Dean Barber

A Small Town with a Company on the Hill

In Corporate Site Selection and Economic Development on August 28, 2016 at 1:11 pm

What happens when a small, isolated, rural town faces the prospect of losing its single largest, dominant employer, the Company on the Hill?

You don’t have to be an expert in much of anything to know that things can turn ugly fast if that happens.

Actually they already had in a community that I visited with colleagues last week. The Big Scare had gripped the place. Was the Company leaving or staying? Nobody knew for sure, but to hedge their bets, people were not in a buying mood. Everyone was sitting tight, waiting for things to play out.

About this time last year, prior to the announced exploratory merger talks between the Company on the Hill and a major competitor, about 35 houses were on the market in this small town of 7,000. Today, the number is approaching 250.

A Town Held Hostage

Before the Big Scare, the town wasn’t exactly fat and happy, but like many places, it was probably too complacent. Whenever a single company or a single industry dominates a local economy, and this particularly holds true in a small town, the community becomes dependent on the financial health of that company or industry.

The town is held hostage, whether it realizes it or not.

The whole idea of economic diversification is about spreading the risk, not having all your eggs in one basket. Again, you don’t have to be an economist or an expert in economic development to figure that one out. That’s common sense.

The Possibility Seers

Still, we were called in, hired by the town, to be the experts. We were not expected to bring immediate relief or quell the Big Scare. The Company on the Hill will stay or go regardless of our findings.

Our job is to look forward and see what the community can do and can become. We will make recommendations on how to achieve that sustainable future via a SWOT and target industry analysis. In that sense, we are the possibility seers.

We spent 2 ½ days in our client community last week, interviewing lots of people, looking at the data, and trying to get a feel for the place. We’ll be going back in a few weeks to continue our probe.

I will not reveal the identify of the town at this stage, even if our hiring was announced in the local newspaper. But I can you that it sits in a sparsely populated area west of the Mississippi, where there are nearby family farms of 10,000 acres or more.

Tough Times for Farmers

We arrived during a perfect storm of sorts. It just so happens that the Big Scare had paralyzed the town, surrounded by a sea of farmland, at a time when commodity prices are at their lowest in years. Not many farmers are buying right now. Like the townsfolk, they are biding their time.

Recent projections from the U.S. Department of Agriculture show that farmers will harvest record corn and soybean crops. Some experts worry that corn prices, already below $3 a bushel, could plummet to $2.30 to $2.50 a bushel, levels that farmers haven’t seen in a decade.

Low commodity prices have rippled through the U.S. economy, helping drive massive corporate mergers such as Dow-DuPont, layoffs at farm equipment manufacturers and lower farmland prices. The deepening downturn is also weakening farm credit conditions, as farmers struggle to pay loans.

Sales of two-wheel drive 100-horsepower tractors in the United States declined 24 percent for July, with year-to-date sales down 24 percent, while four-wheel drive tractors dropped 48 percent year-over-year and were down 33 percent year-to-date, according to the Association of Equipment Manufacturers.

There are “large amounts of late model inventory on dealers’ lots,” said Charlie O’Brien, senior vice president for AEM.

What We Learned

It was a daunting 2 ½ hour drive back to a major airport to catch our flight home to Dallas, where Tim Feemster and I are based. We agreed that this one was going to be a tough nut to crack for a variety of reasons. We were partnered on the project, along with John Hoover of Atlanta-based Modalgistics, a rail-centric consulting group of Norfolk-Southern Corporation.

The day before, we listened to a gentleman who had invested his life savings in the community, buying and starting retail stores and building and operating apartments. A year ago, he had an occupancy rate of 95 percent. Today, because of the Big Scare, it’s hovering around 60 percent.

All his store sales were down double digit, and he was having to dip into his retirement savings to make ends meet. It was gut-wrenching for us to hear his story, as he was nearly in tears.

But Wait, There’s More

To make matters worse, the town’s largest manufacturer recently shut down, with a loss of 150 jobs. The numbers pale in comparison to the Company on the Hill, but it was a substantial hit nonetheless. It would appear that many of the blue-collar production workers have simply moved on, left to find work elsewhere.

And if that were not enough, preliminary indications are there is no vocational training being offered at a community college in our small town. The nearest such courses being offered are on the main campus, 80 miles away.

Behind the Eight Ball

Now here is the rub: If Tim and I were representing a corporate client, a manufacturer, on a site search project, we would almost certainly scratch this community off our list by virtue of the fact that it is not offering vocational training.

Most manufacturers want and expect to have access to training for workers, typically in a community college setting. That’s almost a given these days.

By not offering that, our client community is putting itself behind the eight ball in being able to compete for a manufacturing project.

It’s early in our investigation. We’re going to learn more. The data will reveal things as will our interviews. Our views will sharpen with time.

You Can Go Home Again

Throughout rural America, there are countless parents who only wish there were more opportunities for their children and grandchildren to remain in their hometowns with meaningful jobs. Too often the case, young people must leave to find their own paths of life.

Some, if they are lucky and are of the mind to, do come back home, typically when they have more job-related experience and have something to offer.

In my travels throughout rural America, I have met many young professionals who wanted to come home and were able to pull it off, because they had the needed job experience to fill a particular need in their hometown.

From so many adult sons and daughters of small towns, who are now parents themselves, I have heard them say that they wanted to come back home because it was a good place to raise a family. They remember their own upbringings.

Tim and I heard the very same thing from a young executive who worked for the Company on the Hill. He had made his bones elsewhere. He wanted to come home with his new family. He knew that life could be good there.

But life is only good for those who have the jobs to support themselves and their families. Accountants, teachers and doctors have the skill sets that often allow them to return to that small town in rural America if that is what they want.

But they are likely a minority. Most cannot or will not come back, unless to visit family. That’s just the way it is.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. He can be reached at dbarber@barberadvisors.com or at 972-890-3733.  Mr. Barber is available as a keynote speaker.

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