Manufacturing

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The Ultra Megasite

30 Apr, 2008

By: Kevin M. Mayer
Certification Plus Aggressive Marketing Plus Regional Cooperation

Once a community convinces a manufacturer to locate a large plant within its boundaries, the news breaks quickly, as well it should. But the news from the victorious community follows a familiar script. There’s the celebratory press conference. There’s the groundbreaking ceremony. There’s the story in the newspaper filled with ebullient quotes. Now, nobody would argue that the story is unimportant. But somehow it seems anticlimactic.

 
More interesting is the reaction to the news, particularly the reaction from rival communities – the communities that had courted the very same manufacturer, but failed to close the deal. For these former contenders, the disappointment is palpable. What’s more, it triggers a sequence of coping mechanisms, something like the five stages of grief in the Kübler-Ross model (denial, anger, bargaining, depression and acceptance). But grief ends in acceptance of the inevitable: some ends are final. The disappointment of thwarted economic development works a little differently. It is always possible to fight another day, though it may be necessary to be better prepared next time.
 
Of course the bigger the development opportunity that has been missed, the greater the disappointment. And the height of disappointment is the loss of a megasite project. A megasite project is so large that it may, in a single stroke, alter a struggling community’s fortunes.
 
The megasite projects that attract the most attention are those designed to accommodate automobile assembly plants. Such a project may attract $1 billion or more in corporate investment. It may create at least 2,000 high-paying jobs. And it may attract additional investment, with supplier plants sprouting throughout the immediate area, creating thousands of additional jobs.
 
For a community to be in the running for a megasite project, only to be passed over, is a painful experience. The immediate reaction is disbelief. When the shock begins to wear off, disappointment sinks in. Then the recriminations start. Who “lost” the megasite project? Was the marketing uninspired? Was someone too stingy with the incentives? Or perhaps the project was snatched away at the last minute. Maybe some backroom wheeling and dealing served to reward stealth rather than simple virtue.
 
At this stage, the disappointed community may be tempted to overanalyze the comments from the victorious community and the corporation locating a plant at the megasite location. Typically these comments will cite generalities such as work ethic or educational quality. But such comments may actually reveal little about a corporation’s reasoning. It may be that corporate spokespersons are simply trying to be discrete, or tactful. Perhaps there are no words that anyone could offer that would help the disappointed community make sense of things.
 
In any case, the disappointed community eventually draws its own lessons. The loss becomes a learning experience, one that becomes part of a continual process of improving the megasite’s quality, as well as the community’s readiness.
 
For a concrete example, consider the history of the Wellspring Project. When Toyota Motor Corporation announced it was locating at the Wellspring Project’s megasite near Blue Springs, Mississippi, it was the most notable megasite event of 2007. In the speculative frenzy that preceded the announcement, the Wellspring Project wasn’t even included in the short list of prospective sites. Instead, Toyota was reported to be considering sites in Tennessee, Arkansas and North Carolina.
 
In the aftermath of the Toyota announcement, the news coverage brought out the usual contrasts. There was good cheer in Mississippi, gloom among the former contenders and second-guessing among the observers. There was even speculation that a behind-the-scenes shifting of alliances among regional players gave sudden prominence to the Wellspring option, and tipped Toyota’s decision at the last moment.
 
What actually happened may have been far less dramatic. According to a report issued by the National Association of Development Organizations (NADO), the Wellspring Project had been a contender all along. It just happened that the officials of the PUL Alliance, the group responsible for assembling and marketing the megasite, had been exceptionally discrete. (In fact, the capacity for discretion demonstrated by local officials impressed Toyota executives.)
 
What’s more, the NADO report suggested that the Wellspring Project’s key advantage had been its staying power. The PUL Alliance had kept the Wellspring Project in the game by pooling resources across three counties. (Funds from the state were not forthcoming.) As purchase options for the 1,730-acre site neared expiration, the PUL Alliance bought the tract, which included parcels from nearly two dozen different landowners, on speculation. The purchase was a risky move, particularly as it occurred on the eve of an election year. If the megasite failed to attract Toyota, and remained vacant, disgruntled taxpayers may have been inclined to vote in new representation at the local level.
 
None of this has the whiff of intrigue, but it is fairly dramatic, nonetheless. Accordingly, it takes a little more effort to turn down the drama yet another notch, by recalling that much of a megasite’s appeal is built-in, especially if it is a certified megasite.
 
What could be less dramatic than simply putting your ducks in a row, doing as much site-preparation work as possible in advance? This is, in essence, the whole point of the megasite concept pioneered by the Tennessee Valley Authority (TVA) and McCallum Sweeney Consultants.
 
According to the TVA, the basic attributes of a certified megasite are as follows:

  • At a minimum, the site must cover at least 1,000 acres. Preferably, the parcels constituting the megasite should be contiguous, creating a conveniently proportioned rectangular plot. Finally, sites covering considerably more than 1,000 acres may be necessary if a manufacturer wants a buffer zone or room for suppliers.

  • The site must be immediately available. Typically, manufacturers put a high value on accelerated construction schedules.

  • The necessary environmental and geotechnical tests must be complete.

  • The megasite must be close to interstate highways, railways and auto suppliers. Among auto assemblers, there is a clear preference for dual-rail access, in order to gain a stronger negotiating position with respect to rail service providers.

  • The megasite must be close to sources of plentiful labor. In general, auto assemblers try to avoid placing a plant within a 50-mile radius of any other auto assembler’s plant. This way, auto assemblers avoid competing for the same labor pool, driving up labor costs.

 
John J. Bradley, senior vice president of Economic Development for the TVA, is proud of the TVA’s megasite program. According to Bradley, the megasite program might be better called a “community preparedness program.” The TVA’s program, notes Bradley, “has a unique holistic approach that has raised the bar for due diligence. Communities that participate in the program stand to benefit even if the sites they host are not yet certified. These communities find that they are able to answer 90 percent of the questions a potential megasite occupant might have.”
 
Since the TVA announced its megasite program in 2004, nine TVA megasites have been approved, five of which remain available as of March 2008. Three of the available megasites are in Tennessee (Clarksville/Montgomery County, Chattanooga/Hamilton County and Stanton/Haywood County). One is in Kentucky (Hopkinsville/Christian County). And one is in Alabama (Athens/Limestone County).
 
Three of the TVA-approved sites are already occupied. As already mentioned, the Wellspring Project, in Blue Springs, Mississippi (Pontotoc, Lee and Union counties), was sold to Toyota. The Crossroads site, in Columbus, Mississippi (Lowndes County), was sold to PACCAR. And the Golden Triangle site, in Columbus, Mississippi (Lowndes County), was sold to SeverCorr.
 
Besides the TVA-approved locations, there are many additional megasites that satisfy similar criteria. Often they are associated with regional utilities. For example, Entergy Louisiana lists four megasites—Franklin Farm, Zachary Taylor, Orange Grove and Pointe Sunshine. Also, it is fairly common for site selection consultants to provide their seal of approval once a site has demonstrated it has the qualities of a megasite. In addition to its work on the TVA megasites, McCallum Sweeney has approved megasites in Jacksonville, Florida and Greensville County, Virginia.
 
Depending on how you count them, there may be as many as five dozen megasites, mostly scattered about the southeastern United States. Not all are equally suitable for any given purpose, such as an automobile assembly plant. Accordingly, state development officials often take the lead in identifying a particular megasite’s advantages and matching them to appropriate prospects. In other words, it is an exercise in identifying differentiators in marketing. It is also an iterative process. That is, if deal-scuttling objections are identified in the marketing process, it may be possible to improve the site, eliminating the objections.
 
According to Liz Povar, director of Business Development for the Virginia Economic Development Partnership, “Repeat visits by prospects to communities are necessary for communities to understand business views and needs, and then learn how to match their community assets to those needs. The experience of multiple visits should give communities the opportunity to identify and address weaknesses or gaps in their product so that the next visit has a greater chance of success. Also, by understanding how those clients came to be aware of the community’s product, and by analyzing the types of businesses that are attracted to the site, the community can better target its marketing strategies.”
 
In addition to leveraging the advantages of a particular megasite, communities promote the advantages of the immediate region, such as workforce quality, transportation infrastructure, educational quality and general quality of life. However, to effectively leverage these resources, and perhaps improve them, representatives of local communities must think regionally. According to Povar, “Regional cooperation is absolutely necessary, and it would be surprising to identify any community considering development of a megasite that didn’t have to incorporate, as part of its business case, the assets of the broader region. Labor, transportation, utilities, education, suppliers, the environment and other resources are regional in nature, and these are the factors that influence companies’ location decisions. Megasites should be identified and established after analyzing these factors on a regional basis, and that’s going to cross jurisdictional boundaries.”
 
Although regional cooperation is hardly unprecedented, it is becoming more formalized, much like the process of megasite preparation. For example, the success of the Wellspring Project depended on the formation of the PUL Alliance, which encompassed the counties of Pontotoc, Lee and Union. The Toyota plant is in just one county, Union. But the other counties realized that an automobile assembly plant in a neighboring county would benefit them, too. It would serve as a source of employment for their residents, plus it would increase the likelihood of attracting supplier companies to the area.
 
After missing the Toyota opportunity, officials in Tennessee wasted little time organizing a response. They passed the Tennessee Regional Megasite Authority Act of2007, which extends the same rights and requirements for regional megasite authorities as Tennessee law currently holds for industrial development boards, including the ability to issue bonds, enter into payment-in-lieu-of-tax agreements and receive grants or loans.
 
Such actions, which take place at the state level, suggest that megasites will now compete for investment on a grander scale. There are even hints that regional cooperation will spill over state lines. Again, state-to-state cooperation in the promotion of megasites is not entirely new. When megasites near state lines have been in play, governors of nearby states have issued letters and released announcements expressing support for the host state’s megasite efforts. As with the county-to-county cooperation evidenced by the PUL Alliance, the idea was that employment opportunities and supplier networks would spread beyond jurisdictional boundaries.
 
In Mississippi, the potential for state-to-state cooperation is reflected by a series of events. In 2000, the Advantage Mississippi Initiative was passed. It was designed to encourage alliances between local governments, including local governments in other states. It specifically addressed issues such as the pooling of resources, raising bonds and revenue sharing. In 2003, Ronnie Musgrove, then governor of Mississippi, announced the creation of an East Mississippi–West Alabama regional development cooperative agreement. This alliance was in part a response to disappointment that the Meridian and Kewanee megasites in East Mississippi had been considered, but not chosen, by Hyundai.

In 2006, regional cooperation in the area got a boost when the U.S. Department of Labor announced the kickoff of the WIRED (Workforce Innovation in Regional Economic Development) initiative. As part of the WIRED initiative, which will funnel $15 million to the region, the Economic Transformation of Rural West Alabama–East Mississippi Alliance will work with the region’s community colleges to build a manufacturing training system.

 

 

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