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VOL. 126 | NO. 39 | Friday, February 25, 2011

Dev. Race Procedures Draw Elected Officials’ Ire

By Andy Meek

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When Mitsubishi Electric Power Products Inc. decided the facility in Ako, Japan, where the company produces large power transformers was approaching full capacity, it wasn’t long before the company decided it needed to build another plant.

The decision was a momentous one, because Mitsubishi Electric Power Products, or MEPPI, decided the new facility should be in the U.S., which currently imports the bulky transformers from Japan.

The search for a plant site ultimately pointed to Memphis. But for all the positives company officials saw in choosing Memphis, it’s now clear landing that deal here would not have been possible without the kind of economic development sweeteners that from time to time come under fire from political officials for the way they’re doled out – and for who has the power to do so.

Shelby County Commissioners this week peppered Shelby County Mayor Mark Luttrell with questions about the secrecy such deals require. Some critics also lamented their perception that officials in the know don’t let them in on the details of deals until the last minute.

Even though the County Commission was told cities and states are increasingly finding themselves engaged in a competitive economic arms race over companies with money to spend, County Commissioner James Harvey said it was immaterial to him what goes on outside of Shelby County.

“You’ve been working on this (for months), and the chairman of the economic development committee only finds out a week before it’s time to sign off on a check,” Harvey told Luttrell.

Also within the past several days, criticism of the city and county economic development efforts prompted a rare instance of Memphis Mayor A C Wharton Jr. breaking his usual Zen-like demeanor.

Wharton said critics of the recruitment efforts need to “shut up and read” and understand the realities of economic development.

But the criticism doesn’t stop at the city limits.

Sophie Cousineau, writing for the French-language Canadian publication “La Presse,” suggested Tennessee was a “U.S. state burdened by unemployment (and) is taking desperate measures to attract factories and create jobs,” according to a rough translation of a piece she wrote in January.

The city and county aren’t letting the foot off the brake when it comes to economic development. Nor are administration officials slacking in their close partnership with the Greater Memphis Chamber, which usually takes a lead role in the recruitments.

It was a phone call to chamber vice president Mark Herbison, for example, that got the ball rolling on bringing Swedish appliance maker Electrolux to Memphis. And chamber officials, working behind the scenes, were similarly critical to the MEPPI project.

At the same time, the debate over incentives isn’t letting up. County Commissioner Steve Mulroy this week publicly worried about a “race to the bottom” when it comes to incentives and that economic development could devolve into simply a matter of who could give away the most.

He and others are grappling with the realization that cities, counties and states increasingly have to put money on the table if they don’t want to walk away from a deal empty-handed.

Putting enough money on the table is how Memphis landed MEPPI.

Company officials, working with a site selection consulting firm, began about two years ago their scouting of U.S. sites from coast to coast.

A pool of between six and eight sites was developed.

Ken Badaracco, who will be the plant manager for the new Memphis facility, said MEPPI began ranking the sites based on amenities like good schools – which would produce the quality work force needed – and what kinds of infrastructure assets were in place.

Once that site pool was whittled down, it was on to another round – what financial incentives each locale could offer.

“To be honest, Memphis had a big, uphill battle,” Badaracco said.

He told county commissioners the Memphis site MEPPI ultimately chose, at Rivergate Industrial Park, was not conducive to building a large factory and that a major amount of infrastructure work was needed there.

The city, county and state promised that, when the time came, each government would take out its checkbook and fill in a large-enough dollar amount.

The state is contributing about $11 million for infrastructure grants. The city is putting up about $7.5 million. And this week, the County Commission’s economic development committee recommended the county chip in $1 million.

Wharton made an impassioned plea to the Memphis City Council last year that the area needs to step up its economic development game.

“We’ve got to send a signal that we’re serious,” Wharton said. “That we’re going to equip our agents. Our recruiters. We’ve got to get in the game.”

At the time, MEPPI’s site selection was in the final stage. And for that deal, at least, Memphis was in the game.

Wharton helped convince MEPPI officials with promises, behind the scenes, that he and Memphis would do whatever needed to be done to land the project.

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