Nebraska profit opportuNities for MaNufaCturers of fabriCateD Metal
Nebraska profit opportunities for MANUFACTURERS OF FABRICATED metal products
prepared by
NEBRASKA PUBLIC POWER DISTRICT Economic Development Department PO Box 499 Columbus, Nebraska 68602-0499 sites.nppd.com
NEBRASKA DEPARTMENT OF ECONOMIC DEVELOPMENT Business Development Division PO Box 94666 Lincoln, Nebraska 68509-9466 www.neded.org
UNIVERSITY OF NEBRASKA COLLEGE OF ENGINEERING 114 Othmer Hall PO Box 880642 Lincoln, Nebraska 68588-0642 http://engineering.unl.edu
May 2010 A63 G134542.ZIP
Table of Contents E........................................................................................................................ 1 Part A
The Fabricated Metal Product Manufacturing Subsector.............. 3 I. Industry Structure........................................................................................................... 4 II. Industry Production Characteristics. ............................................................................ 8 III. Industry Location Characteristics............................................................................... 10 IV. Capital Expenditures and Industry Outlook. ............................................................. 12
Part B Nebraska Advantages for Fabricated Metal Product MANUfacturers.............................................................................................................. 15 I. Nebraska Location Resources. ..................................................................................... 15 Transportation.................................................................................................................. 16 Utilities............................................................................................................................. 16 Labor Quality................................................................................................................... 18 Higher Education Resources............................................................................................ 18 –Research................................................................................................................ 18 –Engineering........................................................................................................... 20 Other Development Assistance Programs........................................................................ 24 Performance-Based Tax Incentives.................................................................................. 24 Quality of Life.................................................................................................................. 26 II. Labor and Energy Cost Analysis.................................................................................. 26 Alternative Plant Locations.............................................................................................. 27 The Model Plant............................................................................................................... 28 Energy Used in the Model Plant...................................................................................... 28 Labor-Related Costs......................................................................................................... 28 Energy Costs.................................................................................................................... 32 Labor and Energy Cost Summary.................................................................................... 35 Conclusions.......................................................................................................................................37 Appendix A..........................................................................................................................................A-1
List of Tables Table 1
The Fabricated Metal Product Manufacturing Subsector (NAICS 332), Characteristics and Trends, Selected Years, 1997–2008........................................................ 3
Table 2
The Fabricated Metal Product Manufacturing Subsector (NAICS 332), Value of Industry Shipments by Industry Group, 2002 and 2008.......................................... 4
Table 3
The Fabricated Metal Product Manufacturing Subsector (NAICS 332), Number of Companies and Establishments, Employment, Value of Shipments, Value Added, and Capital Expenditures by Industry Group and NAICS Industry, 2007(a) and 2008.......... 7
Table 4
Production Characteristics for the Fabricated Metal Product Manufacturing Subsector (NAICS 332), 1997, 2002, 2007, and 2008.......................................................... 8
Table 5
Establishment Characteristics for the Fabricated Metal Product Manufacturing Subsector (NAICS 332); Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing Industry Group (NAICS 3327) & Balance of Subsector, 2007............. 9
Table 6
Location Characteristics of Establishments in the Fabricated Metal Product Manufacturing Subsector (NAICS 332), 2008................................................................... 10
Table 7
Shipment Characteristics for the Fabricated Metal Products Manufacturing Subsector (NAICS 332) and Selected Commodities, 2007................................................. 11
Table 8
Capital Expenditures in the Fabricated Metal Product Manufacturing Subsector (NAICS 332), by Industry Groups, 2002 and 2008............................................ 12
Table 9
Employment and Output, Fabricated Metal Product Manufacturing Subsector, by Industry Group, and for All Manufacturing, 1998, 2008, and Projected 2018............... 13
Table 10
Cost of Living in Nebraska, Compared to the National Average, April 1, 2010.................. 27
Table 11
Alternative Locations for a Model Plant for the Fabricated Metal Product Manufacturing Subsector (NAICS 332).......................................................................................................... 27
Table 12
Characteristics of a Model Plant for the Fabricated Metal Product Manufacturing Subsector (NAICS 332)....................................................................................................... 28
Table 13
Energy Use in Fabricated Metal Product Manufacturing Establishments........................... 29
Table 14
Average Hourly Earnings of Production Workers on Fabricated Manufacturing Payrolls, Alternative Plant Locations................................................................................... 29
Table 15
Other Labor Costs, Alternative Plant Locations................................................................... 30
Table 16
Total Annual Labor-Related Costs for a Model Plant for the Fabricated Metal Product Manufacturing Subsector........................................................................................ 31
Table 17
Industrial Rates for Electric Energy and Natural Gas Alternative Plant Locations............. 33
Table 18
Annual Energy Costs for a Fabricated Metal Product Model Plant..................................... 34
Table 19
Summary of Labor and Energy Costs for a Fabricated Metal Product Model Plant............ 35
List of Figures Figure 1
Labor and Energy Costs per Production Worker for Fabricated Metal Product Manufacturers (NAICS 332).................................................................................................. 2
Figure 2
Value of Shipments by Industry Group, Fabricated Metal Product Manufacturers (NAICS 332), 2008................................................................................................................ 5
Figure 3
Truck Access to Regional and National Markets................................................................. 15
Figure 4
Electric Costs for Industrial Service, Summer 2009–Winter 2009...................................... 17
Figure 5A
Workers’ Compensation Rates, Alternative Plant Locations............................................... 19
Figure 5B
Per Worker Unemployment Insurance Costs, Alternative Plant Locations......................... 19
Figure 6A
Location of Colleges and Universities in Nebraska............................................................. 23
Figure 6B
Community Colleges in Nebraska....................................................................................... 23
Figure 7
Manufacturing Employment, Nebraska, Surrounding States, and the U.S., 1990–2009 .......................................................................................................................... 26
Figure 8
Estimated Total Labor Costs for a Fabricated Metal Product Model Plant, Alternative Plant Locations.................................................................................................. 32
Figure 9
Estimated Total Energy Costs for a Fabricated Metal Product Model Plant, Alternative Plant Locations.................................................................................................. 34
EXECUTIVE SUMMARY Nebraska’s attractive business climate, a productive and well-educated labor force, competitive labor and energy costs, and central location are among the wide range of advantages the state offers fabricated metal product manufacturers. U.S. fabricated metal product manufacturers face a variety of challenges, including rapidly increasing foreign as well as domestic competition and the economic recession that began in 2007. For an industry characterized by many small- and medium-sized production facilities, Nebraska provides substantial advantages in reducing costs, expanding capacity, and otherwise becoming more competitive.
Sixteen states are examined in the analysis. These states include the top seven states in terms of value added by the Fabricated Metal Product Manufacturing subsector, the eight states with the highest potential for wind power generation1 (Nebraska ranks third), and other states near Nebraska with which it typically competes for industrial location projects. In the model plant analysis, estimated labor-related costs include the direct wages paid to production workers and costs associated with workers’ compensation insurance, unemployment insurance, social security, and fringe benefits. Compared to the 15 alternative states, Nebraska is found to offer an annual savings of $169,000 in labor-related costs, which is 6.7 percent less than the average labor costs for the other states.
This study has been developed specifically for use by fabricated metal product manufacturers to show how a Nebraska plant location can help them better respond to market conditions and significantly improve their competitive positions. Discussed are the many locational advantages the state offers, including performance-based tax incentives that enhance the state’s high-ranking business climate. To demonstrate quantitatively Nebraska’s locational advantages, the study includes an analysis of geographically variable labor and energy costs—two areas important to fabricated metal product manufacturers where Nebraska compares particularly favorably.
This study also concludes that a Nebraska plant location offers a significant energy cost advantage when compared to the average cost of the other 15 states. Industrial electric rates in the alternative states average 17.2 percent higher, and the average industrial gas rate is 10.2 percent more. Combining these advantages, Nebraska’s energy cost for the model plant is 13.8 percent less than the average for the other 15 alternative locations. Together, Nebraska’s annual labor and energy costs for the model plant are $202,600, or 7.2 percent less than the average costs for the 15 alternative states. Conversely, the average labor and energy costs in the other 15 states are 7.8 percent more than the Nebraska labor and energy costs.
The analysis makes cost comparisons among states on the basis of a model manufacturing plant. The model plant assumes employment of 50 production workers and the manufacture of a product representative for the “Fabricated Metal Product Manufacturing” subsector (NAICS 332).
1
U.S. Department of Energy, wind maps and wind resources potential estimates, www.windpoweringamerica.gov/wind_maps.asp.
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Figure 1 provides a summary of the labor and energy costs for the model plant for each of the
16 alternate plant sites. These costs are shown on a per-production-worker basis.
figure 1 Figure 1 Labor and and energy Energy Costs Costs per perproduction ProductionWorker Workerfor for labor fabricated (NaiCs 332) Fabricated Metal Metal product Product Manufacturers Manufacturers (NAICS 332) $70,000 Energy Cost Labor Cost
$60,000
$50,000
$40,000
$30,000 $ ,
$20,000
$10,000
WY
WI
TX
SD
PA
OH
ND
MT
MO
MI
KS
IA
IL
CO
CA
NE
$0
Calculated labor (wages, workers’ compensation insurance, unemployment insurance, social security, and fringe benefits) and energy (electricity and natural gas) costs for a fabricated metal product manufacturer (NAICS 332). Source: Table Source: Table1919
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Part A The Fabricated Metal Product Manufacturing Subsector The “Fabricated Metal Product Manufacturing” subsector (NAICS 332) is the largest manufacturing subsector2, when measured by employment, in the United States. The 2007 Census of Manufacturing indicates the fabricated metal product sector accounted for 12.0 percent of total employment by U.S. manufacturers in 2007. Moreover, fabricated metal product manufacturing establishments represented 18.5 percent of total U.S. manufacturing establishments and 6.5 percent of value of shipments.
total employees numbering 1,572,700 and production workers numbering 1,153,400. Capital expenditures for the subsector totaled $11,309.6 million in 2008. Data for the 1997–2008 review period provided in Table 1 show declines in total “Fabricated Metal Product Manufacturing” subsector employment and the number of production workers from 2000 to 2005 and then increases in employment from 2005 to 2007. Value of shipment and capital expenditures for the subsector declined from 2000 until 2003 and then increased from 2003 through 2008. Between 1997 and 2008, the value of subsector shipments grew by 38.7 percent and value added increased by 40.9 percent. During the same period, the number of production workers in the “Fabricated Metal
As the data shown in Table 1 indicate, the value of shipments for the “Fabricated Metal Product Manufacturing” subsector in the U.S. totaled $336,716.0 million in 2008. Value added in the industry totaled $188,072.0 million, with
Table 1 table 1 The 332), the Fabricated fabricated Metal Metal Product product Manufacturing Manufacturing Subsector subsector (NAICS (NaiCs 332), Characteristics Characteristics and Trends, trends, Selected selected Years, Years,1997–2008 1997-2008
Year 1997 2000 2001 2002 2003 2004 2005 2006 2007 2008
total employees
production Workers
Value added
Value of shipments
Capital expenditures
avg. hourly earnings prod. Wrkrs.
(1,000)
(1,000)
(Million $)
(Million $)
(Million $)
($)
1,763.8 1,814.9 1,724.7 1,574.8 1,487.6 1,468.5 1,463.4 1,491.8 1,612.6 1,572.7
1,327.1 1,375.1 1,296.0 1,169.2 1,110.9 1,082.0 1,081.4 1,110.9 1,183.2 1,153.4
133,493.1 148,874.7 138,792.7 138,972.0 137,451.7 144,994.8 155,800.8 169,321.7 184,775.0 188,072.0
242,813.5 268,212.0 253,113.4 247,059.5 245,339.2 261,100.5 289,432.4 317,214.5 320,496.7 336,716.0
9,368.7 9,991.8 8,632.9 7,964.3 6,661.2 7,209.4 7,706.2 8,340.3 10,599.6 11,309.6
13.55 14.54 14.56 15.77 15.81 16.26 16.80 17.33 17.71 18.42
Data for the fabricated metal products subsector as defined by the 2002 definition for NAICS 332, Fabricated Metal Product Manufacturing. Source: U.S. Bureau of the Census; Census of Manufacturing, 1997 and 2002; 2007 Core Business Statistics; and Annual Survey of Manufactures, 2001, 2005, 2006, and 2008.
2
The North American Industrial Classification System (NAICS)—used by the statistical agencies of the United States, Canada, and Mexico—employs a hierarchical classification structure consisting of: “National Industries,” “NAICS Industries,” “Sectors,” “Subsectors,” and “Industry Groups.” For example, the “U.S. Industry” Industrial Valve Manufacturing (NAICS 332911) is part of “NAICS Industry” Metal Valve Manufacturing (NAICS 33291), “NAICS Industry Group” Other Fabricated Metal Product Manufacturing (NAICS 3329), “NAICS Subsector” Fabricated Metal Product Manufacturing (NAICS 332), and “NAICS Sector” Manufacturing (NAICS 31-33).
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Product Manufacturing” subsector decreased by 13.1 percent, total employment fell by 10.8 percent, and annual capital expenditures increased by 20.7 percent.
As a subsequent table will show, these nine 4-digit industry groups are further subdivided into fourteen 5-digit NAICS industries.
Worker productivity increased significantly during the study review period, with output per production worker increasing 59.6 percent. From 1997 to 2008, the value of shipments of fabricated metal product manufacturers adjusted for price changes3 increased 16.7 percent. During the same nine-year period, the average hourly wage for production workers adjusted for price changes4 increased 1.3 percent.
The data presented in Table 2 provide a basic description of the “Fabricated Metal Product Manufacturing” subsector with further disaggregation into the major 4-digit NAICS industry groups. The table also provides insights into the relative sizes and growth in industry shipments of the industry groups. For the “Fabricated Metal Product Manufacturing” subsector as a whole, industry shipments grew by 45.1 percent between 2002 and 2008. The fastest growing industry group was “Forging and Stamping” (NAICS 3321), with industry shipments growing by 63.3 percent between 2002 and 2008. The value of industry shipments for “Architectural and Structural Metals Manufacturing”
I.
Industry Structure
The 2002 North American Industrial Classification System (NAICS) divides the “Fabricated Metal Product Manufacturing” subsector (NAICS 332) into nine 4-digit NAICS industry groups shown in Table 2.
Table 2
table 2 the fabricated Metal product Manufacturing subsector(NAICS 332), (NaiCs 332) The Fabricated Metal Product Manufacturing Subsector Value industryShipments shipmentsby byIndustry industryGroup, Group, 2002 2002 and and 2008 2008 Value ofof Industry
NaiCs
industry Description
3320
fabricated Metal product Manufacturing Forging and Stamping Cutlery and Handtool Manufacturing Architectural and Structural Metals Manufacturing Boiler, Tank, and Shipping Container Manufacturing Hardware Manufacturing Spring and Wire Product Manufacturing Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing Coating, Engraving, Heat Treating, and Allied Activities Other Fabricated Metal Product Manufacturing
3321 3322 3323 3324 3325 3326 3327
3328 3329
Value of shipments 2002 2008 (Million $) (Million $)
% Change 2002-2008 (percent)
% of total 2008 (percent)
247,059.5
358,363.1
45.1
100.0
21,374.1 10,721.4
34,899.3 10,164.4
63.3 -5.2
9.7 2.8
60,045.5
94,979.8
58.2
26.5
23,297.9
33,287.4
42.9
9.3
10,406.3 9,034.8
8,948.8 10,104.5
-14.0 11.8
2.5 2.8
42,840.4
64,063.9
49.5
17.9
18,931.9
27,740.3
46.5
7.7
50,407.2
74,174.8
47.2
20.7
Source: U.S. Bureau of the Census; 2002 Census of Manufacturers, Summary Series; and 2008 Annual Survey of Manufactures.
3
Values adjusted using U.S. Bureau of Labor Statistics, Producer Price Index for Fabricated Metal Products. 4 Values adjusted using U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Workers.
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(NAICS 3323), the second fastest growing industry group, grew 58.2 percent between 2002 and 2008. Other “Fabricated Metal Product Manufacturing” subgroups experiencing relatively faster growth in value of shipments between 2002 and 2008 included “Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing” (NAICS 3327), which recorded a 49.5 percent increase and “Coating, Engraving, Heat Treating, and Allied Activities” (NAICS 3328), which recorded a 46.5 percent increase.
The data in Table 2 and Figure 2 show the relative importance of fabricated metal product manufacturing subgroups, in terms of value of shipments for each industry group. “Architectural and Structural Metals Manufacturing” (NAICS 3323) is the largest industry group, accounting for 26.5 percent of total industry shipments. “Other Fabricated Metal Product Manufacturing” (NAICS 3329 – 20.7 percent), is the second largest industry group when measured by value of shipments, followed
figure 2 Figure 2
Value byIndustry industry Group, Valueof ofshipments Shipments by Group, fabricated Manufacturers (NaiCs 332), FabricatedMetal Metalproduct Product Manufacturers (NAICS 332), 20082008 NaiCs 3329 20.7%
NaiCs 3321 9.7% NaiCs 3322 2.8%
NaiCs 3328 7 7% 7.7%
NaiCs 3323 26.5%
NaiCs 3327 17.9%
NaiCs 3326 2.8% NaiCs 3325 2 5% 2.5%
NaiCs 3324 9.3%
total 2008 shipments - $358,363.1 Million Total 2008 Shipments - $358,363.1 Million NaiCs 3321 Forging and Stamping NAICS 3321 Forging a nd sta mping Manufacturing
NaiCs 3326 Spring and Wire Product
NAICS 3326 Spring a nd wire product Manufacturing ma nufacturing
NAICS 3322 Cutlery a nd ha ndtool ma nufacturing NaiCs 3322 Cutlery and Handtool NAICS 3323 Architectura l a nd Manufacturing
NAICS 3327 Ma chine shops;Shops; turned Turned NaiCs 3327 Machine product; a nd screw, nut, a nd bolt and Screw, Nut, and Bolt Product; ma nufacturing
structura l meta ls ma nufa cturing
Manufacturing
NaiCs 3323 anda nd shipping NAICSArchitectural 3324 Boiler, ta nk, conta iner ma nufacturing Structural Metals Manufacturing
NAICS 3328 Coa ting, engra ving, hea t trea ting, a nd a llied a ctivities
NaiCs 3328 Coating, Engraving, Heat
NAICS 3329 Other fa brica ted meta l Treating, and Allied Activities product ma nufacturing
NAICS 3325 Ha rdwa re ma nufa cturing
NaiCs 3324 Boiler, Tank, and Shipping Container Manufacturing Source: Table 2
NaiCs 3329 Other Fabricated Metal Product Manufacturing
NaiCs 3325 Hardware Manufacturing
Source: Table 2
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by “Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing” (NAICS 3327 – 17.9 percent); “Forging and Stamping” (NAICS 3321 – 9.7 percent); “Boiler, Tank, and Shipping Container Manufacturing” (NAICS 3324 – 9.3 percent); “Coating, Engraving, Heat Treating, and Allied Activities” (NAICS 3328 – 7.7 percent); “Cutlery and Handtool Manufacturing” (NAICS 3322 – 2.8 percent); “Spring and Wire Product Manufacturing” (NAICS 3326 – 2.8 percent); and “Hardware Manufacturing” (NAICS 3325 – 2.5 percent).
up the subsector. As noted previously, “Architectural and Structural Metals Manufacturing” (NAICS 3323) is the largest industry group, in terms of industry shipments, and, as shown in Table 3, is also the largest in terms of value added and total employees. The data in Table 3 show that “Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing” (NAICS 3327) is the largest industry group in terms of number of companies, number of establishments, production workers, and capital investment. Also shown in Table 3, “Machine Shops” (NAICS 33271) is the largest 5-digit, NAICS industry in terms of number of companies, number of establishments, total employees, production workers, value added, and capital expenditures, while “Plate Work and Fabricated Structural Product Manufacturing” (NAICS 33231) is the largest NAICS industry in terms of value of shipments.
The data in Table 3 provide further detail for the “industry groups.” Data showing the number of companies, number of establishments, employees, production workers, value added, value of shipments, and capital expenditures are shown for the “Fabricated Metal Product Manufacturing” subsector (NAICS 332) as a whole for 2008 and for NAICS 4-digit industry groups and 5-digit NAICS industries that make
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-7-
Values for "Industry Groups" and "NAICS Industries" may not sum to "Sector" total. Source: U.S. Bureau of the Census; 2007 Census of Manufactures; and 2008 Annual Survey of Manufactures.
(b)
57,633 2,538 2,538 1,399 1,399 13,232 5,420 7,812 1,284 264 612 408 693 693 1,419 1,419 24,994 20,923 4,071 5,672 5,672 6,402 1,060 5,342
60,664 2,764 2,764 1,503 1,503 14,118 5,813 8,305 1,537 297 676 564 768 768 1,579 1,579 25,394 21,140 4,254 6,169 6,169 6,832 1,258 5,574
Number of establishments
1,572,687 123,511 123,511 47,574 47,574 408,466 182,855 225,612 93,641 22,385 39,558 31,698 36,335 36,335 49,239 49,239 398,507 257,313 141,193 136,022 136,022 279,392 101,697 177,694
all employees
1,153,382 91,971 91,971 33,683 33,683 293,095 131,038 162,057 71,077 15,336 30,377 25,364 25,488 25,488 37,132 37,132 298,471 191,684 106,787 103,961 103,961 198,504 68,658 129,846
production Workers
336,715,981 33,437,512 33,437,512 8,757,673 8,757,673 89,441,166 47,237,576 42,203,590 31,093,539 5,552,419 8,718,900 16,822,221 8,075,686 8,075,686 9,083,600 9,083,600 60,910,410 36,584,364 24,326,046 27,053,842 27,053,842 68,862,553 28,044,346 40,818,207
188,072,027 15,833,500 15,833,500 6,137,763 6,137,763 44,877,742 22,199,553 22,678,189 14,668,268 3,421,977 4,535,375 6,710,916 4,816,707 4,816,707 4,930,540 4,930,540 39,940,635 24,638,382 15,302,252 16,432,205 16,432,205 40,434,666 16,646,945 23,787,721
11,309,597 1,205,498 1,205,498 314,874 314,874 2,250,403 1,066,998 1,183,406 1,048,561 434,027 201,601 412,934 212,824 212,824 287,201 287,201 2,930,679 1,784,298 1,146,381 1,030,199 1,030,199 2,029,358 848,558 1,180,800
Value of Value Capital shipments added expenditures - - - - - (Thousand Dollars) - - - - -
Number of companies and establishments from the 2007 Census of Manufactures, Industry Services; all other data from the 2008 Annual Survey of Manufactures.
industry Description
fabricated Metal product Manufacturing Forging and Stamping Forging and Stamping Cutlery and Handtool Manufacturing Cutlery and Handtool Manufacturing Architectural and Structural Metals Manufacturing Plate Work and Fabricated Structural Products Manufacturing Ornamental and Architectural Metal Products Manufacturing Boiler, Tank, and Shipping Container Manufacturing Power Boiler and Heat Exchanger Manufacturing Metal Tank (Heavy Gauge) Manufacturing Metal Can, Box, and Other Metal Container Mfg. Hardware Manufacturing Hardware Manufacturing Spring and Wire Product Manufacturing Spring and Wire Product Manufacturing Machine Shops; Turned Prod.; Screw, Nut & Bolt Mfg. Machine Shops Turned Product and Screw, Nut, and Bolt Manufacturing Coating, Engraving, Heat Treating, and Allied Activities Coating, Engraving, Heat Treating, and Allied Activities Other Fabricated Metal Product Manufacturing Metal Valve Manufacturing All Other Fabricated Metal Product Manufacturing
332 3321 33211 3322 33221 3323 33231 33232 3324 33241 33242 33243 3325 33251 3326 33261 3327 33271 33272 3328 33281 3329 33291 33299
Number of Companies(b)
by industry Group and NaiCs industry, 2007 and 2008
NaiCs Code
(a)
Table 3 table 3
The Fabricated Metal Product Manufacturing Subsector (NAICS 332), the fabricated Metal product Manufacturing subsector (NaiCs 332) Number of Companies and Establishments, Employment, Value of Shipments, Value Added, and Number of Companies and establishments, employment, Value of shipments, Value added, and Capital expenditures 2007(a) and 2008 Capital Expenditures by Industry Group and NAICS Industry, (a)
II. Industry Production Characteristics
subsector declined by 10.8 percent. Much of the reduction occurred between 2000 and 2002. During the same 1997–2008 period, the number of production workers in the subsector decreased by 13.1 percent with production workers’ hours declining 11.8 percent. For the 1997–2008 period, total employment in the “Fabricated Metal Product Manufacturing” subsector decreased by 191,300 or 10.8 percent and the number of production workers declined from 1,327,100 to 1,153,400, a reduction of 173,700 or 13.1 percent.
The manufacture of fabricated metal products encompasses a very large and diverse industry. In 2007, 60,664 establishments were primarily engaged in fabricated metal product manufacturing, a decrease of 2.5 percent from 2002 (see Table 4). It is interesting to note that the number of small establishments, as measured by employment, declined while the number of larger establishments increased during this period. Between 2002 and 2007, establishments in the “Fabricated Metal Product Manufacturing” subsector (NAICS 332) employing 20 or more workers increased by 743, or 4.3 percent, while those with fewer than 20 employees decreased by 2,298, or 5.1 percent.
As shown in Table 4, between 1997 and 2002 the “Fabricated Metal Product Manufacturing” subsector experienced very small increases or declines in cost of materials (1.8 percent decrease), value added (4.1 percent increase), and value of shipments (1.7 percent increase). During the recent 2002 to 2008 period, the subsector experienced large increases in cost of materials (59.1 percent), value added (35.3 percent), and value of shipments (36.3 percent).
The data presented in Table 4 compares selected characteristics of the “Fabricated Metal Product Manufacturing” subsector as a whole for 1997, 2002, 2007, and 2008. During the period, total employment in the 1997–2008
table 4 production Characteristics for the fabricated Metal product Manufacturing Production Characteristics for the Fabricated Metal Product Manufacturing subsector (NaiCs 332), 1997, 2002, 2007, and 2008
Table 4
Subsector (NAICS 332), 1997, 2002, 2007, and 2008
percent Change 1997- 2002- 20072002 2007 2008
1997
2002
2007
2008
62,384 19,021
62,219 17,197
60,664 17,940
N/A N/A
-0.3 -9.6
-2.5 4.3
N/A N/A
All Employees Number [thousands] Payroll [million $]
1,764.0 56,631.6
1,574.8 57,534.9
1,608.6 67,547.5
1,572.7 69,230.8
-10.7 1.6
2.1 17.4
-2.2 2.5
Production Workers Number [thousands] Hours [millions] Wages [million $] Average Hourly Wage [$]
1,327.1 2,674.9 36,251.8 13.60
1,169.2 2,321.7 36,607.7 15.77
1,179.3 2,401.6 42,492.0 17.69
1,153.4 2,359.7 43,468.8 18.42
-11.9 -13.2 1.0 16.0
0.9 3.4 16.1 12.2
-2.2 -1.7 2.3 4.1
Value Added by Manufacture [million $]
133,493.1 138,972.0 185,884.7 188,072.0
4.1
33.8
1.2
Cost of Materials [million $]
110,067.8 108,101.2 160,866.8 171,991.6
-1.8
48.8
6.9
Value of Shipments [million $]
242,813.5 247,059.5 345,104.3 336,716.0
1.7
39.7
-2.4
Establishments Number [thousands] With 20+ Employees [thousands]
Cost of Purchased Fuels and Electric Energy Electric Energy [million $] 2,504.3 Purchased Fuels [million $] 1,187.9 Quantity of Purchased Electric Energy [million kWh]
41,510.1
2,514.9 1,238.7
3,098.5 1,953.0
3,396.2 2,101.0
0.4 4.3
23.2 57.7
9.6 7.6
40,747.1
47,545.8
48,719.0
-1.8
16.7
2.5
N/A - Not Available Sources: U.S. Bureau of the Census; Census of Manufactures, Industry Series 1997, 2002, and 2007; and 2008 Annual Survey of Manufactures, Statistics for Industry Groups and Industries.
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Since 2002, the cost of materials has been of growing concern for fabricated metal product manufacturers, due, in part, to increases in steel and aluminum prices. Energy inputs are another important production input that has generally increased in price. While the cost of electricity inputs increased by 35.0 percent from 2002 to 2008, the cost of purchased fuels increased by 69.6 percent. As the global economy recovers from the recent recession, cost increases are expected to continue.
As the data in Table 5 indicate, there were 57,633 companies and 60,644 establishments in the “Fabricated Metal Product Manufacturing” subsector in 2007. Establishments in the “Machine Shops; Turned Products; and Screw, Nut, and Bolt Manufacturing” industry group totaled 25,394 in 2007, or 41.8 percent of total sector establishments. Data on the distribution of manufacturing establishments by number of employees demonstrate that the industry consists of a large number of small establishments. In 2007, the average establishment in the “Fabricated Metal Product Manufacturing” subsector employed 19.4 production workers; 42,724 or 70.4 percent of the establishments had less than 20 employees; and only 5.6 percent had more than 100 employees.
Table 5 provides data for selected additional production characteristics for fabricated metal product manufacturing for 2007. The industry data presented in Table 5 are for “Fabricated Metal Product Manufacturing” (NAICS 332) as a whole; the “Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing” industry group (NAICS 3327); and the balance of the industry, excluding the “Machine Shops; Turned Products; and Screw, Nut, and Bolt Manufacturing” industry group.
Data in Table 5 show that, on average, establishments in the “Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing” industry group are much smaller than those in table 5 establishment Characteristics for the fabricated Metal product Manufacturing Establishment Characteristics forshops; the Fabricated Metal Product Manufacturing subsector (NaiCs 332); Machine turned product; and screw, Nut and bolt Subsector (NAICS 332); Machine Shops; Turned Product; and Screw, industry Group (NaiCs 3327), & balance of subsector, 2007 Nut, and Bolt Manufacturing Industry Group (NAICS 3327) & Balance of Subsector, 2007
Table 5
NaiCs 332 fabricated Metal product Manufacturing 57,633 60,664 17,940 29.6% 3,400 5.6%
Number of Companies Number of Establishments Est. with 20+ employees Est. with 20+ emp (% of Total) Est. with 100+ employees Est. with 100+ emp (% of Total) Production workers Average Prd. Wrks. Per Estab.
NaiCs 3327 Machine shops; turned product; and screw, Nut, and bolt Manufacturing 24,994 25,394 5,180 20.4% 618 2.4%
balance of fabricated Metal product Manufacturing 32,639 35,270 12,760 36.2% 2,782 7.9%
1,179,280 19.4
303,255 11.9
876,025 24.8
Value added (Million$) Per Establishment ($1,000) Per Production Worker ($1,000)
185,885 3,064 158
39,638 1,561 131
146,246 4,146 167
Value of shipments (Million$) Per Establishment ($1,000) Per Production Worker ($1,000)
345,104 5,689 293
61,833 2,435 204
283,272 8,032 323
Source: Calculated by Ken Lemke, Nebraska Public Power District using preliminary data from U.S. Bureau of the Census, 2007 Census of Manufactures, Industry Series.
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the balance of the “Fabricated Metal Product Manufacturing” subsector. In 2007, 79.6 percent of “Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing” establishments had fewer than 20 employees, only 2.4 percent had more than 100 employees, and the average number of production workers per establishment was 11.9, 61.3 percent, of the subsector average. For the “Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing” industry group, 2007 average value added per establishment, $1.6 million, was 50.9 percent of the subsector average and 2007 value of shipments per establishment, $2.4 million, was 42.8 percent of the subsector average.
by Fabricated Metal Product Manufacturers in 2008. Included among these states are the top seven states in terms of value added by the Fabricated Metal Product Manufacturing subsector, the top eight states for potential wind power generation, Nebraska ranks third, and other states that typically compete with Nebraska for plant locations. The 16 states are included in this study as alternative sites for plant locations and are evaluated in Part B of this report using the geographically variable labor and energy costs. In terms of employment and value added by manufacture, the “Fabricated Metal Product Manufacturing” subsector is largest in California. In terms of employment, Texas is second largest followed by Ohio. As the data presented in Table 6 indicate, the 16 states included in this study accounted for 54.4 percent of the production workers and 53.8 percent of the total value of shipments by the “Fabricated Metal Product Manufacturing” subsector in 2008.
III. Industry Location Characteristics Showing the geographic distribution of the “Fabricated Metal Product Manufacturing” subsector (NAICS 332), Table 6 presents data on employment, wages, value added by manufacture, and value of shipments for 16 selected states. As indicated in the table, the 16 states accounted for $101.2 billion or 53.8 percent, of the $188 billion of value added
table 6 location Characteristics of establishments in the fabricated Metal product Location Characteristics of Establishments in the Fabricated Metal Product Manufacturing subsector (NaiCs 332), 2008
Table 6
Manufacturing Subsector (NAICS 332), 2008
state Nebraska California Colorado Illinois Iowa Kansas Michigan Missouri Montana North Dakota Ohio Pennsylvania South Dakota Texas Wisconsin Wyoming Total Sel. States Percent of U.S. Total U.S.
Number of prod. Wrkrs. 6,307
Value added ($1,000) 1,209,947
Value of shipments ($1,000) 2,354,745
Capital expend. ($1,000) 48,048
avg. hourly earnings ($) 17.21
154,900 14,423 103,034 22,092 17,995 77,099 32,495 1,575 1,913 119,994 90,490 4,156 131,785 70,577 1,465
111,822 10,465 76,219 16,477 12,709 55,921 24,028 1,167 1,482 89,447 66,928 2,982 98,041 51,960 1,031
17,306,572 1,758,759 11,957,445 2,705,707 2,047,425 8,540,739 3,525,584 141,475 312,307 16,517,386 10,834,884 446,324 16,011,107 7,676,332 187,109
30,115,400 3,356,931 22,954,694 4,968,744 3,892,904 15,762,465 7,231,842 283,010 629,362 31,704,278 21,158,397 901,076 32,635,366 14,525,539 330,802
1,040,891 75,182 675,770 195,611 128,682 605,450 223,718 4,632 20,220 879,305 659,296 15,915 953,473 542,152 17,505
18.69 18.81 18.50 18.51 16.95 18.51 19.33 16.79 18.68 18.43 18.56 15.72 17.90 18.52 21.04
852,925 54.3% 1,571,812
626,986 54.4% 1,152,704
101,179,102 53.8% 187,970,539
192,805,555 53.8% 358,170,515
6,085,850 53.8% 11,309,597
18.42 100.0%0 18.42
Number of employees 8,932
Source: U.S. Bureau of the Census, 2008 Annual Survey of Manufacturers.
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California, with 111,822 production workers, led the nation in fabricated metal product manufacturing in 2008. The industry’s value added by manufacture in California of $17,306.6 million accounted for 9.2 percent of the total U.S. value added.
The data in Table 7 show the shipment characteristics for fabricated metal products. As the data in Table 7 indicate, the average shipping distance for fabricated metal products in 2007 was 596 miles, which was 82.7 percent of the 721 mile average for all manufacturing industries. Table 7
Table 7
Shipment Characteristics for the Fabricated Metal Products Shipment Characteristics for the Fabricated Metal Products Manufacturing Subsector (NAICS 332) and Selected Commodities, 2007 Manufacturing Subsector (NAICS 332) and Selected Commodities, 2007
Total fabricated metal products (NAICS 332) Selected Standard Classification of Transported Goods (SCTG) Commodities Pipes and tubes (SCTG 3311) Pipe and tube fittings (SCTG 3312) Structures and parts, except prefabricated buildings (SCTG 3320) Nails, screws, bolts, nuts, washers, staples except in strips, and similar fastening articles (SCTG 3331) Handtools and cutlery, except of precious metals (SCTG 3332) Interchangeable tools for hand- or machine-tools (SCTG 3333) Locks, mountings and fittings, racks and similar fixtures, and automatic door closers (SCTG 3334) Containers of a capacity not exceeding 300 liters, except containers for compressed or liquefied gas (SCTG 3391) Other (SCTG 3399)
Value (Mil. $) 338,290
Tons (1,000s) 118,350
Ton-miles (Millions) 44,620
Value Per Ton 2,858
Average Miles 596
75,999 45,275 85,291
45,561 13,172 30,351
18,243 5,181 11,741
1,668 3,437 2,810
243 355 426
39,814
7,830
2,987
5,085
552
18,642
1,584
1,330
11,769
730
17,594
877
444
20,062
723
19,278
2,534
1,148
7,608
586
17,683
7,129
2,486
2,480
865
68,717
22,886
8,783
3,003
733
Source: U.S. Bureau of the Census, 2007 Commodity Flow Survey.
- 11 -
IV. Capital Expenditures and Industry Outlook
competitive position of U.S. fabricated metal product manufacturers relative to their foreign competitors. Over the longer term, the “Fabricated Metal Product Manufacturing” subsector is expected to record slow, positive growth in output, accompanied by moderate declines in employment.
Capital investment in the “Fabricated Metal Product Manufacturing” subsector (NAICS 332) was $11,309.6 million in 2008, which was $3,345.3 million or 42.0 percent higher than in 2002. As the data in Table 8 demonstrate, the growth and rate of capital expenditures varied significantly among industry groups. The “Boiler, Tank, and Shipping Container Manufacturing” industry group (NAICS 3324) recorded the greatest increase (91.9 percent) in capital expenditures between 2002 and 2008, followed by “Forging and Stamping” (57.8 percent), “Coating, Engraving, Heat Treating, and Allied Activities” (49.8 percent), and “Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing” (43.7 percent) industry groups. In the case of “Hardware Manufacturing,” capital expenditures decreased by 18.5 percent between 2002 and 2008.
As indicated by the data presented in Table 9, employment in the “Fabricated Metal Product Manufacturing” subsector is projected to decline by 8.5 percent between 2008 and 2018. During the same period, real output is projected to increase 14.2 percent, which is about 60 percent of the projected 23.5 percent increase for the entire manufacturing sector. The “Architectural and Structural Metals Manufacturing” industry group (NAICS 3323) is projected to experience the greatest growth in employment, 4.9 percent and output, 26.5 percent, between 2008 and 2018. The “Hardware Manufacturing” industry group (NAICS 3325) is projected to experience the lowest change in real output (0.0 percent). The “Cutlery and Hand Tool Manufacturing” industry group is expected to see the largest decline in employment (decrease of 26.98 percent) from 2008 to 2018.
Economic growth of the “Fabricated Metal Product Manufacturing” subsector is dependent on many factors, including the overall performance of the U.S. economy, economic and business conditions internationally, and the
Table 8
table 8 Capital expenditures in the fabricated Metal product Manufacturing Capital Expenditures in the Fabricated Metal Product Manufacturing Subsector (NAICS 332), (a) subsectorby (NaiCs 332) Groups, by industry Groups, Industry 2002 and 2002 2008 and 2008
NaiCs Code 332 3321
industry Description fabricated Metal product Manufacturing Forging and Stamping
3322
Cutlery and Handtool Manufacturing
3323
Architectural and Structural Metals Manufacturing
3324
2002 2008 - - - - (thousand Dollars) - - - 7,964,345 11,309,597 764,074
1,205,498
percent Change 2002-08 42.00 57.77
2008 Cap. exp. as % Val. add. 6.00 7.60
311,117
314,874
1.21
5.10
1,627,545
2,250,017
38.25
5.00
Boiler, Tank, and Shipping Container Manufacturing
546,527
1,048,561
91.86
7.20
3325
Hardware Manufacturing
261,189
212,824
-18.52
4.40
3326
Spring and Wire Product Manufacturing
261,660
287,201
9.76
5.80
3327
Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing
2,039,249
2,930,679
43.71
7.30
3328
Coating, Engraving, Heat Treating, and Allied Activities
687,846
1,030,199
49.77
6.30
3329
All Other Fabricated Metal Product Manufacturing
1,465,138
2,029,744
38.54
5.00
Source: U.S. Bureau of the Census; 2002 Census of Manufactures; and 2008 Annual Survey of Manufactures.
- 12 -
table 9 Table 9 employment and output, fabricated Metal product Manufacturing subsector,
Employment and Output, Fabricated Metal Product Manufacturing Subsector, by by Group, industryand Group, andManufacturing, for all Manufacturing, 1998,and 2008, and projected Industry for All 1998, 2008, Projected 2018 2018
NaiCs 31-33 332 3321 3322 3323 3324 3325 3326 3327
3328
3329
NaiCs 31-33 332 3321 3322 3323 3324 3325 3326 3327
3328
3329
industry Manufacturing Fabricated Metal Product Manufacturing Forging and Stamping Cutlery and Handtool Manufacturing Architectural and Structural Metals Manufacturing Boiler, Tank, and Shipping Container Manufacturing Hardware Manufacturing Spring and Wire Product Manufacturing Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing Coating, Engraving, Heat Treating, and Allied Activities Other Fabricated Metal Product Manufacturing
industry Manufacturing Fabricated Metal Product Manufacturing Forging and Stamping Cutlery and Handtool Manufacturing Architectural and Structural Metals Manufacturing Boiler, Tank, and Shipping Container Manufacturing Hardware Manufacturing Spring and Wire Product Manufacturing Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing Coating, Engraving, Heat Treating, and Allied Activities Other Fabricated Metal Product Manufacturing
part a -- employment thousands of Jobs avg. ann. rate of Change 1998 2008 2018 1998-2008 2008-2018 17,559.5 13,431.2 12,225.2 -2.6 -0.9 1,739.5 1,528.3 1,399.1 -1.3 -0.9 146.0 79.6
107.9 49.1
84.9 35.9
-3.0 -4.7
-2.4 -3.1
395.8
409.4
429.4
0.3
0.5
108.5
95.8
89.1
-1.2
-0.7
53.5 82.9
29.3 51.5
24.0 41.9
-5.8 -4.6
-2.0 -2.0
370.7
360.1
319.5
-0.3
-1.2
172.6
143.7
124.8
-1.8
-1.4
329.9
281.5
249.6
-1.6
-1.2
part b --Value of output billions of Chain-Weighted 2000 Dollars avg. ann. rate of Change 1998 2008 2018 1998-2008 2008-2018 4,061.2 3,985.3 4,922.9 -0.2 2.1 254.7 250.6 286.3 -0.2 1.3 25.5 11.1
24.0 10.7
24.6 11.1
-0.6 -0.4
0.3 0.3
57.2
58.9
74.5
0.3
2.4
23.8
20.9
23.8
-1.3
1.3
11.2 9.1
10.3 7.4
10.3 9.3
-0.8 -2.0
0.0 2.2
45.2
47.1
55.6
0.4
1.7
19.6
22.5
24.8
1.4
1.0
51.9
49.1
52.5
-0.6
Source: Employment Projections Program, U.S. Department of Labor, U.S. Bureau of Labor Statistics, www.bls.gov/emp/ep_table_207.htm.
- 13 -
0.7
On balance, the factors affecting firms producing fabricated metal products will depend to a great extent on the ability of companies to compete within their industry and in the markets for their products. While many external factors will influence the overall performance of the industry, the outlook for individual companies
that can control costs and respond to emerging and changing market opportunities will be significantly enhanced. Part B of this study discusses how establishments producing fabricated metal products can better respond to market conditions and significantly improve their competitive positions with a Nebraska location.
- 14 -
Part B Nebraska Advantages for Fabricated Metal Product Manufacturers Missouri, and the geographic center is in Butte County, South Dakota (the geographic center of the 48 contiguous states is Smith County, Kansas). More than 50 million people live within a 500-mile radius of Nebraska.
Nebraska offers a wide range of locational advantages to fabricated metal product manufacturers. In the continuing portion of this study, Nebraska resources and location attributes important to fabricated metal product manufacturers are discussed. An evaluation of geographically variable labor and energy costs for selected states follows using a model establishment manufacturing fabricated metal products. I.
In addition to being a prominent location for national markets, Nebraska is well situated to serve international markets, which are important to many fabricated metal product manufacturers. For example, the Union Pacific’s main railroad line in central Nebraska is the busiest freight corridor in the world; many of the trains carry grain to West Coast ports for shipment around the world. Also, the state currently has operating Foreign Trade Zones in Omaha (Zone No. 19, Grantee/Greater Omaha Chamber of Commerce) and in Lincoln (Zone No. 59, Grantee/Operator: Lincoln Chamber of Commerce Foreign-Trade
Nebraska Location Resources
Nebraska lies near both the population and geographic centers of the United States (Figure 3). The nation’s population center moved across the Mississippi River for the first time in 1980 and continues to shift westward. The current population center is in Phelps County,
Figure 3 figure 3 Truck Accesstruck to Regional access toand regional g National and Markets National Markets
federal Motor Carrier safety administration *Maximum driving time for property-carrying vehicles (a) No motor carrier shall permit or require any driver used by it to drive a property-carrying commercial y such driver drive a pproperty-carrying p y y g commercial motor vehicle: motor vehicle,, nor shall any (1) More than 11 cumulative hours following 10 consecutive hours off duty *[68 FR 22616, Apr. 28, 2003]
- 15 -
corridor in the world, with more than 145 trains operating over the line every 24 hours.
Zone). Foreign Trade Zones reduce or eliminate duties and excise taxes by allowing domestic activity involving foreign items to take place as if it were outside of U.S. Customs territory.
BNSF operates more than 1,500 route miles of track in Nebraska, is one of the state’s primary railroads transporting two million carloads of freight in Nebraska each year, and employs more than 4,000 people in the state. BNSF has rail yards in Alliance, Lincoln, McCook, and Omaha; intermodal and automotive facilities in Omaha; and mechanical shops in Alliance and Lincoln.
Transportation Nebraska’s central location is especially advantageous for transportation services. The state’s communities are connected by a good highway system that includes 8,539 miles of interstate, freeway, and arterial roads. That system includes a 455-mile stretch of Interstate 80, the most traveled east-west transcontinental route of the interstate highway system. North-south interstate highways that add to Nebraska’s market include Interstate 29, which passes along the state’s eastern border in Iowa, and Interstate 25, which passes in close proximity to the state’s western border.
Commercial airline service is available in nine Nebraska cities, providing direct service to major hubs. Scheduled air freight service is provided to five additional communities with on-demand service available. A total of 81 public-use airports are located throughout the state. With the Missouri River forming Nebraska’s eastern border, the state is a western terminus for barge traffic. Barges have access to both the Gulf of Mexico via the Mississippi River and to the Atlantic Ocean via the Great Lakes and the St. Lawrence Seaway.
More than 11,500 licensed motor carriers with worldwide connections are based in Nebraska and serve businesses throughout North America. Largely because of Nebraska’s good interstate connections, one of the largest trucking companies in the country, Werner Enterprises, is headquartered in Omaha.
Utilities In providing a full range of reliable utilities with many cost advantages, Nebraska offers additional benefits to fabricated metal product manufacturers. Nebraska’s electric rates for typical industrial customers are 33.3 percent less than the U.S. average and are among the lowest of the 48 contiguous states (Figure 4). This benefit is of particular importance to the “Fabricated Metal Product Manufacturing” subsector (NAICS 332), with its high level of electricity use relative to total energy consumption. A statewide grid system with regional interconnections assures reliability of service and adequacy of supply.
The nation’s two largest rail companies— BNSF Railway Company and Union Pacific Railroad—provide rail service to many Nebraska communities. Ten freight railroads operate more than 3,200 miles of track throughout the state. No major city in the United States is more than five days by rail from Nebraska. Amtrak provides passenger service in Nebraska with stops in five communities. The Union Pacific (UP) maintains headquarters in Omaha and is one of the largest railroads in North America with 32,000 miles of track in the western two-thirds of the country. UP operates more than 1,000 miles of track in Nebraska. The Harriman Dispatching Center in Omaha is the most technologically advanced dispatching facility in the country. Union Pacific’s Bailey Yard in North Platte is the largest rail freight car classification yard in the world. The yard covers 2,850 acres, switches 10,000 rail cars daily, and has 315 miles of track. Union Pacific’s main line in central Nebraska is the busiest rail freight
One of the reasons for Nebraska’s low electric rates is its close proximity to the vast low-sulfur coal fields of eastern Wyoming. It is also the only state in the nation with electric service provided entirely by public power. Nebraska’s two largest utilities, Nebraska Public Power District (NPPD) and Omaha Public Power District (OPPD), have under their control an efficient and dependable “mix” of generating - 16 -
Figure 4 Electric Costs for Industrial Service, Summer 2009–Winter 2009
Source: Edison Electric Institute, “Typical Bills and Average Rates Report,” January 1, 2009 and July 1, 2009. State averages are weighted using eight months of January 2009 data and four months of July 2009 data. Nebraska data represent the average for Omaha Public Power District, Lincoln Electric System, and Nebraska Public Power District using the same seasonal weighting.
Nebraska utilities also operate 12 hydroelectric plants and receive a power allotment from the Western Area Power Administration (WAPA) hydroelectric facilities on the Missouri River. The utilities operate with a reserve capacity that protects users against voltage reductions and brownouts. Furthermore, the utilities are members of the Mid-Continent Area Power Pool (MAPP), which interconnects eight upper Midwestern states and a Canadian province with an extensive network of high voltage transmission facilities.
systems to supply current and projected needs; the mix includes coal, nuclear, hydro, gas, oil, wind, and diesel sources. Some major electric-generating facilities in Nebraska are: •
•
•
•
1,300-megawatt NPPD coal-fired Gerald Gentleman Station near Sutherland, Unit No. 1 on-line in 1979 and Unit No. 2 on-line in 1982 1,330-megawatt OPPD coal-fired Nebraska City Station near Nebraska City, Unit No. 1 on-line in 1979 and Unit No. 2 online in 2009 800-megawatt NPPD Cooper Nuclear Station near Brownville, on-line in 1974 486-megawatt OPPD Fort Calhoun Nuclear Station, on-line in 1973
Natural gas in Nebraska is also attractive to industry for service, supply, and price. A gas-producing state, Nebraska is close and well-connected by pipeline to the major gas fields of the central and southern plains. The state’s average cost of industrial gas is less than both the regional and national averages. The pipelines of two major companies, Northern Natural Gas and Kinder Morgan, provide an ample supply of natural gas to most areas of Nebraska. Depending on usage requirements, natural gas is offered both on a “firm” and “interruptible” basis.
NPPD owns and operates a 59 MW wind generation facility near Ainsworth and has long term agreements to purchase 122 MW of wind generated power from facilities located near Bloomfield. NPPD also has long-term purchase agreements for additional wind power from two proposed wind generation facilities that will be located in Boone and Knox Counties in Nebraska. - 17 -
Labor Quality
Higher Education Resources
Any industry derives benefits from a productive and well-educated labor force. Nebraska’s labor force has a strong work ethic and technical proficiency. The state was settled by individuals with the foresight and diligence to transform it into a world center of agricultural production. Their descendants maintain a work ethic and mechanical aptitude that carry over into the state’s manufacturing sector. Contributing to Nebraska’s high labor productivity are very low absenteeism and labor turnover rates. Furthermore, Nebraska employers pay among the lowest unemployment insurance and workers’ compensation costs in the nation.
As part of a growing and rapidly changing industry, fabricated metal product manufacturers can benefit greatly from flexible state-of-the-art educational resources. The University of Nebraska, state colleges, and the community college network are important elements in providing resources to assist manufacturers in maintaining an educated and trained work force. The University of Nebraska, is comprised of four campuses: The University of NebraskaLincoln, the University of Nebraska at Omaha, the University of Nebraska Medical Center, and the University of Nebraska at Kearney. It has the largest facilities among the state’s 21 colleges and universities and offers advanced degrees in most professional fields. It is a major center for both basic and applied research and has a combined student enrollment of more than 49,000.
In the case of workers’ compensation rates, Nebraska’s rate of $3.53 per $100 of manufacturing payroll is 13.7 percent lower than the average for the other 15 alternative plant location states included in this study (Figure 5A and Table 15). Nebraska’s unemployment insurance cost provides a more significant cost advantage. The state’s estimated unemployment insurance cost of $121.50 per worker is 52.0 percent less than the $253.07 average cost for the other states included in the comparison (Figure 5B).
Founded in 1869, the Lincoln campus of the University of Nebraska is the state’s land-grant university. The University of Nebraska is one of a select group of research universities that holds membership in the Association of American Universities—a distinction granted in 1909. Nebraska was the first university west of the Mississippi to establish a graduate college (in 1896). The University of Nebraska boasts 22 Rhodes scholars and 2 Nobel laureates among its alumni.
Nebraska’s work force quality is also highly rated by the state’s employers and by various national comparisons. In 2008, 90.1 percent of the state’s population 25 years of age and older were high school graduates, compared to 85.0 percent nationally. In addition, the 2008–09 Nebraska high school graduation rate was 89.9 percent. One reason for the high graduation rate is the state’s comparatively low student-teacher ratio—13.3:1 in 2008 compared to 15.5:1 for the nation. Finally, Nebraska students consistently score above the U.S. average on both standardized achievement tests and college entrance exams. In 2009 Nebraska students averaged 22.1 on the ACT college entrance test, compared to 21.1 nationally. Moreover, Nebraska’s average composite ACT score was achieved with 72 percent of graduates taking the exam, compared to 45 percent of graduates nationwide.
–Research The University of Nebraska is among the top 35 public universities in the U.S. in spending on research and development. Research funding has more than doubled since 2002, and extensive new research facilities have been built on the Lincoln campus (UNL) and at the Medical Center. UNL has embarked on an exciting partnership called Nebraska Innovation Campus, a 249-acre private-public research and technology center adjacent to City Campus. The Innovation Campus is being developed with the support of 2015 Vision, a group of Lincoln, Nebraska,
- 18 -
figure 5a Figure 5A
Workers’ Compensation rates Workers’ Compensation Rates, Alternative Plantlocations Locations alternate plant Nebraska u.s.
$3.53 $3.71
California Colorado illinois iowa kansas Michigan Missouri Montana North Dakota ohio pennsylvania south Dakota texas Wisconsin Wyoming $0.00
$6.28 $2.52 $5.29 $3.29 $3.69 $3.10 $3.99 $6.98 $3.71 $3.71 $3.83 $3.02 $4.73 $3.52 $3.71
$1.00
Source: See15. Table Source: See Table
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
15
figure 5b Figure 5B Per Unemployment Insurance Costs, perWorker Worker unemployment Costs Alternative Plantlocations Locations alternate plant Nebraska u.s.
122 268
California Colorado illinois iowa kansas Michigan Missouri Montana North Dakota ohio pennsylvania south Dakota texas Wisconsin Wyoming $0.00
288 163 327 370 113 413 260 243 235 239 370 84 113 311 267 $50.00
$100.00
$150.00
$200.00
$250.00
Source: See Table 15.
Source: See Table 15 - 19 -
$300.00
$350.00
$400.00
$450.00
$500.00
business leaders dedicated to strengthening research, education, and economic development through entrepreneurship and investment. The Innovation Campus will leverage UNL’s research capacity by attracting private sector companies to locate near the university where they can work closely with university researchers generating jobs and economic activity.
of the mechanics of traumatic brain injury resulting from improvised explosive devices, and a facility developing vaccines against biological warfare agents and products that can be used as therapeutic countermeasures to treat people who have been exposed to biological agents. A brief description of centers offering special expertise of interest to manufacturers of fabricated metal products follows.
–Engineering The College of Engineering is situated on three campuses: Lincoln (City and East Campuses) and Omaha. Currently, the college has more than 3,000 students enrolled and 300 permanent faculty and staff. Areas of engineering research and teaching at the University of Nebraska include Architectural Engineering, Biological Systems Engineering, Chemical and Biomolecular Engineering, Computer Science and Engineering, Computer and Electronics Engineering, Construction Management, Construction Systems, Electrical Engineering, Engineering Mechanics, Industrial and Management Systems Engineering, and Mechanical Engineering.
Engineering and Science Research Support Facility (ESRSF)—The ESRSF is a dedicated, highly diverse technical facility with expertise in mechanical design, manufacturing, machining, fabrication, and technical services. The ESRSF technical staff combines high technical aptitude and background in hands-on instrument design, advanced machining, welding, fabrication, and materials testing. ESRSF will provide manufacturers with consulting services, prototyping, new part production runs, and other machining and construction services. Consulting services include: Workflow Management, Product/Process Design, Employee Technical Training, Machining Procedures, and Project Life Cycle Management.
Research at the College of Engineering is progressive and collaborative, supporting innovative research through two core facilities, housing six areas of research, and more than 16 research centers and laboratories. The two core facilities are supported by the Nebraska Research Initiative funded by the Nebraska legislature to significantly enhance the scientific and research capabilities at the University of Nebraska in technological areas with commercial potential. The Advanced Electro Optics Engineering Core Facility houses state-of-the-art lasers for producing a range of novel materials, thin films, and coatings which can be deposited with atomic precision on nanometer- to millimeter-sized areas/volumes. The Advanced Manufacturing Engineering Core Facility has the unique capability of synthesizing biological products, nanocomposites, and nanomachined electrical components. The programs residing in the research centers/laboratories include a $10 million program for transportation research, an organization developing the technologies for the next generation of bridges and pavement, a trauma mechanics research initiative advancing the experimental and theoretical understanding
• • • • •
CNC & Conventional Machining, Welding, Fabrication, and Electroplating/Anodizing Foundry and Pattern Shop Computer Aided Design (CAD) Computer Aided Manufacturing (CAM) Materials Testing Equipment
Equipment housed within the ESRS machine shop includes: CNC Cincinnati-Milacron 1250 Sabre with Ab Acramatic 2100 Control - has four-axis operation with a maximum of three-axis interpolation. This machine is used to machine a variety of drill system parts and components. Its large capacity allows for work pieces up to 50" x 30" x 26". This CNC machining center utilizes the latest computer technology for the machining of complex contours through parametric programming (equational programming), solid modeling programming through CAM software, and online quick programming of simple - 20 -
geometries. This feature enhances the technical staff’s ability to accommodate a wide range of machining jobs.
25" x 18" Nardini Gap Bed Lathe - where much of the large cumbersome work pieces that require turning operations are performed. Drill system equipment such as barrels, large pulleys, housings, winch hubs, etc., are currently machined on the Nardini Lathe. Other heavy applications include the machining of train axles and wheels for material science research projects.
BridgePort Series 1 CNC Milling Machines (2) - provide additional resources for high volume machining and drastically cut delivery time to the customer. They are capable of machining smaller complex and simple 2-dimensional work pieces. Their conversational shop floor programming features allow tool makers to quickly program and machine the work piece.
Conventional BridgePort Milling Machines (3) - used for such applications as milling, drilling, boring, key way cutting, etc.
CNC BridgePort Interact 412 Machining Center - a three-axis, 12-tool station with a GE Fanuc Series O-Mate control that is available for multiple part production. Off-line part programming using a CAD workstation facilitates part design and production.
Conventional 15" x 50" Clausing Lathes (2) - used for turning, threading, and boring of cylindrical work pieces. All of the conventional machining equipment contains state-of-the-art digital readouts and tooling. Kent Automatic Surface Grinder - used for grinding flat and angular surfaces. This grinder has been used for sharpening ice coring cutters, core dogs, reamers, and surface grinding precision drill system parts. An Oliver tool cutter grinder is used for the complex geometry grinding on double angle cutters, core dogs, and reamers.
CNC Mazak Quick Turn ATC Lathe - has a unique feature of live tooling on the turret. This feature allows the technical staff to perform turning and milling operations in one setup. The result is a high precision machining process that can be performed without ever having to remove the work piece from the chuck, which eliminates costly secondary machining processes. The Mazak CNC lathe has been used to machine drill system components for the past eight years.
Tig, Mig, Gas, and Arc Welders - all have a capacity ranging from very intricate applications to heavy-duty. The Tig and Mig welders can accommodate a wide range of steel and non-ferrous alloys. The shop has an acetylene/oxygen gas torch for brazing and flame cutting, along with a Plasma cutting unit.
Engis Lapping Machine - for precision machining, is used to machine and polish work pieces of extreme tolerances (.000001 inch). Common applications are thin film polishing and material removal, sharpening to razor edges, and finish machining of hardened materials. This lapping machine is located in the clean room facility of the engineering machine shop. During and after machining, the work piece is inspected with precision inspection equipment.
Foundry and Pattern Shop - one of the unique features of the ESRSF. The foundry can produce brass and aluminum sand castings. The crucible capacity is approximately 125 pounds for brass and 20 to 25 pounds for aluminum. The pattern shop and foundry add versatility to the engineering shop services by furnishing high quality castings. In the past, the
- 21 -
foundry was utilized by the Polar Ice Coring Office Engineers for the production of winch hub and bearing housing castings. The patterns for these winch parts are still in the inventory of ESRSF.
hardware related to machinability, surface integrity, adaptive control, and expert systems in the processing of new high tech manufacturing materials and methods. Center for Engineering Logistics and Distribution (CELDi) is a multi-university, multi-disciplinary National Science Foundation sponsored Industry/University Cooperative Research Center. Research endeavors are driven and sponsored by representatives from a broad range of member organizations, including manufacturing, maintenance, distribution, transportation, information technology, and consulting.
Betenbender Heavy Duty Shear, Edwards 100 Ton Iron Worker, and Additional Hand Brakes and Foot Shears - turn in-house fabrication and sheet metal work into routine services for the machine shop. Materials Testing Bay - houses computer-controlled testing machines that can perform a variety of material and structural tests. The capacities of these testing machines are from 0 to 440,000 pounds. A torsion testing machine is available for testing barrels, well screens, drive shafts, gears, and more. Impact testing equipment is also accessible for impact tests on metals, plastics, and other materials.
Through basic research, collaborative applied research with industry, technology transfer, and education, CELDi is a catalyst for developing the engineering logistics methodology necessary for logistics value chain optimization. Within CELDi, the activities include, but are not limited to: • Value-adding processes that create time and place utility (transportation, material handling, and distribution) • Value-sustaining processes that prolong useful life (maintenance, repair, and rework) • Value-recovering processes that conserve scarce resources and enhance societal goodwill (returns, refurbishment, and recycling)
Nebraska Center for Materials and Nanoscience (NCMN) is a multidisciplinary organization with more than 75 faculty members from UNL and other University of Nebraska campuses. The concern is with atomic manipulation, properties affected by nanoscale dimensions, self-assembly, ordered nanoarrays, quantum dots and wires, nanoelectronics, quantum computing, nanomechanics, nanooptics, molecular design, nanoelectro-mechanical systems, nanobiological function, and life sciences.
Along with research and development efforts at the University of Nebraska, Nebraska operates a state college system with campuses at Chadron, Peru, and Wayne. Undergraduate degrees are offered at these institutions in Industrial Technology and Industrial Management and teaching endorsements are offered in Industrial Technology Education and Trade and Industrial Education. A variety of private colleges and universities are also located in Nebraska including Creighton University in Omaha, Nebraska Wesleyan University in Lincoln, and others located throughout the state (see Figure 6A).
There are eight central facilities to support the NCMN’s mission: Crystallography, Electron Microscopy, Materials Preparation, Metallurgical and Mechanical Characterization, Scanning Probe Microscopy, X-Ray Materials Characterization, Nanofabrication, and Cryogenics. These facilities are available to all UNL faculty as well as companies in Nebraska and elsewhere. Center for Nontraditional Manufacturing Research is the only research facility in the United States dedicated solely to the examination of nontraditional manufacturing methods. Projects involve both basic and applied research on numerous nontraditional manufacturing processes. The Center’s mission is to target existing and future needs for software and
Another important facet of higher education in Nebraska is the statewide community college system that provides specialized training programs for new and expanding Nebraska industries. As indicated in Figure 6B, the state - 22 -
Figure 6A Location of Colleges and Universities in Nebraska
Chadron Wayne Scottsbluff Blair Fremont Omaha Papillion Seward Bellevue
Grand Island Kearney
Curtis
York
Lincoln Crete
Hastings
Peru
Source: Nebraska Coordinating Commission for Postsecondary Education
Figure 6B Community Colleges in Nebraska
WESTERN NORTHEAST Alliance Scottsbluff
Norfolk
MID-PLAINS Columbus
Sidney
METROPOLITAN Omaha
North Platte Grand Island Hastings McCook
Milford
Lincoln
SOUTHEAST CENTRAL
Source: Nebraska Community College System
- 23 -
Beatrice
has six community college areas, which operate campuses in 13 cities across the state. The colleges offer a full curricula of occupational courses, which provide a steady flow of skilled graduates to Nebraska industries. As examples, Hastings and Milford Community College Campuses offer vocational/technical training in more than 50 different one- and two-year programs including Associate of Applied Science degrees in “Machine Tool Technology,” “Manufacturing Engineering Technology,” “Nondestructive Testing Technology,” and “Welding Technology.” Training is accomplished through the extensive use of hands-on activities and is centered around practical application of technical knowledge gained in lecture and laboratory sessions.
staff helping assemble government financing with conventional financing to put together the best comprehensive package. Performance-Based Tax Incentives In 2005 the Nebraska Legislature enacted the Nebraska Advantage Tax Incentive Program and amended the program in 2008 and 2010. The Nebraska Advantage package replaced and improved on Nebraska’s existing tax incentive programs and created a business climate that makes Nebraska the preferred location for business start-ups and expansions. The Nebraska Advantage rewards businesses that invest in the state and hire Nebraskans. In this progressive, pro-business climate, corporate income and sales taxes are reduced or virtually eliminated. Further information about the Nebraska Advantage is summarized below and is available at www.NebraskaAdvantage.biz.
Other Development Assistance Programs Building on traditional advantages, Nebraska offers additional development assistance programs. Among those programs are the following:
The legislative components of the Nebraska Advantage package include:
Customized Job Training Program Provides a flexible and discretionary job training program with grants from $800 to $4,000 per qualified job. Additional grant funds may be available for new jobs created in rural or high poverty areas. You can design your own training or a statewide training team can assist with training needs and assessments, training plans, curriculum development, and training instruction.
Nebraska Advantage Act (LB 312) • Expanded incentives for six “tiers” of investment and/or job creation • Small business advantage • Research and development advantage • Microenterprise tax credit advantage • Rural development advantage • State and local sales tax exemptions of manufacturing machinery, equipment, and related services
Industrial Revenue Bonds All Nebraska counties and municipalities, as well as the Nebraska Development Finance Fund, are authorized to issue industrial revenue bonds to finance land, buildings, and equipment for industrial projects. No general election is required for an issue.
Qualified businesses for Tier One include research and development, scientific testing, manufacturing, and targeted export services (75% of sales outside Nebraska or to the U.S. Government). Qualified businesses for Tiers Two, Three, Four, and Five include the above plus data processing, telecommunications, insurance, financial services, distribution, storage/ warehousing, transportation, Internet web portal, retail sales of tangible personal property that meet specific requirements, and headquarters (administrative). All businesses other than retail qualify for Super Tier Six.
Other Financing Assistance Supplementing traditional sources, financing assistance is also available through the Nebraska Investment Finance Authority, the Business Development Corporation of Nebraska, and the local development corporations. The Nebraska Department of Economic Development also administers development finance services, with
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Nebraska Agricultural Innovation Advantage (LB 90) • Agriculture opportunities and value-added partnership act • Building entrepreneurial communities act • Ethanol production incentive cash fund enhancement
One additional incentive program of note is Nebraska’s Tax Increment Financing (TIF) program. TIF is a method of financing the public improvements associated with a private development project in a blighted area by using the projected increase in property tax revenue that will result from the private development. In a tax policy incentive, Nebraska determines the taxable income attributable to Nebraska operations using a single factor, or “sales only,” formula. This method for determining corporate income tax allocation provides a significant advantage to multi-state unitary firms that sell products or services outside Nebraska. Nebraska also provides a capital gains exemption. State residents may elect, on a one-time basis, to subtract from their income tax liability the gain from the sale of capital stock of a corporation acquired during Nebraska-based employment with that corporation.
Other components in the Nebraska Advantage package are: Nebraska Research and Development Advantage Offers a refundable tax credit for qualified research and development activities undertaken by a business entity. The credit is equal to 15 percent of federal credit allowed under Section 41 of the Internal Revenue Code of 1986 for research and development. An important feature—businesses with little or no income may take advantage of the tax credit by receiving a sales tax refund or a refundable income tax credit.
It is important to recognize the Nebraska Advantage package replaces and significantly enhances Nebraska’s previous performance based tax incentive programs. Those earlier incentives, the first of which was passed by the Nebraska Legislature in 1987, had a profound effect in stimulating business investment, expansion, and job creation. Nebraska’s previous tax incentive programs contributed to substantial investment and job creation, including total investment of more than $23.5 billion and 121,000 jobs.
Nebraska Microenterprise Tax Credit Advantage Provides a 20 percent refundable tax credit to micro businesses on increased compensation for employees or increased investment in targeted communities. Applicants may qualify for a maximum $10,000 throughout the life of the program. The credit is limited to companies with five or fewer employees, including start-ups. Credits are approved on a first–in–first–out basis through an application process with the Nebraska Department of Revenue. The credits are earned on increased expenditures for wages, buildings, certain expenses, and non-vehicle depreciable personal property.
The combination of many factors, including Nebraska’s attractive business climate, tax incentives, labor productivity, and effective job training programs as well as other positive attributes, has resulted in Nebraska’s manufacturing sector significantly outperforming both that of the surrounding states and of the U.S. as a whole. Manufacturing employment in Nebraska grew by 17.1 percent between 1990 and 2000, declined during the 2000–2004 period, and remained relatively stable from 2004–2008 before experiencing a downturn during the recent national and global economic slow down. For the 1990–2008 period as a whole, Nebraska’s manufacturing employment increased by 3.9 percent, compared with a decline in manufacturing employment for the U.S. as a
Additional Tax Savings: • Sales Tax Exemption On: Manufacturing equipment, Manufacturing or processing raw materials Common carrier vehicles Utilities used in manufacturing • No Tangibles Tax • No Inventory Tax • Sales Tax Refund on Pollution Control Equipment • 100% Depreciation for Personal Property Tax
- 25 -
figure 7
Figure 7 Manufacturing employment, Nebraska, surrounding states, Manufacturing Employment, Nebraska, Surrounding States, and the u.s., 1990-2009, 1990=100 and the U.S., 1990–2009, 1990=100
110 100 90 80 Nebraska
70
sur. states us u.s.
60 1990
1995
2000
2005
2009
Surrounding States include data for states contiguous to Nebraska, as a group, including Colorado, Iowa, Kansas, Missouri, South Dakota, and Wyoming. Source: Bureau of Labor Statistics, www.bls.gov.
whole of 32.8 percent (see Figure 7). For Nebraska’s neighboring states as a group (Colorado, Iowa, Kansas, Missouri, South Dakota, and Wyoming), manufacturing employment declined by 19.7 percent for the 1990–2008 period. These data suggest that companies with Nebraska manufacturing plants benefit from the locational and other competitive advantages associated with doing business in Nebraska.
The cost of living in Nebraska is consistently below the national average. Data presented in Table 10 indicates on average, the cost of living in Nebraska is 3.0 percent less than the U.S. average. Of particular interest is the cost of housing, which, in Nebraska, averages 8.0 percent less than for the U.S. as a whole for families renting a home.
Quality of Life
As shown in the previous discussion, Nebraska offers a wide range of locational advantages for fabricated metal product manufacturers. In this section of the study, labor and energy production cost factors that have geographic variability are analyzed. Such analysis permits the identification of the plant site providing the best advantage on these important input factors.
II. Labor and Energy Cost Analysis
For a potential newcomer to Nebraska, the state’s livability is obviously also a consideration. Nebraska ranks high in quality of life studies—and below average in cost of living measures. The state’s landscape is clean and spacious, both in urban and rural areas. Residents blend Midwestern values with Western enthusiasm for growth and change. This helps create a high degree of citizen participation in both neighborhood and communitywide activities.
In the analysis of geographically variable labor and energy costs, the following procedures are used:
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1) Selection of alternative plant locations for evaluation of the geographically variable labor and energy costs.
table 10 Table 10 Cost of living Nebraska,Compared Comparedtotothe theNational National Average, average, Cost of Living in in Nebraska, april 1, 2010 April 1, 2010 all items index (a)
Consumables
transportation (b)
health services
Monthly rent (c)
home Value (c)
utilities
income/ payroll taxes
U.S. Average
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Nebraska Omaha, NE Lincoln, NE
97.0 95.5 100.5
91.0 92.7 90.9
100.2 95.7 100.2
94.0 92.7 93.9
92.0 103.2 88.5
89.0 81.7 102.0
91.7 100.3 91.7
100.5 101.4 98.4
95.4
89.2
100.2
93.0
80.2
86.0
91.7
101.2
Nonmetro NE (d) (a)
Cost of living values computed for a family of three with an annual income of $50,000.
(b)
Transportation costs assumes ownership of two cars valued at $14,312 which are driven a total of 20,000 miles annually. Assumes a house of 1,613 square feet for both rental assumption and home value.
(c)
(d)
Nonmetro Nebraska data represent the average of 14 Nebraska cities outside of the Omaha and Lincoln metropolitan areas. These cities include Beatrice, Columbus, Dakota City, Fremont, Grand Island, Hastings, Kearney, McCook, Norfolk, North Platte, O'Neill, Scottsbluff, South Sioux City, and Valentine.
Source: Index values computed from cost-of-living data obtained from Economic Research Institute (ERI), Relocation Assessor Database as of April 1, 2010.
2) Definition of a model manufacturing plant for identifying labor and energy inputs and costs. 3) Evaluation of labor-related costs associated with each alternative plant location. 4) Evaluation of energy costs for each alternative plant location.
table 11 Table 11 alternative locations Alternative Locations forfor a Model plant for the fabricated Metal product a Model Plant for the Fabricated Metal Product Manufacturing subsector (NaiCs 332) Manufacturing Subsector (NAICS 332) percent of Value added by Manufacture (a) 0.6
state Nebraska
Alternative Plant Locations Sixteen alternative plant locations were selected for comparison in this analysis. The plant locations include the seven states with the highest value added by the “Fabricated Metal Products Manufacturing” subsector (NAICS 332) and the eight states with the greatest potential for wind energy generation (Texas is included in both categories plus Colorado and Missouri). The seven states with the greatest value added include California, Illinois, Michigan, Ohio, Pennsylvania, Texas, and Wisconsin. The eight states with the greatest potential for wind energy generation include Nebraska plus Iowa, Kansas, Montana, North Dakota, South Dakota, Texas, and Wyoming. The 16 states account for 53.8 percent of the value added by manufacturer in the fabricated metal product manufacturing industry (see Table 11).
California Colorado Illinois Iowa Kansas Michigan Missouri Montana North Dakota Ohio Pennsylvania South Dakota Texas Wisconsin Wyoming
9.2 0.9 6.4 1.4 1.1 4.5 1.9 0.1 0.2 8.8 5.8 0.2 8.5 4.1 0.1
total selected states
53.8
(a)
Percent of the 2008 U.S. total value added by manufacture for establishments in NAICS 332. Source: U.S. Bureau of the Census, 2008 Annual Survey of Manufactures.
- 27 -
table 12 Characteristics of a Model plant for the fabricated product Characteristics of aMetal Model Plant for the Fabricated Metal Product Manufacturing subsector (NaiCs 332) Manufacturing Subsector (NAICS 332)
Table 12
total Model plant Production Workers
per production Worker
50
------
Value Added [dollars] (a)
$18,153,068
$163,061
(b)
$14,596,898
$291,938
19,962
399.23
Total Output [dollars]
Energy Inputs [million BTUs] (c) (a)
Estimated value added applies the 2008 value added per production worker for the Fabricated Metal Product Manufacturing Subsector to the model plant (see Tables 3 & 4).
(b)
Estimated value of shipments derived by applying the 2008 value of shipments per production worker to the model plant (see Tables 3 & 4).
(c)
Estimated by applying the 2008 ratio of energy inputs per production worker to the model plant (see Table 13). Source: Calculated from data presented in Tables 3, 4, and 13.
Part A of Table 13 presents data estimating energy use for the industry in 2008. The estimated energy use for the model plant was derived using the ratio of energy inputs to industry value added. It was further assumed all energy inputs for the model plant are derived from electricity and natural gas.
The Model Plant To facilitate the analysis of the comparative labor and energy costs for the alternative states, it is useful to define a model plant for which the geographically variable costs can be quantified. The model plant is assumed to manufacture a product representative of the fabricated metal product manufactures industry as a whole. To specify the relevant labor and energy costs, information was obtained from the 2007 Census of Manufacturing, and the 2008 Annual Survey of Manufactures.
Part B of Table 13 indicates the model plant, employing 50 production workers, will have annual energy inputs of 19,961.5 million BTUs. Electric energy inputs are estimated to be 7,206.1 million BTUs (2,113,193 kWhs), or 36.1 percent of the total energy inputs, while natural gas inputs are estimated at 12,755.4 million BTUs.
Table 12 presents industry characteristics used in developing the model plant, which is assumed to employ 50 production workers. Estimated production worker hours total 100,000 annually or 2,000 hours per worker. Value added by manufacture is estimated to be $8,153,068 and the total annual output (value of shipments) is estimated to be $14,596,898. Energy inputs are estimated at 19,962 million BTUs, with all energy inputs suppled by electricity and natural gas.
Labor-Related Costs
Energy Used in the Model Plant
Labor costs in the fabricated metal product manufacturing industry are affected by several factors: wage rates, productivity of workers, fringe benefits, unemployment insurance, and workers’ compensation costs. Table 14 includes data on wage rates for the states identified as alternative plant locations.
The assumption that the model plant is representative of the industry as a whole leads to the assumption that energy used in the plant also should be characteristic of industry use patterns.
An analysis of state wage levels indicates Nebraska’s production workers have hourly wage rates significantly below the average for the alternative plant sites. For example, 2008 hourly wage rates - 28 -
Table 13 Energy Use in table Fabricated 13 Metal Product Manufacturing Establishments
part a estimated 2008 industry energy inputs trillion btus Purchased Fuels and Electric Energy Purchased Electric Energy Purchased Fuels
percent
396.0 143.0 253.0
100.0 36.1 63.9
part b energy inputs for the fabricated Metal product Model plant Million btus Purchased Electricity
percent
7,206.1 (2,112,193 kWhs) 12,755.4 19,961.5
36.1
Natural Gas Total Energy Inputs
Source: Part A: Energy use estimated from data from the U.S. Bureau of the Census, 2008 Annual Survey of Manufactures, 2008 Statistics for Industry Groups and Industries Part B: Calculated from data in Table 12 and Part A of this table.
table 14 average hourly earnings of production Workers on Table 14 Average Hourly Metal Earnings of Productionpayrolls Workers on fabricated Manufacturing Fabricated Manufacturing Payrolls, Alternative alternate plant locations Plant Locations plant locations Nebraska California Colorado Illinois Iowa Kansas Michigan Missouri Montana North Dakota Ohio Pennsylvania South Dakota Texas Wisconsin Wyoming
2002 $13.56
2008 $17.21
percent Change 2002-2008 27.0
15.92 15.56 16.35 15.27 14.29 16.01 16.03 14.62 14.22 16.41 15.74 12.63 14.86 16.46 16.64
$18.69 $18.81 $18.50 $18.51 $16.95 $18.51 $19.33 $16.79 $18.68 $18.43 $18.56 $15.72 $17.90 $18.52 $21.04
17.4 20.9 13.1 21.2 18.6 15.6 20.6 14.8 31.4 12.3 17.9 24.5 20.5 12.5 26.4
Source: U.S. Bureau of Census; 2002 Census of Manufactures; and 2008 Annual Survey of Manufactures.
63.9 100.0
- 29 -
Table 15 Other Labor Costs, Alternative Plant Locations table 15 other labor Costs, alternate plant locations
plant locations Nebraska California Colorado Illinois Iowa Kansas Michigan Missouri Montana North Dakota(c) Ohio(c) Pennsylvania South Dakota Texas Wisconsin Wyoming(c)
Workers' Compensation
unemployment insurance factors(b) per Worker
Wage
rates (a) ($) 3.53
Costs ($) 121.50
tax rate (%) 1.35
base ($) 9,000.00
6.28 2.52 5.29 3.29 3.69 3.10 3.99 6.98 3.71 3.71 3.83 3.02 4.73 3.52 3.71
288.40 163.00 327.18 369.72 112.80 413.10 260.00 243.47 234.63 239.40 370.40 84.00 112.50 310.80 266.60
4.12 1.63 2.66 1.56 1.41 4.59 2.08 0.97 0.99 2.66 4.63 0.84 1.25 2.59 1.24
7,000.00 10,000.00 12,300.00 23,700.00 8,000.00 9,000.00 12,500.00 25,100.00 23,700.00 9,000.00 8,000.00 10,000.00 9,000.00 12,000.00 21,500.00
(a)
Rates for all manufacturing classifications from: Actuarial & Technical Solutions, Workers Compensation State Rankings, Manufacturing Industry Costs and Statutory Benefit Provisions, 2009 Edition, December 2009.
(b)
Unemployment Factors from: U.S. Department of Labor, Employment and Training Administration, Unemployment Insurance Data Summary, 1st Quarter 2009.
(c)
North Dakota, Ohio, and Wyoming are not rated and assumed to equal national average.
Estimated annual labor-related costs for operating the model plant producing fabricated metal products are presented in Table 16 and Figure 8. These labor-related costs include direct wages paid to production workers and estimates of other labor-related costs, including costs of workers’ compensation and unemployment insurance, social security, and other fringe benefits.
for Nebraska production workers ($17.21) are 18.2 percent below the average wage rates for the other 15 states included as alternative plant locations. Other associated costs contributing to the total labor-related wage bill are shown in Table 15. These costs include rates for unemployment insurance and workers’ compensation.
If located in Nebraska, the model plant has a significant labor cost advantage over the alternative locations. The Nebraska labor cost advantage reaches as high as $534,000 in annual savings when compared to Wyoming. When compared to the average labor costs for the 15 alternative locations, Nebraska’s annual labor cost advantage is $169,000 or 6.7 percent lower.
The Nebraska costs for unemployment insurance and workers’ compensation are significantly less than the other states. In the case of unemployment insurance contributions, the average cost per employee for the 15 alternative states is estimated at $253.07 or more than twice the Nebraska cost of $121.50. Insurance rates for workers’ compensation average $4.09 per $100 of payroll for the 15 alternative states, 13.7 percent more than Nebraska’s rate of $3.53.
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- 31 -
18.69 18.81 18.50 18.51 16.95 18.51 19.33 16.79 18.68 18.43 18.56 15.72 17.90 18.52 21.04
California Colorado Illinois Iowa Kansas Michigan Missouri Montana North Dakota Ohio Pennsylvania South Dakota Texas Wisconsin Wyoming
1,869,000 1,881,000 1,850,000 1,851,000 1,695,000 1,851,000 1,933,000 1,679,000 1,868,000 1,843,000 1,856,000 1,572,000 1,790,000 1,852,000 2,104,000
$1,721,000
payroll
total
$117,000 $47,000 $98,000 $61,000 $63,000 $57,000 $77,000 $117,000 $69,000 $68,000 $71,000 $47,000 $85,000 $65,000 $78,000
$61,000
insurance
Workers' Compensation
$14,000 $8,000 $16,000 $18,000 $6,000 $21,000 $13,000 $12,000 $12,000 $12,000 $19,000 $4,000 $6,000 $16,000 $13,000
$6,000
insurance
unemployment
143,000 144,000 142,000 142,000 130,000 142,000 148,000 128,000 143,000 141,000 142,000 120,000 137,000 142,000 161,000
477,000 480,000 472,000 472,000 432,000 472,000 493,000 428,000 476,000 470,000 473,000 401,000 456,000 472,000 537,000
$439,000
benefits(b)
security(a) $132,000
fringe
social
2,620,000 2,560,000 2,578,000 2,544,000 2,326,000 2,543,000 2,664,000 2,364,000 2,568,000 2,534,000 2,561,000 2,144,000 2,474,000 2,547,000 2,893,000
$2,359,000
Costs
total labor
Fringe benefit costs include paid leave, supplemental pay, and retirement and savings payments and are assumed to be 25.5 percent of payroll. Source: Compiled from data in Tables 12, 14, and 15.
(b)
50 50 50 50 50 50 50 50 50 50 50 50 50 50 50
50
Workers
Number of production
Employer Social Security costs are 7.65 percent of payroll (wages).
$17.21
Nebraska
(a)
rate
hourly Wage
location
plant
Table 16 table 16
261,000 201,000 219,000 185,000 -33,000 184,000 305,000 5,000 209,000 175,000 202,000 -215,000 115,000 188,000 534,000
0
Nebraska
Cost Difference other states (-)
Total Annual Labor-Related Costs for a Model Plant total annual labor-related Costs for a Model plant for the fabricated Metal product Manufacturing subsector for the Fabricated Metal Product Manufacturing Subsector
111.1 108.5 109.3 107.8 98.6 107.8 112.9 100.2 108.9 107.4 108.6 90.9 104.9 108.0 122.6
100.0
Nebraska
Cost relative other states (/)
Figure 8 Figure 8
Estimated Labor Costs* EstimatedTotal Total Labor Costs* for a for a Fabricated Metal ProductModel Model Plant, Alternative Plant Locations Fabricated Metal Product Plant, Alternative Plant Locations Nebraska
2,359
California Colorado Illinois Iowa Kansas Michigan Missouri Montana North Dakota Ohio Pennsylvania S th D South Dakota k t Texas Wisconsin Wyoming $500.00
2,620 2,560 2,578 2,544 2,326 2,543 2,664 2,364 2,568 2,534 2,561 2 144 2,144 2,474 2,547 2,893 $1,000.00
$1,500.00
$2,000.00
$2,500.00
$3,000.00
(Labor Costs in Thousands of Dollars) *Calculated labor costs wages, includeworkers’ wages, workers’ compensation insurance, * Calculated labor costs include compensation insurance, unemployment insurance, social security, and fringe benefits. unemployment insurance, social security, and fringe benefits. Source: See Table 16.
Source: See Table 16 Energy Costs
1,000 kW billing demand with monthly usage of 400,000 kWhs for the 15 alternative plant sites is $0.0722 per kWh or 17.2 percent more than the Nebraska rate of $0.0616.
The availability and cost of energy are increasingly important factors in the industrial location process. Rates for industrial electricity and natural gas for the alternative plant locations are presented in Table 17. For both energy sources, Nebraska’s rates are substantially less than the alternative states. The average electric rate for a
In the case of industrial rates for natural gas, the average for the 15 other states is 10.2 percent more than the Nebraska rate of $8.83 per million BTUs.
- 32 -
table 17 industrial rates for electric energy and Natural Gas Industrial Rates for Electric Energy and Natural Gas alternative plant locations
Table 17
Alternative Plant Locations
plant locations Nebraska California Colorado Illinois Iowa Kansas Michigan Missouri Montana North Dakota Ohio Pennsylvania South Dakota Texas Wisconsin Wyoming
average Cost of industrial Natural Gas, 2008(a) ($/MM btu)
Cost of 1,000 kW billing Demand With 400,000 kWh, 2009(b) ($/Monthly) ($/kWh)
8.83
24,652
0.0616
10.47 8.49 10.25 9.04 9.13 9.94 10.97 10.69 8.04 12.32 11.72 8.72 8.68 10.24 7.31
47,168 29,035 18,735 23,071 24,858 31,875 24,892 25,167 26,362 33,665 36,230 24,129 30,937 31,267 26,066
0.1179 0.0726 0.0468 0.0577 0.0621 0.0797 0.0622 0.0629 0.0659 0.0842 0.0906 0.0603 0.0773 0.0782 0.0652
Sources: (a) Natural Gas: American Gas Association, Gas Facts: 2008 data. (b) Electric: Edison Electric Institute, Typical Residential, Commercial, and Industrial Bills, January 1, 2009 and July 1, 2009. State average weighted using eight months of January 2009 data and four months of July 2009 data. Nebraska data represent average for Nebraska Public Power District, Omaha Public Power District, and Lincoln Electric System using the same seasonal weighting.
Table 18 and Figure 9 provide an analysis of the energy costs for the operation of the model plant. The total energy costs for the alterative locations include the cost for the assumed level of electrical energy and natural gas inputs for the operation of the plant.
plant locations. When considering the California location, energy costs for the model plant are 57.6 percent more than the Nebraska energy costs. When compared to the average total energy costs for the 15 alternative states, Nebraska energy costs are 12.1 percent lower, translating into an average annual savings of $33,600.
Nebraska provides a significant energy cost savings compared to the average of the alternative
- 33 -
Table 18
table 18 annual energy Costs for a fabricated Model plant Annual Energy Costs for a Fabricated Metal Metalproduct Product Model Plant Cost Difference other states (-) Nebraska
total energy Cost
plant locations
electricity rate(a) Cost
Nebraska
$0.0616
$130,000
$8.83
$113,000
$243,000
$0
100.0
California Colorado Illinois Iowa Kansas Michigan Missouri Montana North Dakota Ohio Pennsylvania South Dakota Texas Wisconsin Wyoming
$0.1179 $0.0726 $0.0468 $0.0577 $0.0621 $0.0797 $0.0622 $0.0629 $0.0659 $0.0842 $0.0906 $0.0603 $0.0773 $0.0782 $0.0652
$249,000 $153,000 $99,000 $122,000 $131,000 $168,000 $131,000 $133,000 $139,000 $178,000 $191,000 $127,000 $163,000 $165,000 $138,000
$10.47 $8.49 $10.25 $9.04 $9.13 $9.94 $10.97 $10.69 $8.04 $12.32 $11.72 $8.72 $8.68 $10.24 $7.31
$134,000 $108,000 $131,000 $115,000 $116,000 $127,000 $140,000 $136,000 $103,000 $157,000 $149,000 $111,000 $111,000 $131,000 $93,000
$383,000 $261,000 $230,000 $237,000 $247,000 $295,000 $271,000 $269,000 $242,000 $335,000 $340,000 $238,000 $274,000 $296,000 $231,000
$140,000 $18,000 -$13,000 -$6,000 $4,000 $52,000 $28,000 $26,000 -$1,000 $92,000 $97,000 -$5,000 $31,000 $53,000 -$12,000
157.6 107.4 94.7 97.5 101.6 121.4 111.5 110.7 99.6 137.9 139.9 97.9 112.8 121.8 95.1
(a)
Natural Gas rate(b) Cost
Cost relative other states (/) Nebraska
Electric rate is cost per kWh using the average per kWh cost for 1,000 kW monthly demand with 400,000 kWh of consumption. The model plant is assumed to use 2,363,864 kWh annually.
(b)
Natural Gas rate is per million BTUs. The model plant is assumed to use 11,369.4 million BTUs annually. Source: Calculated from data presented in Tables 13 and 17.
Figure 9 figure 9
Estimated Total total Energyenergy Costs* for a Fabricated estimated Costs* for a Metal Product Model Plant, Alternative Plant Locations
fabricated Metal product Model plant, alternative plant locations Nebraska
243
California Colorado illinois iowa kansas Michigan Missouri Montana North Dakota ohio pennsylvania s th D south Dakota k t texas Wisconsin Wyoming
383 261 230 237 247 295 271 269 242 335 340 238 274 296 231 $0.00
$100.00
$200.00
$300.00
$400.00
(energy Costs in thousands of Dollars)
*Calculated energy costs include electricity and natural gas costs. * Calculated energy costs include electricity and natural gas costs. Source: See Table 18.
Source: See Table 18
- 34 -
$500.00
Labor and Energy Cost Summary
Conversely, the average labor and energy costs for the alternative states are 7.8 percent more than the costs associated with a Nebraska location. Inescapable from these results is the conclusion that, in terms of major labor and energy inputs costs, Nebraska fabricated metal product manufacturers have a clear competitive advantage over manufacturing establishments in the industry not so fortunately located.
Combining the labor and energy cost findings, the results of the model plant analysis are summarized in Table 19. As the table shows, a Nebraska location has a cost advantage over sites in 13 of the 15 alternative states. When considering the average labor and energy costs for the 15 alternative states, the cost advantage the Nebraska location is $202,600 annually, of or 7.2 percent less than the average costs for the other 15 plant sites considered.
table 19 summary of labor and energy Costs for a Summary of Labor and Energy Costs for a fabricated Metal product Model plant Fabricated Metal Product Model Plant
Table 19
Cost Difference other states (-) Nebraska
Cost relative other states (/) Nebraska
plant locations
total labor Cost
total energy Cost
total labor and energy Cost
Nebraska
$2,359,000
$243,000
$2,602,000
$0
100.0
California Colorado Illinois Iowa Kansas Michigan Missouri Montana North Dakota Ohio Pennsylvania South Dakota Texas Wisconsin Wyoming
2,620,000 2,560,000 2,578,000 2,544,000 2,326,000 2,543,000 2,664,000 2,364,000 2,568,000 2,534,000 2,561,000 2,144,000 2,474,000 2,547,000 2,893,000
383,000 261,000 230,000 237,000 247,000 295,000 271,000 269,000 242,000 335,000 340,000 238,000 274,000 296,000 231,000
$3,003,000 $2,821,000 $2,808,000 $2,781,000 $2,573,000 $2,838,000 $2,935,000 $2,633,000 $2,810,000 $2,869,000 $2,901,000 $2,382,000 $2,748,000 $2,843,000 $3,124,000
401,000 219,000 206,000 179,000 -29,000 236,000 333,000 31,000 208,000 267,000 299,000 -220,000 146,000 241,000 522,000
115.4 108.4 107.9 106.9 98.9 109.1 112.8 101.2 108.0 110.3 111.5 91.5 105.6 109.3 120.1
Source: Calculated from data presented in Tables 13 and 15.
- 35 -
Conclusions This study concludes the fabricated metal product manufacturing industry is desirable for Nebraska and a Nebraska location is desirable for the industry. The locational advantages Nebraska offers appear well-suited to fabricated metal product manufacturers. They cover a wide spectrum, ranging from an attractive business climate to a high quality of life at a relatively low cost. But, as the study’s model plant analysis demonstrates, the competitive advantages Nebraska offers in such important cost areas as labor and energy are particularly noteworthy. The state’s well-educated and productive labor force is a long-standing asset, as are its very favorable electric and natural gas rates.
applicable to the fabricated metal product manufacturing industry generally. Individual manufacturers will therefore need to further consider the locational requirements of their particular kinds of fabricated metal product manufacturing as well as the merits of specific sites within states. Certainly in terms of general locational situation for fabricated metal product manufacturers, Nebraska has much to offer. The three organizations cooperating in the preparation of this study can also assist fabricated metal product manufacturers in assessing advantages in Nebraska for a specific new location or expansion project. To obtain this assistance, write or call:
Essentially, the analysis presented in this study was based on state-to-state comparisons
Economic Development Department NEBRASKA PUBLIC POWER DISTRICT PO Box 499 Columbus, Nebraska 68602-0499 (402) 563‑5534 (800) 282‑6773 Fax: (402) 563‑5090 Email: [email protected] sites.nppd.com Business Development Division NEBRASKA DEPARTMENT OF ECONOMIC DEVELOPMENT PO Box 94666 Lincoln, Nebraska 68509‑9466 (402) 471‑3789 (800) 426‑6505 Fax: (402) 471‑3365 Email: [email protected] www.neded.org UNIVERSITY OF NEBRASKA COLLEGE OF ENGINEERING 114 Othmer Hall PO Box 880642 Lincoln, Nebraska 68588‑6363 (402) 472‑5600 Email: [email protected] http://engineering.unl.edu
- 37 -
APPENDIX A The Nebraska Advantage consists of six “tiers” of investment and job creation activity. The example spreadsheet below illustrates the job creation and investment levels required and the tax incentives generated by Tier 2, which
includes the jobs creation and investment required for the establishment of the model fabricated metal product manufacturing facility discussed previously in this report.
Nebraska Advantage - TIER 2 Minimum 30 New Jobs & $3 Million Investment
Potential Tax Credits and Refunds Project Name Date NOTE: Shaded values require input of project-specific variables. Potential Tax Credits and Refunds
Compensation Credit - Percent of annual compensation paid to all new employees over 7 year period. A. Assumptions are as follows Number of New Employees in Year 1: 50 Average Annual Salary * : $35,797 Initial payroll: $1,789,850 Annual Cost-of-Living Increase beginning Year 2: 3.00% * Only positions earning at least 60% of the Nebraska Average Wage are eligible to earn Compensation Credit.
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Employees
Payroll
Hourly Wage
Comp % *
Comp Credit
50 50 50 50 50 50 50
$1,789,850 $1,843,546 $1,898,852 $1,955,817 $2,014,492 $2 074 927 $2,074,927 $2,137,175
$17.21 $17.73 $18.26 $18.81 $19.37 $19 95 $19.95 $20.55
5% 5% 5% 5% 5% 5% 5%
$89,493 $92,177 $94,943 $97,791 $100,725 $103 746 $103,746 $106,859
Compensation Tax Credit
$685,733
$685,733
Total
$13,714,658
* Use Table below to determine appropriate Compensation Percentage for each year. NOTE: Compensation credit can be used against employee withholding up to amount paid in. 2008 Neb Ave Wage Annual
$35,227.00
60% NAW $21,136
75% NAW $26,420
100% NAW $35,227
125% NAW $44,034
Hourly
$16.94
$10.16
$12.70
$16.94
$21.17
3%
4%
5%
6%
Comp %
A-1
APPENDIX A – Continued II. Investment Tax Credits and Sales Tax Refunds A. Assumptions about project investment are as follows * 1.
Building Cost A. OWN: Purchase/New Construction
$1,000,000 OR $0 $200,000 $200,000
OR 2. 3.
B. LEASE: Term of Lease Amount up to Ten Years Non-Manufacturing Furniture, Fixtures and Equipment Additional Investment (over 7 years) Total investment subject to Sales and Use Tax over a 7 year period
4.
Manufacturing Machinery and Equipment (Exempt from Sales Tax)
TOTAL PROJECT INVESTMENT
$1,400,000 $750,000
$2,150,000
* Assumes values of building, equipment, furniture and fixtures are PRIOR to application of any state and local sales or use taxes. Note: For LB312 investment calculations, existing equipment and furnishings brought into the state can be calculated at original purchase price, rather than at depreciated value.
B. Sales Tax Refund State Sales Tax Rate Local Sales Tax Rate * TOTAL SALES TAX RATE
5.5% 1.5% 7.0%
* Current Local Sales & Use Tax Rates can be found at http://www.revenue.state.ne.us/question/sales.htm
1.
Building
2.
$500,000 X Furniture, Fixtures and Equipment $200,000 X
3.
Additional Investment (over 7 years) $200,000 X
0.070
=
$35,000
0.070
=
$14,000
0.070
=
$14,000
Total Sales Tax Refund:
$63,000
Sales Tax Refund $63,000
$215,000
Investment Tax Credit $215,000
C. Investment Credit: Percent of investment in qualified property during 6-7 year entitlement period. Includes all investment in building, equipment and components. For leased space, investment is equal to annual lease rate times term of lease for up to 10 years. This credit may be applied to state corporate income tax liability or sales and use tax liabilities.
$2,150,000
x
10%
=
TOTAL TAX CREDITS AND REFUNDS WAIVER of LIABILITY: Officials representing the Nebraska Department of Economic Development have prepared the enclosed estimates to determine the amount of any benefits that might become available for this project under the Nebraska Advantage tax incentive program. Be advised that these represent projected benefits. The Nebraska Department of Revenue will make a final determination of any tax incentives complimenting this project. The Nebraska Department of Economic Development and its representatives waive any financial responsibility for
A-2
$963,733
prepared by
NEBRASKA PUBLIC POWER DISTRICT Economic Development Department PO Box 499 Columbus, Nebraska 68602-0499 sites.nppd.com
NEBRASKA DEPARTMENT OF ECONOMIC DEVELOPMENT Business Development Division PO Box 94666 Lincoln, Nebraska 68509-9466 www.neded.org
UNIVERSITY OF NEBRASKA COLLEGE OF ENGINEERING 114 Othmer Hall PO Box 880642 Lincoln, Nebraska 68588-0642 http://engineering.unl.edu
May 2010 A63 G134542.ZIP
Table of Contents E........................................................................................................................ 1 Part A
The Fabricated Metal Product Manufacturing Subsector.............. 3 I. Industry Structure........................................................................................................... 4 II. Industry Production Characteristics. ............................................................................ 8 III. Industry Location Characteristics............................................................................... 10 IV. Capital Expenditures and Industry Outlook. ............................................................. 12
Part B Nebraska Advantages for Fabricated Metal Product MANUfacturers.............................................................................................................. 15 I. Nebraska Location Resources. ..................................................................................... 15 Transportation.................................................................................................................. 16 Utilities............................................................................................................................. 16 Labor Quality................................................................................................................... 18 Higher Education Resources............................................................................................ 18 –Research................................................................................................................ 18 –Engineering........................................................................................................... 20 Other Development Assistance Programs........................................................................ 24 Performance-Based Tax Incentives.................................................................................. 24 Quality of Life.................................................................................................................. 26 II. Labor and Energy Cost Analysis.................................................................................. 26 Alternative Plant Locations.............................................................................................. 27 The Model Plant............................................................................................................... 28 Energy Used in the Model Plant...................................................................................... 28 Labor-Related Costs......................................................................................................... 28 Energy Costs.................................................................................................................... 32 Labor and Energy Cost Summary.................................................................................... 35 Conclusions.......................................................................................................................................37 Appendix A..........................................................................................................................................A-1
List of Tables Table 1
The Fabricated Metal Product Manufacturing Subsector (NAICS 332), Characteristics and Trends, Selected Years, 1997–2008........................................................ 3
Table 2
The Fabricated Metal Product Manufacturing Subsector (NAICS 332), Value of Industry Shipments by Industry Group, 2002 and 2008.......................................... 4
Table 3
The Fabricated Metal Product Manufacturing Subsector (NAICS 332), Number of Companies and Establishments, Employment, Value of Shipments, Value Added, and Capital Expenditures by Industry Group and NAICS Industry, 2007(a) and 2008.......... 7
Table 4
Production Characteristics for the Fabricated Metal Product Manufacturing Subsector (NAICS 332), 1997, 2002, 2007, and 2008.......................................................... 8
Table 5
Establishment Characteristics for the Fabricated Metal Product Manufacturing Subsector (NAICS 332); Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing Industry Group (NAICS 3327) & Balance of Subsector, 2007............. 9
Table 6
Location Characteristics of Establishments in the Fabricated Metal Product Manufacturing Subsector (NAICS 332), 2008................................................................... 10
Table 7
Shipment Characteristics for the Fabricated Metal Products Manufacturing Subsector (NAICS 332) and Selected Commodities, 2007................................................. 11
Table 8
Capital Expenditures in the Fabricated Metal Product Manufacturing Subsector (NAICS 332), by Industry Groups, 2002 and 2008............................................ 12
Table 9
Employment and Output, Fabricated Metal Product Manufacturing Subsector, by Industry Group, and for All Manufacturing, 1998, 2008, and Projected 2018............... 13
Table 10
Cost of Living in Nebraska, Compared to the National Average, April 1, 2010.................. 27
Table 11
Alternative Locations for a Model Plant for the Fabricated Metal Product Manufacturing Subsector (NAICS 332).......................................................................................................... 27
Table 12
Characteristics of a Model Plant for the Fabricated Metal Product Manufacturing Subsector (NAICS 332)....................................................................................................... 28
Table 13
Energy Use in Fabricated Metal Product Manufacturing Establishments........................... 29
Table 14
Average Hourly Earnings of Production Workers on Fabricated Manufacturing Payrolls, Alternative Plant Locations................................................................................... 29
Table 15
Other Labor Costs, Alternative Plant Locations................................................................... 30
Table 16
Total Annual Labor-Related Costs for a Model Plant for the Fabricated Metal Product Manufacturing Subsector........................................................................................ 31
Table 17
Industrial Rates for Electric Energy and Natural Gas Alternative Plant Locations............. 33
Table 18
Annual Energy Costs for a Fabricated Metal Product Model Plant..................................... 34
Table 19
Summary of Labor and Energy Costs for a Fabricated Metal Product Model Plant............ 35
List of Figures Figure 1
Labor and Energy Costs per Production Worker for Fabricated Metal Product Manufacturers (NAICS 332).................................................................................................. 2
Figure 2
Value of Shipments by Industry Group, Fabricated Metal Product Manufacturers (NAICS 332), 2008................................................................................................................ 5
Figure 3
Truck Access to Regional and National Markets................................................................. 15
Figure 4
Electric Costs for Industrial Service, Summer 2009–Winter 2009...................................... 17
Figure 5A
Workers’ Compensation Rates, Alternative Plant Locations............................................... 19
Figure 5B
Per Worker Unemployment Insurance Costs, Alternative Plant Locations......................... 19
Figure 6A
Location of Colleges and Universities in Nebraska............................................................. 23
Figure 6B
Community Colleges in Nebraska....................................................................................... 23
Figure 7
Manufacturing Employment, Nebraska, Surrounding States, and the U.S., 1990–2009 .......................................................................................................................... 26
Figure 8
Estimated Total Labor Costs for a Fabricated Metal Product Model Plant, Alternative Plant Locations.................................................................................................. 32
Figure 9
Estimated Total Energy Costs for a Fabricated Metal Product Model Plant, Alternative Plant Locations.................................................................................................. 34
EXECUTIVE SUMMARY Nebraska’s attractive business climate, a productive and well-educated labor force, competitive labor and energy costs, and central location are among the wide range of advantages the state offers fabricated metal product manufacturers. U.S. fabricated metal product manufacturers face a variety of challenges, including rapidly increasing foreign as well as domestic competition and the economic recession that began in 2007. For an industry characterized by many small- and medium-sized production facilities, Nebraska provides substantial advantages in reducing costs, expanding capacity, and otherwise becoming more competitive.
Sixteen states are examined in the analysis. These states include the top seven states in terms of value added by the Fabricated Metal Product Manufacturing subsector, the eight states with the highest potential for wind power generation1 (Nebraska ranks third), and other states near Nebraska with which it typically competes for industrial location projects. In the model plant analysis, estimated labor-related costs include the direct wages paid to production workers and costs associated with workers’ compensation insurance, unemployment insurance, social security, and fringe benefits. Compared to the 15 alternative states, Nebraska is found to offer an annual savings of $169,000 in labor-related costs, which is 6.7 percent less than the average labor costs for the other states.
This study has been developed specifically for use by fabricated metal product manufacturers to show how a Nebraska plant location can help them better respond to market conditions and significantly improve their competitive positions. Discussed are the many locational advantages the state offers, including performance-based tax incentives that enhance the state’s high-ranking business climate. To demonstrate quantitatively Nebraska’s locational advantages, the study includes an analysis of geographically variable labor and energy costs—two areas important to fabricated metal product manufacturers where Nebraska compares particularly favorably.
This study also concludes that a Nebraska plant location offers a significant energy cost advantage when compared to the average cost of the other 15 states. Industrial electric rates in the alternative states average 17.2 percent higher, and the average industrial gas rate is 10.2 percent more. Combining these advantages, Nebraska’s energy cost for the model plant is 13.8 percent less than the average for the other 15 alternative locations. Together, Nebraska’s annual labor and energy costs for the model plant are $202,600, or 7.2 percent less than the average costs for the 15 alternative states. Conversely, the average labor and energy costs in the other 15 states are 7.8 percent more than the Nebraska labor and energy costs.
The analysis makes cost comparisons among states on the basis of a model manufacturing plant. The model plant assumes employment of 50 production workers and the manufacture of a product representative for the “Fabricated Metal Product Manufacturing” subsector (NAICS 332).
1
U.S. Department of Energy, wind maps and wind resources potential estimates, www.windpoweringamerica.gov/wind_maps.asp.
-1-
Figure 1 provides a summary of the labor and energy costs for the model plant for each of the
16 alternate plant sites. These costs are shown on a per-production-worker basis.
figure 1 Figure 1 Labor and and energy Energy Costs Costs per perproduction ProductionWorker Workerfor for labor fabricated (NaiCs 332) Fabricated Metal Metal product Product Manufacturers Manufacturers (NAICS 332) $70,000 Energy Cost Labor Cost
$60,000
$50,000
$40,000
$30,000 $ ,
$20,000
$10,000
WY
WI
TX
SD
PA
OH
ND
MT
MO
MI
KS
IA
IL
CO
CA
NE
$0
Calculated labor (wages, workers’ compensation insurance, unemployment insurance, social security, and fringe benefits) and energy (electricity and natural gas) costs for a fabricated metal product manufacturer (NAICS 332). Source: Table Source: Table1919
-2-
Part A The Fabricated Metal Product Manufacturing Subsector The “Fabricated Metal Product Manufacturing” subsector (NAICS 332) is the largest manufacturing subsector2, when measured by employment, in the United States. The 2007 Census of Manufacturing indicates the fabricated metal product sector accounted for 12.0 percent of total employment by U.S. manufacturers in 2007. Moreover, fabricated metal product manufacturing establishments represented 18.5 percent of total U.S. manufacturing establishments and 6.5 percent of value of shipments.
total employees numbering 1,572,700 and production workers numbering 1,153,400. Capital expenditures for the subsector totaled $11,309.6 million in 2008. Data for the 1997–2008 review period provided in Table 1 show declines in total “Fabricated Metal Product Manufacturing” subsector employment and the number of production workers from 2000 to 2005 and then increases in employment from 2005 to 2007. Value of shipment and capital expenditures for the subsector declined from 2000 until 2003 and then increased from 2003 through 2008. Between 1997 and 2008, the value of subsector shipments grew by 38.7 percent and value added increased by 40.9 percent. During the same period, the number of production workers in the “Fabricated Metal
As the data shown in Table 1 indicate, the value of shipments for the “Fabricated Metal Product Manufacturing” subsector in the U.S. totaled $336,716.0 million in 2008. Value added in the industry totaled $188,072.0 million, with
Table 1 table 1 The 332), the Fabricated fabricated Metal Metal Product product Manufacturing Manufacturing Subsector subsector (NAICS (NaiCs 332), Characteristics Characteristics and Trends, trends, Selected selected Years, Years,1997–2008 1997-2008
Year 1997 2000 2001 2002 2003 2004 2005 2006 2007 2008
total employees
production Workers
Value added
Value of shipments
Capital expenditures
avg. hourly earnings prod. Wrkrs.
(1,000)
(1,000)
(Million $)
(Million $)
(Million $)
($)
1,763.8 1,814.9 1,724.7 1,574.8 1,487.6 1,468.5 1,463.4 1,491.8 1,612.6 1,572.7
1,327.1 1,375.1 1,296.0 1,169.2 1,110.9 1,082.0 1,081.4 1,110.9 1,183.2 1,153.4
133,493.1 148,874.7 138,792.7 138,972.0 137,451.7 144,994.8 155,800.8 169,321.7 184,775.0 188,072.0
242,813.5 268,212.0 253,113.4 247,059.5 245,339.2 261,100.5 289,432.4 317,214.5 320,496.7 336,716.0
9,368.7 9,991.8 8,632.9 7,964.3 6,661.2 7,209.4 7,706.2 8,340.3 10,599.6 11,309.6
13.55 14.54 14.56 15.77 15.81 16.26 16.80 17.33 17.71 18.42
Data for the fabricated metal products subsector as defined by the 2002 definition for NAICS 332, Fabricated Metal Product Manufacturing. Source: U.S. Bureau of the Census; Census of Manufacturing, 1997 and 2002; 2007 Core Business Statistics; and Annual Survey of Manufactures, 2001, 2005, 2006, and 2008.
2
The North American Industrial Classification System (NAICS)—used by the statistical agencies of the United States, Canada, and Mexico—employs a hierarchical classification structure consisting of: “National Industries,” “NAICS Industries,” “Sectors,” “Subsectors,” and “Industry Groups.” For example, the “U.S. Industry” Industrial Valve Manufacturing (NAICS 332911) is part of “NAICS Industry” Metal Valve Manufacturing (NAICS 33291), “NAICS Industry Group” Other Fabricated Metal Product Manufacturing (NAICS 3329), “NAICS Subsector” Fabricated Metal Product Manufacturing (NAICS 332), and “NAICS Sector” Manufacturing (NAICS 31-33).
-3-
Product Manufacturing” subsector decreased by 13.1 percent, total employment fell by 10.8 percent, and annual capital expenditures increased by 20.7 percent.
As a subsequent table will show, these nine 4-digit industry groups are further subdivided into fourteen 5-digit NAICS industries.
Worker productivity increased significantly during the study review period, with output per production worker increasing 59.6 percent. From 1997 to 2008, the value of shipments of fabricated metal product manufacturers adjusted for price changes3 increased 16.7 percent. During the same nine-year period, the average hourly wage for production workers adjusted for price changes4 increased 1.3 percent.
The data presented in Table 2 provide a basic description of the “Fabricated Metal Product Manufacturing” subsector with further disaggregation into the major 4-digit NAICS industry groups. The table also provides insights into the relative sizes and growth in industry shipments of the industry groups. For the “Fabricated Metal Product Manufacturing” subsector as a whole, industry shipments grew by 45.1 percent between 2002 and 2008. The fastest growing industry group was “Forging and Stamping” (NAICS 3321), with industry shipments growing by 63.3 percent between 2002 and 2008. The value of industry shipments for “Architectural and Structural Metals Manufacturing”
I.
Industry Structure
The 2002 North American Industrial Classification System (NAICS) divides the “Fabricated Metal Product Manufacturing” subsector (NAICS 332) into nine 4-digit NAICS industry groups shown in Table 2.
Table 2
table 2 the fabricated Metal product Manufacturing subsector(NAICS 332), (NaiCs 332) The Fabricated Metal Product Manufacturing Subsector Value industryShipments shipmentsby byIndustry industryGroup, Group, 2002 2002 and and 2008 2008 Value ofof Industry
NaiCs
industry Description
3320
fabricated Metal product Manufacturing Forging and Stamping Cutlery and Handtool Manufacturing Architectural and Structural Metals Manufacturing Boiler, Tank, and Shipping Container Manufacturing Hardware Manufacturing Spring and Wire Product Manufacturing Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing Coating, Engraving, Heat Treating, and Allied Activities Other Fabricated Metal Product Manufacturing
3321 3322 3323 3324 3325 3326 3327
3328 3329
Value of shipments 2002 2008 (Million $) (Million $)
% Change 2002-2008 (percent)
% of total 2008 (percent)
247,059.5
358,363.1
45.1
100.0
21,374.1 10,721.4
34,899.3 10,164.4
63.3 -5.2
9.7 2.8
60,045.5
94,979.8
58.2
26.5
23,297.9
33,287.4
42.9
9.3
10,406.3 9,034.8
8,948.8 10,104.5
-14.0 11.8
2.5 2.8
42,840.4
64,063.9
49.5
17.9
18,931.9
27,740.3
46.5
7.7
50,407.2
74,174.8
47.2
20.7
Source: U.S. Bureau of the Census; 2002 Census of Manufacturers, Summary Series; and 2008 Annual Survey of Manufactures.
3
Values adjusted using U.S. Bureau of Labor Statistics, Producer Price Index for Fabricated Metal Products. 4 Values adjusted using U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Workers.
-4-
(NAICS 3323), the second fastest growing industry group, grew 58.2 percent between 2002 and 2008. Other “Fabricated Metal Product Manufacturing” subgroups experiencing relatively faster growth in value of shipments between 2002 and 2008 included “Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing” (NAICS 3327), which recorded a 49.5 percent increase and “Coating, Engraving, Heat Treating, and Allied Activities” (NAICS 3328), which recorded a 46.5 percent increase.
The data in Table 2 and Figure 2 show the relative importance of fabricated metal product manufacturing subgroups, in terms of value of shipments for each industry group. “Architectural and Structural Metals Manufacturing” (NAICS 3323) is the largest industry group, accounting for 26.5 percent of total industry shipments. “Other Fabricated Metal Product Manufacturing” (NAICS 3329 – 20.7 percent), is the second largest industry group when measured by value of shipments, followed
figure 2 Figure 2
Value byIndustry industry Group, Valueof ofshipments Shipments by Group, fabricated Manufacturers (NaiCs 332), FabricatedMetal Metalproduct Product Manufacturers (NAICS 332), 20082008 NaiCs 3329 20.7%
NaiCs 3321 9.7% NaiCs 3322 2.8%
NaiCs 3328 7 7% 7.7%
NaiCs 3323 26.5%
NaiCs 3327 17.9%
NaiCs 3326 2.8% NaiCs 3325 2 5% 2.5%
NaiCs 3324 9.3%
total 2008 shipments - $358,363.1 Million Total 2008 Shipments - $358,363.1 Million NaiCs 3321 Forging and Stamping NAICS 3321 Forging a nd sta mping Manufacturing
NaiCs 3326 Spring and Wire Product
NAICS 3326 Spring a nd wire product Manufacturing ma nufacturing
NAICS 3322 Cutlery a nd ha ndtool ma nufacturing NaiCs 3322 Cutlery and Handtool NAICS 3323 Architectura l a nd Manufacturing
NAICS 3327 Ma chine shops;Shops; turned Turned NaiCs 3327 Machine product; a nd screw, nut, a nd bolt and Screw, Nut, and Bolt Product; ma nufacturing
structura l meta ls ma nufa cturing
Manufacturing
NaiCs 3323 anda nd shipping NAICSArchitectural 3324 Boiler, ta nk, conta iner ma nufacturing Structural Metals Manufacturing
NAICS 3328 Coa ting, engra ving, hea t trea ting, a nd a llied a ctivities
NaiCs 3328 Coating, Engraving, Heat
NAICS 3329 Other fa brica ted meta l Treating, and Allied Activities product ma nufacturing
NAICS 3325 Ha rdwa re ma nufa cturing
NaiCs 3324 Boiler, Tank, and Shipping Container Manufacturing Source: Table 2
NaiCs 3329 Other Fabricated Metal Product Manufacturing
NaiCs 3325 Hardware Manufacturing
Source: Table 2
-5-
by “Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing” (NAICS 3327 – 17.9 percent); “Forging and Stamping” (NAICS 3321 – 9.7 percent); “Boiler, Tank, and Shipping Container Manufacturing” (NAICS 3324 – 9.3 percent); “Coating, Engraving, Heat Treating, and Allied Activities” (NAICS 3328 – 7.7 percent); “Cutlery and Handtool Manufacturing” (NAICS 3322 – 2.8 percent); “Spring and Wire Product Manufacturing” (NAICS 3326 – 2.8 percent); and “Hardware Manufacturing” (NAICS 3325 – 2.5 percent).
up the subsector. As noted previously, “Architectural and Structural Metals Manufacturing” (NAICS 3323) is the largest industry group, in terms of industry shipments, and, as shown in Table 3, is also the largest in terms of value added and total employees. The data in Table 3 show that “Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing” (NAICS 3327) is the largest industry group in terms of number of companies, number of establishments, production workers, and capital investment. Also shown in Table 3, “Machine Shops” (NAICS 33271) is the largest 5-digit, NAICS industry in terms of number of companies, number of establishments, total employees, production workers, value added, and capital expenditures, while “Plate Work and Fabricated Structural Product Manufacturing” (NAICS 33231) is the largest NAICS industry in terms of value of shipments.
The data in Table 3 provide further detail for the “industry groups.” Data showing the number of companies, number of establishments, employees, production workers, value added, value of shipments, and capital expenditures are shown for the “Fabricated Metal Product Manufacturing” subsector (NAICS 332) as a whole for 2008 and for NAICS 4-digit industry groups and 5-digit NAICS industries that make
-6-
-7-
Values for "Industry Groups" and "NAICS Industries" may not sum to "Sector" total. Source: U.S. Bureau of the Census; 2007 Census of Manufactures; and 2008 Annual Survey of Manufactures.
(b)
57,633 2,538 2,538 1,399 1,399 13,232 5,420 7,812 1,284 264 612 408 693 693 1,419 1,419 24,994 20,923 4,071 5,672 5,672 6,402 1,060 5,342
60,664 2,764 2,764 1,503 1,503 14,118 5,813 8,305 1,537 297 676 564 768 768 1,579 1,579 25,394 21,140 4,254 6,169 6,169 6,832 1,258 5,574
Number of establishments
1,572,687 123,511 123,511 47,574 47,574 408,466 182,855 225,612 93,641 22,385 39,558 31,698 36,335 36,335 49,239 49,239 398,507 257,313 141,193 136,022 136,022 279,392 101,697 177,694
all employees
1,153,382 91,971 91,971 33,683 33,683 293,095 131,038 162,057 71,077 15,336 30,377 25,364 25,488 25,488 37,132 37,132 298,471 191,684 106,787 103,961 103,961 198,504 68,658 129,846
production Workers
336,715,981 33,437,512 33,437,512 8,757,673 8,757,673 89,441,166 47,237,576 42,203,590 31,093,539 5,552,419 8,718,900 16,822,221 8,075,686 8,075,686 9,083,600 9,083,600 60,910,410 36,584,364 24,326,046 27,053,842 27,053,842 68,862,553 28,044,346 40,818,207
188,072,027 15,833,500 15,833,500 6,137,763 6,137,763 44,877,742 22,199,553 22,678,189 14,668,268 3,421,977 4,535,375 6,710,916 4,816,707 4,816,707 4,930,540 4,930,540 39,940,635 24,638,382 15,302,252 16,432,205 16,432,205 40,434,666 16,646,945 23,787,721
11,309,597 1,205,498 1,205,498 314,874 314,874 2,250,403 1,066,998 1,183,406 1,048,561 434,027 201,601 412,934 212,824 212,824 287,201 287,201 2,930,679 1,784,298 1,146,381 1,030,199 1,030,199 2,029,358 848,558 1,180,800
Value of Value Capital shipments added expenditures - - - - - (Thousand Dollars) - - - - -
Number of companies and establishments from the 2007 Census of Manufactures, Industry Services; all other data from the 2008 Annual Survey of Manufactures.
industry Description
fabricated Metal product Manufacturing Forging and Stamping Forging and Stamping Cutlery and Handtool Manufacturing Cutlery and Handtool Manufacturing Architectural and Structural Metals Manufacturing Plate Work and Fabricated Structural Products Manufacturing Ornamental and Architectural Metal Products Manufacturing Boiler, Tank, and Shipping Container Manufacturing Power Boiler and Heat Exchanger Manufacturing Metal Tank (Heavy Gauge) Manufacturing Metal Can, Box, and Other Metal Container Mfg. Hardware Manufacturing Hardware Manufacturing Spring and Wire Product Manufacturing Spring and Wire Product Manufacturing Machine Shops; Turned Prod.; Screw, Nut & Bolt Mfg. Machine Shops Turned Product and Screw, Nut, and Bolt Manufacturing Coating, Engraving, Heat Treating, and Allied Activities Coating, Engraving, Heat Treating, and Allied Activities Other Fabricated Metal Product Manufacturing Metal Valve Manufacturing All Other Fabricated Metal Product Manufacturing
332 3321 33211 3322 33221 3323 33231 33232 3324 33241 33242 33243 3325 33251 3326 33261 3327 33271 33272 3328 33281 3329 33291 33299
Number of Companies(b)
by industry Group and NaiCs industry, 2007 and 2008
NaiCs Code
(a)
Table 3 table 3
The Fabricated Metal Product Manufacturing Subsector (NAICS 332), the fabricated Metal product Manufacturing subsector (NaiCs 332) Number of Companies and Establishments, Employment, Value of Shipments, Value Added, and Number of Companies and establishments, employment, Value of shipments, Value added, and Capital expenditures 2007(a) and 2008 Capital Expenditures by Industry Group and NAICS Industry, (a)
II. Industry Production Characteristics
subsector declined by 10.8 percent. Much of the reduction occurred between 2000 and 2002. During the same 1997–2008 period, the number of production workers in the subsector decreased by 13.1 percent with production workers’ hours declining 11.8 percent. For the 1997–2008 period, total employment in the “Fabricated Metal Product Manufacturing” subsector decreased by 191,300 or 10.8 percent and the number of production workers declined from 1,327,100 to 1,153,400, a reduction of 173,700 or 13.1 percent.
The manufacture of fabricated metal products encompasses a very large and diverse industry. In 2007, 60,664 establishments were primarily engaged in fabricated metal product manufacturing, a decrease of 2.5 percent from 2002 (see Table 4). It is interesting to note that the number of small establishments, as measured by employment, declined while the number of larger establishments increased during this period. Between 2002 and 2007, establishments in the “Fabricated Metal Product Manufacturing” subsector (NAICS 332) employing 20 or more workers increased by 743, or 4.3 percent, while those with fewer than 20 employees decreased by 2,298, or 5.1 percent.
As shown in Table 4, between 1997 and 2002 the “Fabricated Metal Product Manufacturing” subsector experienced very small increases or declines in cost of materials (1.8 percent decrease), value added (4.1 percent increase), and value of shipments (1.7 percent increase). During the recent 2002 to 2008 period, the subsector experienced large increases in cost of materials (59.1 percent), value added (35.3 percent), and value of shipments (36.3 percent).
The data presented in Table 4 compares selected characteristics of the “Fabricated Metal Product Manufacturing” subsector as a whole for 1997, 2002, 2007, and 2008. During the period, total employment in the 1997–2008
table 4 production Characteristics for the fabricated Metal product Manufacturing Production Characteristics for the Fabricated Metal Product Manufacturing subsector (NaiCs 332), 1997, 2002, 2007, and 2008
Table 4
Subsector (NAICS 332), 1997, 2002, 2007, and 2008
percent Change 1997- 2002- 20072002 2007 2008
1997
2002
2007
2008
62,384 19,021
62,219 17,197
60,664 17,940
N/A N/A
-0.3 -9.6
-2.5 4.3
N/A N/A
All Employees Number [thousands] Payroll [million $]
1,764.0 56,631.6
1,574.8 57,534.9
1,608.6 67,547.5
1,572.7 69,230.8
-10.7 1.6
2.1 17.4
-2.2 2.5
Production Workers Number [thousands] Hours [millions] Wages [million $] Average Hourly Wage [$]
1,327.1 2,674.9 36,251.8 13.60
1,169.2 2,321.7 36,607.7 15.77
1,179.3 2,401.6 42,492.0 17.69
1,153.4 2,359.7 43,468.8 18.42
-11.9 -13.2 1.0 16.0
0.9 3.4 16.1 12.2
-2.2 -1.7 2.3 4.1
Value Added by Manufacture [million $]
133,493.1 138,972.0 185,884.7 188,072.0
4.1
33.8
1.2
Cost of Materials [million $]
110,067.8 108,101.2 160,866.8 171,991.6
-1.8
48.8
6.9
Value of Shipments [million $]
242,813.5 247,059.5 345,104.3 336,716.0
1.7
39.7
-2.4
Establishments Number [thousands] With 20+ Employees [thousands]
Cost of Purchased Fuels and Electric Energy Electric Energy [million $] 2,504.3 Purchased Fuels [million $] 1,187.9 Quantity of Purchased Electric Energy [million kWh]
41,510.1
2,514.9 1,238.7
3,098.5 1,953.0
3,396.2 2,101.0
0.4 4.3
23.2 57.7
9.6 7.6
40,747.1
47,545.8
48,719.0
-1.8
16.7
2.5
N/A - Not Available Sources: U.S. Bureau of the Census; Census of Manufactures, Industry Series 1997, 2002, and 2007; and 2008 Annual Survey of Manufactures, Statistics for Industry Groups and Industries.
-8
Since 2002, the cost of materials has been of growing concern for fabricated metal product manufacturers, due, in part, to increases in steel and aluminum prices. Energy inputs are another important production input that has generally increased in price. While the cost of electricity inputs increased by 35.0 percent from 2002 to 2008, the cost of purchased fuels increased by 69.6 percent. As the global economy recovers from the recent recession, cost increases are expected to continue.
As the data in Table 5 indicate, there were 57,633 companies and 60,644 establishments in the “Fabricated Metal Product Manufacturing” subsector in 2007. Establishments in the “Machine Shops; Turned Products; and Screw, Nut, and Bolt Manufacturing” industry group totaled 25,394 in 2007, or 41.8 percent of total sector establishments. Data on the distribution of manufacturing establishments by number of employees demonstrate that the industry consists of a large number of small establishments. In 2007, the average establishment in the “Fabricated Metal Product Manufacturing” subsector employed 19.4 production workers; 42,724 or 70.4 percent of the establishments had less than 20 employees; and only 5.6 percent had more than 100 employees.
Table 5 provides data for selected additional production characteristics for fabricated metal product manufacturing for 2007. The industry data presented in Table 5 are for “Fabricated Metal Product Manufacturing” (NAICS 332) as a whole; the “Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing” industry group (NAICS 3327); and the balance of the industry, excluding the “Machine Shops; Turned Products; and Screw, Nut, and Bolt Manufacturing” industry group.
Data in Table 5 show that, on average, establishments in the “Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing” industry group are much smaller than those in table 5 establishment Characteristics for the fabricated Metal product Manufacturing Establishment Characteristics forshops; the Fabricated Metal Product Manufacturing subsector (NaiCs 332); Machine turned product; and screw, Nut and bolt Subsector (NAICS 332); Machine Shops; Turned Product; and Screw, industry Group (NaiCs 3327), & balance of subsector, 2007 Nut, and Bolt Manufacturing Industry Group (NAICS 3327) & Balance of Subsector, 2007
Table 5
NaiCs 332 fabricated Metal product Manufacturing 57,633 60,664 17,940 29.6% 3,400 5.6%
Number of Companies Number of Establishments Est. with 20+ employees Est. with 20+ emp (% of Total) Est. with 100+ employees Est. with 100+ emp (% of Total) Production workers Average Prd. Wrks. Per Estab.
NaiCs 3327 Machine shops; turned product; and screw, Nut, and bolt Manufacturing 24,994 25,394 5,180 20.4% 618 2.4%
balance of fabricated Metal product Manufacturing 32,639 35,270 12,760 36.2% 2,782 7.9%
1,179,280 19.4
303,255 11.9
876,025 24.8
Value added (Million$) Per Establishment ($1,000) Per Production Worker ($1,000)
185,885 3,064 158
39,638 1,561 131
146,246 4,146 167
Value of shipments (Million$) Per Establishment ($1,000) Per Production Worker ($1,000)
345,104 5,689 293
61,833 2,435 204
283,272 8,032 323
Source: Calculated by Ken Lemke, Nebraska Public Power District using preliminary data from U.S. Bureau of the Census, 2007 Census of Manufactures, Industry Series.
-9
the balance of the “Fabricated Metal Product Manufacturing” subsector. In 2007, 79.6 percent of “Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing” establishments had fewer than 20 employees, only 2.4 percent had more than 100 employees, and the average number of production workers per establishment was 11.9, 61.3 percent, of the subsector average. For the “Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing” industry group, 2007 average value added per establishment, $1.6 million, was 50.9 percent of the subsector average and 2007 value of shipments per establishment, $2.4 million, was 42.8 percent of the subsector average.
by Fabricated Metal Product Manufacturers in 2008. Included among these states are the top seven states in terms of value added by the Fabricated Metal Product Manufacturing subsector, the top eight states for potential wind power generation, Nebraska ranks third, and other states that typically compete with Nebraska for plant locations. The 16 states are included in this study as alternative sites for plant locations and are evaluated in Part B of this report using the geographically variable labor and energy costs. In terms of employment and value added by manufacture, the “Fabricated Metal Product Manufacturing” subsector is largest in California. In terms of employment, Texas is second largest followed by Ohio. As the data presented in Table 6 indicate, the 16 states included in this study accounted for 54.4 percent of the production workers and 53.8 percent of the total value of shipments by the “Fabricated Metal Product Manufacturing” subsector in 2008.
III. Industry Location Characteristics Showing the geographic distribution of the “Fabricated Metal Product Manufacturing” subsector (NAICS 332), Table 6 presents data on employment, wages, value added by manufacture, and value of shipments for 16 selected states. As indicated in the table, the 16 states accounted for $101.2 billion or 53.8 percent, of the $188 billion of value added
table 6 location Characteristics of establishments in the fabricated Metal product Location Characteristics of Establishments in the Fabricated Metal Product Manufacturing subsector (NaiCs 332), 2008
Table 6
Manufacturing Subsector (NAICS 332), 2008
state Nebraska California Colorado Illinois Iowa Kansas Michigan Missouri Montana North Dakota Ohio Pennsylvania South Dakota Texas Wisconsin Wyoming Total Sel. States Percent of U.S. Total U.S.
Number of prod. Wrkrs. 6,307
Value added ($1,000) 1,209,947
Value of shipments ($1,000) 2,354,745
Capital expend. ($1,000) 48,048
avg. hourly earnings ($) 17.21
154,900 14,423 103,034 22,092 17,995 77,099 32,495 1,575 1,913 119,994 90,490 4,156 131,785 70,577 1,465
111,822 10,465 76,219 16,477 12,709 55,921 24,028 1,167 1,482 89,447 66,928 2,982 98,041 51,960 1,031
17,306,572 1,758,759 11,957,445 2,705,707 2,047,425 8,540,739 3,525,584 141,475 312,307 16,517,386 10,834,884 446,324 16,011,107 7,676,332 187,109
30,115,400 3,356,931 22,954,694 4,968,744 3,892,904 15,762,465 7,231,842 283,010 629,362 31,704,278 21,158,397 901,076 32,635,366 14,525,539 330,802
1,040,891 75,182 675,770 195,611 128,682 605,450 223,718 4,632 20,220 879,305 659,296 15,915 953,473 542,152 17,505
18.69 18.81 18.50 18.51 16.95 18.51 19.33 16.79 18.68 18.43 18.56 15.72 17.90 18.52 21.04
852,925 54.3% 1,571,812
626,986 54.4% 1,152,704
101,179,102 53.8% 187,970,539
192,805,555 53.8% 358,170,515
6,085,850 53.8% 11,309,597
18.42 100.0%0 18.42
Number of employees 8,932
Source: U.S. Bureau of the Census, 2008 Annual Survey of Manufacturers.
- 10
California, with 111,822 production workers, led the nation in fabricated metal product manufacturing in 2008. The industry’s value added by manufacture in California of $17,306.6 million accounted for 9.2 percent of the total U.S. value added.
The data in Table 7 show the shipment characteristics for fabricated metal products. As the data in Table 7 indicate, the average shipping distance for fabricated metal products in 2007 was 596 miles, which was 82.7 percent of the 721 mile average for all manufacturing industries. Table 7
Table 7
Shipment Characteristics for the Fabricated Metal Products Shipment Characteristics for the Fabricated Metal Products Manufacturing Subsector (NAICS 332) and Selected Commodities, 2007 Manufacturing Subsector (NAICS 332) and Selected Commodities, 2007
Total fabricated metal products (NAICS 332) Selected Standard Classification of Transported Goods (SCTG) Commodities Pipes and tubes (SCTG 3311) Pipe and tube fittings (SCTG 3312) Structures and parts, except prefabricated buildings (SCTG 3320) Nails, screws, bolts, nuts, washers, staples except in strips, and similar fastening articles (SCTG 3331) Handtools and cutlery, except of precious metals (SCTG 3332) Interchangeable tools for hand- or machine-tools (SCTG 3333) Locks, mountings and fittings, racks and similar fixtures, and automatic door closers (SCTG 3334) Containers of a capacity not exceeding 300 liters, except containers for compressed or liquefied gas (SCTG 3391) Other (SCTG 3399)
Value (Mil. $) 338,290
Tons (1,000s) 118,350
Ton-miles (Millions) 44,620
Value Per Ton 2,858
Average Miles 596
75,999 45,275 85,291
45,561 13,172 30,351
18,243 5,181 11,741
1,668 3,437 2,810
243 355 426
39,814
7,830
2,987
5,085
552
18,642
1,584
1,330
11,769
730
17,594
877
444
20,062
723
19,278
2,534
1,148
7,608
586
17,683
7,129
2,486
2,480
865
68,717
22,886
8,783
3,003
733
Source: U.S. Bureau of the Census, 2007 Commodity Flow Survey.
- 11 -
IV. Capital Expenditures and Industry Outlook
competitive position of U.S. fabricated metal product manufacturers relative to their foreign competitors. Over the longer term, the “Fabricated Metal Product Manufacturing” subsector is expected to record slow, positive growth in output, accompanied by moderate declines in employment.
Capital investment in the “Fabricated Metal Product Manufacturing” subsector (NAICS 332) was $11,309.6 million in 2008, which was $3,345.3 million or 42.0 percent higher than in 2002. As the data in Table 8 demonstrate, the growth and rate of capital expenditures varied significantly among industry groups. The “Boiler, Tank, and Shipping Container Manufacturing” industry group (NAICS 3324) recorded the greatest increase (91.9 percent) in capital expenditures between 2002 and 2008, followed by “Forging and Stamping” (57.8 percent), “Coating, Engraving, Heat Treating, and Allied Activities” (49.8 percent), and “Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing” (43.7 percent) industry groups. In the case of “Hardware Manufacturing,” capital expenditures decreased by 18.5 percent between 2002 and 2008.
As indicated by the data presented in Table 9, employment in the “Fabricated Metal Product Manufacturing” subsector is projected to decline by 8.5 percent between 2008 and 2018. During the same period, real output is projected to increase 14.2 percent, which is about 60 percent of the projected 23.5 percent increase for the entire manufacturing sector. The “Architectural and Structural Metals Manufacturing” industry group (NAICS 3323) is projected to experience the greatest growth in employment, 4.9 percent and output, 26.5 percent, between 2008 and 2018. The “Hardware Manufacturing” industry group (NAICS 3325) is projected to experience the lowest change in real output (0.0 percent). The “Cutlery and Hand Tool Manufacturing” industry group is expected to see the largest decline in employment (decrease of 26.98 percent) from 2008 to 2018.
Economic growth of the “Fabricated Metal Product Manufacturing” subsector is dependent on many factors, including the overall performance of the U.S. economy, economic and business conditions internationally, and the
Table 8
table 8 Capital expenditures in the fabricated Metal product Manufacturing Capital Expenditures in the Fabricated Metal Product Manufacturing Subsector (NAICS 332), (a) subsectorby (NaiCs 332) Groups, by industry Groups, Industry 2002 and 2002 2008 and 2008
NaiCs Code 332 3321
industry Description fabricated Metal product Manufacturing Forging and Stamping
3322
Cutlery and Handtool Manufacturing
3323
Architectural and Structural Metals Manufacturing
3324
2002 2008 - - - - (thousand Dollars) - - - 7,964,345 11,309,597 764,074
1,205,498
percent Change 2002-08 42.00 57.77
2008 Cap. exp. as % Val. add. 6.00 7.60
311,117
314,874
1.21
5.10
1,627,545
2,250,017
38.25
5.00
Boiler, Tank, and Shipping Container Manufacturing
546,527
1,048,561
91.86
7.20
3325
Hardware Manufacturing
261,189
212,824
-18.52
4.40
3326
Spring and Wire Product Manufacturing
261,660
287,201
9.76
5.80
3327
Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing
2,039,249
2,930,679
43.71
7.30
3328
Coating, Engraving, Heat Treating, and Allied Activities
687,846
1,030,199
49.77
6.30
3329
All Other Fabricated Metal Product Manufacturing
1,465,138
2,029,744
38.54
5.00
Source: U.S. Bureau of the Census; 2002 Census of Manufactures; and 2008 Annual Survey of Manufactures.
- 12 -
table 9 Table 9 employment and output, fabricated Metal product Manufacturing subsector,
Employment and Output, Fabricated Metal Product Manufacturing Subsector, by by Group, industryand Group, andManufacturing, for all Manufacturing, 1998,and 2008, and projected Industry for All 1998, 2008, Projected 2018 2018
NaiCs 31-33 332 3321 3322 3323 3324 3325 3326 3327
3328
3329
NaiCs 31-33 332 3321 3322 3323 3324 3325 3326 3327
3328
3329
industry Manufacturing Fabricated Metal Product Manufacturing Forging and Stamping Cutlery and Handtool Manufacturing Architectural and Structural Metals Manufacturing Boiler, Tank, and Shipping Container Manufacturing Hardware Manufacturing Spring and Wire Product Manufacturing Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing Coating, Engraving, Heat Treating, and Allied Activities Other Fabricated Metal Product Manufacturing
industry Manufacturing Fabricated Metal Product Manufacturing Forging and Stamping Cutlery and Handtool Manufacturing Architectural and Structural Metals Manufacturing Boiler, Tank, and Shipping Container Manufacturing Hardware Manufacturing Spring and Wire Product Manufacturing Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing Coating, Engraving, Heat Treating, and Allied Activities Other Fabricated Metal Product Manufacturing
part a -- employment thousands of Jobs avg. ann. rate of Change 1998 2008 2018 1998-2008 2008-2018 17,559.5 13,431.2 12,225.2 -2.6 -0.9 1,739.5 1,528.3 1,399.1 -1.3 -0.9 146.0 79.6
107.9 49.1
84.9 35.9
-3.0 -4.7
-2.4 -3.1
395.8
409.4
429.4
0.3
0.5
108.5
95.8
89.1
-1.2
-0.7
53.5 82.9
29.3 51.5
24.0 41.9
-5.8 -4.6
-2.0 -2.0
370.7
360.1
319.5
-0.3
-1.2
172.6
143.7
124.8
-1.8
-1.4
329.9
281.5
249.6
-1.6
-1.2
part b --Value of output billions of Chain-Weighted 2000 Dollars avg. ann. rate of Change 1998 2008 2018 1998-2008 2008-2018 4,061.2 3,985.3 4,922.9 -0.2 2.1 254.7 250.6 286.3 -0.2 1.3 25.5 11.1
24.0 10.7
24.6 11.1
-0.6 -0.4
0.3 0.3
57.2
58.9
74.5
0.3
2.4
23.8
20.9
23.8
-1.3
1.3
11.2 9.1
10.3 7.4
10.3 9.3
-0.8 -2.0
0.0 2.2
45.2
47.1
55.6
0.4
1.7
19.6
22.5
24.8
1.4
1.0
51.9
49.1
52.5
-0.6
Source: Employment Projections Program, U.S. Department of Labor, U.S. Bureau of Labor Statistics, www.bls.gov/emp/ep_table_207.htm.
- 13 -
0.7
On balance, the factors affecting firms producing fabricated metal products will depend to a great extent on the ability of companies to compete within their industry and in the markets for their products. While many external factors will influence the overall performance of the industry, the outlook for individual companies
that can control costs and respond to emerging and changing market opportunities will be significantly enhanced. Part B of this study discusses how establishments producing fabricated metal products can better respond to market conditions and significantly improve their competitive positions with a Nebraska location.
- 14 -
Part B Nebraska Advantages for Fabricated Metal Product Manufacturers Missouri, and the geographic center is in Butte County, South Dakota (the geographic center of the 48 contiguous states is Smith County, Kansas). More than 50 million people live within a 500-mile radius of Nebraska.
Nebraska offers a wide range of locational advantages to fabricated metal product manufacturers. In the continuing portion of this study, Nebraska resources and location attributes important to fabricated metal product manufacturers are discussed. An evaluation of geographically variable labor and energy costs for selected states follows using a model establishment manufacturing fabricated metal products. I.
In addition to being a prominent location for national markets, Nebraska is well situated to serve international markets, which are important to many fabricated metal product manufacturers. For example, the Union Pacific’s main railroad line in central Nebraska is the busiest freight corridor in the world; many of the trains carry grain to West Coast ports for shipment around the world. Also, the state currently has operating Foreign Trade Zones in Omaha (Zone No. 19, Grantee/Greater Omaha Chamber of Commerce) and in Lincoln (Zone No. 59, Grantee/Operator: Lincoln Chamber of Commerce Foreign-Trade
Nebraska Location Resources
Nebraska lies near both the population and geographic centers of the United States (Figure 3). The nation’s population center moved across the Mississippi River for the first time in 1980 and continues to shift westward. The current population center is in Phelps County,
Figure 3 figure 3 Truck Accesstruck to Regional access toand regional g National and Markets National Markets
federal Motor Carrier safety administration *Maximum driving time for property-carrying vehicles (a) No motor carrier shall permit or require any driver used by it to drive a property-carrying commercial y such driver drive a pproperty-carrying p y y g commercial motor vehicle: motor vehicle,, nor shall any (1) More than 11 cumulative hours following 10 consecutive hours off duty *[68 FR 22616, Apr. 28, 2003]
- 15 -
corridor in the world, with more than 145 trains operating over the line every 24 hours.
Zone). Foreign Trade Zones reduce or eliminate duties and excise taxes by allowing domestic activity involving foreign items to take place as if it were outside of U.S. Customs territory.
BNSF operates more than 1,500 route miles of track in Nebraska, is one of the state’s primary railroads transporting two million carloads of freight in Nebraska each year, and employs more than 4,000 people in the state. BNSF has rail yards in Alliance, Lincoln, McCook, and Omaha; intermodal and automotive facilities in Omaha; and mechanical shops in Alliance and Lincoln.
Transportation Nebraska’s central location is especially advantageous for transportation services. The state’s communities are connected by a good highway system that includes 8,539 miles of interstate, freeway, and arterial roads. That system includes a 455-mile stretch of Interstate 80, the most traveled east-west transcontinental route of the interstate highway system. North-south interstate highways that add to Nebraska’s market include Interstate 29, which passes along the state’s eastern border in Iowa, and Interstate 25, which passes in close proximity to the state’s western border.
Commercial airline service is available in nine Nebraska cities, providing direct service to major hubs. Scheduled air freight service is provided to five additional communities with on-demand service available. A total of 81 public-use airports are located throughout the state. With the Missouri River forming Nebraska’s eastern border, the state is a western terminus for barge traffic. Barges have access to both the Gulf of Mexico via the Mississippi River and to the Atlantic Ocean via the Great Lakes and the St. Lawrence Seaway.
More than 11,500 licensed motor carriers with worldwide connections are based in Nebraska and serve businesses throughout North America. Largely because of Nebraska’s good interstate connections, one of the largest trucking companies in the country, Werner Enterprises, is headquartered in Omaha.
Utilities In providing a full range of reliable utilities with many cost advantages, Nebraska offers additional benefits to fabricated metal product manufacturers. Nebraska’s electric rates for typical industrial customers are 33.3 percent less than the U.S. average and are among the lowest of the 48 contiguous states (Figure 4). This benefit is of particular importance to the “Fabricated Metal Product Manufacturing” subsector (NAICS 332), with its high level of electricity use relative to total energy consumption. A statewide grid system with regional interconnections assures reliability of service and adequacy of supply.
The nation’s two largest rail companies— BNSF Railway Company and Union Pacific Railroad—provide rail service to many Nebraska communities. Ten freight railroads operate more than 3,200 miles of track throughout the state. No major city in the United States is more than five days by rail from Nebraska. Amtrak provides passenger service in Nebraska with stops in five communities. The Union Pacific (UP) maintains headquarters in Omaha and is one of the largest railroads in North America with 32,000 miles of track in the western two-thirds of the country. UP operates more than 1,000 miles of track in Nebraska. The Harriman Dispatching Center in Omaha is the most technologically advanced dispatching facility in the country. Union Pacific’s Bailey Yard in North Platte is the largest rail freight car classification yard in the world. The yard covers 2,850 acres, switches 10,000 rail cars daily, and has 315 miles of track. Union Pacific’s main line in central Nebraska is the busiest rail freight
One of the reasons for Nebraska’s low electric rates is its close proximity to the vast low-sulfur coal fields of eastern Wyoming. It is also the only state in the nation with electric service provided entirely by public power. Nebraska’s two largest utilities, Nebraska Public Power District (NPPD) and Omaha Public Power District (OPPD), have under their control an efficient and dependable “mix” of generating - 16 -
Figure 4 Electric Costs for Industrial Service, Summer 2009–Winter 2009
Source: Edison Electric Institute, “Typical Bills and Average Rates Report,” January 1, 2009 and July 1, 2009. State averages are weighted using eight months of January 2009 data and four months of July 2009 data. Nebraska data represent the average for Omaha Public Power District, Lincoln Electric System, and Nebraska Public Power District using the same seasonal weighting.
Nebraska utilities also operate 12 hydroelectric plants and receive a power allotment from the Western Area Power Administration (WAPA) hydroelectric facilities on the Missouri River. The utilities operate with a reserve capacity that protects users against voltage reductions and brownouts. Furthermore, the utilities are members of the Mid-Continent Area Power Pool (MAPP), which interconnects eight upper Midwestern states and a Canadian province with an extensive network of high voltage transmission facilities.
systems to supply current and projected needs; the mix includes coal, nuclear, hydro, gas, oil, wind, and diesel sources. Some major electric-generating facilities in Nebraska are: •
•
•
•
1,300-megawatt NPPD coal-fired Gerald Gentleman Station near Sutherland, Unit No. 1 on-line in 1979 and Unit No. 2 on-line in 1982 1,330-megawatt OPPD coal-fired Nebraska City Station near Nebraska City, Unit No. 1 on-line in 1979 and Unit No. 2 online in 2009 800-megawatt NPPD Cooper Nuclear Station near Brownville, on-line in 1974 486-megawatt OPPD Fort Calhoun Nuclear Station, on-line in 1973
Natural gas in Nebraska is also attractive to industry for service, supply, and price. A gas-producing state, Nebraska is close and well-connected by pipeline to the major gas fields of the central and southern plains. The state’s average cost of industrial gas is less than both the regional and national averages. The pipelines of two major companies, Northern Natural Gas and Kinder Morgan, provide an ample supply of natural gas to most areas of Nebraska. Depending on usage requirements, natural gas is offered both on a “firm” and “interruptible” basis.
NPPD owns and operates a 59 MW wind generation facility near Ainsworth and has long term agreements to purchase 122 MW of wind generated power from facilities located near Bloomfield. NPPD also has long-term purchase agreements for additional wind power from two proposed wind generation facilities that will be located in Boone and Knox Counties in Nebraska. - 17 -
Labor Quality
Higher Education Resources
Any industry derives benefits from a productive and well-educated labor force. Nebraska’s labor force has a strong work ethic and technical proficiency. The state was settled by individuals with the foresight and diligence to transform it into a world center of agricultural production. Their descendants maintain a work ethic and mechanical aptitude that carry over into the state’s manufacturing sector. Contributing to Nebraska’s high labor productivity are very low absenteeism and labor turnover rates. Furthermore, Nebraska employers pay among the lowest unemployment insurance and workers’ compensation costs in the nation.
As part of a growing and rapidly changing industry, fabricated metal product manufacturers can benefit greatly from flexible state-of-the-art educational resources. The University of Nebraska, state colleges, and the community college network are important elements in providing resources to assist manufacturers in maintaining an educated and trained work force. The University of Nebraska, is comprised of four campuses: The University of NebraskaLincoln, the University of Nebraska at Omaha, the University of Nebraska Medical Center, and the University of Nebraska at Kearney. It has the largest facilities among the state’s 21 colleges and universities and offers advanced degrees in most professional fields. It is a major center for both basic and applied research and has a combined student enrollment of more than 49,000.
In the case of workers’ compensation rates, Nebraska’s rate of $3.53 per $100 of manufacturing payroll is 13.7 percent lower than the average for the other 15 alternative plant location states included in this study (Figure 5A and Table 15). Nebraska’s unemployment insurance cost provides a more significant cost advantage. The state’s estimated unemployment insurance cost of $121.50 per worker is 52.0 percent less than the $253.07 average cost for the other states included in the comparison (Figure 5B).
Founded in 1869, the Lincoln campus of the University of Nebraska is the state’s land-grant university. The University of Nebraska is one of a select group of research universities that holds membership in the Association of American Universities—a distinction granted in 1909. Nebraska was the first university west of the Mississippi to establish a graduate college (in 1896). The University of Nebraska boasts 22 Rhodes scholars and 2 Nobel laureates among its alumni.
Nebraska’s work force quality is also highly rated by the state’s employers and by various national comparisons. In 2008, 90.1 percent of the state’s population 25 years of age and older were high school graduates, compared to 85.0 percent nationally. In addition, the 2008–09 Nebraska high school graduation rate was 89.9 percent. One reason for the high graduation rate is the state’s comparatively low student-teacher ratio—13.3:1 in 2008 compared to 15.5:1 for the nation. Finally, Nebraska students consistently score above the U.S. average on both standardized achievement tests and college entrance exams. In 2009 Nebraska students averaged 22.1 on the ACT college entrance test, compared to 21.1 nationally. Moreover, Nebraska’s average composite ACT score was achieved with 72 percent of graduates taking the exam, compared to 45 percent of graduates nationwide.
–Research The University of Nebraska is among the top 35 public universities in the U.S. in spending on research and development. Research funding has more than doubled since 2002, and extensive new research facilities have been built on the Lincoln campus (UNL) and at the Medical Center. UNL has embarked on an exciting partnership called Nebraska Innovation Campus, a 249-acre private-public research and technology center adjacent to City Campus. The Innovation Campus is being developed with the support of 2015 Vision, a group of Lincoln, Nebraska,
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figure 5a Figure 5A
Workers’ Compensation rates Workers’ Compensation Rates, Alternative Plantlocations Locations alternate plant Nebraska u.s.
$3.53 $3.71
California Colorado illinois iowa kansas Michigan Missouri Montana North Dakota ohio pennsylvania south Dakota texas Wisconsin Wyoming $0.00
$6.28 $2.52 $5.29 $3.29 $3.69 $3.10 $3.99 $6.98 $3.71 $3.71 $3.83 $3.02 $4.73 $3.52 $3.71
$1.00
Source: See15. Table Source: See Table
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
15
figure 5b Figure 5B Per Unemployment Insurance Costs, perWorker Worker unemployment Costs Alternative Plantlocations Locations alternate plant Nebraska u.s.
122 268
California Colorado illinois iowa kansas Michigan Missouri Montana North Dakota ohio pennsylvania south Dakota texas Wisconsin Wyoming $0.00
288 163 327 370 113 413 260 243 235 239 370 84 113 311 267 $50.00
$100.00
$150.00
$200.00
$250.00
Source: See Table 15.
Source: See Table 15 - 19 -
$300.00
$350.00
$400.00
$450.00
$500.00
business leaders dedicated to strengthening research, education, and economic development through entrepreneurship and investment. The Innovation Campus will leverage UNL’s research capacity by attracting private sector companies to locate near the university where they can work closely with university researchers generating jobs and economic activity.
of the mechanics of traumatic brain injury resulting from improvised explosive devices, and a facility developing vaccines against biological warfare agents and products that can be used as therapeutic countermeasures to treat people who have been exposed to biological agents. A brief description of centers offering special expertise of interest to manufacturers of fabricated metal products follows.
–Engineering The College of Engineering is situated on three campuses: Lincoln (City and East Campuses) and Omaha. Currently, the college has more than 3,000 students enrolled and 300 permanent faculty and staff. Areas of engineering research and teaching at the University of Nebraska include Architectural Engineering, Biological Systems Engineering, Chemical and Biomolecular Engineering, Computer Science and Engineering, Computer and Electronics Engineering, Construction Management, Construction Systems, Electrical Engineering, Engineering Mechanics, Industrial and Management Systems Engineering, and Mechanical Engineering.
Engineering and Science Research Support Facility (ESRSF)—The ESRSF is a dedicated, highly diverse technical facility with expertise in mechanical design, manufacturing, machining, fabrication, and technical services. The ESRSF technical staff combines high technical aptitude and background in hands-on instrument design, advanced machining, welding, fabrication, and materials testing. ESRSF will provide manufacturers with consulting services, prototyping, new part production runs, and other machining and construction services. Consulting services include: Workflow Management, Product/Process Design, Employee Technical Training, Machining Procedures, and Project Life Cycle Management.
Research at the College of Engineering is progressive and collaborative, supporting innovative research through two core facilities, housing six areas of research, and more than 16 research centers and laboratories. The two core facilities are supported by the Nebraska Research Initiative funded by the Nebraska legislature to significantly enhance the scientific and research capabilities at the University of Nebraska in technological areas with commercial potential. The Advanced Electro Optics Engineering Core Facility houses state-of-the-art lasers for producing a range of novel materials, thin films, and coatings which can be deposited with atomic precision on nanometer- to millimeter-sized areas/volumes. The Advanced Manufacturing Engineering Core Facility has the unique capability of synthesizing biological products, nanocomposites, and nanomachined electrical components. The programs residing in the research centers/laboratories include a $10 million program for transportation research, an organization developing the technologies for the next generation of bridges and pavement, a trauma mechanics research initiative advancing the experimental and theoretical understanding
• • • • •
CNC & Conventional Machining, Welding, Fabrication, and Electroplating/Anodizing Foundry and Pattern Shop Computer Aided Design (CAD) Computer Aided Manufacturing (CAM) Materials Testing Equipment
Equipment housed within the ESRS machine shop includes: CNC Cincinnati-Milacron 1250 Sabre with Ab Acramatic 2100 Control - has four-axis operation with a maximum of three-axis interpolation. This machine is used to machine a variety of drill system parts and components. Its large capacity allows for work pieces up to 50" x 30" x 26". This CNC machining center utilizes the latest computer technology for the machining of complex contours through parametric programming (equational programming), solid modeling programming through CAM software, and online quick programming of simple - 20 -
geometries. This feature enhances the technical staff’s ability to accommodate a wide range of machining jobs.
25" x 18" Nardini Gap Bed Lathe - where much of the large cumbersome work pieces that require turning operations are performed. Drill system equipment such as barrels, large pulleys, housings, winch hubs, etc., are currently machined on the Nardini Lathe. Other heavy applications include the machining of train axles and wheels for material science research projects.
BridgePort Series 1 CNC Milling Machines (2) - provide additional resources for high volume machining and drastically cut delivery time to the customer. They are capable of machining smaller complex and simple 2-dimensional work pieces. Their conversational shop floor programming features allow tool makers to quickly program and machine the work piece.
Conventional BridgePort Milling Machines (3) - used for such applications as milling, drilling, boring, key way cutting, etc.
CNC BridgePort Interact 412 Machining Center - a three-axis, 12-tool station with a GE Fanuc Series O-Mate control that is available for multiple part production. Off-line part programming using a CAD workstation facilitates part design and production.
Conventional 15" x 50" Clausing Lathes (2) - used for turning, threading, and boring of cylindrical work pieces. All of the conventional machining equipment contains state-of-the-art digital readouts and tooling. Kent Automatic Surface Grinder - used for grinding flat and angular surfaces. This grinder has been used for sharpening ice coring cutters, core dogs, reamers, and surface grinding precision drill system parts. An Oliver tool cutter grinder is used for the complex geometry grinding on double angle cutters, core dogs, and reamers.
CNC Mazak Quick Turn ATC Lathe - has a unique feature of live tooling on the turret. This feature allows the technical staff to perform turning and milling operations in one setup. The result is a high precision machining process that can be performed without ever having to remove the work piece from the chuck, which eliminates costly secondary machining processes. The Mazak CNC lathe has been used to machine drill system components for the past eight years.
Tig, Mig, Gas, and Arc Welders - all have a capacity ranging from very intricate applications to heavy-duty. The Tig and Mig welders can accommodate a wide range of steel and non-ferrous alloys. The shop has an acetylene/oxygen gas torch for brazing and flame cutting, along with a Plasma cutting unit.
Engis Lapping Machine - for precision machining, is used to machine and polish work pieces of extreme tolerances (.000001 inch). Common applications are thin film polishing and material removal, sharpening to razor edges, and finish machining of hardened materials. This lapping machine is located in the clean room facility of the engineering machine shop. During and after machining, the work piece is inspected with precision inspection equipment.
Foundry and Pattern Shop - one of the unique features of the ESRSF. The foundry can produce brass and aluminum sand castings. The crucible capacity is approximately 125 pounds for brass and 20 to 25 pounds for aluminum. The pattern shop and foundry add versatility to the engineering shop services by furnishing high quality castings. In the past, the
- 21 -
foundry was utilized by the Polar Ice Coring Office Engineers for the production of winch hub and bearing housing castings. The patterns for these winch parts are still in the inventory of ESRSF.
hardware related to machinability, surface integrity, adaptive control, and expert systems in the processing of new high tech manufacturing materials and methods. Center for Engineering Logistics and Distribution (CELDi) is a multi-university, multi-disciplinary National Science Foundation sponsored Industry/University Cooperative Research Center. Research endeavors are driven and sponsored by representatives from a broad range of member organizations, including manufacturing, maintenance, distribution, transportation, information technology, and consulting.
Betenbender Heavy Duty Shear, Edwards 100 Ton Iron Worker, and Additional Hand Brakes and Foot Shears - turn in-house fabrication and sheet metal work into routine services for the machine shop. Materials Testing Bay - houses computer-controlled testing machines that can perform a variety of material and structural tests. The capacities of these testing machines are from 0 to 440,000 pounds. A torsion testing machine is available for testing barrels, well screens, drive shafts, gears, and more. Impact testing equipment is also accessible for impact tests on metals, plastics, and other materials.
Through basic research, collaborative applied research with industry, technology transfer, and education, CELDi is a catalyst for developing the engineering logistics methodology necessary for logistics value chain optimization. Within CELDi, the activities include, but are not limited to: • Value-adding processes that create time and place utility (transportation, material handling, and distribution) • Value-sustaining processes that prolong useful life (maintenance, repair, and rework) • Value-recovering processes that conserve scarce resources and enhance societal goodwill (returns, refurbishment, and recycling)
Nebraska Center for Materials and Nanoscience (NCMN) is a multidisciplinary organization with more than 75 faculty members from UNL and other University of Nebraska campuses. The concern is with atomic manipulation, properties affected by nanoscale dimensions, self-assembly, ordered nanoarrays, quantum dots and wires, nanoelectronics, quantum computing, nanomechanics, nanooptics, molecular design, nanoelectro-mechanical systems, nanobiological function, and life sciences.
Along with research and development efforts at the University of Nebraska, Nebraska operates a state college system with campuses at Chadron, Peru, and Wayne. Undergraduate degrees are offered at these institutions in Industrial Technology and Industrial Management and teaching endorsements are offered in Industrial Technology Education and Trade and Industrial Education. A variety of private colleges and universities are also located in Nebraska including Creighton University in Omaha, Nebraska Wesleyan University in Lincoln, and others located throughout the state (see Figure 6A).
There are eight central facilities to support the NCMN’s mission: Crystallography, Electron Microscopy, Materials Preparation, Metallurgical and Mechanical Characterization, Scanning Probe Microscopy, X-Ray Materials Characterization, Nanofabrication, and Cryogenics. These facilities are available to all UNL faculty as well as companies in Nebraska and elsewhere. Center for Nontraditional Manufacturing Research is the only research facility in the United States dedicated solely to the examination of nontraditional manufacturing methods. Projects involve both basic and applied research on numerous nontraditional manufacturing processes. The Center’s mission is to target existing and future needs for software and
Another important facet of higher education in Nebraska is the statewide community college system that provides specialized training programs for new and expanding Nebraska industries. As indicated in Figure 6B, the state - 22 -
Figure 6A Location of Colleges and Universities in Nebraska
Chadron Wayne Scottsbluff Blair Fremont Omaha Papillion Seward Bellevue
Grand Island Kearney
Curtis
York
Lincoln Crete
Hastings
Peru
Source: Nebraska Coordinating Commission for Postsecondary Education
Figure 6B Community Colleges in Nebraska
WESTERN NORTHEAST Alliance Scottsbluff
Norfolk
MID-PLAINS Columbus
Sidney
METROPOLITAN Omaha
North Platte Grand Island Hastings McCook
Milford
Lincoln
SOUTHEAST CENTRAL
Source: Nebraska Community College System
- 23 -
Beatrice
has six community college areas, which operate campuses in 13 cities across the state. The colleges offer a full curricula of occupational courses, which provide a steady flow of skilled graduates to Nebraska industries. As examples, Hastings and Milford Community College Campuses offer vocational/technical training in more than 50 different one- and two-year programs including Associate of Applied Science degrees in “Machine Tool Technology,” “Manufacturing Engineering Technology,” “Nondestructive Testing Technology,” and “Welding Technology.” Training is accomplished through the extensive use of hands-on activities and is centered around practical application of technical knowledge gained in lecture and laboratory sessions.
staff helping assemble government financing with conventional financing to put together the best comprehensive package. Performance-Based Tax Incentives In 2005 the Nebraska Legislature enacted the Nebraska Advantage Tax Incentive Program and amended the program in 2008 and 2010. The Nebraska Advantage package replaced and improved on Nebraska’s existing tax incentive programs and created a business climate that makes Nebraska the preferred location for business start-ups and expansions. The Nebraska Advantage rewards businesses that invest in the state and hire Nebraskans. In this progressive, pro-business climate, corporate income and sales taxes are reduced or virtually eliminated. Further information about the Nebraska Advantage is summarized below and is available at www.NebraskaAdvantage.biz.
Other Development Assistance Programs Building on traditional advantages, Nebraska offers additional development assistance programs. Among those programs are the following:
The legislative components of the Nebraska Advantage package include:
Customized Job Training Program Provides a flexible and discretionary job training program with grants from $800 to $4,000 per qualified job. Additional grant funds may be available for new jobs created in rural or high poverty areas. You can design your own training or a statewide training team can assist with training needs and assessments, training plans, curriculum development, and training instruction.
Nebraska Advantage Act (LB 312) • Expanded incentives for six “tiers” of investment and/or job creation • Small business advantage • Research and development advantage • Microenterprise tax credit advantage • Rural development advantage • State and local sales tax exemptions of manufacturing machinery, equipment, and related services
Industrial Revenue Bonds All Nebraska counties and municipalities, as well as the Nebraska Development Finance Fund, are authorized to issue industrial revenue bonds to finance land, buildings, and equipment for industrial projects. No general election is required for an issue.
Qualified businesses for Tier One include research and development, scientific testing, manufacturing, and targeted export services (75% of sales outside Nebraska or to the U.S. Government). Qualified businesses for Tiers Two, Three, Four, and Five include the above plus data processing, telecommunications, insurance, financial services, distribution, storage/ warehousing, transportation, Internet web portal, retail sales of tangible personal property that meet specific requirements, and headquarters (administrative). All businesses other than retail qualify for Super Tier Six.
Other Financing Assistance Supplementing traditional sources, financing assistance is also available through the Nebraska Investment Finance Authority, the Business Development Corporation of Nebraska, and the local development corporations. The Nebraska Department of Economic Development also administers development finance services, with
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Nebraska Agricultural Innovation Advantage (LB 90) • Agriculture opportunities and value-added partnership act • Building entrepreneurial communities act • Ethanol production incentive cash fund enhancement
One additional incentive program of note is Nebraska’s Tax Increment Financing (TIF) program. TIF is a method of financing the public improvements associated with a private development project in a blighted area by using the projected increase in property tax revenue that will result from the private development. In a tax policy incentive, Nebraska determines the taxable income attributable to Nebraska operations using a single factor, or “sales only,” formula. This method for determining corporate income tax allocation provides a significant advantage to multi-state unitary firms that sell products or services outside Nebraska. Nebraska also provides a capital gains exemption. State residents may elect, on a one-time basis, to subtract from their income tax liability the gain from the sale of capital stock of a corporation acquired during Nebraska-based employment with that corporation.
Other components in the Nebraska Advantage package are: Nebraska Research and Development Advantage Offers a refundable tax credit for qualified research and development activities undertaken by a business entity. The credit is equal to 15 percent of federal credit allowed under Section 41 of the Internal Revenue Code of 1986 for research and development. An important feature—businesses with little or no income may take advantage of the tax credit by receiving a sales tax refund or a refundable income tax credit.
It is important to recognize the Nebraska Advantage package replaces and significantly enhances Nebraska’s previous performance based tax incentive programs. Those earlier incentives, the first of which was passed by the Nebraska Legislature in 1987, had a profound effect in stimulating business investment, expansion, and job creation. Nebraska’s previous tax incentive programs contributed to substantial investment and job creation, including total investment of more than $23.5 billion and 121,000 jobs.
Nebraska Microenterprise Tax Credit Advantage Provides a 20 percent refundable tax credit to micro businesses on increased compensation for employees or increased investment in targeted communities. Applicants may qualify for a maximum $10,000 throughout the life of the program. The credit is limited to companies with five or fewer employees, including start-ups. Credits are approved on a first–in–first–out basis through an application process with the Nebraska Department of Revenue. The credits are earned on increased expenditures for wages, buildings, certain expenses, and non-vehicle depreciable personal property.
The combination of many factors, including Nebraska’s attractive business climate, tax incentives, labor productivity, and effective job training programs as well as other positive attributes, has resulted in Nebraska’s manufacturing sector significantly outperforming both that of the surrounding states and of the U.S. as a whole. Manufacturing employment in Nebraska grew by 17.1 percent between 1990 and 2000, declined during the 2000–2004 period, and remained relatively stable from 2004–2008 before experiencing a downturn during the recent national and global economic slow down. For the 1990–2008 period as a whole, Nebraska’s manufacturing employment increased by 3.9 percent, compared with a decline in manufacturing employment for the U.S. as a
Additional Tax Savings: • Sales Tax Exemption On: Manufacturing equipment, Manufacturing or processing raw materials Common carrier vehicles Utilities used in manufacturing • No Tangibles Tax • No Inventory Tax • Sales Tax Refund on Pollution Control Equipment • 100% Depreciation for Personal Property Tax
- 25 -
figure 7
Figure 7 Manufacturing employment, Nebraska, surrounding states, Manufacturing Employment, Nebraska, Surrounding States, and the u.s., 1990-2009, 1990=100 and the U.S., 1990–2009, 1990=100
110 100 90 80 Nebraska
70
sur. states us u.s.
60 1990
1995
2000
2005
2009
Surrounding States include data for states contiguous to Nebraska, as a group, including Colorado, Iowa, Kansas, Missouri, South Dakota, and Wyoming. Source: Bureau of Labor Statistics, www.bls.gov.
whole of 32.8 percent (see Figure 7). For Nebraska’s neighboring states as a group (Colorado, Iowa, Kansas, Missouri, South Dakota, and Wyoming), manufacturing employment declined by 19.7 percent for the 1990–2008 period. These data suggest that companies with Nebraska manufacturing plants benefit from the locational and other competitive advantages associated with doing business in Nebraska.
The cost of living in Nebraska is consistently below the national average. Data presented in Table 10 indicates on average, the cost of living in Nebraska is 3.0 percent less than the U.S. average. Of particular interest is the cost of housing, which, in Nebraska, averages 8.0 percent less than for the U.S. as a whole for families renting a home.
Quality of Life
As shown in the previous discussion, Nebraska offers a wide range of locational advantages for fabricated metal product manufacturers. In this section of the study, labor and energy production cost factors that have geographic variability are analyzed. Such analysis permits the identification of the plant site providing the best advantage on these important input factors.
II. Labor and Energy Cost Analysis
For a potential newcomer to Nebraska, the state’s livability is obviously also a consideration. Nebraska ranks high in quality of life studies—and below average in cost of living measures. The state’s landscape is clean and spacious, both in urban and rural areas. Residents blend Midwestern values with Western enthusiasm for growth and change. This helps create a high degree of citizen participation in both neighborhood and communitywide activities.
In the analysis of geographically variable labor and energy costs, the following procedures are used:
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1) Selection of alternative plant locations for evaluation of the geographically variable labor and energy costs.
table 10 Table 10 Cost of living Nebraska,Compared Comparedtotothe theNational National Average, average, Cost of Living in in Nebraska, april 1, 2010 April 1, 2010 all items index (a)
Consumables
transportation (b)
health services
Monthly rent (c)
home Value (c)
utilities
income/ payroll taxes
U.S. Average
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Nebraska Omaha, NE Lincoln, NE
97.0 95.5 100.5
91.0 92.7 90.9
100.2 95.7 100.2
94.0 92.7 93.9
92.0 103.2 88.5
89.0 81.7 102.0
91.7 100.3 91.7
100.5 101.4 98.4
95.4
89.2
100.2
93.0
80.2
86.0
91.7
101.2
Nonmetro NE (d) (a)
Cost of living values computed for a family of three with an annual income of $50,000.
(b)
Transportation costs assumes ownership of two cars valued at $14,312 which are driven a total of 20,000 miles annually. Assumes a house of 1,613 square feet for both rental assumption and home value.
(c)
(d)
Nonmetro Nebraska data represent the average of 14 Nebraska cities outside of the Omaha and Lincoln metropolitan areas. These cities include Beatrice, Columbus, Dakota City, Fremont, Grand Island, Hastings, Kearney, McCook, Norfolk, North Platte, O'Neill, Scottsbluff, South Sioux City, and Valentine.
Source: Index values computed from cost-of-living data obtained from Economic Research Institute (ERI), Relocation Assessor Database as of April 1, 2010.
2) Definition of a model manufacturing plant for identifying labor and energy inputs and costs. 3) Evaluation of labor-related costs associated with each alternative plant location. 4) Evaluation of energy costs for each alternative plant location.
table 11 Table 11 alternative locations Alternative Locations forfor a Model plant for the fabricated Metal product a Model Plant for the Fabricated Metal Product Manufacturing subsector (NaiCs 332) Manufacturing Subsector (NAICS 332) percent of Value added by Manufacture (a) 0.6
state Nebraska
Alternative Plant Locations Sixteen alternative plant locations were selected for comparison in this analysis. The plant locations include the seven states with the highest value added by the “Fabricated Metal Products Manufacturing” subsector (NAICS 332) and the eight states with the greatest potential for wind energy generation (Texas is included in both categories plus Colorado and Missouri). The seven states with the greatest value added include California, Illinois, Michigan, Ohio, Pennsylvania, Texas, and Wisconsin. The eight states with the greatest potential for wind energy generation include Nebraska plus Iowa, Kansas, Montana, North Dakota, South Dakota, Texas, and Wyoming. The 16 states account for 53.8 percent of the value added by manufacturer in the fabricated metal product manufacturing industry (see Table 11).
California Colorado Illinois Iowa Kansas Michigan Missouri Montana North Dakota Ohio Pennsylvania South Dakota Texas Wisconsin Wyoming
9.2 0.9 6.4 1.4 1.1 4.5 1.9 0.1 0.2 8.8 5.8 0.2 8.5 4.1 0.1
total selected states
53.8
(a)
Percent of the 2008 U.S. total value added by manufacture for establishments in NAICS 332. Source: U.S. Bureau of the Census, 2008 Annual Survey of Manufactures.
- 27 -
table 12 Characteristics of a Model plant for the fabricated product Characteristics of aMetal Model Plant for the Fabricated Metal Product Manufacturing subsector (NaiCs 332) Manufacturing Subsector (NAICS 332)
Table 12
total Model plant Production Workers
per production Worker
50
------
Value Added [dollars] (a)
$18,153,068
$163,061
(b)
$14,596,898
$291,938
19,962
399.23
Total Output [dollars]
Energy Inputs [million BTUs] (c) (a)
Estimated value added applies the 2008 value added per production worker for the Fabricated Metal Product Manufacturing Subsector to the model plant (see Tables 3 & 4).
(b)
Estimated value of shipments derived by applying the 2008 value of shipments per production worker to the model plant (see Tables 3 & 4).
(c)
Estimated by applying the 2008 ratio of energy inputs per production worker to the model plant (see Table 13). Source: Calculated from data presented in Tables 3, 4, and 13.
Part A of Table 13 presents data estimating energy use for the industry in 2008. The estimated energy use for the model plant was derived using the ratio of energy inputs to industry value added. It was further assumed all energy inputs for the model plant are derived from electricity and natural gas.
The Model Plant To facilitate the analysis of the comparative labor and energy costs for the alternative states, it is useful to define a model plant for which the geographically variable costs can be quantified. The model plant is assumed to manufacture a product representative of the fabricated metal product manufactures industry as a whole. To specify the relevant labor and energy costs, information was obtained from the 2007 Census of Manufacturing, and the 2008 Annual Survey of Manufactures.
Part B of Table 13 indicates the model plant, employing 50 production workers, will have annual energy inputs of 19,961.5 million BTUs. Electric energy inputs are estimated to be 7,206.1 million BTUs (2,113,193 kWhs), or 36.1 percent of the total energy inputs, while natural gas inputs are estimated at 12,755.4 million BTUs.
Table 12 presents industry characteristics used in developing the model plant, which is assumed to employ 50 production workers. Estimated production worker hours total 100,000 annually or 2,000 hours per worker. Value added by manufacture is estimated to be $8,153,068 and the total annual output (value of shipments) is estimated to be $14,596,898. Energy inputs are estimated at 19,962 million BTUs, with all energy inputs suppled by electricity and natural gas.
Labor-Related Costs
Energy Used in the Model Plant
Labor costs in the fabricated metal product manufacturing industry are affected by several factors: wage rates, productivity of workers, fringe benefits, unemployment insurance, and workers’ compensation costs. Table 14 includes data on wage rates for the states identified as alternative plant locations.
The assumption that the model plant is representative of the industry as a whole leads to the assumption that energy used in the plant also should be characteristic of industry use patterns.
An analysis of state wage levels indicates Nebraska’s production workers have hourly wage rates significantly below the average for the alternative plant sites. For example, 2008 hourly wage rates - 28 -
Table 13 Energy Use in table Fabricated 13 Metal Product Manufacturing Establishments
part a estimated 2008 industry energy inputs trillion btus Purchased Fuels and Electric Energy Purchased Electric Energy Purchased Fuels
percent
396.0 143.0 253.0
100.0 36.1 63.9
part b energy inputs for the fabricated Metal product Model plant Million btus Purchased Electricity
percent
7,206.1 (2,112,193 kWhs) 12,755.4 19,961.5
36.1
Natural Gas Total Energy Inputs
Source: Part A: Energy use estimated from data from the U.S. Bureau of the Census, 2008 Annual Survey of Manufactures, 2008 Statistics for Industry Groups and Industries Part B: Calculated from data in Table 12 and Part A of this table.
table 14 average hourly earnings of production Workers on Table 14 Average Hourly Metal Earnings of Productionpayrolls Workers on fabricated Manufacturing Fabricated Manufacturing Payrolls, Alternative alternate plant locations Plant Locations plant locations Nebraska California Colorado Illinois Iowa Kansas Michigan Missouri Montana North Dakota Ohio Pennsylvania South Dakota Texas Wisconsin Wyoming
2002 $13.56
2008 $17.21
percent Change 2002-2008 27.0
15.92 15.56 16.35 15.27 14.29 16.01 16.03 14.62 14.22 16.41 15.74 12.63 14.86 16.46 16.64
$18.69 $18.81 $18.50 $18.51 $16.95 $18.51 $19.33 $16.79 $18.68 $18.43 $18.56 $15.72 $17.90 $18.52 $21.04
17.4 20.9 13.1 21.2 18.6 15.6 20.6 14.8 31.4 12.3 17.9 24.5 20.5 12.5 26.4
Source: U.S. Bureau of Census; 2002 Census of Manufactures; and 2008 Annual Survey of Manufactures.
63.9 100.0
- 29 -
Table 15 Other Labor Costs, Alternative Plant Locations table 15 other labor Costs, alternate plant locations
plant locations Nebraska California Colorado Illinois Iowa Kansas Michigan Missouri Montana North Dakota(c) Ohio(c) Pennsylvania South Dakota Texas Wisconsin Wyoming(c)
Workers' Compensation
unemployment insurance factors(b) per Worker
Wage
rates (a) ($) 3.53
Costs ($) 121.50
tax rate (%) 1.35
base ($) 9,000.00
6.28 2.52 5.29 3.29 3.69 3.10 3.99 6.98 3.71 3.71 3.83 3.02 4.73 3.52 3.71
288.40 163.00 327.18 369.72 112.80 413.10 260.00 243.47 234.63 239.40 370.40 84.00 112.50 310.80 266.60
4.12 1.63 2.66 1.56 1.41 4.59 2.08 0.97 0.99 2.66 4.63 0.84 1.25 2.59 1.24
7,000.00 10,000.00 12,300.00 23,700.00 8,000.00 9,000.00 12,500.00 25,100.00 23,700.00 9,000.00 8,000.00 10,000.00 9,000.00 12,000.00 21,500.00
(a)
Rates for all manufacturing classifications from: Actuarial & Technical Solutions, Workers Compensation State Rankings, Manufacturing Industry Costs and Statutory Benefit Provisions, 2009 Edition, December 2009.
(b)
Unemployment Factors from: U.S. Department of Labor, Employment and Training Administration, Unemployment Insurance Data Summary, 1st Quarter 2009.
(c)
North Dakota, Ohio, and Wyoming are not rated and assumed to equal national average.
Estimated annual labor-related costs for operating the model plant producing fabricated metal products are presented in Table 16 and Figure 8. These labor-related costs include direct wages paid to production workers and estimates of other labor-related costs, including costs of workers’ compensation and unemployment insurance, social security, and other fringe benefits.
for Nebraska production workers ($17.21) are 18.2 percent below the average wage rates for the other 15 states included as alternative plant locations. Other associated costs contributing to the total labor-related wage bill are shown in Table 15. These costs include rates for unemployment insurance and workers’ compensation.
If located in Nebraska, the model plant has a significant labor cost advantage over the alternative locations. The Nebraska labor cost advantage reaches as high as $534,000 in annual savings when compared to Wyoming. When compared to the average labor costs for the 15 alternative locations, Nebraska’s annual labor cost advantage is $169,000 or 6.7 percent lower.
The Nebraska costs for unemployment insurance and workers’ compensation are significantly less than the other states. In the case of unemployment insurance contributions, the average cost per employee for the 15 alternative states is estimated at $253.07 or more than twice the Nebraska cost of $121.50. Insurance rates for workers’ compensation average $4.09 per $100 of payroll for the 15 alternative states, 13.7 percent more than Nebraska’s rate of $3.53.
- 30 -
- 31 -
18.69 18.81 18.50 18.51 16.95 18.51 19.33 16.79 18.68 18.43 18.56 15.72 17.90 18.52 21.04
California Colorado Illinois Iowa Kansas Michigan Missouri Montana North Dakota Ohio Pennsylvania South Dakota Texas Wisconsin Wyoming
1,869,000 1,881,000 1,850,000 1,851,000 1,695,000 1,851,000 1,933,000 1,679,000 1,868,000 1,843,000 1,856,000 1,572,000 1,790,000 1,852,000 2,104,000
$1,721,000
payroll
total
$117,000 $47,000 $98,000 $61,000 $63,000 $57,000 $77,000 $117,000 $69,000 $68,000 $71,000 $47,000 $85,000 $65,000 $78,000
$61,000
insurance
Workers' Compensation
$14,000 $8,000 $16,000 $18,000 $6,000 $21,000 $13,000 $12,000 $12,000 $12,000 $19,000 $4,000 $6,000 $16,000 $13,000
$6,000
insurance
unemployment
143,000 144,000 142,000 142,000 130,000 142,000 148,000 128,000 143,000 141,000 142,000 120,000 137,000 142,000 161,000
477,000 480,000 472,000 472,000 432,000 472,000 493,000 428,000 476,000 470,000 473,000 401,000 456,000 472,000 537,000
$439,000
benefits(b)
security(a) $132,000
fringe
social
2,620,000 2,560,000 2,578,000 2,544,000 2,326,000 2,543,000 2,664,000 2,364,000 2,568,000 2,534,000 2,561,000 2,144,000 2,474,000 2,547,000 2,893,000
$2,359,000
Costs
total labor
Fringe benefit costs include paid leave, supplemental pay, and retirement and savings payments and are assumed to be 25.5 percent of payroll. Source: Compiled from data in Tables 12, 14, and 15.
(b)
50 50 50 50 50 50 50 50 50 50 50 50 50 50 50
50
Workers
Number of production
Employer Social Security costs are 7.65 percent of payroll (wages).
$17.21
Nebraska
(a)
rate
hourly Wage
location
plant
Table 16 table 16
261,000 201,000 219,000 185,000 -33,000 184,000 305,000 5,000 209,000 175,000 202,000 -215,000 115,000 188,000 534,000
0
Nebraska
Cost Difference other states (-)
Total Annual Labor-Related Costs for a Model Plant total annual labor-related Costs for a Model plant for the fabricated Metal product Manufacturing subsector for the Fabricated Metal Product Manufacturing Subsector
111.1 108.5 109.3 107.8 98.6 107.8 112.9 100.2 108.9 107.4 108.6 90.9 104.9 108.0 122.6
100.0
Nebraska
Cost relative other states (/)
Figure 8 Figure 8
Estimated Labor Costs* EstimatedTotal Total Labor Costs* for a for a Fabricated Metal ProductModel Model Plant, Alternative Plant Locations Fabricated Metal Product Plant, Alternative Plant Locations Nebraska
2,359
California Colorado Illinois Iowa Kansas Michigan Missouri Montana North Dakota Ohio Pennsylvania S th D South Dakota k t Texas Wisconsin Wyoming $500.00
2,620 2,560 2,578 2,544 2,326 2,543 2,664 2,364 2,568 2,534 2,561 2 144 2,144 2,474 2,547 2,893 $1,000.00
$1,500.00
$2,000.00
$2,500.00
$3,000.00
(Labor Costs in Thousands of Dollars) *Calculated labor costs wages, includeworkers’ wages, workers’ compensation insurance, * Calculated labor costs include compensation insurance, unemployment insurance, social security, and fringe benefits. unemployment insurance, social security, and fringe benefits. Source: See Table 16.
Source: See Table 16 Energy Costs
1,000 kW billing demand with monthly usage of 400,000 kWhs for the 15 alternative plant sites is $0.0722 per kWh or 17.2 percent more than the Nebraska rate of $0.0616.
The availability and cost of energy are increasingly important factors in the industrial location process. Rates for industrial electricity and natural gas for the alternative plant locations are presented in Table 17. For both energy sources, Nebraska’s rates are substantially less than the alternative states. The average electric rate for a
In the case of industrial rates for natural gas, the average for the 15 other states is 10.2 percent more than the Nebraska rate of $8.83 per million BTUs.
- 32 -
table 17 industrial rates for electric energy and Natural Gas Industrial Rates for Electric Energy and Natural Gas alternative plant locations
Table 17
Alternative Plant Locations
plant locations Nebraska California Colorado Illinois Iowa Kansas Michigan Missouri Montana North Dakota Ohio Pennsylvania South Dakota Texas Wisconsin Wyoming
average Cost of industrial Natural Gas, 2008(a) ($/MM btu)
Cost of 1,000 kW billing Demand With 400,000 kWh, 2009(b) ($/Monthly) ($/kWh)
8.83
24,652
0.0616
10.47 8.49 10.25 9.04 9.13 9.94 10.97 10.69 8.04 12.32 11.72 8.72 8.68 10.24 7.31
47,168 29,035 18,735 23,071 24,858 31,875 24,892 25,167 26,362 33,665 36,230 24,129 30,937 31,267 26,066
0.1179 0.0726 0.0468 0.0577 0.0621 0.0797 0.0622 0.0629 0.0659 0.0842 0.0906 0.0603 0.0773 0.0782 0.0652
Sources: (a) Natural Gas: American Gas Association, Gas Facts: 2008 data. (b) Electric: Edison Electric Institute, Typical Residential, Commercial, and Industrial Bills, January 1, 2009 and July 1, 2009. State average weighted using eight months of January 2009 data and four months of July 2009 data. Nebraska data represent average for Nebraska Public Power District, Omaha Public Power District, and Lincoln Electric System using the same seasonal weighting.
Table 18 and Figure 9 provide an analysis of the energy costs for the operation of the model plant. The total energy costs for the alterative locations include the cost for the assumed level of electrical energy and natural gas inputs for the operation of the plant.
plant locations. When considering the California location, energy costs for the model plant are 57.6 percent more than the Nebraska energy costs. When compared to the average total energy costs for the 15 alternative states, Nebraska energy costs are 12.1 percent lower, translating into an average annual savings of $33,600.
Nebraska provides a significant energy cost savings compared to the average of the alternative
- 33 -
Table 18
table 18 annual energy Costs for a fabricated Model plant Annual Energy Costs for a Fabricated Metal Metalproduct Product Model Plant Cost Difference other states (-) Nebraska
total energy Cost
plant locations
electricity rate(a) Cost
Nebraska
$0.0616
$130,000
$8.83
$113,000
$243,000
$0
100.0
California Colorado Illinois Iowa Kansas Michigan Missouri Montana North Dakota Ohio Pennsylvania South Dakota Texas Wisconsin Wyoming
$0.1179 $0.0726 $0.0468 $0.0577 $0.0621 $0.0797 $0.0622 $0.0629 $0.0659 $0.0842 $0.0906 $0.0603 $0.0773 $0.0782 $0.0652
$249,000 $153,000 $99,000 $122,000 $131,000 $168,000 $131,000 $133,000 $139,000 $178,000 $191,000 $127,000 $163,000 $165,000 $138,000
$10.47 $8.49 $10.25 $9.04 $9.13 $9.94 $10.97 $10.69 $8.04 $12.32 $11.72 $8.72 $8.68 $10.24 $7.31
$134,000 $108,000 $131,000 $115,000 $116,000 $127,000 $140,000 $136,000 $103,000 $157,000 $149,000 $111,000 $111,000 $131,000 $93,000
$383,000 $261,000 $230,000 $237,000 $247,000 $295,000 $271,000 $269,000 $242,000 $335,000 $340,000 $238,000 $274,000 $296,000 $231,000
$140,000 $18,000 -$13,000 -$6,000 $4,000 $52,000 $28,000 $26,000 -$1,000 $92,000 $97,000 -$5,000 $31,000 $53,000 -$12,000
157.6 107.4 94.7 97.5 101.6 121.4 111.5 110.7 99.6 137.9 139.9 97.9 112.8 121.8 95.1
(a)
Natural Gas rate(b) Cost
Cost relative other states (/) Nebraska
Electric rate is cost per kWh using the average per kWh cost for 1,000 kW monthly demand with 400,000 kWh of consumption. The model plant is assumed to use 2,363,864 kWh annually.
(b)
Natural Gas rate is per million BTUs. The model plant is assumed to use 11,369.4 million BTUs annually. Source: Calculated from data presented in Tables 13 and 17.
Figure 9 figure 9
Estimated Total total Energyenergy Costs* for a Fabricated estimated Costs* for a Metal Product Model Plant, Alternative Plant Locations
fabricated Metal product Model plant, alternative plant locations Nebraska
243
California Colorado illinois iowa kansas Michigan Missouri Montana North Dakota ohio pennsylvania s th D south Dakota k t texas Wisconsin Wyoming
383 261 230 237 247 295 271 269 242 335 340 238 274 296 231 $0.00
$100.00
$200.00
$300.00
$400.00
(energy Costs in thousands of Dollars)
*Calculated energy costs include electricity and natural gas costs. * Calculated energy costs include electricity and natural gas costs. Source: See Table 18.
Source: See Table 18
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$500.00
Labor and Energy Cost Summary
Conversely, the average labor and energy costs for the alternative states are 7.8 percent more than the costs associated with a Nebraska location. Inescapable from these results is the conclusion that, in terms of major labor and energy inputs costs, Nebraska fabricated metal product manufacturers have a clear competitive advantage over manufacturing establishments in the industry not so fortunately located.
Combining the labor and energy cost findings, the results of the model plant analysis are summarized in Table 19. As the table shows, a Nebraska location has a cost advantage over sites in 13 of the 15 alternative states. When considering the average labor and energy costs for the 15 alternative states, the cost advantage the Nebraska location is $202,600 annually, of or 7.2 percent less than the average costs for the other 15 plant sites considered.
table 19 summary of labor and energy Costs for a Summary of Labor and Energy Costs for a fabricated Metal product Model plant Fabricated Metal Product Model Plant
Table 19
Cost Difference other states (-) Nebraska
Cost relative other states (/) Nebraska
plant locations
total labor Cost
total energy Cost
total labor and energy Cost
Nebraska
$2,359,000
$243,000
$2,602,000
$0
100.0
California Colorado Illinois Iowa Kansas Michigan Missouri Montana North Dakota Ohio Pennsylvania South Dakota Texas Wisconsin Wyoming
2,620,000 2,560,000 2,578,000 2,544,000 2,326,000 2,543,000 2,664,000 2,364,000 2,568,000 2,534,000 2,561,000 2,144,000 2,474,000 2,547,000 2,893,000
383,000 261,000 230,000 237,000 247,000 295,000 271,000 269,000 242,000 335,000 340,000 238,000 274,000 296,000 231,000
$3,003,000 $2,821,000 $2,808,000 $2,781,000 $2,573,000 $2,838,000 $2,935,000 $2,633,000 $2,810,000 $2,869,000 $2,901,000 $2,382,000 $2,748,000 $2,843,000 $3,124,000
401,000 219,000 206,000 179,000 -29,000 236,000 333,000 31,000 208,000 267,000 299,000 -220,000 146,000 241,000 522,000
115.4 108.4 107.9 106.9 98.9 109.1 112.8 101.2 108.0 110.3 111.5 91.5 105.6 109.3 120.1
Source: Calculated from data presented in Tables 13 and 15.
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Conclusions This study concludes the fabricated metal product manufacturing industry is desirable for Nebraska and a Nebraska location is desirable for the industry. The locational advantages Nebraska offers appear well-suited to fabricated metal product manufacturers. They cover a wide spectrum, ranging from an attractive business climate to a high quality of life at a relatively low cost. But, as the study’s model plant analysis demonstrates, the competitive advantages Nebraska offers in such important cost areas as labor and energy are particularly noteworthy. The state’s well-educated and productive labor force is a long-standing asset, as are its very favorable electric and natural gas rates.
applicable to the fabricated metal product manufacturing industry generally. Individual manufacturers will therefore need to further consider the locational requirements of their particular kinds of fabricated metal product manufacturing as well as the merits of specific sites within states. Certainly in terms of general locational situation for fabricated metal product manufacturers, Nebraska has much to offer. The three organizations cooperating in the preparation of this study can also assist fabricated metal product manufacturers in assessing advantages in Nebraska for a specific new location or expansion project. To obtain this assistance, write or call:
Essentially, the analysis presented in this study was based on state-to-state comparisons
Economic Development Department NEBRASKA PUBLIC POWER DISTRICT PO Box 499 Columbus, Nebraska 68602-0499 (402) 563‑5534 (800) 282‑6773 Fax: (402) 563‑5090 Email: [email protected] sites.nppd.com Business Development Division NEBRASKA DEPARTMENT OF ECONOMIC DEVELOPMENT PO Box 94666 Lincoln, Nebraska 68509‑9466 (402) 471‑3789 (800) 426‑6505 Fax: (402) 471‑3365 Email: [email protected] www.neded.org UNIVERSITY OF NEBRASKA COLLEGE OF ENGINEERING 114 Othmer Hall PO Box 880642 Lincoln, Nebraska 68588‑6363 (402) 472‑5600 Email: [email protected] http://engineering.unl.edu
- 37 -
APPENDIX A The Nebraska Advantage consists of six “tiers” of investment and job creation activity. The example spreadsheet below illustrates the job creation and investment levels required and the tax incentives generated by Tier 2, which
includes the jobs creation and investment required for the establishment of the model fabricated metal product manufacturing facility discussed previously in this report.
Nebraska Advantage - TIER 2 Minimum 30 New Jobs & $3 Million Investment
Potential Tax Credits and Refunds Project Name Date NOTE: Shaded values require input of project-specific variables. Potential Tax Credits and Refunds
Compensation Credit - Percent of annual compensation paid to all new employees over 7 year period. A. Assumptions are as follows Number of New Employees in Year 1: 50 Average Annual Salary * : $35,797 Initial payroll: $1,789,850 Annual Cost-of-Living Increase beginning Year 2: 3.00% * Only positions earning at least 60% of the Nebraska Average Wage are eligible to earn Compensation Credit.
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Employees
Payroll
Hourly Wage
Comp % *
Comp Credit
50 50 50 50 50 50 50
$1,789,850 $1,843,546 $1,898,852 $1,955,817 $2,014,492 $2 074 927 $2,074,927 $2,137,175
$17.21 $17.73 $18.26 $18.81 $19.37 $19 95 $19.95 $20.55
5% 5% 5% 5% 5% 5% 5%
$89,493 $92,177 $94,943 $97,791 $100,725 $103 746 $103,746 $106,859
Compensation Tax Credit
$685,733
$685,733
Total
$13,714,658
* Use Table below to determine appropriate Compensation Percentage for each year. NOTE: Compensation credit can be used against employee withholding up to amount paid in. 2008 Neb Ave Wage Annual
$35,227.00
60% NAW $21,136
75% NAW $26,420
100% NAW $35,227
125% NAW $44,034
Hourly
$16.94
$10.16
$12.70
$16.94
$21.17
3%
4%
5%
6%
Comp %
A-1
APPENDIX A – Continued II. Investment Tax Credits and Sales Tax Refunds A. Assumptions about project investment are as follows * 1.
Building Cost A. OWN: Purchase/New Construction
$1,000,000 OR $0 $200,000 $200,000
OR 2. 3.
B. LEASE: Term of Lease Amount up to Ten Years Non-Manufacturing Furniture, Fixtures and Equipment Additional Investment (over 7 years) Total investment subject to Sales and Use Tax over a 7 year period
4.
Manufacturing Machinery and Equipment (Exempt from Sales Tax)
TOTAL PROJECT INVESTMENT
$1,400,000 $750,000
$2,150,000
* Assumes values of building, equipment, furniture and fixtures are PRIOR to application of any state and local sales or use taxes. Note: For LB312 investment calculations, existing equipment and furnishings brought into the state can be calculated at original purchase price, rather than at depreciated value.
B. Sales Tax Refund State Sales Tax Rate Local Sales Tax Rate * TOTAL SALES TAX RATE
5.5% 1.5% 7.0%
* Current Local Sales & Use Tax Rates can be found at http://www.revenue.state.ne.us/question/sales.htm
1.
Building
2.
$500,000 X Furniture, Fixtures and Equipment $200,000 X
3.
Additional Investment (over 7 years) $200,000 X
0.070
=
$35,000
0.070
=
$14,000
0.070
=
$14,000
Total Sales Tax Refund:
$63,000
Sales Tax Refund $63,000
$215,000
Investment Tax Credit $215,000
C. Investment Credit: Percent of investment in qualified property during 6-7 year entitlement period. Includes all investment in building, equipment and components. For leased space, investment is equal to annual lease rate times term of lease for up to 10 years. This credit may be applied to state corporate income tax liability or sales and use tax liabilities.
$2,150,000
x
10%
=
TOTAL TAX CREDITS AND REFUNDS WAIVER of LIABILITY: Officials representing the Nebraska Department of Economic Development have prepared the enclosed estimates to determine the amount of any benefits that might become available for this project under the Nebraska Advantage tax incentive program. Be advised that these represent projected benefits. The Nebraska Department of Revenue will make a final determination of any tax incentives complimenting this project. The Nebraska Department of Economic Development and its representatives waive any financial responsibility for
A-2
$963,733
