From Site Selection magazine, March 2013
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Assessing and planning industrial sites is the best form of economic development marketing.
t has been stated that the largest crisis in economic development today is irrelevance.
Irrelevance: not good, not bad, just simply unnoticed.
If the antonym to "irrelevance" is "uniqueness," then the litmus test for being noticed becomes, "What does my community offer that sets it apart and makes it relevant for industrial development?"
I'm going to let you in on a little secret ... one that is kept far too well. Read on.
The average American will state that the largest capital investment they will make in their lifetime will be their homes. Now, if you own a home, consider all of the diligence you pursued in making the decision to purchase. You likely checked the school district, the transportation routes to areas of personal significance, the condition of the home, the suitability of the property, the property tax rates, and the proximity to services.
Now, consider industrial prospects. Instead of purchasing a home, they are making multi-million, if not multi-billion-dollar capital investments when they invest in a site. The products they produce require significant infrastructure support and capacity. Labor matters. Roads matter. Rail matters. Zoning matters. Other analytical, site preparedness items matter. Timeliness to market is paramount. An underestimation of a site's ability to serve specific industrial needs can result in catastrophic outcomes, including closures, layoffs, or worse.
Here's the secret: The best marketing you can do as an economic developer is to thoroughly assess and plan your industrial sites. Companies simply cannot afford to take a risk on a "maybe this site can serve" or "we think we can obtain property control." Absolutely, without a doubt, risk avoidance in the form of industrial site preparedness is crucial to site selection decisions. Communities must be able to fully explain the functionality of their site inventory to effectively compete for industrial development.
Here's the problem: When a site selector or end-user is looking for a new site, much of the information necessary for them to begin their search is found on the Internet, without you ever knowing that they inquired. Economic developers spend a good amount of time creating a story that will sell their communities and sites, but, shockingly, few have robust, site-specific infrastructure information available for these seekers. Considering that company profits hinge on site-specific attributes such as input availability, time-to-production, and exchange and proximity to markets, ready access to this information should be a top priority for economic developers.
Site selection has evolved considerably over the last few decades. Highly specialized equipment and telecommunications advancements have led to unique siting requirements for the majority of end-users. Rarely does a one-size-fits all approach to site development work for today's modern industrial company. As many as 75 different site and community attributes may be requested for initial diligence in site selection decisions, all with the intention of efficiently identifying risk-to-development factors. Site preparedness should be seen not only as a means to attracting an end-user, but as a means for playing the economic development game intelligently.
The benefits of site preparedness are vast and provide benefits locally, beyond simply serving as a tool for economic development marketing. Here are a few local benefits that you may not have considered:
Streamlined Industrial Targeting: A community cannot effectively develop a plan to target market industrial segments without understanding if the sites within their communities can adequately serve company infrastructure demands. Site preparedness allows a community to understand their natural assets and mitigate uncovered deficiencies so that they can align likely user groups to sites that make sense for optimal industrial development types. Companies make decisions based upon a lower production cost on their chosen site compared to any other site. Since production costs are a primary reason for a site decision, it is wise for economic developers to effectively target industrial segments for which the community and site can provide a natural advantage.
Capital Improvements Budgeting: Economic development is most often a public/private partnership that requires investment of dollars to build infrastructure that serves industrial sites. To make the case to county boards, city councils, and other elected officials that these funds should be designated for economic development growth, it certainly helps to understand why … why this site? Why this capacity? Why this timeline? To invest in site-readiness without a plan is risky for the longevity of public officials and the job of the economic developer. Industrial absorption rates are historically slower than retail and commercial. Industrial infrastructure needs are more stringent and costly. However, the ability to provide a solid plan for logical infrastructure phasing is necessary to mitigate risk in the eyes of a prospective end-user. Having a plan mitigates political risk and encourages readiness actions.
Incentives Negotiation: Recently, I worked with a client who was looking at investing nearly $500 million at a site in the Midwest. It was discovered that nearly $1 million would be made available in working capital (cash) incentive to the company, among other tax and work-force incentives. As part of the underwriting of the site, it was discovered that the Department of Transportation within this state would require an additional turn-lane for access. Designing and permitting a turn-lane off of a state highway is approximately a nine-month process. Local planning and zoning policies often provide little protection for industrial companies. In addition, the company would need to thoroughly assess water availability, volume, and pressure to assure compatibility with its production needs, posing the need for an assessment that would also take several months to complete. The math proves that if this company were to be delayed in time-to-production due to permitting issues or undiscovered infrastructure capacity deficiencies, $1 million would be eaten up in lost profitability in less than one week. One week. Site preparedness assists communities in crafting incentives packages that truly add to the bottom-line profitability of the companies they are courting. In this instance, funding to assist in turn-lane design and a water study impacted the bottom-line profits, well beyond what the working capital investment would have provided. Smart site preparedness allows communities to anticipate and to make wise incentive decisions.
Industrial Company Protection: Local planning and zoning policies often provide little protection for industrial companies. In many instances, future land use maps reserve peripheral, low-resource land tracts for industrial uses. The zoning code that governs these areas allows for a variety of uses, some of which could be detrimental to industrial companies.
Land use laws provide the highest level of protection to residential, commercial, and retail areas with industrial receiving the least protection. Noise, smells, dust, and other normal aspects of industrial production could cause operational shut-downs due to encroachment of incompatible uses. Consider this: Industrial companies often provide the highest levels of local, taxable capital investment and jobs, have the least zoning protection, and can be forced out of production due to encroachment of incompatible peripheral developments. Protection for industrial companies through site preparedness tasks is a necessary step in mitigating risk to production.
Industrial Tract Optimization: A crucial aspect of site preparedness is the master planning of industrial tracts. Master planning is a preferred method to platting as plans are technically sound, yet considerably more fluid than a registered plat. Master plans allow users to visualize the intended design of an industrial park, but have options to join lots to create additional spaces. These plans effectively accommodate drainage, access and other easement issues while allowing for optimization of tract development.
Many communities choose to take site preparedness to an accelerated level of site certification. Certification programs vary nationally and are offered by private companies or governmental entities. Communities taking the site preparedness steps necessary to achieve certification are absolutely elevating the marketability of their site inventory, leading to quality jobs and capital investment critical to community quality of place. Receipt of certification for industrial sites provides a sense of confidence in crucial site attributes for site selectors and end-users.
Site selection decisions are largely made by determining that the costs to produce are less and the bottom-line profits will be more in the chosen location than anywhere else. Undergoing site preparedness exercises to assess attributes, mitigate deficiencies and organize tracts for optimum efficiency is crucial to successfully creating the relevance necessary to attract new industrial investment
Courtney Dunbar is the Economic Development Leader for Olsson Associates in Omaha, Neb.