CEO Roundtable: Economic Development

Springfield Business Journal Editor Eric Olson discusses economic development with Steve Childers, Ozark’s city administrator; Brad Erwin, vice president of economic development for the Springfield Area Chamber of Commerce Board of Directors and president of Paragon Architecture LLC; Sarah Kerner, Springfield’s economic development director; and Garrett Tyson, Republic’s community development director.

Eric Olson: In a word, how would you describe the economic development environment?
Steve Childers: Robust. I think the economy is moving forward with great optimism. I hope that lasts.
Olson: We’re currently at the longest economic expansion on record, so it can only last for so long.
Childers: It can. Springfield is the retail hub of the metropolitan statistical area and (Ozark) loses a lot of our workforce every day. We see our daily population shrink and our evening population swell. You hope that the rooftop growth that you are getting, certainly in the amount we’re getting, would generate some commercial retail because that is really what drives our revenue base.
Sarah Kerner: Growth. We know we are in expansion phase. There still is a lot of enthusiasm, but we’re all kind of just wondering how much longer.
Garrett Tyson: Hopeful. There is a, from my perspective, quite a bit of newness and freshness around the region. I’ve been in Republic for 11 years and have grown up around here and I’ve see quite a bit of alignment regionally. For me, that generates a sense of hope about the future. I think that alignment has the potential to preserve all of us through whatever comes next.
Brad Erwin: Positive. I think you have some support for economic development at all levels of government right now.
Olson: What are the key drivers? Why are things robust, growing, hopeful? It’s a bright outlook.
Childers: Money is cheap. You’re starting to see growth probably slow even more rapidly in the coastal states, and I think you’re seeing a lot of national players start to focus on the Midwest. We have relatively low property taxes. Our land values are lower. … When you look at businesses now that are relocating, they don’t just choose to relocate based on the old common factors. I want the most qualified labor force. I need a place for that labor force to live. I look at quality housing and quite frankly, if I’m going to bring my CEOs and my vice presidents and presidents there, I know there has to be a level of quality of life that their families are going to want.
Erwin: That quality of place has been more at the forefront of discussions around the community level over the last six to 12 months – even getting to the point where Springfield City Council is talking about that. You can have all those quality business metrics to attract or retain talent or businesses or expand, but if there’s not the talent pipeline there that’s a negative. What attracts that talent and keeps that talent here is the quality of place.

Growth path
Olson: On the regional aspect of development, which direction do you see Springfield growing outward?
Childers: I think Rogersville is your next explosion. I think it’s going to go down all the way east to Marshfield. I think Willard. You’re just going to see the entire MSA fill in.
Kerner: We even talked about in the Planning Department that [Route] 125 could be another north-south road. That’s a long ways down the road, but eventually.
Erwin: You’ve got to start thinking about it now. And the [Route] 160 expansion up in Willard, I think that’s going to be interesting to see what that leads to.
Olson: How far out is that outlook?
Kerner: That depends on some very unsexy things like sewer. Truly, utilities are a big issue of development. You probably have to get out some urban service area maps and see where the watersheds go.
Childers: People don’t realize just the importance of the decisions that are being made at the federal level, like the federal transportation bill. We’d all like to see a long-term transportation bill put in place. You have to plan so far ahead because there’s such large projects and it costs so much. Infrastructure is the key.
Tyson: Transportation drives what the pace of growth will be. The infrastructure will facilitate that growth, but transportation is different in one key aspect and that’s how it is funded. Whereas for your water and your sanitary sewer systems, you have ratepayers that kind of fund and get some funding structures that can help you pay for those expansions. But on the transportation, it’s not as easy to secure that funding because you’re having to go out for, in most cases, sales taxes. The lack of transportation funding is the barrier that I think you could see slowing up the pace of growth. The three most important drivers of economic development are education, transportation and public safety. Historically, our region has been very resilient through economic ups and downs. But transportation ... something has got to be done there if we’re really going to seize on the opportunities that we have in the next 20, 30 years.
Olson: Where does northwest Arkansas come into play? Is that more of a community competitor or complementing the growth in Springfield?
Childers: They are a benefit. When we have companies, it could be international or national companies that are looking to relocate, and they’re going through their site acquisition process and then they’re evaluating you. They’re not determining whether you’re on the list. They’re determining whether you’re off the list. That’s the aggressive nature of what they do. It’s not that far away. It only takes you about an hour and a half, maybe two hours to get there. So big companies look at that and say, “Well, that’s all the Midwest.”
Kerner: As part of my job I get to hear a lot of the, “Why don’t we have a Trader Joe’s?” That area down in northwest Arkansas has a lot higher average income, so they get a lot of retail stores that we never get here. I don’t know that that’s really even a competitive thing because that’s just that site selectors have their cutoff. There’s a little element of competition, but you know, we are where we are. You just have to build on our own strengths.

Industrial space
Olson: With industrial development for the city of Springfield, I understand there’s a challenge with the ownership of the industrial parks and you see some other pockets getting some developments. Republic is a great example. Is Springfield missing out on industrial development?
Kerner: Partnership Industrial Center and PIC West were developed because we didn’t have good development-ready industrial land. Public entities went in and put tax dollars in to build the roads, put in the infrastructure, have it ready to sell and we sell it for a cost-recovery basis because we need to put the money back that paid for it. It wasn’t really developed for the purpose of being the best price on the market and to compete with private owners. The city is an active member of (Springfield Business Development Corp.), and we’re fully supportive of industrial development in the region. Republic is blessed with a large, flat, beautiful area for industrial development. I don’t personally feel that Springfield is losing out because somebody’s putting that big industrial building in Republic. I think that’s good.  
Erwin: When those opportunities come up with the Springfield Regional Economic Partnership, it’s really where is the best fit for that particular project? PIC West is designed for very specific purposes. … It’s not designed to compete with the private sector.
Olson: The original PIC is full. And then PIC West?
Kerner: Probably half. Something we’d really love right now that’s kind of a focus is we get a lot of requests for rail-serve sites and often quite large rail-serve sites. We don’t really have that here. They’ll say 200 acres, flat, room to turn the train. 
Erwin: The biggest thing we’re missing, though, is that speculative warehouse, industrial and office space. Tom Rankin has stepped up with his development and put up a 100,000-square-foot building. Before it was even done, it was leased out plus added onto. If you don’t have the real estate there to offer a business to come up and to get in the building right away, we just get knocked out.
Tyson: The way your question was phrased is important, because “does Springfield lose out on some opportunity” I think is reflective of maybe an unfortunate misconception that’s out there that if a particular business locates in Republic or in Ozark or in Springfield that the other communities have lost out. The economy is so much bigger than Republic. If you look at a lot of that industrial growth that has occurred in Republic, it’s in the consolidated area that was formerly the Village of Brookline. Everybody is most likely benefiting from the product that comes from that particular growth. And in some of our own internal estimates, we actually think that Republic may be benefiting the least from that growth financially. Competition amongst the outlying communities … if you buy into it, what you end up with often is what I call an economic development race to the bottom.

Working together
Olson: Are there a few things that you guys would say private industry can do to help limit those number of noes that disqualify us as a region?
Kerner: BNSF, which is the major rail player in the area, is obviously also very interested in being able to provide the rail service for these major companies that are going to pay them a lot of money for it. That’s an economic development problem that we have yet to figure out.
Childers: You have to brand yourself as a place that is open for business. If you don’t even give them the reason to look your direction, you’ll never land the business.
Erwin: One component of that, too, is not just the new people coming in, but making sure that we’re retaining the existing businesses that are here and giving them the opportunities to expand as well. That’s kind of that first line of defense, allowing those opportunities for existing businesses to prosper.
Tyson: Data is extremely important. You can’t be attracted to a market that you don’t know anything about or that you don’t know enough about. The site selection process is becoming more complex all the time. They want data about your region and data about the markets, so they can make the best informed decision for their client that they possibly can.

Attraction game
Olson: Which comes first to you guys, businesses or the workforce?
Erwin: If you’re talking about attracting new businesses, if there’s not the qualified workforce to fill the needs, then they’re either not going to come or they’re going to siphon off that talent from somebody else creating another hole. Flip it a different way: What’s going to attract the workforce?
Childers: It’s very expensive to attract the workforce. The quality of life amenities like open space and parks and trails and nice lofts and cool living, somebody has to pay for all that. It’s the chicken and the egg.
Kerner: Another thing we see is kind of looking at the generational differences. Newer college graduates often are looking at where do I want to live and then I’ll figure out where to work. How do we be a place that somebody wants to live?
Tyson: I think workforce is both attracted and grown in our region. One of the real reasons why I am so hopeful is because I really do believe our region understands that the education that’s available at all levels is very good. That’s producing future workers right there. Our school superintendent announced a couple of weeks ago that they had started a pilot program over the summer to try to get some elementary school kids up to grade level at reading, and just in the pilot program, they did that for 90 kids. Ninety kids back up to grade level at reading is incredible. If you really understand how important that is to their future, long term, and how damaging it can be to not be at grade level. It gives me a lot of hope.
Olson: What about the hotly debated topic of business tax incentives? What’s your argument?
Kerner: Tax abatements are a fantastic tool for the right projects. They can become very controversial. People don’t always see them in the broader scope of all the development. So, you know, we’ll get a huge amount of public outcry about a particular proposed incentive. Oftentimes the property taxes that are being abated, it’s mostly the school district’s levy. Total property value in the whole city that’s under any kind of abatement is like 1%. Sometimes the total impact can get a little bit blown out of proportion. What we are allowed to use property tax abatement for is to remediate blight and capital investment.
Tyson: It’s really difficult to just say broadly that these incentives are good or bad. A lot of times these economic development incentives are focused on immediate impacts of job creation, for example, and it’s easy to lose sight of those secondary and tertiary economic impacts that also need to be accounted for as well as opportunity costs. My recommendation to our city administrator and council pretty consistently is that we are an emerging market, so let’s focus on some basic fundamentals. I think for us trying to get into developing some of these complex incentives and then putting in the real work that Sarah and her team have to do to make sure that project by project, these things are all progressing right away, would take a lot of resources away from us.
Erwin: When they’re properly applied, they shouldn’t come at a cost to somebody else.

Excerpts from Features Editor Christine Temple, ctemple@sbj.net.