The Keystone State: An Excellent Choice For Business

Tuesday, July 1, 2008 - 01:00

The Editor interviews Dennis Yablonsky, Secretary of Community and Economic Development, Commonwealth of Pennsylvania.

Editor: Mr. Yablonsky, would you tell our readers something about your professional experience?

Yablonsky: I spent the early part of my career in the software industry. After serving as president of a company in Cincinnati, I returned to my hometown, Pittsburgh, to become CEO of a software company that was spun out of Carnegie Mellon University and eventually went public.

I went on to become the founding CEO of two technology-focused economic development entities - the Pittsburgh Digital Greenhouse, focused on the semiconductor industry in Pittsburgh, and the Pittsburgh Life Sciences Greenhouse, with a focus on the region's bio-science sector. This, in turn, led me into state government working with Governor Rendell five years ago.

Editor: Please give us an overview of your responsibilities as Pennsylvania's Secretary of Community and Economic Development.

Yablonsky: The department combines what was originally two separate departments, commerce and community affairs. We oversee nearly 90 programs with an annual programmatic funding budget of about a billion dollars. This involves grants, loans, tax credits, guarantees and venture capital investments, with the principal focus on stimulating the growth of business in Pennsylvania. This includes attracting new business from outside the state and encouraging growth from within, and it extends to both tourism and the revitalization of the state's core communities.

Editor: And the agency's mission?

Yablonsky: Our mission is to improve the state's business climate and to support the retention and growth of jobs in the state. That entails developing a coherent strategy and implementing the programs that transform that strategy into reality. This is a joint effort in which we cooperate with local governmental and community and economic development agencies.

Editor: I gather that, among other things, the department acts as a bridge between government and the private sector. How does this work?

Yablonsky: The previous administration established a very important distribution network called the Governor's Action Team that Governor Rendell has taken to new heights. The group serves as a single point of contact for businesses interested in expanding their operations or relocating to Pennsylvania. In this model, a company is assigned a development specialist who is responsible for understanding the company's needs and for marshalling the state's financial and technical resources to meet those needs. The development specialist also serves as a bridge to connect the company with the local authorities as well.

Editor: Can you give us some examples of projects that the department has undertaken?

Yablonsky: We relocated the North American headquarters of a well-known Japanese company, Olympus, from Long Island to the Lehigh Valley in the northeastern part of Pennsylvania. That represented an inflow of 800 jobs and millions in private sector investment. We also work with start-up operations on a regular basis. For example, Plextronics, a Carnegie-Mellon spinoff in the solar energy industry, was the beneficiary of some early stage capital from the department, and in just a few years, the company has grown and now employs between 50 and 75 people.

Editor: Competition for new business is intense. What do you say to prospective investors about Pennsylvania as an investment destination and place to do business?

Yablonsky: We stress a number of key points. First, we talk about the work force, its quality and quantity. That is a major selling point for us: the ability to assure a prospective employer that a strong, qualified work force is readily available.

The second thing we talk about is location. We are centrally located as part of the Northeast, Midwest and the Mid-Atlantic regions, but more importantly, we are within easy reach of 60 percent of the population of the U.S. and 60 percent of the country's consuming public. We constitute a gateway to that public.

We go on to talk about Pennsylvania's educational system, both pre-K through 12 and our colleges and universities. We believe that our educational system represents our future, and that the health of our economy is a direct outgrowth of that system. Accordingly, we make every effort to insure that Pennsylvania's educational system remains at the head of the class.

The quality of life is also something in which we take great pride. Where we live, work and play is of great importance. We have invested a great deal of money into core communities across the state, and we are revitalizing a great many downtown areas, not just Pittsburgh and Philadelphia, but also in places like Allentown, Erie, Bethlehem and Scranton-Wilkes-Barre. These are vital neighborhoods where businesses can thrive. We are beginning to see movement into these neighborhoods from the suburbs, particularly with respect to young people, and we know that this reflects well on the quality of life we offer to someone coming from outside the state.

We also talk about our leadership, in particular Governor Rendell. He has made economic development and community revitalization a priority, and he is very actively engaged in those efforts. We believe that the door is open in Pennsylvania for people to do business, and by an open door I mean that this administration is there to help with incentive packages, technical support, licensing and permitting and all of the other things that a company factors into its decision-making.

A final point that we make has to do with the overall cost of operations. We are in a good position vis-à-vis the competition: our business taxes are reasonable, rental costs and the cost of real estate in general compare well with nearby states and personnel costs are relatively low. We promote the cost of doing business in Pennsylvania as an advantage.

I would also like to reiterate the customized approach our department takes with respect to inbound investment. A company looking to build a manufacturing facility or a warehouse/distribution operation is going to be focused on facility costs. A company setting up a research arm is going to be concerned about access to the university community. Another company establishing a headquarters operation is going to look at quality of life issues. Whatever concerns are paramount, we are prepared to act in a responsive way. As you note, competition for new business is intense, and we must be responsive to individual needs if we are going to remain competitive.

Editor: Where does inbound investment originate?

Yablonsky: We have identified four industry clusters, life sciences, technology-based industries, advanced manufacturing and business services. Domestically, inbound investment from these sectors comes to us from New York, New Jersey, Ohio and California, in that approximate order. As a general matter, companies do not always, or even often, relocate lock, stock and barrel to Pennsylvania. Most of the time an operation in Pennsylvania will represent an expansion of an existing out of state company into Pennsylvania..

Internationally, Canada and Mexico send us the largest volume of inbound investment, but we also see substantial investment from the UK and Germany. Japan and China are also beginning to pick up momentum.

Editor: Please tell us about the incentives that the department offers with respect to inbound investment.

Yablonsky: We have a variety of incentives. This includes a number of grant programs that are typically tied to job creation. We also have a series of low-interest loan programs for working capital, for equipment and machinery purchases, and for construction. And we have a tax credit program that provides a specific tax credit for every new job created. We also have what we call Keystone Opportunity Zones, which are generally located in industrial areas and virtually tax free. These zones are particularly attractive for businesses.

Editor: How about a company's zoning and planning needs?

Yablonsky: Generally speaking, zoning and planning are local issues. The department has a group called the Center for Local Government Services, however, which is responsible for our working relationships with our local government agencies. The permits may have to come from a local environmental protection agency, but our group will step in to provide assistance and the right connections to enable the process to move forward.

Editor: Would you share with us your thoughts about the prospects of Pennsylvania's economy over, say, the next five years?

Yablonsky: Based on our record over the past five years, I would say the prospects for the next five are excellent. We have seen solid growth in our gross state product, our exports, and our creation of jobs, and our unemployment rate has been decreasing. We are not experiencing as much difficulty with the current economic downturn as some of the other states in the region. In fact, when our fiscal year ends on June 30, we expect to have a surplus of approximately $300 million dollars, and our budget proposal for next year includes no new taxes and no cuts in services. In the next few years, we anticipate a significant investment in infrastructure, including roads, bridges and site preparation, and in the construction of research facilities and in the increased use of alternative energy products. We are going to invest in projects that will generate construction and engineering jobs and result in the creation of long-term assets that enhance the business climate and competitiveness of Pennsylvania. Over the past five years we have worked hard to build momentum; we are now poised to continue and, I trust, enhance what is already underway.

Editor: Is there anything you would like to add?

Yablonsky: One of the very first things Governor Rendell did was to develop an economic stimulus package - $2.8 billion dollars - passed in the spring of 2004. Over the next few years our exports went from 16 billion dollars to 29 billion, an 85 percent increase, and I think the correlation between the economic stimulus package and this rise in output is clear. At the same time, Governor Rendell has tripled our budget for international business development and invested approximately $310 million into the formation of a new venture capital funding in the state - of more than a billion dollars - to support emerging high tech, IT, life sciences and clean and renewable energy enterprises in Pennsylvania. That is a story that I believe is going to attract a great deal of attention over the next five years