Cover Story Firing on All Cylinders Private sector allies are  vital members of the state's economic development team

Learn more: Co-ops eager to cooperate in growing local economics

By Lawrence Bivens

Economic development is one of those endeavors that seems to lend itself to athletic metaphor. It’s a marathon, a contact sport, a game won in the trenches. And as practiced in North Carolina, it is a contest where teamwork matters. That’s where private sector “allies” come in, companies and organizations that collaborate with state and local economic development agencies in the competition to bring new jobs and investment to the state.

“Allies enable us to leverage resources,” says Commerce Secretary Jim Fain. From railroads and telephone companies to banks and construction firms, allies add value in economic development through their leadership, technical expertise, ideas and financial resources, Fain explains. “That involvement is really important.”

Involvement by the private sector in economic development is nothing new. During the 1800s, railroads worked actively to draw new businesses to the communities they served. In the 20th Century, power companies developed the nation’s earliest suburbs in hopes of aggregating demand for electricity.

“The role of economic development allies has never really changed,” says Mike Luger, director of the Office of Economic Development at UNC-Chapel Hill. The changing economic landscape, however, has brought new allies into the mix, led some to adjust their posture and others to dramatically boost theirs. “Competitive pressures inside these industries, as well as global economic competition, means allies have to be more aggressive,” Luger says.

For most allies, the question is not whether to get involved in economic development, but how, when and with whom. Should the company attempt be a leader in the process or merely a participant? What, if anything, should it expect in return?


Helping Behind the Scenes

One mechanism through which allies can get engaged is a three-year-old program known as Friends of North Carolina (FoNC). Organized in 2000, FoNC enables allies to provide financial support, energy and advice to the Department of Commerce’s marketing programs. Various levels of membership require dues ranging from $2,500 to $25,000 per year, which helps the state organize high-caliber marketing events around the world. “We found previously there was an ad-hoc approach to seeking support from allies,” notes Fain.

Fain also encourages private sector participation in economic development through service on one of his department’s enterprise teams. Such cross-functional teams made up of officials from government, academic units and business are now helping design and execute a carefully targeted strategy to attract and grow promising industry sectors such as life sciences, information technology and chemical manufacturing. “Allies can be helpful not just in identifying prospects, but in providing insight into public policy action needed to support these sectors and international trade opportunities that might exist,” Fain says. Membership in Friends of North Carolina or participation on a Commerce enterprise team offers allies the flexibility to determine for themselves how visible they’d like to be in the process, a key consideration for some firms.

“Many allies grapple with the question of whether they can be more effective behind the scenes or out in front,” explains Richard Wiley, director of economic development at Duke Power and president of the North Carolina Economic Developers Association (NCEDA). Wiley, who oversees Duke’s North Carolina economic development team, says allies typically assume a “first, do no harm” posture when determining how best they can help. “In responding to infrastructure requirements, cost issues and other needs, we want to be deal makers, not deal killers,” he says.

One critical way allies support economic development is through their membership and participation in NCEDA, Wiley says. The group relies heavily on its allied members for sponsorship of meetings, educational programs and publications. “Allies contribute significantly to NCEDA,” Wiley says. “That support enables the organization to keep fees low for practicing members.” Cash-strapped development groups can enjoy the benefits of NCEDA programs, which include scholarships for specialized training, without having to foot their full cost.


Utilities Provide Key Support

The increasingly prominent role of allies recently prompted NCEDA to establish an Allies Advisory Committee, which will hold its charter meeting at this fall’s conference. “The committee will be a permanent venue for allies to share ideas and experiences with each other and with our partners on the agency side,” says Sandy Jordan, vice president of economic development at Progress Energy, who is chairing the new group.

Given the technical complexity of today’s corporate site searches, success often hinges on reliable communications between agency developers and private-sector technical experts. “North Carolina is fortunate to have such a strong ally community,” says Jordan, “from utility and railroad representatives to the geo-technical engineers who do the site preparation work or the bankers who arrange construction financing.”

In addition to their leadership in groups such as NCEDA, North Carolina utilities help foster economic development in less obvious ways. Both Duke Power and Progress Energy, for example, offer “re-development riders,” essentially steep discounts on electricity as an incentive to companies that move their operations into vacant buildings. The reduced power rates are good for the first year of operations, typically the period when an arriving company’s ramp-up costs are highest. ElectriCities, a statewide nonprofit group comprised of municipal power providers, Dominion North Carolina Power and the state’s 26 electric membership co-ops, are also generous supporters of economic development in North Carolina, offering site selection assistance, power quality expertise, loans and grants.

But those programs ring hollow if the state’s electric providers don’t excel in their core function of providing reliable flows of industrial-quality power. “Our most effective means for supporting economic development in North Carolina have been the investments we’ve made, both in terms of hardware and human factors, in ensuring safe, reliable power,” says Progress Energy’s Jordan.


Railroads Join the Team

In addition to collaborating with development agencies on important projects, allies also work with each other. That was the case during much of the 1990s when Duke Power and Norfolk-Southern joined state and local officials in securing two large industrial properties in Alamance County that had captured the interest of the automotive industry. With Mercedes among the names eyeing the county for a possible production facility, allies swung into action to cobble together a “mega site” out of about 35 different properties. “We holed up at a local hotel for a week contacting each owner and getting options on the properties,” recalls Jimmy Bowman, a Raleigh-based industrial developer for Norfolk-Southern.

Working side by side, Bowman and Duke’s Wiley tracked down local landowners as far away as Florida and California, explaining to each just how important the project would be to the county and the state. “Some of these were not easy sales,” says Sonny Wilburn, president of the Alamance Area Chamber of Commerce. The two companies then split the costs of maintaining the options until earlier this year, an estimated $50,000 per year according to Wilburn. “Their financial commitment to the project and to our county can certainly be documented and measured,” Wilburn says. “But it goes well beyond that. There was a time commitment, strategizing, planning and involvement of other entities they brought to the table.”

While no carmakers brought a plant to the sites, the county was able to carve out a 650-acre expanse for a new industrial park. The park’s first tenant, Ford Motor Co., is leasing 225,000 square feet of space for a spare-parts distribution center. In landing Ford, which plans to employ 50 at the site, results-oriented action by Norfolk-Southern and the North Carolina Railroad Company was critical. “One of Ford’s requirements was access to rail,” Wilburn says. The two rail companies promptly guaranteed they would extend the necessary service.

America’s transition into a post-industrial economy has not diminished the importance of railroads in economic development. Industrial projects continue to call for rail service in order to move raw materials into a site, finished goods out, or both. At Norfolk-Southern, economic development is supported through project management and technical services. The company’s engineers, in addition to designing rail spurs, can show clients how to position their site to maximize rail access. “Some of the clients we work with have never utilized rail before,” Bowman explains. Norfolk-Southern’s technical team drafts design plans for several possible sites, giving clients a better grasp of available options and their costs. “A picture is worth a thousand words,” says Bowman, whose company provides the images at no charge.

Norfolk-Southern’s technical expertise also adds value for developers. The company’s rail specs for an industrial site in Iredell County became the basis for the master plan for the 500-acre Mooresville Business Park. “Their engineers are incredible,” says Melanie O’Connell Underwood, executive director for economic development at the Mooresville-South Iredell Chamber of Commerce. With park details stored in Norfolk-Southern’s computer-assisted design (CAD) files, Underwood needs only to contact company technicians with project parameters in order to get detailed site sketches within hours. “Their help has been invaluable,” she says.

Nor is it uncommon that companies such as Norfolk-Southern or CSX Transportation — an equally devoted economic development ally — bring prospective businesses to the state to explore relocation and expansion possibilities. Both companies serve long lists of customers in other states and are frequently the initial point of contact when a site need arises. “Unless the client specifically tells us not to, we try to involve the local community as quickly as possible,” Bowman says. As project needs dictate, he also notifies developers at the Department of Commerce and the appropriate regional partnership. “We see ourselves as part of the economic development team,” Bowman says.

“NCEDA brings all those involved in economic development together,” says John Peterson, executive director of the Raleigh-based association. “Our allies are actively involved — serving in leadership capacities and lobbying the general assembly in support of our legislative priorities.”


Gas, Phone Companies Get Connected

Agency-based development professionals are eager to make allies part of their programs. For Mooresville’s Underwood, help from Duke Power, Norfolk-Southern and PSNC Energy not only connects her to the answers she needs on technical questions, but provides the necessary assurances to her clients that they’ll get the correct level of service. In order to bring Minneapolis-based Cardinal Glass Industries to Mooresville in 1999, new natural gas lines were needed. Assurances by PSNC that it would extend ample capacity to the site proved key in welcoming the company and the 250 jobs it would create. “If PSNC hadn’t been involved, we would have had no chance of landing that company,” Underwood says.

It is understandable that a utility would be willing to invest in new infrastructure in instances when it knows a customer is waiting to take advantage of the service. But in today’s fast-turnaround economy, many arriving companies are unwilling to wait for capacity to be added. “Natural gas is probably the most capital-intensive utility to provide service for,” according to Dale Hewitt, vice president for North Carolina operations at Piedmont Natural Gas. On occasions when his company extends gas lines to make an industrial park or site more appealing, they consider it an “advance” that will hopefully yield new business later on.

Advanced telecommunications — increasingly a must-have for companies — is another area where allies bring not only specialized knowledge and leadership, but also sizable investments in new capacity.  “We want to do all we can to be supportive,” says Herb Crenshaw, director of economic development at BellSouth Corp. “But being a good corporate citizen alone will only take you so far if the state isn’t well situated with up-to-date technology.” The Atlanta-based telecom provider has worked closely with the North Carolina Rural Internet Access Authority (RIAA) in assuring high-speed Internet access is available to rural users, and it has been active in building valuable linkages between the state’s economic development community and the North Carolina Electronics and Information Technologies Association (NCEITA), an increasingly influential industry group.

Like other telecom firms, BellSouth’s economic development role continues to evolve in the wake of changes in technology, the telecom industry and the state’s economic development governance, Crenshaw says. The company aims to serve as a one-stop shop on telecommunications questions for developers at all levels. “Technology changes so fast, it’s hard for developers to keep up with it,” he says. Along with helping development agencies bring new businesses to North Carolina, BellSouth also works to make sure companies already here are able to keep their telecommunications gear and services in line with evolving needs. “A lot of people aren’t aware of what telecommunications infrastructure can mean to an economy,” says Crenshaw, a former president of NCEDA.

Since becoming area executive for Sprint in 2000, Steve Parrot has transformed his company into a key economic development ally, especially in North Carolina’s rural communities. The company provides local phone service to communities ranging from Ahoskie to Yanceyville, covering more geography than any other telecom firm in the state. “That obviously creates some unique technical and business challenges,” Parrot says.

The company has invested heavily in rural Internet capacity, extending Digital Subscriber Lines (DSL) into some of the state’s most sparsely populated counties. “DSL access is a quality-of-life issue that can impact a company’s ability to recruit and retain quality employees in a community,” Parrot explains.

As an ally, Sprint applies no hard and fast rules to how it works with respective economic development groups. It provides in-kind technology services to agencies as wide-ranging as the Nash County Visitors Bureau and North Carolina’s Northeast Partnership, for example. In the case of the Edenton-based Northeast Partnership, Sprint joined Progress Energy in providing sophisticated video-conferencing capabilities that allow the region to build virtual connections to companies around the world it hopes to recruit. Sinking major sums in such state-of-the-art gear represents an investment that could offer substantial returns to the company in the long-haul, Parrot reasons. “It’s a very effective seed investment, directly utilizing technology that we are promoting and marketing,” he says.

Much about the role, and ultimately the effectiveness, of allies has to do with the sense of urgency top executives place on economic development, reasons Rick Watson, president of North Carolina’s Northeast Partnership. “Immediately after assuming that position, Steve Parrot had his people really come together as a financial and infrastructure sponsor,” Watson recalls. “They’ve been a really strong partner.”


Banks Invest in the Future

Watson’s organization depends on a long list of allies for financial, technical and leadership support. Among them is Gateway Bank & Trust Co., a dynamic,  growing bank with branches in Tidewater Virginia as well as northeastern North Carolina. Gateway’s presence in the Old Dominion helped the region’s leaders cajole Virginia officials into initiating major improvements to U.S. 17, which directs commuters, tourists and commerce into and out of the Northeast Region. “The bank’s presence there gave me the contacts to help us forge the alliance,” says Ben Berry, Gateway’s president and a founding board member at the Northeast Partnership.

“Ben chairs our Economic Development Advisory Committee,” says Watson. The committee, which meets monthly, is comprised of local developers and others in the region. It is frequently called on for help in sorting our financing options for smaller companies on-the-grow in the region. “He knows everything there is to know about SBA loans and other small business lending programs,” Watson says of Berry. “Ben’s financial skills are critical to us.”

In decades past, banks were as central to economic development as energy firms and railroads. But today’s multi-state banking institutions are re-thinking their place in the economic development world. Some have largely withdrawn from the scene, while others are determined to forge an even more influential leadership position. “There was a time when banks did pure economic development work,” says Rob Wright, corporate development group manager at Wachovia Bank in Charlotte. Involvement today more often takes the form of financial support for agencies than a hands-on role in shepherding clients into a new site. Among other programs, Wachovia supports economic development through its participation in the Dogwood Equity Fund, a venture capital group that helps rural enterprises in the state. Wright, whose bank has committed more than $10 million to the fund, serves on Dogwood’s board of advisers.

“Banks are taking a look at just what we can do,” explains Jim Brown, a market manager at RBC Centura specializing in the public sector. Indeed, the tight economy has prompted all economic development allies to take a hard look at what they’re doing, Brown believes. “I’m sure more can be done, but the trouble is figuring out what that is.”

In the past year, Centura has augmented its ongoing support for economic development agencies by getting involved in two major regional initiatives. Kel Landis, Centura’s CEO, has provided much of the inspiration behind the Foundation of Renewal for Eastern North Carolina (FoR ENC), a Greenville-based organization whose mission is to advocate for what has become the state’s least prosperous region. Along with Shauneen Bruder, COO of RBC’s wealth management unit, Brown has assumed a leadership role on the Clusters of Innovation Task Force, a high-level panel now charting long-range strategies for the 13-county Research Triangle Region. “Just putting money into the process is not the answer,” says Brown. “The one thing I’ve learned about economic development is that there’s no magic.”


Contractors Build Support

Some allies add value to economic development through their knowledge of the minutest details of North Carolina’s topography and geology. Engineering firms can easily fetch soil quality, wetlands and other property data, and help prospects discern what types of industrial facilities may work where. “Our resource library contains reports from more than 15,000 projects conducted in North Carolina since 1966,” says Larry Jones, assistant vice president at MACTEC (formerly Law Engineering). Jones and his associates are frequently summoned by the Department of Commerce early in the site selection process, usually when the identity of the client is unknown, to provide insight into the permitting requirements and planning hurdles that will apply.

In many instances, MACTEC makes little if any charge for its assistance in early-stage project development. “We want to support the efforts of the Department of Commerce and help them be successful,” says Jones, whose Atlanta-based company maintains six offices in North Carolina. The company makes no secret of its hopes that, when industries do locate in the state, MACTEC will get a fair shot at winning new business. “I guess you might say we’re investing in the future,” Jones says.

Economic developers are not blind to the motives of their allies. “As long as citizens of the state or region benefit from our results — more and better jobs — it’s a win-win for all parties,” explains Watts Carr, chairman of the Piedmont Triad Partnership and vice-chair of NCCBI’s economic development committee. Carr, who once headed up the Department of Commerce’s Business & Industry Division and more recently chaired the N.C. Economic Development Board’s Committee on Recruitment and Retention, says what impresses him most about the state’s allies is the leadership resources they provide.

Some of the state’s staunchest economic development allies are found in its real estate and construction communities. Clancy & Theys, a Raleigh-based general contractor, provides budget estimates to prospects with unique building requirements. “Every project will need space,” says Bob Wheeler, the company’s vice president for business development. Wheeler also provides development agencies with data on commercial construction costs in North Carolina vis-à-vis competing locations, which help highlight the state’s affordability. “I try to be a resource any way I can,” he says. Wheeler, a veteran of economic development, has watched the number and nature of allies change during the past two decades. “There are definitely more players now,” Wheeler says.

“Many attorneys have always been involved in economic development but perhaps didn’t recognize it,” says Don Donadio, an attorney with Womble, Carlyle, Sandridge and Rice. The complexities surrounding today’s tax laws, international investment rules, contracts and labor regulations often put attorneys at the center of the process, Donadio says. Law firms also help local governments navigate the maze of laws governing land-use, public finance and public-private partnerships. Among the avenues through which Donadio’s firm offers leadership are full membership in Friends of North Carolina and participation in the Clusters of Innovation Task Force, an initiative Donadio’s colleague, former Gov. Jim Hunt, is chairing.

Like most allies, attorneys are driven to serve as economic development allies out of “a desire to do good and do well,” Donadio says. “I’d be suspicious otherwise.” The real value of allies, Donadio believes, is found in the reliable core of technical skills and expertise they represent. “That’s something the state could never afford to build on its own.”




Co-ops Eager to Cooperate in Growing Local Economies
Even in robust economic times, drawing new industry into rural communities is no slam dunk. But in eras of boom or bust, rural developers have no greater champion than their local utility co-ops.

“It’s pretty unbelievable what a team effort it takes to make good things happen in a small community like ours,” says Chuck Heustess, executive director of the Bladen County Economic Development Commission. Among his program’s most reliable allies are Four-County Electric Membership Corp. and Star Telephone Membership Corp. “We’ve certainly found our co-ops to be extremely cooperative,” Heustess says.

Help from his two co-ops was central to Heustess’ success in persuading Crown Manufacturing, a Maryland cabinet maker, to relocate its 50-employee operation to Bladenboro. The company settled in a 40,000-square-foot shell building in the community’s industrial park that had been constructed with the help of a zero-interest loan from Four-County. Though the company found the location appealing, one critical amenity was missing. “At the time, high-speed Internet service was not available at the park,” Heutess recalls. Enter Star Telephone. Even though the co-op didn’t serve the park, it made a deal with the park’s telephone company to adjust the exchange boundaries so that Star could provide immediate DSL service to Crown and other tenants at the park. Crown, which is now known as Bladen Industries, relies heavily on the Internet for transmission of kitchen design specifications to and from its customers.

“We want secure jobs for our young people so they won’t wind up in the Charlotte’s and Raleigh’s of the world,” says Lyman Horne, executive vice president of Star Telephone. The co-op, based in Clinton, provides voice, data, wireless and cable service to a sparsely populated service area roughly the size of Rhode Island. Horne says modern telecommunications infrastructure is akin to paved roads 65 years ago for their transformative impact on rural communities. His co-op is investing heavily in deploying DSL service to all its central offices by the end of the year. “We want to be able to keep our rural areas competitive with the cities.”

Similarly, Four-County EMC takes a strategic approach to its role in Bladen, Columbus, Duplin and Pender counties. “We have a long-term commitment to being part of the process,” says Jimmy Smith, director of economic and community development at Four-County. “It’s part of being a good corporate citizen, and that’s central to our role in the community.”

A planner by training, Smith offers infrastructure and site development support for projects, in addition to playing a leadership role in marketing and government relations. “This is a client-driven world,” he says. “We not only have to respond to the needs of today’s industry, we have to anticipate them.”

Four-County is one of 26 EMCs serving the state, all of which have access to training, support and financial resources of the North Carolina Electric Membership Corp. (NCEMC), a Raleigh-based supplier to the co-ops.

“Generally, we support and encourage economic development efforts at all the co-ops,” says Bud Cohoon, manager of economic development at NCEMC since 1982. Cohoon’s group provides EMCs with matching funds to conduct site assessments, for example. “The biggest thing we have is the business development loan fund,” Cohoon says, from which EMCs may borrow $1 million at zero interest to support economic development efforts — as happened when Four-County provided financing for the Bladenboro shell building. “It’s a great financial tool for local communities,” says Cohoon.

A member of Friends of North Carolina, NCEMC has participated in state economic development missions to Atlanta and New York City, and it promotes available industrial sites and buildings through advertisements it places in national and international publications. NCEMC takes care to ensure the support it provides local co-ops is flexible enough to accommodate wildly divergent economic development objectives. Job growth opportunities that exist for Harker’s Island may not resemble those that present themselves at co-ops serving portions of Mecklenburg and Wake counties, Cohoon explains. “Economic development cuts a pretty wide path,” he says. -- Lawrence Bivins


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