here’s no mystery to Pittsburgh.
The reversal of the City of Bridges’ image problem and momentum is exactly why the city was chosen to host the Group of 20 Summit in September 2009. As corporate project counts and their sectoral diversity attest, the reversal is very real. And when world financial leaders descend onto southwestern Pennsylvania, they will see manufacturing and redevelopment still lie at the city’s economic core.
According to the Conway Data New Plant Database, Allegheny County leads all Pennsylvania counties in attracting private-sector facility locations and expansions between July 2008 and today. The nearby counties of southwestern Pennsylvania are doing their part too.
Why the resurgence? The Pittsburgh G-20 Partnership has been busy passing out “Ask Me – I’m a Pittsburgher” buttons. So we took the command seriously.
Bill O’Rourke has been an Alcoa vice president since 1997, serving since 2005 in successive roles as president of Alcoa Russia, vice president of global business services and chief information officer and, since September 2008, as vice president, sustainability and environment, health & safety.
He’s held numerous other titles in the organization during his 34-year career at the company, including that of patent attorney when he joined Alcoa in 1975 after receiving his law degree from Duquesne University’s School of Law in Pittsburgh. Alcoa was born in Pittsburgh 121 years ago.
“We were founded in 1888 on Smallman Street, close to where this year’s G-20 Summit is being held,” says O’Rourke. “In the 1950s, Alcoa contributed to the development of the Golden Triangle with construction of our 31-story aluminum-clad headquarters. And, in the 1990s, we led the resurgence of the North Shore when we built our new corporate center anchored between the 7th and 9th Street bridges on the Allegheny River.”
Today, that area boasts PNC Park, Heinz Field, the Warhol Museum, the Equitable Resources and Del Monte buildings and North Shore Park, and recently welcomed the new $780-million Rivers Casino.
Alcoa image used with permission.” title=”Alcoa’s Corporate Center on the North Shore riverfront, built in 1998, used many design elements that are now standard practice in green building.Alcoa image used with permission.”>
O’Rourke’s affinity for his native city is matched by his company’s.
“Alcoa operates worldwide, with offices in a number of cities, large and small,” he says of the aluminum industry leader that saw 2008 revenues of $26.9 billion. “However, keeping our corporate administrative services, information technology and data center, and our research facility in Pittsburgh continues to work for us. Although I’ve spent some time during my career in other places –New York City, Virginia and Russia – I was born and raised in Pittsburgh and I know it to have a very caring population that has a strong work ethic and extreme loyalty to the region. I’m sure other companies that started in Pittsburgh or have been drawn here have realized those strengths too.”
O’Rourke says the area economy has continued to rely on its traditional strengths – manufacturing, energy, and finance – while also creating jobs in new fields such as information technology, alternative energy and biomedical research. And it’s cleaned up its act along the way.
“We’ve made great strides in environmental improvements from our Smoky City days,” he says, pointing to the G-20 Summit site, the David L. Lawrence Convention Center, which is the world’s largest LEED-Gold certified convention center. He also points out that the city just hosted a world championship bass fishing tournament on its famous three rivers.
Redevelopment and sustainability also were central to the new Three PNC Plaza project from PNC Financial Services Group.
“Three PNC came about after PNC, over a period of more than 10 years, acquired 13 properties west of our campus,” explains Gary Jay Saulson, director of corporate real estate for the Pittsburgh-based financial services giant. “The properties were generally older buildings, most in disrepair and some in blighted condition. We made the acquisitions in order to protect our campus from their further deterioration and to allow for future expansion.”
PNC has been committed to environmentally friendly design and construction for more than a decade, and has built more LEED-certified buildings than any company in the world, says Saulson. Asked how well the company’s sustainability goals mesh with policy in the metro area and in the state, Saulson says, “Fortunately, the Pennsylvania and Pittsburgh governments are supportive of these initiatives. Pennsylvania, for instance, recently passed Act 129, which requires utilities to reduce the energy demand on the grid.
Therefore, many utilities have state grant money to support energy efficiency programs that might have been otherwise cost prohibitive in this economic climate for organizations and households to cover. The City of Pittsburgh and surrounding Allegheny County have both made environmental stewardship a major part of their agendas, and they have hired new sustainability coordinators to drive these initiatives forward.”
Saulson finds business conditions in the area “extremely conducive to growth and expansion of companies,” but pointed to transportation as an area of increased focus for the region and for his company.
“As in many cities, the broader availability of public transportation is critical to encouraging employees and employers to relocate,” he says. “That is important to us.”
Again, collaboration and good planning is the order of the day.
“If you look at our major downtown Pittsburgh facilities, they are all within a block of public transportation hubs,” he says. “A recently acquired facility on the north bank of the Allegheny River will be near the new terminus of the extended subway system. At the other end of that system, where the train line enters downtown, we convinced the transit authority to locate a station next to our first green building, PNC Firstside Center.”
Though some identify the layers of government in the Keystone State as an obstacle, Saulson says, “We have found that transparency and cooperation with local, municipal and state governments has paved the way for successful projects with very little red tape and governmental intervention.”
Dennis Yablonsky is glad to hear it. Another native Pittsburgher, the former software executive resigned in October 2008 from his post as Secretary of Community and Economic Development for the state, only to resurface in early 2009 as the new CEO of the Allegheny Conference on Community Development, the umbrella organization heading up economic development for the entire southwest Pennsylvania region.
Work led by Yablonsky’s team during his state-level tenure was instrumental in continuing the Pittsburgh recovery, thanks to revitalization projects under the state’s Community Action Team program and thanks to Act 47, which helped pull the city from financially distressed status in 2004 to surpluses of more than $100 million each year from 2005 through 2007.
Echoing O’Rourke’s comments, Yablonsky says the area’s richness in manufacturing innovation is now complemented by innovations in other realms, and that a vibrant energy cluster has sprouted within the area’s strong technical and engineering environment.
Yablonsky says he is cautiously optimistic: Pittsburgh is still losing jobs, he says, “just less than other places.” At the same time, the level of inquiries is steady, and the month of June saw the largest number of new projects all year enter his organization’s pipeline.
Filling the talent pipeline is also center stage. Yablonsky says the current number of open jobs in the region (tracked at www.imaginemynewjob.com) is approximately 25,000, with 1,800 of those paying more than $100,000 a year.
The Allegheny Conference has a 10-county responsibility, but its vision resonates far beyond that. A two-year regional visioning process recently kicked off involving 34 counties in four states, and the Conference is involved in a technology-oriented economic development effort with Cleveland, Ohio, called the Tech Belt Initiative.
“I think the big issues of economic development and infrastructure are blind to municipal boundaries,” says Yablonsky.
?
Carnegie Mellon University, the University of Pittsburgh and 32 other universities and colleges in southwestern Pennsylvania are doing their part for economic development. That includes the redevelopment for which the area is so renowned.
an Onorato, county executive for Allegheny County since January 2004, oversees a territory that comprises 1.3 million people, 130 municipalities and 43 school districts. The Pittsburgh native likes tracking things by numbers, especially if those numbers signify less government.
Since taking office (when the city of Pittsburgh had filed for bankruptcy and its largest employer had too), Onorato’s administration has downsized its own operations (now with 625 fewer employees) consolidated 10 offices into four and consolidated five 911 centers into one, in addition to writing down debt by $40 million. The 911 consolidation alone has saved $6 million a year, he says in an interview. The payroll reduction saved another $31 million annually.
“On my watch, the county’s bond rating was upgraded for the first time in 10 years,” he says, adding that the marketplace has responded well to the governance of having tough fiscal controls. “We sent a signal to all companies and to the public that we’d do it by getting our expenses under control,” he says. “My predecessor raised property taxes. I cut them twice, and I froze reassessment for properties. Allegheny County is the only county in southwestern Pennsylvania that has not raised property taxes for eight years in a row. I will present another budget in October, with no property tax increase. We continue to wring out the expense side.”
Onorato says his team was focused on economic development from day one, with a particular goal of cleaning up and developing the area’s brownfields. Another was to streamline permitting.
“The CEOs said tough regulations are not the problem – it’s getting an answer out of the bureaucracy. We said we’d get them an answer. That worked well.”
In late June 2009, Carnegie Mellon reached an agreement to purchase three acres (1.2 hectares) from Carnegie Institute and an additional 17,150 sq. ft. (1,593 sq. m.) from PNC to further develop Forbes Avenue into an educational, research, business and cultural corridor, continuing a process that began in 1999.
Carnegie Mellon also will purchase the National City property at 4612 Forbes, currently owned and operated by PNC. The transactions are valued at approximately $25 million. End uses are in the planning stage, but will include aspects that advance Carnegie Mellon’s priorities and the region’s economic development, said Carnegie Mellon President Jared L. Cohon.
“This is an investment in our future,” he said. “This land is of such compelling importance to the university that we have decided to move forward with the purchase, even in this challenging economic climate.”
According to a press release, “the university hopes to model the development of some of the property after its Collaborative Innovation Center, which has allowed Carnegie Mellon to attract Apple, Google, Intel and a Microsoft sponsored research lab.” Bill Gates himself will visit campus during the G-20 Summit in September to launch the new Gates Center for Computer Science.
“Organizations like the Allegheny Conference have high expectations of what can be done when the university grows because we’ve seen what having great organizations in such close proximity will do for the region,” said Yablonsky at the Forbes corridor announcement. “Carnegie Mellon has a unique way of adding luster to many of the city’s growth sectors.”
“Alcoa has always had a very strong presence at our local colleges and universities,” says Alcoa’s Bill O’Rourke. “We maintain a strong internship program, as well as good success in recruiting new talent. From what I can see, the region’s colleges and universities have continually enhanced their relationships with Pittsburgh-area businesses, so I would say that infrastructure is solid and Alcoa benefits from it.”
PNC’s Gary Saulson agrees, noting his company’s alliances with the University of Pittsburgh’s Mascaro Center for Sustainable Innovation and with Carnegie Mellon on such topics as best building practices, energy usage and workplace environment.
Yablonsky says both Pitt and CMU have seen their technology transfer operations mature greatly.
“We used to start up two companies a year in life sciences. We’re now averaging 15 to 20 a year,” he says. “They also do a wonderful job of teaching entrepreneurship. There are a lot of young people coming out thinking of starting a new company.”
s Labor Day approached to end the summer of 2009, 20th Century Fox was approaching Pittsburgh to film its $90-million action thriller “Unstoppable,” starring Denzel Washington, thanks in part to an incentive program to attract such activity to the Commonwealth. But it also came thanks to having a new place to do its work: Mogul Mind Studios, which is investing $30 million to renovate the former Pittsburgh Flat Roll complex in the Strip District along the Allegheny River.
The tracks that used to carry raw material for steel products now carry the locomotive at the center of that film’s storyline. John Yost, a Pittsburgh native and CEO of Mogul Mind, hopes the runaway train is a perfect metaphor for the growth potential of entertainment production in the region.
Yost says the project will eventually feature up to 10 soundstages, in addition to conference, post-production and office facilities. He sees it as a multimedia business park, which will provide a one-stop, a la carte menu of services, staff and facilities.
The project came about through negotiations with 31st Street Business Park owner David Kowalski. Yost is seeking financing from the U.S. Economic Development Administration. He says about $3 million have been invested thus far, and his company, which moved from nearby Glassport to the new site, has grown from half a dozen employees to about 40. By the time the studios are fully realized, he said, he hopes to employ 1,200.
“We, in fact, are a factory,” says the longtime actor and entrepreneur, describing how his business model takes an integrated, streamlined approach to the production process, and also provides over 46 different revenue streams, from carpenters and caterers to electricity. “We’re not a typical studio. One major problem among people in this business is not only are they not from our business, but they consider it a real estate play, which it’s not.”
Yost’s initial plan was aimed for a space in nearby Robinson Township, but feedback from Hollywood directed him toward an in-city location. Friend and real estate developer Lucas Piatt (whose family is ubiquitous in Pittsburgh real estate development) introduced him to Kowalski and his property.
2008 saw 11 productions with a $50-million economic impact come to southwest Pennsylvania, drawn in part by that 2004 film incentive program offered by the state. Yost says he’d like to see the $75-million program remove its cap: “If it was unlimited, we’d literally take all of those runaway projects from Canada and bring them here,” he says, pegging the cost advantage over a Hollywood production at between 20 percent and 30 percent – “It will be 30 to 40 percent when I’m done,” he says.
Asked if he looked outside the area for his site, Yost said, “Never. I’m a kid from Pittsburgh. I lived in New York and in Germany, but I’m a kid from Pennsylvania. If I were to run for president, my attitude would be ‘America first.’ So here’s my attitude – Pennsylvania first. We have a tremendous brain drain, with wonderful minds leaving our state to find jobs.”
He says he’s received a lot of queries from expatriate talent since his project first got going in summer 2008, people who “would love to come home.”
Like most area employers, Yost is impressed with the work force in his industry in the area, but he’s less impressed with the permitting and regulatory process, where he encountered a maze of “power brokering on the most minute issues” that he attributes to residual old-boy networks from the state’s days as a manufacturing mecca.
“Everybody needs a pound of flesh,” he says. “If I were to consider leaving, that would have been the reason.”
Dennis Yablonsky of the Allegheny Conference says the distributed local governance structure of Pennsylvania “can create a more complex environment for businesses,” but points to important reforms passed by the state legislature in 2008, including making earned income tax collection “much simpler, less expensive and less time consuming.” He says the state department of environmental protection also has developed a more streamlined and predictable permitting process.
For now, Yost says, “You have to have a passion for what you do, and for the location, to make it successful.”
Yost sees the coming of the G-20 as an opportunity too, not just for meeting potential international financiers, but for presenting the Pittsburgh story in microcosm:
“We have reinvented ourselves,” he says, “in this ancient building that used to manufacture things out of steel. We are bringing an entirely new sector to Pittsburgh, taking all the bits and pieces and congealing them to a new purpose.”
Yost’s passion is evident. It might even be unstoppable.
“This is not a movie town,” he says, “but, my friend, it will be.”
ike Pittsburgh, Germany-based Flabeg knows about industrial diversification. The dominant firm in automotive mirror manufacturing had to temporarily cut back payroll at its facility in nearby Brackenridge in 2009. But a parabolic mirror production facility (right) is scheduled to open in October 2009 at Clinton Commerce Park in Findlay Township to supply the growing solar energy marketplace.
The project is one of many landing on sites near Pittsburgh International Airport, thanks to the efforts of private developers such as Horizon Properties Group and Imperial Land, as well as government support led by Allegheny County Executive Dan Onorato, a likely gubernatorial candidate in the state’s upcoming election.
“There are about 6,000 acres (2,428 hectares) around the airport that they concentrated on,” says Onorato. “We had this billion-dollar airport, all this land, but no infrastructure, no water or sewer. So we expanded the local water utility’s authority. It’s all taken off in the last six years.”
In addition to Flabeg, Knepper Press, American Tire Distributors and FedEx Ground are finding suitable space at Clinton Commerce Park. Dick’s Sporting Goods is constructing a 900,000-sq.-ft. (83,610-sq.-m.), $150-million headquarters in concert with Horizon on the 440-acre (178-hectare) Northfield site. Both sites are developed with ground leases to the Airport Authority, says Louis Oliva, senior vice president, Grubb & Ellis Co. Other private development include Imperial’s 300-acre (121-hectare) Chapman Commerce Center at Westport and the 640-acre (259-hectare) Findlay Industrial Park at Westport, where projects from Appliance Dealers Cooperative and Okonite will be complete by the end of 2009, says Oliva, adding that new highway upgrades are making the area even more accessible.
“It is apparent that both publicly held Fortune 500 companies and local and regional privately held companies consider the Airport Corridor as a great location for their operations,” says Oliva. “With the infrastructure in place, the existing inventory of pad ready sites can accommodate over 10 million square feet [929,000 sq. m.] of new development.”
vidence that manufacturing continues to be a mainstay was offered in early August 2009 when Sen. Bob Casey, D-Pa., joined United Steelworkers International President Leo W. Gerard and Campaign for America’s Future co-director Robert Borosage at the release of a new report on the area’s manufacturing profile and its role in the Pittsburgh renaissance.
Contrary to descriptions of high-end services having taken over, “industry is part of the mix,” said Borosage. “Manufacturing continues to employ roughly 10 percent of the work force.” Industry, faced with extraordinary global competition, has reinvented itself, resulting in advanced robotics and much more sophisticated production methods, he said. Pending billion-dollar expansions by Allegheny Technologies and U.S. Steel are a case in point.
That reinvention needs to continue. Gerard noted the state’s recent attraction of Spanish wind equipment manufacturer Gamesa to multiple sites in Pennsylvania had brought two under-utilized steel plate mills to life. While Gamesa has cut back its payroll, it’s simultaneously working with economic developers to develop a supply chain in the U.S., as it currently has to source a number of its thousands of components from China and Europe. “You get more competitive the more local you go,” said Jim Buddelmeyer, Gamesa’s vice president of purchasing, in the report.
“There are those in our society who say we can forget manufacturing and move to high-end services,” said Gerard. “The reality is that in 2008, we had a deficit of $850 billion in goods and services that weren’t high end.” He pointed to the “huge disparity” between the average manufacturing salary of $57,000 and service salaries averaging $27,000. And he took issue with the persistent stereotyping of the region.
“I get annoyed when I hear it called the Rust Belt,” said Gerard. “There is no rust. A modern steel mill is a very high-tech facility. You put raw material in at one end, and a quarter mile down the road, steel will come out rolled within 1/10,000th of an inch of spec. And a Pittsburgh area steel mill has one third the carbon emissions of a steel mill in China.”
Casey and Gerard both talked of putting transition mechanisms in place as the U.S. looks at passing a cap-and-trade climate bill.
“Also, if renewable energy is part of that bill, we need to make sure we’re not importing those turbines and PV cells,” said Gerard. If the U.S. does import such products from nations with dirtier carbon footprints, he said, “we’ll not only have carbon leakage, but job leakage.”
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