There are numerous factors that play a role in the decision-making process when a company expands or relocates.
Unquestionably, a skilled and available work force is critical, as is the ability to continually train that work force. Logistical considerations are also important. A substantial incentive package from the state and local economic development agencies can certainly be a deciding factor in the site location process.
There is another factor that cannot be overlooked because it can be just as important as a skilled work force or incentive package — utilities.
In the initial stages of a site location search, data is key if a company is to consider a particular site for its expansion project. If the information is not available, then the company might not consider that site.
To meet this requirement, the economic development departments of most utility companies publish statistical data and market facts — current demographic, economic, business and quality of life information, etc. — that are helpful in the search process.
They also maintain a list of commercial and industrial land available in their coverage area.
Of course, there are questions related to the core competency of a utility company — capacity, price and reliability of its product.
“We can provide a power rate comparison and conservation advice for buildings,” said Dan Olmstead, community relations manager for the Southern Idaho region for Idaho Power, a subsidiary of IDACORP Inc. “We can also provide information on line extensions and substation infrastructure facilities that would be required for a manufacturing plant.”
MidAmerican Energy Co., which serves portions of four states in the upper Midwest, has the ability to use a short-term, reduced-rate initiative on a negotiated basis if it would make a difference in a company’s site location decision.
MidAmerican Energy can also be flexible in its pricing for companies that are larger consumers of energy.
Customers of MidAmerican Energy include numerous food processors and other makers of commodity products that rely on utility reliability and capacity.
“Utilities are a critical part of their operations,” said John Wetzel, vice president of economic development for MidAmerican Energy. “In most cases, these companies are running 24/7. They are making a commodity product, producing hundreds of thousands, if not millions, of items each year. A one-quarter cent cost on their product can make a huge difference in their margins.”
Just where utilities fall in the decision-making process depends on their importance to expanding companies, said Robin Spratlin, general manager of economic development for Georgia Power, which covers most of the Peach State.
“If they operate on low margins and utilities are an important part of the production process, then they will be a very important factor for companies,” she said.
Oftentimes, because of the vast knowledge of the region they cover, utility companies will be the first contact when a company begins its site search.
While the utility company will answer as many questions as it can, it will usually contact the state and local economic development agencies to form a partnership to maximize efforts.
Philadelphia-based PECO Energy, for example, teamed up last year with the Greater Philadelphia Chamber of Commerce to post a collection of regional economic development data on the Select Greater Philadelphia Web site, www.selectgreaterphiladelphia.com.
“Our primary goal is to generate new business and jobs for our service territory and generate new revenues for our company,” said Greg Byrnes, director of economic and business development for PECO Energy.
PECO Energy has helped bring 50,000 new jobs to the Philadelphia metro during the past decade.
Utilities want to use their expertise to create expansion opportunities for their regions and states.
“We’re on the front line of economic development negotiations,” said John Sundergill, director of economic development for Baltimore Gas & Electric Co. “From a utility standpoint, we want to make it as easy as possible for companies so there are no unknowns as they go through their decision matrix.”
Utilities Critical For Many Projects
Utilities play a major role in the site location of high-tech and life science expansion. Two such expansions occurred last year in North Carolina.
Dell Inc. and Merck & Co. announced they will site new facilities in the state and in both cases, Duke Power, a subsidiary of Duke Energy Co., was part of the process.
Tony Almeida, vice president of economic development for Duke Power, which has customers in North Carolina and South Carolina, said the company will match what the prospect needs with what the states have in sites, buildings and work force.
“Our interest is bringing more manufacturing activity to the Carolinas,” he said. “We want to do what we can to make manufacturing more competitive in [both] states.”
The Dell and Merck projects will both bring a bevy of new manufacturing activity to North Carolina.
Dell will build a 400,000 square foot, state-of-the-art manufacturing plant and distribution facility in Winston-Salem, in the Piedmont Triad region, creating as many as 2,000 jobs during the next five years in a $100 million investment.
The project is expected to have a $24.5 billion impact on the state’s economy during the next 20 years and bring an estimated $743 million in net revenue.
The North Carolina General Assembly approved an economic incentive for computer manufacturing companies. In the case of Dell, the incentive will provide up to $225 million in tax credits during the next 15 years. In addition, Dell will receive a Job Development Incentive Grant valued at up to $14.1 million over 12 years.
“Once the state decided to put together a package to present to Dell, we got involved at the regional level,” Almeida said. “Our North Carolina team was actively involved in providing energy expertise information and incentive rate information, and money out of our shareholder-funded Carolina Investment Fund helped support the project.”
In Durham County, Merck will site a new vaccine manufacturing facility, bringing about 200 jobs and up to $300 million in additional investment to the region.
The complex’s four primary buildings — production facility, administration building, powerhouse and warehouse — will include 272,000 square feet of office and manufacturing space. Merck expects the facility to be operational and fully staffed in 2008 with employees earning an average annual salary of $55,000.
Both projects will have a ripple effect, generating additional high-paying jobs as suppliers site facilities to be near the manufacturing plants.
Companies looking to site large manufacturing facilities or warehouses also have to keep utilities in mind when comparing one community with another.
That was the case when Oakland, Calif.,-based Dreyer’s Grand Ice Cream Holdings Inc. was debating whether to expand its facility in Laurel, Md., or look elsewhere.
Eventually, the company decided to remain in Laurel, where it will add 300 jobs by 2007 in addition to retaining more than 220 workers.
The $180 million expansion will add nearly 600,000 square feet of production and warehouse space, including a state-of-the-art warehouse to serve the eastern United States, 10 frozen snack production lines and two packaged ice cream lines.
Baltimore Gas & Electric was part of a team of state and local officials that worked to keep the facility in Maryland.
“Utility is a major cost of the operation [for Dryer’s],” Sundergill said.
When the expansion is complete, Dreyer’s will have a 1 million square foot facility.
“It is critical to the success of our brands that we have a stellar manufacturing and distribution center on the East Coast,” said Gary Rogers, chairman and CEO of Dreyer’s. “Our Laurel facility is in a great location to draw talent from the surrounding area.”
Duke Power Helps in Work Force Training
Work force is always a major concern for companies as they consider an expansion or relocation. It’s why Duke Power has become involved in funding work force training in North Carolina and South Carolina.
The company last year committed a $600,000 grant to support community college training programs in both states.
In North Carolina, these funds will support the enhancement of the New and Expanded Industry Training and Focused Industrial Training programs. In South Carolina, the grants will support the Center for Accelerated Technology Training.
Separately, the company will fund grants totaling up to $3 million annually for four years to community colleges and other organizations in North Carolina that do significant training for major industries served by Duke Power.
The focus of the program is on training, retraining and other efforts to revitalize manufacturing and related businesses.
Forsyth Technical Community College in Winston-Salem received a two-year, $249,600 grant, which is expected to help pay to train at least 150 workers for employment at Reynolds American Inc.
Reynolds American (formerly R.J. Reynolds Tobacco) merged with Brown & Williams Tobacco last year, which meant the relocation of hundreds of workers to North Carolina.
Reynolds American asked Forsyth Technical Community College to assist in preparing the relocated workers for new jobs, specifically in the positions of mechanical specialists.
“The support from Duke Power affirms the importance of community colleges in training and strengthening the work force,” said Gary Green, president of Forsyth Technical Community College. “[The program] will add tremendous value to our local economy.”
Duke Power is making the funds available because having an available, skilled work force is a key driver in a company’s decision to relocate or expand, Almeida said.
“We have outstanding community colleges in North Carolina and South Carolina, but they need additional funds to train and retrain workers to meet the demands of our increasingly technical manufacturing industries,” he said. “The [funding] is intended to make the colleges’ training programs more attractive to manufacturers considering relocating or expanding in our service area.”
In South Carolina, Duke Power has established AdvanceSC, an independent limited liability company that will, in part, support economic growth in the company’s South Carolina service area.
AdvanceSC will be funded with 50 percent of the South Carolina allocation of certain Duke Power wholesale or bulk power marketing sales (BPM) of electricity made from Jan. 1, 2004, to Dec. 31, 2007. The initial funding for AdvanceSC is $6.5 million.
Duke Power uses a portion of its BPM revenues to more aggressively drive economic growth, said Ellen Ruff, group vice president for power policy and planning for the company.
AdvanceSC will build partnerships with customers, educational and economic development organizations to help drive economic development growth in the state. In the site location arena, BPM funds will be allocated to:
§ Strengthen existing manufacturing industries. Grants will be available to manufacturers investing in applications that increase the productivity, efficiency and reliability of their facilities.
§ Create new sustainable manufacturing and manufacturing-related jobs by making funds available to regional economic development partnerships, chambers of commerce and economic development groups.
§ Fund community college, technical college, university and high school programs that support manufacturing and manufacturing-related economic development.
There are numerous ways a utility can help companies in their relocation and expansion efforts, aside from negotiating the best price for its products and making sure there is enough capacity to meet the demands of a manufacturing plant or warehouse.
A utility can help pave the way for a company’s decision to site its facility in its region, helping the company to expand and helping the community grow its tax revenues and jobs base.
In that regard, it’s a win-win situation for all parties involved — the company, community and utility.
“If we succeed in attracting expanding companies, we will have a growing, robust community that is attractive to other companies,” Sundergill said. “It gives credibility to the area as other companies consider an expansion or relocation.”
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