BUTTESILVER BOW Target Industry Report September 9 2014

BUTTE-SILVER BOW Target Industry Report September 9, 2014

AGENDA • Stakeholder Engagement • Target Industry Selection Process • Target Industries and Niches • Target Industry Summaries • Product Improvement • Site Selector Perception Survey Butte-Silver Bow Target Industry Report | 2

PROJECT APPROACH PHASE 1 Stakeholder Engagement • One-to-One Interviews • Focus Groups • Online Surveys PHASE 2 Target Industry Analysis • Target Industries • Business Case Analysis PHASE 3 Strategic Recommendations • Strategic Recommendations • Best Practices Butte-Silver Bow Target Industry Report | 3

PROJECT APPROACH STAKEHOLDER ENGAGEMENT INTERVIEWS & FOCUS GROUPS 1 -ON-1 KEY STAKEHOLDER INTERVIEWS RESIDENT SURVEY INDUSTRY FOCUS GROUPS BUSINESS SURVEY Butte-Silver Bow Target Industry Report | 4

PROJECT APPROACH TARGET INDUSTRY ANALYSIS BUSINESS CASE ANALYSIS CLUSTER ANALYSIS GROWTH POTENTIAL BENCHMARKING NATIONAL/REGIONAL TRENDS Butte-Silver Bow Target Industry Report | 5

PROJECT APPROACH TARGET INDUSTRY ANALYSIS BUSINESS CASE ANALYSIS INDUSTRY SITE SELECTION REQUIREMENTS & SCORECARD COST OF OPERATIONS MODEL OCCUPATIONAL ANALYSIS REVERSE SITE SELECTION DELIVERABLES: Target Industry Analysis, Occupational Analysis, Cost of Operations Model, Reverse Site Selection, Strategic Recommendations Butte-Silver Bow Target Industry Report | 6

STAKEHOLDER ENGAGEMENT RESIDENT SURVEY RESPONSES Factor Available jobs Quality of public schools Overall economic conditions Aesthetics/appearance Affordable healthcare Safety Parks & resources for recreation Cost of living Presence of colleges/universities Employee compensation Uptown district Importance Rating (1 -5) 4. 59 2. 38 4. 54 3. 07 4. 42 2. 41 4. 35 2. 52 4. 33 2. 93 4. 27 3. 20 4. 23 3. 32 4. 18 3. 60 4. 16 4. 02 4. 10 2. 76 4. 10 3. 04 Ø 397 Resident Respondents What are the most significant challenges facing Butte-Silver Bow? Available jobs 66. 2% Uptown district 37. 9% Social barriers for newcomers 32. 7% Resources to support small business 30. 6% Quality of public schools 30. 0% Healthcare options 25. 9% Access to healthy foods 23. 9% Employee compensation 22. 7% Affordable housing options 18. 1% Regional planning 17. 2% Cost of living 10. 8% Local public transportation 10. 2% Safety 9. 6% Taxes 9. 6% Regional transportation 8. 7% 0% 25% 50% 75% 100% Butte-Silver Bow Target Industry Report | 7

STAKEHOLDER ENGAGEMENT BUSINESS SURVEY RESPONSES Importance Rating (1 (1 -5) Access to customers 4. 58 3. 08 Quality of life 4. 56 3. 73 Cost of living 3. 97 3. 85 Operating costs 3. 95 3. 38 Ability to attract & retain employees 3. 93 2. 56 Aesthetics/appearance 3. 93 2. 39 Utilities and infrastructure 3. 90 3. 28 Quality of public schools 3. 88 3. 03 Uptown district 3. 75 3. 37 Cost of utilities 3. 71 3. 17 Labor costs 3. 71 3. 26 Factor What are the primary reasons your business is located in Butte-Silver Bow? Community ties/founded here 82. 9% Quality of life 41. 4% Ease of customer access 24. 3% Local business environment 21. 4% Favorable cost of doing business 21. 4% Proximity to collegs/universities 11. 4% Trained and educated workers 10. 0% regional transportation and. . . 7. 1% Infrastructure 7. 1% Proximity to suppliers 2. 9% 0% 50% 100% Ø 79 Business Respondents Butte-Silver Bow Target Industry Report | 8

STAKEHOLDER ENGAGEMENT SWOT Analysis Strengths • • • High quality of life Great place to do business Strong work ethic Politicians are accessible to the public Montana Tech & Highlands College Low cost of living Access to fiber optic networks Strong sense of community pride Local sense of belonging to a community A safe place to live Low business taxes and fees Centrally located within the wider region • • Opportunities Union Pacific to have a greater presence Junction at I-15 & I-90 Fed Ex’s first major hub coming to and from Canada Leverage the Port of Montana Weaknesses • • • High rate of poverty Wage disparities Lack of young professionals Few sustainable middle class jobs High rates of vacancy Many buildings need renovations before they can be occupied • Problem with drugs in the community • Decaying infrastructure • Perception that government needs better balance between public and business interests Threats • • Declining retail sector Lingering perceptions of local labor unions Closure of Montana Resources Economic growth stalls Butte-Silver Bow Target Industry Report | 9

TARGET INDUSTRY SELECTION PROCESS Cluster Concentration 1) Which industries are strong and are concentrated locally or regionally? Industry Trends 2) Do the clusters reflect national growth trends? Regional Assets 3) Are there local or regional assets that give industries a competitive edge? Vision Alignment 4) Do these clusters meet the goals of the community? Butte-Silver Bow Target Industry Report | 10

TARGET INDUSTRY ANALYSIS Competitive Assets Industry Concentrations (By Location Quotient, 2013) Industry Montana Tech & Highlands College Employment LQ Natural resources and mining 460 1. 92 Education and health services 3, 470 1. 45 Leisure and hospitality 2, 274 1. 36 Growing Festival Economy Trade, transportation, and utilities 3, 506 1. 16 Legacy of Mining Other services 495 1. 01 Information 241 0. 76 Construction 495 0. 72 1, 260 0. 58 Community Pride Financial activities 465 0. 52 Fiber Optic Network Manufacturing 672 0. 47 High Quality of Life Professional and business services Major Interstate junction at I-15 & I 90 Major rail intersection – BNSF & UP Natural Beauty & Outdoor Recreation Port of Montana Source: BLS Uptown District & Historic Structures Butte-Silver Bow Target Industry Report | 11

TARGET INDUSTRIES AND NICHES Economic Development Activities: Mature/Core Targets Tourism & Destination Retail Manufacturing Logistics Mining & Environmental Engineering Outdoor sports Light assembly Warehousing Mining support services Specialized truck delivery • Retention • Expansion Diversification Targets Innovative & Specialized Services Micro-distilleries DIY manufacturing Supply chain management Mining technologies Publishers Web app design • Attraction • Entrepreneurship and Small Business Development Emerging Targets • Expansion • Attraction • Entrepreneurship and Small Business Development Tour packages Prototyping Creative content providers Festival economy Bed & breakfasts Aerospace International trade services Environmental remediation Education IT Health IT Butte-Silver Bow Target Industry Report | 12

TOURISM & DESTINATION RETAIL Wages Per Capita (Total Employment) Number of Businesses: 253 $25, 000 Total Square Footage: 2. 8 million Total Revenues: $900 million $20, 427 $20, 000 $16, 010 $17, 820 $15, 000 $10, 000 (3, 465) (90, 988) (23, 365, 530) $5, 000 $0 Butte-Silver Bow “Heat map” of Butte-Silver Bow Businesses Lower Density Higher Density q q q q q Montana US INDUSTRY CRITERIA Reliable workforce with hospitality experience Low labor cost Natural, historical, and cultural assets Entertainment venues Transportation infrastructure Strong airport accessibility Low cost of doing business Stable regulatory environment Hotel/Convention space Food support Sources: BLS, AE, Sources: Reference. USA AE, BLS Butte-Silver Bow Target Industry Report | 13

TOURISM & DESTINATION RETAIL RANKING OF BUTTE-SILVER BOW’S TOURISM & DESTINATION RETAIL INDUSTRY Assessment Rationale Tourism & Destination Retail Variable • Employment levels fluctuate year to year due to seasonality • Overall, employment growth is slow, but positive Employment Trends • Wages are competitive compared to state and U. S. • Wage growth is strong, growing by 27% between 2003 & 2013 Wage Trends • Establishments have remained stable since 2003 • Growth in establishments was 3. 3% from 2003 to 2013 Business Establishments • Butte-Silver Bow has the semi-skilled workers necessary Employee Skill Set • Strong outdoor recreation activities • Historical bed and breakfast locations • The retail sector has lost major employers in recent years Industry Assets Leading Strong Average Weak Overall Tourism & Destination Retail Industry Butte-Silver Bow Target Industry Report | 14

TOURISM & DESTINATION RETAIL Industry Action Plan 1. Create retail clusters along major corridors. Provide incentives to new and existing retailers to move or relocate along the chosen corridors. Offer moving costs, financing options, and grants for modernizing old buildings 2. Create and market vacation packages that combine natural attractions, historical sites, cultural events, festivals, retail, and outdoor recreation 3. Recruit a home supply store 4. Work with Butte Plaza Mall owners to develop plan for empty spaces 5. Continue to facilitate & encourage development of bed & breakfast establishments Butte-Silver Bow Target Industry Report | 15

MANUFACTURING Number of Businesses: 41 Total Square Footage: 350, 000 Total Revenues: $146 million Wages Per Capita (Employment) $70, 000 $61, 137 $53, 317 $50, 000 $43, 818 $40, 000 $30, 000 (12, 039, 266) (672) (18, 342) $20, 000 $10, 000 $0 Butte-Silver Bow Montana US INDUSTRY CRITERIA “Heat map” of Butte-Silver Bow Businesses Lower Density Higher Density Skilled & trained workforce Low labor cost infrastructure Transportation Strong airport accessibility Stable regulatory environment q q q Sources: BLS, AE, Reference. USA Butte-Silver Bow Target Industry Report | 16

MANUFACTURING Cost of Operations: Wind Turbine Manufacturing Local Cost of Operations Index Ø Butte-Silver Bow is marginally more expensive than benchmarks 12000% 10000% 8000% Ø Low property taxes are a strength to the region 6000% 4000% 2000% 119% BSB, MT Golden, CO 0% Ø Utilities are the primary negative cost factor 96% 91% Pocatello, ID Twin Falls, ID Total Annual Operating Costs BSB, MT $8, 617, 877 Golden, CO Pocatello, ID Twin Falls, ID $10, 222, 024 $7, 845, 822 $8, 298, 454 Butte-Silver Bow Target Industry Report | 17

MANUFACTURING RANKING OF BUTTE-SILVER BOW’S MANUFACTURING INDUSTRY Assessment Rationale Manufacturing Variable • Significant positive net employment growth, 27%, since 2003 • Growth in employment increased throughout the recession Employment Trends • Industry wages are more competitive than national wages • The state is more competitive for manufacturing wages Wage Trends • Establishments diminished strongly during the recession, only seeing growth in the most previous year of data • 2012 - 2013, growth in establishments was strong, at 10. 8% Business Establishments • Employee skills seem specialized in a few areas, but training may be needed many different manufacturing types • The local labor force is well-suited for manufacturing jobs, having strong work ethic and a propensity for skilled labor Employee Skill Set • Butte-Silver Bow is competitive for employee wages, building payments, and property taxes • Competitiveness is hampered by high utility costs Cost of Operations Leading Strong Average Weak Overall Manufacturing Industry Butte-Silver Bow Target Industry Report | 18

MANUFACTURING Industry Action Plan 1. Implement a shovel ready certification program within the TIFID to attract development and streamline development and permitting process 2. Create a “Makers’ Space” to support manufacturing entrepreneurs and promote innovation 3. Consider establishment of 3 D printing & rapid prototyping center 4. Work with local high schools and trade schools to develop needed workforce development programs for manufacturing 5. Market the county’s high school and tech school manufacturing job training programs Butte-Silver Bow Target Industry Report | 19

LOGISTICS Wages Per Capita (Employment) Number of Businesses: 75 Total Square Footage: 2. 7 million Total Revenues: $2 billion $70, 000 $59, 794 $60, 000 $50, 000 $45, 932 $47, 767 (563) (22, 617) Butte-Silver Bow Montana $40, 000 $30, 000 $20, 000 (6, 887, 500) $10, 000 $0 US INDUSTRY CRITERIA transportation infrastructure Solid Access sales and distribution channels Low laborto international Availabilitycosts land Availability ofof inexpensive utilities “Heat map” of Butte-Silver Bow Businesses Lower Density Higher Density q q q q q Export and import products Proximity to market Hub airport access Public policy support Sources: BLS, AE, Reference. USA Butte-Silver Bow Target Industry Report | 20

LOGISTICS Cost of Operations: Warehousing Total Cost of Operations Index Ø The region is cost competitive vs benchmarks Ø Employee payroll (38%) and building payments (37%) are the primary cost factors Ø Utilities only comprise 7% of costs, but are much higher than benchmarks 12000% 10000% 8000% 6000% 4000% 2000% 116% 105% 95% BSB, MT Golden, CO Pocatello, ID Twin Falls, ID 0% Total Annual Operating Costs BSB, MT $6, 507, 220 $7, 558, 618 Golden, CO Pocatello, ID Twin Falls, ID $6, 802, 176 $6, 187, 598 Butte-Silver Bow Target Industry Report | 21

LOGISTICS RANKING OF BUTTE-SILVER BOW’S LOGISTICS INDUSTRY Assessment Rationale Logistics Variable • Employment has yet to reach pre-recession levels • Despite growth since the recession, the most previous year saw a 2. 4% decrease in industry employment Employment Trends • Wages are rising, but remain competitive against state & U. S. Wage Trends • Establishment growth has outpaced the state and the nation • Establishments have surpassed pre-recession levels Business Establishments • The semi-skilled nature of the jobs in this industry are a good fit for the local workers in this industry • Strong work ethic is a competitive advantage for the region Employee Skill Set • Total operating costs are lower in Butte-Silver Bow than all benchmarks except Twin Fall, ID • Shipping and utilities are the region’s least competitive aspects, but those are only a small percent of overall costs Cost of Operations Leading Strong Average Weak Overall Logistics Industry Butte-Silver Bow Target Industry Report | 22

LOGISTICS Industry Action Plan 1. Offer additional incentives to suppliers of existing businesses to develop the supply chain of target industries 2. Create and implement a marketing campaign which promotes Butte-Silver Bow as a hub for road and rail transportation 3. Work with local high schools and trade schools to develop effective job training programs or apprenticeships, which teach modern logistics skills and practices 4. Market Port of Montana as a logistics hub between Canada and Latin America Butte-Silver Bow Target Industry Report | 23

MINING & ENVIRONMENTAL ENGINEERING Number of Businesses: 75 Total Square Footage: 784, 000 Total Revenues: $195 million Wages Per Capita (Employment) $87, 000 $83, 764 $82, 000 $77, 000 $74, 072 $72, 000 $67, 000 $69, 969 (793) (3, 798, 209) (21, 775) $62, 000 Butte-Silver Bow Montana US INDUSTRY CRITERIA & trained workforce Skilled Low labor cost infrastructure Transportation interstate accessibility Strong Stable regulatory environment q q q “Heat map” of Butte-Silver Bow Businesses Lower Density Higher Density Sources: BLS, AE, Reference. USA Butte-Silver Bow Target Industry Report | 24

MINING & ENVIRONMENTAL ENGINEERING RANKING OF BUTTE-SILVER BOW’S MINING & ENVIRONMENTAL ENGINEERING INDUSTRY Assessment Rationale Mining & Environmental Engineering Variable • Employment grew steadily through the recession but has remained flat since 2009 • Growth in employment from 2003 to 2013 was 27% Employment Trends • Wages are higher in comparison to the rest of the state, making the region less competitive • The region is still competitive when compared against U. S. Wage Trends • Since the recession, establishments recovered more quickly than Montana or the U. S. Business Establishments • Legacy of skilled labor in mining • Wages for key positions remain competitive compared to U. S. Employee Skill Set Leading Strong Average Weak Overall Mining & Environmental Engineering Butte-Silver Bow Target Industry Report | 25

MINING & ENVIRONMENTAL ENGINEERING Industry Action Plan 1. Create more programs, like the What a Blast program, that engage high school students in mining or environmental engineering to generate interest for the industry 2. Market Butte-Silver Bow as a hub for environmental remediation services 3. Establish an annual conference or trade show that showcases mining technologies Butte-Silver Bow Target Industry Report | 26

INNOVATIVE & SPECIALIZED SERVICES Number of Businesses: 177 Wages Per Capita (Employment) Total Square Footage: 3. 2 million $60, 000 Total Revenues: $303 million $50, 000 $40, 000 $53, 089 $38, 283 $41, 239 $30, 000 $20, 000 (22, 071, 491) (1, 402) (66, 958) Butte-Silver Bow Montana $10, 000 $0 q q q “Heat map” of Butte-Silver Bow Businesses Lower Density Higher Density US INDUSTRY CRITERIA Skilled professional workforce Entrepreneurial environment Existing medical presence Available venture capital Proximity to market Institutional research and development Affordable lab space International airport access Business friendly climate Low tax environment Public policy support Sources: BLS, AE, Reference. USA Butte-Silver Bow Target Industry Report | 27

INNOVATIVE & SPECIALIZED SERVICES Cost of Operations: Web App Design Local Cost of Operations Index Ø Butte-Silver Bow is comparable to benchmarks for this industry 12000% 10000% 8000% Ø Employee payroll and benefits comprise 89% of costs 6000% 4000% 2000% 128% 100% BSB, MT Golden, CO Pocatello, ID 0% 93% Twin Falls, ID Ø Utilities prices are the least competitive cost factor Total Annual Operating Costs BSB, MT $1, 634, 188 Golden, CO Pocatello, ID Twin Falls, ID $2, 097, 976 $1, 630, 894 $1, 525, 924 Butte-Silver Bow Target Industry Report | 28

INNOVATIVE & SPECIALIZED SERVICES RANKING OF BUTTE-SILVER BOW’S INNOVATIVE & SPECIALIZED SERVICES INDUSTRY Assessment Rationale Innovative & Specialized Services Variable • Local employment has not followed the steady growth trends seen state-wide and nationally • Employment has grown by 30. 4% since 2003, but has not yet recovered to pre-recession levels Employment Trends • Wages have stayed fairly flat, but remain competitive against state and local averages Wage Trends • Establishments have seen solid growth since 2011, at 5. 4% • Butte-Silver Bow will be able to rely somewhat on the growth that is taking place at the state and national level Business Establishments • The occupational analysis shows that while wages are competitive, some key jobs are underrepresented locally Employee Skill Set • Apart from utilities costs, Butte-Silver Bow is generally more competitive than two out of three benchmarks • Travel is more expensive in Butte-Silver Bow, while offering fewer flight options. Cost of Operations Leading Strong Average Weak Overall Innovative & Specialized Services Industry Butte-Silver Bow Target Industry Report | 29

INNOVATIVE & SPECIALIZED SERVICES Industry Action Plan 1. Develop a tech-based business accelerator or incubator 2. Allow live/work product zoning 3. Develop co-working space that hosts entrepreneurs, seminars, guest speakers, and networking events 4. Expand connectivity of fiber network throughout Uptown and then throughout residential areas 5. Offer housing options to local artists which include 100% home financing or price levels based on income 6. Offer coursework at Montana Tech or Highlands College for entrepreneurship Butte-Silver Bow Target Industry Report | 30

PRODUCT IMPROVEMENT Product Improvement Strategies 1. Consider locating the Highlands College expansion Uptown, to occupy currently vacant space 2. Commission a highest and best use study to cover the TIFID to ensure all of the land is properly utilized 3. More strict adherence to code enforcement policies 4. Consider combining economic development organizations to increase efficiencies in economic development efforts 5. Create an alumni network to bring highly-skilled Butte-Silver Bow natives back to the region 6. Develop a “go to” process for business attraction, retention, and expansion 7. Leverage the Butte Aero. Tec Facility to attract additional high-tech research and development to the region 8. Raise funds for marketing ventures through public / private partnerships 9. Establish a united regional brand 10. Celebrate regional successes by engaging the media to cover positive developments in the community 11. Market to industry-related conferences and trade shows Butte-Silver Bow Target Industry Report | 31

SITE SELECTOR PERCEPTION SURVEY What is your current perception of Butte. Silver Bow, MT? Neutral, 43% If you have worked with Butte-Silver Bow in the past, please rate your satisfaction with the agency Positive, 43% Responsiveness 4. 5 Ability/willingness to coordinate with local economic developers/officials 4. 5 Accessibility 4. 3 Availability of business incentive tools 4. 3 Negative, 14% 1 2 3 4 5 Which of the following cities have you considered most often for business locations for your clients? Lincoln, NE 7. 0 Golden, CO 6. 0 Twin Falls, ID 5. 2 Yakima, WA 4. 7 Pocatello, ID 4. 6 Helena, MT 3. 3 Great Falls, MT 3. 0 Butte, MT 2. 2 1 2 3 4 5 6 7 8 Butte-Silver Bow Target Industry Report | 32

SITE SELECTOR PERCEPTION SURVEY Based on your experience, please rate the aggressiveness of the economic development marketing activities for the following cities Lincoln, NE 3. 7 Twin Falls, ID 2. 7 Butte, MT 2. 5 Pocatello, ID 2. 3 Golden, CO 2. 3 Great Falls, MT 2. 3 Yakima, WA 2. 2 Helena, MT 2. 0 1 2 3 4 Based on your experience, please rate the aggressiveness of the economic development incentive programs for the following cities Lincoln, NE 3. 1 Pocatello, ID 2. 5 Twin Falls, ID 2. 3 Helena, MT 2. 3 Butte, MT 2. 3 Great Falls, MT 2. 1 Golden, CO 1. 7 Yakima, WA 1. 4 1 2 3 4 Butte-Silver Bow Target Industry Report | 33

THANK YOU! Butte-Silver Bow Target Industry Report | 34

APPENDIX: COST OF OPERATIONS SOURCES Employee Payrolls: Bureau of Labor Statistics Occupational Employment Statistics (http: //www. bls. gov/oes/current/oessrcma. htm) Employee Benefits: Bureau of Labor Statistics Employer Costs for Employee Compensation (http: //www. bls. gov/ro 7 ecec. htm) Electric / Natural Gas Rates: Energy Information Administration (http: //www. eia. gov/) Water / Sewer Rates: County and City Websites Land Costs / Property Lease Rates: Averages found from Loop. Net (www. loopnet. com) Construction Costs: Reed Construction Data (http: //www. reedconstructiondata. com/rsmeans/models / 2012 Means Construction Indexes) Property Tax Rates: County and City Websites Industry Clusters: U. S. Cluster Mapping (http: //clustermapping. us/home/) Travel Costs: Bureau of Transportation Statistics (http: //www. rita. dot. gov/bts/airfares) Hotel Costs: Hotel Price Index (http: //files. hotel-price-index. com//2010/full-year/pdf/HPI_USA_2010. pdf) Freight Costs: UShip (www. uship. com)