Wall Street West

Leveraging their proximity to New York City (less than a two hour drive), the nine counties in northeastern PA have banded together as Wall Street West to market their rural location as a second home for Wall Street. Being on a separate electric grid, reasonable proximity to NY and NJ and lower operating costs are all keys to developing this regional designation into a key economic cluster.

The Pocono region was known for years as the “honeymoon capital of the world.” My parents drove from IL out there in 1951 for their honeymoon and proudly showed us their home movies of being stranded by a huge snowstorm, something they didn’t seem to mind at all. It is a beautiful, rolling country with a great deal of history. Hopefully, this new regional initiative will breath economic life and good paying jobs into the rural communities in these nine counties.

Government Payments, Good or Bad?

For some time it has concerned me how government payments have translated directly into the price of land, driving up the key cost component of farming and making it increasingly difficult for new farmers to enter the profession. The dark green areas of the map show where this impact has been the greatest, where over 45% of gross cash farm income is coming from the government. In my opinion this is far too much dependence upon government payments, creates a false sense of economic well being and ultimately leads to painful crashes at some future point in time.

Wouldn’t we better off in the long run by having the government less involved in the economics of agriculture? Wouldn’t we better to have a more diversified agricultural economy in our rural communities? Wouldn’t we be much better off if we helped, rather than hindered new, younger faces in our farming communities?

What do you think?

105 Year Old Beauty Open After 75 Years!

Earlier this month I wrote about a trip my wife and I made to the newly reopened French Lick Resort in rural French Lick, IN. Bill Cook, a self-made billionaire from nearby Bloomington, IN invested $382 million into the renovation of the French Lick Resort and nearby West Baden Springs Hotel. He reopened the West Baden Springs Hotel last week after being closed to guests since 1932.

When West Baden was built in 1902 it was called the “eighth wonder of the world” for its 110-foot free-span dome, the largest of its kind until the opening of the Houston Astrodome in the 1960s. The hotel’s original 508 guest rooms were restored and reconfigured into 246 modern rooms and suites.

“You only read things like this in fairy tales,” local State Representative Jerry Denbo said at the ribbon cutting. He added, “We have two grand hotels out here in the sticks of Indiana and we’re truly blessed.”

Bill Cook said, “We’ve come a long ways. This building could have been history. Now, it’s here for history, and it’s here for people to enjoy.”

Only a local person, with ties to the area would invest almost $400 million into a dream of past grandeur in an out-of-the-way place like French Lick.

Record Rebuilding

Normally it would take at least four years to rebuild a bridge like the Bay of St. Louis Bridge which was destroyed by Hurricane Katrina in 2005. It takes at least a year to design and then three years to rebuild. To the people of the Gulf Coast having that key link out for so long was unacceptable. Instead the State of Mississippi and Federal Highway Administration embarked on the largest, fastest and first design-build bridge project in the state.

The original bridge was beyond repair so a new site was selected and this past week the first two lanes were opened to the public. The project required installing 1,160 new concrete piles, hundreds of concrete girders and over 500,000 sf of concrete bridge deck. All four lanes of the bridge will be completed in November, just over 2 years after Katrina’s devastating impact.

Bay St. Louis is a wonderful artist town and having this bridge back in operation is a big help on their road to recovery.

Entrepreneurship in the Rural South

Rural Entrepreneurship is fast becoming a top economic development strategy. The Southern Rural Development Center just released a report on the trend in the south.

One of the “stars” mentioned was Tupelo, MS (population 34,211) with their new Renasant Center for IDEAs (Innovation, Development, Entrepreneurship in Action), a 28,089 sf. Business incubator. I’ve been to their facility twice in the past six months and continue to be amazed at how economic development has elevated Tupelo into a world-class town. Tupelo is on the leading edge of turning entrepreneurship into the next ED tool for their town.

Don't Give Up

Yesterday’s blog on Cambridge, MN resurrecting a closing plant generated the following response from Larry Paine, who writes a wonderful blog in Concordia, KS where he is city manager.

Your blog comments today reminded me that a few years ago as the City
Administrator of Jerome, Idaho, I was part of a team that responded to to the
announced closing of the Moore Business Forms plant. A working group of
State HR folks, the regional ED organizations (Twin Falls and Jerome) and the
business worked to do the things that the Cambridge folks are
doing.

As we worked with the Moore Business Forms folks we learned
that the Jerome plant was the most productive in the product group. Who
knows why they made the closure decision - probably internal politics. As
we learned about their productivity we went to the State Department of Commerce Director who was able to call the Moore CEO and diplomatically ask why they were closing a productive plant. After 4-6 months of raising the question, Moore reversed their decision.

Cambridge’s Manufacturing Focus

When I first toured Cambridge, MN (population 5,520) in 2005 I was impressed with their manufacturing diversity and Tom Willett’s, head of ED, aggressive approach to expanding his manufacturing base. I was not surprised when I learned of Cambridge’s recent successes.

Earlier this year St. Louis-based Leggett & Platt Inc announced that they were going to close their Cambridge plant. Willett marshaled resources in the community including almost $5 million in local financing and helped to find a new buyer for the business to secure 84 local jobs in Cambridge.

Other successes in Cambridge this year include Mape USA, an Italian manufacturer of integrated systems (connecting rods, crank shafts and cam shafts) for firms like Polaris, Artic Cat and Mercury Marine new plant, an expansion by U. S. Water Services, a water treatment company, Adventure Publications and Schlagel (grain handling equipment).

It is a good time to be fishing for manufacturing expansions. The fish are biting and if you have your line in the water like Tom Willett in Cambridge, MN you’ve got a good chance of pulling in some nice ones.

Protect Us!

I always try to listen to the local radio stations as I’m traveling around the country in search of boomtowns. It was about an hour and a half drive from Green Bay to Antigo, WI and I got a chance to listen to numerous stations. All of the local announcers were talking about Raj Bhandari in nearby Merrill, WI (population 10,146) who had developed a $50 shopping card for the local youth hockey program. In exchange, customers got 3 cents off every gallon of gas they bought. Bhandari also offered his senior citizen customers a 2 cent discount. Everyone should be happy, right?

The Wisconsin auditor sent Bhandari a letter demanding that he stop selling fuel at a discount. Wisconsin has a minimum mark-up law which requires gasoline retailers to sell their fuel for at least 9.2% above their wholesale price, and Bhandari’s discounts pushed his prices below that margin.

Really! Do we need the government telling us what price to sell our products for? Don’t they have enough things to worry about, rather than customers getting a discount on their gas while helping the local hockey program?

Antigo Turnaround

“We have such a shortage of qualified workers that we’ve started offering a $2,000 bonus for new employees to move into Antigo. They have to live in the city though to collect their bonus. We started the project earlier this year, have had 75 apply and since then 15 hired. We’re running ads in the upper peninsula of Michigan and other spots where they’ve had factories close.” Dale Soumis told me as I toured the town of Antigo, WI (population 8,560) of his preparations for 400 to 600 new jobs that are going to be needed as local manufacturers are gearing up production.

About 22% of the workforce is in the manufacturing sector in Antigo, with no one company dominating the market. Most of the 48 manufacturing companies hire less than 100 employees, in a wide range of industries. There is everything from bowling pins to nuclear submarine bearings made in the town.

At the community event I was talking at, Mayor Mike Matousek reported that these manufacturing companies have collectively invested over $100 million into new equipment and facilities in the past three years.

Antigo also has a wonderful plan to tie Lake Antigo, Springbrook Creek and their downtown together with trails, water features and other amenities. It is an ambitious project but one that will continue to make Antigo a preferred destination for new residents and tourists. You can view this plan on their website. They hope to leverage this plan into branding the community and area as the “Community of Trails.”

Antigo is a town on the move. I hope to return in the future to witness its progress.

Auto Parts Manufacturer in Alabama

Last week was a busy week for Team Agracel. Not only did we do a ground breaking in SC, which I wrote about yesterday, but we also broke ground on a new manufacturing plant in Alabama. I was on my way to a talk in WI, so I couldn’t join in the festivities in Scottsboro, AL (population 14,762).

Scottsboro had a vacant spec building which they built in the spring of 2006. This spec building lured KTNA, a joint Japanese/French auto parts supplier, to make Scottsboro a finalist for the company’s first U.S. manufacturing facility. Agracel was brought in on the project in the summer of 2006 to assess the feasibility of purchasing the facility, up-fitting the spec building, and then leasing it to KTNA. After assessment, KTNA, Agracel and Jackson County Economic Development Authority determined that it was more cost effective for KTNA to do a new build-to-suit project and then lease the facility back from Agracel. Agracel purchased 7.6 acres in the Jackson County Industrial Park to develop the new manufacturing facility.

The new 36,000 sf facility will house the manufacturing of floor carpet, underlay acoustic parts, dash insulators and floor mats for Nissan Motor Company. The target date for moving machinery & equipment into the facility is October of 2007. Operations will commence with 25 employees with plans to expand, over the next three years, to 72,000 sf and 70 employees.

We have been very pleased with the activity we are seeing in the expansion of manufacturing companies. It is a good time to be doing industrial development with a focus upon the manufacturing sector. It also is a good time for communities to look at spec buildings, using them as a lure to bring in new firms.

Spec in SC

I was in Camden, SC (population 6,682) for the groundbreaking of our first spec building in six years. We have built six spec buildings over the years and have had great success with our programs until the downturn of 2001. Too many empty buildings became available and the demand for new spec buildings declined.

We weren’t necessarily looking to build new spec space as the demand for our existing space and new build-to-suit projects has our development team at Agracel on the go a great deal. However, several compelling factors motivated us to partner with the local Kershaw County Economic Development Office, the local utility company Progress Energy and a local engineering company.

South Carolina has impressed our team with their very progressive approach to economic development and Camden is a charming town with great potential. The town has had their previous two spec buildings snapped up by German filter manufacturer Hengst USA and Forgitron, an Ohio-based maker of aluminum wheels, both in 2005. It was time to build a new one, a 75,000 sf building that is expandable to twice its size.

Nelson Lindsay, head of the local EDC, told me of recruiting in Haier America, the giant Chinese appliance manufacturer. “They were looking at moving their U. S. production to either Greenwich, CT or Orlando, FL. We got in the mix when one of the Americans on the project, mentioned to us that they were looking. We got Camden in the mix and the Chinese quickly realized that it made a lot more sense to locate here.”

We are right across the street from Haier America’s USA headquarters and hope to use our new building to bring another international company into Camden.

Scary for Urban Areas

“It’s official. City working has had its day. Half of UK bosses, based in an urban environment, are dreaming of escaping the rat race to find their own small slice of rural happiness.” This was the finding of a research project by Cornwall Pure Business in the UK. I was alerted to it by Becky McCray from rural Oklahoma who writes a wonderful blog at Small Business Survival.

The really astounding part of the research was that 64% of those who are seriously considering relocating, intend to do so in the next one month to five years.

The reasons for such a move were:
· Creating a better environment for family and personal well-being 75%
· Attaining a better work-life balance 71%
· Reduce commuting time 45%

The trend that we documented in BoomtownUSA toward a more rural lifestyle seems to be spreading to other countries.

Free Entrepreneurial Tuition

I’ve studied and written numerous times about the Kalamazoo Promise, which has been copied by Newton, IA and El Dorado, AR. It is a program to pay the college tuition for anyone who goes to the local schools in those towns. I see it as a huge economic development tool, focused upon the future.

The Michigan Spirit of Entrepreneurship Initiative is a proposal to offer free tuition to students of any age who take a college course in entrepreneurship and offers grants to encourage students to participate in programs like Junior Achievement, aimed at high school students.

Every town might not be able to offer free tuition to every student in their schools, but I’m guessing that everyone should be able to figure out a way to do so for entrepreneurial education.

Imagine the impact that this could have in the development of new businesses for the future. New businesses in your hometown!

Big Offices?

At the Industry Trends Committee Meeting at NAIOP last week, I suggested that with rapidly rising construction costs (we’ve seen a 47% increase in the past five years) combined with the falling costs of telecommunications, computer technology and video conferencing it might make more sense for companies to look at the rapidly expanding growth of homesourcing. Jet Blue is the most famous company to use homesourcing, doing all of their reservations from homes in Utah.

I probably shouldn’t have been surprised that a group of office builders might not like the thought that their big office buildings might become technologically obsolete. They didn’t laugh me out of the room, but no one thought this was something we should look into further.

This week’s Business Week magazine has an article “Rolling Out the Instant Office: Why maintain empty cubicles? Companies are gaining flexibility with on-demand office space.” Several items in the article caught my attention.

“About 60% of the office space that companies pay so dearly for is now a dead zone of darkened doorways and wasting cubes. Imagine if a factory had a utilization rate of only 40%.”

“Mark Golan (VP of real estate for Cisco Systems Inc.) says technology is enabling companies to move more and more of their real estate portfolios anywhere. Not to mention that office outsourcers usually deliver superior services in backwaters. It’s hard to justify rolling out the works for five workers in the middle of nowhere.”

In my travels around the USA, I am increasingly meeting people who are living a more tranquil life in rural America, while maintaining their existing work via telecommunications and video technology. I think that we will see this trend continue to grow as babyboomers either take early retirement or move to locations that they want to live in for quality of life issues.

Will office buildings in central cities continue to be the preferred location for employment growth or will office jobs become more dispersed throughout the country? What do you think?

Devastated Greensburg, KS

The photos of the devastation from Greensburg, KS are incredible. Take a look at this website. http://www.kansas.com/static/slides/050507tornadoaerials/

Non-Mobile Manufacturers

Other than a piece that we did last month on immigration into the USA, last week’s Agurban on the non-mobility of manufacturers has generated the most comments that I’ve seen. And, every one of the comments and emails has indicated that what we found in our research at Agracel was the experience of others.

Our "Why We Love Manufacturers" Agurban looked at the 52 projects we at Agracel have done over the past 15 years in 13 states. We found that only 5 of the 52 left us, with 90% staying in their buildings and continuing to offer jobs in their original towns.

I was at a semi-annual National Association of Industrial and Office Properties (NAIOP) this past week, meeting with other industrial developers from around the USA. Several mentioned our Agurban and indicated that they have had the same experience that once they get a manufacturer into a building, most tend to grow in the space rather than move out.

NAIOP was intrigued by our findings and would like to study it further on a national basis. If you know of someone who has done or could do some research in this area, please let me know.

My guess is that people like Lou Dobbs aren’t going to like what we find out about in this research. It doesn’t fit with their political or journalistic agenda.

Awesome Altoona!

Recreational land and outstanding outdoor amenities are becoming increasingly important for a growing number of Americans. Towns that are within driving distance of major metro areas have an opportunity to attract day tourists who can turn into second home buyers and eventually into full-time residents. I was in such an area last week when I was doing a talk in Altoona, PA (population 49,523).

Altoona was a major railroad town on the east side of the famous Horseshoe Curve, built to traverse one of the more difficult Allegheny Mountain passes of the Pennsylvania Railroad. Opened in 1854, Altoona quickly grew into a major railroad and industrial town.

Today Altoona is reinventing itself as a high tech, job creating engine. Its wonderful setting in the midst of the Allegheny Mountains and close proximity of less than a four hour drive to Pittsburg, Philadelphia, Washington DC, Cleveland and New York, afford wonderful assets for Altoona.

Another quality of life attribute is the Blair County Ballpark, built in 1999, which is home field for the Altoona Curve, a Class AA farm team of the Pittsburg Pirates. The Curve regularly draw 6,000 to 10,000 fans. I had a great time at the game I attended against the Bowie Baysox, an affiliate of the Baltimore Orioles.

French Lick is Back!

French Lick, IN (population 1,941) used to be an easy place to get to in the days of railroads and that is why its natural springs were a favorite destination for many famous families in the early 1900s. Two renowned resorts were built within months of each other in 1901 and 1902. The West Baden’s six story atrium was the world’s largest free-span dome until the Houston Astrodome was built in 1965, quite an engineering feat for the early 1900s.

During the Prohibition Era, French Lick boasted 13 casinos, all of them illegal. One was owned by Indiana’s Democratic Party Boss and another by its Republican Party Boss, protected by both sides of the political aisle in Indianapolis. In 1949 the last of these illegal casinos was shut down by a reformist governor and French Lick slowly spiraled down into obscurity.

The town’s “15 Minutes of Fame” occurred when native son Larry Bird achieved basketball fame at Indiana State and with the Boston Celtics as the “Hick from French Lick.” Bird still maintains a modest home in the countryside a couple of miles outside of town.

In 2003, Bill Cook of nearby Bloomington, who achieved billionaire status (estimated by Forbes at $3.2 billion) with his medical device manufacturing company that he started with his wife at their dining room table, bought both of the old resorts and began the painstaking task of renovating them, along with building a new casino. My wife and I visited the French Lick Springs Resort after our trip to Paducah to see the $382 million makeover. We were disappointed that the West Baden Springs resort won’t reopen until June, but were amazed by the makeover of the French Lick Springs, a property we had visited a dozen years before.

During a spa treatment, my wife learned that Mr. Cook paid the 400 employees of the resort their full salaries during the reconstruction. Since reopening, employment has increased to over 1,000.

A trip to French Lick is well worth the drive. Seeing what someone like a Bill Cook can do is amazing.

Bankers as Heroes

Bankers as heroes? You’re probably wondering where I’m going with this blog today. Bankers aren’t usually known for their heroic efforts but rather as the person that you have to go plead with for a loan. But, in the past week I’ve met two who have altered their communities with their efforts in Gulfport, MS and Paducah, KY. Please read their stories on April 25th and May 1st.

My experience is that bankers tend to be risk adverse. You don’t tend to get ahead in the business by doing risky things like both George Schloegel or Joe Frampton did, but because of their actions and commitments both Gulfport and Paducah are much better communities.

I’d like to report on other bankers who have made heroic decisions like those two. If you know of such cases, would you mind emailing them to me at jschultz@agracel.com.

Another Local Bank Hero

“None of what I’m showing you would have happened if it weren’t for the local bank. Joe Frampton, its CEO, used the book “Good to Great” as his guide and understood that for this project to succeed he was going to have to stick his neck out. Sometimes he was lending 300% of appraised value to make this program work. He really took a chance.” Renee Nunez was explaining to me how the transformation of the Lower Town area from crack houses to artist’s studios was accomplished in the past six years.

Mark Palmer, one of the first artists in the program told me, “The bank lent me $220,000 to redo my place but when we were completed it only appraised for $150,000. Today, five years later, it’s probably worth over $350,000.”

Wow! It is bankers like that who can really make things happen in a town. I knew that I had to go meet him. After my tour I walked down to the Paducah Bank and even though it was already 4:30 on a Friday afternoon, Joe Frampton agreed to meet me. Whoever makes comments about “banker’s hours” hasn’t met Joe.

Joe explained to me about his bank, “We are a $400 million bank with five branches, all located here in the county. We are the only locally owned bank in the entire region. We committed $1 million to the program because we knew the history of the Lower Town area and took pride in what it once was. We’d seen it deteriorate into a horrible place of absentee landlords, a nice phrase for slumlords, that was filled with transient residents. It was unstable and unsafe. The property was deteriorating quickly as drugs, noise, crime and prostitution had moved in.”

He went on, “The mayor came to see our president Wally Bateman and I and said, ‘We’ve got this crazy idea for revitalizing the Lower Town. What can your bank do?’ We were so impressed with what they wanted to do that we committed to them that day for the $1 million. We told them we will do it at market rates, but we will get very creative on longer terms, appraisals, etc.”

“The artists started coming in and frankly we’ve been very pleasantly surprised at the financial capacity and quality of them. We originally thought we were going to get a bunch of hippies. But we found that we got some very high quality folks. One of our first one was an M. D. from the east coast.”

You would normally think that with this type of program that you’d have some significant write-offs but Joe told me that they’ve yet to take a write-off to date, even though the program has grown to over $10 million invested in Lower Town. The bank is assisting the city with a similar program, but not arts related, in another historic part of town, committing another $1 million.

I asked him about how the Artist Relocation Program has worked out compared to what he envisioned. He told me, “We thought we would be lucky if we got 90% back on that first $1 million commitment. But, it has been wildly more successful than we ever imagined. We’ve grown our business as a result, both in the Lower Town area and in the community because people saw our commitment to the town.”

“For the community it has been a big boost. The artists who have come in are well educated, creative, diverse and have a tremendous intellectual intensity that wasn’t here before. Our tourism has grown greatly. Coffee shops have sprung up. We are now making plans to start an art school here which could completely dwarf everything that we’ve done with the Artist Relocation Program.”

If you get a chance, be sure to visit Paducah and see what they’ve accomplished in only six short years with this program. And, all because one banker took a big chance.