AEDC’s Mike Preston Is Bullish on Arkansas

Mike Preston, the new executive director of the Arkansas Economic Development Commission, sits in his fourth-floor office overlooking Capitol Avenue in downtown Little Rock on a sunny late-spring afternoon, sipping from a can of the energy drink known as Red Bull.

He’s talking about the changes that were made when he was at Enterprise Florida, Inc., the public-private partnership between Florida businesses and state government that focuses on job creation.

“We put Enterprise Florida on steroids,” Preston says. “Wait. That’s probably not the best term. Let’s just say we put Enterprise Florida on Red Bull.”

He takes a swig from the energy drink as he prepares to head to the airport for yet another flight and yet another economic development mission. Life has been a whirlwind since Preston became one of the country’s youngest state economic development directors at age 31 in early April, just as the regular session of the Arkansas Legislature was coming to an end.

Preston, a graduate of the University of Florida, had an early interest in state government and politics. At age 19, he began working for a Florida state representative, who would go on to become the speaker of the Florida House of Representatives. After college, Preston became the chief of staff for a state senator who represented Gainesville (where the university is located) and several surrounding counties.

‘EXCITING STUFF’
“As his chief of staff, I was always out in the district,” Preston says. “I was at the chamber of commerce breakfasts, the civic club luncheons, all of those things where you’re expected to have a presence. I also got to work on economic development projects and became familiar with the efforts of Enterprise Florida. I remember thinking to myself: ‘This is exciting stuff. This is really interesting.’”

Preston didn’t hesitate when he was offered a job with Enterprise Florida in late 2008. In 1996, when Lawton Chiles was governor, Florida became the first state in the country to place economic development and business image marketing in the hands of a public-private partnership. Chiles believed that the increased participation of business leaders in economic development would help Florida more quickly diversify its economy, which was based on agriculture and tourism. Chiles wanted Enterprise Florida to operate like a business with a board made up of appointed members and a group of investors representing corporations with a strong presence in the state.

The Great Recession, which gained momentum throughout 2008, hit Florida particularly hard as the state’s real estate bubble burst. Preston soon became frustrated with his career choice.

“We were sitting there with 12 percent unemployment in 2010, and I’m questioning whether I had made the right move,” he says.

Preston’s attitude began to change in November 2010 when former hospital executive Rick Scott was elected governor. Scott, a Southern Methodist University graduate who specialized after college in health-care mergers and acquisitions, put together a $6 billion bid in 1987 to purchase HCA, the Tennessee-based hospital firm founded by Drs. Thomas Frist Sr. and Thomas Frist Jr., the father and brother of former U.S. Sen. Bill Frist. When the offer was rejected, Scott and Texas billionaire Richard Rainwater started a hospital company called Columbia, which finally made a successful bid for HCA in 1994. Scott left the company in 1997 with $10 million in cash and $300 million in stocks and options. He became a venture capitalist and moved to Naples, Fla., in 2003.

SWOOPE’S VISION
Scott, an aggressive businessman, hired Gray Swoope in February 2011 to serve as Enterprise Florida’s president. Swoope, who had once worked at AEDC, had been the executive director of the Mississippi Development Authority since 2004. Swoope was the jobs czar for then-Gov. Haley Barbour of Mississippi. Among his coups was landing a Toyota assembly plant for northeast Mississippi that most people had thought was going to Marion, Ark.

“I consider Gray the top economic development official in the country,” Preston says. “I bought into his vision, and he put me on his management team.”

Enterprise Florida helped generate more than $10 billion in capital investment in the state and played a role in the creation of more than 147,000 jobs under Swoope’s leadership. The defense contractor Northrup Grumman brought 1,800 jobs to Florida, and Hertz moved its corporate headquarters and 700 jobs there. Those were among the projects on which Preston worked. Swoope announced in early March that he would be leaving Enterprise Florida to head a Tallahassee-based economic development consulting firm known as VisionFirst Advisors. Barbour is the VisionFirst chairman.

“It was a good time,” Preston says of the Swoope era at Enterprise Florida. “We were landing the type of projects that would actually change things for the better.”

DEMANDING SCHEDULE
A headhunter contacted Preston about the Arkansas job. He had heard Swoope talk positively about his time in Arkansas. Preston, a political junkie, also knew about Gov. Asa Hutchinson. But he had never been to Arkansas until he flew to Little Rock to meet with Hutchinson earlier this year at the Governor’s Mansion.

“We visited for more than an hour,” Preston says. “I got the same feeling from him that I got from Gov. Scott: That this is a man who loves his state and has a plan in mind to make it better.”

The job offer was extended, the recently married Preston accepted and life has been a blur ever since. During a recruiting trip to California with Hutchinson and Acxiom founder Charles Morgan, Preston says he woke up in his hotel room one morning wondering where he was. That pace doesn’t seem to be letting up. At the time of the interview, Preston was preparing to accompany Hutchinson to the Paris Air Show, where Arkansas would have a booth for the first time.

Asked about his first impressions of Arkansas, Preston says: “The people who live here are some of the friendliest people I’ve ever been around. They come up to you in the grocery store and talk to you. They’re passionate about their state. You especially see that kind of passion from entrepreneurs such as Charles Morgan. He went to California with us just because he wants to help his state attract more high-tech jobs.”

The largest Arkansas companies – Walmart, Tyson Foods, J.B. Hunt, Dillard’s and Murphy Oil among them – weren’t recruited by AEDC from other states. They were built by Arkansas-based entrepreneurs. AEDC, in fact, is headquartered in the building that long housed the Dillard’s corporate offices. Preston is well aware that helping homegrown companies succeed is as much a part of his mission as attracting new firms. He wants to use Arkansas business leaders such as Morgan to help spread the gospel of Arkansas.

“What I learned on our trip to California is that people in other states don’t have any idea about the things we’re doing here,” Preston says. “We have to do a better job of communicating with business decision-makers in places such as New York, Illinois and California. Once they hear our story, I think they will like what they hear.”

60TH ANNIVERSARY
In addition to telling the Arkansas story outside the state, Preston plans to travel to all parts of Arkansas and hear what business leaders think of AEDC and the job it’s doing. He says, “I need to figure out what they think we do well along with the things they think we can do better.”

Preston inherits an agency that’s celebrating its 60th anniversary this year. In 1955, the Legislature created the Arkansas Industrial Development Commission to bring industries to a state that was rapidly losing population. Gov. Orval Faubus appointed Winthrop Rockefeller as the first AIDC chairman. Rockefeller, a billionaire New Yorker, had moved to the state a couple of years earlier to escape the Manhattan media spotlight that had shown brightly on him since a messy divorce.

The state had six congressional districts in those days. Under the original legislation, there was to be an AIDC commissioner from each congressional district along with the president of the Arkansas Bankers Association, who would serve as an ex-officio member. In addition to Rockefeller, the original commissioners were W.W. Campbell of Forrest City, Earl Harris of Rogers, Leon Kuhn of Texarkana, William Smith of Lake Village, Elmer Yancey of Searcy and ABA President Louis Hurley of El Dorado.

Rockefeller, who had fallen in love with his adopted state, took on the chairmanship with gusto. He created a group known as the Committee of 100 to raise $200,000 to supplement the $75,000 AIDC budget. Business leaders from every county were asked to give $100 each. On April 1, 1955, Rockefeller announced that the first industry had been lured to Arkansas – Gay Apparels Inc. of Cotter. By the end of the year, 123 industries with 5,090 jobs had been brought to Arkansas. The first full-time director of the AIDC, Bill Rock, began work on July 1, 1955.

STOPPING OUT-MIGRATION
The state was desperate at that point to halt out-migration. In his book “Arkansas in Modern America,” historian Ben Johnson of Southern Arkansas University declares that the state’s “most dramatic net loss was its people.”

Writing for the autumn 2005 issue of the Arkansas Historical Quarterly, the late Donald Holley of the University of Arkansas at Monticello described out-migration as “the largest domestic event of the World War II era and postwar Arkansas.”

“Pioneers emigrating mostly from Tennessee, Alabama and Georgia settled the state in the first half of the 19th century,” Holley wrote. “After the Civil War, Arkansas continued to gain population from in-migration. The state government, planters and railroads encouraged settlement during this period, soliciting people from as far away as China, Germany and Italy. Unfortunately, good land soon ran out, leaving many of the state’s rural areas overpopulated in relation to arable soil. The earliest out-migration, beginning in the 1890s, was in part a response to this fundamental problem. Population losses continued in the first two decades of the 20th century. In the 1920s, Arkansas lost almost 200,000 people, a record high to that point. Migration slowed slightly during the depressed 1930s, but by the 1940s, when the national economy shifted to war production, the migration stream that had previously been a steady leak turned into a torrential flood. Arkansas, in fact, lost population in every decade between 1890 and 1970.”

In the 1950s, Business Week had a story headlined “Why do Arkansans vanish?” Holley wrote: “It was a valid question, and the answer was easy – the lack of well-paying jobs. Arkansas’ most significant export was not lumber, cotton or bauxite but people.”

One Arkansas native who had left the state told the Business Week reporter: “There’s nothing for me back home. They are talking about a new factory, but I don’t think they’ll get it. I don’t think any college graduates have ever come back to town since I can remember.”

CHANGING THE IMAGE
In the 1940s, Arkansas experienced the third largest population loss among the 48 states, trailing only Oklahoma and Mississippi. In the 1950s, Arkansas’ out-migration percentage trailed only West Virginia. No state lost a greater proportion of its people than Arkansas did from 1940-60, leading to an inferiority complex among those Arkansans who stayed behind. Rockefeller used his own money to try to change that self-image.

“The absence of this vast pool of workers created severe labor shortages, especially in agriculture,” Holley wrote. “These shortages remained critical even after the war and destroyed the old, inefficient plantation system, which had always been based on cheap labor. In postwar Arkansas, the number of sharecroppers and tenant farmers plunged so significantly that by 1959 the agricultural census stopped collecting data on them. In the same period, the number of farms declined but the average size of farms increased.”

Rockefeller worked with Dun & Bradstreet to come up with a list of 30,000 companies that the state needed to call on. By 1961, every company on the list had been contacted. The Legislature increased the annual AIDC budget to $575,000 in 1957, enabling the commission to triple its staff. By 1960, manufacturing employment had increased by almost 50 percent from five years earlier.

Rockefeller was elected governor in 1966 and went on to serve a pair of two-year terms. During the agency’s 15th anniversary celebration on April 1, 1970, at the Marion Hotel in downtown Little Rock, the governor noted that he had a hard time finding workers in the early 1950s when he began building his ranch atop Petit Jean Mountain.

“It was at that point that I became interested in industrial development as a means of reversing the outflow,” he said. “I accepted the appointment as the first chairman, and for eight years we interlaced our industrial brokerage function with some rather exciting exploration of regional development concepts and community action programs. I was convinced of the need to scatter industries in our smaller towns rather than let them pile up in a handful of urban areas. Arkansas is currently growing at a rate far exceeding that of the nation as a whole. Working under the scatter approach, we have generated some 3,000 new and expanded industries representing more than 145,000 new jobs.”

The chairman of the commission at the time was banker Herbert McAdams. He described the previous 15 years as a period of growth “so explosive that it is difficult to find proper words that describe it. At a time when Arkansas was seriously losing population because of a lack of jobs for its people, we brought those jobs in.”

Frank White, who served as the AIDC director from 1975-77, would be elected to a single two-year term as governor in 1980. In a 1977 column, White wrote: “Having traveled more than 142,000 miles promoting the state, I find there is an enormous misconception of what Arkansas actually is. In November 1976, I was quoted by the state’s news media as saying the biggest problem we are faced with today is overcoming the Arkie image. This was not meant in a negative way for I am proud of our state’s folk culture heritage. But the frequently stereotyped image of Arkansans as backwoods, undereducated hillbillies or the racist image that still persists because of the Central High School incident in 1957 does not accurately portray what our state is. … The future is limited only by our leadership and our attitude.”

DIVERSIFYING THE ECONOMY
Preston doesn’t have to face the overall out-migration problems that plagued the state 60 years ago. Yet rural counties in large parts of eastern and southern Arkansas continue to lose population. There’s also the challenge of having a marketing budget that is far smaller than those in most of the states against which Arkansas must compete for projects. Preston believes his political experience – he was Enterprise Florida’s vice president for government affairs and spent much of his time at the state Capitol in Tallahassee – will help him convince Arkansas legislators that changes need to be made.

“Economic development is a team sport,” Preston says. “We have to recruit legislators to be a part of that team. There are things we need to do. Our corporate income tax structure is outdated. We need to take a look at the size of the governor’s closing fund and other incentives. Incentives will never make a bad deal good, but they will make a good deal better. We need to attract companies in areas like biotechnology so more of the students in Arkansas will want four-year degrees and go to work for such companies. We want to further diversify our economy and find better ways to ensure a trained, skilled workforce to satisfy the job needs of that diversified economy.”

With that, Preston takes another swig of Red Bull and is off to the airport to catch his flight. Just as Winthrop Rockefeller and Frank White before him, he has a state to sell.