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Idaho Gets Top Rankings for Economic Acheivment
Horizon Air Magazine 10-2007
National surveys have long ranked Idaho high in recreation, quality of life and agricultural output, but what many people might not know is that Idaho also ranks right at the top as an economic powerhouse.
In the 2007 Development Report Card for the States, produced by the nonprofit Corporation for Enterprise Development, Idaho ranked first in new companies formed, patents issued per capita, and short-term employment growth. What’s more, Idaho ranked second in manufacturing investment and advantageous energy costs, and third in long-term employment growth. Thanks to these ratings, Idaho received an overall “A” for economic performance.
CFED distills its rankings from official reports, but one need look no further than Idaho companies for proof of the Gem State’s success as a place that attracts and fosters business. The experiences of companies such as Beckmer Products, SCOTTEVEST, PakSense, Alturas Analytics, Hoku Materials, Titan Spring Co. and H-K Contractors help put a face on the numbers of Idaho’s impressive economic performance.
New Companies Formed For every 1,000 workers in Idaho in 2005- the year CFED used in determining the new-companies rankings for its 2007 report- there were 12.61 new companies formed, giving Idaho a No. 1 ranking among the states, according to the CFED report.
One of the notable companies formed during the last five years has been Beckmer Products Inc. of Nampa, near Boise, which was founded in June 2004 by dental hygienist Becky Logue.
Beckmer- a combination of Logue’s first name and her husband Mert’s--makes a product with a public health benefit. Its Dental Remote Access Terminal (R.A.T.) is designed to improve hygiene and efficiency in the dental office.
Microbiologically speaking, the mouth is a pretty risky place, says Logue, who is the company’s president. All sorts of diseases can be spread through saliva, and when a hygienist starts cleaning teeth and gums, most people bleed to some extent, adding to the potential for germs. Hygienists can spread germs between patients, especially when a hygienist stops what he or she is doing to touch something else. For example, hygienists have to measure and type in the condition of the gumline around teeth, but going between the keyboard and the patient’s mouth allows germs to be spread to the next patient.
“People just don’t realize what lives on a keyboard and the risk of cross-contamination,” says Logue, a dental hygienist for 20 years. “It’s impossible to sterilize a keyboard or mouse, and we’d cover them with plastic wrap, but it’s not always effective.”
Logue figured there had to be a better way, and one day she noticed her kids playing electronic games that involved using a foot pad instead of a hand controller.
That, along with Tom Hank’s by-foot giant-piano playing in the movie Big, inspired Logue to ponder a foot-operated computer mouse—especially since dental hygienists already use their feet to operate polishing, rinsing and camera equipment—and the Dental R.A.T. was born.
After some research, Logue discovered that no one had patented a foot-operated data-entry computer mouse. She worked with an engineer, and received advice and consulting services from the Boise State University Technology and Entrepreneurial Center—where she now has an office alongside a couple dozen other companies—to develop a foot-operated system where the heel does the left click, the toe of the toe of the shoe atop a short joy stick “mouse” controls the pointer, and four buttons between the mouse and the left click correspond to numbers. Pressing the buttons for longer or shorter times brings up different numbers.
Logue says the device can be learned in half an hour, as the feet are surprisingly dexterous and can move the pointer quickly between data cells and difference programs.
A computer recognizes the Dental R.A.T. as just another mouse, so the system requires no special software. In fact, for testing, Logue had her kids play solitare, Pong (pingpong) and other computer games with it. Her invention was a runner-up in the 2006 Idaho Innovation Awards presented by the Idaho office of the Stoel Rives law firm.
AirTrack Electronics Corporation in Boise manufactures the device, and a wireless model should be out this fall.
Logue says the Dental R.A.T. has plenty of other uses, although right now she’s just marketing it to dental offices. Anyone who needs to use a mouse but keep their hands free could benefit—assembly-line workers, surgeons and food servers, for example—and it could be adapted for people with disabilities, she says.
The system starts at $995, and Logue says the device will pay for itself in a few weeks if two people are currently employed to enter dental data—to say nothing of the benefits of improved hygiene.
“Instead of standing there entering numbers, that employee can be put to better use,” Logue says. Ninety percent of my stockholders are dental patients who like the safety and privacy factor of it.”
Logue’s patent is pending. She sold her first R.A.T. to her employer in June 2004 and has sold several hundred since. Customers include the dental school and dental hygiene program at Idaho State University, her alma mater, and dentist as far away as Canada, Austrailia and New Zealand. She’s especially interested in selling to dental schools so that emerging students will be familiar with the technology.
To get her company going, she spent money that had been saved for a backyard pool.
“I asked the kids if it was OK, and they said, ‘Yes’ “ Logue says. “I hope to build them that pool someday.”
Patents Issued Per Capita For every million Idahoans, there were 1,084 patents issued in the state in 2005, according to the CFED report—far and away the greatest number of patents on a percapita basis. Vermont, at 660, came in second.
The 2006 Stoel Rives Idaho Patent Report provides a closer look, showing that many Idaho patents were given to Micron Technology, Hewlett-Packard and the Idaho National Laboratory. However, the number of patents granted to small and midsize companies increased by about 38 percent last year.
Chemical/materials science patents more than doubled, and innovation even continued in the long-standing field of agriculture, where patents grew 37.5 percent.
SCOTTEVEST, based in Ketchum-Sun Valley area, holds one of the more interesting patents, for a Personal Area Network: an internal conduit system that lets you thread wires for MP3 players, cell phones, PDAs and other electronic gadgets through the seams of your garments, providing hands-free use and essentially making your clothing the carrying case. The company received the patent in December 2004.
The company’s vests, coats and pants are selling well—President Bush ordered his second one, says company CEO and founder Scott Jordan. In addition, in response to seven years of requests from women, SCOTTEVEST will launch a ladies’ line in December.
Jordan says it doesn’t surprise him that Idaho attracts innovative people. He started his company in 2001 in Chicago and moved to Idaho in 2003. He had been coming to Sun Valley frequently for vacations, and decided he could work anywhere and run his business. He tests new designs on the ski slopes in Sun Valley.
“I like skiing in the morning and answering emails on the lift ride up, and taking a conference call on the ski runs down,” Jordan says. “Most people in Idaho weren’t born here—they came here to do something better, and there’s much more of an entrepreneurial spirit.”
That’s not to say that innovation isn’t also homegrown. PakSense was formed by longtime Boise resident Tom Jensen, a product designer who had worked on products for Apple and Hewlett-Packard, among others.
The company sprang from a 2002 airplane conversation that one of Jensen’s associates, Wayne DeBord—who worked in business development for high-tech firms—had with an executive from a meat packing company. The executive lamented the lack of an affordable, accurate way to tell if meat had been kept as the correct temperature during its time in transit. When DeBord returned home, he talked the issue over with Jensen, and the two men decided to see if they could design a solution.
Technology had long existed to document the temperature of food and other sensitive materials in transit, but existing sensors cost $25-$130, were about the size of a PDA, could be damaged and didn’t measure the product’s temperature so much as the air temperature around it, Jensen says.
Given the recent concerns over food safety, he says, “We’re in the right place at the right time.”
As a co-inventor, Jensen was charged with designing a temperature monitor that was less than $20, reusable, tough, tamper-proof, accurate and very small. After some design work by himself and with other engineers, he developed what he dubbed the “Smart TXi Label” and took it to market in April 2006. DeBord does not play an active role in the company but is a shareholder.
“I built some prototypes and demonstrated those to the fellow from the meat industry, and one thing led to another,” Jensen says. “This measures the temperature of the packaging and product directly, not the air temperature around it.”
Sometimes the label is affixed to the packaging, other times to the product itself. The TXi label has some of the same components as a wristwatch—a logic circuit, a quartz clock and a battery—as well as an electronic temperature sensor, additional memory and software. Each label is about the size of sugar packet and as thin as a thin piece of cardboard. The sensor has three lights on the front: a green light that stays lit and flashes is the package has stayed inside its temperature boundary since activation, and up and down amber arrows that flash if the package has been above or below its correct range and subjected to “temperature abuse.” Both arrows flash if the product has been both about and below the safe range.
Bending a corner starts up the label, which stays powered for up to eight weeks. Jensen doesn’t disclose sales figures, but clients include Albertsons LLC, which has mandated the use of PakSense labels for fresh-produce and fresh-meat shipments to its 350 stores nationwide, he says.
“There are other temperature sensors out there, but nobody has taken temperature monitoring and put it on a label like we have and made it affordable and easy to use,” he says. “If the package arrives at a restaurant or store, the staff will immediately be able to tell if there’s been a temperature excursion. We’ve seen our customers put these inside premade-sandwich packaging.”
Company spokeswoman Amy Childress says PakSense has been able to pinpoint issues with a particular trucking service. “With gas prices so high, sometimes refrigeration units on the trucks will be turned off to conserve fuel,” she says. “When a producer hands over their product to someone, it’s out of their direct control, and this label is their eyes and ears. We think consumers will appreciate that, especially in today’s world.”
The company’s clients cannot change or program the sensors. Rather, they tell PakSense what temperature range they need their products to stay at, and PakSense has the sensors assembled and programmed accordingly in Boise.
For clients who want more-detailed information than the green light and arrows, PakSense sells a reader for $179 that, when pressed against the label, downloads temperature readings and times for 5 minute intervals. The sensor can be connected to a USB port and its data downloaded into a computer.
The labels can be filed like paper documents, thrown away (they’re certified as being made of nonhazardous materials) or sent back to Boise for reprogramming. A single label sells for $11, although there are volume discounts.
Sometimes only a few labels are needed, such as inside a shipping truck, where they can be distributed among different pallets. In very sensitive uses, such as for monitoring medical supplies, one sensor may be attached to each parcel. The labels are certified for between 0 and 131 degrees Fahrenheit, although they have remained accurate in testing between 20 below and 200 degrees Fahrenheit. They also resist impact.
In addition to monitoring the temperature of food items, the sendors have been used to monitor shipments of medications, transplant organs, tropical fish, live animals and flowers. The company is researching the labels’ ability to measure concrete curing (the hardening of concrete), which is affected by factors such as water and temperature.
The Wall Street Journal named the TXi label the runner up in the Technology Design category of its 2006 Technology Innovation Awards, and the label won a Stoel Rives Innovation Award in 2006.
PakSense has applied for 19 U.S. and international patents involving smart labels and related technologies to read, store and analyze data, and already holds two patents, both related to the TXi label. The first was issued in June 2006, the second in July 2007.
“PakSense is a small company, but they invented a really useful product that has the potential to significantly impact the food-distribution business,” says Kris Ormseth, a business attorney and managing partner of the Stoel Rives Boise office. “PakSense did not have a huge R&D budget, but they did have creative people who recognized a need and turned it into a great opportunity.”
Jensen says he likes being in Idaho, both personally and as a businessman, and intends to keep innovating here. His company currently has 20 employees.
“We love Boise for its quality of life and fairly low cost of living,” he says. “The city has a fantastic downtown, and if you want to get out and do something outdoors, the sky’s the limit.”
Short-Term Employment Growth Between 2004 and 2005, the number of people employed in Idaho grew by nearly 4.9 percent, according to the CFED report, giving the state yet another first place ranking. Numerous companies are finding Idaho the perfect place to grow.
One of those is Moscow-based Alturas Analytics, which expects to add three or four scientists a year over the next couple of years to its current staff of 20. It’s adding 10,000 spquare feet to its Moscow facility to make room.
The eight year old company has a specialized niche in the process of testing new pharmaceuticals, whose development and approval process can take up to a decade. Biotechnology and pharmaceutical companies conducting clinical trials send Alturas samples of blood or tissue to accurately measure for levels of drugs. Among other things, the test are used to determine safe dosage level, and the results are submitted to the Food and Drug Administration as it considers whether to approve the drug for the general public.
Alturas doesn’t set up the tests, find test subjects, draw blood samples or interpret the test results—that’s up to the drug company. “We just do the analytical work, but it’s our specialty, and we develop very rugged methods, so when out work is submitted to the FDA, it is defensible,” says founder Shane Needham.
Smaller pharmaceutical companies don’t have the money to build and run testing labs, so they contract the work out to labs such as Alturas. The company also sometimes does work for larger pharmaceutical companies such as Pfizer, Merck and Lilly when their in-house labs need the extra help.
Needham—a 1993 Washington State University chemistry graduate who went on to receive a Ph.D. in analytical chemistry from the University of Rhode Island—started the company with lab manager Mike Pearson, a 1987 University of Idaho electrical-engineering graduate, and Robin Woods, a 1987 WSU genetics graduate.
After working for Pfizer in Connecticut, Needham, who grew up in Eastern Washington, began seeing the need for a lab that would do analysis exclusively and cater to small and midsize companies. His entrepreneurial urge led him to start his own business, and he wanted to return to the Moscow-Pullman area to raise his family.
Idaho has been a good place to grow his business because of its low taxes and worker’s compensation rates, and relatively inexpensive energy, he says. While most centers of biotech are on the East and West coasts, Idaho’s location is an advantage.
“Running a lab is very expensive, and you need to have an extremely high caliber of people and quality control. In the places where there are so many biotech companies, employees move around, but for us, people come to Idaho because they want to be in this area and have a stable job in the industry,” he says. “We have lower overhead and less turnover, and we can attract good employees, so that keeps our costs competitive.”
Needham says it’s been helpful to be near Washington State University and the University of Idaho, both of which supply graduates in the sciences, and he has hired most of this employees from those schools.
“We like to think that as this area grows, it will become a biotechnology center someday,” says Needham. “We do have two major state universities nearby, and there are a lot of students, and we’re a great option for them.”
He says his company’s reputation for excellence has been spreading so far afield, he even recently picked up business from a Hong Kong company, although because Alturas is a private company, he declines to discuss revenues.
“We’ve always had the entrepreneurial spirit, and Idaho is very pro-business, and that’s been attractive to us,” Needham says. “It’s great we can locate a business here and yet compete on a national and now international level.”
Manufacturing Investment By many accounts, manufacturing investment is the backbone of a region’s economic health. Manufacturing represents a huge capital investment and usually means long-term, well-paying jobs. On that measurement, Idaho ranked second nationally. Between 2002 and 2004, the years CFED used for manufacturing rankings in the 2007 report, investment in machinery and equipment by Idaho manufacturers equaled 10.29 percent of the value that was added to products in the manufacturing process, according to the CFED report.
In 2005, according to the U.S. Bureau of Economic Analysis, manufacturing accounted for nearly $8.8 billion, or 20.8 percent, of the state’s gross domestic product.
Idaho is such an attractive place for manufacturing that Oahu-based Hoku Materials is building a plant in Pocatello. The company is in the early stages of building a $260 million, 67-acre facility that will produce polysilicon for use in solar panels. It chose Idaho after a worldwide search, says Gynii Gilliam, executive director of the Bannock Development Corporation, which worked with the Idaho State University, and other public and private groups to attract Hoku Materials to the Gem State.
“What drew Hoku here was a combination of power costs, land costs, operating costs in general, and that the community likes them and wants them here,” says Gilliam. “They needed a partnership with the community to get them to where they want to be.”
When completed in early 2009, the plant will produce 2,000 tons of polysilicon and employ 200 workers. The plant could be expanded to produce up to 3,000 tons of polysilicon. That’s enough to build solar panels for about 200 megawatts of generating power, equal to the amount of power used by 150,000 homes.
Polysilicon starts as high-grade sand, then is melted, purified and crystallized through a complex process. Hoku CEO Dustin Shindo says the company will ship the polysilicon to manufacturers as chunks of silver colored rock, but the rocks are produced in a “clean room” environment and carefully packaged, because just touching them would contaminate them and render them unusable for manufacture into solar panels.
The manufacturers will melt down the polysilicon chunks to create big blocks called “ingots” that are sliced into pieces called “wafers.” The wafers will then be processed by being treated with chemicals and having wires attached that collect sunlight. A processed wafer is called a “cell.” Multiple cells are connected to other cells, and these connected cells are encased in plastic and/or glass to create solar panels.
“Since most of the raw materials (such as the sand) are imported, logistics are important,” Shindo says. “One of the attractive things about Pocatello is the good rail, air and freeway access.”
Electricity prices were also important, since the polysilicon-manufacturing process demands lots of power, Shindo says. In addition, Idaho’s relatively mild winters simplify the construction of the factory, and the proximity to Idaho State University and the Idaho National Laboratory are also pluses.
“But the No. 1 reason above all (for choosing Idaho) is the people, by far. The people in Idaho are very pro-business,” Shindo says, pointing specifically to Gilliam and the Bannock Development Corporation in Pocatello. “They have been very proactive and responsive to our needs as a company that’s trying to set up in Idaho.”
Hoku Materials is one of three divisions of Hoku Scientific Inc., which was formed in 2001 to build advanced fuel cells, which are used at the Pearl Harbor naval base in Hawaii. This year Entrepreneur Magazine ranked the company 91st among the top fastest-growing—“Hot 500”—small businesses in the United States.
There’s currently a shortage of polysilicon worldwide, and Shindo has already found three solar-panel manufacturers that have committed to buy $1.2 billion of the polysilicon over the next 10 years.
Gilliam says Hoku is an especially desirable company to have in Idaho because its presence will attract related industries. “We found the solar industry comes in clusters, and having Hoku makes it easier to recruit upstream or downstream of the company, like bringing in a solar components manufacturer,” says Gilliam. “Economic development is a team effort, and we have the city involved, the university, Idaho Department of Environmental Quality, and we’re working together to make sure these is no delay in the process.”
“This plant is a huge step for our company and will be the largest investment the company has ever made,” Shindo says. “We are happy to be doing it in Idaho.”
Advantageous Energy Costs Idaho also ranked second among the states for affordable energy, according to CFED, with an average cost of 5.11 cents per kilowatt-hour (that’s the equivalent of lighting 10 100-watt bulbs for an hour). Kentucky came in first at 4.94 cents per kilowatt-hour. Idaho’s low energy costs are attributable to its use of hydroelectric dams, the least expensive of all forms of energy, as well as the importing of power from low-cost coal plants in Wyoming and Nevada.
Energy costs are particularly important to industries and factories, and attractive prices are one of the reasons Titan Spring Co. decided to move to Idaho. This month Titan is opening its new 16,000 square foot factory in the Warren K. Industrial park in Hayden, near Coeur d’Alene, after moving from Southern California.
Titan Spring, which is celebrating its 50th anniversary this year, makes custom precision springs, stampings (small pieces of metal bent and pressed into different shapes), wire forms and related items for the aerospace, medical, telecommunications and electronics industries. Springs are used in many items people touch each day—a typical keyboard has more than 100 springs—although the springs are tensioning the seat-back pouch that held this magazine.
Titan Spring’s niche is springs used in pacemakers and orthopedic devices, along with gold-plated springs specifically ordered for use aboard the space shuttle. The company’s smallest spring is made of wire the diameter of a human hair. Some of its springs look as much like abstract art as precision mechanisms.
For the most part, Titan makes small quantities of highly specialized springs that are built to customer specifications. High-volume spring manufacturers wouldn’t find it profitable to make just too springs out of exotic alloys for aircraft landing gear, but Titan will do the job.
“If Boeing went to a Chinese manufacturer, that manufacturer wouldn’t even talk to them, because there’s not enough volume,” says Titan Spring CEO Jim Glenn. “We’re a niche player and specialize in smaller quantities made to precision specs to meet very demanding needs.”
Titan, whose annual sales are about $3 million, uses many electrically powered machines for manufacturing, some of them computer-controlled, and energy is a significant expense. “When we ran the numbers, we found our energy costs in Idaho would be 60 to 65 percent cheaper than in California,” Glenn says. Lower taxes and workers’ compensation rates were another factor. Idaho’s workers’ comp rate per $100 of payroll is about a third of the cost of California’s.
The company employs 35, and Glenn says he will hire and train new employees in conjunction with the move. Glenn is a second-generation Titan employee, and the third generation is already involved in the company, with the fourth generation being groomed. Glenn’s father-in-law began coiling springs in his Los Angeles basement with a machine made of junkyard parts. The company expanded quickly, meeting the needs of Lockheed and other Southern California aerospace companies.
The Inland Northwest Economic Alliance aggressively recruited Titan starting at a 2003 trade show in California. At first, Glenn had no plans to move his company. But recruiter Bob Potter was persistent and created a report for Titan showing how much the company could save by relocating to Idaho. Meanwhile, Glenn says, he felt California’s business climate and government policies were becoming less business-friendly. Idaho started looking more attractive all the time. Glenn visited, then had his employees visit.
“The cost of housing really shocked our employees, because it’s 50 percent cheaper than in California,” Glenn says, “and it’s a beautiful and safe place to live.”
Long-Term Employment Growth Some companies grow by drawing attention to themselves. That’s not true of H-K Contractors Inc., which may be one of the biggest companies around (more than $100 million in sales) that doesn’t have a Website.
Yet it’s that slow-but-steady approach that makes the company a good example of Idaho’s long-term-growth potential. Between 1995 and 2005, the number of people employed in Idaho grew by 25.2 percent, according to the CFED report, giving Idaho a third-place ranking among the states (Nevada was first, at 44.9 percent, and Arizona was second at 29.3).
H-K lays asphalt for roads and driveways—some 660,000 tons of it in 2006—and also installs sewer and water lines, everything from storm drains to water lines for subdivisions. The company also paves airport roads, although it works only with asphalt and therefore doesn’t do concrete runways. The company just broke the 400 employee mark in July, having steadily added a handful of employees each year since its beginning in 1951.
The company got its start when George Hartwell used a truck and excavator to dig basements. His business grew, and he merged with Jim Kennedy, a local paver, in 1975, lending the name H-K.
The company sticks close to its headquarters in Idaho Falls, doing most of its work in Idaho, Montana, Utah and Wyoming. It is one of the three largest contractors in Idaho, yet it doesn’t even have a public relations department.
“We keep a low profile, and many people don’t even know we’re here,” says CFO Douglas Dredge, who handles media calls.
Thanks to strong growth in the four states it primarily serves, the company hasn’t needed to leave the region. “We’ve done most of the roads in Yellowstone, and we just landed a contract in Glacier National park, and we’ll be doing the roads there for the next 10 years,” Dredge says. “We anticipate continued growth for the company and hiring more people over the next 15 years.”
Dredge says there’s plenty of work to be done. More than 50 years of infrastructure is in need of replacement, and this summer’s collapse of a bridge in Minneapolis has underscored for politicians the need for infrastructure investment. Eighty percent of H-K’s business is with local, state and federal governments, with the rest from developers and homeowners.
“We don’t go after volume—getting a lot of revenue doesn’t do you any good if you’re not making money,” Dredge says. “It’s easy to be the low bidder, but it’s hard to be the low bidder and make a good profit, so we have focused our company on growing slowly and steadily.”
Going Strong The pro-business climate assists Idaho in other ways. Idaho ranked first in percentage change in the poverty rate. Between 1999-2000 and 2003-2004, the percent of Idaho’s residents who lived in households with incomes below the federal poverty line decreased by 3.5 percentage points, according to the CFED report.
In addition, Idaho ranked third in income-distribution change—that is, the income gap between the richest 20 percent of households and the poorest 20 percent decreased by 10.36 percent from 200 to 2003, noted the report. Not surprisingly, Idaho also ranked third in positive change in the unemployment rate: Between 2001 and 2005, the unemployment rate decreased by 1.2 percentage points, according to CFED.
The state has been gaining the economic power to weather changes such as the recent layoffs at Micron Technology—the state’s largest employer—which this past summer laid off around 10 percent of its Idaho work force in response to market challenges and volatility. The company still employs approximately 10,000 people in Idaho and more than 20,000 total worldwide.
According to Idaho Department of Labor Director Roger B. Madsen, Idaho’s economic growth has made the state a national leader since the mid 1990’s, even with a significant slowdown in 2001 and 2002.
“When I started in 1995, Idaho had less than 32,000 employers,” Madsen says. “Since then we’ve seen an increase of 18,000 employers and 163,000 new jobs—jobs that are making our payrolls among the fastest-growing in the nation. Personal income increased 92 percent between 1995 and 2006 to $44 billion, and Idaho’s average annual wage ahs increased 50 percent since the mid 1990’s, to more than $32,500.
“Our gross state product, adjusted for inflation, was up a nation-leading 7.4 percent in 2006 and should exceed $53 billion by the end of this year. We currently lead the nation in the increase in dollar value of our exports, which are up by 25 percent for the first half of this year to 2.2 billion, and by the end of 2007 should exceed $4 billion.”
Madsen says he expects companies to continue to start, relocate and grow in Idaho, allowing then and their employees to “take full advantage of the quality of life they can only find here in Idaho.”
Martin Johncox is a business and features writer who lives in Boise.
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