Economic impacts of the Oklahoma Capital Investment Board's Venture Investment Program and Oklahoma Capital Access Program

              ECONOMIC IMPACTS OF THE
OKLAHOMA CAPITAL INVESTMENT BOARD’S
VENTURE INVESTMENT PROGRAM AND
OKLAHOMA CAPITAL ACCESS PROGRAM
PREPARED BY:
APPLIED ECONOMICS
11209 N. TATUM BLVD, SUITE 225
PHOENIX, AZ 85028
MARCH 2010
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1.0 INTRODUCTION
Applied Economics has been retained on behalf of the Oklahoma Capital Investment Board (OCIB or
Board) to prepare an updated economic impact statement of their venture investment and capital access
programs on the State of Oklahoma from 1992 through June 2009. Applied Economics is an economic
consulting firm, based in Phoenix, Arizona, specializing in economic development, economic and fiscal
impact assessment, socioeconomic modeling, urban planning and custom software applications. Our
clients include local governments--cities, counties, and councils of government; as well as school
districts, utilities, regional economic development organizations, and private businesses. Applied
Economics conducts studies and develops models to measure the impacts of a wide variety of activities.
These activities can include development land use and policy changes, business-driven economic impacts,
and program-driven economic and fiscal impacts.
This analysis is intended to quantify the contributions of the companies assisted by OCIB to the
Oklahoma economy. The impacts stem from two programs – the Venture Investment Program and the
Capital Access Program. In addition the analysis includes a summary of the impacts of the NBA Hornets
who played in Oklahoma City following Hurricane Katrina and received a $10 million revenue guarantee
through an investment syndicate which included OCIB, the City of Oklahoma City and a group of private
investors.
Through its Venture Investment Program, OCIB supports investments in private, professionally managed
venture capital firms that have committed to building a significant presence within Oklahoma and have a
history of producing solid returns for their investors.
The OCIB Capital Access Program provides banks a form of portfolio guarantee, allowing them to stretch
their loan capabilities and offer more loans to small businesses in Oklahoma. Both businesses and
financial institutions in Oklahoma benefit from the higher volume of small business loans created through
the capital access program. Loans generally range in size from $1,000 to $700,000 and are used by a
wide variety of businesses.
Since 1992, OCIB has assisted 29 Oklahoma companies through its venture investment program and 876
companies through its capital access program. These companies range in size from 1 or 2 employees to
over 400 employees, although the vast majority are smaller firms. They also represent a broad spectrum
of different industries.
The impact represented here shows a year-by-year snapshot of the companies assisted in each year. In the
case of the venture investment program, most companies reported Oklahoma payroll and employment
numbers for multiple years and are therefore included in totals for each of the reported years. However,
once a company was no longer active in Oklahoma, they were no longer included in the impacts.
The venture investment program includes 29 companies that participated between 1993 and 2009. In
total, they account for $205.4 million in payroll and over 1,500 employees over this time period.1 These
29 companies as a group received approximately $131.2 million in venture capital funding through OCIB
over the fourteen year period.
The capital access program includes data on 407 of the 876 companies that participated between 1992 and
2009. This includes companies that were willing to provide information on their industry type and the
number of new jobs they created. For this program, the impact analysis is based on new jobs created
1 Employee count based on peak employment of each firm during the time period they reported employment and
payroll.
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during their initial year of participation in the program, rather than total jobs. The 876 companies as a
group received approximately $45.0 million in loans between 1992 and 2009. In this respect, the analysis
provides a very conservative estimate of the cumulative impacts given that only 407 of the 876 Oklahoma
companies were considered in the analysis. In addition, their impact was only considered for a one-year
period even though most of the companies are likely still operating in Oklahoma.
In addition to their regular programs, this analysis also includes information about a revenue
guarantee provided by OCIB to the NBA Hornets. Due to the devastation caused by Hurricane
Katrina in New Orleans in September 2005, Oklahoma City was approached by the New Orleans Hornets
and the National Basketball Association (NBA) to play their 2005-06 season at the Ford Center in
Oklahoma City. To assist in this effort, OCIB participated in a $10 million revenue guarantee put in place
to recruit the team to Oklahoma.
The information and observations contained in this report are based on our present knowledge of the
components of development, and of the current physical, socioeconomic and fiscal conditions of the
affected areas. All company-specific data was provided by OCIB. Estimates made in this analysis are
based on hypothetical assumptions and the current economic structure of the region. However, even if the
assumptions outlined in this report were to occur, there will usually be differences between the estimates
and the actual results because events and circumstances frequently do not occur as expected. This
analysis is based on the best available information and is intended to aid the Oklahoma Capital
Investment Board in demonstrating its impact to the state. In no way will Applied Economics be held
responsible or have any liability or be subject to damages as a result of this analysis. This report may be
used only for the purposes that it was intended.
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2.0 SUMMARY OF RESULTS
The Oklahoma Capital Investment Board provides access to a unique set of financial resources for
companies looking to develop or expand in Oklahoma. These companies in turn provide on-going
economic benefits to the state. These positive impacts include the following:
􀂃 OCIB has had a total economic impact of $1.3 billion on the Oklahoma economy over the past 17
years as a result of the venture capital and capital access programs and the NBA Hornets revenue
guarantee. These programs assisted over 900 companies during this time period.
􀂃 The largest component of the impact is from the venture investment program. The 29 Oklahoma
companies that received capital from Board-supported funds provided close to 9,400 job-years over
the multi-year period, (or an average of 553 jobs per year) and a total of $204.8 million in payroll. In
addition to these results the venture investment program supported 8 venture firms that were
headquartered in Oklahoma. These firms employed 21 investment professionals plus support staff.
􀂃 As a result of the multiplier effect, the total impact of the companies in the venture investment
program on the State of Oklahoma was $1.0 billion in increased economic activity, 14,700 jobs, (or
an average of 865 jobs per year) and $338.5 million in payroll. This includes jobs and payroll at
participating companies, as well as jobs and payroll at other local businesses.
􀂃 The capital access program has assisted 876 small and medium sized companies since its inception in
1992. Of these 876 companies, 407 provided enough information to calculate impacts. These 407
companies created about 1,380 new jobs and $40.8 million in payroll.
• The total economic impact of the capital access program, including additional supported jobs and
payroll at other local businesses, was $219.4 million in increased economic activity, 2,400 jobs and
$73.1 million in payroll.
• In addition to these impacts from developing and expanding Oklahoma companies, OCIB also
provided 1/3 of a $10 million revenue guarantee put in place to recruit the NBA Hornets to Oklahoma
for their 2005/06 season. The Hornets organization employed about 100 people (players and front
office) with a total payroll of $60 million, of which an estimated 10 percent was spent in Oklahoma.
In addition, they supported $45.6 million in direct game spending by patrons. The payroll and game
spending combined resulted in an annual economic impact of $71.0 million.2
2 City of Oklahoma City.
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Venture Investment Program
Total Investment $131,150,274
Number of Participating Companies 29
Payroll (1993 - 2009) $204,787,667
Total Employment* 9,388
Average Annual Employment 0
Average Wage per Job $21,814
Economic Impacts (1993 - 2009)
Total Output $1,027,722,566
Total Payroll $338,525,279
Total Jobs (in Job-Years)* 14,709
Capital Access Program
Total Loans $44,970,164
Number of Participating Companies** 876
Estimated Payroll (1992 - 2009) $40,841,030
New Employment** 1,285
Average Wage per Job $31,783
Economic Impacts (1992 - 2009)
Total Output $219,401,011
Total Payroll $73,122,481
Total Jobs 2,417
NBA Hornets
Total Loan Guarantee $10,000,000
Estimated Payroll Spent in Oklahoma (2005-2006)*** $6,000,000
Average Wage per Job $600,000
Direct Game Spending (38 games) $45,568,384
Economic Impacts (2005-2006)
Total Output $71,011,462
Total Payroll $25,443,000
Total Jobs 229
***Assumes 10 percent of total payroll spent in Oklahoma.
SUMMARY OF RESULTS
*Represents total employment in job-years over a 17 year period. Jobs
at individual firms may be included multiple times if the company
maintained operations in Oklahoma for multiple years.
**Only 407 of the 876 companies submitted sufficient information to be
included in the impact. Employment number shown here is estimated
total for those 407 companies.
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3.0 ECONOMIC IMPACTS
The economic benefits resulting from OCIB include combined impacts of all companies assisted by this
program since 1992. Economic impacts measure the effects of economic stimuli or expenditures in the
local economy. These impacts include direct and indirect jobs, personal income, and economic activity or
output that are generated by these companies. Indirect impacts are the result of the multiplier effect and
capture supported supplier and consumer businesses and their employees in Oklahoma that benefit from
local purchases made by these companies and their employees.
Venture Investment Program
The venture investment program was initiated in 1993. Since that time, 29 companies have received
funding. All total, OCIB has provided these companies with access to over $131.2 million in venture
capital funding over the past 16 years. The companies range in size from 1 employee to over 400
employees. A list of the types of industries and associated employment and payroll for participating
companies is listed below.
It should also be noted that the program has supported 8 venture firms that were headquartered in
Oklahoma. These firms were structured with 10 to 12 year lives, employed 21 investment professionals
plus support staff. Headcount and payroll numbers for these firms have not been included in the venture
investment program impact totals.
Industry Type Employment Payroll
Advertising 130 $3,486,000
Construction & management services 212 $12,794,000
Communication services 73 $12,018,000
Transformers 56 $9,461,000
Custom programming/software/CAD/design 266 $45,485,500
Service company 403 $74,700,000
Health care 159 $26,289,667
Costume jewelry 93 $3,269,000
Photo laboratories 60 $6,800,000
Instruments 17 $2,472,000
Electronic equipment 24 $2,360,500
Biological products/research 26 $6,239,000
Note: Payroll include totals for all years for all companies in that industry type.
Employment includes peak levels during the participation period.
COMPANIES PARTICIPATING IN VENTURE INVESTMENT PROGRAM
BY INDUSTRY TYPE
FIGURE 1
On average, companies receiving OCIB support through its venture investment program have been active
in Oklahoma for about six years. The data represented here shows a snapshot of the combined economic
impact of all companies participating in any given year. For reasons described above, most companies
are represented in the impact totals for an average of six years.
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Capital Access Program
The capital access program was initiated in 1992. Since that time, 876 companies have received loans,
some more than one loan. The impact from these companies is only included for a one-year period even
though the participants were likely active in Oklahoma for multiple years. Multi-year data was not
included because this information is not available to the Board. An additional factor that adds to the
conservative nature of our analysis of the capital access program is that only 407 of the total 876
companies reported employment numbers. Therefore only 407 of these companies are considered in the
study. The total amount of loans funded since 1992 is about $45.0 million. In this analysis, each
borrower is counted only one time, even if they received more than one loan. The participants in this
program span almost every industry sector (Figure 2). They range in size from 1 to 200 total employees
with annual sales ranging from $2,000 to $4.9 million. Over the 17 year period, these companies created
approximately 1,600 new jobs in Oklahoma.3
3 Estimate of new jobs includes companies that did not provide sufficient information to be included in the analysis.
The companies included in the analysis account for 1,376 of the approximately 1,600 new jobs.
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New Jobs
Industry Borrower Sales Created
Agriculture- Livestock Production $1,086,738 16
Agricultural Services $199,959 8
Mining $3,258,825 7
Construction $11,017,162 146
Utilities $175,000 1
Food Processing $2,468,480 13
Apparel $475,154 9
Lumber and Wood Products $231,531 10
Furniture & Fixtures $2,337,515 29
Printing $517,340 4
Chemcials $175,000 4
Leather Products $70,000 1
Stone, Clay & Glass $559,905 10
Primary Metals $527,800 1
Fabricated Metals $5,723,348 79
Industrial Machinery $1,961,069 12
Electronics na 1
Transportation Equipment $1,617,087 9
Instruments $100,000 5
Misc Manufacturing $612,158 4
Interurban Transportation $114,000 1
Motor Freight Transportation $6,502,680 37
Water Transportation $52,000 1
Air Transportation na 2
Transportation Services $1,171,021 29
Communication Services $607,000 2
Refuse Services $93,600 51
Wholesale Trade $6,719,611 44
Building Materials and Garden Stores $419,843 8
General Merchandise Stores $86,032 6
Food Stores $3,469,074 47
Auto Dealers $4,232,000 19
Apparel Stores $4,213,252 25
Home Furnishing Stores $802,713 13
Eating & Drinking Places $6,380,934 252
Misc Retail $5,830,012 61
Non-Store Retail $47,000 1
Banking and Credit $95,000 1
Real Estate $111,039 13
Personal Services $798,193 67
Business Services $3,817,251 92
Auto Repair and Services $1,438,287 36
Misc Repair Services $1,476,114 4
Motion Pictures and Video Production $194,410 6
Amusement and Recreation $140,405 10
Health Care $1,989,843 45
Legal Services $68,875 10
Educational Services na 3
Social Services $220,227 18
Membership Organizations $5,593,403 14
Professional Services $1,824,723 19
Other Services $2,155,198 31
FIGURE 2
COMPANIES PARTICIPATING IN CAPITAL ACCESS PROGRAM
BY INDUSTRY TYPE
Note: Figure includes only the 407 companies out of 876 total with sufficient
information to be included in the analysis.
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The impacts of these companies stem from two sources. First, companies purchase a variety of goods and
services from vendors within the state creating additional demand, jobs and payroll. The amount and type
of local purchases depends on the industry type of the participating company. Second, company
employees, as well as supported vendor employees, make local purchases of consumer goods. This
creates additional demand and supports additional employment and payroll, primarily at retail and
personal services establishments.
NBA Hornets Revenue Guarantee
Due to the devastation caused by Hurricane Katrina in New Orleans in September 2005, Oklahoma City
was approached by the New Orleans Hornets and the National Basketball Association (NBA) to play their
2005-06 season at the Ford Center in Oklahoma City. This temporary relocation created significant
economic benefits for the city and the state. To assist in this effort, OCIB participated in a $10 million
revenue guarantee put in place to recruit the team to Oklahoma.
The team played 38 home games in Oklahoma City that year with average attendance of 18,737 per game.
This resulted in $45.6 million of direct game spending by both residents and out of town attendees. In
addition, the 100 players and staff of the NBA Hornets spent an estimated 10 percent of their $60 million
payroll in Oklahoma during the season. Both of these types of spending support local businesses and
create economic impacts. Although the Hornets stayed in Oklahoma for a second season, the impact
results were only included for the initial year. It is likely that the Hornets would not have been in
Oklahoma for the second season without OCIB’s support during the initial season, but we have again
elected to be conservative with analysis
Economic Impact Results
The economic impact results presented here are grouped into direct impacts and total impacts (Figures 3
and 4). Direct output represents the value of production at participating companies. Direct jobs and
payroll were provided by OCIB and represent the number of jobs and amount of payroll at the companies
participating in the program in any given year. These companies and their employees in turn make
additional local purchases that are captured in the total impact estimates. The total impact includes both
the direct impacts and the secondary, or indirect and induced impacts created at other local businesses and
their employees.
The magnitude of the impact is proportional to the number of companies participating in any given year,
the size of those companies, and the types of industries. Some industries generate a much greater
multiplier effect than others, depending on the amount of local purchases they are able to make.
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Number of
New Participating
Year Investment Companies Output Jobs* Payroll Output Jobs Payroll
1993 $250,000 1 $202,519 3 $108,000 $379,100 4 $165,972
1994 $0 1 $247,523 4 $132,000 $463,345 5 $202,855
1995 $9,380,000 2 $11,464,572 311 $3,932,000 $18,596,561 442 $6,213,700
1996 $13,232,000 5 $14,678,245 391 $5,570,000 $24,513,137 582 $8,707,574
1997 $12,445,000 9 $23,922,810 604 $9,193,000 $40,735,787 921 $14,667,222
1998 $22,369,248 12 $67,446,900 1,093 $26,161,000 $116,481,101 1,735 $42,093,773
1999 $21,383,026 13 $83,250,105 1,056 $28,822,000 $141,849,851 1,695 $47,613,227
2000 $9,134,000 10 $74,994,985 788 $22,208,000 $125,393,629 1,295 $38,092,263
2001 $1,066,000 8 $46,741,689 694 $17,388,000 $78,988,681 1,066 $27,768,626
2002 $4,000,000 8 $33,468,742 594 $12,453,000 $56,173,296 903 $19,987,501
2003 $464,000 8 $27,497,436 507 $9,370,000 $45,356,603 754 $15,158,433
2004 $5,080,000 8 $33,434,836 532 $10,899,000 $54,341,257 773 $17,658,880
2005 $390,000 8 $34,691,742 532 $11,408,000 $56,443,819 777 $18,438,121
2006 $8,922,000 10 $38,791,947 629 $12,918,000 $64,408,684 958 $21,149,223
2007 $4,866,000 11 $35,848,268 543 $12,077,667 $59,626,903 808 $19,756,473
2008 $10,031,000 14 $59,314,050 556 $14,622,667 $95,331,797 1,019 $27,071,157
2009 $8,138,000 15 $29,546,906 551 $7,525,333 $48,639,017 972 $13,780,280
Total $131,150,274 na $615,543,277 9,388 $204,787,667 $1,027,722,566 14,709 $338,525,279
FIGURE 3
*Represents the sum of jobs at participating companies over 17 years. Jobs at individual firms may be included multiple times
if they participated in multiple years and maintained the same level of employment.
Direct Impacts Total Impacts
ECONOMIC IMPACTS OF OCIB VENTURE INVESTMENT PROGRAM
ON THE STATE OF OKLAHOMA
Current Dollars
All total, the venture investment program created an economic impact of $1.0 billion in Oklahoma from
1993 to 2009. The companies assisted through this program created an increase in demand of $412.2
million that supported $133.7 million in payroll and close to 5,300 jobs-years at other local businesses
through their supplier purchases and purchases made by employees. These economic impacts are in
addition to the cumulative impacts of 9,400 jobs-years and $204.8 million in payroll that were supported
by the companies directly.4
4 Note that jobs are counted in job-years and include total employment in each year a company participated in the
program.
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Number of
Participating
Year Companies Output Jobs Payroll Output Jobs Payroll
1992 7 $5,773,427 33 $1,456,153 $9,645,003 74 $2,847,216
1993 49 $28,149,166 252 $8,918,609 $49,418,972 488 $16,263,636
1994 33 $11,991,272 172 $3,479,294 $22,108,418 280 $6,812,613
1995 32 $16,670,689 163 $4,536,727 $31,958,524 325 $9,585,705
1996 32 $6,785,043 99 $2,614,332 $12,298,954 162 $4,530,894
1997 33 $6,697,841 104 $2,596,747 $11,949,080 166 $4,501,759
1998 39 $6,053,596 90 $1,979,654 $10,505,961 140 $3,515,468
1999 17 $3,061,350 48 $1,191,809 $5,380,843 75 $2,045,005
2000 36 $8,899,885 124 $3,361,710 $15,657,184 202 $5,808,408
2001 15 $2,015,252 23 $659,246 $3,525,733 40 $1,196,876
2002 7 $975,902 8 $279,661 $1,686,029 15 $527,325
2003 10 $3,818,957 26 $887,851 $6,488,022 53 $1,785,932
2004 12 $1,911,947 21 $763,385 $3,351,334 38 $1,295,092
2005 14 $1,406,307 20 $533,292 $2,477,893 32 $899,655
2006 15 $10,091,970 71 $4,023,115 $15,474,960 141 $5,762,101
2007 13 $1,805,218 22 $564,124 $3,018,995 34 $940,950
2008 20 $3,782,472 49 $1,497,252 $6,120,617 69 $2,204,179
2009 23 $4,869,070 51 $1,498,068 $8,334,492 80 $2,599,668
Total 407 $124,759,364 1,376 $40,841,030 $219,401,011 2,417 $73,122,481
Direct Impacts Total Impacts
FIGURE 4
ECONOMIC IMPACTS OF OCIB CAPITAL ACCESS PROGRAM
ON THE STATE OF OKLAHOMA
Current Dollars
All total, the capital access program created an economic impact of $219.4 million in Oklahoma from
1992 to 2009. The companies assisted through this program created an increase in demand of $94.6
million that supported $32.3 million in payroll and about 1,040 jobs at other local businesses through
their supplier purchases and purchases made by employees. These economic impacts are in addition to
the 1,400 employees and $40.8 million in payroll that were created by these companies directly.
Along with the on-going impacts of the venture capital and capital access programs, OCIB was also able
to support the significant impacts created by the NBA Hornets during the 2005-06 season in Oklahoma
City. Note that these impacts are not included in the figures above. Although this represents a non-recurring
impact, it was significant in the 2005-06 fiscal year. The total economic impact of the NBA
Hornets is estimated at $71.0 million. This includes direct game spending generating increased demand
of $45.6 million. There was also an estimated $6 million in direct payroll spending that created an
economic impact of $25.4 million and supported 229 jobs (100 direct, 129 indirect and induced).5
The secondary impacts described above are called multiplier effects. Multiplier effects are a way of
representing the larger economic effects on the local economy. The multipliers effects translate an
increase in output (loosely defined for service industries as sales, less profits) into a corresponding
5 Note that impacts results for NBA Hornets are based on analysis by City of Oklahoma City, not Applied
Economics.
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increase in jobs and personal income or payroll. In essence, the multiplier effect represents the recycling
of local spending. This recycling process creates new business opportunities.
The multipliers used in this analysis are from IMPLAN, a national vendor of economic impact software,
and are specific to Oklahoma. Industry specific multipliers were used for each type of participating
company. The variation in multipliers between the specific industry types is due to the different mix of
secondary industries that are affected since multipliers are industry-specific.
On average, the output multiplier for the venture investment program is 1.67. This means that for every
$1 million of production by the participating companies, an additional $670,000 in additional economic
activity is generated in the local economy, along with 9 jobs at related businesses. On average, the
income from these jobs is about $25,100 per employee.
On average, the output multiplier for the capital access program is 1.76. This means that for every $1
million of production by the participating companies, an additional $760,000 in additional economic
activity is generated in the local economy, along with 8 jobs at related businesses. On average, the
income from these jobs is about $31,000 per employee.
A summary of the impacts of the two on-going OCIB programs and the NBA Hornets guarantee are
shown in Figure 5. The venture investment program has the larger impact of the two programs due to
several factors:
• The venture investment program includes all employment, not just new employment.
However, many of these are start up companies, and thus the bulk of the jobs created are new.
As a result, the average number of direct jobs attributed to companies in the venture investment
program is larger. In general, the capital access program includes many very small companies.
• Companies in the venture investment program may be counted multiple times, once for each
year they were an active Oklahoma company, whereas companies in the capital access program
are only counted in the single year in which they receive a loan. It is very likely that many of
the companies that participated in the capital access program over the past 17 years are still in
operation in Oklahoma, but their information is simply not tracked by the OCIB on an on-going
basis. As a result, the cumulative impacts of the companies in the capital access program are
understated.
• Despite the overall difference in magnitude of impacts between the two programs, the capital
access program actually has a higher average multiplier due to the larger share of manufacturing
companies versus services. Manufacturers typically make more supply purchases than service
providers due to their material-intensive nature.
• Figure 5 also includes the economic impact of the NBA Hornets loan guarantee, which
produced a significant economic impact during the 2005/2006 season. The impacts of the
Hornets include both the impacts of the Hornets organization and their employees, as well as
the impacts of tourism spending by game attendees.
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FIGURE 5
TOTAL OCIB ECONOMIC IMPACT BY PROGRAM
1992-2009
$0
$200
$400
$600
$800
$1,000
$1,200
Investment Total Output Total Payroll
Venture Investment Capital Access Hornets Guarantee
million
Both the venture capital and capital access program create significant annual impacts on the Oklahoma
economy. The Oklahoma Capital Investment Board not only helps to start and expand local companies,
but also supports job growth at other local supplier companies. In addition, these new jobs generate
increased payroll and spending that support the state’s economy.