Even though Mississippi’s recruitment of a $930-million Nissan plant was rated one of the top business deals in the Southeast, and the Mississippi Development Authority was recently named one of the nation’s top 10 economic development groups of 2000, there’s no time to slow down.
Competition is keen, experts say.
“In the decision-making process, timing is the new key,” said James Lothian, senior manager of Deloitte & Touche Fantus Corporate Real Estate, a prominent corporate site selection-consulting firm in the U.S. “Processes that used to take a couple of years are now condensed to three to six months. The cycle time for translating a vision into strategy and a business plan into execution has really been cut, and there are a number of factors that play into that.”
Earlier this month, Lothian told business leaders at the Community Development Foundation’s annual meeting in Tupelo that the battle to recruit better companies with higher-paying jobs is a product of “faster, cheaper, better.”
“With faster, corporations are looking for situations like available buildings where they can short circuit the process of having to obtain a site, go through a permitting process and build a building,” he said. “Staffing is another issue, and it becomes more important as unemployment rates drop. Communities can provide assistance with screening, hiring, job fairs and things of that nature. Permitting and pre-permitting are issues that can be very time consuming in some areas. While it takes days or weeks to complete the process in some areas of the country, it can take years in others. And time can make or break a project.”
Even though economic development efforts usually don’t show up on checklists of the most critical location factors, site selection committees consider economic development organizations “windows to the community,” Lothian said.
“If they do not respond quickly and appropriately, the projects are going to pass them by. And with the speed that these things move at, these corporations don’t look back. Once you’ve fallen behind, you can’t catch up,” he said.
With the slowdown in the economy, corporations are focusing on reducing operating costs and returning to a dynamic of 20 to 25 years ago, Lothian said.
“When I got into this business, almost invariably, manufacturers generally went to a low-cost location,” he said. “Then that changed. A lot of other factors came into play — quality of life, business climate, et cetera — but things are swinging back again. A number of factors, including incentives, cash, workforce training, can have a decided impact on cheaper. The big new things are tax-free zones, enterprise zones and even empire zones which some of the northern states are coming up with.”
What are other states offering? In Pennsylvania, Keystone Opportunity Zones have been created and neighboring states are following suit. In the zones, new manufacturers have total tax exemption for the initial decade. This includes state and local income and franchise taxes, sales taxes, gross receipts taxes, occupancy taxes and property taxes.
“Tax free is a pretty lucrative incentive,” Lothian said.
Utility cost differentials for large users is very important, Lothian said. “For example, New York has empire zones with long-term economic development rates, such as electric power for 3.9 cents a kilowatt hour — less than half the scheduled rate,” he said. “That rate is tough to find anywhere in the country and can mean huge savings for large users.”
Communities are offering creative incentives, such as cheaper occupancy costs, off balance sheet financing and leaseback arrangements. Oklahoma landed a $625-million investment because the location had the lowest overall operating cost and the corporation received an incentive package that totaled $134 million, Lothian said.
“‘Better’ often reflects economic development cooperation and flexibility,” he said. “The economic development organizations that do well in the new corporate marketplace are those that are more creative and are willing and able to bend the rules and be creative with incentives, permitting, one-stop shopping, timing issues and so forth.
A well-trained workforce is probably the No. 1 decision making criteria. For example, Tupelo’s Advanced Education Center is a big plus. That’s only part of the education system. You have to look at all of it.”
Intangible qualities that protect the value of their investment include having — and keeping — the right covenants and zoning in place so that “when you invest $100 million, you don’t end up with a junk yard next door,” Lothian said.
“Image can be critical,” he said. “Companies do not go to places that do not fit their image of themselves.”
Despite concerns to the contrary, Mississippi’s sultry summers might actually be a benefit, Lothian said.
“The hot South is, in many cases, an attractant, unless the corporate visit comes in and it’s 100 degrees and humid,” he said. “Then again, it depends. I was involved in a project a number of years ago where one of the finalists was in the Northeast and the other was in Florida. Corporate executives were making their final visit in the wintertime and had to drive through a blizzard to get to the northeastern site. But that’s the site they picked. It’s because of all the other things the Northeast site was able to supply.”
Around the same time Mississippi landed the Nissan deal, several smaller manufacturers, such as Takata Restraint Systems Inc. in Greenwood, were closing shop in favor of production in Mexico and the Philippines.
“Mississippi has had to compete with lower cost locations,” Lothian said. “Mexico has done very well over the last few years, but there are other strong, emerging locations, such as China, India and Honduras for low-cost locations.”
Christer C. Person, mayor of Solleftea, Sweden, said it’s a matter of pure economics.
“Over the last several decades, we’ve watched manufacturing facilities move from the North, such as New York, to the Middle Atlantic states and to the South,” he said. “Now, companies are simply going farther south because they’re chasing cheaper labor. It’s nothing that Mississippi has done wrong.”
In an effort to help smaller municipalities in the state become more competitive, Raymond Phelps II, Ph.D., associate professor of marketing for Millsaps College’s Else School of Management, recently polled local government leaders.
“Even though Mississippi’s mayors are pleased with the progress the state has made, there are still some concerns,” Phelps said.
Top concerns include infrastructure, followed by crime and law enforcement, cultural and racial relations issues, the funding of mandates and services requested by citizens and the downhill trend for downtown areas.
“In the minds of the mayors, some of the long-term needs have higher priorities than short-term needs,” Phelps said. “If you don’t have adequate roads and streets and services, infrastructure becomes an issue for economic development. Zoning, annexation, sewage and water are all economic development issues.”
When site selection committees were polled several years ago, members were asked to rate various factors in order of their influence. At the time, the flag issue was not mentioned, Phelps said.
That was then. The April 17 referendum vote brought Mississippi into the national spotlight when the state voted to retain the 1894 state flag with Confederate imagery.
“If it’s a quiet issue, it’s different than if it
in the headlines,” said an economic developer from New York, who preferred anonymity. “Think about it. If it’s an issue that can disrupt or hurt the image of a corporation, and the company takes it seriously, they might take their business elsewhere.”
Janie Mortimer, executive director of the Tate County Economic Foundation, said the fla
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