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Beware of the Sweetheart Dell?

In 2004 my hometown of Oklahoma City was all excited about being selected for a new Dell “customer contact center” to be located on 60 acres near downtown. Around the same time, Dell announced plans for a similar center in Edmonton, Canada. Everyone in Edmonton seemed excited, from a Business Edge article from January 2005:

“With 475 of the initial 500 positions now filled, Dell said it will hire another 250 people and hopes to have a total staff of 750 working in its Edmonton customer-contact centre by July.

Dell’s entry into Edmonton was first projected to create economic benefits pegged at $600 million over a 20-year period. That figure now rises to $900 million.

“The new jobs could mean another $300 million over the 20-year period,” said Edmonton Economic Development Corp. (EEDC) president and CEO Allan Scott, who added that these numbers may have to be revised upward once more.

The EEDC inducements included lease incentives valued at $1.1 million – equal to five years of property taxes during the first five years of the 20-year agreement – and assistance in helping Dell to locate a permanent site for its customer-contact centre. Further, land for Dell’s permanent Edmonton home will be leased to Dell for 20 years at the rate of $1 per year. Dell will pay all school and business taxes from the beginning of its operations in Edmonton. Over the first five years, those taxes are valued at about $750,000.

In return, Dell agreed to provide and maintain at least 500 full-time positions within its first six months and to begin construction of a permanent facility on the leased land within 18 months.

According to Scott, the incentives were necessary to level the playing field with highly competitive prospects in the U.S. Dell was considering a total of 153 locations, and that also included Calgary.”

Time for Edmonton’s EEDC to recalculate — Dell today announced the closing of the facility. In Oklahoma City another 200-300 employees got pink slips, 1,200 in total between the two locations. Did the deals with Edmonton and Oklahoma City include any type of clawback in case Dell backed out before the end of the deal? Given the competition among cities, probably not.

So what happened? Many things beyond the control of the respective governments of Edmonton and Oklahoma City. HP passed Dell to be the #1 supplier of computers in the world (or was that US?, doesn’t really matter), Dell’s quest to offer the public a $400 computer didn’t really leave room for a profit. While computer sales have been growing, Apple’s sales have far outpaced the growth of the overall market. Microsoft released Vista upon the world and many ordered new computers with XP instead — the sales boom that makers like Dell expected never happened. Finally, Dell’s delivery method — a very efficient system —- has saved every penny it can. I should disclose that I am a major Mac fan — logo tattoo and all.

Interestingly, as I’ve gleaned from my professors, companies often do not select a city based on the incentives offered. Other factors such as a workforce skilled for the proposed work, availability of a suitable site (which could play into incentives) and such are the bigger forces. Of course, if offered, the companies are not going to turn them down.

So what does all this have to do with urban life in St. Louis? Plenty.

St. Louis’ RCGA (Regional Commerce and Growth Association) does business much like all the other cities out there. Local governments do the same. Centene’s decision to locate in downtown St. Louis at the delayed Ballpark Village comes to mind. We’ve all seen the reports — x-number of jobs to be created, generation of so many hundreds of millions of dollars — yadda yadda yadda. In all the excitement we lose track that markets can change quickly.

One day Enron is a wonderful corporate citizen and the next it is bankrupt because of mismanagement by owners. The St. Louis region has some great long-term companies — those that haven’t cashed out yet. Small to large, longevity is more important than flash and show for the short term. If they want incentives here is one — on the 20th anniversary of a facility with an average of x-number of employees over the years then the company will get a refund of Y. Break it up in five year increments or whatever. We need to know more about these sweetheart deals that companies like Centene are getting and what happens if they are bought out, go under or just decide to move?

Edmonton’s Dell center was only open just over 3 years. It probably took the city a year to put the deal together. Certainly not a good return on their investment.

 

Should Missouri Eliminate Self-Service Gas?

January 16, 2008 Economy, Travel 45 Comments

In at least a couple of states, motorists don’t pump their own gas — I know from personal experience that Oregon and New Jersey both require, by state law, that an attendant pump the gas.

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Yesterday when I was getting gas in NJ we had to wait in line at a fueling station just off the turnpike, before entering Manhattan on the Cross Bronx Expressway (I-95). For those wondering what I am doing driving through the Northeast — I was driving a friend of a friend, her two cats and her car to her new job in the Providence Rhode Island area. I’m flying back late Thursday evening from Boston.

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OK, back to the gas issue. So while the wait issue was a pain it was interesting how a state law could create jobs. We paid $2.97/gallon for regular — far less than the $3.17/gallon we paid in Pennsylvania that I had to pump myself. The lines would have been shorter but everyone, including us, seemed to have the tank filler located on the driver’s side of the vehicle. And no, this was not full service — they did not check tire pressure, clean the windows or check under the hood. It was simply gas.

Still, think of the number of entry-level jobs that could be created statewide by eliminating self serve. You guys discuss that while I catch a train to Boston.

 

Ald Young Thinks Downtown Condo Prices “Skyrocketed” Based on Centene Announcement

At last night’s Downtown St. Louis Residents Association (DSLRA) meeting, at Dubliner’s on Washington Avenue, 7th Ward Alderwoman Phyllis Young proclaimed to the loft dwellers that their property values had just “skyrocketed” based on the news that Centene would be relocating their headquarters to a portion of Ballpark Village, bringing with them some 1,200 jobs.  I think she was looking for cheers from the group with her non-reality based assertion.

REALTORS® in the room, myself included, were skeptical.  Pressed on the issue of foreclosures, long days on the market and more new projects as rentals, Ald Young indicated “I think” this news will have a positive impact on the market.  Yes, a new corporate headquarters and more M-F workers will translate into more people during the work week.  We may see more lunchtime restaurants as well as stores catering to the office workers.  The impact, however, on residential housing units in the downtown area and a 24/7 lifestyle remains to be seen.  The condo market, days after the announcement, has not changed substantially.  Proclamations of dramatic and overnight increases in property value is typical of St. Louis political spin.  If values are so much higher now, I guess that means she’ll stop supporting subsidies for developers?

If Ald Young wants cheers from the downtown residents she needs to announce a new 24-hour Walgreen’s within walking distance — not the one to be built on Lafayette across from the former City Hospital.

If you have thoughts on this topic be sure to share below and/or contact Ald Young directly.

 

A ‘Rural Renewal’ Program Would Provide Habitat for Deer and other Wildlife

The tony collection of McMansion subdivisions known as Town & Country, MO is back on the issue of Deer overpopulation. It seems their 1-3 acre lots amongst the natural woods are overrun with deer. The reality is that our natural environment is overrun with low-density and often tacky housing that requires an SUV to go anywhere. From a KSDK report:

“Deer like the suburbs that we build,” said Erin Shank, a Missouri Department of Conservation urban wildlife biologist. “They like that broken forest interspersed with meadow-like lawns. That’s really ideal for them, so their populations have really grown over the last several decades.”

Wow, it seems they have managed to design an environment ideally suited to the main deer population but only a small segment of the human population. A number of years ago Town & Country engaged in a horrible plan to relocate the deer but many perished due to shock (see Grim Harvest). Some municipalities allow hunting using bows to avoid shooting some VP from shooting a lawyer friend in the face. Town & Country, however, does not yet permit hunting. Some are advocating traps where they are instantly killed via a bolt to the brain. Ick. Others say the deer are fine and simply plant other vegetation that deer don’t like, a logical solution in my view.

But I have some other ideas as well. We could start by banning vegetation all together. These people with their 4-bedroom/4-car garage houses on an acre of land like the illusion of country living but we know they really are not. So I say we prohibit them from growing any sort of plants outdoors — at least the ones known to attract deer. Hey, if they don’t like it they can always move much easier than the deer. I don’t think this is going far enough though. Those brick front houses look bad enough as it is but without vegetation it would be a horrible sight. The kids there already suffer from not being able to walk or bike anywhere so they really shouldn’t have to live without hostas and ferns.

I say we hire PGAV or Development Strategies to do a blighting study on the area. We argue that all of Town & Country and everything else in St. Louis County outside of the I-270 highway loop is Ecologically Obsolete. With places like Creve Coeur, Chesterfield and Dardenne Prairie all working on town centers to create walkable destinations we can justify that others are old fashioned and obsolete forms of development. New Urbanism represented by New Town at Charles or even old urbanism represented by original city development as well as the older ring of suburban development such as downtown Ferguson, Maplewood, Webster Groves and such is more ecologically sustainable.

So much like the maps of the 40s & 50s that justified razing entire sections of the city because a percentage of the structures lacked indoor plumbing, we can create maps of the region where the obsolete development pattern is too low to sustain a walk-to town center & transit. Everything below a certain threshold would be targeted. I call it Rural Renewal. St. Louis County would identify areas for land clearance, returning the land to nature with wildlife and vegetation taking over former manicured lawns. The deer population would once again be controlled with bobcats and other natural predators. Of course we’d need to use eminent domain to take all the homes, strip shopping centers and fast food joints. We’d need to clear thousands of acres at a time.

This could all be justified, of course, based economic development for the region. By returning an area to nature we’d force residents into existing areas, assuming we also limited fringe development. People living in an $800K house in Town and Country could do wonders with a $500 house owned by the LRA! Think of the economic benefits of such a renewal plan — one that could easily past muster after the Kelo decision on eminent domain. We’d see a surge in new construction within the I-270 highway loop giving new vitality to both the city and older areas of St. Louis County. Low density areas in the county, but within the I-270 loop, would be targeted for redevelopment to accommodate those displaced for the new rural areas. Rail transit (commuter, light rail) and quality localized service via bus and/or streetcar would be far more feasible than currently. We’d naturally eliminate some of the 91 municipalities in St. Louis County as well as excessive school districts, fire districts and so on. These new large ‘rural renewal’ areas would become wonderful natural areas again — attracting tourists to our area. This could become a model program for other regions to follow.

It would, of course, be difficult on those being displaced but they really shouldn’t stand in the way of progress and that which is beneficial to the larger region. The environment and the economy both outweigh their private land interests. We’ve been through large scale land clearance projects before and the suburbanites always seemed supportive of such efforts.

 

Why That Delivered Pizza Costs More

As summer approaches so do escalating gasoline prices. My car gets over 30mpg in the city and I use my 85+mpg scooter whenever I can. Many of you may be thinking you can handle the gas prices too. But what about the cost of getting a pizza delivered? From KSDK:

Adam Soiab, a delivery driver for Joanie’s Pizza in the Soulard area of St. Louis, said the price hike is unsettling, considering he spends most of his time on the road.

“That’s the main thing I do. I get in my car and drive. So needless to say, I use a lot of gasoline.”

The company includes a $1.50 delivery surcharge to help offset soaring prices.

Wait, another buck fifty? This is simply the tip of the iceburg salad! Look for more fuel charges from other fuel intensive businesses. I can’t really blame them, the restuarants and their delivery folks are just trying to earn a living. Remember, those pizza delivery guys can’t afford a new hybrid Prius. But maybe, for close deliveries, businesses can look to more efficient modes such as bicycles and scooters.

I’d much rather pay the extra $1.50 so they can buy a scooter for deliveries.

So now is a good time for some predictions. I think, come this Fall, we will not see the gas prices dip back below $3/gallon for extended periods. The demand is too high, the supply to scarce, the extraction of more too costly. Get used to paying at least $3/gallon for gas and extra to have that pizza delivered.

Or is this simply my own wishful thinking as sweet justice to all those Hummer drivers living in exurban ranch houses an hour from the CBD? Maybe… Refineries are down at the moment but they could be back up by fall. Cost of exploration and drilling is certainly up but with increased prices for a barrel of oil it makes it more fiscally worth while to use various extraction methods. The incentives to create new more efficient technologies will increase.

I certainly do hope, along the way, people will think maybe a walk or bike ride to the store (or local pizza place) would be kinda nice.

 

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