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HomeMy WebLinkAboutPartnership Summary of Iowa Trip FYI The following is a summary of findings from a visit by the St. Cloud Area Economic Development Partnership to Dubuque Iowa. The SCAEDP visited Dubuque (specifically the Dubuque Area Development Corporation) because they have successfully attracted an IBM facility with 1,300 jobs and the city is similar in size to St. Cloud. Of course a fundamental difference between the Dubuque Devl. Corp. and the Partnership is that the Dubuque Area Development Corporation is able to financially assist (gifts, grants, loans, loan guarantees, etc) private developers whereas the SCAEDP is not set up to provide financial incentives. The Development Corp. also does not have to abide by government regulations. It's further noted the state, county, development corporation, and City provided $52 million dollars in incentives to IBM (about $45,000 /job). I'm also attaching interesting reading re: incentives in other communities and the nature of incentives as viewed from the perspective of a site selection company. I thought the participation by several units of government and educational institutions was particularly interesting. St. Cloud Group Tour of Dubuque, Iowa —July 15 and 16, 2010 Trip Notes By Kathy Gaalswyk, Initiative Foundation Critical Success Factors "Time changes nothing. It's people with courage that get things done. RD" • Clear vision and goals which are shared by all groups. Clear roles for each group while sharing outcomes /successes. • Consistent message. • Commitment to partnerships and healthy relationships. "We are friends. RD" • Commitment to measuring and reporting results (they know their numbers and their dates!). "Good is the enemy of great. MV" • Actively pursue awards /recognitions and tell about them. • Extensive private sector involvement and support. • Ongoing revenue stream (gaming). • Strong partnerships with state and federal partners. Community Values Reflected • Commitment to sustainable development (encompasses economic prosperity, environmental stewardship, social and cultural well being). • Faithful in seeking citizen input. "Put there a spark. JE" • Demonstrate a positive attitude. "Success is unlimited RD." • Promote a sense of community pride. • Humility, sharing of the credit. "Check the egos at the door." • Act with integrity. • Commitment to transparency and accountability. Vision and Goal Setting "Our plan and relationships were developed out of crisis and there is a shared sense that we never want to return there." "It's important to reinvent yourselves every three to four years. MV" "Money follows a good plan. MV" • 2005: Envision Dubuque 2010 - Citizen Engagement process facilitated by community foundation and chamber led to 10 goals being implemented by separate committees. 12,000 people generated 3,500 ideas; 100 selected through voting process; 10 selected by 30 member team. Most completed by now. • 2009: Dubuque 2.0 Sustainability Initiative – Once again facilitated by community foundation and chamber, the process created a venue where sustainable ideas were presented, best practices were shared, and results from the community's efforts are measured. Like Envision 2010, Dubuque 2.0 is a process that encourages public /private partnerships to shape the community's future. A forty member task force developed sustainability project vision, 11 principles and numerous projects. • City council updates strategic plan and priorities annually. "The secret is planning, partnership and people who provide leadership and execution. MV" Economic Development "Elect talent, hire talent, support the talent that you elect and hire. RD" "Economic development isn't sexy. It's hard work and relationships. RD" "Economic development isn't about making people rich. It's about making people's lives better. RD" • GDDC is a 501(c)6 with a subsidiary 501(c)3 for charitable contributions. Eight full time and one part time staff. 40 member board (meets quarterly); 15 member executive committee meets monthly. No committees or membership structure. Two thirds of the board is private sector and two thirds of funding is private. `A pitfall of economic development groups is to be weighted/perceived as public sector. You must have private sector presence and champions. RD" • $6.7 million five -year fund raising campaign. 160 private donors. $1.7 million annual budget. • Priority is placed on existing local businesses (200 visits per year) and creation of quality jobs. "Take care of who's here first. Must follow up on issues identified. Track data. Always meet with the CEO. RD" 1 • Clear point of contact at GDDC for external inquiries received with a rapid and complete response provided. Weekly meetings with city staff who serve as the "promise keepers." "Recruitment is a misnomer. It's the ability not to drop the ball. RD" • Five -year outcomes: 5,500 net new jobs; $300 million investment, 6% population growth, increase average wages from $16 to $17 per hour • Initiatives related to workforce development, recruitment (created local website), concierge services to newcomer employees. • Factors in IBM's choice of Dubuque: quick response, collaboration, "smart" city planning, large student population, quality of life, cost of living, available housing. Chamber of Commerce /CVB- Tourism • 1,500 members, $2.3 million budget. • Organizes events and celebrations. • Facilitates community visits to state and national law makers. Community Foundation • Serves donors, grantmaker, community leadership and convening. • With Chamber of Commerce facilitated both visioning processes. • Every child, every promise initiative. • Assists with bringing financial assets into the community from government sources such as new market tax credits. Cultural Arts • Staffed by city. • Theatre, opera house, symphony, museums. Downtown & Riverfront Redevelopment • Phase one riverfront: $188 million, Port Dubuque. • Phase two riverfront: $200 million, America's River. • Offer free MainStreet design services. • IBM building is downtown (1000 jobs now; 300 more by year end). • Historic millwork district project underway $200 million. Local Government • Dubuque is largest city in single county, single school district. • Partners with area communities, including communities across the river in Wisconsin and Illinois. Discussion Points/Possible Next Steps • Share information about the many "pieces" already underway in the greater St. Cloud area. • Take the group on a bus tour of our area. • Focus on building social capital, developing leadership. • Explore gaming as a revenue source. • Determine best process for engaging the community to clarify our strategic direction and goals. o Align resources and initiatives toward those goals. o Determine measures of success. o Develop clear messages about the future of our area. o Clarify roles and responsibilities to achieve the goals. 2 Economic Development Report —Rick Bauerly, Henry Fischer & Len Wohlman Notes from meetings with Rick Dickinson, Executive Director & COO, Greater Dubuque Development Corporation and Aaron DeJong, Assistant Director of Economic Development, City of Dubuque • The Greater Dubuque Development Corporation (GDDC) started around 1983 or so and is the regional equivalent to the St. Cloud Area Economic Development Partnership. • GDDC's 2009 annual report published on their website www.zreaterdubuque.org contains an abstract of the bylaws and defines the broad purpose of the corporation to improve the economy and quality of life in the region. • GDDC is officially incorporated as a 501(c)6 corporation with 501(c)3 subsidiary or affiliate for charitable donations. The Partnership is a 501(c) 4 organization. • GDDC was initially created with a 22- member Board of Directors, which grew to 40 members over the years. The Partnership has 24 full members and 12 associate members. • GDDC's board is comprised of "ex officio" members including the Mayor, City Manager, City Economic Development Director, 2 City Counsel Members, and 2 representatives of organized labor who serve on the board as a function of their positions, "at large" members who are largely private sector businesses "Investors." • GDDC Board members serve staggered three -year terms. Investor board members are nominated by the Executive Board (a subset of 15 of the full Board members) and approved by investors at the annual meeting. Currently the Nominating Committee for Greater Dubuque is the Executive Board. Staff informs the Board of what terms are up and also informs them of anyone that has expressed an interest in serving on the Board. The Executive Board, serving as the nominating committee, makes their recommendations to the investors at our annual meeting. The investors elect the Officers and Board members. • The full board meets quarterly; the Executive Board meets monthly; no other board committees are used. The full board oversees major policy matters; the Executive Board has broad latitude on operating activities and work is implemented by the staff. The Partnership Board and Executive Committee both meet monthly and utilize six volunteer committees – Access to Capital, Business Retention & Expansion, Governance, Marketing, Membership, and Workforce. • GDDC's full Board meeting is more of a report -out In which the full board is updated on staff activities. It includes financial reports, updates on National Marketing, Business Retention & Expansion, Workforce and issues of the day. The Executive Board meeting is held in the months in between and is more hands on. The Executive Board reviews and approves budgets, board membership and direction. • Investors do not pay annual membership dues nor do they sign contracts; their investment amount is based on their ability and willingness to pay; investments can be cancelled at any time; investments have to be "earned daily." The Partnership has two membership levels – full members (at a minimum of $8,000 per year) and associate members (at $2,500 per year). • There are approximately 160 investors today, including the City of Dubuque at $340,000 per year, Dubuque Racing Association at $250,000 per year, Dubuque Bank & Trust at $45,000 per year, plus around 110 or so businesses at say $1k (guess) up to $45k for the largest business investor (a regional bank) and perhaps averaging around $10,000 each, and 40 individual high net worth investors. GDDC has a $1.7 million annual operating budget. The Partnership has a $350,000 annual operating budget. • National Community Development Services (NCDS) was used as a fundraising consultant in 2002 for their first five - year campaign; GDDC implemented its second five -year campaign internally in 2008, raising around $8 million for the subsequent five -year period. Investors are asked to make five -year pledges to GDDC. They may drop at any time but the drop rate is less than 3 percent. • GDDC holds an annual meeting to nominate directors and present an annual report to investors; progress reports against the four strategic goals are also presented to the Executive Board on a monthly basis. • GDDC's four strategic goals include: 5,500 net new jobs, $300 million in new construction/capital investment, average wage target of $16.00 per hour plus benefits, and 6 percent population growth by 2012. Progress toward each of these goals is tracked and reported monthly on GDDC's website and in their e- newsletter: • http:// www .greaterdubuque.org/UserFiles /File/ 2008 - 2009% 20Greater% 20Dubuque %20Annual %20Report.pdf • The Executive Director and COO is hired by the Executive Board, who in turns hires eight full time and 1 part time staff; the Executive Board also hires a peer position to the Executive Director and COO – the organization's President -- that is responsible for new business recruiting and is the external "face" of the GDDC with prospects. The 3 Executive Director & COO is a former mayor and state legislator in Iowa; the President is a former congressman from Iowa and former director of the Iowa Department of Economic Development. The Partnership's President is hired by the board, who in turn hires two full -time and two part-time staff. • GDDC's Executive Director and President are selected reviewed and compensated by the Executive Board. All other employees are hired reviewed, and compensated by the Executive Director. The pool of funds for compensation is determined by the Executive Board. • GDDC's marketing effort has a $250,000 annual budget, which equips President Mike Blouin to travel anywhere in the world to close deals. He is the point person for GDDC. Marketing funds are primarily used to develop and enhance their website as well as arrange face -to -face meetings with site selectors. The Partnership's annual marketing budget is $5,000. • GDDC works very closely with area cities and counties to maintain the sites and buildings inventory for the region; when a prospect comes calling, GDDC "leads with trump" offering the best site or building to meet the prospect's need in the region regardless of political jurisdiction. The Partnership follows a similar protocol. • "Everything we do stems from Business Retention & Expansion" at GDDC. GDDC serves as the central and lead organization for all business retention visits and all retention and recruiting proposals are tracked with the " Synchronist" software through their InfoAction program. Synchronist was later adopted by the State of Iowa and is now used statewide. GDDC has two full -time staff who conduct about 200 visits annually, meeting with local CEOs. These visits have resulted in approximately 40 expansions planned thus far this year. Partnership staff participated in 175 visits during the past year and plans to visit 100 businesses this year. The Partnership is raising funds to purchase and utilize the Synchronist software program for reporting out on BR &E visits as well as prospect tracking. • On a weekly basis, GDDC BR &E staff meets with City of Dubuque staff to review visits and plan action steps to meet the needs of these businesses. Partnership staff visit with local officials as needed. • Business retention is first priority. Most recruiting leads come from the State of Iowa. GDDC's ability to recruit flows from the people and processes for retaining businesses. Recruiting has no staff. The senior level recruiting post is a "closing" role on work done in collaboration with the business retention staff and their processes. • Entrepreneurship and small business development is a tertiary priority to business retention and business recruiting and the "Achilles heel" of the region. The local Small Business Development Center has their hands full covering several counties and they freely admit that entrepreneurial development is not a core competency. • Greater Dubuque successfully attracted an IBM Service Center, resulting in the creation of 1,300 high -tech jobs for downtown Dubuque. Minnesota was not included in this site search and Dubuque beat Madison, Wisconsin for this coveted project. • The IBM incentive package included $11 million from the State of Iowa in the form of a five -year forgivable loan at the rate of $8,000 per job. If IBM maintains 1,300 employees with a minimum average wage of $45,000 per year (approximately) for five years, they do not have to repay the loan. • The City of Dubuque offered standard Tax Increment Financing to rehabilitate a former six -story department store. The City purchased the building for $45,000 and provided a $24 million loan guarantee. The City also provides shuttle transportation between the IBM facility and area parking ramps /lots. • GDDC also operates as a "one stop shop" for economic development - related workforce recruitment. The City of Dubuque also contracted separately with GDDC to provide a dedicated workforce person to assist IBM with employee recruitment ($125,000 per year). Dubuque "guarantees" that they will supply all of the employees IBM needs. They initially provided IBM with the resumes of 700 people in the region that could meet IBM's requirements and IBM received over 10,000 applications. • From a regional transportation perspective, American Eagle operates three daily flights each way between Dubuque and Chicago- O'Hare. Efforts are underway to extend Amtrak service from Chicago to Dubuque, as well; a $60 million appropriation has been approved by the State of Illinois. St. Cloud is already served by Amtrak. Efforts are underway to secure direct air service from St. Cloud to Chicago - O'Hare and extend Northstar Corridor Commuter Rail service from Big Lake to St. Cloud. • Looking to the future, Rick and Aaron believe that Dubuque needs to become a "destination" for vacationers, tourists, and bring former residents home. Dubuque is ranked #2 nationally in terms of having the shortest daily commute to work — 12 minutes. The next big thing will be to rehabilitate the downtown housing market and redevelop the downtown millwork district, where many of the structures are over 100 years old and are in need of repair. Dubuque is the oldest city in Iowa, with five historic districts and 600 registered buildings. 4 • To what does GDDC attribute its success? "Public /Private partnerships have transformed the regional economy. Their biggest failure was the defeat of Minor League Baseball in Dubuque. What they learned from that failure is that you must pull the rope not push it. On baseball, they didn't have time to bring the public on board. Their biggest challenge is complacency, feeling that we have "made it ". Once you think you have arrived in the business of economic development, you have already `missed the train.' Our competitive advantage is the laser beam focus we have on Business Retention and Expansion." Dickinson pointed out. • Rick Dickinson is open to a follow up call or meeting to share more: call 563.557.9049 or e-mail rickd�areaterdubuque.org. • Their main philosophy is, "Elect talent. Hire Talent. Support Talent." "Investment and focus needs to be on the private sector, and the public sector needs to support that." • The St. Cloud Area Economic Development Partnership is on a parallel path with GDDC in many respects but is limited by staff, budget and private sector investment. 5 Inside Wisconsin Page 1 of 2 SEARCH ID e teree. - - - -, Wiwonsin ` - �'. �_• f )1. n ' 1( ABOUT I is / Return.. ra BOARD How Mercury Marine incentives stack up nationally EVEN CALENDAR November8, 2009 NE WSROOM MADISON — Now that the Doyle administration has revealed the costs of keeping Tube PUBLICATIONS Mercury Marine in Fond du Lac, a predictable "Was it worth it ?" reaction is all rippling through the public, press and policymakers. POLICY PROGRAMS S y paid or announced bt incentives nd b other states to retain or lure major businesses, the answer appears to be "yes.' In fact, Wisconsin may have kept RESOURCES Mercury Marine in the state at a "cost-per-job" that falls somewhere on the lower end of the national incentives scale. WIN MEMBERSHIP The fight to keep Mercury Marine Inc. from moving its Fond du Lac operations to CONTACT US Oklahoma could cost Wisconsin taxpayers $70 million in public assistance to the outboard-engine maker, Doyle said fast week. That's in addition to a $50 million loan funded a half -cent Fond du Lac County sales tax and $3 million from the city of Fond du Lac. Wi In return, Mercury Marine is expected to retain or create up to 2,700 jobs in the Fox Valley, where it is � one of the largest employers. About 400 of those jobs will come from the company shutting down a plant in Stillwater, Okla. If the company retains or creates the full estimate of 2,700 jobs, and all of the state and local incentives kick in, that's about $45,500 per job. A back -of -the- envelope estimate suggests 2,700 workers paid at $45,000 per year are worth $120 million per year in gross pay alone. That buys a lot of houses, groceries, electricity, health A ngel care, gasoline and all the other things that make a local economy click. •• It also generates a lot of state and local tax revenue, which is how those governments recover their investments over time. How does the Mercury Marine incentives package stack up to other recent deals? 1,i ► 1 • When IBM decided to open a technology delivery service center in Dubuque, THE SHOW Iowa, a stone's throw from Wisconsin, the cost per job created was about $40,700. That's based on the reported public - private incentive package of $53 million and 1,300 jobs, which is the predicted total when the center is fully operational in June 2010. WSRC In early June, GE Healthcare announced it will open a new digital �/�/ mammography production facility in New York. The 230,000 - square -foot VJiscor srn Security facility will add 150 manufacturing jobs with an annual payroll of $10 Wsco s Secu rt; million. Investment in the facility totals more than $165 million, including a capital grant of $10 million from New York state, according to the company. That's about $66,000 per job. • In mid -2008, IBM announced it would invest up to $1.5 billion to expand and upgrade its facilities in New York, creating 1,000 jobs and retaining 1,400 more. The reported state and local incentive package was $140 million, or roughly $58,300 per job. • The Mercury Marine incentives look like a bargain when stacked against the state, local and private package assembled in the attempt to keep General Motors in Janesville. That $195 million package, which included $l 15 million from the state, would have created between 1,200 and 1,500 jobs. Using the higher . jobs estimate, that's an average of $130,000 per job — or three times the Mercury Marine cost per job. The cost-per-job equation is only one way to calculate the value of incentives, of course, with total investment by the company being another measure. Total investment takes into account capital expenditures and secondary jobs, such as construction, that are also valuable. But when unemployment is hovering around 10 percent, direct jobs and payroll are what most people understand and value. http: / /wisconsintechnologycouncil .com/newsroom /inside- wi / ?ID =858 8/18/2010 Inside Wisconsin Page 2 of 2 To be sure, there's a philosophical argument against states engaging in an endless War of Incentives. In a perfect world, competition over job creation wouldn't involve state and local tax credits, land discounts and the like. But the world is far from perfect and the marketplace is brutally efficient, which means states must compete or risk losing jobs and companies they already have without gaining anything new. Wisconsin's conservative public psyche may find incentive packages like the Mercury deal troubling. It would be much more worrisome, however, if Wisconsin continued to stand idly by while other states and nations played an aggressive incentives game. Not all incentive packages are worth the cost, but the smart deals pay for themselves over time. Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal. © Wisconsin Technology Council 1 All Rights Reserved 1 info Wsvisconsintechnologycouncit .com l Privacy Policy 1 Site Credits http: / /wisconsintechnologycouncil .com /newsroom /inside- wi / ?ID =858 8/18/2010 COVER STORY {an ' e F uture ,. ,,.... ..„ , , „. .. of E conomic In centives : : g g �� .7...,- Although state and local budgets have been strained by the current economic crisis, incentive funds are still available in many places �� for the most viable projects. Fr , By Tracey Hyatt Bosman, CEcU Director, Strategic Consulting, and Noah Shlaes, CRE, FRICS, Managing Director, SKY Strategic Consulting, ', <1/4 Grubb & EIIis y. F New national leadership, market uncer- benefits under the State's Quality Jobs Strategic Targets (FIRST) Initiative. The new tainty, recession, and low consumer confi- Program, citing the need to "get Missourians incentive offers cash to companies in high - dence have combined to create a very dif- back to work and support small- business impact industries, such as life sciences. ferent landscape from that of a year ago. growth during these challenging economic Washington, D.C.: "We believe that When the fundamentals behind corporate times." Under the Quality Jobs Program, economic development officials are more decisions have changed this much, it's time eligible companies are able to retain the intent than ever to retain existing/remain - to pause and consider the fundamentals. state withholding tax of new jobs and /or ing jobs and to promote emerging areas Rules of thumb and familiar behavior pat- claim state tax credits, which are refundable, where they have made significant invest - terns break down, but the building blocks transferable, and /or saleable. Governor ments," reports Grubb &Ellis' Bruce of location selection, economic incentives, Nixon also proposes the creation of a low- McNair. He reports securing $15 million in and negotiation remain unchanged. cost, direct -loan program for small business- real estate tax waivers to motivate a non - So what does this mean for the future es and the use of tax credits to offset pre- profit client to relocate into an emerging of economic incentives? Change is already employment training expenses. market in the District of Columbia. He evident in the programs offered, the com- In Virginia, Governor Tim 'Caine is pursu- does note, "This position may change as panies seeking them, and the environment ing a $5 million increase in the Governor's the economy continues to deteriorate and in which they are negotiated. Patterns are Opportunity Fund, and legislation is being local budget pressures grow." beginning to emerge, but the field is still considered that would raise the cap on the full of conflicting information. To make Virginia Investment Partnership Program. INCENTIVE STRUCTURE: SELF - sense of it, we've surveyed economic And other states, like South Carolina and FUNDING MAKES A DIFFERENCE development agencies and real estate pro- Utah, aren't expecting large increases to Some incentives are easier on the budg- fessionals to identify what's changed and their incentive funds, but report continued et than others. Incentives funding directly what hasn't. We'll look at local, state, and strong support for economic development tied to new tax revenues generated by the federal programs, and at recent experience programs despite budget issues. project are easier to stomach when the from across the country. Last summer the Commonwealth of economy is down because they don't divert Puerto Rico established very aggressive money from existing funding priorities. THE LEGISLATIVE ENVIRONMENT incentive programs through its Economic EDGE — Economic Development for a This year will mark the clash of budget Incentives for the Development of Puerto Growing Economy (EDGE) programs in realities with the dire need for economic Rico Act, including a reduced income tax Indiana and Illinois let companies retain development. A down economy is precise- rate of zero to 1 percent for target indus- part of income tax withheld from new ly the situation that makes communities tries, a $5,000 per job tax credit for employees instead of sending it on to the work harder to bring in jobs and invest- employment created in target municipali- state. This payment vehicle short cuts the ment. But 2009 will also be a time of rev- ties, and a credit of up to 10 percent of administration process, while leaving enue shortfalls and shrinking budgets, and industrial energy cost. employees unaffected, but it also assures the balance between them will not be that the state only gives up money that is even across all markets. THE LOCAL LEVEL directly attributable to those new jobs. The Center for Budget and Policy To identify trends at the local level, we Property tax abatement and tax incre- Priorities reports 44 states face budget surveyed senior Grubb & Ellis transaction ment financing (TIF) districts are similarly deficits in either fiscal year 2009 or 2010. professionals. In general, it seems local self- adjusting, in that incentives are based The only states expected to be in the incentives are not falling off: on new revenue to the taxing entity. black are Texas, West Virginia, Montana, Minneapolis, MN: Bruce Maus notes Reports from local economic developers Alaska, Wyoming, and North Dakota. that recessionary pains are felt most indicate continued willingness to offer Some states are facing mid -year short- intensely at the local level and so it is the these programs in 2009. falls. Florida, for example, is faced with a local organizations that are frequently the Infrastructure investment remains in $2.3 billion deficit for FY 2009. As a result, most creative. "Cash will be short, but free favor with all levels of government, state lawmakers are eliminating $24 million land, tax abatement, tax increment financ- because of the immediate, reliable impact from Florida's Quick Action Closing Fund, ing, and other programs that don't require coming from construction salaries and Pur- a grant program used to bolster business a city or county to write a check to start the chase of building material. Economic attraction and retention efforts. Other project will still be available," he says. development organizations have shown a states may squeak through 2009, but be Oklahoma City, OK: Mark Beffort preference for these "safe" investments, faced with reduced budgets in July, when expects to see continued aggressive pursuit which lend greater weight to the long -term most begin a new fiscal year. of economic development projects in his projections of companies with significant Yet it would be wrong to assume that area. "Oklahoma City is very aggressive. capital investment. President Obama's 2009 will be a bad year for incentives, They see the benefit if it means jobs. This budget is also expected to include funds even in states facing a shortfall. First, by all is very visible in the recent establishment for infrastructure. Companies that pursue economic forecasts, we should expect of a new TIF district to support Devon construction projects in 2009 will likely fewer companies to be investing in new Energy's proposed new 1.9- million- find communities willing to help with locations. There will still be movement, but square -foot corporate headquarters. In needed infrastructure improvements. the "new development pie" will be smaller. addition, in '08 we (the public) passed an Tax credits — Annual budgetary This reduces the candidate pool for incen- incentive to relocate the Seattle Sonics debates often gloss over tax credits, which tive programs. Less money will chase fewer (now Thunder) to Oklahoma City. We are typically established by state statute. projects, so winners may end up better off. have raised well in excess of $1 billion to We expect these programs to remain Second, many states are holding the line improve infrastructure and entertainment." largely untouched, with a few exceptions. in the face of widespread budget woes, and Lee County, FL: In an effort to turn the California will "limit use of research and even expanding economic development economic tide, Lee County, Florida, recent- enterprise zone tax credits in the 2008 incentive programs. Jay Nixon, Missouri's ly established an unprecedented $25 mil- and 2009 tax year" by reducing the per - new governor, is already working to expand lion Financial Incentives for Recruiting centage of the franchise or income tax due that can be offset. However, this incentive tions. Likewise, monies earmarked — easy to defend, but awards to companies structure is only relevant to the extent that even if not paid out — may become avail- that are already in place are grounds for companies have taxable income. able when companies find themselves grumbling among other companies. Discretionary grants — The toughest unable to proceed with earlier plans. Successful arguments for retention incen- battles involve programs that rely on grant tives are usually based on a handful of monies awarded during budgetary process- NEW NEGOTIATING ENVIRONMENT arguments, consisting of the following: es. These include the discretionary "deal- In 2009, remember that all incentive • We have to make a choice. — closing funds" that many states use to applications will receive greater scrutiny Companies considering consolidation cinch projects, as well as training incentives than in the past. Governments are under across multiple markets have a legitimate that rely on annual appropriations. While extreme pressure to make ends meet and argument that the consolidation could be drastic cuts have not yet appeared across will need to be convinced that the project here, or it could be elsewhere. the board, heated discussions will be a fea- is a safe investment (i.e., the company has • We'll be adding jobs somewhere. — ture of the current legislative sessions. the financial resources to carry through and The combined entity often ends up larger Financing — Financing- driven incentives stay liquid) and that the return on invest- than the existing facility, when out -of -town show a mixed outlook. The credit crunch ment (job creation, job quality, and tax rev- components are included. makes these incentives more important than enue) warrants the expenditure of funds. • This is a big commitment. — in the past. Local and state financing assis- Those that survive the review process Companies may be shifting from a short - tance that relies on federal programs like will face a sharper pencil during negotia- term relationship (a leased facility or non - Community Development Block Grants or tions. Even markets with money and the crucial company functions) to capital the Small Business Administration (SBA) may political will to spend it will he very investment, long -term job training, or see an increase, especially under the focused on good stewardship of scarce development of a specialized facility. Obama administration. However, private- funds. "Whereas before we might have sector participation requirements are mak- thrown in an extra $50,000 just to make BETTER ODDS, SMALLER WINS, ing it tougher to put together a successful sure we won the project, now we're more MORE ACCOUNTABILITY package. In Carlsbad, Calif., Grubb &Ellis' likely to put out a lower number and keep The tug -of -war between budget short - Mark Randall reports, "The secondary mar- our fingers crossed," noted one state offi- falls and a greater need for economic ket for SBA loans has become quite slow, cial. "Companies will need to explicitly tell development continues. A lot is riding on which will affect the extent to which the us what bridge we need to cross." current legislative sessions. While out - SBA can leverage its funds." This year, far fewer companies are comes will vary based on geography, proj- Foreign investment — In Greenville, pulling the trigger on new investments, so ect type, and form of incentive, two prin- N.C., Steve Navarro, president of Grubb & governments show increased interest in ciples remain as valid as ever: Ellis 1 The Furman Company, expects more smaller projects. We were surprised by the 1. Good projects will still see active emphasis on federally assisted programs to warm response to a recent incentives recruitment. Look no further than IBM's cover the gap left by the banking cornmu- assignment — a small (two- person, 1,300 - person technology service center in nity. One potential source is the federal 35,000- square -foot) distribution facility Dubuque, Iowa, which was accompanied investor visa (or EB5) program, which was offered significant up -front cash by a $55 million incentive package. Or awards a U.S. visa to foreign individuals grants. This was a big change from the consider Michigan's approval of $335 mil - who create U.S. jobs through investment in environment of two years ago, with one lion in tax credits for battery manufactur- target geographies. Navarro and colleague community noting, "In today's economy, ing plants. Allen Ballew see this program as a way to all jobs are good jobs." 2. Incentives do not make a bad loca- bring foreign capital and American jobs to tion good. Companies consider the entire South Carolina. They have become one of SORTING OUT RETENTION INCENTIVES operating picture when making a location 17 designated regional centers nationwide As corporations struggle with reduced decision. Economic incentives are some - to sponsor EB5 immigration investment. demand for service and products, they thing they consider very late in the loca- Half of the 10,000 visas available under naturally consider consolidations, reduc- Lion selection process, when they've creat- this program will be awarded through tions, and closings. Requests for proposal ed a list of locations that work. these regional centers. Other entities, (for corporate real estate services) arriving The mechanisms that fund incentives including economic development organiza- in our offices show a pronounced shift in are strained by the current economic cri- tions, have taken a similar approach. emphasis, from "strategic planning for sis, but their justification is stronger than Clawback funds — The dark side of future expansion" to "cost reduction and ever, and strong incentive programs incentive implementation has also identification of consolidation opportuni- endure. They are characterized by revealed one bright spot. Clawback agree- ties." This is at odds with the traditional increased accountability, tougher scrutiny ments, which kick in when companies fail motivations for granting economic devel- of projects, and built -in self- funding. For a to meet agreed -upon investment and job- opment incentives, namely the expansion strong project in genuine need, the world creation targets, may require them to of a local economy. In a stalled or shrink- has not changed that much. son repay monies received. The good news in ing economy, retention is the equivalent of this had situation is that these monies are growth, but it presents several challenges. The authors can be reached by e -mail frequently being added back to the "pot" First, who is eligible for retention incen- at tracey.bosman @grubb - ellis.com and above and beyond budgetary appropria- tives? Spending to create new growth is noah.shiaes @grubb- ellis.com. Reprinted from Area Development Magazine, February/March 2009 Financial incentives for bringing IBM to Columbia - Columbia Missourian Page 2 of 6 • Volunteer • Events • Restaurants • Schools • TV Listings Search j Home » 2010 » 05» 17» E -mail Print Financial incentives for bringing IBM to Columbia Monday, May 17, 2010 1 7:12 p.m. CDT; updated 9:35 p.m. CDT, Monday, May 17, 2010 BY The Missourian staff COLUMBIA — It took a lot of doing — and a lot of money — to bring IBM to Columbia. Here's a look at the incentives that government and other entities provided. State incentives: • $8.6 million through the Missouri BUILD Program • $14.7 million through the Missouri Quality Jobs program • $4.2 million in new jobs training • $300,000 for customized job training • $412,500 worth of recruitment assistance • Sales tax exemption on personal property under the Chapter 100 program Local incentives: The city of Columbia will buy the building at 2810 LeMone Industrial Blvd. for $3 million and will lease it to the company for $1 per year for 10 years with an option to extend it for an additional 5 years at the same price. Boone County will provide a 50 percent property tax abatement on personal property for the depreciable life of equipment and will exempt personal property from sales tax. MoreStory Related Articles • IBM website posts 27 available jobs in Columbia • DEAR READER: IBM story shows the structure for private deals with public money • COLUMN: Can we put an end to corporate socialism already? • TODAY'S QUESTION: Should the IBM deal have been conducted the way it was? • IBM deal filled with questions, secrecy • IBM brings big business, new challenges to Dubuque, Iowa, economy http:// www .columbiamissourian.com/stories /2010 /05 /17 /ibm- incentives/ 8/18/2010 MISSISSIPPI RIVER CORRIDOR -- Site Selection magazine, March 2009 Page 1 of 5 S 1 1 NF n Ed d ition ed ,- i.'t t I0 0 N LatNtE MISSISSIPPI RIVER CORRIDOR From Site Selection magazine, March 2009 The Dubuque Solution IBM finds many virtues poised in a city at the juncture of three states. by ADAM BRUNS adam. brunseconway.com H igher education has a way of exerting gravitational pull, whether it be the power of the past or of the future. Two years ago, Mike Blouin, director of the Iowa Dept. of Economic Development, a 2006 gubernatorial candidate and a former member of the U.S. Congress, Iowa Senate and Iowa House, decided to take on a new post: president of Greater Dubuque Development Corp. "Dubuque was my first home in Iowa," Blouin says, citing his graduation from Loras College. "I always wanted to find a way back." Spoken like a true citizen of the county whose attractions include the "Field of Dreams" movie site to the west near Dyersville. Sometimes the field of dreams is a field full of talent. In January 2009, IBM announced it had found its own way to Dubuque to establish a 1,300 -job technology services delivery center, to be located in a landmark department store building downtown. Part of the allure was the higher education infrastructure, beginning with Loras, Clarke College, the University of Dubuque and Kirkwood Community College in the immediate area — quite a pool of post - secondary resources for a city of 58,000. "There are 30 colleges and universities within 90 minutes of the IBM location in Dubuque, producing about 2,000 IT grads a year," explains Joe Dzaluk, vice president of global infrastructure and resource management, IBM Global Technology Services.That number includes some with which IBM already had relationships. "We met with the presidents of seven or eight of the largest universities, sat down with them and reviewed their curricula. We're excited about the opportunity to partner with those universities. We can ensure they stay connected to the marketplace, and they can ensure their students are coming out competitive." IBM hopes to employ several hundred by the end of 2009, and 1,300 by the end of 2010. While the ., company declined to reveal its finalists out of the hundreds of communities it surveyed, Blouin says the six finalists included Greenville, S.C.; Morgantown, W.Va.; Bloomington, Ind.; Columbia, Mo.; and Laramie, Wyo. — "five university towns and us." But the small private schools that dot the Midwest carry :- i cumulative weight, as does the University of Wisconsin - Platteville, only 30 minutes away. Blouin says about 60 percent of the 7,000 students in Platteville are engineering students, with about two- thirds of those in IT fields. "We have enough post - secondary institutions in a 20- minute circle to amount to about 18,000 ; ; students," says Blouin. "Throw it out to a 100 -mile [161 -km.] radius and we have about 23 colleges and universities in that circle. And there are two million to three million people in that same radius." http: / /www.siteselection.com/ features / 2009 /mar/Mississippi- River - Corridor/ 8/18/2010 MISSISSIPPI RIVER CORRIDOR -- Site Selection magazine, March 2009 Page 2 of 5 Joseph Dzaluk, Vice President of Global Infrastructure and Resource `- Management, IBM Global + �Teclpology Services J I f/ k- MINNES *a A. ..-.. _� P; . — , .i 0 i pi Hennepin -) f t; Ramsey WISCONSIN ! 3 . I Dakota — - Rove ;', I -f '1 � I Goodhue - . /La Crosse t r - f i I 6 Winona ,Grant 10 II I _ Houston - - . _ r `�„ ' ' WA _ ID r '1 Ailamakea - ` ` 1 i ', 1 . Dubuque - — iLi5Talots , � + ., . Jackson - -, . __ _. Carroll , ` I , 1 Clinton _ WhiteStde 1 ill gcatt MIN ‘i -. ,„ maw ' t Rock (Bland - ..�.w.: Muscatine - D t'S Mcti M@rCBt . 4 0, maim . _ . McDonough . ...._ - �.. . Hancock „ tv1.SSouA Adams The nine -story Dubuque Building's attributes , Marion Pike will allow IBM to implement geothermal Rails ct� ,1 Pike , technology for heating and cooling at its new JaCkSO4 technology delivery center. Alexander . St. Louis ' ,. , ._.,. ' Since Blouin's arrival, the corporate project Jefferson " track record of this river city near the Wisconsin Cafe Girardeau J Scott . - KFNIUCKY and Illinois state lines has catapulted Dubuque to ;E ad _ _ . -__ _- - • N �ew M � � � rid - " - _. - ) ,)'4':'-' ' TI � P3Nr<4 the upper echelon of economic development along l � , , ARKANSAS • - -cm the Mississippi River's entire length. The river's • Mississippi - - Lauderdale leading counties are concentrated in the Memphis, ' Crittenden - S heib p • ` -" - M i ol i ,e � s -St. Paul and St. Louis metro areas. So ' ' S nnea � 1 rJ where does Dubuque come from. J�,S I M IS SI PI The answer may be found amid its surprising I a blend of business sectors. Dubuque launched 2008 Washington 1 on a roll, with expansions from Minnesota -based LUISPANA I Midwestern stalwart Hormel ($89 million, 180 Madison -= - - - jobs), Michigan -based International Transmission vo alias t Co. ($3 million, 30 jobs) and Wisconsin -based East Baton Rouge \ hydraulic controls maker HUSCO International in West Bato Rouge _ Ibery Ille ~� I, ': nearby Maquoketa ($20 million, 200 jobs), � �n sion- _-- following that up with a $3- million, 17 -job St,+Charlea - _ �� ,,,` expansion announced in June 2008 by Dubuque Stamping & Manufacturing. All are great projects in tough times, from great industrial companies. But who could have Counties indicated in yellow saw new plant or expansion activity between July foreseen the IBM project from the community's 1, 2007, and Dec. 31, 2008. Those highlighted in red made the top 10 for track record? Mike Blouin says the project will do project totals, led by Shelby County (Memphis), Tenn. for Dubuque's white - collar economy what John http: / /www.siteselection.com/ features / 2009 /mar/Mississippi - River - Corridor/ 8/18/2010 MISSISSIPPI RIVER CORRIDOR -- Site Selection magazine, March 2009 Page 3 of 5 Deere's arrival in the 1940s did for its blue - collar economy: "It will change the standard," he says. "It will make things happen." Musical Chairs IBM began to make things happen starting in spring 2008, when a typically cross - functional team began looking at siting a new global delivery center somewhere in the United States. The most recent project in that category had opened in Brno, Czech Republic, in 2006, when the company also opened an integrated delivery center in Johannesburg, South Africa. Dzaluk is responsible for 8 million sq. ft. (743,200 sq. m.) of global data centers that IBM runs on behalf of its strategic outsourcing customers, as well as 3 million sq. ft. (278,700 sq. m.) of office space such as this center, which will support the data center needs of IBM customers. pi River Corridor Top Performing Counties "We started with a clean piece of paper, with no preconceptions," says Dzaluk, whose 27 years of IT industry experience include senior lasts and Expansions July 2001 — Dec. 2008 IBM positions for the Europe, Middle East and Africa (EMEA) market Projects as CFO of Global Technology Services and general manager, integrated Fenn. (Memphis) 73 technology delivery. That sheet of paper turned into several pages of �., Minn. (Minneapolis -St. Paul) 39 criteria, lumped under such headings as economics and demographics, as . Mo. (St. Louis) 38 well as a catch -all category that included flexibility, time to occupancy Minn. (Minneapolis - St. Paul) 18 i4.. O. (St. Louis) 17 and the ability to meet the goals of IBM's green strategy — Dzaluk leads Minn. (Minneapolis - St. Paul) the team pursuing IBM's Project Big Green initiatives, and is aiming for Rouge Parish. La. (Baton Rouge) 11 LEED -Gold certification on this project. . 111. (St. Louis) 10 The Depression -era structure, now called the Dubuque Building, will a (Keokuk) 10 see some infrastructure upgrades in terms of generators and ., Iowa (Dubuque) 9 uninterruptible power supply (UPS) equipment. Dzaluk's team is also no. (Dyersburg) 9 pursuing energy efficiency improvements such as an insulation upgrade rap Data New Plant Database and a reflective roofing system and the use of geothermal energy for heating and cooling. The measures fit in well with the city's own Sustainable Dubuque plan, which aims to merge goals involving economic, environmental and social equity needs in the community. As it happens, another downtown building with a new geothermal heating system played a part in the IBM project, as other companies worked with Dubuque. McKesson, which occupied space in the Dubuque Building, is moving to a facility formerly occupied by contact center firm WS Live in the Dubuque Technology Park in nearby Key West. WS Live is moving its contact center headquarters into the newly renovated Interstate Power Company Building downtown. "The negotiations were indirectly connected to IBM," says Jeff Mentzer, WS Live CFO. "The decision to relocate was a separate negotiation, but where and when were not yet determined when we started the process. As we worked WS give's move into the newly renovated through our site selection options, the building developer and City jointly Interstate Power Company Building in approached us about a) relocating downtown to the Interstate Power Company downtown Dubuque was an important step in the sequence of events that brought IBM Building and b) doing it quickly, as the timing of exiting our old building became to town . critical to the City being able to put a proposal together that met all parties' needs." Mentzer says the number of job applications for the expansion has been "considerably higher than anticipated," but says it's too early to say how many new jobs will ultimately be created. The moves complete a circle of sorts: WS Live's predecessor company, Advanced Data -Comm, occupied space in the Dubuque Building between 1988 and 1999. Fill 'Er Up http: / /www.siteselection.com/ features / 2009 /mar/Mississippi - River - Corridor/ 8/18/2010 MISSISSIPPI RIVER CORRIDOR -- Site Selection magazine, March 2009 Page 4 of 5 While Dzaluk's focus for data center site selection is on such factors as electricity costs, bandwidth availability and other building and hardware items, the focus for this delivery center was on such factors as IT salaries, annual operating expense, labor pool demographics from IT graduates to tech school graduates and average housing prices, as well as available incentive packages from federal, state and local governments. Dzaluk says the fact that IBM wanted to occupy by June 2009 made for "a very accelerated schedule," but says that was not a deciding factor. He says the company put out an RFP to finalist locations asking for demographic and other detail, and spent a lot of time doing "physical, on- the - ground due diligence. So did Blouin's team. "We did substantial research on the current work force within the 100 -mile [161 -km.] radius, as to people who worked in occupations comparable to what the company was providing us," says Blouin. We knew how many workers there were and were able to drop a 22,000 figure in front of *-4 them. Why is a company moving ahead in this economy? This is when their business is growing. And to move ahead when there is a pool of unemployed workers is a great time to do it. You'll never have a better chance to fill up from the worker side. "We went to every college and asked about IT offerings," Blouin continues, "numbers of students enrolled in those offerings, the capacity of those offerings, their willingness to expand those programs, and the willingness of the student body [to stay in the area] if they could find a Mike Blouin, President, professional pursuit." Greater Dubuque As for the real estate, "we kept our options open," says Dzaluk, regarding owning, leasing, Development Corp. greenfield development or finding an existing building. "We had an opportunity here with the Dubuque Building to do a lease with the city, and it made good economic sense for us." Though the company is cutting back in sales and software development, it's ramping up services positions in the Upper Midwest, including a new, 1,500 job application development and support services operation on the campus of Michigan State University in Lansing. When asked just how many Dubuque positions might be filled by IBM -ers relocating from other communities, Dzaluk says, "Our current plans are for a small number of the positions early on to be transferred from existing IBM locations, to help as we're bringing on new staff], but the majority of staff in this location will be hired locally." The service delivery center in Dubuque will provide server systems operations to IBM clients in the U.S. Dzaluk says the center will connect with other global delivery centers in Brno; East Fishkill, N.Y.; Boulder, Colo.; Buenos Aires, Argentina; Sao Paulo, Brazil; Shenzhen, China; and India. "The goal is to deliver on global and national contracts with common processes and tools," he explains. Hiring is under way for the center, for different groups operating under the monikers "Rhythm," "Blues,' and "Jazz." Dzaluk says lessons from other delivery centers' operations automatically are injected into the many work streams of the new project. A Transformative Project Gets a Watershed Package Dzaluk says the alliance of Greater Dubuque Development Corp., Dubuque Initiatives, the City of Dubuque and the Iowa Dept. of Economic Development made a strong impression. "We viewed them during the decision process and since then as true Turn Toward the Water partners," he says. "People use that word all the time, but clearly they did L est the IBM project in downtown differentiate themselves with their willingness and can-do attitude, and they Dubuque, a few blocks from the continue to do that." Mississippi River, send the message that Blouin says the key dollar figure is not the project's capital investment, but riverbome commerce is a thing of the past, IBM's planned salaries of $80 million a year over its initial 10 -year lease. That Mike Blouin says there is plenty of activity kind of number justifies the final incentive package of between $52 million and $55 million, which was still in the final stages of government approval at waiting to burst onto the region's waterfront. press time. "We have nine prospects looking at us, "The city is not only offering them a 20 -year TIF, which is pretty long for all of whom manufacture different most TIFs, but a private non - profit entity is buying the building and borrowing $25 million for major renovations, and the city is guaranteeing that $25 million component parts of the wind mill," he says. http: / /www.siteselection.com/ features / 2009 /mar/Mississippi - River - Corridor/ 8/18/2010 MISSISSIPPI RIVER CORRIDOR -- Site Selection magazine, March 2009 Page 5 of 5 with a 20 -year interest -only loan payment," says Blouin. "The building sits in an "If manufacturers that make blades or urban renewal zone, which give them a fallback option if the tax credits fall short towers or gear boxes can use the river to in their ability to attract from New Markets credits, historic district credits and supply a growing market in Texas as well the like." as the upper Midwest, they get their ideal A training package worth between $8.5 million and $10.5 million, depending setting. Siemens has built two facilities in on actual wages, is on offer from the state's community college system. the southeast corner of Iowa for that Meanwhile, the state is offering $11.7 million, plus tax credits of approximately reason. $1.25 million and another $450,000 to help the Dubuque Initiative buy the "I think you're going to see more of building. Blouin calls it "an aggressive incentive package for the Upper Midwest" that," he says. "River and rail are becominc and "the largest package I'm familiar with in the states history." more and more important to anybody who Ultimately, he says, "We answered every question they had, and they liked makes something heavy that has to be what they saw." transported. It's driven by fuel costs, and He hopes more companies like what they see in an adjoining 17 -block nobody believes the [fuel price] backoff is warehouse district that is in the early stages of conversion to mixed use. permanent." "I've always looked at it as 20 years down the road," Blouin says of that project, "but IBM makes this happen in 10 years. This is the type of community where entrepreneurs and venture capitalists want to live. That area will take on a life of its own." That is just what Dubuque has done since its industrial malaise of the 1980s, as a white - collar market has gradually acquired critical mass even as traditional industry also grows. "Right now were flying high," says Blouin, "If we do justice to IBM, they will not only continue to grow, but they will be a magnet for other companies that will want to be in the area." www.siteselection. COm TOP OF PAGE Top of Paae 1 Letter to Editor 1 Site Selection Online 1 SiteNet Site Selection Online — The magazine of Corporate Real Estate Strategy and Area Economic Development. ©2009 Conway Data, Inc. All rights reserved. SiteNet data is from many sources and not warranted to be accurate or current. http: // www.siteselection.com /features/ 2009 /mar/Mississippi - River - Corridor/ 8/18/2010