”˜Shovel-ready’ means infrastructure with utility access
Site selectors weigh in on Right to Work, incentives and workforce
In a red-hot industrial market driven largely by the hurried race toward electrification, real estate deals have to move “now.”
“Having shovel-ready sites with infrastructure is hugely important, especially with utility infrastructure,” said Frank Ervin III, Managing Director, Ervin Policy Group. “If you have a site that does not have utility infrastructure especially on the electricity side, you could be looking at two to three years to build a sub station to get electricity to that site.”
That’s an obvious deal stopper, according to Ervin, a site selector who appeared along with self-described “deal-junkie” and AC Economics’ Managing Partner Jim Colson at the Detroit Regional Partnership’s 2023 “One Region Together” Annual Meeting at the Shinola Hotel in Detroit.
Here are four other takeaways from their fireside chat with the DRP’s Executive Vice President of Economic Development Justin Robinson on April 20.
Front-load incentives but negotiate ones that ”˜pay you too.’
To keep projects viable, corporations must mitigate their front-end investment in sites because of the time it takes to deliver a return on investment, so incentives need to be structured accordingly, explained Ervin.
“I always tell states, if someone comes and wants a ten-year incentive plan – they should run away really quickly,” Ervin said. “The (smart) incentive plans bring the incentive to the front end and not taking it all the way to the back end.”
Colson, agreed, and also advised that effective incentive packages should also “pay” the region. He cited an example in New Mexico where a job-tax credit incentive package encouraged higher wages and required higher levels of education.
“What that did for the state, is it left behind a product,” said Colson. “If the company didn’t stay, we still had the talented people there. So, we invested in either existing New Mexicans or people who were going to move the state, and that worked well.”
In a hot manufacturing market, the challenge is finding land.
Recently when completing a site location evaluation in a preferred region, Colson recalled how there wasn’t a site that worked for the project, forcing the company to look elsewhere.
“By the time we ultimately made decisions about what we were going to do, we would have had to sacrifice so much in terms of what the company wanted to achieve,” said Colson.
Those type of experiences make programs like VIP by DRP — which allows site selectors to preliminarily assess vacant industrial properties in region — absolutely vital, according to Colson.
The labor pinch has been bad for a long time – it’s getting worse.
“Labor has been a very challenging thing for a very long time, and it’s only getting worse. The need to address workforce issues and improve skillsets of people coming in and upskilling people in companies is driving a lot of decisions,” said Colson in a statement reflecting why the DRP has made providing talent solutions to companies such a priority.
”˜Uninformed’ repeal of Right to Work hurts workers and companies
The repeal of Right to Work will hurt the region’s competitiveness but also a significant portion of workers, said Ervin. He outlined how employees who might make $18 or $20 an hour and struggling to make ends meet, would be forced to pay $500 to join a union to receive CBA compensation already sustained by the rest of the workforce.
“(The legislature) tackled it too quickly without enough backup data to make an informed decision,” Ervin said. “I was a proponent of leaving it like it was.”