n early 2007, Toyota selected a 1,700-acre site in Blue Springs, Miss., to build its eighth North American vehicle assembly plant. The $1.3-billion plant, to be located just outside of Tupelo, will have the capacity to build 150,000 vehicles annually of Toyota’s popular Highlander sport utility vehicle. Production is scheduled to begin by 2010.
Last summer, Paccar broke ground on a $400-million facility that will include a 420,000-sq.-ft. engine plant and technology center on a 400-acre site in Columbus, Miss. The facility is due to be completed in 2009.
Last fall, SeverCorr completed phase one of its new $700-million steel mill near Columbus, Miss. Able to produce 1.7 million tons of high-quality steels a year, the facility provides products for use in the automotive, building, agricultural, pipe & tube, and appliance industries. A unique feature of the 1,400-acre mega-site is that it was designed to accommodate production partners and related manufacturers on site. Projections call for an additional investment of approximately $500 million, which will more than double the mill’s output by late 2009 or early 2010.
What these three projects have in common is that each chose to locate at one of Tennessee Valley Authority’s (TVA) certified mega-sites, a program the utility launched several years ago in an effort to attract large automotive manufacturing operations to their service territory.
“We re-engineered our entire economic development program about five years ago,” says John Bradley, TVA senior vice president for economic development. “We wanted to look at smart growth from a utility standpoint, so we hired target market specialists to help us determine the best industries to pursue. Of course, automotive was a natural.”
An important part of their deliberation process was to talk to automakers to find out what was most important to them in selecting an actual piece of ground for a major assembly plant.
“Since our goal was to take a lot of the risk off the table for our auto clients, we went to three OEMs and got their input on what type of detailed due diligence we should be doing for potential auto sites,” says Bradley. “They told us that if we did this, we would save them six to nine months off their site selection process.”
The OEMs also told Bradley that TVA would have to have a credible third party conduct the certification process for them. The utility ultimately hired McCallum Sweeney Consulting of Greenville, S.C., to develop the program because of their extensive experience with automotive site selection.
According to Bradley, communities in the TVA service sector nominated about 30 potential sites for the megasite program, and nine sites were eventually certified, including the three Mississippi locations chosen by Toyota, Paccar and SeverCorr.
Each megasite must include a minimum of 1,000 acres, be immediately available for purchase, have basic environmental and geotechnical testing completed, be in close proximity to Interstate highways, railways and auto suppliers, and have plentiful labor in the quantity and quality required by a modern auto assembly plant.
TVA’s mega sites program is not the only one designed to take some of the uncertainty and risk out of finding suitable industrial sites.
“There are lots of communities and states that put different labels on the concept of having property ready for development,” says Don Schjeldahl, vice president and director of Austin Consulting, a Cleveland-based site selection division of The Austin Company. “New York calls it shovel ready, Oregon has certified sites and, when you dive into it, it all means different things.”
Why do manufacturers find these sites so attractive?
“Historically, shovel-ready site programs have been targeted at the big manufacturers like auto or ‘wafer fabs,’ where delays and unpredictability can be measured in millions of dollars,” says Bob Farley, president of economic development for AngelouEconomics, an Austin, Texas-based site consulting firm specializing in high-technology sites. “Now it’s expanding to the service sector side as well … applications like financial services and data centers.”
According to Farley, his firm is always working on a number of those types of projects at any given time, where time to market is the dominant factor.
“The old 1960s-to-1980s orientation of ‘We’ve got land’ no longer works,” says Farley. “Companies want to know how you’re going to have the site ready to go and who will bear the cost. If you don’t have these, you’re in a world of hurt competitively.”
So why doesn’t every community offer some form of certified or shovel-ready sites?
“The problem every community runs into is resources,” says Clark Gillespy, director of economic development for Duke Energy Carolinas. “We could plow a bunch of money into one site to make it a certified site, but that’s probably not the best use of resources. We decided to take the money we might spend on a mega-site and spread it out among several sites.”
Most communities throughout the U.S. don’t have the financial resources necessary to establish a full-blown certified sites program.
“It’s a great thing to have if you can get some sites certified, but I don’t think it’s a make or break thing,” says Allen Neel, president of the East Tennessee Economic Development Association in Knoxville, Tenn. According to Neel, most communities cannot afford the expense involved in a formal certification process. In those situations, however, it’s still important to go through the due-diligence thought process for prospective industrial sites a community is trying to market.
Buzz Canup of Canup & Associates agrees.
“For example, for some sites you need 2 million to 3 million gallons of water a day, and those things cost big bucks,” says Canup. “Better to just go through the due diligence planning that shows how you will do it. It’s the credibility of the due diligence that sells the site.”
In other words, what is the engineered solution to the problem? How are you going do it? Who is going to do it? Where will it go? Who will pay for it? According to many site location experts, if you have everything pre-planned with engineered solutions, that’s just as good.
Still, an important element of any company’s due diligence of a prospective industrial site is to measure the ability of a state or region to deliver on what they have promised.
“When someone says not to worry about a sewer line, that’s when I begin to worry,” says Canup.
For a company looking to find the best location for a future operating facility, it’s a positive sign if a community has some form of formal site due diligence program, because it means that not only does it have a real estate product that is deliverable,
but also that the community has defined what those uses are.
Among other things, it means that the property has all the utilities to the site, proper zoning and road and possibly rail access, and that it is under control of the local economic development organization or, if in private hands, that the price is established and is known.
“Nobody has the luxury of time these days,” says Schjeldahl. “Everyone is in a hurry. Some, though, have a business model built on speed to market, like food products. They only go into a project because they’ve already got buy-in from the market side.”
According to Schjeldahl, it’s important to have “shovel ready” sites because it tells a corporate site selector that there’s a better chance that the town is well-run and that the other resources will be there, that projects can move forward quickly with low risk and known costs.
“I extend it further,” he says. “It means that the community itself is certified, with good work force and good training. The wastewater and utilities are high quality and can support growth. The community is well managed and has good quality of life. It’s not enough to just have a good piece of property. You’ve got to have the rest of the package.”
Bill King is the former chief editor of Expansion Management magazine. He is managing partner of B&L Research and can be reached at BillKing@BandLResearch.com.