Sunday, June 11, 2006

The Greater Paducah Economic Development Council returned 12 times more earnings to the area than the nearly $4.1 million spent recruiting industry over the past five years, a new study says.

A report by Capital Strategists Group of Atlanta, Ga., says the spending:
o Created or retained 1,761 direct jobs and $50.5 million in earnings with a weighted average of $28,690 per job. That accounted for 85 percent of the new jobs in McCracken County from January 2001 to June 2005.

o Generated 1,543 spin-off jobs with another $30 million in earnings. The numbers are based on a standard formula that assumes every main job creates nearly a whole secondary job, such as a truck driver to haul goods.

The findings will be discussed at 7:30 a.m. Friday at the Luther F. Carson Four
Rivers Center as part of GPEDC's new fund-raising campaign, with a goal of exceeding $5 million over the next four years.

Capital Strategists Group founder Tom RaIser, who has been evaluating economic development organizations since 1994, said the council would have broken even had it created only 85 jobs.

"The average cost to create ajob was $2,322," he said, noting the spending does not take into account state and local government incentives. "That's a bargain when you're looking at just the spending of the GPEDC."

His company rated GPEDC slightly below average in comparison with peer groups.
"Slightly below average isn't necessarily a bad thing. On a cost-per-job basis they're right in line," RaIser said. "My concern here is the earnings those jobs are carrying could use some improvement."

He said wages here are lower than in some other areas of the nation partly because the cost of living is lower. His report estimates GPEDCrelated jobs generate $41.5 million in annual consumer spending, largely in housing, food and transportation.

The GPEDC was well below average before 2001 when it took a big step with the fund-raising campaign, Chairman David Denton said. "Many of the communities we're compared against have been involved in significant economic development fund-raising campaigns for a long time. "

While the report lists all the jobs as "created," GPEDC figures show that 882 are or will be new over the first one to six years of company growth.

The remaining 869 are retained by employers' decisions to expand here rather than move elsewhere. Last year, land deals helped convince shippers Marquette Transportation and Ingram Barge Co. to opt for new Paducah headquarters, Mayor Bill Paxton said. Together they employ 1,300 here.

"For our analysis, created versus retained doesn't matter," RaIser said. "What we're reporting are the jobs that GPEDC had its fingerprints on, whether it's hard work to get a company to move to town or an existing company to stay here."

McCracken County Judge-Executive Danny Orazine said GPEDC work influenced a decision by Coca-Cola Bottling Co. to expand its distribution center here rather than move to Hopkinsville. That saved 80 jobs and created 25, he said.

"The retained jobs are just as important as new ones, especially when you get new jobs mixed with them," Orazine said.

He, Paxton and Denton said the GPEDC must pay more attention over the next four years to existing businesses and industry. The mayor said smaller firms such as Paducah's many machine shops need help expanding to create jobs.

GPEDC sought $3 million in 2001 and raised $4.2 million. Its board members, a mix of business leaders and elected officials, set a goal of 2,500 jobs and $500 million in capital investments.

In early 2003, just one year into the five-year plan, the GPEDC staff became depleted and recruiting was idled with the resignation of former president Stuart Gilbert. After a six-month search he was replaced by Wayne Sterling, billed as one of the nation's leading business recruiters, and the staff built to four. "Essentially we lost two of the first five years of the five-year plan," Paxton said. "We've only been working at this for three years so that's why I feel good about bringing in 1,761 jobs."

Paducah would have "phenomenal success" if it lands just a few of the more than 33 potential projects Sterling is pursuing, Paxton said. "You've got to build up the pipeline so you can ultimately get a certain percentage of those."

About $385,500 ofGPEDC's $1.193 million annual budget pays the salaries of four full-time employees, including Sterling's $180,000. The budget also has $429,747 for marketing, including trips in the U.S. and overseas and $140,000 a year to pay retired German businessman Stephan Atchison. He is helping Sterling recruit European manufacturing prospects, particularly those in the auto industry.

Both the city and county contribute $300,000 a year, or 50.2 percent of the budget. The rest comes from business donors. Paxton and Denton want far more private dollars and less governmental funding in keeping with many other economic development groups.

"My goal is a 75-25 split (in favor of private funding)," Paxton said. "When you start out you need public-sector dollars, then the private dollars need to kick in."

Heavy private funding is important because public dollars hinge on changes in administrations and elected officials' views of the importance of business recruitment, he said. Paxton said there are 125 private supporters now, and he wants 200 to 250.

The mayor led a controversial .5 percent payroll tax increase partly to help the GPEDC budget and fund infrastructure incentives for economic development. The tax will expire in three years unless the city commission reinstates it.

"They're not coming to Paducah because they like you," he said. "They come because of the incentives."

State and local incentives that hinge partly on job creation and wage ranges are tracked to be sure companies comply, Paxton said. "Quite honestly we've had to contact a couple of companies and tell them they weren't in compliance and the incentives would stop ifthey didn't comply within a certain time."

Both firms did comply, Paxton said, declining to identify them.

GPEDC-assisted
companies,
2002-2006

JMS Metal Services

National Railway Equipment
(VMV shop)

Infiniti Media

Ulrich Medical Concepts

Coca-Cola Bottling Co.

AAA Fabricators

BellSouth

Millwork Products

Aluma-Kraft

American Justice School of Law

Marquette Transportation

Ingram Barge Co.

A&K Construction

Total jobs, 1,751

882 new jobs over one to six years

869 retained jobs

Capital investment, $77 million

Infiniti Media, $47 million

American Justice School of Law, $11 million

Ingram Barge Co., $5 million

Coca-Cola Bottling, $4.7 million

Seven others ranging from $100,000 to $2.1 million