Delaware: Where “Cash Is Really King”
01 Oct, 2012
By Sharon H. Fitzgerald
You can get things done quickly in Delaware, and Alan B. Levin, cabinet secretary of the Delaware Economic Development Office, says that the ability to swiftly and easily reach key decision makers is one of the state’s top business assets. Rounding out Levin’s list of top three reasons to do business in Delaware are the state’s skilled workforce and its central East Coast locale.
Delaware approaches the incentives game in a different way since Gov. Jack Markell took office in 2009. “In our case, we have found that cash is really king,” Levin says. While some states offer a combination of tax credits and some cash incentives, Delaware has shifted its tactic. “The philosophy is that a lot of these companies that will come in, even if they are large companies, will set up subsidiaries that may not be profitable for a period of time,” Levin says. “Therefore, while the tax incentives sound good on paper, really they are not useful.”
The Delaware Strategic Fund is the source of customized financial assistance to existing and prospective businesses. Help may come in the form of low-interest loans, grants or other creative financial instruments. Terms are negotiated specific to each business’s situation.
Delaware does have some tax incentives on the books that predate the Markell administration. One of the more popular is the New Economy Jobs Program, which allows a rebate of 25 percent to 40 percent on withholding taxes if at least 50 jobs are created with a minimum annual salary of just over $100,000. This year, the Delaware Legislature amended the program, allowing a rebate if 200 jobs are created at a salary of $70,000 or higher.
“We still have the same clawbacks if they don’t hit their numbers,” Levin explains. “But having the ability to write a check for the company to spend instantly is really an eye-opener.”
Industries And Innovations
Leading the upswing in Delaware’s economy is the aviation and aerospace sector. Levin acknowledged that Delaware took quite a hit when it lost two automotive manufacturers, Chrysler and General Motors; yet, the federal dollars to retrain those autoworkers was put to good use, preparing the labor force to fill the rising number of aviation jobs statewide. Aviation employers also take advantage of the skills and expertise of military retirees from Dover Air Force Base.
Summit Aviation in Middletown is a full-service FAA-certified aircraft maintenance and modification center, founded in 1960 and still growing. With a broad customer base that includes military contracts, Summit owns and operates its own airport. Expanding at the New Castle Airport is a Dassault Falcon Jet Corp. repair station, and in July, Hawker Beechcraft Corp. opened a new Northeast regional service center at the airport to maintain and overhaul the company’s entire product line, from single-engine Bonanza aircraft to the super-midsize Hawker 4000. The operation is expected to generate up to 100 new jobs during the next five years.
Southern Delaware boasts aviation jobs as well, thanks to PATS Aircraft Systems. Located in the industrial park adjacent to Sussex County Airport, PATS employs about 500 workers, who specialize in aircraft systems manufacturing and repair, particularly for business, VIP and head-of-state aircraft.
“We’re doing well with our strengths,” says Julie Wheatley, Sussex County economic development director. She encourages people to “do the MATH,” explaining that the county’s largest employers are manufacturing, agriculture, tourism and health care. Manufacturers in the county include Craig Technologies Inc., a growing enterprise that makes precision-ground plastic balls and injection-molded and fabricated parts.
Thanks to southern Delaware’s lush farmland, food processing is a job creator. Corn and soybeans are top crops, and the poultry industry is an agricultural hallmark on the Delmarva Peninsula.
“Agriculture has always played such a tremendous role in Kent County, and we’ve seen a lot of growth in our agricultural market,” says Judy Diogo, president of the Central Delaware Chamber of Commerce. She says farmers markets, commercial orchards, wineries and even custom brewers are marrying the art of agriculture with the art of marketing. “From April to December, they are constantly having events that highlight the local area produce,” Diogo says of Fifer Orchards in Camden.
Not surprisingly, clean energy is a sector gaining traction in Delaware. Leading the charge is Bloom Energy, a fuel-cell manufacturer devoted to clean, reliable and affordable power. The Silicon Valley manufacturer chose Newark for its first East Coast facility, locating on the 272-acre site formerly occupied by the Chrysler assembly plant. Today, that acreage is owned by the University of Delaware and is the site of its new STAR (Science, Technology & Advanced Research) Campus. Levin says Bloom expects to employ 600 to 900 people.
“Delaware has become a lot more environmentally conscious state than it was,” Levin says. “NRG Energy closed down what was the dirtiest coal-fired energy-generating plant in the country at Indian River and has now opened the cleanest coal-fired facility in the United States.” NRG invested $360 million in the emission-reduction initiative and created 700 construction jobs during the two-year project.
Talent And Education
The STAR Campus is in the throes of development, with a goal of maximizing academic know-how to lure innovative enterprises to the state. The sustainable campus is expected to foster academic-private sector research laboratories in energy, the environment, national security and defense, and health and life sciences, just to name a few.
Delaware boasts five colleges and four universities. Kent County alone is home to Delaware State College, Wesley College, a campus of Wilmington University and Delaware Technical & Community College. In fact, DelTech has four campuses across the state. Wheatley credits DelTech’s Jack F. Owens Campus in Sussex County with the customized workforce training that fueled a critical expansion of PATS Aircraft Systems.
Delaware’s central East Coast location makes for easy logistics. Access by road, rail and air is complemented by access to the Delaware Bay. The Port of Wilmington is North America’s No. 1 seaport for fruit importation, especially bananas.
Another asset is Delaware’s Atlantic beaches, the centerpiece of a $2.1 billion tourism industry. “The quantity of jobs is huge,” Wheatley says of tourism employment in her county. In the last year, she adds, there has been renewed interest in building and refurbishing beachside hotels. In fact, representatives of one flagship hotel came to Sussex County recently to consider purchase of one hotel — and now have plans for three.
Tourism is hot in Kent County, too, thanks to a thriving gaming industry. Dover Downs Hotel and Casino recently completed an expansion, resulting in nearly 500 hotel rooms on the property. Dover Downs is also a legendary NASCAR site, hosting a race in the spring and another in the fall. In June, Dover Downs hosted the first Firefly Music Festival, which drew 30,000 people to town for the three-day event. South of Dover, Harrington Raceway and Casino is also a tourist destination. Both Harrington and Dover host harness racing.
Delaware offers big-city life in Wilmington and the epitome of rural living in its southernmost county. Less than two hours away are Philadelphia, Baltimore and Washington, D.C. Cost of living is lower than in neighboring states, and especially for a state its size, Delaware offers world-class health care.
“In the last 10 years, we have seen such an expansive growth here in Kent County in regards to the quality of our businesses, the quality of our agriculture, the quality of medical care, the quality of educational facilities and the quality of our downtown district,” Diogo says. “All of those things have blossomed magnificently. There are endless possibilities and endless opportunities now.”
Illustration by renjithkrishnan