announced in 2014.

Top transportation equipment manufacturing projects

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Table 2. Top 20 projects ranked by new and retained jobs, 2014

Company name State Product/facility useInvestment

(in $m)Jobs

Tesla Motors NV Battery manufacturing facility $5,000 6,500

General Electric KY Appliance manufacturing facility 280 5,263

Toyota TX Headquarters facility 300 4,000

SolarCity NY Solar panel manufacturing facility 5,000 3,000

Boeing WA Commercial airplane manufacturing 4,000 2,760

Alevo NC Battery manufacturing facility 1,000 2,500

Burns & McDonnell MO Offices 130 2,100

Remington Outdoor AL Firearm manufacturing facility 110 2,000

Volkswagen TN Automobile manufacturing facility 600 2,000

Shandong Tralin Paper VA Paper and fertilizer manufacturing facility 2,000 2,000

Giti Tire SC Tire manufacturing facility 560 1,700

Express Scripts MO Offices and research and development facility

56 1,500

Under Armour TN Apparel 100 1,500

Macy’s OK Retail merchandise 170 1,500

Comcast PA Technology development 1,200 1,500

Cerner MO Offices and mixed-use development 4,300 1,500

Vertex Rail NC Rail car manufacturing facility 60 1,340

Blue Cross Blue Shield of Illinois

IL Offices 0 1,300

Zenefits AZ Offices 0 1,300

Sealed Air Corp. NC Headquarters facility 58 1,262

Source: Ernst & Young LLP research; Conway data.


Other top manufacturing projectsSeveral other investments in new manufacturing facilities with large job impacts were announced in 2014. In total, the manufacturing sector accounted for half — more than 206,000 jobs — of all new or retained job announcements captured in this study.

• General Electric (GE) plans to spend $280 million to modernize manufacturing facilities at its Appliance Park in Louisville, KY. GE announced that it will retain more than 5,000 jobs at the site. Pending a review by the U.S. Department of Justice, GE plans to sell its appliances division — including Appliance Park — to Electrolux, a Swedish appliance manufacturer, for $3.3 billion.

• In addition to the battery manufacturing-related investments of Tesla and SolarCity described earlier, Alevo Energy completed work in October 2014 on a $1 billion facility in Concord, NC, that will produce batteries. The facility employs 2,500 workers and could create more jobs as production increases. Alevo’s GridBank batteries are geared toward storing energy to smooth out the energy production fluctuations of renewable sources like wind and solar power.

• Remington Outdoor announced that it will invest $110 million and create 2,000 jobs for a new manufacturing facility in Huntsville, AL. The facility will produce handguns for Remington’s commercial, military and law enforcement businesses. Remington will purchase a facility that previously housed Chrysler automobile manufacturing.

Headquarters/office and research facilitiesThe acquisition or construction of new headquarters and office facilities tend to attract many new jobs to states as companies consolidate their operations. In 2014, facilities investments were no exception. Overall, office and research facilities accounted for more than $24 billion (16% of total spending) of the investments tracked in this year’s USIM and nearly 130,000 new and retained jobs (31% of total jobs). Three of 2014’s top office investments are described below.

• Toyota announced that it would spend $300 million to build a new North American headquarters campus in Plano, TX. The investment will create approximately 4,000 new jobs in the state, with support from the Texas Enterprise Fund.

• Cable and entertainment company Comcast announced that it would build a new 59-story Comcast Innovation and Technology Center in Center City, Philadelphia, PA. The facility will be next door to Comcast’s global headquarters. The $1.2 billion facility will house 1,500 Comcast employees, including technologists, engineers and software architects.

• Engineering firm Burns & McDonnell announced plans to invest $130 million to expand its headquarters in Kansas City. The new facility will house 2,100 employees. Burns & McDonnell conducts engineering design work for oil and natural gas projects and electricity generation and distribution investments.

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Investment in mobile capital projects and the resulting new and retained jobs created are summarized by industry in Table 3 on the next page.

As noted above, industries capturing high amounts of investment include liquid natural gas, chemical manufacturing, and other non-durable manufacturing for batteries and solar panels. Chemical manufacturing alone accounts for nearly a quarter of all investment, and non-durable manufacturing as an industry overall is nearly half of 2014’s capital investment. Additionally, durable manufacturing plays a strong role; machinery, motor vehicle parts and semiconductors continue to be important investments in the US, accounting for nearly $4 billion in investment.

Over the 10 years of the USIM there has been a general shift away from labor-intensive projects as labor productivity has improved and the number of investments in capital-intensive chemical manufacturing projects has increased. However, durable manufacturing and office facility investments are are still key job-creating projects for 2014. Other industries poised to add significant employment include food, beverage and tobacco product manufacturing, as well as wholesale and retail trade. These industries are generally more labor-intensive than industries such as chemical manufacturing.

Industry summary


Table 3. Announced capital investment and jobs in US facilities, 2014

Sector IndustryInvestment

(in $m)Jobs

Agriculture, mining, construction

Agriculture, forestry, fishing and hunting $473 1,821

Construction 502 2,614

Mining including oil and gas extraction 7,978 4,645

Subtotal: Agriculture, mining, construction 8,952 9,080

Durable manufacturing

Machinery and fabricated metal manufacturing 14,045 40,530

Motor vehicle and parts metal manufacturing 13,961 48,540

Other durable manufacturing 2,254 13,685

Semiconductor and electronic component manufacturing

11,219 29,895

Subtotal: Durable manufacturing 41,478 132,650

Financial and professional services

Business support services 832 24,496

Finance, insurance, and real estate services 4,225 22,910

Health care and social assistance 362 3,744

Management of companies and enterprises 603 3,567

Other services 533 3,982

Professional services 3,339 39,094

Subtotal: Financial and professional services 9,895 97,793

Information Data centers 3,363 5,763

Information 6,610 20,440

Subtotal: Information 9,973 26,203

Non-durable manufacturing

Chemical manufacturing 38,142 12,367

Food, beverage, and tobacco product manufacturing 6,278 23,298

Other non-durable manufacturing 6,094 18,971

Petroleum and coal products manufacturing 13,601 1,667

Pharmaceutical manufacturing 1,750 5,964

Rubber and plastics manufacturing 2,632 12,367

Subtotal: Non-durable manufacturing 68,497 74,634

Trade and transport Transport, storage and logistics 4,194 19,392

Wholesale and retail trade 7,833 50,725

Subtotal: Trade and transport 12,027 70,117

Total $150,821 410,477

Note: Figures may not appear to sum due to rounding.Source: EY research; Conway data.

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Project sizeWhile attention is often focused on the megaprojects in any given year, projects under $250 million in capital investment accounted for 99% of project announcements and 88% of total jobs announced in 2014. While less than 1% of projects announced in 2014 were for over $500 million in investment, these projects accounted for 8% of total announced employment (see Figure 3).

Figure 4 shows the distribution of projects by the number of new or retained jobs. Only 137 project announcements (nearly 4% of total projects) in 2014 were larger than 500 jobs, of which only 44 projects (1% of total projects) were larger than 1,000 jobs. Fifty-one percent of projects announced fewer than 50 jobs created or retained, up from 45% in 2013.

76%

18%

5% 1% 1%

49%

22% 17%

4% 8%

Share of projectannouncements

Share of newemployment

$0–$9 $10–$49 $50–$249 $250–$499 $500+

51%

31%

9% 6%

2% 1%

0–49 50–149 150–249 250–499 500–999 1,000+

Figure 3. Share of project announcements and total new employment by project capital investment size ($m), 2014

Figure 4. Share of project announcements by total jobs created or retained, 2014

Note: Figures may not appear to sum due to rounding.Source: Ernst & Young LLP research; Conway data.

Note: Chart includes only projects with disclosed employment information. Figures may not appear to sum due to rounding.Source: Ernst & Young LLP research; Conway data.


The average project size was less than $35 million for 9 of the 10 states with the most project announcements, shown in Figure 5. Of these states, only Louisiana had an average project size of greater than $35 million — the average project announced in Louisiana in 2014 represented $129 million in new investment. For the third straight year, Texas led the nation and Ohio placed second in announcements of new capital investment projects.

705

580

386

311 261

232 225 201 198 190

TX OH IL NC KY MI PA LA TN CA

Figure 5. Top 10 states by number of project announcements, 2014


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Capital intensityAs Figure 6 shows, capital expenditure per job for projects announced in 2014 varied widely across sectors. Chemical manufacturing projects were by far the most capital-intensive, averaging $3.1 million per new or retained job, compared to $4.3 million in 2013 and $3.1 million in 2012. Durable manufacturing projects were less capital-intensive, averaging only $313,000 per new or retained job. These projects tend to be accompanied by large workforces, particularly in the transportation, machinery and fabricated metal manufacturing sectors.

Financial and professional services continued to be the least capital-intensive industry monitored in the USIM, with $101,000 of investment per job, in line with recent years. Capital intensity across all 2014 project announcements was $367,000 per job.

The top 20 projects ranked by capital expenditure are among the most capital-intensive projects, with an average $3.1 million of capital investment per job, compared to an average of $367,000 per job for all projects announced in 2014.

Jobs

Capital investment (in US$ millions)

140k—

130k—

120k—

110k—

100k—

90k—

80k—

70k—

60k—

50k—

40k—

30k—

20k—

10k—

0k— 0k 10k 20k 30k 40k 50k 60k 70k

Trade and transport 1,183 projects $172,000 per job announced

Information 284 projects $381,000 per job announced

Financial and professional services 1,000 projects $101,000 per job announced

Non-durable manufacturing 1,334 projects

$918,000 per job announced

Chemical manufacturing 257 projects $3.1 million per job announced

Agriculture, mining, construction 230 projects $986,000 per job announced

Durable manufacturing 1,766 projects $313,000 per job announced

Figure 6. Capital intensity of projects by sector, 2014 (announced capital investment per jobs announced)



Investment by type of facilityTable 4 summarizes mobile capital investments in 2014 by type of facility. Investments in new or expanded industrial facilities accounted for the majority of announced projects, representing 77% of announced investments ($115 million) and 50% of jobs (206,000). In 2013, industrial facilities accounted for 72% and 46% of investment and jobs, respectively. Investments in expensive LNG export and chemical manufacturing facilities and new jobs at transportation manufacturing facilities led this growth in 2014. Industrial facilities have consistently represented over 60% of project announcements in the USIM.

Office and research facilities (including corporate headquarters) accounted for 16% of total announced investments and 31% of

jobs, compared to 16% of investment and 37% of jobs last year. Large investments in office and research facilities include Toyota’s new North American headquarters campus in Plano, TX, and Comcast’s new Innovation and Technology Center in Philadelphia, PA.

Distribution and warehousing facilities’ 13% share of new and retained jobs is consistent with recent years. Announced data center projects totaled $1.4 billion in 2014, representing 1% of total investment. This marks a decline in data center investment from recent years. Call center investment also declined from 2013, with only $234 million of new investment. Still, with more than 80 jobs created or retained for every $1 million invested, call centers accounted for 5% of jobs.

Table 4. Announced mobile capital investments by facility type, 2014Facility type Investment (in $m) % of total Jobs % of totalIndustrial facilities $115,424 77% 206,231 50%

Office and research facility $24,660 16% 127,520 31%

Distribution and warehousing $9,124 6% 54,889 13%

Data center $1,380 1% 1,821 0%

Call center $234 0% 20,016 5%

Total $150,821 410,477

Note: Figures may not appear to sum due to rounding. Source: EY research; Conway data.

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Industrial facilities, which are highly capital-intensive, accounted for 77% of the capital investment spending announced in 2014.


The manufacturing industry remained the top industry among foreign investment projects with 91% of all announced foreign investment. The majority of foreign investment (55%) was in non-durable goods manufacturing and 36% was in durable goods manufacturing. Durable goods manufacturing projects related to products such as semiconductor and electronic components, motor vehicles, and automobile parts.

Foreign manufacturing companies accounted for 71% of the jobs announced by foreign companies. This is partially due to the manufacturing sector’s large share of total foreign investment. A closer look at the foreign investment projects shows that chemical manufacturing led the way with 34% of total announced investment related to foreign investors, while the motor vehicle and parts manufacturing industry was the top job-creating industry, with 22% of announced jobs by related to foreign investors.

As shown in Table 5, China was the top investing nation in 2014, with nearly $12 billion of mobile capital investment project spending in the United States — one-third of total foreign investment. Nearly all of China’s total investment announcements (97%) were in the manufacturing industry, especially in projects related to chemical manufacturing and other durable goods manufacturing. Partly because chemical manufacturing is less labor intensive than other sectors, total job announcements by Chinese companies ranked third, after German and Japanese companies.

Both Germany and Japan remained among the top three investing nations in 2014, with $5 billion and $4 billion in announced capital investment spending, respectively. The leading industry for German investment was motor vehicle and parts metal manufacturing; for Japanese investors, semiconductor and electronic component manufacturing projects led the way.

The rest of the top five investing nations in 2014 included Singapore and Canada, each with around $2 billion of capital investment spending announced. Even so, Canadian investors expected to create or retain nearly 10 times as many US jobs as Singaporean investors. Nearly all of Singapore’s announced capital investment spending was related to a project in the chemical manufacturing industry, which is generally among the least labor-intensive industries.

China, Singapore and France were new entrants to the list of top 10 foreign investing nations in 2014, replacing Australia, Italy and Belgium.

• The largest capital investment made by a foreign company was by the investment partners of Fund Connell USA Energy and Chemical Investment, the investment division of Sino Life Insurance Company and the Connell Group, both headquartered in China. Fund Connell will invest $4.5 billion to build a large methanol production and export facility at Shoal Point, TX, creating 700 jobs, of which 500 will be new permanent jobs and the remaining 200 will be contractor positions.

Foreign investmentIn 2014, total investment in new and expanded US facilities announced by foreign companies reached $36 billion, accounting for 24% of all mobile capital investment monitored. Table 5 summarizes the sources of foreign investment based on the global ultimate parent company of an announced project.

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• Switzerland-based Alevo Energy claimed this year’s top job-creating foreign investment with the opening of a new facility at Victory Industrial Park in Concord, North Carolina. The company focuses on battery storage technology and plans to create 2,500 jobs with its $1 billion investment.

• Chinese companies announced manufacturing investments totaling $11.5 billion, accounting for 97% of total Chinese investment announcements in the United States in 2014. For example, the second-largest capital investment project announced by a Chinese company was Shandong Tralin Paper’s $2 billion capital investment in a Virginia paper and fertilizer plant.

• The level of investment announced by foreign investors in recent years is consistent with U.S. Bureau of Economic Analysis (BEA) data on multinational enterprises’ foreign direct investment in the United States. The BEA’s data on property, plant and equipment expenditures in the United States by foreign parent companies shows an increase of 6% in investment spending from 2008 to 2012, which is consistent with the USIM’s trend of total announced foreign investments for the same time period.

Table 5. Announced foreign investment and job announcements in US facilities by origin country, 2014

Investing country Investment (in $m) JobsChina $11,831 19,125Germany 5,047 27,263Japan 4,390 20,188Singapore 2,483 1,538Canada 2,206 13,900Switzerland 1,630 8,143United Kingdom 1,163 12,704South Korea 875 4,438Netherlands 776 3,289France 472 6,620Subtotal 30,874 117,209Other countries 5,166 40,719Total foreign investment 36,040 157,928US investment 114,782 252,549Total, all investment $150,821 410,477

Note: The overall distribution of investment and jobs by investing country is assumed to be consistent with the distribution among projects for which the investing country was identified.Figures may not appear to sum due to rounding.Source: Ernst & Young LLP research; Conway data.


Figure 7. Announced foreign investment as a share of total announced investment


Low foreign capital investment to total ratio

High foreign capital investment to total

ratio

Alaska Hawaii

• Both USIM and BEA data show a sharp upward trend of Chinese investment spending in the United States in recent years. According to the BEA, Chinese parent companies’ expenditures on property, plant and equipment in the United States grew from annual levels of $119 million or less before 2010 to $1.7 billion in 2012. Three drivers of this trend in Chinese investment in the United States were: (1) rising input and labor costs in China’s domestic market, (2) Chinese companies’ interests in exploring new product markets, and (3) a more relaxed regulatory environment for Chinese outbound investment activity. In particular, China’s Ministry of Commerce (MOFCM) eliminated certain approval requirements for non-sensitive outbound foreign direct investment.

The top five states ranked by total foreign investment spending in 2014 were Texas, Virginia, Louisiana, Oregon and North Carolina due to the announcements of large projects by foreign chemical and automotive manufacturing companies. As shown in Figure 7, the Southeast and Northwest regions of the United States received a high percentage of total investment from foreign sources. Over past years, the coastal regions in general have received more foreign investment than the interior of the US, a trend that continues in this year’s USIM as well.

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Top states by capital investment

Louisiana. Louisiana attracted more mobile capital investment than any other state, with project announcements totaling nearly $26 billion in value. For the second straight year, Louisiana claimed 7 of the top 20 largest projects. These seven projects alone account for nearly $23 billion in investment announcements and more than 1,200 jobs. Louisiana continues to benefit from the US shale gas boom — with ready access to both natural gas pipelines and shipping ports, Louisiana captured $22 billion in investment from the chemical manufacturing industry, or 58% of total investment by that industry.

Texas. In each of the last 10 US Investment Monitors, Texas ranked in the top three states for capital investment. Texas’ natural resources, central location and proximity to the Gulf of Mexico make it a highly desirable location for capital-intensive facilities in the chemical manufacturing and LNG export industries. Investment in Texas for 2014 exceeded $22 billion. The largest investment ($4.5 billion) was by Fund Connell USA Energy and Chemical Investments. The China-based company is building a methanol complex in Texas City. Additionally, Chevron is investing $6 billion in two ethylene manufacturing plants in Texas — one in Midland and the other in Old Ocean. Chevron expects these projects to create 400 jobs in Texas.

New York. For the third time in the past 10 years, New York is among the top five states by capital investment announcements. Total announced investment in New York totaled more than $8 billion — well above the $5 billion of investment announcements that New York averaged from 2009 through 2013. This increase in investment is mostly due to a $5 billion investment by SolarCity. The company will build a solar panel manufacturing plant in Buffalo that will create over 3,000 new jobs. Buffalo is also the location of the next two biggest investments for the state by a pair of California-based companies, Silevo and Soraa. These companies will invest a combined $1.5 billion to relocate major parts of their operations to a high-tech manufacturing center in Buffalo.

Missouri. Missouri ranked fourth in the amount of capital investment spending announced in 2014 — the first time Missouri has ranked in the top 10 across the 10-year history of the US Investment Monitor. In 2014, the state captured nearly $6 billion in investment from a variety of key projects, mostly in the professional and technical services industry. The top capital investment project was a $4.3 billion investment announced by Cerner, a health care information technology company based in the state. The company aims to create around 1,500 jobs with their new 11-tower campus in Kansas City.

Capital investment is an essential ingredient in long-run economic development, and states continued to compete for capital investments in major new facilities in 2014. The 10 states that were the most successful in attracting this investment in 2014 are shown in Figure 8 on the next page. Projects announced in these states accounted for 60% of total mobile capital investment announced during 2014.


Low capital investment to GDP ratio

High capital investment to

GDP ratio

Alaska Hawaii

$25.9

$22.3

$8.1 $5.8 $5.6 $5.4

$2.8 $5.0 $4.6 $4.6 $4.6

$16.7

$20.9

$5.2

$2.0

$8.4

$0.8

$5.3 $6.6

$3.9

$0.5 $1.5

LA TX NY MO OH NV CA MI SC MD ND

2014 2009–13 average

Figure 8. Top 10 states for mobile capital investment ($m)


Figure 9. Mobile capital investment as a percentage of state GDP, 2014

Figure 9 shows capital investment per dollar of state GDP to show investment levels in relation to economy size for each state. Similar to 2013, Louisiana and North Dakota attracted the most capital investment relative to their sizes. Nevada followed closely with the third-highest ratio of capital investment to state GDP.

Source: Ernst & Young LLP research; Conway data; US BEA.

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Texas. Texas remained the leader in new and retained jobs with approximately 33,400 jobs announced in 2014, a 10% decrease from the state’s five-year average of announced new and retained jobs. Less labor-intensive projects, such as non-durable goods and chemical manufacturing facilities, made up a larger share of Texas job announcements than in previous years. Still, the leading job-creating industry in the state in 2014 was durable goods manufacturing of motor vehicles, semiconductor and other products. For example, Toyota announced a new North American headquarters facility in Plano. This facility will host approximately 4,000 employees relocating from other states. Also, technology services provider CVE Technology Group announced that it would create 1,200 jobs at new headquarters in Allen.

North Carolina. Capital investments creating more than 29,500 jobs were announced for North Carolina in 2014, with the majority (62%) coming from companies in the manufacturing industry. The top job-creating project in the state was also this year’s top job-creating foreign investment — a battery manufacturing facility announced by Alevo Energy. Alevo, based in Switzerland, plans to employ 2,500 people at the new facility in Concord. Vertex Rail Technologies announced that it will add more than 1,300 jobs and invest $60 million in Wilmington at a railcar production facility. The company plans to hire at least 10% of its entire workforce in Wilmington through local programs and will also focus on hiring unemployed veterans. The State of North Carolina will contribute more than $600,000 toward infrastructure improvements to accommodate Vertex’s facility.

Ohio. Ohio has consistently ranked among the top five states for job creation announcements since 2007. This year, Ohio ranked third among all states with over 27,600 announced jobs. The leading job-creating industries in 2014 were the trade and transport and durable goods

manufacturing industries. Ohio’s top project was a customer service center announced by Zulily, an online retailer. The facility will employ 900 workers in Columbus. The second-highest job-creating project in the state was a foreign investment project announced by the Chinese company Fuyao Glass Industry Group. The company specializes in the manufacture of automotive glass products. It plans to invest $200 million in a new plant in Moraine and will add 800 workers. Operations are expected to begin by late 2015. State officials believe that Fuyao’s investment is the largest ever by a Chinese company in Ohio.

Tennessee. Tennessee announced more than 24,600 new or retained jobs in 2014 — 36% higher than it averaged over the previous five years. Job announcements in the state were concentrated in the manufacturing industry, relating to products including automobiles, ceramic tiles and medical instruments. Volkswagen, for instance, announced a $600 million expansion of its sole US manufacturing facility, in Chattanooga. The expanded facility — set to employ 2,000 more workers than at the present — will focus on manufacturing a new automotive line. It will also house Volkswagen’s new National Research & Development Center. The state is providing a $165.8 million grant to facilitate the company’s site development and facility construction; the state will also provide a $12 million grant for training new employees. Leading sports apparel company Under Armour announced the state’s second-ranked job-creating project, a $100 million distribution and warehouse facility that will create 1,500 jobs in Mount Juliet, near Nashville.

Top states by announced jobsIn 2014, projects monitored by the USIM announced more than 410,000 new and retained jobs, a 1% increase over the average total new and retained jobs announced from 2009 to 2013. Job creation announcements from the top 10 states shown in Figure 10 on the next page accounted for 53% of all job creation announcements this year.


Figure 11 shows announced jobs as a percentage of existing employment in each state. Job announcements were especially high in the Southeast, including Tennessee, Kentucky, and North and South Carolina. Nevada was also among the states with the most job announcements, mainly due to Tesla Motors’ announcement of a new battery manufacturing facility near Reno.

Announcements by durable goods manufacturers accounted for the highest number of employment in the top four states. Companies operating in the trade and transport and financial and professional services industries were also top job creators in states including Ohio, Tennessee, North Carolina and Texas. Comparing Figure 9 and Figure 11, states that performed well in terms of capital investment also saw significant mobile job announcements as a percentage of current employment.

Low job growth

High job growth

Alaska Hawaii

33.4 29.5

27.6 24.6

19.6 19.1 17.0 16.7 16.0 16.0 14.5

37.0

24.6 27.6

18.1

12.6

19.8 18.8 18.4

30.0

9.6

14.8

TX NC OH TN KY IN VA GA MI IL SC

2014 2009–13 average

Figure 10. Top 10 states for mobile project jobs (thousands of jobs)


Figure 11. Announced mobile project jobs as a percentage of existing employment by state, 2014

Source: Ernst & Young LLP analysis of Conway data and US BLS data.

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SummaryMany factors play key roles in a company’s decision to invest in a particular location. Policymakers and state business leaders alike should be aware of the effects that taxes, operating costs, natural resources and the nature of the local market — among others — have on a state’s economic climate. Awareness of industry trends, workforce development levels, and the availability of state and local tax incentives can help businesses choose where to locate their mobile capital investments. These factors were highlighted by several trends seen in this year’s US Investment Monitor:

• State tax incentives. As in previous years, many states used tax incentives to persuade companies to locate large capital investment projects within their borders.

• Infrastructure. States with access to infrastructure such as natural gas pipelines and deepwater ports benefited from large capital investment announcements.

• Foreign investment. Foreign investment accounted for nearly one-quarter of all investments announced in 2014, including several investments of $1 billion or more.

This year we have seen an especially marked rise in the solar panel and battery industries, as well as proof of the continuing strength of the chemical manufacturing industry. The diverse nature of the projects analyzed in this year’s US Investment Monitor reinforces what has been shown in the previous nine years of this publication: by maintaining a competitive environment for business investment across a broad range of industries, states can attract large investments that generate jobs and opportunities for additional growth.


About the US Investment MonitorThe USIM is an Ernst & Young LLP research initiative designed to analyze investment in the United States and discuss the factors that attract large investment projects to particular locations. It represents the input of our Quantitative Economics and Statistics (QUEST) and Indirect Tax Incentives practices.

QUEST assists businesses at every step of the quantitative analysis process. This multidisciplinary practice combines business and industry experience with capabilities including federal, state and local tax policy analysis and revenue estimation; economic development strategy and targeting; economic and fiscal impact modeling; and statistical sampling and surveys. QUEST also provides analyses to inform legislative and regulatory change, relying on its team of respected tax economists and statisticians to produce quantitative studies of a variety of federal, state and global issues. QUEST’s Economic and Fiscal Contributions service provides public- and private-sector clients with estimates of potential economic and fiscal impacts resulting from capital investment, business relocation, economic development initiatives, tax reform proposals and regulatory changes.

Indirect Tax focuses on the tax processes that can help companies effectively manage their state and local tax costs. Our Indirect Tax professionals offer a broad array of both tax compliance and advisory services that relate to a company’s business-driven initiatives. Indirect Tax Incentives professionals in the Indirect Tax practices comprise a dedicated network of US and global practitioners who understand the business incentives arena and how investment in people, property, training and new facilities can dramatically affect a company’s tax position.

They focus on helping clients identify and obtain incentives that may be available through legislative change or negotiation with appropriate agencies: income or sales and use tax exemptions, income or franchise tax credits, sales and use tax refunds, property tax abatements, training expense reimbursements, employer credits, and favorable financing arrangements.

EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

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Notes

EY | Assurance | Tax | Transactions | Advisory

About EYEY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US.

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2015 US Investment Monitor - Building a better working …FILE/EY-2015-us-investment-monitor.pdfor retained jobs captured in this year’s USIM, compared to 34% of current private