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VOL. 126 | NO. 241 | Monday, December 12, 2011

Pulling the Strings

Behind-the-scenes economic development efforts bolster city’s fortunes

By Andy Meek

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Long before the first widgets roll off the assembly line, way back before the ribbon cutting and the first shovels break ground, and even before executives quietly slip in to scout out a prospective piece of land, someone like Mark Sweeney gets a phone call.

Mark Sweeney, left, senior principal with McCallum Sweeney Consulting, was the featured speaker during “A Conversation With” series that featured Calvin Anderson at a Greater Memphis Chamber luncheon. Sweeney is a national site selector that helps large companies find locations for expansion.

(Photo: Lance Murphey)

Major corporate relocations and economic development coups might seem like a happy stroke of luck for the cities and states that win them. That’s because the public doesn’t see what went on to woo employers like City Brewing Co., Electrolux, Mitsubishi Electric Power Products Inc. (MEPPI), Great American Steamboat Co. and Kruger, all of which have brought tens of millions of dollars in new investment and the potential for thousands of new jobs to the Memphis area over the past year. One of the most recent such deals involved IDEXX Laboratories Inc., which completed a $13.5 million expansion of its Memphis reference laboratory and distribution center that will have resulted in 90 new jobs by the end of 2012.

IDEXX’s Memphis distribution center also is the worldwide hub for the company’s products, with more than 40 employees processing and shipping orders.

Like the journeys of a thousand miles that begin with a single step, so too begin the business recruitments and expansions that can reshape their hometowns for years to come. And what frequently sets that chain of economic development events in motion is often a site selection consultant like Sweeney, senior principal with McCallum Sweeney Consulting, simply answering the phone.

“We are generalists. We’ve helped companies in just about any industry you can imagine,” said Sweeney, whose Greenville, S.C.-based firm helped steer MEPPI to Memphis earlier this year. “But in our business, your clients have to find you when they’re ready.”

To hear Sweeney talk about his work and what it requires after that initial call, it leaves the impression site selectors must possess a vast skill set. Such consultants, for example, help companies draw up and then whittle down lists of potential sites, making them function a little like real estate brokers. The consultants also do the work of research assistants, helping answer a company’s questions about a region and compiling information to study.

Sometimes, they’re part-gophers who round up additional data, facts and double-checked answers a company wants to follow up on. And at times, site selectors operate with the absolute, zero-margin-for-error confidentiality of a secret agent.

If that sounds metaphorical, the nearly two-year search by MEPPI for a U.S. site where it could build a large plant that makes power transformers shows why that’s an apt description.

To preserve the company’s identity for as long as possible, the MEPPI search was codenamed “Project 21.” According to the Houston Business Journal, when MEPPI representatives took a helicopter ride in early 2010 to take in an aerial view of a 15,000-acre industrial park in Houston that was at one time being considered for the plant location, each executive wrote the same last name on the waiver they had to sign before flying: “Smith.”

“We don’t have these code names just for fun,” Sweeney said. “Many communities have been cut because of leaks to the press.”

Like the journeys of a thousand miles that begin with a single step, so too begin the business recruitments and expansions that can reshape their hometowns for years to come. And what frequently sets that chain of economic development events in motion is often a site selection consultant like Sweeney.

There’s another important task a site selector plays: that of a quasi-government liaison. Such selections, of course, are often influenced heavily by which cities and states pony up the most cash and development incentives to lure a company – and which ones already have the friendliest tax and business structures in place.

The competition can be fierce. Sophie Cousineau, writing for the French-language Canadian publication “La Presse,” suggested Tennessee “is taking desperate measures to attract factories and create jobs,” according to a rough translation of a piece she wrote earlier this year.

The Daily News, sister publication of The Memphis News, was the only outlet to report how Memphis’ ranking in the No. 3 spot in 2010 on Forbes’ list of “America’s Most Miserable Cities” nearly cost the city MEPPI. The company wanted a response from the city about that ranking. In return, the Greater Memphis Chamber prepared a splashy booklet that included letters promoting the city in specific ways from local political and business figures. The chamber sent the booklet to the company – along with a basketball signed by Grizzlies players.

“I hope you enjoy this autographed ball – a personal gift from my team to yours,” wrote Grizzlies coach Lionel Hollins in one of the package’s letters.

With so many factors to juggle, it probably shouldn’t come as a surprise to hear a consultant readily admit there’s no such thing as the perfect development site. Sweeney still recalls with a knowing smile the memory of seeing MEPPI president Brian Heery, whose company needed water access for its new U.S. plant, unroll a map of the U.S.

“Look at all this water!” Heery exclaimed while scanning the country, not knowing – as Sweeney would eventually be able to show him – that plenty of those sites wouldn’t work, for a variety of reasons.

“There’s no perfect site – only the best site,” Sweeney said to an audience of business executives at a recent chamber-sponsored event as part of its “A Conversation With” series. “The only perfect site I’ve known of was in the Bible. And that one had a fruit problem.”

That helps explain why the economic development game that brings new corporate investment into an area comes down to something as basic as companies first looking for reasons to say no. Specifically, saying no so they can whittle down a list of potential locations. Then, when the list is short enough, those companies look for reasons to say yes – eventually, to say yes to that one best location.

“Incentives become more important the deeper you get into a project,” said Sweeney, who often reminds companies he works with that “all the incentives in the world can’t make a bad location good.”

They may not make a location good, but they certainly can make it work. Before MEPPI chose to build its new plant in Memphis’ Rivergate Industrial Park, company officials working with McCallum Sweeney began scouting U.S. sites from coast to coast.

They came up with a pool of between six and eight sites. Memphis was in that pool. But Ken Badaracco, who will be the plant manager for MEPPI’s Memphis facility, said Memphis “had a big, uphill battle.”

The company started ranking sites in its pool based on amenities like schools and what kinds of infrastructure assets are in place. Once that pool got whittled down, the list was culled again based on what financial incentives each location could offer.

“Projects drive incentives. Incentives don’t drive projects,” Sweeney said. Still, “there were some big infrastructure costs here that weren’t faced at other locations.”

The state agreed to contribute about $11 million for infrastructure grants. The city approved about $7.5 million for the project, and the county agreed to chip in $1 million.

“As (Tennessee) Gov. (Bill) Haslam has often said, it is not the government’s job to create jobs – it’s simply our job to create a business environment that is friendly, so that private sector companies can thrive,” said Ted Townsend, regional director with the state’s Department of Economic and Community Development.

Incentives are one piece of that. But so is relationship-building. At an economic development event hosted by the law firm Butler, Snow, O’Mara, Stevens and Cannada PLLC, Townsend cited some performance metrics along those lines.

In the recent past, his agency has met with more than 200 existing businesses in the greater Memphis area. They’ve conducted 122 meetings with more than 2,400 economic development partners and stakeholders. And they’ve had a few dozen legislative one-on-one meetings.

Townsend said his group has assisted in landing five projects since June that represent $71 million in capital investment and 172 net new jobs. In addition, it has six projects currently under management representing $562 million in capital investment and more than 1,100 net new jobs.

“So our pipeline is strong,” Townsend said. “It’s healthy.”

After hearing that Larry Cox, president and CEO of the Memphis-Shelby County Airport Authority, has been chosen by the chamber’s board to be its new chairman, Memphis Mayor A C Wharton Jr. couldn’t resist an airplane metaphor when speaking at that Butler Snow event.

“A plane cannot fly with ice on its wings,” Wharton said. “If you’ve got that thin coat of ice – oh, you can bump along at treetop levels. But when you need that lift, when you need to surge, that thin coat of ice will deprive you of that surge you need in times like this.

“That ice on our wings is those who for whatever reason have not been able to share in our prosperity. We’re going to redouble our efforts to make sure everybody enjoys the progress we’re making in this great community.”

Wharton was bullish on Memphis’ future, pointing to improvement in several different economic indicators.

“You go to Washington, and they’re like Chicken Little,” Wharton said. “‘The sky’s about to fall.’ But if we’re not careful, recovery’s going to break out around here!

“You only have to look. The numbers are real, no doubt about it. Unemployment is dropping. Our sales taxes are up. We’re coming back. And we’re coming back strong. This is a great city, and let’s just make sure we take all of our people with us.”

PROPERTY SALES 51 328 20,960
MORTGAGES 58 387 24,132
BUILDING PERMITS 170 842 43,435
BANKRUPTCIES 50 288 13,468