07
Mar
2005
When it opened for business in fall 2000, the 203-acre Eastern Iowa Industrial Center was meant as a
catalyst for economic growth - able to attract large-scale industrial companies who had in the past not even considered the Quad Cities.
The land was purchased in 1997 by the City of Davenport and developed to create an inventory of large, "shovel-ready" industrial parcels for the Quad Cities, something that the Quad City Development Group had argued was missing in the local economy. That land was purchased by the Greater Davenport Redevelopment Corporation, or GDRC, in 2000. The GDRC is a public-private partnership comprising the City of Davenport, Scott County, MidAmerican Energy, and DavenportOne.
Organizers hoped to sell one or two 15-acre parcels a year, and those sales would pay off debt and fund the continued administration and marketing of the Eastern Iowa Industrial Center (EIIC).
It hasn't worked out that way.
After more than four years of operation, the EIIC has sold only one piece of land: to Quad-City Consolidation & Distribution, which began operation in early 2003 and employs roughly 80 people at that site. The Eastern Iowa Community College District also has its John T. Blong Technology Center on the site.
Without land sales, the GDRC has been forced to go back to its partners for money and re-think its funding model of land sales supporting its operations. Fundamentally, though, the industrial park is using the same business plan, and it has the same deficiencies it always has.
Because of no land sales, the EIIC has become a black hole for its partners - and, consequently, taxpayers. To combat its grim financial situation, the industrial park has hacked its marketing and operations budget. But how can the GDRC sell property if it's cutting its marketing?
"I think they see a problem," said Bill Lynn, a Davenport alderman and a member of the GDRC board. "I don't think they have a solution."
GDRC representatives interviewed for this story offered a variety of explanations for the EIIC's troubles - from the economy to no rail service at the site to the quality of the workforce to marketing. But there's no consensus on what needs to be done to make the EIIC more successful, and no new action plan beyond cutting its budget.
More than anything, though, the partners plead for patience. "This is really meant to be a long-term project," said John Wetzel, president of the GDRC board and vice president of economic development for MidAmerican Energy.
"We were hopeful that we could achieve an eight- to 10-year horizon," he added, and that timeline is still possible. Because of the nature of what the EIIC does, he said, "we could be out of business [fully occupied] in three months."
"One project, two projects, and the whole thing looks different," said Dan Huber, president and CEO of DavenportOne.
"If we had a sale of 40 acres, that would put us in the black," said Timothy Huey, the county's planning director and a GDRC board member. A sale of that magnitude would allow the EIIC to pay off its $475,000 in loans from the city and county, which themselves were used to retire previous debt.
Unmet Expectations
There is no disputing that the EIIC has not met its partners' expectations.
On the original projections of one or two land sales a year, "I think that was optimistic," said Clayton Lloyd, Davenport's director of community and economic development and a GDRC board member.
DavenportOne, as part of goals set in 2001 to be completed by July 2006, anticipated five new industrial-park tenants and 200 jobs.
"It's really the only area where we did not experience the level of success we'd hoped to," Huber said.
The lack of sales success has led to cutbacks. "Our budget comes off of land sales," Wetzel said. "We've had to reduce marketing and operating expenses so we could keep our doors open."
Beyond their initial investments, both the City of Davenport and Scott County have given the Greater Davenport Redevelopment Corporation loans.
Last year, the Davenport City Council approved two loans totaling $375,000, which were used to pay down debt. The GDRC is now supposed to re-pay its loans to the city by September 2005. The Scott County Board in May 2003 gave the GDRC a $100,000 loan that was originally due in June 2004. That term was extended to June 2005.
In addition, the county has in its budget for the upcoming fiscal year set aside $30,000 for the EIIC's operational expenses, and the city has included $85,000 in its Fiscal Year 2005-6 budget. DavenportOne, in lieu of taking $125,000 a year in management fees, is making its staff support an in-kind contribution. Huber said DavenportOne's management fee was entirely human resources. "There was no margin in it," he said. "We were passing through our cost." Kathy Evert, a senior vice president with DavenportOne, is the EIIC's director. Evert declined to discuss the GDRC with the River Cities' Reader, referring all questions to Wetzel.
But those contributions only cover the operational expenses of the EIIC. "It costs us about $80,000 [a year] just to keep the doors open," Wetzel said. The city's and county's contributions will now cover operational expenses above that bare-bones level.
MidAmerican is giving between $10,000 and $15,000 in both the current and upcoming fiscal years to help pay for EIIC marketing. In addition, Wetzel said, MidAmerican is giving between $10,000 and $15,000 worth of staff support, such as representing the EIIC at trade shows MidAmerican attends.
Even with those contributions, the EIIC's marketing budget for the upcoming fiscal year likely will be only between $30,000 and $40,000, compared to between $50,000 and $60,000 in previous years. Marketing efforts include everything from visiting trade shows to the industrial center's Web site (http://www.eiic.net) to face-to-face meetings with prospective buyers.
The Quad-City Development Group will also take a more active role in marketing the EIIC, Wetzel said. The organization will be unveiling its new marketing plan at its annual meeting on Thursday, and the industrial park will be a component of that initiative, he said.
While the EIIC was envisioned as fully self-supporting, even in the early years, the industrial park will require regular subsidies from its partner organizations - and therefore taxpayers - until land sales pick up.
Conjunction Junction
Talking to GDRC board members about the industrial center's challenges produces a laundry list of problems. Some are easy excuses out of the control of the EIIC or its partners, such as the economy. But others could be addressed, with either money or less-passive leadership.
The most frequently voiced problem with the EIIC is that it's not connected to rail lines. Wetzel said that the park has been eliminated from three or four site searches because it doesn't have a rail spur.
Huber said that the battle for industrial businesses is intense. "The ante has been raised ... in terms of what it requires to be competitive," he said.
Huey agreed. "It doesn't take much to get you crossed off that list," he said. He added that roughly 20 percent of large industrial producers require rail service.
Although planning and design for a rail spur have been done, it was not portrayed as an essential part of the industrial park when the EIIC was rolled out. Huey called not having a rail spur a "limiting factor" in terms of which companies the GDRC can pursue.
A key problem with getting rail at the EIIC is the funding. A rail spur at the park is estimated to cost $4.14 million. The GDRC's application last year for an 80-percent grant from the Iowa Clean Air Attainment Program was denied. Wetzel said that money for the project might be included in the federal transportation bill, which is now making its way through Congress. The organization is also "pressing our case with the Iowa DOT," he said.
Wetzel said one challenge with getting money is that the federal government doesn't want to fund a project that might lure business; it wants more certainty. "They have money if we have a project," he said.
But industrial-park prospects that need rail want the physical rail spur, not a promise that one is going to be built, Huey said.
If a rail spur is so important, why couldn't the city and county build it themselves, without federal or state assistance?
Wetzel said that both the city and the county are aware that GDRC might come to them about funding the rail project on their own. "We're trying to exhaust all other avenues," he said. "We're really trying to minimize the local cost component."
Huey said the county board, like the federal government, is less likely to support the rail spur financially if it's not meeting a need for a specific landowner. "The county's enthusiasm for that would be dependent on the size of the user needing a rail spur," he said. If the rail spur is merely speculative - meant to attract prospects rather than serve an existing landowner - the county's enthusiasm would probably be much lower, he said.
"The problem is getting the stars to align," Huber said. "The GDRC is not idle on this issue."
Other Issues
The rail spur is merely one of several obstacles the EIIC faces, according to GDRC board members.
Lynn argued that the industrial park won't find success until workforce issues are addressed. As with a rail spur, companies don't want to hear that there are plans to develop the training they need. "Our problem in the Quad Cities is workforce," Lynn said. "We don't have the workforce to attract the industry. ... They want to hear we've got training in place.
"It goes deeper than the industrial park," he continued. "Why aren't the Quad Cities expanding?"
While the Eastern Iowa Community College does have its John T. Blong Technology Center on-site, Lynn said it's not the right type of training. "We're training about 20 years behind the times," he said.
Lynn also said there's an issue of marketing. "We don't have any real marketing strategy for that place right now," he said. Rather than actively searching for possible landowners, he said, the EIIC is being passive in its marketing. "We're not getting to enough people," he said. "We're kind of waiting for people to come to us." He added that the GDRC should be targeting growing industries, industrial clients that are going public, and companies where a central location is essential, such as in the food and distribution sectors.
But Huey said that marketing dollars are best spent creating and maintaining a Web site with all the information prospective buyers could want. The early phases of a site search, he said, are done via the Web. "You need to market with the knowledge that you're probably only going to talk to people [when you're] on the short list," Huey said.
Overall, Lynn said, the EIIC needs a comprehensive strategic plan that identifies specific industries and ways to address the park's shortcomings. "We don't really develop a complete plan," he said. At this point, the GDRC appears to be reacting to a financial crisis more than developing a long-term plan to sell lots.
Other board members acknowledged that it's difficult to sell property with a reduced marketing budget. "It is difficult to postpone marketing and have success in sales," Lloyd said.
Wetzel said the GDRC has also explored other management options. It has commission-based agreements with three realtors - Mel Foster, NIA Ruhl & Ruhl Commercial, and Premier Partners. It has also looked at partnering with a developer-investor/professional management company. "Those folks wanted an arm and a leg," he said. "They won't do anything in this sort of market without some [financial] guarantees."
Despite the slow absorption of the EIIC, board members said that it's an important weapon in the Quad Cities' arsenal. Without the park, the Quad Cities wouldn't even be discussed as a possible location for new industrial development; now the area is part of the conversation.
"We see benefits of it being there," Lloyd said.
Huber stressed that the City of Davenport and the other partners stepped in to fill a need where the private sector wouldn't. "They couldn't afford to because they [industrial parks] take too long to absorb," he said.
The land was purchased in 1997 by the City of Davenport and developed to create an inventory of large, "shovel-ready" industrial parcels for the Quad Cities, something that the Quad City Development Group had argued was missing in the local economy. That land was purchased by the Greater Davenport Redevelopment Corporation, or GDRC, in 2000. The GDRC is a public-private partnership comprising the City of Davenport, Scott County, MidAmerican Energy, and DavenportOne.
Organizers hoped to sell one or two 15-acre parcels a year, and those sales would pay off debt and fund the continued administration and marketing of the Eastern Iowa Industrial Center (EIIC).
It hasn't worked out that way.
After more than four years of operation, the EIIC has sold only one piece of land: to Quad-City Consolidation & Distribution, which began operation in early 2003 and employs roughly 80 people at that site. The Eastern Iowa Community College District also has its John T. Blong Technology Center on the site.
Without land sales, the GDRC has been forced to go back to its partners for money and re-think its funding model of land sales supporting its operations. Fundamentally, though, the industrial park is using the same business plan, and it has the same deficiencies it always has.
Because of no land sales, the EIIC has become a black hole for its partners - and, consequently, taxpayers. To combat its grim financial situation, the industrial park has hacked its marketing and operations budget. But how can the GDRC sell property if it's cutting its marketing?
"I think they see a problem," said Bill Lynn, a Davenport alderman and a member of the GDRC board. "I don't think they have a solution."
GDRC representatives interviewed for this story offered a variety of explanations for the EIIC's troubles - from the economy to no rail service at the site to the quality of the workforce to marketing. But there's no consensus on what needs to be done to make the EIIC more successful, and no new action plan beyond cutting its budget.
More than anything, though, the partners plead for patience. "This is really meant to be a long-term project," said John Wetzel, president of the GDRC board and vice president of economic development for MidAmerican Energy.
"We were hopeful that we could achieve an eight- to 10-year horizon," he added, and that timeline is still possible. Because of the nature of what the EIIC does, he said, "we could be out of business [fully occupied] in three months."
"One project, two projects, and the whole thing looks different," said Dan Huber, president and CEO of DavenportOne.
"If we had a sale of 40 acres, that would put us in the black," said Timothy Huey, the county's planning director and a GDRC board member. A sale of that magnitude would allow the EIIC to pay off its $475,000 in loans from the city and county, which themselves were used to retire previous debt.
Unmet Expectations
There is no disputing that the EIIC has not met its partners' expectations.
On the original projections of one or two land sales a year, "I think that was optimistic," said Clayton Lloyd, Davenport's director of community and economic development and a GDRC board member.
DavenportOne, as part of goals set in 2001 to be completed by July 2006, anticipated five new industrial-park tenants and 200 jobs.
"It's really the only area where we did not experience the level of success we'd hoped to," Huber said.
The lack of sales success has led to cutbacks. "Our budget comes off of land sales," Wetzel said. "We've had to reduce marketing and operating expenses so we could keep our doors open."
Beyond their initial investments, both the City of Davenport and Scott County have given the Greater Davenport Redevelopment Corporation loans.
Last year, the Davenport City Council approved two loans totaling $375,000, which were used to pay down debt. The GDRC is now supposed to re-pay its loans to the city by September 2005. The Scott County Board in May 2003 gave the GDRC a $100,000 loan that was originally due in June 2004. That term was extended to June 2005.
In addition, the county has in its budget for the upcoming fiscal year set aside $30,000 for the EIIC's operational expenses, and the city has included $85,000 in its Fiscal Year 2005-6 budget. DavenportOne, in lieu of taking $125,000 a year in management fees, is making its staff support an in-kind contribution. Huber said DavenportOne's management fee was entirely human resources. "There was no margin in it," he said. "We were passing through our cost." Kathy Evert, a senior vice president with DavenportOne, is the EIIC's director. Evert declined to discuss the GDRC with the River Cities' Reader, referring all questions to Wetzel.
But those contributions only cover the operational expenses of the EIIC. "It costs us about $80,000 [a year] just to keep the doors open," Wetzel said. The city's and county's contributions will now cover operational expenses above that bare-bones level.
MidAmerican is giving between $10,000 and $15,000 in both the current and upcoming fiscal years to help pay for EIIC marketing. In addition, Wetzel said, MidAmerican is giving between $10,000 and $15,000 worth of staff support, such as representing the EIIC at trade shows MidAmerican attends.
Even with those contributions, the EIIC's marketing budget for the upcoming fiscal year likely will be only between $30,000 and $40,000, compared to between $50,000 and $60,000 in previous years. Marketing efforts include everything from visiting trade shows to the industrial center's Web site (http://www.eiic.net) to face-to-face meetings with prospective buyers.
The Quad-City Development Group will also take a more active role in marketing the EIIC, Wetzel said. The organization will be unveiling its new marketing plan at its annual meeting on Thursday, and the industrial park will be a component of that initiative, he said.
While the EIIC was envisioned as fully self-supporting, even in the early years, the industrial park will require regular subsidies from its partner organizations - and therefore taxpayers - until land sales pick up.
Conjunction Junction
Talking to GDRC board members about the industrial center's challenges produces a laundry list of problems. Some are easy excuses out of the control of the EIIC or its partners, such as the economy. But others could be addressed, with either money or less-passive leadership.
The most frequently voiced problem with the EIIC is that it's not connected to rail lines. Wetzel said that the park has been eliminated from three or four site searches because it doesn't have a rail spur.
Huber said that the battle for industrial businesses is intense. "The ante has been raised ... in terms of what it requires to be competitive," he said.
Huey agreed. "It doesn't take much to get you crossed off that list," he said. He added that roughly 20 percent of large industrial producers require rail service.
Although planning and design for a rail spur have been done, it was not portrayed as an essential part of the industrial park when the EIIC was rolled out. Huey called not having a rail spur a "limiting factor" in terms of which companies the GDRC can pursue.
A key problem with getting rail at the EIIC is the funding. A rail spur at the park is estimated to cost $4.14 million. The GDRC's application last year for an 80-percent grant from the Iowa Clean Air Attainment Program was denied. Wetzel said that money for the project might be included in the federal transportation bill, which is now making its way through Congress. The organization is also "pressing our case with the Iowa DOT," he said.
Wetzel said one challenge with getting money is that the federal government doesn't want to fund a project that might lure business; it wants more certainty. "They have money if we have a project," he said.
But industrial-park prospects that need rail want the physical rail spur, not a promise that one is going to be built, Huey said.
If a rail spur is so important, why couldn't the city and county build it themselves, without federal or state assistance?
Wetzel said that both the city and the county are aware that GDRC might come to them about funding the rail project on their own. "We're trying to exhaust all other avenues," he said. "We're really trying to minimize the local cost component."
Huey said the county board, like the federal government, is less likely to support the rail spur financially if it's not meeting a need for a specific landowner. "The county's enthusiasm for that would be dependent on the size of the user needing a rail spur," he said. If the rail spur is merely speculative - meant to attract prospects rather than serve an existing landowner - the county's enthusiasm would probably be much lower, he said.
"The problem is getting the stars to align," Huber said. "The GDRC is not idle on this issue."
Other Issues
The rail spur is merely one of several obstacles the EIIC faces, according to GDRC board members.
Lynn argued that the industrial park won't find success until workforce issues are addressed. As with a rail spur, companies don't want to hear that there are plans to develop the training they need. "Our problem in the Quad Cities is workforce," Lynn said. "We don't have the workforce to attract the industry. ... They want to hear we've got training in place.
"It goes deeper than the industrial park," he continued. "Why aren't the Quad Cities expanding?"
While the Eastern Iowa Community College does have its John T. Blong Technology Center on-site, Lynn said it's not the right type of training. "We're training about 20 years behind the times," he said.
Lynn also said there's an issue of marketing. "We don't have any real marketing strategy for that place right now," he said. Rather than actively searching for possible landowners, he said, the EIIC is being passive in its marketing. "We're not getting to enough people," he said. "We're kind of waiting for people to come to us." He added that the GDRC should be targeting growing industries, industrial clients that are going public, and companies where a central location is essential, such as in the food and distribution sectors.
But Huey said that marketing dollars are best spent creating and maintaining a Web site with all the information prospective buyers could want. The early phases of a site search, he said, are done via the Web. "You need to market with the knowledge that you're probably only going to talk to people [when you're] on the short list," Huey said.
Overall, Lynn said, the EIIC needs a comprehensive strategic plan that identifies specific industries and ways to address the park's shortcomings. "We don't really develop a complete plan," he said. At this point, the GDRC appears to be reacting to a financial crisis more than developing a long-term plan to sell lots.
Other board members acknowledged that it's difficult to sell property with a reduced marketing budget. "It is difficult to postpone marketing and have success in sales," Lloyd said.
Wetzel said the GDRC has also explored other management options. It has commission-based agreements with three realtors - Mel Foster, NIA Ruhl & Ruhl Commercial, and Premier Partners. It has also looked at partnering with a developer-investor/professional management company. "Those folks wanted an arm and a leg," he said. "They won't do anything in this sort of market without some [financial] guarantees."
Despite the slow absorption of the EIIC, board members said that it's an important weapon in the Quad Cities' arsenal. Without the park, the Quad Cities wouldn't even be discussed as a possible location for new industrial development; now the area is part of the conversation.
"We see benefits of it being there," Lloyd said.
Huber stressed that the City of Davenport and the other partners stepped in to fill a need where the private sector wouldn't. "They couldn't afford to because they [industrial parks] take too long to absorb," he said.
