Dean Barber

People, Infrastructure and Cost: Key to Community Competitiveness

In Corporate Site Selection and Economic Development on January 29, 2017 at 12:27 pm

Years ago, I knew this man in Alabama who described himself as a “simple cotton farmer.” He was far more than that.

He was successful businessman and the chairman to the local economic development organization. In fact, he was a far better negotiator and salesman that the economic developer of that community.

His town became a finalist for a large manufacturing project, and I will always remember what he told the company executives during our meetings.

“What is important to you is important to us.”

It is a statement that has stuck with me over the years. He said, in effect, we’re listening to you and will do our best to address your concerns.

That is customer service, which should the hallmark and mission of all economic development organizations and really all businesses. Do more than just sell. Listen to your customers. Help them when you can. Be an ally, and apply the Golden Rule.

It seems the idea of customer service is eroding during this time of digital disruption, being viewed in some quarters as “quaint” but not practical. As I mentioned in last week’s blog, I have run across some IT companies that do not publish telephone numbers as they don’t want to be bothered.

Big mistake in my book. But then again, I am not driving a Ferrari in Silicon Valley, so what do I know.

Listen and Ask

What I do know something about is corporate site selection. It is not, nor should it be, a core strength for most companies, which is all the more reason why they should not attempt it on their own. Indeed, it can be a real minefield, with the wrong decision being very costly.

Thankfully, I have surrounded myself and learned from experienced mine detectors. We have come to know, through experience, the different wants and needs of companies. We also know they can differ from company to company.

What is important and required by a manufacturer will differ from that of a data center or a corporate headquarters/back office operation.

The key for me is listening. It also means probing, asking questions, and drilling down to gain a better understanding a company’s operations. As a site selection consultant, I also need to know why a company wants to expand to a new location and the intended ramifications.

A Weighted Ranking

At some point, after extensive discussions with senior management, I must come up with a weighted ranking for site selection criteria based on what I have learned. I will share this with the company, asking for feedback so that we are on the same page.

What is important to them is important to me, so I better dang well get this right.

So what are these site selection criteria? Again, they will differ in their order of importance from project to project, but they will generally fall into three broad categories — people, infrastructure and cost.

Now I am not including quality of life, which often is very important. But I would suggest that quality of life is largely derived from people, infrastructure and cost. I will write about quality of life, which means different things to different people, in a future blog.

Let’s take a very abbreviated look at people, infrastructure and cost and see how we factor in the site selection process.

People

In a nutshell, we are looking for both quality and quantity of the labor market. We’re focusing on the talent pool and the extent of it.

Ultimately, I want to know if a community has the sufficient human resources to staff a prospective operation. I want to see the numbers pertaining to the different skill sets. I also want to see a pipeline for talent for the future.

If there are local high schools and/or community colleges turning out students with vocational skills, I certainly want to know about it, and even go over the curriculum. Frankly, I would be suspect of any community that is not addressing vocational training in a big way.

I also want to see evidence of a close working relationship between the community college, existing industry, and the local economic development groups. In so many places, that partnership simply does not exist.

It should be no surprise that we want to have a good handle on the cost of hiring the talent that we would need, so the prevailing wage rates, based on recent surveys, in a community are important.

Infrastructure & Real Estate

When referring to infrastructure, I’m using a very broad brush. It can include (and typically does) transportation, utilities, and telecommunications. But I will deviate a bit and throw in real estate product (available of buildings and sites).

It’s all the physical stuff that would or could be needed to make a particular business operation a go or no go in a particular place.

For most manufacturers, a good highway system is needed in order to get product efficiently on the road and moving. Some need rail. For a data center, a robust dual system for electrical and broadband is needed. For food processors, we’re looking for excess capacity in water and wastewater treatment.

Finally, a community has to have real estate product. It means available buildings and sites. A company has to go into some physical space. If a community doesn’t have that space, be it a building or a site, it loses out.

Even when a community has real estate product, it may not be the right fit. I know of an industrial park in the Southeast, where the nearest natural gas line is 30 miles away. Leave it to say, that park hasn’t done so well.

One last thing on real estate, we have little or no interest in unimproved raw land. That is not a real site in our book. It could be made into one with the proper investment.

Generally, in terms of infrastructure and real estate, a community either has what we are looking for or it doesn’t. And again, that can change from project to project. Certainly, if there are concrete plans for infrastructure expansion, we want to know about it because that could be game changing.

Cost

On cost, well, the bottom line is that cost affects the bottom line. We want to know the total cost, including the elements of labor, taxes, permitting and regulation.

We want to know utility costs and the cost of real estate. In short, we want to determine the cost of entry what the total continuing costs will be.

Generally speaking, smaller communities, especially those outside of metropolitan areas, are less expensive in terms of the cost of real estate, labor and taxes, but often they may fall short of the needed talent pool or be geographically isolated.

The cost of energy may be very important to a manufacturer or a data center, but not so much for a corporate headquarters or back office operation.

The tax bite is a tangible cost that must be considered. Eighteen states have adopted individual income tax cuts since 2008, and 15 states have reduced corporate income taxes over the same span, but a number of states have raised sales tax rates.

Forty-four states levy a corporate income tax. Rates range from 4 percent in North Carolina to 12 percent in Iowa. The good news is that states have been eliminating or reducing reliance on tangible personal property taxes (generally levied on business property like equipment and fixtures) and that trend will likely continue.

The high property tax burdens in New Jersey, New York, Texas, and Illinois are largely due to the metropolitan centers of New York City, Chicago, and Dallas, where I happen to live.

The cost of construction is something for a company to factor if it intends to build a new facility. It is safe to say that building an office building in Manhattan, Kansas, will be less expensive than Manhattan in New York. Same goes for Philadelphia, Miss., and Philadelphia, Pa. The same goes for leases.

Permitting and the regulatory climate in some places can be a royal pain the petute. (Forgive me for the technical language.) It can appreciably slow down construction in some venues and impact the company speed to market goals.

We all know that time is money. Expedited, one-stop-shop, permitting is always viewed favorably.

Important to Existing Industry, Too.

And it’s not just companies engaged in a site search that are concerned with people, infrastructure and costs. It matters big to existing companies that would consider an expansion or even remaining in a community.

If an existing company is having problems – whether it is finding workers (people), getting faster broadband or a turning lane installed (infrastructure), or is asking for tax or permitting relief (cost), the local economic developer should darn well be aware and doing all he or she can to find solutions.

That is the essence of BR&E. It’s listening to your customers. Helping when you can. And this ties back to business attraction. Believe it or not, I want to see evidence of a serious BR&E program during a site search.

Why? I will answer with a question. Do you think I would advise a company to go to a place where it will be taken for granted and where its future concerns will be largely ignored?

Website Advisor

Last week, I helped two economic development organizations with their websites. I am not in the website building business and never will be. But I can help in terms of what information should be included and how it should be should be presented.

I come across good and bad economic development websites all the time. Where I may differ from many site selection consultants is that I will not eliminate a community for a project simply because it has, and this is another very technical term, a “shitty” website.

I explain my reasoning in a past blog, if you are so interested.

Ideally, an ED website should address the old-three legged stool model of building wealth in any given place – entrepreneurial or business startups; business retention and expansion, and business attraction.

But most websites are slanted more toward business attraction. With that in mind, I think it is smart to emphasize people, infrastructure and costs in a community. They are their own legs of a stool, and economic developers should know them like the back of their hand.

Remember the cotton farmer’s motto, and you’ll do just fine.

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. BBA helps companies and communities. Mr. Barber can be reached at dbarber@barberadvisors.com or at 972-890-3733. He is available as a keynote speaker.

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