Tag Archives: failed economic development project

Anatomy of a Failed Economic Development Project

(June 28, 2016)
This is the story of a failed economic development project. The names and locations have been changed to protect the guilty. It is a lesson for economic developers and community leaders seeking to recruit large projects to their areas.

A large retailer operating in a dozen states in the southeastern part of the United States was seeking to expand. Headquartered in a major metropolitan area, its sales were increasing and its market area was growing. Its analysts recommended opening a new distribution center to improved logistics and increase sales even more. They hired a site selector who recommended two sites in a certain area.

The company was family-owned, having been founded 30 years ago by a man and wife who began their business with a dress shop managed by her and a men’s clothing store managed by him. Their joint business expanded to household items and more. Their sons took over day-to-day management of the business with the goal of doubling in size in 10 years.

The area under consideration was located at the intersection of two large U.S. highways. It had a steady increase in population, and was projected to grow at even faster rate in the coming decade. Growth was occurring at a faster rate in the suburban area, which is located outside the city limits of the central city. Average income was higher than the state average and the unemployment rate was lower than the national average.

The central city had a well-established industrial park. There was only one vacant building, which was formerly used by a trucking company that went out of business. It met the needs of the company, with only slight modifications and could be ready in less than 90 days. A second option for the expanding company was to construct a new facility in the county. Although it would be slightly more efficient it would mean a construction period of at least nine months. The company decided that both options were equal. It sent its in-house real estate vice president to meet with local officials in the city and the county.

Recently, there had been increasing animosity between the chambers of commerce in the suburban areas and the one in the central city. A year ago, county leaders formed an economic development organization and hired its first economic developer, a 31-year-old male with previous experience as the assistant economic developer in a suburban county in the Atlanta area. His hiring was somewhat contentious from the beginning. A search committee put forth two candidates, one from the local area who was well-known and respected and one from outside the area. One faction of county leaders felt that a certain local candidate would be the best choice because the position required someone who knew the local “lay of the land.” Another group felt that the best choice would be someone from a growing suburban county from another state. Eventually, the board chose the economic developer from the other state.

On the appointed day, the real estate vice president met with the city economic developer in the morning and the county economic developer in the afternoon. As is now customary in the economic development world, there were discussions of incentives that would be offered to the company. Each economic development official was informed that two sites were under consideration and were asked why the company should choose their respective site. The central city economic developer pointed out the reasons that the city site met the needs of the company. The county economic developer did the same, but then chose to talk about the reasons that the city site was a bad choice. He pointed out that suburbia was where distribution companies were locating. He then handed the prospect a sheet that compared the city and county. The facts presented were about crime, schools, infrastructure, government officials and future growth. The county economic developer concluded his presentation by saying, in effect, “… choose that other site and it will get burglarized, your drivers will get mugged and it will be difficult to recruit employees who have children in school.”

The real estate vice president went back to headquarters and reported the details of his visit. It did not take long for the company management to choose the city site. The CEO of the company remarked if the county economic developer talked that way about his competition then he probably talks that way about other things. Today, the company is still in its distribution center in the city and the county economic developer was fired a long time ago.

The primary lesson in this story is that one should not disparage their competition, but should instead sell the benefits of their own assets. As this writer’s grandfather was fond of saying, “Never talk bad about someone else because when you do you’re really taking bad about yourself.”

A secondary lesson in this story is that sooner or later the city and county will be marketing itself as a region. Talking negatively about a neighbor will not be tolerated. When prospective clients see a divided region it raises the proverbial red flag. All one has to do is look at the most successful economic development projects in Mississippi to conclude that regions that work together get the best projects.

Friendly competition and pride in one’s community is a healthy thing. Attempting to sell a community by telling why a prospect should not move to a neighboring community is a disease that needs treatment.