Andy Mace, Managing Director, Global Business Consulting , Cushman & Wakefield Business Consulting (Location USA 2010)
When searching for the ideal location for a new facility in the United States, foreign investors face daunting decisions. The country is expansive and diverse in its economy, business climate, and infrastructure. This presents challenges in assessing national, state, and local factors that influence the feasibility, cost, and success of investment. Fortunately, there exists an invaluable network of U.S. economic development agencies that assist investors throughout the facility location and implementation process. Investors typically seek information from the general to the site-specific as the project progresses. Similarly, the level of effort, expense, and commitment that EDAs and government officials offer prospective investors grows as a project continues.
An EDA Primer
There are many types of EDAs in the United States, and many areas typically have two or more EDAs. They vary based on locations served, funding source (public, private, or both), services, emphasis on business attraction versus retention, available government incentives, and scale (level of funding, employees, and resources). Local EDAs often exist as subgroups, with economic development responsibilities within chambers of commerce or local governments. Regional EDAs have become more common and effective in recent years by pooling the resources of multiple cities and jurisdictions in an area recognizable to outside investors. Some regional EDAs even include agencies from multiple states. Each state typically has one leading public agency devoted to statewide community development and business attraction. Some states have privately funded EDAs with a complementary role. Large electric-power utilities also allocate employees and resources to attract and serve potential customers, and can help investors with significant power requirements. EDAs do not charge for their services.
No two EDAs are the same, and the interplay between overlapping EDAs is unique. Investigating the services, resources, and interactions between EDAs is worthwhile and easily done online or by contacting the agencies. An effective approach is to contact state organizations and request referrals to regional and local entities. An EDA's size does not predict its effectiveness. In some areas, smaller regional and local EDAs take leadership and provide the most assistance, while the state EDA takes a secondary role. Business leaders realize the best outcome is when multiple EDAs cooperate on the investor's behalf.
Phase 1: State and Regional Comparisons
First, the investor should collect state and regional indicators of key cost drivers and the availability of critical resources for the proposed facility, such as work force and industry clusters, utilities and transportation infrastructure, government incentives, and federal and state regulations and taxes.
Standardized information requests effectively source this information from state and local EDAs. Agency websites contain relevant information, but direct information requests obtain comparable metrics and tailored data. At this and in later stages, EDAs contact appropriate state agencies, such as work force development, environmental management, taxation, and transportation. They serve as a gateway to other government functions and departments.
In early project stages, it is not necessary to reveal the company's identity or the details of the investment. Each EDA has its own confidentiality policies and practices.
Phase 2: Property-Specific Comparisons
Once the investor narrows down several states or regions, the evaluation progresses to identifying and comparing greenfield sites and buildings. Regional and local EDAs identify eligible, available properties and compile information on each property through their local contacts. As in the first phase, standardized information requests effectively gather comparable information. This process is easily completed remotely until deciding among the final locations.
Myriad data can be collected during evaluation, but this stage should focus on economic, infrastructure, and qualitative factors that will influence facility costs, feasibility, and future operations. The most useful EDA data includes physical real estate features and costs, relevant major employers and industries, educational institutions, taxation rates, amenities and attractions, local utility costs, and infrastructure capacities. Other EDA data may not allow for regional comparison because they are not similar in geographic scale or time of measurement. Such data include wages, demographics, and overall economic indicators. For this information, third-party databases offer more robust, current, and uniform details.
Data availability varies among locations. In this early phase, EDAs may gather only limited new information to address a data deficiency. They typically limit such efforts until the investor company seriously considers the location.
Phase 3: Due Diligence and Negotiations
Once investors identify top locations and properties, they should perform in-depth analyses on specific operating conditions, implementation requirements, government incentives, and key cost factors. These activities should provide full confidence of the facility's feasibility, competitive longevity in the location, and confirm the area's attractiveness.
EDAs facilitate investor visits; property and labor market due diligence; and negotiations with property owners, service providers, and government agencies. Experienced EDAs provide invaluable logistics and planning support to ensure productive investor visits. Upon request, EDAs will develop tailored itineraries that include:
• Meetings with local corporations and industry associations to discuss operational and business climate issues;
• Introductions to officials about government incentives, business support, and registration;
• Meetings with state agencies about hiring and training, environmental and construction approvals, taxation and revenue, and transportation authorities;
• Introductions to specialty service providers (such as work force staffing; legal, engineering, and industrial services; and construction); and
• Tours of housing communities, healthcare facilities, education institutions, and recreation and cultural amenities.
Large industrial projects may require technical and engineering analyses before the final site selection. Sometimes EDAs will commission activities on the investor's behalf, such as site inspections, improvements, physical testing, and preliminary design. If incentives are involved, EDAs can assist investors with assessing eligibility for incentives and navigating the application process.
Given the significant commitment of resources, EDAs in this phase look for signs of sincere interest and potential commitment by the investor. EDAs will often require the identity of the investor, and will examine the company's financial health, business plan, and project financing. It is important to share this information, with appropriate confidentiality, to foster collaboration and consensus among community and government stakeholders responsible for project approvals and incentive programs.
Phase 4: Implementation and Startup
Even after completing incentive negotiations and property-acquisition activities, EDAs can assist with implementation. These activities may include relocating transferred employees and their families, recruiting and training new workers, and facilitating construction. Sometimes these services are formalized within state incentives agreements.
Acclimating transferred employees is critical for the facility startup. EDAs and their contacts can help find housing, schools, and spousal employment opportunities; connect transfers with social and professional networks; and obtain work authorizations, identifications and registrations, and bank accounts.
Many state agencies pride themselves on their ability to identify, qualify, and train new workers. Those services typically include finding job applicants, testing applicants for relevant skills, providing space for applicant screening and employee training, and training new employees. For large projects, state incentives may fund the trainers' travel to foreign investors' facilities, as well as future employees for training-program development and execution.
Both state and local EDAs may support construction and site improvements. EDAs can identify necessary permits and approvals, connect the investor with government authorities, and identify contractors of potential interest. The EDAs' coordination with government agencies, along with proactive, preliminary meetings with key agencies, can reduce the time and risk of permitting and approvals.
Investors should be aware of the EDA's limitations. EDAs are inherently biased to their own locations, and their objective is to influence investors' decisions while providing information and services. Investors must remain objective about an EDA's claims, and should obtain third-party analysis regarding key cost factors, labor market dynamics, infrastructure capacities, and incentive programs. Furthermore, EDAs do not provide comparative analysis of their locations versus others; this remains the investor's responsibility.
Managing EDA communications and interpreting information requires considerable resources, particularly at the project start when considering multiple locations. Iterative communications are needed to address uncertainties, and EDAs function at various speeds and competencies, which do not always align with investors' requirements.
Ultimately, EDAs' interests are somewhat aligned with those of the investor. But many investors retain independent site selection consultants. Consultants represent the investor's best interests, manage confidentiality concerns, provide value-added comparative analyses, negotiate competitive incentives, and expedite the overall process.
Foreign investors considering the United States must navigate challenges and decisions to optimally locating and implementing new facilities. State and local economic development agencies can be instrumental allies throughout the process, providing invaluable support services in return for investors' consideration of their communities. Investors should take full advantage of the EDAs' assistance while comparing the features of one location in the context of its competition and independently verifying important facts and figures.