Editor’s note: The loss of manufacturing jobs throughout the area led The Republic to look into economic development efforts and how our communities work to remain competitive.
Reporters and editors interviewed the heads of the economic development programs in area counties, elected officials and experts to find out what is working and what is not in their efforts to recruit and retain jobs in our communities.
We spoke to new or growing employers to find out what led them to locate or expand their business there.
The result is a 10-day series beginning today called “Jobs: Lost and Found.”
By Boris Ladwig, The Republic
Whether companies bring jobs to Columbus depends on reasons as varied as labor costs, tax rates and whether the climate allows the CEO to parasail late in the season.
The multitude of factors that contribute to companies moving or expanding can be gleaned from Bartholomew County news from the last few years:
In 2001, two entrepreneurs launched LHP Software in Columbus, partially because of the proximity to their largest customer, costs, traffic and their local connections: One founder worked for and the other one did consulting work for Cummins Inc., and both of their wives worked for Cummins.
In 2002, Cummins ceased heavy-duty truck engine assembly in Columbus, partially because of excess capacity and because a plant in Jamestown provided greater efficiencies and more modern equipment.
In 2003, Dorel Juvenile Group, primarily a children’s car-seat manufacturer, decided to stay in Columbus, preserving 1,100 jobs and planning to invest $25 million in the local State Street plant.
Company officials had considered three other locations: China, Mexico and Greenwood. Executives ruled out China mainly because of freight costs, Mexico because moving operations there would have been too expensive and Greenwood because the company’s warehouse there lacked rail access.
In 2003, Swiss flexible packaging company Georg Utz decided to open an office in Columbus because the city met infrastructure and logistics requirements and because of quality of life and competent economic development officials.
In late 2003, ArvinMeritor Inc. decided to close an exhaust plant in Franklin because of excess capacity and because it wanted to move production closer to customers.
As a result, by late 2004, the company’s Columbus plants had gained more than 200 workers.
In November, Columbus-based Makuta Technics Inc. announced it will move to Shelbyville because of a better location, cheaper land and a more concise and cohesive economic development effort.
In November, Cummins said it plans, with partner Scania, to invest $31 million and create 65 jobs at a Columbus plant to produce the next generation fuel system, partially because existing facilities can house the work and partially in recognition of the good work that has been performed there.
Specific needs
Economist Morton Marcus said reasons for companies choosing locations are probably more varied than their consumers.
“Companies have to have something very specific to what they’re producing and how they produce it,” said Marcus, formerly with Indiana University’s Kelley School of Business.
Initially, they might look at major requirements, such as proximity to an airport, railroad tracks or an interstate.
Companies also will be influenced by tax rates. Counties with a high tax rate may not be able to compete even if they offer tax abatements, because those incentives offer only short-term relief.
“Very often these tax abatements are just … frosting on the cake … but the basic recipe has already been decided,” Marcus said.
Factors such as availability of union labor, a racially diverse population and cost of operation, transportation and communication also influence the decision for some companies.
Yet others will look at whether they need to construct a building or can use an existing one and whether land is available and at what cost.
Those decisions, Marcus said, typically are made by a few individuals at the top.
Once a company has narrowed its search to a few locations, it will look at which possible site will produce the greatest shareholder return.
Companies might inquire about whether sewer and water lines already reach the property and whether water pressure is adequate for the sprinkler system, the quality of which can affect fire insurance rates.
If top managers plan to work at the new facility, quality-of-life aspects such as schools, architecture and snow removal could tip the balance in favor of Columbus over Scottsburg, for example, Marcus said.
Marketing and learning
Despite the difficulties, municipalities should engage in economic development efforts, such as visiting companies that are considering and expansion, Marcus said.
“A community that engages in marketing has a better chance of attracting an investment,” he said.
A city that fails to market itself is somewhat like a company that and doesn’t advertise, and therefore probably doesn’t sell very much, he said.
Columbus has a set of assets that it needs to try to match with the needs of a specific company, and city officials need to seek those companies.
This prospecting process also aids future business attraction and retention efforts, Marcus said.
“Every time somebody turns you down, you learn something about what it is they want … and you use that information for the next company.
“There’s very little you can learn sitting home,” Marcus said.
Low taxes, low biz
Columbus and Bartholomew County set themselves up for mediocrity if they focus only on being a low-business-cost environment, said James C. Smith, a Columbus resident and senior lecturer in finance at the Kelley School.
Smith has said in previous interviews that Indiana’s efforts to attract high-tech companies partially have been affected by its educational system.
High-tech companies want to hire highly educated employees, and they want good schools for their children, Smith has said.
Indiana consistently ranks near the bottom in terms of Hoosiers with at least four-year college degree.
Smith said recently that if the state or a county concentrates on being a low-tax state, they get into trouble in a budget crunch, because it may result in teachers being laid off.
People make location decisions based on where they want to live, Smith said, and companies make location decisions based on where the can find educated, skilled employees.
“Bartholomew County has always been a good place to live,” he said. “It’s important to maintain our reputation.”
However, the efforts to retain that reputation for good schools, a well-run government and a diversity of employment opportunities has been strained somewhat by a shortage of tax receipts, he said.
Minnesota, for example, with a worse climate than Indiana, no mountains or beaches, and higher taxes, has fared much better in economic development efforts than Indiana, Smith said, partially because it offers residents better education, snow removal, public transportation, parks and recreation.
A higher level of education for Minnesota residents also correlates with higher income, he said.
Minneapolis consistently ranks as a great city to live in and has a great reputation for cultural activities and health with the nearby Mayo Clinic nearby, Smith said.
“That’s different than having a reputation for two Wal-Marts and potholes.”
Coming tomorrow: A look at Shelby County.