Q&A with David Rosenberg, Indiana’s new secretary of commerce

David Rosenberg

As Indiana’s new secretary of commerce, David Rosenberg becomes CEO of the Indiana Economic Development Corp. at a time when the agency has been given unprecedented funding to pursue its aggressive economic development strategy.

That strategy has included buying thousands of acres of farmland for a planned advanced manufacturing district in Boone County and offering nine-figure incentive packages to lure new investment. In the most recent state budget, the IEDC received an additional $1.2 billion in funding for its pursuits.

Gov. Eric Holcomb last month elevated Rosenberg to the state’s top economic development post after Brad Chambers stepped down and later announced he would run for governor. Rosenberg previously was IEDC’s chief operating officer and chief of staff.

Rosenberg sat down with IBJ’s Peter Blanchard to discuss the modern economic development landscape, his vision for the LEAP district in Boone County and the rising cost of economic development incentives used to attract new businesses. (LEAP is an acronym for Limitless Exploration/Advanced Pace.)

This conversation has been edited for clarity and brevity.

How are you settling into your new role?

It’s been great. I crossed the two-year mark with the IEDC a couple of weeks ago, and stepping in this role has been incredible. I’m truly honored and humbled to get the nomination by Gov. Holcomb, who has been a great leader for economic development in his time, and we’ve been able to build and grow just an incredible team here. We’ve really moved from a transactional organization to more of a strategic, going-to-get-the-economy-that-we-want, not just accept the economy that comes here. But our mission, our vision, is not changing. It’s time to implement, especially with where we’re at in the [Holcomb] administration, and so I’m really looking forward to these next 16 months and making those generationally impactful initiatives and deals come to life.

You were one of Brad Chambers’ first hires when he was appointed head of IEDC. Have you, or do you plan to, bring your own people into the organization?

In an homage to [the movie] “Hoosiers,” my team is on the floor. We’ve been able to really grow the team that was here when we came in, plus add a few really strong pieces. Everyone has bought into the vision and the … focus that we’ve had, and I think the market has responded. This next 15 months is about focus and implementation and getting as many things done as we can to set up the economy for 30 years out and really helping to make that generational impact.

Brad Chambers’ tenure may end up being defined by the LEAP District. Are you picking up where he left off, or do you have some ideas of your own for how that project can grow and prosper in the future?

To date, the LEAP vision has come into place a lot faster than I think any of us expected. The market has truly responded to us. As we went out and looked at what other states were doing, speed being that new incentive was absolutely critical. So being able to put in place almost 9,000 acres, either under ownership or option, have it zoned and a lot of that annexed into the City of Lebanon, have a plan for utilities, the road network, other things, the market has just responded, and we’ve seen that with Eli Lilly and Co.’s $3.7 billion anchor investment there. It was the largest single manufacturing site for Eli Lilly in their company’s history and the largest single deal in IEDC history, and on the day of that announcement, [Lilly CEO] Dave Ricks said without LEAP, without the vision, that investment would not have happened in Indiana. So I think that has already catapulted to the rest of the market. We have over $60 billion of potential deals in the pipeline, including some deals where we’re starting to negotiate purchase sale agreements on land at that site. The infrastructure continues to build out. The water plan is coming together really strong. So I think to date, setting that vision, meeting the needs and demands of the market, has really come into place and exceeded our expectations. There is really untapped potential, because what the market is looking for is not only speed but an ecosystem of talent, of companies and ideas that are pushing the envelope. And that’s where that hard tech corridor really comes into place, starting with Purdue University in West Lafayette and the talent pipeline they produce, down to the LEAP District and the companies and the environment set there, and what’s happening on the near west side of Indianapolis, not only having the population center but the new IUPUI campus and what can be accomplished with the commercialization of the research that’s coming. 16 Tech, what’s happening with the new Elanco headquarters at the former GM stamping plant, that whole corridor is really primed, and I think the market’s already taking notice. So the future vision of LEAP is really strong.

Speed is a big incentive, but financial incentives are a big part of it as well, right? Some people see these large, nine-figure incentive packages and wonder if the state is giving up too much. In 2011, Gov. Mitch Daniels warned states not to let “their zeal for the deal take them past the point of prudence.” Are you worried at all that the size of these incentives is getting close to that point?

I’m not, and I think there’s a couple of reasons for that. One, with the tools the legislature gave us, we have to be very diligent with incentives because there’s a lot of potential. Our overall deal pipeline is almost $95 billion from companies looking at Indiana. We know that putting all of our eggs in one basket could lose us opportunities on the other side, and so we have to have a view of the full chessboard when we’re looking at those packages. Indiana has a great product already. We have a low tax, stable operating climate, and we’re investing in quality of place through the READI program. That balance we have here as a state is really strong and it’s a great product to market already. Third, it’s important to remember that these incentives are based on what the state sees as a return, and so they are calculated based on what the company will pay in taxes over a certain period of time. That incentive is the upfront piece to have that payback over a long period of time. Fourth, most importantly, all of our incentives—whether it’s cash performance grants, tax credits—are all performance-based. Until a company performs and the state is starting to see that payback in terms of taxes, there is no incentive they can claim. We’ve worked through our accounts management team to be able to claim that credit. A lot of these [incentives] are for “first mover” industries. Eighteen months ago, we didn’t have any microelectronics companies. Now we have seven operating in the state. We didn’t have any EV battery facilities 18 months ago and now there’s multiple operating in the state. Those first movers, sometimes you give an incentive and it’s still a positive return to the state. It’s really important you look at the ecosystem they bring. They bring their entire supply chain, and those companies have to be within direct proximity to that main facility, and so then it’s kind of shooting fish in a barrel where you’re getting higher and higher returns on that investment. You may have been more aggressive on that initial investment, but once they bring in their supply chain and you look at the overall deal, it’s very much double digits in terms of the investment made by the state.

A relatively new requirement for the IEDC is having to go before the State Budget Committee to get funding authorized for incentive packages, land acquisition and other tools at your disposal. Does discussing those deals in public ever complicate negotiations with companies?

Sure, it can complicate it, but we welcome the transparency. The legislature has been a great partner and provided those tools, but we understand they have their constituents to answer to as well. Everything we do, whether it’s our annual compliance report, the public meetings we do around the state and throughout the legislative session, we welcome the opportunity to answer those questions. Now, there are certain times we can’t share information due to [non-disclosure agreements], or because companies have their own shareholders to report to or filings they have to do. Trust me, whenever we could make an announcement and put something out there, we would love to, but it’s not always our call. It involves working with the companies as a partnership and making sure we’re able to keep the Legislature as informed as we’re able to. Whenever we’re able to publicly share information, we do.

The IEDC has said that meeting the water demands of the LEAP District is going to require tapping into an aquifer along the Wabash River aquifer and transporting as much as 100 million gallons of water per day from West Lafayette to Lebanon. Many people are anxious to see the results of the water monitoring studies happening in Tippecanoe County. When can we expect to see those findings?

We think the final results will be ready by the end of this year. What I will say is that the initial testing and work has been extremely positive. There’s more water than I think anyone projected or predicted up there. The hydrologists say the geological framework of what the aquifers looked like up there exceeded all of their expectations. We have a lot of positive initial data and obviously we want to see that get finalized, and we want to put it out there. We’re going to ask some of our university partners to do peer reviews on that, but we want to make sure that stakeholders up and down the pipeline have the opportunity to see that. I think it’s important to remember this is not only about the LEAP District. Central Indiana has a known water problem. It’s been well-documented in Indiana Finance Authority studies dating back to the 1960s. Unlocking a true regional, generational water solution is going to have to happen at some point, so being able to use economic development to unlock that and pay for some of those costs, I think, is a big win. It allows us to attract companies that we’ve never been able to attract to certain areas, especially in the LEAP District. It opens up Lafayette to continue to expand exponentially and not have water worries, and they can attract mega water users that they haven’t previously been able to. And I think the thing that gets lost is that cities and towns up and down that potential pipeline corridor will be able to tap into that and do housing or economic development that they couldn’t do because they didn’t have that water resource. If the final results prove what we think they will in terms of the amount of water that’s up there, I think there could be a huge number of developments, and it’s truly an investment for the state that it can get a return on.

You’re probably aware that Republican state lawmakers are exploring the idea of eliminating the state’s personal income tax to keep Indiana competitive with states like Florida and Tennessee. I’m wondering if you think it’s prudent to eliminate an $8 billion revenue source at a time when Indiana business and civic leaders have talked about the need for investments in workforce and quality of life initiatives.

I think it’s about finding plenty of balance, and I think we have a really good balance right now. Indiana is consistently ranked as a top business climate, and companies have responded. In the last two years, we’ve had $33 billion in new committed capital expenditures. That’s a figure that normally would have taken six years to achieve, and we’ve done it in six quarters. Those jobs that brought about average wages that exceed the U.S. national average, putting more money in pockets and bringing generational change. But at the same time, in terms of attracting those industries and companies, we’ve also been able to invest in things like READI (the Regional Economic Acceleration and Development Initiative grants). The first round of READI projects are wrapping up, and that $500 million has leveraged over $12 billion in investments, and those investments are going directly to population growth and quality of life programs to keep and attract talent here for the future. Another $500 million appropriation with READI 2.0 is coming out, and we expect that to have a similar leverage point. If you look at that, the state’s investment of $1 billion is going to attract and leverage over $20 billion of direct investments in cities and towns throughout Indiana, with the sole goal of growing the population and creating those amenities that people want to see. We have a great balance that allows us to attract companies and make the investments in attracting and retaining the talent of the future.