GBIC Honors Senator Leahy at 62nd Annual Meeting

BURLINGTON – The Greater Burlington Industrial Corporation (GBIC) presented its highest recognition award today to United States Senator Patrick J Leahy, at its 62nd  Annual Meeting on June 16, 2016 at the Echo Leahy Center on the Burlington Waterfront.

Attended by approximately 300 members of the Northwest Vermont community, GBIC presented the 2016 C. Harry Behney Lifetime Economic Development Achievement Award our State’s Senior United State Senator and outstanding Vermont leader: to United States Senator Patrick J Leahy.  Given each year since 1995 in honor of past GBIC president C. Harry Behney, the Behney Award recognizes Vermont leaders for their significant contributions to advancing the economic well-being of the people of our community and promoting a climate that enhances the economic vitality of the state of Vermont.  GBIC is proud to award Senator Patrick J Leahy with the 2016 C. Harry Behney Lifetime Economic Development Achievement Award.

GBIC honors Senator Leahy for his many contributions to the people and the State of Vermont in supporting dynamic economic development, attracting investment and saving and growing jobs for Vermonters. In addition, Senator Leahy has been a leader in advancing entrepreneurship & innovation advancing opportunities for truly significant economic opportunities for Vermonters in our region and throughout Vermont.

Senator Leahy is the only person who has ever earned this prestigious recognition twice (2004 and 2016).

GBIC President Frank Cioffi said:  “GBIC thanks Senator Leahy for his many contributions to the people and the State of Vermont in the field of economic development.  Senator Leahy is an outstanding Vermont leader who always seeks to find answers, realistic solutions and resources to the challenges and opportunities facing our state.  Senator Leahy cares about improving the lives of working Vermonters and their families and he works hard every day to help our Vermont communities and our state improve our infrastructure and make our state the best place to live, work and raise a family.   We honor and thank Senator Leahy as one of Vermont’s most outstanding leaders and most tireless advocates for Vermonters and for Vermont.”

 

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The Shape of our Manufacturing Future

Industrial development and urban areas have always shared a unique history. There were times when manufacturing was considered the heartbeat of a region and times when it has been castigated; it has appeared to be on the decline in favor of cheaper overseas options, yet at the same time a source of high-value local pride. The ideals with which employers associate the Vermont workforce come up again and again as the pillars of our industrial past; the appreciation for quality and value of a job well done.

But collectively, we’ve also come to understand the important nature of our natural assets. Vermont is home to many of these advantages, with mountains and a lake that equally characterize who we are. And with this recognition has come a shift in perception for how we grow our economy, some of the changes are real and some are perceived. But what is for certain is that the successful path to a prosperous economic future is not to have these ideals of value-adding manufacturing and natural space be at loggerheads.

The reality of our situation is that manufacturing jobs in Chittenden County account for more than 11% of the workforce. Projections for future growth in our County indicate that by 2035, we can expect another 55,000 individuals to join the workforce; the trend, even if the service economy is to grow, is that there will be around 5,000 more employees as a part of our manufacturing future.

The question, then, is where? We understand that space is at a premium. Greenfield development is not an ideal solution due to the finite nature of land, as well as the prohibitive costs associated with developing infrastructure to meet the needs of employers. The commercial market favors quicker returns, and has been ready and willing to produce office-space infill, the type of space that is quickly moved, and highly dense. The industrial market takes time; money is tied up until lots sell, or are leased.

The solution as GBIC sees the situation is that there are already existing locations in this County that have not yet been included in the industrial market for reasons of commercial willingness or timing. These spaces already have the required infrastructure, and would be infill on already industrially designated areas. Our high value-adding manufacturing future will rely on a collective willingness to create these “job-banks” for future Vermonters to find employment. It will require significant foresight and strong partnerships, both public and private, to ensure that we’re ready when the opportunity comes knocking.

 

Legislative Session: Some Frustrations, Some Disappointments, Some Progress

There’s an often quoted saying that one should never watch legislation or sausage being made; the process for both can be off-putting when attempting to enjoy the results. The 2012 Legislative session was what many would euphemistically describe as “spirited.” The final days were long as nerves grew short, but even at its most chaotic the process held together: compromises were made, decisions were rendered, and another session came to a close with the fall of the gavel.

GBIC entered the Statehouse in early January knowing that there were going to be two major issues that required immediate attention: ensuring the continued viability of our State’s economic incentive program (the Vermont Employment Growth Incentive), and rectifying a seemingly small taxation issue regarding secondary packaging equipment that was about to have huge implications for one of Vermont’s most beloved and highly regarded brands, Green Mountain Coffee Roasters.

What wasn’t known ended up being the most contentious and frustrating issue of our time in Montpelier. In late November of 2011, we learned that Vermonters were being charged sales and use tax on Software as a Service (SaaS). SaaS uses a cloud computing platform to provide software services to an end user, and the Tax Department had determined via Technical Bulletin that these services could, and should, be taxed as tangible personal property. Companies under audit were being assessed taxes plus penalties reaching back to 2006, and were understandably confused and shocked at the new interpretation. In late 2011, we had assumed that this issue was fairly cut and dry; it had an administrative solution in the form of correcting the Technical Bulletin, and it was a clear example of a misinterpretation of intent.

But seemingly straightforward solutions have an odd way of zigging when you expect them to zag. The issue piqued the interest of the Legislature and once it arrived under the golden dome, it became open season on the Cloud Tax. As is most often the case, the issue found champions and detractors on both bodies of the Legislature. A relatively simple issue that appeared complex on the surface became further obfuscated in the heat of committee room discussions. As testimony continued to come in, the issue moved away from the implementation of a new tax to how do we deal with an economy that is moving away from tangible goods and into a service-based model. It’s a valid concern, but one that unfortunately begs the question, and glosses over the way the tax originated.

Despite strong appeals from Vermont employers and information being provided up until the Conference Committee rendered their recommendation, Vermonters were left with a compromise of second best that failed to address the underlying lack of transparency. A one-year moratorium was applied to the collection and remittance of Cloud Taxation, and any retroactive payments collected (a number that was conspicuously vague throughout the process) will be returned upon appeal. Unfortunately, whether it was intended or not, by passing a moratorium the Legislature tacitly implemented a service tax that never was intended to be levied.

Over the next year GBIC will continue to work to clarify the issue and correct it moving forward, but until that time Vermont will have instituted and codified a broad-based tax on a growing service technology sector.

By the end of the session, the secondary packaging issue was generally regarded to be a no-brainer and with the exception of some posturing and point-making, it was included as a component of the “must-pass” miscellaneous tax bill. The VEGI program always raises a few more hackles. Economic incentives have sometimes been a point of contention among legislators, and this session was no different. After sunsets were proposed and eliminated, the program gutted and restored, there was compromise made that ensured the program’s near-term future with a five year extension on the sunset. Not the complete victory that we would have wanted, but an important action that will allow employers to make greater and more significant investments in Vermont.

And then it was over. The doors closed, the papers were filed, and legislators went home for another year.

Vermont’s Tipping Point?

Malcolm Gladwell took the concept of “The Tipping Point” out of the realm of epidemiologists and made it a must know phrase with his book by the same title.  Mr. Gladwell sought to describe the underlying factors that can make large impacts on social phenomenon; comparing fashion trends to disease epidemics in their often sudden rate of impact and ubiquitous presence.  The tipping point that Mr. Gladwell is fascinated by is not a new concept, but the depth of analysis presented in back-of-the-napkin format made his bestseller its own cultural epidemic.

In Vermont, employers have been trying to describe our current challenges as their own kind of tipping point.  The challenge is that you’re never quite sure where or when the tipping point will come into play.  For the state, we can see challenges looming: the bankrupting of our unemployment fund clearly shows a broken link in our social support system and our state deficit is currently on the frontlines as a target of concern, but whether or not (or when) one of these or the other will actually lead to a rapid decline in our socioeconomic sustainability is not known.  Within the business community, this discussion can be heard through the quiet comment of “death by a thousand cuts.”  It’s often a challenge to pinpoint that single thing that could cause a company to close its doors, either permanently or to complete a move to another state with perceived higher return on investment, however, we know that for every individual employer that limit exists.

It is often argued that small changes and tweaks to our tax rates, regulatory system, and other associated business costs have not made a dramatic impact on the number of high-wealth individuals in the state or on the overall composition of our economy.  And while this might have some historical validity, it fails to consider any sort of limit on when a slow trickle turns into a broken dam.  Yet these are things that are repeated as challenges on par with healthcare reform, economic competitiveness and power supply quality and rates.  The important thing to remember is that for each of these factors, there is an equal opportunity to effect positive change.  The movement towards a cultural epidemic should ignite a sense of opportunity as much as one of concern.

Part of the challenge is finding those factors, the “agents of change,” that can catalyze rapid restructuring.  The goal is to find and support those factors that can rapidly add value to a system that is otherwise in equilibrium.  We often think of these actions as revitalization of existing resources or in the creation of new assets with broad value.  An example might be the factors behind the expansion and renovation of the Dealer.com technology campus on Pine St.  The 300 person expansion is being heralded as a focal point of a growing technology community in the South End of Burlington that includes other Vermont employers such as Google analytics experts EpikOne.

Critical in the decision making process for that single employer was the value, both real and perceived, of the state’s three premier economic programs: the Vermont Employer Growth Incentive, low finance rate money from the Vermont Economic Development Authority, and the Vermont Training Program.  Dealer.com met their positive tipping point and decided to grow employment in our state 100%.  What we need is to promote a cultural shift that sees strength in retention of employers and increased growth in the addition of new companies, both from Vermont entrepreneurs and from out of state employers looking to be a part of our economy.  Governor-Elect Shumlin has been open about the fact that he has asked every one of his appointees what they will do to create jobs under their purview.  The question is the right one to ask; what we need is the support, vision and strength of implementation to ensure that we tip the scales towards growth of our value-adding employers – without strong action, we stand to tip in the other direction.

Vermont’s Economic Challenge: Finding a recipe for Competitiveness while Maintaining our Quality of Place

As an organization chiefly concerned with aiding in economic development for Chittenden Country, GBIC often speaks with Vermont employers to figure out what helped encourage them to set up their business in our state. Our goal is that if we can find a common denominator to support, it will encourage other potential employers and entrepreneurs to choose to do the same. Yet after hearing of the many positives that make Vermont a great choice, what often comes out is that choosing to do business in Vermont sometimes is in part a decision made with the heart and not with the head (or at least not without rationalizing with your accountant). Every employer understands the cost environment in which they are establishing their business when the decision is made to take the risk of opening their doors. However, as Vermont continues to increase both real taxation rates and new areas of taxation, there is growing concern that little seems to be done to encourage the expansion of Vermont’s tax base, rather than simply drawing more from the same wells.

What is abundantly clear is many Vermont entrepreneurs and employers have such a genuine love for Vermont that initially deters them from seeking locations outside of our borders. The problem, as has been seen with some of the most successful Vermont companies, is that with success comes the pressure for further growth; boards, shareholders and continued competitive strains (that may or may not have ties to our state) force some traditionally Vermont based employers to move aspects of their operations to states or countries with more advantageous tax policies and structures. Competitiveness out-places love of place.

Vermont’s answer has tended to focus on asking more from the same pools of employers. The situation is analogous to sugaring: either extract more from the same trees, or establish an environment in which more saplings can thrive, be tapped and foster the growth of future forests. If you unsustainably overtap the productive trees, eventually they will die; in the case of our successful entrepreneurs, they just pick up their roots and move to Florida and/or other places that aggressively seek investment and job growth.

With the challenge of the aging demographics that our state faces, it would seem to be a prudent moment in time to examine how we can encourage entrepreneurial Vermonters (both native and who come to our expansive college and university system) to stay in the state and generate employment. If we are unable to accomplish this goal, a shrinking tax base will be forced to shoulder the weight of increased state expenditure. No one wants to see a decrease in meaningful and supportive public expenditure, but relying on the same sources for revenue will only lead to a more dramatic budget challenge in the long run. This unsustainable approach to income generation for the state, coupled with other increased cost burdens shouldered by our employers (health care, unemployment insurance etc), will surely force the hands of some Vermonters to move their businesses, and the people they employ, out of Vermont.

The Blue Ribbon Tax Commission has begun its work to look at Vermont’s tax structure and our overall competitiveness. GBIC and LCRCC have organized business people and Vermont entrepreneurs to meet with the Commission and share some concerns and ideas about how to retain our quality of place while we seek to be a place where entrepreneurs can be globally competitive.

Common Ground

Vermont, like much of the country, is at a crossroads.  While the economic conflict that has engulfed many of the world’s economies seems to be ending and the painful process of rebuilding has begun, the need for actively preparing and delivering on actions to further our state has never been more fundamental to success.  At a time when planning appears to be the most difficult and divisive due to conflicts of theory and philosophy, it also holds the potential to unify and galvanize Vermonters’ needs and interests.  Recognizing this potential, GBIC has drafted “Common Ground,” a paper that examines areas of agreement between two of the most valuable and current reports in support of a unified economic plan.  Our hope is that Common Ground can be a part of the conversation that moves comprehensive economic planning in our state forward in a meaningful way.

The first report driving the content of Common Ground began its life at the state level; in 2006 the Vermont legislature set about defining a process for the development of an economic plan, and the Commission on the Future of Economic Development was formed.  With a public outreach process as the backbone of their research, the CFED condensed input from employers, stakeholders and public participants into a series of benchmarks and goals for analysis and action from state economists and legislators.

Nearly concurrently, in late 2007 the Vermont Council on Rural Development came to the realization that Vermonters were expressing concern about a lack of vision on a statewide level and proceeded to construct the Council on the Future of Vermont.  Charged with synthesizing the vision of what Vermont is and should be from the eyes of Vermonters, the CFV ultimately created both a vision for Vermont and a comprehensive analysis of who we are right now (“Vermont in Transition”).

GBIC has long been a proponent for the development of an economic plan that is definitive in its direction without being overbearing in its recommendations; independent in formation yet based on broad public input; measureable in success, but avoids setting goals without a means to reach them.  To this end, we have set about examining these two papers to find the clearest areas of overlap between leadership and public demand.  Rather than assessing the validity of individual recommendations, Common Ground identifies those areas of agreement between these reports; finding the areas where economic reality most clearly aligns with the vision Vermonters see as necessary to maintain the core values of our state.

For too long, we have lacked a successful unified and forward thinking economic vision and, as such, have come up short in developing a comprehensive economic plan. Part of the reason for this stems from disagreement between leaders and stakeholders. Common Ground seeks to avoid those areas of conflict by presenting the unified interests of these two reports.  By focusing not on solving disagreement, but by moving forward through areas of agreement, this document can act as a vital step in moving towards a valid, comprehensive and unified economic plan.

Good Jobs in a Clean Environment

The Greater Burlington Industrial Corporation ~ GBIC is a non-profit economic development corporation serving Chittenden County, Vermont. GBIC was incorporated by 50 municipal officials, civic leaders from the Greater Burlington area and by an Act of the Vermont Legislature in 1954.

Since its founding, GBIC has served as a catalyst for economic opportunity in Chittenden County, assisting in the creation and retention of sustainable jobs and economic opportunities for thousands of Vermonters in the value-added industry sectors.