Understanding the Site Selection Process

SEMCOG recently hosted Understanding the Site Selection Process, a SEMCOG University workshop providing local governments with important information about the site selection process. Southeast Michigan is increasingly on the radar of companies because of our improving economy. Site selectors provide consultation services to businesses. Among the factors they evaluate are supply chain, labor, talent, infrastructure, ease of business, incentives, and tax.

Some highlights from the workshop:

• Progress with the region’s economic development strategy implementation;
• Why it’s so important to respond to site selector requests in a timely manner;
• Demonstrating the Michigan Economic Development Corporation (MEDC)’s powerful commercial real estate database and engagement platform “ZoomProspector,” which is used for working with site selectors; and
• Site selectors’ insights on their business clients’ goals and location choices.

MEDC Works with Site Selectors and Local Partners

Nicole Whitehead, Director of Sales & Service Operations at MEDC, provided a presentation on their outreach to national and international site consultants.

Their work helps generate Requests for Proposals (RFP) and Requests for Information (RFI) by site selectors on behalf of their clients. Generally, an RFP signifies that both property information and incentives with dollar figures are sought. Conversely, an RFI usually means that they’re looking for site information only. This process is very fluid with a short response time window. Based on site selector feedback, missed deadlines are the primary reason for properties being eliminated from consideration.

MEDC Process

When an RFP arrives, an MEDC team member is assigned to shepherd the request through the process. MEDC also shares the RFP with its local partners across the state known as CDCs – collaborative development councils. When the site selector specifies geographic preferences, MEDC spells this out in the email communication and identifies regional partners in the specified area.

During this vetting period, the RFPs are also forwarded to local utility partners to identify infrastructure needs; if there are talent needs, workforce development agencies are also engaged. The primary goal of MEDC during this stage is to respond to each request in a timely manner in order to keep Michigan in the running on a shortlist of preferred states.

Triage meetings are held daily at MEDC to discuss projects. Tax estimates are developed internally and incentives are identified. Projects valued at $1 million or below can be approved by email; weekly executive triage meetings address projects exceeding that amount.

At the onset of each project, things are very vague, Ms. Whitehead explained. Companies are often referred to by code names such as Project Polar Bear. MEDC may send scenarios of past projects to the interested party, demonstrating the range of incentives that may be available. With the nuts and bolts of a project known, incentives can be put on the table to keep Michigan in the running for a particular project.

Once there has been a discussion about incentives, MEDC begins to draft an offer letter. This document lays out what incentives will be offered and from where these incentives are coming. Incentives from local partners and workforce development agencies may be included.

Business clients who know little or nothing about Michigan will receive an executive summary put out by industry to explain why a company should locate in this state. Nicole Whitehead’s division also houses targeted industry teams who are subject matter experts on particular topics such as the supply chain for an industry. Off-the-shelf reports are customized to a specific company’s industry and included with the offer letter.

Proposals are sent virtually through ZoomProspector, MEDC’s powerful and versatile tool. The proposal has information describing the process for the customer and lets them know that MEDC staff is readily available to help walk them through the process. Everything is finalized through ZoomProspector – culminating with a signed offer that they are coming to Michigan with an investment in the state!

MEDC’s ZoomProspector Tool

John Redwine, Project Manager with MEDC’s Sales & Service Operations, demonstrated ZoomProspector, MEDC’s commercial real estate database and engagement platform. This site selection portal provides data and information about Michigan communities, sites, and properties, and contains over 14,000 brick-and-mortar and available land properties in its statewide database. As described earlier, this tool also manages RFP responses.

You’re encouraged to test the various menu options along the top of the home page. On the left side of the page is the site database with buildings and sites. To the right are the Businesses, Communities, Heat Maps, and Local Layers. These options are resources that complement the database using GIS features.

Data sources behind the information are Applied Geometric Systems, Bureau of Labor Statistics, and several other credible resources. ZoomProspector includes Land Bank and Racer Trust property sites.

Here’s a working example – try it out:

Site Selector Panel

Bryan Bays, Manager, State and Local Tax with RSM US LLP, described his group’s role in the site selection process. As accountants, their primary focus is on the numbers – property tax incentives, state and local taxes, workforce and union wage information, and property abatements. Professionals compare this information with their knowledge about other states and what these states can offer. Armed with this information, his team can develop packages and provide recommendations that address a location’s tax consequences.

In his presentation, John Kerr, Director, Hickey & Associates, discussed his organization, a privately held site selection firm that delivers advisory services in incentives and labor analytics for a range of organizations, including multinational companies and emerging markets.

Businesses can go anywhere, and their location decisions will depend on which communities can best meet their key needs such as talent, which is an ever-increasing challenge for the industry. Kerr said that while incentives are always a factor, they are rarely a driving force of where companies ultimately land. However, they can be a deciding factor once sites have been narrowed to the last few.

A strong message is sent when a community solidly supports a project; mayoral involvement in the latter stages can help. Kerr noted that communities should highlight their Redevelopment Ready Communities (RRC) certification if they have attained that status. Local governments should work closely with MEDC as the point of entry and make sure that MEDC is aware of things happening in their communities.

In her presentation, Gina Staudaucher, Partner, Tax Practice Leader with Howard & Howard, underscored the importance of collaboration. In pursuing incentives for clients, Howard & Howard’s approach begins with understanding the client’s goals and objectives, which helps with an early understanding of options. Time is spent working with local and state representatives on options for the client company to put a business plan together.

A company’s business case drives activities. Scoping needs to cover a range of areas such as water, dairy, and related supply chain issues with alternatives identified during the process. A lot of thought and background detail goes into the process, and local communities can help. Timing is critical, and collaboration and communication are needed between the local community and the state. At the end of the day, the client company’s return on investment (ROI) drives the process. Negotiation and final agreement is a very fluid component, and there needs to be flexibility. There also needs to be room for other collaboration such as with utilities, which is part of the ROI. A collaborative solution is the goal, with the starting point to at least get to an initial offer to evaluate ROI.

Staudaucher discussed the important role of Federal Opportunity Zones, which will impact site selection, development, and corporate growth in terms of private investment and fund development. Across the state and country, Opportunity Zones should be part of the packaging. However, diligence is required as misunderstanding on how to use them is common.

The panel responded to questions. Here were some key takeaways:

• There are several important things that communities can do when working with site selectors.
  • Maintain a good website with a single point of contact; identify available incentives; include information about available sites.
  • Point of contact should have a solid connection with the state level point person and should return calls to site selectors.
  • Identify a handful of local business champions in your community who are willing to talk with the community about their experiences on topics important to business. This kind of testimonial feedback is invaluable.
• Small businesses, retailers, and service providers can make decisions based on location by having a good understanding of the company business plan, such as proximity to its employee base. This could take time, and they may need to have a five-year plan to get the employees that they need in place.
• Shortages of construction workers with the building boom is not necessarily unique when compared to other markets. This isn’t a big issue if planning had been done well enough in advance of when building needs to proceed. Business incentives can often be mismatched with the timing of business needs.
• Business attraction incentive programs may provide incentives for bringing in new jobs. However, there will be an immediate cash need for building, which should occur a couple of years in advance of when the jobs will be there. This can be problematic and necessitates local governments having a familiarity of federal programs such as those that provide low-interest loan capital. Without an understanding of these kinds of tools or a good banking relationship, some of these deals will not get done.
• Opportunity Zones (OZ) are available for nearly everybody – this in response to a question whether retailers and service providers will benefit. OZ is a tax tool for investors to invest in business property or businesses. This can apply to retailers if they are located in an OZ, by bringing in investment, or if there are capital gains, these can be reinvested and put back into the business. This is an interesting tool for startups.
• Last, the panelists were asked to provide their point of view on the region’s future prospects.
  • Southeast Michigan is ripe for foreign investment – there’s lots of inbound investment. Collaboration is important, and the automotive industry is key to this investment.
  • Things look promising from a Technology/Artificial Intelligence (AI) standpoint. AI will change the view of Southeast Michigan.
  • The race for talent needs to be considered because innovative things are happening around the country in the workforce arena with community colleges and creative strategies with state economic development groups.
  • MEDC, local economic development organizations, universities, colleges, and others need to continue to grow and respond to business needs. There’s already a talent shortage and a workforce not prepared for advanced manufacturing. We need to make sure that we’re a step ahead, and local communities must have this dialogue on a constant basis.