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From the Ground Up

If any lesson can be learned from Site Selection magazine’s 1997 Deals of the Year, it is that every deal is different. The deals ranged from the simple to the complex, the use of lots of incentives to no incentives and the creation of only a few hundred jobs to several thousand jobs.

This year the editors had lots of big deals to choose from so they announced a top 10 and 25 runner-ups. Unfortunately, none of those 35 were in Mississippi, but two economic development organizations from the Magnolia State were recognized under the category of Top Economic Development Organizations — The Community Development Foundation in Tupelo and the Economic Development Authority of Jones County. Harry Martin of Tupelo and Mitch Stennett of Laurel are two of the best in Mississippi and are very deserving of the recognition. More details about both appear elsewhere in this issue, but I couldn’t let this opportunity go by without adding my kudos.

Amazon.com, the on-line bookstore, was featured for its headquarters move to Seattle. What is so unique about the deal was its move to the fourth floor of a very old Seattle building. Its 250 employees spend most of their time behind a computer so the company needed a place where high-tech computer talent was available — without Silicon Valley prices. Amazon has minimal need for inventory because most of its sales are outsourced. There will be more companies like this in the future. Investment: $3.5 million (est.) Jobs: 250.

Then there is the Boeing deal, which landed in Decatur, Ala. after flirting with a few other states, including Mississippi. In contrast to Amazon’s fourth floor in downtown, Boeing is expected to build a 2-million square-foot facility and is expected to employ 3,000. Alabama offered Boeing $80 million in incentives, with strong clawback provisions if it doesn’t get built. According to a Boeing vice president, Alabama beat out other sites by having available workers, training and in-place infrastructure, including the Tennessee-Tombigbee Waterway, which will facilitate shipping to Florida and California. Investment: $400 million. Jobs: 3,000.

Jeep had to move from its existing location in downtown Toledo, Ohio. The factory was over 90 years old and spread out over 61 buildings. Toledo and Ohio stepped up to the plate and gave Jeep a reason to stay in town. A $223-million incentive package “…was pivotal in Toledo’s keeping Jeep.” The company will locate on a brownfield site next to the existing site.

There’s one thing about the deal that is puzzling however.

To justify the incentive package a local leader said that the company will generate $350 million in payroll taxes over 10 years. The point of this deal is that a community can keep a big employer from moving. The company was impressed by a community that wanted it to stay. The community demonstrated its love for Jeep by doing things other than throwing incentives its way.

There were parades, songs, billboards and numerous meetings. Reminds one of a base closure retention effort. Investment: $1.2 billion. Jobs: 4,900.

Not every company needs incentives to expand or relocate. Gateway, the computer giant, is opening a facility in Salt Lake City. It’s getting no tax breaks, but is receiving a loan and some job training from the state. It will build a 260,000-square-foot facility that will turn out 8,000 personal computers a day. In this case, business factors outweighed incentives offered by other states. According to the senior vice president, Salt lake City offered “…quality labor, great quality of life, a recognized education system and Utah’s values.” Investment: $20 million. Jobs: 1,350.

One more deal and I’ll close. MCI, which is in the process of merging with WorldCom, searched 20 cities for its new 240,000-square-foot Information Technology Center. The center’s employees, mostly electrical engineers and computer programmers, will develop new products and customer solutions. It needed a high-tech city and it found one in St. Louis, where there are now over 1,000 high-tech companies. A lesson here is that a community must have the type labor needed by an employer. Investment: $43 million. Jobs: 1,200.

In summary, every deal is different and custom-made for both the community and the company.

Phil Hardwick’s column on Mississippi business appears regularly in the Mississippi Business Journal. His e-mail address is hardwickp@aol.com.

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