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A Site Selection Web Exclusive, January 2014
WEB Exclusive story

Not a Prison

A vision care company decides to stay and grow in California after all, and it’s not alone.

The space VSP is moving into in Folsom, Calif., became available when California Independent System Operator Corporation (Cal-ISO), the independent grid operator for the state, moved into this LEED-Platinum headquarters nearby in 2011.
Photo courtesy of Cal-ISO

The scientists at Bayer CropScience in Davis, Calif., specialize in developing biological crop protection products which provide additional options for farmers.
Photo courtesy of Bayer CropScience AG

In the fall of 2012, VSP Global, an eyewear and ophthalmic technology and benefits company that employs more than 2,000 people in the Greater Sacramento community of Rancho Cordova, had just about had it with California.

Faced with the fact that the California Health Benefits Exchange Board, the state’s healthcare agency, initially prohibited stand-alone vision plans like VSP’s from participating in the individual market when President Obama’s Affordable Health Care Act was due to be implemented in 2014, VSP’s CEO Rob Lynch wrote of potential future expansion in an op-ed in the Sacramento Business Journal: “We have been heavily solicited to relocate out of state with incentives and subsidies. Maybe it’s time for us to choose to go where we are wanted.”

It was a bad season for the region: Comcast had announced it was closing three call centers in the state, eliminating 1,000 jobs (including 300 in Natomas). And Campbell’s Soup announced it would gradually shut down a 2,000-employee plant.

But intervention by business leaders and elected officials saved the day for VSP at least, and the state healthcare agency, now running the Covered California health exchange, approved full participation of stand-alone vision plans after all. That released VSP to start filling 150 new jobs it had put on hold pending the decision.

Another positive end result came this month, when the Sacramento Area Commerce and Trade Organization (SACTO) announced the addition of a new manufacturing facility in Folsom as part of a redevelopment and expansion plan for VSPOne Sacramento, the flagship laboratory for VSP Vision Care.

“With the addition of 200-250 new jobs, the nearly 80,000-sq.-ft. (7,432-sq.-m.) facility will include close to 650 union jobs at full capacity and will have a regional economic impact of more than $70 million in output (market value of goods and services produced),” said the official release. “The facility further expands the company's global and regional footprint, bringing the VSP Global companies' overall regional employment count to nearly 2,500.”

“As a leading employer in the Sacramento region, we are proud that growing our business also results in a 60-percent increase in job creation,” said Dave Delle Donne, vice president of business development, VSP Optics Group. “This initiative will enable VSPOne Sacramento to conduct all of its manufacturing operations under one roof while increasing efficiency and production capabilities using the newest state-of-the-art equipment.”

“Changes in federal health care laws as well as ongoing technological advancements in the optical industry have led to a tremendous growth cycle for VSP,” said SACTO Chair Gary Bradus. “The region is proud to serve as its headquarters and looks forward to the company's continued success here and throughout the world.”

VSP Global companies include not-for-profit VSP Vision Care, the largest vision benefits and services company with more than 60 million members; Marchon® Eyewear Inc., the third largest manufacturer, designer and distributor of quality fashion and technologically advanced eyewear in the world; Eyefinity ®, the largest premier practice management software company for the eyecare industry; and VSP Optics Group, which provides a broad range of ophthalmic products and services to the VSP network of 30,000 eye doctors through VSPOne™ Optical Technology Centers. The company also develops and markets UNITY, its proprietary branded premium ophthalmic lenses and coatings. VSP Global companies operate in 100 countries on six continents.

The project enlisted the assistance of many partners at both the state and local levels. “SACTO would like to especially thank the Governor's Office of Business and Economic Development (GO-Biz), the California Employment Training Panel, and the Sacramento Municipal Utility District (SMUD) for their support in the effort,” said the news release. Matthew W. Ellis and Nicole Gleason of Downey Brand, LLP, provided legal counsel to VSP on this transaction. VSP Global was represented by Bruce Hohenhaus, Ron Thomas, Kevin Partington, and Chris Schwarze of Cushman & Wakefield.

The new VSP facility is expected to be completed and operational by November 2014. A VSP Global spokesperson declined to make anyone available for an interview, and asked most of the organizations involved in the deal to honor its wishes to not discuss it, despite the promulgation of the Jan. 22 news release, until the time comes next fall to celebrate the facility’s inauguration. But a bit of research and a few on- and off-the-record conversations help flesh out the story today.

A Place to Hang Your Hat and Not Your Head

The new facility in Folsom is located in the former headquarters of the California Independent System Operator Corp. (Cal-ISO), the operator of the state’s electrical grid, which in Jan. 2011 moved into a new LEED-Platinum headquarters nearby after an early lease termination. According to the Sacramento Bee, VSP paid around $6 million for the property.

After the departure of Cal-ISO, the building owners couldn’t move the property in a down market. A new developer came in and bought the property inexpensively from the bank via a short sale, performed select renovations and updates, and put it on the office market with a very small proportion of the space built out. VSP, which had been looking for a few years before the health exchange dust-up temporarily put things on hold, seized on the opportunity immediately, as the location presented a much more affordable option than doing a built-to-suit closer to its HQ.

“We are pleased to welcome VSP to Folsom,” said Folsom City Manager Evert Palmer in the SACTO release. “VSP demonstrates a tremendous commitment to excellence not only in its customer products and services, but also in its unparalleled employee programs. The VSP Optical Group [VSP Optics] is a perfect match to the 95630 lifestyle in Folsom, and we are pleased they have chosen Folsom to continue to build their success.”

Out-of-staters — especially those of a certain age — might look askance at the mention of Folsom and a zipcode lifestyle in the same sentence, given the city’s association with the Folsom State Prison made legendary by Johnny Cash. But David Miller, Folsom’s community development and public works director, sets the record straight.

“It’s quality of life that captures people,” he says. “If you’re a quality of life business, which VSP is, things that mean a lot to their families are important to them. So it was a nice fit for us.”

Miller is a veteran of the private-sector office and retail building marketplace. “I’m not a bureaucrat,” he says. “I’m concerned with streamlined permitting.” His resume also includes time in the Maricopa County area of Greater Phoenix.

“I compare Folsom to the Scottsdale area,” he says. “Our median income is higher than Santa Clara in Silicon Valley. When I was in the office business, it was ‘Where did the CEO want to live?’ Whoever had the housing opportunities that attracted the CEOs had it all over the competition. We believe in quality of life — that’s why places such as Boulder and Scottsdale can really shine and bring people in.”

“It’s quality of life that captures people.”
— David Miller, community development and public works director, City of Folsom

Miller rattles off the area’s accolades and growing amenities: Intel’s little-publicized 7,000-employee campus, the company’s largest, is among strong corporate presences that also include Micron, Kikkoman Foods and Aerojet. The area boasts 42 miles of off-road bike trails, the fastest-growing junior college in the state in Folsom Lake College, two of the region’s top schools, and a high school jazz program named the best in the nation for three years running by none other than Down Beat magazine. The city is also home to a new $82-million performing arts center and a new 650,000-sq.-ft. (60,385-sq.-m.) high-end retail center.

“We sold them the community as a place to live and a place for employee retention,” he says of the successful deal with VSP, noting the role of Folsom Economic Development Corp (FEDCorp) in cementing the commitment. The new location is a mere 10 minutes away from VSP headquarters along US Hwy. 50 … which means 10 minutes closer to Lake Tahoe, another 80 minutes down the road.

The infrastructure of the former Cal-ISO building helped too, says Miller, as the sub-floor space that used to house IT infrastructure for the ISO’s command center can accommodate such things as a vacuum system for collecting all the tailings that come from the lens manufacturing process.

Sacramento leapt to No. 2 in VSP’s 2013 Eye Health Index rankings. More VSP employees being hired in the area will not hurt that ranking in the years to come.
Map courtesy of VSP

Sacramento Momentum

VSP is not the only growing life sciences and healthcare player in Greater Sacramento.

Last July, Bayer CropScience, whose US headquarters are located in North Carolina, announced plans to consolidate and expand its US-based R&D operations for vegetable seeds and biological crop protection products in a new site in West Sacramento. The integrated site, with an existing office and laboratory building on 10 acres (four hectares) of land, has the capacity to employ approximately 300 people. The vegetable seeds research, as well as the company’s Biologics business management, both located in Davis, Calif., will move about 10 miles (16 km.) to West Sacramento during this first quarter of 2014. The site will also include a pilot plant, and Bayer CropScience has identified nearby land for greenhouse and test plot purposes.

“We are focused on better leveraging our full research and development capabilities by both consolidating and expanding our global R&D organization,” said Dr. David Nicholson, Bayer CropScience’s head of Research & Development, last summer. “Our new facilities in West Sacramento will enable us to deliver integrated crop solutions more rapidly by intensifying the research links between our vegetable seeds and Biologics experts and thus strengthening our innovative power.”

“The new location offers top-notch equipment and allows for a stimulating exchange across disciplines,” said Johan Peleman, head of Vegetable Seeds R&D. “At the same time, we can further strengthen our bonds with the University of California at Davis, one of the world’s top plant science institutes.”

“We’ve been really lucky here to have major institutions that act as a magnet for investment — UC-Davis is a big part of that,” says Bob Burris, senior vice president at SACTO, noting that the school’s more than $700 million in annual research investment puts it on a par with UC-Berkeley. The area has targeted biotech and life sciences for many years, and over that time has watched that target sector branch off into promising areas such as alternative fuels, therapeutic foods and stem cell research.

“About $128 million has gone into stem cell research in just our region alone,” says Burris, as a result of the state-backed California Institute for Regenerative Medicine (CIRM). The money has found its way into 33 different facilities in the Sacramento area, including at Sacramento State University and at Maine-based Jackson Laboratory (JAX), which is investing $27 million in a new, expanded facility more than four times the size of its previous property. With the expansion, JAX — West, originally founded at UC-Davis in 2001 as a small lab, is increasing its footprint to 165,000 sq. ft. (15,328 sq. m.) and growing to more than 200 employees from 132 before.

“It is critical to our mission to make our specialized mouse models conveniently available to the West Coast for pharmaceutical, biotech and academic researchers,” said Kathy Vandegrift, associate general manager of JAX Mice & Services, in the official project announcement in October 2012, just when all the area jobs news seemed bad. She also noted “significant biosecurity and redundancy benefits to balancing our production more evenly between our East and West Coast facilities. As our Sacramento facility expands, it enables us to distribute in an easterly direction over the Rockies and into the remainder of the United States.” Moreover, she said of the location, “ we can take advantage of the tremendous human capital available here as well as Sacramento’s location at an important intersection of West Coast commerce.”

Other major life sciences firms in the area include Volcano Therapeutics, Monsanto, Novozymes and Thermogenesis.

A Clear-Eyed Assessment

Asked if the area is seeing other job creation results that might be because of the Affordable Care Act rather than in spite of it, Shari Little, vice president of business development at SACTO, says Sutter Health’s new hybrid shared services center in the suburb of Roseville “was in direct response to the changes we’re seeing in healthcare.”

After looking out of state, the healthcare system decided to locate in Roseville, where it hopes during the first two years of operation to create a couple thousand jobs.

“They also took out an option on an adjacent piece of property in hopes they would grow beyond that,” says Little, though she adds that uncertainty about ACA in general keeps firms from firmly committing to such growth just yet.

“About $128 million has gone into stem cell research in just our region alone.”
— Bob Burriss, senior vice president, SACTO

According to a report this week in the Sacramento Business Journal, Covered California itself is moving into a new headquarters. The space it’s leaving “is part of the property expected to be developed when a new arena is built in downtown.” That arena will be for the Sacramento Kings NBA team, which also unveiled its plans for the structure this week.

Last August, Covered California itself signed a lease for 52,000 sq. ft. (4,831 sq. m.) in a former call center space in Fresno where it will employ close to 300 full- and part-time workers at a new service center. The agency also operates service centers in VSP’s hometown of Rancho Cordova and in Concord. Nearly 700 people were expected to be working at those two centers by October.

Burris says every major hospital in the region has expanded to nearly twice their previous footprint over the past decade. Thus SACTO is seeing the other side of the equation: heavy demand for new workers, from clinical lab technologists to nurses and doctors. The push aided the growth of a six-year-old California campus from Drexel University, a school synonymous with the University City corridor in its native Philadelphia. The school’s Sacramento campus now has about 500 students, and works directly with Kaiser Permanente, the area’s largest healthcare institution.

“What started as a finance and business graduate program has grown into health administration, a PhD in education program, and now several medical school pathology degrees,” says Burris. Further talks are under way with the UK’s University of Warwick about a potential US campus.

As for the city’s health in general, it turns out Sacramento ranks highly in a very specific index published last summer by none other than VSP Vision Care.

Last June, the firm’s annual Eye Health Index (see map), which reviews tens of millions of VSP claims from more than 100 geographic areas across the country to identify which cities and regions are the most focused on maintaining their eye health, found Sacramento had risen from No. 10 in 2012 to No. 2 for 2013, just behind Boise, Idaho.

There’s no indication whether VSP’s rising number of employees, like a fervent baseball city’s All Star Game voters, may have skewed those results in the state capital’s favor. But one thing is certain: The company itself now sees its future in the region much more clearly.

Greater Sacramento’s life sciences and healthcare sector is doing its part when it comes to job creation in the state capital.
Photo by Tom Myers
courtesy of Sacramento Convention & Visitors Bureau

Adam Bruns
Managing Editor of Site Selection magazine

Adam Bruns

Adam Bruns has served as managing editor of Site Selection magazine since February 2002. In the course of reporting hundreds of stories for Site Selection, Adam has visited companies and communities around the globe. A St. Louis native who grew up in the Kansas City suburbs, Adam is a 1986 alumnus of Knox College, and resided in Chicago; Midcoast Maine; Savannah, Georgia; and Lexington, Kentucky, before settling in the Greater Atlanta community of Peachtree Corners, where he lives with his wife and daughter.


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