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Get the Deal Done: Recruiting Businesses to Columbia

Get the Deal Done: Recruiting Businesses to Columbia

The Aurora Organic Dairy site, off Waco Road, is pretty barren for the time being. Eventually, the Colorado-based dairy company will be opening a $90 million milk and butter processing plant there. If all goes according to plan, 150 people will go there every day and work for a “living wage,” or lower middle-class income, the sort of job that nearly every community in America wants to create. But, for now, the site is flat acres of dirt, with a few hills of dirt, guarded by some temporary office trailers in a gravel parking lot and some heavy-duty CAT vehicles dotted throughout the site.

There was a roaring wind on Aurora’s groundbreaking day — it rattled and shook the tent that had been set up for the ceremony; it caused the welcome banner, strung up between two CAT excavators, to flap; later, it caused the microphone on a small podium at the front of the tent to squeal. Still, there was a triple-digit crowd that included Aurora executives, construction workers, elected officials, city staff, REDI representatives, business leaders, a handful of journalists, and one protester. (Her bright green sign, which read “Not Organic, Not my Milk,” a nod toward a recent newspaper article questioning Aurora’s farming practices, was blocked from podium view by a line of Big D Construction employees toward the end of the ceremony.)

Mayor Brian Treece talked to the crowd about how he was only one generation removed from dairy farmers, and he used to carry a bucket of cream around his family’s farm to help out. He said the Aurora project honored “Missouri’s values of hard work and innovation.” Steve Johnson, from the Missouri Partnership, also spoke, as did Aurora CEO Marc Peperzak, who talked about how he’d first come to scout the site five years earlier.

At that time, five years earlier, nobody from the city knew any Aurora officials were in Columbia. They didn’t even know Aurora Organic Dairy was thinking about Columbia. Business recruitment deals are governed by a strict process of confidentiality and meticulous planning, double-checking, analyzing, and evaluating from multiple levels in the public and private sector. These deals can hinge on little differences between dozens of communities across the country; they can change based on relationships, tax incentives, workforce changes, local ordinances, and a host of other factors. It’s hard to overstate the amount of consideration and conversation that built up to that windy groundbreaking day. The same could be said for any of these recruitment projects, including American Outdoor Brands, which quickly followed Aurora as the fifth company to receive a Chapter 100 tax abatement in exchange for investing in Boone County.

The ceremony’s finale was a photo-op featuring 20 ceremonial shovels stuck in two neat rows of loose gravel. Nineteen of them were gold and brown, but one had a shaft painted in the black-and-white pattern of a Holstein cow — to welcome Aurora to Columbia.

Investing in Recruitment

“Recruitment is the sexiest part of economic development,” Greg Steinhoff says. “These guys are wired to find deals, and then it’s purely sales — how you sell Missouri relative to another part of the United States, and in our case, we’re competing largely against Arkansas, Texas, and Illinois.”

Steinhoff is perhaps the man most responsible for the current economic development infrastructure in the state of Missouri. As Governor Matt Blunt’s director of economic development, Steinhoff oversaw the creation of a more aggressive business recruitment strategy, the crown jewel of which was the Missouri Partnership, a public–private economic development group tasked with marketing the state to site location specialists across the country. Steinhoff left public service in 2008 for executive life, now at Veterans United Home Loans, but his policies made Missouri’s DED a more aggressive competitor for recruitment projects like Aurora. But when he first started, he mostly studied and listened.

“When I came on board, we weren’t winning anything,” Steinhoff says. “What I found out was that we saw where the major investment was happening was in the Southeast, especially automotive. The core of Asian automobile manufacturing, and then the thousands of companies that feed those, were in the Southeast. So we started to study it and figure it out.”

What he found was a slick, professionalized recruitment operation with ample support from both state government figures (former Texas governor Rick Perry was a notoriously effective recruiter, helped by his state’s “deal-closing fund” that could kick in millions of dollars in extra cash to attract businesses) and private sector businesses.

“Recruitment is the sexiest part of economic development. These guys are wired to make deals.” — Greg Steinhoff, former Missouri director of economic development

“We had people — no offense, they were good people, but they were two years out of college, getting paid $28,000 a year, and making $500 million dollar deals. And we were losing,” Steinhoff says. “These other states had the same teams in place for a long time. . . . I said we can either sit back, rely on our low tax rating, and try to promote our state through advertising, or we can compete. And if we’re going to compete, we’re going to need to up our flexibility to have more incentives, and we need to put together a sales team.”

The state created the Missouri Quality Jobs Program (hence replaced by Missouri Works) to develop a broader set of performance-based incentives, and it created the Missouri Partnership as the sales team. The Partnership develops relationships with site selection specialists — there are around eight law firms who handle the majority of cases — and helps connect local economic development teams with companies that would be a good fit. The Partnership can arrange meetings around the state and the country, sometimes around the world, showing off what Missouri has to offer.

“If we tried to do that on our own, you know, those kind of events would cost thousands of dollars,” says Bernie Andrews, vice president of REDI in Columbia. “But if we partner with Missouri Partnership, we just pay a fee to go along and pay our air fare and everything else is taken care of.”

The Missouri Partnership is the first stop for a company interested in coming to Missouri. The Partnership is the first to handle a request for information, or RFI, from a site selector: a document that outlines the broad strokes of a company’s investment in the state and asks for information on qualified communities. If the Partnership talks with REDI and decides that Columbia might be a good fit for a dairy processing plant, for example, then they’ll have the city submit an RFI response to the company, explaining things like local infrastructure capacity, workforce patterns, schools, and incentives. And while the site selector is evaluating the state and its cities, the state and cities are evaluating the company: Will this company bring the right kind of jobs to the community? What will their financial impact be on local taxing entities? Will they create ancillary jobs outside of their company? Will they fit into an existing industry cluster?

“I don’t think people realize how calculated these proposals are,” Steinhoff says. “These people are experts at making sure that it’s a core job, that it’s going to bring back a good return to the state . . . You’re basically trying to find the threshold of public investment to then garner a certain amount of private investment.”

These kind of calculations are what leads the city to sell a piece of land that they paid $3 million for to a company like Aurora for $2.1 million — if the city figures it can make up revenue in the long term by adding permanent facilities and high-paying jobs, it can offer more to a company in the short term.

“We don’t submit to every project that’s out there,” Andrews says. “Sometimes [the RFI] might have wage information saying they’re looking to hire 100 people at a certain wage. If we don’t think that’s going to be high enough here to be attractive to the labor force, we don’t submit for that. If it’s something that’s kind of a heavy industry that we don’t think would fit well within the city of Columbia, we’re not going to see that site in Columbia. We’ll look at these to see if it’s something we feel comfortable encouraging.”

Andrews says Columbia is especially interested in “basic” employers serving at least a multistate customer base, but preferably a national or international one. Generally speaking, these are candidates like manufacturing companies (like Dana Light Axle Products, another recent Chapter 100 recipient) or life sciences companies (like Northwest Medical Isotopes, another recruitment project many years in the making).

For most of the recruitment process, the business remains anonymous; if word leaked that company XYZ was looking at a site in Columbia, their competitors could potentially mobilize faster and beat them to the punch. The city gives potential recruitment projects code names for most of the negotiation process. Aurora was “Project Cadre”; some years ago, IBM’s data center, now on Lemone Industrial Boulevard, was “Project Tiger.”

If, after going to the Missouri Partnership and then collecting an RFI submission from a city, a site selector feels that Columbia could be a nice fit, they put the city on a finalist list. Sometimes these lists include 10 cities; sometimes just three. But making a finalist list is a big deal — American Outdoor Brands started with a pool of more than 80 cities across 18 states. Being a finalist means you’re close. It means you’re about to have a lot more conversations. That’s particularly true in Columbia.

Cards on the Table

Chapter 100 bonds are one example of the types of performance-based tax incentives that Steinhoff promoted at DED; they’re also the only type of tax incentive that can be deployed for local projects in Boone County. “Basically, our only real tool at this point in time, locally, is the Chapter 100 abatement, which is Boone County policy,” Andrews says. The city briefly tried to designate part of Columbia as an enhanced enterprise zone, or EEZ, which would have opened up more incentive possibilities, but opponents of the policy eventually won out.

Chapter 100 policy is determined at individual county levels, but generally speaking, the program offers property tax breaks in exchange for a certain amount of investment in the community. In Boone County, the current policy calls for a minimum $10 million capital investment for a new company or a minimum $5 million investment from an existing company to qualify for the bonds. Aurora received a 75 percent abatement over 10 years, paying $1.7 million in taxes over that period. The county is currently reexamining the threshold limits on its Chapter 100 policy, but the thresholds aren’t really what makes Boone County’s Chapter 100 bonds so quirky.

Dave Griggs, owner of Dave Griggs’ Flooring America, former county commissioner, and former REDI chair, is now the incentives committee chair for REDI; once a company indicates that Columbia is a finalist for a site and they’re interested in Chapter 100, Griggs gets to work. He studies what impact the project would have on taxing entities in town, the biggest of which is Columbia Public Schools. He meets with County Assessor Tom Schauwecker to parse through the revenue that would be gained by a project and abated through Chapter 100. And none of that is really normal.

“Let’s say that you and I want to start a saw mill in Henry County and we want to take advantage of Chapter 100,” Griggs says. “We go to the county commission and say, ‘Hey guys, here’s what we’re gonna do and we want to do Chapter 100.’ Generally, what happens outside of Boone County is the county commission says, ‘Hmm, you’re going to spend how much money in our community? You’re going to pay how much in property taxes? OK, we’ll do it!’” At the next commission meeting, Griggs says, they’ll hold a first reading for their approval of the Chapter 100 bonds; if there’s a newspaper in the county, they might report it, but it’s unlikely that the public would ever hear anything about it. At the next meeting, they’ll approve the application and grant the incentives.

“That would just be an impossibility here,” Griggs says. “So, when we drafted our policy, we very methodically and very intentionally involved all those taxing entities. But that’s what makes our process, I think, very open, very upfront, and extremely valuable. Because Bernie, Stacey [Button, director of REDI], and I may not think of something. Bernie, Stacey, and I and the Missouri Partnership and DED might have overlooked something.”

Any Chapter 100 application in Boone County has to first clear a Chapter 100 review committee, which includes appointees from each taxing entity in the county, who have the power to reject an application before it ever reaches the county commission. REDI, city officials, and the company have to present their ideas and plans to the committee and answer any questions that come up. In other counties, the library district and the school district might bemoan Chapter 100 projects getting breaks on taxes that would otherwise go to them; in Boone County, those taxing entities control the process.

“Instead of three people making the decision, like in every other county in Missouri, 75 people make the decision before it even goes to the three people who are going to vote,” Griggs says.

It should be reiterated that the guiding principle not only of the Chapter 100 process, but also the Missouri Partnership and DED and REDI, is job creation. The lens through which every potential recruitment project is viewed is jobs: how many jobs will the company bring, how many more jobs will those jobs create, how much tax revenue will those jobs make up for, and so on. While the county has approved three Chapter 100 applications in the last year, they’ve only approved two others since adopting the policy in 2005 (EAG Laboratories, formerly ABC Laboratories, and Kraft Heinz, who said they’d move to Madison, Wisconsin without an abatement).

“The real potential, the actual potential for jobs, that was something that really motivated me to look much more kindly on this,” says Janet Thompson, the Northern District commissioner for Boone County. “I would much rather not give these tax benefits to companies where, you know, I think they could get financing another way, and tax money is hard to come by. And that’s why it has to be vetted so carefully to make sure you’re not giving something up that outweighs this other benefit. It’s a balance that you have to strike, and that’s why we look very closely at things like infrastructure cost.”

Before the county commission would approve the 75 percent abatement for the Aurora project, they asked Columbia City Manager Mike Matthes to provide certification that the facility wouldn’t cause any undue strain on sewer capacity; maintaining water quality was a particular concern for Thompson.

By the time Chapter 100 comes into play, a company has generally already been sold on Columbia as a suitable site for their project; that’s essentially what being a finalist means. But — to repeat an important point — business recruitment is an outlandishly competitive game, and you have to play hard to win. If you don’t have incentives, other communities will. “The genie is out of the bottle for tax abatements,” Thompson says. “Since he’s out, let’s direct him in a direction that helps our community and doesn’t turn around and snap at us.”

Griggs says the county will likely update its Chapter 100 policy — probably changing the investment thresholds and erasing some language that’s now repeated in state policy — but the public-facing process will stay in place. “When companies first come to us, one of the first things we do is hand them our policy and say, ‘If you decide to do this, it’s an open public process,’” he says. “You’ve got to put your cards on the table or we’re not the right choice.”

A Bipartisan Investment

The trouble with open government processes, like the Chapter 100 approval procedure, is that the public often doesn’t voice its opinion until it’s too late. To the citizen who’s a casual follower of local happenings, the prospect of giving up a weeknight to listen in on a dairy processing company’s infrastructure presentation to the library board is understandably less appealing than a normal night in. But the business recruitment process in Boone County — that is, the process that starts once Columbia is seriously contending for a company — is designed to be perpetually strengthened by public input. If you want to make it better, you can literally do that just by speaking up.

“I think, you know, if we are concerned, if we want to know where our tax dollars are going, then speak up if there’s an opportunity for a public hearing, which there are with Chapter 100,” Thompson says. “There’s at least two in the commission chambers and even more through REDI. And I wish we, as citizens, would be more engaged and ask more questions, and say those things that are important.”

Aurora, while it has received criticism from some anti-incentive hardliners and skeptical organic-certification enthusiasts, had broad support across the ideological spectrum. Steinhoff, a conservative who served in a Republican governor’s cabinet, sees it as a fulfillment of the business-friendly economic development strategy the state began to develop a little more than a decade ago. Thompson, a former public defender and Democrat, supports it as a way to provide middle-class jobs to workers whose only other alternative would be minimum wage. At the local level, business recruitment — even though it intersects with public policy in a number of different ways — isn’t really political.

“The real potential, the actual potential for jobs — that was something that really motivated me to look much more kindly on this.” — Janet Thompson, Boone County commissioner

“All the politics aside, all the opinions,” Steinhoff says, “is this deal going to produce a better community when it’s done than what we have now, and can you make a case for why that’s going to happen? That’s the bottom line for economic development.”

At the Aurora groundbreaking, Marc Peperzak, the CEO, talked about Columbia being a good “cultural fit,” which is also something that Andrews says REDI considers when responding to an RFI forwarded to them by the Missouri Partnership. The appropriate people will calculate the return on investment and the revenue impact of a recruitment project, but is the company something that could really integrate into Columbia for the next several decades? After all, those are the types of businesses that create other businesses and other jobs; those are the types of businesses that end up putting people on the boards of REDI and producing people who run for school board and participate in Chapter 100 committees down the road.

“From a personal standpoint, I’m passionate about economic development,” Griggs says. “I’m a regular guy. A Boone County farm boy, born and raised. But if I wanted a career position working for somebody, if I can create that kind of job where I can start and grow in that job — well, that’s my personal goal for what we do.”

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