Special Report: Why Huntsville, Ala., is beating the Springs

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Huntsville’s economy has long been dominated by aerospace.

Huntsville’s economy has long been dominated by aerospace.

HUNTSVILLE, Ala. — More than 8,000 engineers in this city lost their jobs in 1995 with a single stroke of Bill Clinton’s presidential pen.

Clinton had ended the so-called Stars Wars missile defense program, throwing Huntsville’s economy into a tailspin. With the loss of thousands of high-paying jobs, nearly every sector of the city’s job market was affected.

Today, 15 years later, Huntsville is once again a bustling aerospace hub, the envy of many including Colorado Springs.

The Springs, of course, also has a sizeable aerospace sector but it’s not nearly as robust as Huntsville’s.

Empty storefronts in Huntsville are rare, as is available office space. Businesses not only are hiring, but start-ups sprout up regularly. None of that can be said about the Springs.

Unemployment in Huntsville at the moment is about 7 percent — not great, but much lower than Colorado Springs’ nearly 8.9 percent and the national average, which is 9.5 percent. Unemployment among those with college degrees in Huntsville is less than 4 percent.

“What downturn?” jokes Larry Lamb, an official at the engineering firm Mitre Corp., which has offices in Huntsville and the Springs, among other locations. “We’ve been growing here.”

“You can’t swing a dead cat without hitting a new high-tech start-up,” Lamb added.

He remembers when conditions weren’t so bright.

“Not that long ago, most people in town were scrambling to survive,” he said.

Yet somehow, each time the city was faced with a challenge — cuts to NASA, the end of federal research programs, general economic downturns — its leaders somehow found the way back to prosperity.

So, what’s given Huntsville, nestled in the hills of northeastern Alabama, its edge? Colorado Springs economic development officials are planning a trip there at month’s end to find out. Buddy Gilmore, a small defense contractor and mayoral candidate, also is planning a separate trip to Huntsville.

What they’ll discover is that Huntsville’s success took close coordination by jobs-creation groups, influential political allies, a long-standing commitment to building a diverse economy, generous government incentives and a university that makes technology innovation a top priority.

A united front

Huntsville’s recipe for success begins with its approach to economic development.

In Colorado Springs, the Colorado Springs Regional Economic Development Corp., the Greater Colorado Springs Chamber of Commerce, the Pikes Peak Workforce Center, 60ThirtyFive and a host of other organizations are all engaged in jobs creation.

The Huntsville/Madison County Chamber of Commerce, on the other hand, is the sole economic development force in its area.

“That’s by design,” said Ethan Hadley, vice president of economic development. “We marshal all the resources, acting as a conduit.”

It’s been that way since the late 1970s, when the economic development offices of the city and two surrounding counties were folded into the chamber.

Now, everywhere you go in the city, business owners, heads of corporations and academic leaders all credit the chamber for the city’s triumphs.

Moreover, elected officials get behind the chamber, as does the community. The Huntsville chamber gets its funding not only from membership fees, but largely from area sales tax revenue.

“It’s part of our DNA,” said Rick Davis, a chamber official. “The county commission, the mayors, the city council, they all speak with one voice on this. They always have, no matter who’s in office.”

In Colorado Springs, the absence of that level of coordination is only part of the problem.

Stephannie Finley, vice president for legislative affairs for the Springs chamber, said that what is sorely missing here is someone to lead the way.

“There’s a hue and cry for a strong leader, for someone to create a vision and carry it forward,” she said. “We need to be bigger, bolder than we’ve had to be before.”

Mike Kazmierski, president and CEO of the Colorado Springs EDC, envies Huntsville’s advantage.

“It’s about attitude,” he said. “They have an attitude that they’ll invest in jobs, and the government will play a role in that.

“Southern states understand that investing in jobs creates a better environment,” he continued. “Here, there is a limited government mindset that says, ‘That’s not the role of government.’ It’s hard to overcome.”

Southern states “know that if you invest a little now, you’ll save a lot later,” he added. “It’s penny-wise and pound-foolish not to invest in the community, in jobs.”

Huntsville’s local leaders aren’t alone in speaking in unison — members of the Alabama legislature and congressional delegation who represent the area do, too.

Examples of that coordination can be found as far back as the early 1950s, when lawmakers from the area lobbied the Defense Department to relocate German rocket scientist Wernher von Braun — who helped the Nazis develop their deadly V-2 rockets — to the city. From his newly adopted home in Huntsville, Von Braun led the development of booster rocket technologies that helped land the first men on the moon.

More recently, state and federal officials worked to help find some of the start-up money needed for a new Huntsville biotech research site.

That sort of political help and commitment to jobs-creation is missing in Colorado Springs, and is another sore point for economic development professionals.

“We have to work hard in Denver to get them to recognize the value and pay attention to (the aerospace and defense industries),” said Brian Binn, vice president of military affairs for the Colorado Springs chamber. “They don’t always get it.”

“These are national assets that benefit the entire state, not just Colorado Springs. But it can be tough.”

Finley and Binn say state and federal leaders also often fail to cooperate on projects that involve the defense industries.

“They don’t always view it as equally important,” Finley said. “It would be better if they would come together more often.”

The Colorado congressional delegation also doesn’t have the clout that Alabama’s has, and because it includes Republicans and Democrats, it is often politically divided, Binn said.

Economic diversity

Building a diverse economy is another of Huntsville’s strengths.

Aerospace and defense represent about 40 percent of the economies in both Huntsville and the Springs. But Huntsville has worked hard to encourage job growth in other sectors so that it can better buffer itself against a downturn in any single industry.

Last year, 14 manufacturing companies either located or expanded in Huntsville, for a total of 1,035 new jobs and an investment of more than $215 million. Another 18 non-manufacturing companies expanded in Huntsville, creating 992 jobs and investing nearly $4 million.

City leaders saw the economic scales tipping too heavily toward aerospace decades ago. Thanks to Martin Cummings, a farmer with a vision that extended far beyond his cotton fields, the city set aside nearly 4,000 acres 48 years ago to create the Cummings Research Park.

The park is home to 285 research and development companies. Huntsville’s manufacturing base is also strong, with more than 220 companies in the city, many of them trained to perform technology-based manufacturing. The biotech, biomedical and pharmaceutical fields employ 1,000 people, and the city is home to more than 300 electronics companies.

“That diversity gives us more peace of mind than we had,” the Huntsville chamber’s Hadley said.

“The industry here in town is just bigger,” said Kader Frendi, professor of aerospace engineering at the University of Alabama at Hunstville and the head of the program. “People come here because they know the high-tech companies are here, and they know we have this relationship with them.”

Clustering at the Cummings Research Park also makes it possible for competitors to sometimes collaborate.

“Today’s primary contractor is tomorrow’s subcontractor,” said Marc Bendickson, CEO of Dynetics, one of the companies in the park “It helps to have the competition this close. It allows us to build relationships so if we don’t get the main contract, we might get the subcontract. It’s the way these very large aerospace contracts work.”

Investors like Huntsville, too.

Start-ups in this city have received nearly $16 million from the Huntsville Angel Network and its investing partners in just the past five years.

Binn said Huntsville’s lessons are fundamental.

“We want to grow the military, aerospace and defense side, of course,” he said. “But we need to focus more on diversifying the economy.”

For too long, the Springs was too complacent about nurturing job development, Kazmierski said. Now, work is under way on that front.

“We looked and saw we lost 1,000 $80,000-a-year jobs (in 2008, when Intel Corp. moved out of Colorado Springs) and we were replacing them with much lower-paying jobs,” he said. “It’s one reason we did the 60ThirtyFive study (last year).”

The 60ThirtyFive study outlined industry sectors the city should pursue, and recommended better city leadership and more cooperation among economic development groups.

To diversify the Springs’ economy, the EDC today is focusing more on jobs in a variety of fields.

“We’re sending the message — you don’t have to be a scientist to work here,” Kazmierski said. “We want to keep the defense portion, but we want to grow the sports industry, we want to grow manufacturing.”

The EDC also is recruiting in the renewable energy and information technology sectors.

Heavy on incentives

Corporate incentives also have helped Huntsville grow.

“When we first looked at expanding to Colorado Springs, companies asked us why we were doing it,” Bendickson said. “They said stay in Huntsville, it’s better there.”

Better, without a doubt, in terms of the state and local tax abatements and grant programs available to new and expanding companies.

Huntsville doesn’t levy property taxes on business inventory, neither on raw materials nor finished products. Raw materials also are exempt from sales tax. And sales and use tax statues likewise give business a break.

What’s more, companies with operations in other states that pay sales and use taxes in those locations do not pay those taxes in Alabama. The state will also grant a 5 percent credit for state income taxes in many cases.

Huntsville also offers industrial development training — training for high-tech manufacturing jobs — all at a city facility, at no charge to a company. And the state offers industrial grant programs for expanding businesses. The grants can be used for everything from buying property, adding roads and utilities to property or building new office space.

The Springs relies heavily on the state’s incentives, but those are limited and Colorado generally doesn’t hand companies money, though credits are available for companies that establish themselves in distressed areas. El Paso County does not impose personal property taxes from local businesses.

Colorado offers several other tax credits, but, again, they’re limited to specific industries such as biotech and aviation.

Colorado has set aside $2.7 million in the coming year for job-training grants.

The state had offered certain tax credits for businesses — tax credits on purchases such as software and for other business expenses such as direct mailing — but many were axed in the last legislative session. The odds of restoring any of those credits in a tight economy aren’t good.

“We’re in a mindset of cut, cut, cut,” Kazmierski said. “Instead, it should be invest, invest, invest.”

Like the Discovery Channel

The education system in Huntsville is one of the nation’s best and a major contributor to the city’s success.

Of course, Colorado boasts a well-educated workforce, too. The state has a high number of people with both bachelor’s and master’s degrees. But Huntsville has more engineers and scientists per capita than any other city in the U.S.

When you have that many smart people in one city, you get a city of entrepreneurs and risk-takers, said O’Neal Smitherman, executive vice president at HudsonAlpha, a fast-growing biotechnology research and development institute.

“I was struck by the vibrancy of this city,” he said. “Every time you go out, you hear conversations that are interesting, exciting. It’s like watching the Discovery Channel.”

The University of Alabama at Huntsville plays a large role in creating that environment. Scientists there managed the first non-government rocket programs in the United States, and the first high-temperature superconductor was discovered there.

UAH has worked with NASA at the Marshall Space Flight Center in a co-op program for students and in its propulsion research center. The university also has a research relationship with the U.S. Army Aviation and Missile Command, the Army’s headquarters for aircraft and missiles at Redstone Arsenal, a military base located in Huntsville. The National Space Science and Technology Center, a research arm of NASA, also is located on the UAH campus.

All those research and development programs mean more state financial support — and more support from the federal government. That means the state has to cover only about 15 percent of the university’s budget, a total of $498 million for the entire University of Alabama system.

The University of Colorado at Colorado Springs, on the other hand, is facing a second year of funding cuts as the state struggles to balance budgetary needs with TABOR, which hamstrings legislative budget writers even in growth years.

Colorado colleges and universities anticipate cuts of at least $56 million in state aid every year for the next five years, and will be raising tuition rates by up to 9 percent each year through 2015-16.

While Alabama struggles with budget challenges, too, UAH is still able to afford cutting-edge research, thanks to its funding relationships with private industry and NASA.

UAH also involves students and local businesses in its Innovation, Commercialization and Entrepreneurship lab — a collaboration of engineering and marketing students and local businesses. Technology transfer companies at UAH received direct contracts for projects that were just short of $100 million.

The ICE Lab works with companies such as United Tech, Pratt Whitney, Rocketdyne and Otis Elevator. These companies open their entire patent portfolio and invites students to try to find new applications for their products.

The ICE lab is more than a generic transfer-technology or small-business development operation — both of which exist at UC Colorado Springs. The idea in Huntsville is to take research, create new applications for it and then build a business plan around that.

“We’re not interested in creating a business plan for the next dry cleaners,” said David Berkowitz, professor of marketing and director of the ICE lab. “We’re interested in creating new technology that every dry cleaner will be interested in. It’s about the deployment of technology in brand-new ventures.”

Colorado Springs leaders say that’s the way they’d like to see things done here.

“Our university is doing great things, our technology incubator works hard,” said Kazmierski. “But we’re behind on things like this. It’s one reason we’re going to Huntsville, to find out what they’re doing that we should be doing.”

One Response to Special Report: Why Huntsville, Ala., is beating the Springs

  1. You hit the nail on the head with your first few paragraphs. Having made several trips to Huntsville over the past two years, and after a great discussion this week with Mayor Tommy Battle, I can tell you the secret to their success is partnerships. As an example, this past week Mayor Battle presented his vision for Huntsville Cyber – a collaborative effort between city government, academia, and industry – all focused on a strategic plan to bring some of the high-tech cyber work to Huntsville. Each stakeholder has an appointed representative, meeting on a near-weekly basis to plan and execute the cyber vision. As you correctly note, here in Colorado Springs we have several well-intended organizations that sometimes appear to function as enclaves rather than uniting and moving as a cohesive force. A good example is the sometimes-sputtering effort to make the Springs the center of \green technologies. We have the sun, we have the wind, we have green technologies being implemented at our utilities, and we have the space (think Lewis-Banning); in addition, we are geographically well-positioned. We have an educated workforce, and our entreprenureal spirit is very strong. However, what we lack is the pointy end of the spear to bring together our various groups. This city needs strong leadership that can pull these various organizations together to be part of a solution set, and to correctly call them out as part of the problem when they decide to play by themselves. In addition, city government needs to become more business friendly. The business personal property tax needs to be phased out. In addition, the process to set up new businesses in Colorado Springs has been described by many as the most difficult process on the Front Range. What Huntsville is doing is not rocket science; they just have the ability to dream beyond their boundaries, and work together to turn those dreams into reality.

    Buddy Gilmore
    August 21, 2010 at 7:30 am