Alabama business roundup: Headlines from across state – 8/3/16 edition

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According to federal figures where does lotto money really go? Who’s hiring 500 new employees?

Answers to these questions and more in today’s business roundup: Amid Alabama lottery proposal, federal figures show where lotto money really goes

Alabama is apparently so broke that it might be forced to adopt a lottery to raise funds, giving up on a longtime abstinence that would see it join a group of 44 other states where the ‘game of chance’ is not only legal, but raising crucial revenues for services such as education, tax relief and infrastructure costs.

Each year tens of billions of dollars are raised across the country by lotteries in order to plug holes in state budgets, allowing lawmakers to keep taxes low and state agencies functioning.

But despite claims by most states that lotteries are largely charitable organizations, the latest (2014) U.S. Census Bureau statistics on lottery revenues show that only around 33 percent of money raised by the 44 states is made available to spend on state services. The rest, around 62 percent, is given in prizes, while around 5 percent is set aside for administrative fees.

As part of his pitch for an Alabama lottery, Gov. Robert Bentley made an impassioned plea late last week claiming that a state lottery would bring in as much as $225 million a year, which he said would be spent on services for children, the mentally ill, law enforcement and “those in the most need,” as well as the contributing to the state’s General Fund.

“The time has come for us to find a permanent solution,” said Bentley. “This solution will provide funding that we can count on for year after year without ever having to raise your taxes or put one more band-aid on our state’s money problems.”

And those so-called money problems are becoming more acute every year as Alabama looks to deal with debt that exceeds $60 billion.

While the scant details of Bentley’s lottery spending plan are generally in line with how other states claim they spend lotto revenues, his figure of $225 million would depend on what percentage of lottery revenue the state will allocate to prizes, administration and to state services.

In nearby Louisiana, which has a similar population and economy to Alabama, the state generated around $432 million in lottery revenues in 2014, according to the U.S. Census Bureau. Of that, $160.5 million went to the state treasury, $237 million was given out in prizes and $26 million spent on administering the lottery. What isn’t immediately clear is whether Bentley’s $225 million estimate is before or after administrative costs and prizes are discounted.

The North American Association of State and Provincial Lotteries offers a general view of how each state spends its lottery revenue, although there is little centralized documentation that shows the exact details of how every dollar is spent. However, some state lottery websites do offer more information on post-prize expenditure.

For example, California directs around $1.6 billion of its state services-assigned revenue toward education, while in Pennsylvania almost all of the $1 billion it raises for state spending is used exclusively on caring for pensioners. But even these high figures account for a far less amount that what is given out in prize money.

But there are some states that buck the big-prize trend.

For example, Rhode Island, West Virginia, Oregon, and South Dakota divert around 60 percent of all lottery cash raised toward state-funded programs, such as education, tourism, economic development, gambling addiction and tax reductions. Only a very small amount finds its way to prizewinners. In West Virginia, for example, $509 million of the $654 million pot was directed into state services in 2014, while only $111 million was given in prizes. The rest, $33 million, was spent on administrative costs.

Whether or not Alabama will be similar to one of these states is yet to be seen.

Read more here.

Alabama News Center: How Google came to choose Alabama for its $600 million data center

Getting Alabama to come out on top of Google’s own search results for its high-tech data center took thousands of emails and texts, 20 visits from the company to north Alabama and the last-minute signature of a mayor named Bubba.

The key players in the recruitment of the $600 million Google data center to Jackson County gave a behind-the-scenes look at the twists and turns the project took before settling on 500 acres at a power plant that was shutting down. The recruitment was the subject of a panel discussion at last week’s Economic Development Association of Alabama summer conference.

It was a project shrouded in secrecy. At various times, it went by the codename of “Project Zebra” and “Project Spike.” Officials involved in the recruitment had to sign nondisclosure agreements even though they didn’t know the name of the company.

In April 2014, Tennessee Valley Authority project manager Spencer Sessions took the first call and began trying to find sites that matched the criteria.

Bob Smith, project manager with the Alabama Department of Commerce, was brought in a few weeks later. He said Alabama had won a fair number of data centers the previous four years — projects that were heavy with capital investment because of the technology infrastructure, but don’t have the same number of employees as large manufacturing plants.

Site Selection magazine, an economic development trade publication, had cited Alabama’s success in the data center arena. Smith said officials recognized that the state’s incentives were more geared toward manufacturing but needed to focus on data centers.

The state passed such incentives in 2012. Alabama now had a new tool in the toolbox and waited for an opportunity to use it.

Meanwhile, TVA had a site in Jackson County certified as ready for a data center.

“We had this certified data center site right next to the community college,” said Dus Rogers, president and CEO of the Jackson County Economic Development Authority.

The only problem is Project Zebra (or was it Project Spike by this time?) didn’t care for that site and wanted officials to think bigger and broader to come up with something unique or special.

“They kept wanting something big and outside of the box,” Sessions said. “They turned down multiple sites.”

Read more here. Auto supplier expanding operations, hiring 500-plus new workers

A Tuscaloosa County auto supplier plans to spend almost $28 million and hire over 500 additional workers in a dramatic expansion of its Vance operations.

Lear Operations Corp., which now makes auto seats for Mercedes-Benz’s C-Class sedans, is expanding manufacturing operations and workforce to meet the demands for seats for Mercedes’ GLE and GLS sport utility vehicles, according to the Tuscaloosa News.

The new plant will be operational in 2019.

Currently the company employees about 140 workers. The expansion will make Lear one of the largest auto suppliers in Tuscaloosa County, according to the newspaper.

Birmingham Business Journal: AT&T deems another metro Bham industrial park fiber ready 

Another industrial park in metro Birmingham has gained the AT&T Fiber Ready designation.

Jasper Industrial Park was recently upgraded to allow gigabit internet speeds at the site.

Economic development experts have said access to ultra-high speed internet connections are quickly becoming a necessity in the development world.

Fiber internet provides the connectivity speeds needed to support firms relying heavily on data services, including video, collaboration and cloud services.

For Jasper, the fiber designation comes just a few weeks after the completion of the Interstate 22/Interstate 65 junction — another recent development that is expected to be a catalyst for development in the Walker County city.

“AT&T’s certification that the Industrial Park has high-speed, fiber-based internet infrastructure is a vital tool for economic development,” said Alabama Sen. Greg Reed. “Along with the completion of Interstate 22, the Fiber Ready designation puts Walker County in a tremendous position to recruit new companies to our area.”

In the past year, AT&T has been working to expand their Fiber Ready service to businesses throughout Birmingham. Experts and political leaders have advised that to enhance economic growth, fast internet speeds need to be available throughout the state.

The new certification will appeal to those making site selections for their companies, as it guarantees connection speeds on par with other industrial facilities around the country.

“The economic development process is extremely competitive, and we are always looking for ways to improve the marketability of our sites and buildings,” said David Knight, executive director of the Walker County Development Authority. “High-speed data access and connectivity are critical elements when companies consider a new location.”

The effort is a part of a greater push by AT&T to expand their Business Fiber services across the state, particularly in metro areas.

Alabama News Center: Mercedes-Benz sets record U.S. sales in July, led by Alabama vehicles

Mercedes-Benz posted record July U.S. sales, pulling further ahead of BMW AG’s namesake brand and Toyota Motor Corp.’s Lexus in the luxury-auto sales race.

Deliveries for Daimler AG’s Mercedes climbed 3.6 percent to 28,523, boosted by a 47 percent gain for its GLC and GLK sport utility vehicles. Sales fell 6.5 percent from a year earlier to 27,890 for Lexus and 4.4 percent to 25,777 for BMW.

Mercedes is more than 11,000 sales ahead of its two main rivals this year through July as demand for its SUVs has helped the brand pull away. BMW, which has held the annual crown the past two years, has been hamstrung by its greater reliance on cars, while Lexus has made gains in SUVs but has seen its car sales tumble.

“The players without very competitive SUVs in those segments are struggling,” said Mark Wakefield, managing director and head of the automotive practice at consultant AlixPartners. “Having the right portfolio of SUVs is very important.”

A fresh product line, especially in compact and mid-size sport utility vehicles, has been critical for luxury brands to succeed, he said.

In July, Mercedes’s volume leaders were the C-Class for cars, with a 1.3 percent decline from a year earlier to 6,304, and the GLE for sport utility vehicles, with a 15 percent increase to 4,412. Both models are built at the automaker’s plant near Tuscaloosa.

BMW reported increases of 51 percent to 3,303 for its 5 Series and 31 percent to 1,203 for the 7 Series, helping boost car sales 10 percent. But deliveries of its SUVs fell 4.4 percent, including a 54 percent slide to 2,744 for the X5.

The sales figures don’t include BMW’s Mini models or Daimler’s work trucks and Smart cars, which aren’t luxury vehicles.

BMW AG on Tuesday also pledged to remain the world’s leading luxury-auto maker after being usurped by Mercedes in the first half, highlighting the challenge it will face without a blockbuster new model. BMW reported that second-quarter earnings before interest and taxes rose 7.9 percent to 2.73 billion euros ($3.05 billion), beating the 2.67 billion-euro average of analyst estimates compiled by Bloomberg.

In the U.S., the four SUV models of Toyota’s Lexus generated a July record 15,455 sales, up 2 percent from a year earlier, as the RX gained 3.1 percent to 8,522. The brand’s car deliveries tumbled 15 percent to 12,435, with only the ES managing an increase, up 1 percent to 5,497.

For the year’s first seven months, none of the luxury brands posted a gain from a year earlier, with declines of 0.6 percent for Mercedes, 4.9 percent for Lexus and 8.4 percent for BMW. The wider market is headed for full-year deliveries of 17.6 million cars and light trucks, the average estimate of analysts surveyed by Bloomberg. That would be up from 2015’s record 17.5 million, but the projection is down from 17.8 million in January.


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