Indiana communities seek to diversify local economy

What happens when a city loses its identity? For much of the 20th century, the fortunes of the Midwest could not be extracted from those of the automotive industry. The big three - General Motors Corp., Ford Motor Co. and DaimlerChrysler AG - operated plants across the region.

And for 70 years, Anderson was akin to Detroit's southern campus. General Motors Corp., Guide Corp. and Remy International once employed about 25,000 people in the city. Now that era has come to an end.

On April 30, Guide officially relinquished the keys to Plant 9. May 1 marked the first day of unemployment for the remaining 100 Delphi employees at Plant 20, as another 70 await transfer to GM's Kokomo plant.

Mourning the loss - asking "What happened?" - is less important than setting the agenda for the next phase. For Anderson, that has meant stabilizing the losses with new manufacturing jobs, strengthening educational resources and broadening its economic base.

"We lost 23,000 manufacturing jobs, all related to each other," said Larry Sloan, president and CEO of the Anderson Group Consulting. "The manufacturing, the rust belt thing is never coming back.

"I think we can be a center for advanced engineering, we have a lot of good engineers. (Anderson Mayor Kevin Smith's administration) and its people understand the vision needed to move forward."

New way of business

The automotive industry essentially created the middle class in America. It allowed generations of Americans in places like Anderson, Kokomo, New Castle and Marion to go from high school to high-paying jobs that allowed them leisure time, homeownership and the ability to send their children to college.

In May 2006, a television crew from BBC World (of the British Broadcasting Corp.) came to Anderson to film a segment for its Emerging Giants series, focusing on the economies of India and China. The city provided a good example of a community whose economy was based on a single industry.

"Many of the same issues occur," reporter and producer Caroline Hepker told The Herald Bulletin. "Essentially, it's globalization - people somewhere will always do it cheaper."

The issue is almost universal across the Midwest.

In February, BorgWarner Automotive announced it would close its light manufacturing plant in Muncie. A Guide plant in Monroe, La., closed the same week as those in Anderson and Pendleton.

But manufacturing savvy in Indiana's industrial cities has also pointed the way forward - albeit with foreign investors some of the time.

In June 2006, Honda Motor Co. announced it would build a 1,700-acre, $550 million plant in Decatur County near Greensburg. The factory, which will produce the Civic, is expected to generate 2,000 new jobs.

"This announcement says great things about the caliber of workers and sense of community that we have in southeastern Indiana," said state Rep. Cleo Duncan, R-District 67. "It also speaks volumes about the new direction our state is heading and its commitment to economic development."

Tax credits, training assistance and real and personal property tax abatements for the project total $41.5 million, while local infrastructure improvements will total $44 million and state improvements around $56 million.

"This is another example of the positive changes that have been made to Indiana's business climate," said Pat Kiely, president of the Indiana Manufacturers Association (IMA). "Changes the IMA has fought for include the elimination of the inventory tax, improvements to Indiana's corporate tax structure and investments in Indiana work force - all designed to encourage investment in Indiana."

Toyota, meanwhile, unveiled plans to create a facility of its own in Lafayette, creating 1,000 more jobs. And German transmission-maker Getrag Corporate Group is working in conjunction with DaimlerChrysler to construct a $560 million plant in Tipton County expected to employ 1,200 people. It will produce 400,000 to 500,000 transmissions annually starting in February 2009.

In July 2006, Nestlé Corp. announced plans to build a nearly 900,000 square-foot factory and distribution facility in Anderson that will create 300 jobs.

To land the deal, Anderson and the state of Indiana put together an incentive package worth about $46 million, much of it devoted to infrastructure. Around $4 million in tax increment financing (TIF) funds will be used to improve roads, $4.8 million to build an electrical substation, while other funds will create a railroad spur, drainage ditch and new utility lines.

"Although this is necessary to serve Nestlé, it also will serve everyone in (industrial park The Flagship) and allow additional land to the west to be developed," Anderson deputy economic development director Linda Dawson said.

The Indiana Economic Development Corp. (IEDC) touts Indiana as having the lowest workers' compensation rate in the United States at $1.88 million. Not to mention its low state business tax of $172,133 per $100 of payroll and low industrial electricity costs.

But those jobs represent the old way. What Indiana cities really need is a new way of doing business.

Destination state

Some indications suggest that Indiana may soon could become more of a destination state.

In the early morning hours of April 29, the Indiana House and Senate passed legislation authorizing slot machine gaming at Indiana's two pari-mutuel horse tracing tracks, Hoosier Park in Anderson and Indiana Downs near Shelbyville. The measure allows for 2,000 slot machines with a one-time licensing fee of $250 million. Gov. Mitch Daniels signed the legislation into law on May 11.

"I've seen it in other parts of the country. It works," said Hoosier Park President and General Manager Rick Moore. "Anderson will become a destination point."

Each facility will invest $100 million more in capital projects related to the venture and predictions suggest that could create hundreds, if not thousands of new jobs, including kitchen and wait staff, along with maintenance and security positions.

During hearings over the bill at the Indiana Statehouse, Shelbyville Mayor Scott Ferguson spoke on behalf of Indiana Downs, calling it a good corporate citizen.

"I'm here to tell you what a great partner Indiana Downs has been for our community," he said. "Frankly, we're afraid of losing this on our community. We appreciate any assistance and anything you can do to help."

The western United States has Las Vegas, Nev., the East has Atlantic City, N.J. Perhaps Indiana is on its way to becoming the gambling capital of the Midwest.

Casino gaming has already boosted the economic portfolio of Indiana communities along the Ohio River and near Lake Michigan. And "racinos" elsewhere, like those that could be coming to Anderson and Shelbyville, have had similar impacts in other states.

Mary Lou Coady, media relations specialist at Prairie Meadows Racetrack and Casino in Altoona, Iowa, said the addition of slot machines in 1995 allowed the facility to go from 40 employees to 1,350.

Coady described Altoona as a blue-collar area, with a history of organized labor and widespread agriculture.

Sound familiar?

Other indications of a growing service-based economy are also popping up across the region.

On April 30, IBM announced plans to create a $2.9 million customer service call center in Daleville. The call center will employ a total of 500 people. It was another major asset for Delaware County, which has found varied ways to insulate itself against the decline of manufacturing.

"Today we introduce the second Fortune 500 company to open offices in our county in the last year," said Bob Curtis, chairman of the Muncie, Delaware County Economic Development Alliance, referring to the addition of lender Sallie Mae. "Together they will employ 1,200 people."

The county struck an agreement with IBM, stating that the company would make a "good-faith" effort to hire 75 percent of its work force from Delaware County.

"Everyone is excited because the promises have finally come true," said Daleville Town Councilman Stephen Overmeyer. "We're trying to bring life back to what were stagnant, empty buildings for many years."

High-tech training

With new manufacturing jobs to prop up the current economic model and the promise of entertainment dollars on the horizon, Indiana is looking to build its economy with training and high-tech industries.

The challenge is to fit the skill set of the existing work force into a new container. In a sense, communities like Anderson can exploit the high-tech training propagated during the GM years and mold it to current needs.

The Kokomo Howard County Development Corp. has used a grant from the U.S. Department of Agriculture to provide incentives for business expansion, job creation and investment in rural areas of Indiana.

"Our entrepreneurs have high-tech, creative new businesses," KHDC President Greg Aaron said. "The Kokomo Technology Center already provides on-site facility services for emerging businesses. From coaching and mentoring services, to shared equipment and technology. This allows us to provide better financial assistance to our businesses."

In March, ground was broken for the $2.6 million Flagship Accelerator, located at Exit 22 along Interstate 69 in Anderson's southwest corner. It provides 70,000 square feet of operational space and 28 feet of clear span for storage, light manufacturing and prototyping.

Charles Staley, CEO of the Flagship Enterprise Center, pointed out the new facility will support the needs of incubator graduates and qualified early stage companies that are transitioning to a permanent location within Anderson and Madison County.

"This truly represents a turning of the corner in economic development for the area," Staley said. "This building gives us stage two for graduates from the Flagship Enterprise Center."

Education is regarded as a steppingstone to economic development, and the statewide network of Ivy Tech Community College of Indiana is gaining new leadership.

On July 1, Tom Snyder will take over as president of Ivy Tech. Snyder comes off a 30-year career with GM and Remy International, and is revered for his ability to recruit business.

"The critical element for Indiana is to ensure that we have a work force trained and ready to take on the new job opportunities that are coming to Indiana," Snyder said. "Madison County is a good example with Mancor Industries, with Nestlé and other projects the (city of Anderson) has brought in."

The IEDC has made an array of programs available to attract and keep businesses. Its 21st Century Research and Technology Fund, Venture cap Tax Credit Program, Small Business Development Center Network, Small Business Innovation Research Program and others help industries adapt as well as expand.

Maps of transportation and logistics, foreign investment and institutions of higher learning are also available though the IEDC, which keeps a list of available facilities throughout the state.

The Regional Employment Assessment Center for Hiring, or REACH, in Lafayette provides services to businesses in a 14-county area. It recently added Howard County's WorkKeys, a skills assessment tool that helps employers locate desirable job candidates.

"This is a tremendous opportunity for our entire area," Lafayette Mayor Tony Roswarski told the Journal and Courier. "It will help market us on the national and global economy."

REACH is a pilot project of the Workforce Innovation in Regional Economic Development initiative funded by Purdue University. It provides services to employers in Benton, Carroll, Cass, Clinton, Fountain, Fulton, Howard, Miami, Montgomery, Tippecanoe, Tipton, Wabash, Warren and White counties.

Top 100 cities

As good news has snowballed, Indiana cities are gaining a reputation.

In April, seven Hoosier cities earned spots on Forbes' list of 100 small communities that are good for business: Bloomington (6), Lafayette (24), Columbus (45), Terre Haute (56), Muncie (64), Elkhart (83), Anderson (98) and Michigan City (99).

The Forbes list took into account local colleges, cost of doing business, crime rate, culture and leisure, education attainment, income growth, job growth and net migration. Not surprisingly, most of the Indiana cities fared especially well in the cost of doing business. With the modest price of property and housing in most Indiana locales - vs. those costs in rapidly growing areas on the East Coast, West Coast and elsewhere - Indiana has a built-in incentive to attract businesses from out-of-state.

Anderson Mayor Kevin Smith has made job growth and economic development the central focus of his administration.

"In 2006 more than 40 companies decided to relocate existing businesses or create new businesses in Anderson," Smith said. "This community is a good investment. We're very business-friendly. Our municipal tax rate has gone down for the second year in a row."

Smith has gone to Asia and Europe recruiting business and hired consultant Greg Winkler in 2004 as a "salesman for the city" at a hefty price. The city drew criticism in June 2006 for renewing Winkler's contract, valued at up to $208,000 annually.

Across Indiana, communities are using a similar recipe, based on the primary ingredients of investment and diversification, to forge a new economy.