At the 2016 Trust Belt conference in Chicago, a captivating session called “Closing the Perception Gap” was moderated by Site Selection Executive Vice President Ron Starner and featured the following panelists:
- Michael Jastifer, Director of Real Estate for North America, Freudenberg Real Estate GmbH
- Bradley Migdal, Executive Managing Director, Transwestern
- Katie Murphy, Expansion Matriarch & Founder, Expansion Group, LLC
- Christopher Wild, Manager, Corporate Real Estate – Americas & Asia Pacific, Kennametal
The following is an edited transcript of their conversation. The next Trust Belt conference takes place October 22-24, 2017, in Des Moines, Iowa.
Ron Starner: The Midwest is a national and global leader. Why do we still have the perception gap depicting the region in a negative light?
Brad Migdal: Look at Milwaukee, Cleveland, Detroit and Indianapolis — we’ve seen this growth over time. Look into more heavy industry and you see abandoned buildings and brownfields. But what no one understands is those old, abandoned, beautiful buildings are tremendous opportunities going forward. Buildings built in the 1920s and ‘30s — you can’t get that anymore. Those are diamonds in the rough, and it takes people in the communities to understand what is available … I’ve seen a lot of the communities and states work very hard. There is rehab going on. But it takes vision and a big public-private partnership, and is extremely expensive.
Starner: Katie, before your current role, you were the first US employee of BrewDog. Talk about the UK company bringing BrewDog to Canal Winchester in the Columbus, Ohio, metro area. It’s an irreverent upstart, and seems like the antithesis of what you find in the Midwest.
Katie Murphy: BrewDog is a large, Scottish craft brewery leading the craft beer revolution loudness-wise. It’s about the size of Great Lakes Brewing Company, but only around since 2007, and has seen explosive growth due to crowdfunding. They could have gone anywhere in the US. The founders have friends at Stone Brewing — that’s one reason Columbus and Charleston, South Carolina, were in the mix, because they were the losers on Stone Brewing [a craft brewery project that went to Richmond, Virginia, in 2014]. From the research done on that project, BrewDog co-founder James Watt said Columbus reminded him of the craft beer scene in Scotland. As for South Carolina, there are massive projects in the South. Some states have the ability to finance a building — that’s incredibly difficult to compete with. They say it was the people: Everyone pulled together. Columbus is an epicenter for logistics, as is most of the Midwest. The reason Canal Winchester won was they spoke to the immediate risk of the project. It came down to lowering the cost of land through using TIF dollars, offering a no-fees, one-stop process. And lowering the cost of water and wastewater by 35 percent just killed it.
Starner: Chris, what drove the Kennametal process in moving your headquarters to Pittsburgh?
Christopher Wild: A lot of it has to do with talent, and trying to attract the young, millennial worker. In Latrobe the average age is 55. Pittsburgh is frankly a lot more convenient. I endured a one-hour-and-15-minute commute for several years. A big part of the reason Pittsburgh is doing so well right now is it has a lot of very good universities and great infrastructure.
Starner: Michael Jastifer, you led a major expansion in Findlay, Ohio.
Michael Jastifer: In 2014, we had the opportunity to expand multiple facilities. A lot of corporations don’t have deep benches. The next day the mayor of Findlay was at our location. We had needs and wants, and Tony Iriti and the economic development folks at JobsOhio helped us devise a plan. It was one-stop fast-tracking. I need these kinds of experts to do these kinds of expansions — a lot of corporations don’t have deep benches.
It’s not the only opportunity we have — there is about $100 million of investment coming in Shelbyville and Morrisville, Indiana, and in Michigan. The incentives are there, but it’s the other things that help us.
[At the time of this discussion, Tony Iriti led the economic development team in Findlay and Hancock County. He has moved to lead the team in Henderson, Kentucky, and Findlay’s team is now led by Tim Mayle. —Ed.]
Starner: Our surveys have shown Indiana as a top location among site consultants. What are your observations about its business climate?
Jastifer: Indiana has great talent. I’d put our engineers and workers against anyone on the globe. Individuals from the economic development community have been very quick and nimble — not alone, but with utilities and departments. I’ve been very impressed. Lessons are being learned — Ohio, Michigan and Illinois are getting more responsive.
Wild: We worked on expansion of our plant in New Albany, Indiana, in 2010. We worked with the state and local governments, and they were able to give us payroll tax incentives and real estate tax abatement. For us to expand, it was also driven by our product there. We needed the extra space. There were other places we could have put it, but Indiana came to the table.
Migdal: I had two projects in Indiana last year. The common theme with them was prior business experience. Indiana raised the bar. What my clients like is there’s fiscal certainty at the state. They’ve done a great job of marketing — you see “Welcome to a balanced-budget state” as you drive into Indiana from Illinois. They actually have a budget. It’s fiscal certainty. What’s also great about the Midwest is fantastic public schools. For companies, this is not a two-year investment, it’s for 20 years. When they’re plunking down $100 million, they want to be certain.
Jastifer: When I sat down with folks from Indiana, they came with accountants, and knew our effective tax rate. They understood what it really meant for the holding costs of our facility. They knew as much about my property as I did. I think that’s really important, and the game has to be stepped up a little bit. It makes my job easier to fly back to Germany and get this deal approved.
Starner: What things would you like to see regional economic development agencies do?
Murphy: Invest in development-ready sites. It doesn’t have to be certified, because some certification programs are absolute garbage. But if the company can be digging there in a month, if it’s pre-approved, then they can just go, and use things like design-build to get a building up in six to eight months. And piggyback on your region and state — they create the leads, but you create the project. We would not have won the project [in Columbus] if it weren’t for how kick-ass the city was. The project didn’t have to go through one local approval, which typically could take three months.
Migdal: Put yourself in the corporation’s shoes. The reality is you have to think how the corporation is thinking. Roads? Sewers? Am I going to get a curb cut? Redundant power? Where do they want to be in three, five or seven years? Economic developers need to focus on retention. Ask everybody in that manufacturing organization, “What else would you like to see in this community?” They should talk to them every month. “What other industries do you want around you? What products? Who’s your biggest vendor?” The biggest expansion strategy is your retention strategy. I’d be traveling around the country to the corporate headquarters of the companies you have, asking, “What can we do to make your experience better? How much is your lease rate? Power rate? Tax bill?” Talk to the plant managers.
Starner: Detroit and Cleveland get the lion’s share of the media Rust Belt narrative. Brad, what has your experience been working as a site selector in those markets?
Migdal: Detroit first — I was born there, and I love Detroit. Chicago is the financial engine, and Detroit is the heart and soul of auto manufacturing. But look at Detroit and Cleveland — it’s really the same MSA … like Chicago and Milwaukee. The guy that owns the Cavaliers [Dan Gilbert] owns Cleveland and Detroit. The biggest shortcoming is Dan Gilbert is in both places, so he can’t serve as an ambassador for one. He’s got guts and bravado, and he’s built beautiful empires in both cities.
Starner: Iowa and Nebraska are known for aggressive and innovative incentives programs — thoughts on those two states?
Migdal: Look at the Des Moines region — it’s amazing, with investments in data centers, back offices and financial services. In the Midwest, people like to be close to parents and close to home. A lot of people left and want to come back home. I’ve been lucky to travel this country and this world, and hear the nice slow drawl of the South, but people in the Midwest like to be close to their moms. It’s reality.
Kansas City is experiencing a rebirth too. You’re paid a little bit less, but you’re getting a lot more. For a lawyer, a back office pays $60,000 in KC, or $150,000 in Chicago. People will be at the office at 7:30, and asking the family next door to watch the kids when they have to stay a little late. Iowa and Nebraska also have a low cost of power and real estate, and are largely disaster-free. But most importantly, people want to come home.
Starner: What would you like to see Midwest state economic development agencies do?
Jastifer: Have a better focus on retention. “If you’re bringing me 300 jobs, we’ll clear the deck for you.” But what about some of my companies that are bringing in technology? They might lose a few jobs, but they’re making an investment and staying.
Migdal: You don’t need a 30-page application. I want to applaud Illinois — they got rid of the project profile, thank god. If consultants have to do a ton of paperwork, and they’re managing a $10-million portfolio, they’re not going to fill it out. Automate all you can, and have an online portal. Move at the speed of business. Georgia can flip it around in three days, Indiana too. Time kills all deals. The biggest things I’ve seen in my career have happened because government never gets in the way.
