Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, May 1, 1994 TAG: 9405020124
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: JEFF DEBELL STAFF WRITER Note: above
DATELINE: LENGTH: Long
WHEN Mercedez-Benz decided last year to build a huge auto plant in Alabama, bringing with it 1,500 new jobs, it was big news among economic developers.
Scores like that are extremely rare among the people who labor to attract industry to their states and communities.
It's a matter of simple arithmetic. There are a lot more places looking for industry than there are industries looking for new places.
Between 5,000 and 15,000 organizations promote economic development in the United States, according to Conway Data Inc., publisher of ``Site Selection'' magazine, a bible of the industry. They range from amateur/volunteer to highly professional.
Yet in 1993, according to Conway's Donna Faulkner, there were only about 800 industrial new-builds or expansions that created 100 jobs or more.
``Clearly, there are many more fishermen than fish in this situation,'' Virginia Tech professor John Levy writes in his book on economic development.
That doesn't mean the developers are wasting their time. Economic development is necessary to help replace disappearing jobs and create new ones. In the best of circumstances, it helps to raise local income and living standards.
Knowing they have little chance of landing a big fish like the Mercedes-Benz plant, economic developers such as Beth Doughty of Roanoke set their sights on smaller ones.
``Our niche is for 200 [employees] or fewer,'' says Doughty, the executive director of the Economic Development Partnership of the Roanoke Valley.
Modern economic developers also have learned to focus their hunt more narrowly than in the past.
Gone are the days when, in the words of John Accordino, a professor at Virginia Commonwealth University, ``you'd put the flag up for anybody who'd want to come.''
Instead, sophisticated developers ``target'' selected industries and cultivate ``clusters'' of companies with common interests. They look for prospects not only in this country but all over the world.
They gather the data necessary to answer a prospect's every query, from per capita income to the number of day care centers in a community. They're comfortable online and on-site.
They mount sophisticated marketing campaigns - that's a huge part of economic development. It's handled in the Roanoke Valley by the Partnership and in the New River Valley by the New River Valley Economic Development Alliance.
Finally, savvy economic developers understand that, while new industry gets the headlines, plant expansions account for more new manufacturing jobs. Accordingly, they try to hang on to the industry they have, making sure its owners and managers are happy and eager to grow.
That is called ``retention,'' and policy analyst Doug Peterson of the National League of Cities says retention makes a lot more sense than for cities to ``cut each others' throats'' in competition for new industry.
Peterson said the league's advice to members is ``Concentrate on your positives. It can help keep you from shooting yourself in the foot.''
They need speed
VCU's Accordino agrees. The economic development program that concentrates exclusively on industry attraction ``is pre-1980 and spending someone's money very unwisely,'' he said.
While the Partnership and Alliance concentrate on marketing, retention generally is left to the local governments in the Roanoke and New River valleys. The steps they take cover a broad range of activities: making street or sewer improvements, helping with a training program, maybe just stopping by to schmooze with management.
Salem makes a specialty of quick turn-arounds on site plan approvals, permit applications and the like.
``A lot of time they're under a time constraint,'' said Joe Yates, the city's economic development officer as well as its planning director. ``They need speed.''
Phil Sparks, acting head of economic development for Roanoke, said the retention efforts of his office helped save 1,000 jobs with an estimated annual payroll of $20 million in 1988-89.
The office helped one company get a waiver on right-of-way encroachment problems. Another got special access to needed water. A third was given favorable terms on city-owned land it needed for expansion.
In his book, Tech's John Levy offers the ``very conservative'' estimate that $10 billion is spent annually on local economic development in the United States. He says the actual amount is impossible to pin down, in part because the funds come from so many sources.
Among them are chambers of commerce, government departments at every level, quasi-government agencies, public-private partnerships, nonprofit corporations and international development brokerages with huge staffs and earnings in the millions.
That's in addition to organizations that promote retail business and tourism, which also are important parts of the economic development tapestry - organizations like Downtown Roanoke Inc. and the Roanoke Valley Convention and Visitors Bureau.
On a hand-drawn chart of economic development activity in the Roanoke Valley, Sparks came up with more than 20 organizations. They include not only obvious players like the Chamber of Commerce, Economic Development Partnership and development officials in local governments, but organizations like the Roanoke Redevelopment and Housing Authority, the Williamson Road Area Business Association and Total Action Against Poverty, which runs a program to encourage entrepreneurship in poor neighborhoods.
Among its own ``core organizations,'' the New River Valley Economic Development Alliance lists not only the usual parties but Pulaski Encouraging Progress (a grass-roots business retention program known as PEP), and Virginia Tech's Corporate Research Center.
Schools play key roles in economic development. They teach future workers to read and write. They educate managers. They run specialized vocational training programs like those at New River Community College in Dublin and Virginia Western Community College in Roanoke.
Blacksburg-based Virginia Tech, the state's largest university, is ardently cultivating economic ties with the Roanoke Valley. It also has a high profile in the New Century Council, the business-fostered effort to promote economic development in the overall Roanoke-New River Valley region.
Economic development activity is so widespread, in fact, that it worries Adrienne Birecree a bit. She watches it closely from her vantage point in the Radford University economics department, and she suspects that more focus might be desirable.
``There are all sorts of overlapping agencies,'' Birecree said. ``A lot of people seem to be working at cross-purposes and not coordinating their efforts.''
The important marketing side of economic development consists of trying to get the attention of companies that are planning to move a plant or build a new one, then persuading them to do it in a given locality. Offices and stores are generally welcome, but manufacturing facilities are the real prizes because they typically pay the best wages to the most people.
The Alliance serves the economic development marketing interests of Radford and the counties of Floyd, Giles, Montgomery and Pulaski. It has offices in a shopping-center office suite on Christiansburg's North Franklin Street. It is supported equally by corporate and government funds and has a fiscal 1994 budget of about $318,000.
The staff of four, including one part-timer, is headed by executive director Franklyn Moreno.
The Partnership operates out of an upstairs suite in downtown Roanoke's glass-sided Central Fidelity Bank building. It employs five, four of whom are full-timers, and has a budget of $605,846 for 1994-95.
Most of the money comes from the partnership's member governments: the cities of Salem and Roanoke, the town of Vinton and the counties of Botetourt, Craig, Franklin and Roanoke.
Corporate ``investors'' contribute $500 each per year. There currently are about 215 of them.
Beth Doughty, a former advertising executive, has been the partnership's executive director since May 1992.
``My job is to sell people on the Roanoke Valley in general,'' she said. ``I don't even tell them where the [political] boundaries are. It's my job to bring them to the door.''
Moreno says the same, citing ``prospect generation'' as the Alliance's primary objective.
The two organizations employ a number of tools toward that end, foremost among them advertising, industrial trade shows and direct mail.
The Partnership buys display space in regional editions of The Wall Street Journal and other publications, including trade magazines like ``Site Selection'' and ``Area Development.''
The Alliance takes a different approach.
``We advertise where the state advertises, where we can get extra mileage out of a state promotion,'' Moreno said. ``We figure we get more attention if we work off the fact that people know Virginia.''
In those instances, the organization calls itself Virginia's New River Valley Economic Development Alliance. That's because the largely rural New River Valley tends to be either unknown or confused with West Virginia.
``They think we're white-water rafting,'' Moreno said.
The aim of the ads is to get the attention of relocation consultants and footloose industry - and, of course, to portray the valleys favorably against perceived competitors.
One Partnership ad contrasts the valley's cost-of-living index with the higher ones of Charlotte, N.C. and Greenville, S.C. - two industrial development hotspots of the Southeast.
``THE ROANOKE VALLEY HAS ALWAYS LOOKED UP TO ITS SOUTHERN NEIGHBORS,'' the headline says.
Typical promotions also stress the area's relatively low costs - for electricity (important to high-tech industries and power-intensive plastics manufacturers), for land, for wages and taxes.
``Quality of life'' factors such as the area's scenery are regarded as good selling points. Photos of mountains and glowing sunsets abound in the promotional material. It says ``Blue Ridge Mountains' Majesty'' on the front of one Partnership informational binder.
Marketers also tout the public infrastructure - roads, water, sewerage and the like.
Industrial trade shows are another important tool of the marketing organizations. Representatives of the Partnership and the Alliance attend several each year, sometimes sharing expenses with their counterparts from other localities or the state's economic development department.
The shows are used both to promote the valleys and to make potentially valuable personal contact with companies that may one day become relocation prospects.
Richard Beard, marketing rep for the Partnership, recently attended the National Electronics Packaging and Production Conference in California. One of the valley's advantages, he told exhibitors there, is its proximity to Virginia Tech, where there is extensive research in fiber optics, computer software and other areas of interest to electronics manufacturers.
Beard will attend the International Plastics Exposition this summer. Plastics is a target industry with the Partnership because it's power-intensive and electricity is relatively cheap in this area.
On the Alliance's 1994 agenda are the Woodworking Machinery & Supply Fair in California and the Chemical Process Industries Expo in New York.
Just making the hubcaps
Another marketing tool is direct mail. Unlike the kind of generic material that turns up at the homes of consumers, mailings from the Partnership and Alliance are aimed with care at ``target'' industries that the economic developers hope to cultivate.
An example, Doughty said, might be ``electronics companies with 200 or fewer employees in states east of the Mississippi.'' Similar mailings might go to other industries on the Partnership's target list, which includes ``fiber optics and related electronics,'' distributors (including mail-order firms), transportation companies and makers of auto-related equipment.
Moreno said the Alliance aims to generate 2,000 pieces of direct mail per year to its own target industries. They include plastics, fabricated metals, electronic components and radio and television communications equipment.
Targeted industry lists are drawn from a number of sources, including corporate business studies and academic research. For the most part, though, the lists reflect the organizations' own assessments of their markets and the industries they believe would complement the mix that's already in place.
``I don't have a scientific formula,'' Doughty said.
Lists may include industries that already are a part of the local mix; industries for which there happens to be a ready supply of raw materials or appropriately trained workers; industries that depend on available rail or highway access; industries for which the region is geographically suited as a distribution point; and potential parts and materials suppliers to existing industries, including those that may be outside the immediate area.
Mike Hensley, director of the Center for Economic Development Assistance at Virginia Tech, says the Roanoke and New River valleys are favorably situated to take advantage of increased auto manufacturing activity in the Carolinas.
``We may just be making the hubcaps, but we could be in a good position to do that,'' he said.
Targeting is ``just a piece of trying to find the right kind of fit,'' VCU's John Accordino said. To do it properly, he said, local economic developers need a solid data base and intimate knowledge of their existing industrial mix.
``Where I think communities often screw up when they're planning is that they don't look closely enough at existing industry,'' Accordino said. ``You want to get a rich picture. The richer the picture, the better you are able to present yourself.''
The Alliance and Partnership maintain extensive information on economic indicators, regional demographics, local industries and available sites and buildings.
``We're very data-driven,'' Doughty said. ``We seldom don't know the answer'' to a data-based question.
Jack Resnick can testify to that. He's president of Transkrit Corp., a business form printer that just opened corporate offices and a manufacturing facility in Roanoke after moving from New York.
``Beth did an exceptional job,'' he said. ``Every time I came up with another request for information, it was put together and sent back almost the same day.''
As money allows, both organizations hope to develop better ways of getting the information to prospects and manipulating it for their use. Moreno, for example, would like the capability to rapidly project operating costs via computer matchups of information from clients and the Alliance's database.
He's seen it done, and he says ``it's a good selling tool.''
Playing matchmaker
The Partnership reported 35 prospects last year, and 74 prospect visits.
Most projects come to naught. That's the nature of a game in which, as Levy said, there are more fishermen than fish. But sometimes the Partnership wins. Three manufacturers decided to relocate in the valley last year, and several others announced major expansions.
The Alliance reported 57 prospects in fiscal 1993, with seven visits to the area. The work resulted in five announcements of new industry or expansions.
When prospects visit, they are not simply picked up at the airport and taken to prospective properties. Depending on available time, they are introduced to businessmen and civic leaders. They're given tours, not only of potential industrial sites but of landmarks, cultural institutions, schools and even the neighborhoods where workers and managers might one day make their homes.
They're given promotional presentations, usually customized to reflect their needs and interests. Before they are taken to look at properties, their criteria will have been filtered through the marketing organizations' site inventory so they can be steered toward the land and/or buildings that best meet their needs.
A prospect that requires interstate highway frontage, for example, won't likely be shown property in Craig County.
``In a lot of ways, we are a matchmaker,'' Doughty says.
The economic development officials of the local governments are the ones who show the sites and buildings in their localities, though a Partnership representative may go along. In the New River Valley, local economic development officials comprise a ``prospect team'' that joins Moreno in showing available sites.
If a prospect finds a site to its liking, the Partnership usually steps out of the picture. It turns things over to economic development officials in the locality.
A similar protocol obtains in the New River Valley.
The locality works out the most attractive deal it can with the prospect, agreeing perhaps to make site improvements for the industry or to offer land at a bargain price. The idea is that whatever concessions are made will be regained in the form of tax revenues from the industry.
``We have in some instances given land away,'' Roanoke County's Tim Gubala said. ``We look for a three- to five-year payback."
In comparison with their counterparts in certain other states, including North Carolina, Virginia's local economic development officers are tightly limited in the incentives they can offer to industrial prospects. State law prohibits tax abatements, for example.
Tax credits are allowed under certain circumstances, but they pale beside those offered by other southeastern states. And the Governor's Opportunity Fund, established to help finance site acquisition and improvements, loans, training and certain other incentives, contains only $8.5 million for the entire state.
``Because Virginia was late in waking up to the incentives issue and still lags in addressing it,'' Doughty said, ``we're continuing a free-fall in our competitive status with states like North Carolina, South Carolina and Alabama.''
Sparks gave two examples of how bad it can hurt:
Tiny Reidsville, N.C., last year assembled an $8-million package of local and state incentives to land an 800-job manufacturing plant owned by the Schlegal Co., a Michigan-based maker of rubber automotive seals.
Sparta, another small North Carolina community, was selected by Bristol Compressors as the site of a $40-million refrigeration and air-conditioning parts plant that will employ 750. The bait: $15.5 million in state tax credits, site and infrastructure improvements.
``We were in the final two or three localities being considered by each of these companies,'' Sparks said
Inadequate incentives is only one of the complaints area economic development officials have against the state. They fault its marketing efforts and its lackluster record on delivering industrial prospects to this part of the state.
``People are not enchanted with what we're getting from on high," said Lee Cobb, director of economic development for Lynchburg. He attributes the problem in part to turnover and vacancies in top leadership at the Virginia Department of Economic Development.
``Changing personalities has not led to stability,'' said Cobb, who also is marketing director of Region 2000, a Lynchburg-based economic development marketing organization similar to the Partnership. He and his counterparts in the region say they're hopeful the department will get its act together under Gov. George Allen, who seems committed to aggressive economic development.
Doing the nuts and bolts
Despite problems with the state, those who are part of the economic development system in the Roanoke and New River Valleys say it works well.
The localities "do the nuts and bolts'' of negotiating with new industry and retaining existing employers,'' Doughty said. ``We do the marketing,'' which the localities can ill-afford anyway.
``It's taken us 10 years, but I think we all understand it now.''
As a result, she and the others say, unseemly competition for industrial prospects is a thing of the past.
``Things are good,'' Roanoke County economic development chief Gubala said. ``The Partnership has helped by being the umbrella.''
It's better to have an industry in a neighboring locality than nowhere in the valley at all, he and the others say, because the economic benefits of new or expanding industry transcend political boundaries. The worker who earns his paycheck in Roanoke may pay his property taxes in Botetourt County, for example, and may do most of his shopping in yet another locality.
``We might get their football players,'' Joe Yates of Salem quips.
by CNB