Energy costs surge in importance to businesses seeking sites

We’re a great place to raise a family.

We enjoy a wonderful quality of life.

We’re a terrific little city, town, county, etc.

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These platitudes fall on deaf ears when site locators are making decisions about where to invest millions of dollars and create new jobs. What is frustrating for local leaders is to love the town they’re in but not understand why companies are not lining up to locate.

Annually Area Development Magazine surveys corporate decision makers and site-selection consultants to determine what factors weigh the most for site locations or relocations that year. Respondents in the 2007 survey were mostly representatives of manufacturing or distribution companies.

Information: www.areadevelopment.com/annualReports/dec07/corporateSurveyIntro.shtml)

For the past four years, the criteria of highway accessibility and labor costs have vied for the first and second spots on the list, rated as either very important or important to new location considerations. This year, highway accessibility beat out labor costs as the highest-rated concern when evaluating a community.

Rounding out the top five are (3) energy costs and availability, (4) availability of skilled labor and (5) occupancy or construction costs. With the increase in oil and gas prices, it is no wonder energy costs and availability shot up in importance from eighth in 2006 to third in 2007. Until last year, availability of skilled labor had been in the top three considerations since 1999.

New this year on the survey was the option to rate “expedited or fast-track permitting” which previewed at No. 16 with more than 70 percent indicating its importance to the process.

Access to information and companies’ need to respond quickly to changing economic conditions have condensed the entire site-location process and created an even stronger sense of urgency when companies are looking for a new place to build.

Fifteen years ago, an economic development organization would have been mailed an extensive survey to manually fill out and overnight back supplying the data requested by the company. With the wealth of good (and bad) information available electronically, communities are forced to have Web sites complete with up-to-date demographics in order to even be considered.

Fifteen years ago, company representatives would have visited numerous cities for evaluation purposes. Today it is not unusual for a community to already be on a short list before even knowing it is in competition for a project. Access to information has lessened the importance of hands-on collection of information in every city or county under consideration.

Fifteen years ago, data collection and evaluation of communities took numerous visits by teams of company representatives. Economic development professionals had greater opportunities for building relationships with decision makers and providing more of the “soft sell” in the process. Today - because of the access to information, virtual tours of buildings and land, and information online - the face-to-face selling time has been severely cut.

The importance of quality data about your community and the shortened selling time involved in the site location process should make all local leaders take a look at what is important to site-location decision makers. Look at the trends over the years and develop strategies to shore up where a community is weak. Make sure your community is in control of the information used for evaluation by having a quality Web site and current data.

Although in the end, sometimes you just get lucky.

Right after I started work at the Knoxville (Tenn.) Chamber of Commerce in 1989, Days Inn announced a huge (500-plus workers) telephone reservations center opting for Knoxville over Athens, Ga. Fresh-faced and in awe of the process, I asked the head of the site-location team what gave Knoxville the edge.
He iterated that both cities had the communications technology needed; large existing buildings on a bus line; a nearby college campus to lure part-time, round-the-clock workers; the legislative and tax climate to make the location attractive; and pretty much it was dead even until the end.

“What tipped it in our favor?” I asked breathlessly.

He replied, “Well, because I am going to be the director of operations locally, and move my family here, the company left it up to me to decide between the two. I thought about it and picked Knoxville based on where my mother-in-law lives.”

The answer shocked me so much that I did not ask, and to this day do not know, if his mother-in-law lived closer to Knoxville or Athens.

Kristin R. Williams, owner and principal of KRW Consulting, has worked in economic development for more than 20 years. She is former president-CEO of the Greater Paducah Economic Development Council and helped lead Paducah’s “Think Tank” on business growth in 2006-2007. Williams continues to volunteer in those efforts.