Economic Development Best Practices for Rural Communities Mike Kirchhoff, CEcD

1. Economic Development Best Practices for Rural Communities Mike Kirchhoff, CEcD Principal, DPI Group

2. Economic Development Best Practices for Rural Communities- Marketing/Business Attraction Approaches

3. Why Is Attracting Business Important? • Economic base jobs • Community wealth • Property values • Property tax base • Sales tax revenue • Multiplier effect • Linked industries • Construction jobs • Quality of life • “Service after the sale”

5. Successful Communities • Know their product • Know their targets • Are ready to respond

6. Know the Product • Study the area – to identify strengths to exploit and weaknesses to strengthen • Prospect perspective is key to this process • Community leaders must be willing to be self-critical • Plan to prepare/position • Assemble key information about the area (Labor costs, workforce quality & availability, and commute shed; community data & demographics; site & building data, maps, & photos; utility information; tax information; financial assistance & incentives; major employers; and MORE!)

7. Be Ready to Respond Not Optional • Current data - timely, accurate, and appropriate • Adequate real estate • Effective programs • Professional presentation • Web presence Optional • Target industry business case • CEO testimonials • Community “viewbook” • Video/CD/data disk

8. A Unified Message…

9. …Not an Inconsistent Message

10. E.D. Marketing Toolkit • Web Page • Other Web-Based Tools • Direct Mail • Newsletter • Blast e-mail • Telemarketing • Advertising • Article Placement • Referral Services • Direct Sales Calls • Trade Shows • Association Marketing /e-Newsletter • Consultant/Broker Outreach

11. Other Web-Based Tools • Location One Information System (LOIS) – Owned by KCPL, DCEO is a subscriber (www.locationone.com) • www.fastfacility.com – Created by Area Development Magazine • Economic Development Directory – listing of economic development organizations by state and region (www.ecodevdirectory.com/) • GIS Planning/Zoom Prospector (www.zoomprospector.com) • LinkedIn, FaceBook, Twitter

12. www.ecodevdirectory.com

13. www.ecodevdirectory.com

14. www.ecodevdirectory.com

15. Marketing Strategies • Regional Marketing Approach • Individual Marketing Approach • Target Marketing • Ally Marketing

16. Regional Marketing Approach • Most cost-effective approach • Leads from regional program are shared with regional partners • From a site selector perspective, a region can generally demonstrate critical mass better than a single area • As an example, JREDC partners with the Western Illinois Corridor Council

21. Individual Marketing Approach • Best suited for areas where a regional effort is not practical • Success depends to a great degree on the knowledge base of the organization’s staff and leadership • A solely independent approach is less likely to generate interest among prospects and allies unless the organization represents a large urban area • Not as cost-effective as a regional approach; a blend of individual and regional marketing can be very effective • Only the best-funded independent organizations are able to use the more sophisticated tools due to cost and logistics issues

22. Target Marketing Preparation • Target business segments identified based on a strategic analysis of the area • Segment-specific research to understand the nature of each segment(market structure, competitiveness, products, cost structure, business linkages, etc.) • Developing a business case for each target based on business advantages in the region

23. Ally Marketing Program • Partner with DCEO/IDC at CoreNet Global national events and participate in Chicago Chapter events • Chicago CoreNet Chapter sponsor • Partner to participate in Industrial Asset Management Council (IAMC) conference • Arrange and conduct meetings with targeted entities in Chicago and St. Louis • Conduct an annual allies event, either locally or on-site in Chicago/St. Louis • Regular meetings with key allies, including state, utilities, railroads, site selection consultants, corporate realtors, etc.

24. Ally Marketing Components • Newsletter • Other Direct Mail • Office Visits • Community Tours • Association Participation • Special Events • Joint Marketing Efforts

25. Economic Development Best Practices for Rural Communities- Existing Business Retention/Expansion Approaches

26. The Importance of Existing Industry • Economic base jobs • Community wealth • Property values • Property tax base • Sales tax revenue • Multiplier effect • Linked industries • Construction jobs • Quality of life • “Service after the sale” • IDENTICAL to the reasons for attraction, but often easier and less expensive!

27. Typical Program Goals • Build goodwill and relationships with business clients • Improve company’s familiarity with/perception of the economic development organization • Gather data about the status of the local economy • Serve as early warning system – company or community problems • Assist companies at risk of downsizing or leaving • Assist companies seeking to expand • Identify potential opportunities for inter-firm collaboration, expansion, or attraction activities

28. Existing Industry Program Elements • Recognition activities • Educational workshops/seminars • Industry linkage programs • Targeted technical assistance • Company visitation programs • The “next wave”

29. Recognition Activities • Industry Spotlight • Industry of the Year • Newsletter recognition • Media assistance • Other activities

30. Educational Workshops & Seminars • Based on need • Targeted subjects/audiences • Financing workshops

31. Industry Linkage Programs • New Managers Reception • Industry Index • Services Index • CEO Roundtables • HR Managers Group • Industrial Alliance • Buyer/supplier relationships

32. Targeted Technical Assistance • Needs are frequently identified during Synchronist visits • Customized, confidential assistance to clients • Referral to SBDC, IMEC, IDES, other allies

33. Synchronist Visitation Program • Questionnaire focuses on industry, management, products, satisfaction, and community connection • Detailed data/trend analysis – analytical and reporting capabilities • Identification of red flags • High quality, predictive data • Enables proactive programming • EDC acts as an opportunity catalyst (market, cluster, joint venture, partnership, linkage opportunities, etc.)

34. Corporate HQ Visitation Program • More general in nature • Strategic discussion • No set questionnaire • Company-specific • Visits arranged in partnership with local plant manager

35. The “Next Wave” Sophisticated Approach • Business model approach to existing industry development • Adapted from “Rocketing out of the Twilight Zone: Gaining Strategic Insight from Business Retention (Blane, Canada) • Local companies as “clients” • New vocabulary: “service delivery, business drivers, accounts” • Extensive use of diagnostic tools • Portfolio management approach • Maximize return on investment – consciously direct resources toward high value and high growth opportunities (and away from risk)

36. Is Proactive BRE Important? Here’s Why… The CYBERTEK Deal

37. Company History • CYBERTEK has been located in Jacksonville for more than 70 years in one form or another • Founded as Central National Life Insurance • Purchased by John Deere in 1985 (150 employees) • John Deere sold policies to Reassure America in 1995; CYBERTEK was created by PMSC to service the policies (50 employees) • PMSC leased the facility and equipment from John Deere • In 1998, PMSC sought to build a new 50,000 s.f. facility and expand by 200-300 employees

38. The Problem • PMSC asked to extend their lease for an additional two years • John Deere said “buy it or get out” • PMSC had no interest in owning the building and began seeking interim space in the region around Jacksonville • Space was identified in Springfield • The company planned to construct the new building in whichever community its interim space was located • Lease expired December 31, 1998

39. The EDC Gets Involved • With six months remaining on the lease, PMSC approached the EDC for help • By mid-October, no suitable space had been found in Jacksonville • The EDC suggested an alternative…why not make the current space the interim space? • Perhaps the City or the EDC could purchase the existing building and extend the lease to allow CYBERTEK to complete it’s new facility • PMSC, John Deere, the EDC, and the City of Jacksonville began building negotiations on November 20, 1998

40. Crafting a Creative Solution • A variety of scenarios were examined – City purchase; EDC purchase; John Deere donation of the building to a 501 (c) 3 • A City purchase would mean that the ultimate disposition of the building would be restricted by government requirements • A purchase by EDC was a problem because of a lack of funds • Jacksonville Main Street, the best choice for the 501 (c) 3 donation option didn’t yet have it’s IRS status • Negotiations left the problem unresolved, and time was running out – CYBERTEK’s lease was due to expire in less than 45 days • A deal was completed by phone the following week

41. An EDC Purchase • Purchase price $375,000 ($100,000 down) – 8 ½ % interest (imputed) • Funds for the down payment came from the City, which purchased two parking lots near the building for $50,000, and… • CYBERTEK, which agreed to purchase the building contents for $50,000, subject to the EDC’s repurchase at the end of the lease for $25,000 • CYBERTEK also agreed to lease the building through December 31, 2000 for $24,000/month • The EDC sold the building and first-floor equipment in August, 2000 (negotiated down from full- price offer; PMSC saved $95,000 in rent expense)

42. Everyone Won! • John Deere sold its building • CYBERTEK/PMSC (now CSC) was able to extend its lease without relocating during construction of its new 60,000 s.f., $10,000,000 facility • The City retained the company, and is benefiting from an increased employment base and (ultimately) an increased property tax base • The EDC sold the building, retained ownership of $25,000 in equipment and furniture (later sold), and netted $232,000 during the 18 months it owned the building!

43. Today – A Downtown Destination • The first floor has been redeveloped to include a premier fitness center and various retail shops • The second floor (more than 16,000 s.f.) is now the finest banquet hall in Jacksonville, comparable to hotel facilities in nearby Springfield • The three banquet rooms can accommodate a total of up to 600 people • During its first year, the popular facility exceeded projected bookings three-fold • The Jacksonville Rotary Club, EDC, Chamber of Commerce, and other groups use the facility extensively

44. Lessons Learned • NEVER GIVE UP when negotiating a BR&E or prospect deal • Think “out of the box” and use creativity to find a solution where none appears to exist • Work diligently and proactively to retain and expand existing companies; it’s easier (and much less expensive) to retain and expand the companies already in the community than to hit a home run and attract others to relocate to the community

45. Contact Information Mike Kirchhoff, CEcD Principal 1212 NE 94th Terrace Kansas City, Missouri 64155 317.554.9660 kirchhoff_mike@yahoo.com www.dpigroup.biz