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GE Oil & Gas: How we got it, what it means and what comes next (Video)

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This article was originally published on Jacksonville Business Journal.

It was a rainy week in May in Jacksonville when some metaphoric dark clouds also started rolling in over City Hall.

The city’s economic development office and JaxChamber had spent the past few months chasing after GE Oil & Gas, a subsidiary of the ninth largest company in the U.S.

The energy company was impressed with the city’s transportation network; it liked its workforce and had plans to use its port.

But there was a sticking point: a $15 million shortfall between Jacksonville and it closest competitor.

“We said we had to do something, we had to be innovative and creative,” Mayor Alvin Brown said.

That creativity paid off.

Last week, GE Oil & Gas announced that it would be setting up shop in Jacksonville in the next month, eventually bringing 500 jobs, investing $89 million in real estate construction and manufacturing equipment and beefing up the city’s manufacturing credentials.

The move could be a game changer for the city and even the region, spawning additional investment and luring more of the nation’s resurging manufacuring sector to the First Cost.

Getting the deal done required a number of pieces to fall into place, including a fortuitously timed building project, a transportation system that met the company’s needs and a workforce that GE could build upon in the future.

Even with those attributes, though, the deal almost fell apart: In May, city officials said, GE told them it couldn’t make the numbers work. Going instead to an unnamed city in North Carolina would put the company some $15 million ahead.

“Jacksonville was not deemed to be competitive on pricing,” Ted Carter, the head of the city’s economic development office, said in a memo about the deal.

That message — coming shortly after the sole visit the company made to Jacksonville — led to some late nights in City Hall, as city economic development officials, representatives from eventual landlord Hillwood Investment Properties and the leadership of JaxChamber huddled, looking for a solution.

The result: the creation of the Economic Development Manufacturing Employer Grant, a $400-per-job payment that will be made to the company from 2015 to 2030.

Without even knowing the name of the company that would be receiving the money, the City Council signed off on the deal — $10 million from the city and another $5.4 million from the state.

As well as the $3 million manufacturing grant, the city is also offering $500,000 under the Qualified Target Industry program and $6.5 million in property tax rebates. The state would pay

$2.5 million from its quick action closing fund, $900,000 in training grants and $2.5 million from the targeted industry program.

All told, the city agreed to $10 million in incentives, with the state kicking in $5.4 million more

In return, the company has committed to making a $50 million capital investment and hiring 500 employees.

Creating the new incentive was an unprecedented move by the city, one that economic development officials said was born out of necessity.

“We only want to use it if we have to,” Jerry Mallot, executive director of JaxUSA, the economic development arm of the chamber, said after the deal was announced.

In this case, they did.

“We didn’t want to take no for an answer,” Mallot said.

***

Getting to “yes” led to the August announcement that a Fortune 500 company planned to set up a facility in Jacksonville. Code named Project Speed — not, official say, for any particular reason — the deal was pitched as one of the most significant economic development projects in the city’s history.

Last week, GE Oil & Gas made its intentions official, saying that by November it would start moving into a building now under construction at Cecil Commerce Center.

The company’s new home will be a 510,000-square-foot warehouse in the AllianceFlorida development, one of the largest industrial parks in Florida and a place Jacksonville has long hoped to turn into a major commercial center.

The benefits of Cecil Commerce Center were key in getting GE Oil & Gas to look at Jacksonville, according to those who worked on the real estate part of the deal.

“The location and infrastructure at the Cecil Commerce Center is really second to none in North Florida,” said CBRE First Vice President Terry Quarterman, the exclusive broker for Hillwood’s development at Cecil.

Dan Tatsch, senior vice president for Hillwood Investment Properties, says development of the site has been a priority of both Hillwood and the city.

“Hillwood has worked with GE since early spring of this year to ensure the facility meets all of GE’s specifications regarding schedule and design,” Tatsch said.

Hillwood Investment Properties, which the city hired almost four years ago as the site’s master developer, began work on the speculative building in April 2013. It was driven by a requirement in its deal with the city that it build a 400,000-square-foot warehouse by June 2013, whether it has a tenant lined up or not.

“If they hadn’t started the building, it wouldn’t be here,” Mallot said. “That was a make-or-break point right in the beginning.”

Starting at the beginning of this year, the administration had pushed Hillwood to do more with the site, saying now that they heard there then was someone in the market for a large chunk of space.

“The mayor said get out to Hillwood and get their game amped up, because I want to see some activity there,” Carter said. “We knew there was a big occupier in the marketplace.”

***

With its interest piqued by the Hillwood building, GE began a deeper dive into the other things that would enable it to make a decision.

The company had a matrix with some 100 variables that it used in making its decision, saidJulie DeWane, GE’s vice president of Global Supply Chain.

Among them: the employee talent pool, the area’s transportation network, the Port of Jacksonville and the incentives offered by the city.

The workforce was key, local economic development officials said – and it’s something GE already has some familiarity with: More than a decade ago, it bought Unison Industries, a Jacksonville-based company that makes electrical components, sensors and systems for the aircraft, industrial, marine and space industries. General Electric also has a presence at the Fleet Readiness Center at Naval Air Station Jacksonville — the largest manufacturing employer in the area.

Hiring managers from GE have reached out over the last few months to centers such as CareerSource, which will partner with GE in its recruiting efforts.

“One of the reasons Jacksonville was on the short list for this facility is that Jacksonville is one of the best manufacturing centers in the nation, and also because our military workforce has the kind of skills that transfer so easily to what GE is looking for,” saidCandace Moody, vice president of communications for CareerSource Northeast Florida.

Entry-level workers will be paid an average $48,850, or about $25 an hour. The annual mean wage for similar positions within the manufacturing sector in Jacksonville was $42,130 for 2013, according to the U.S. Bureau of Labor Statistics.

With a large military presence in Jacksonville, veterans transitioning into the civilian workforce are especially attractive candidates for this division of GE Oil & Gas’ manufacturing, according to Aaron Bowman, senior vice president of business development for JaxUSA’s partnership workforce development program.

Shortly before the deal was announced, retired Rear Admiral Victor Guillory — head of the city’s military affairs department — took GE officials on a tour of the Readiness Center, showing off the skilled workforce that comes from the city’s supply of former military personnel.

Lake Ray, president of the First Coast Manufacturing Association, said his organization has been working to determine what skills manufacturers are looking for and then helping manufactures scout out that talent.

He said the exposure people get to manufacturing from its prevalence in the city — combined with military personnel who have already been taught many of the skills needed — makes Jacksonville a hotspot for employees in the sector.

“At the end of the day,” he said, “it’s about the ability to have the available workforce or get that created in the short term.”

Another key factor in the decision: the city’s logistics network.

Having GE Oil & Gas come to Jacksonville could be a boost for the city’s port.

“Clearly any time we get a major manufacturing company coming here to set up a business, that is not just going to produce material for domestic products but also some for international products, it creates a new opportunity to use the facilities at the port,” saidBrian Taylor, CEO of the Jacksonville Port Authority. “And clearly having access to a vibrant port facility was part of the decision-making process GE went through to choose Jacksonville.”

Being near a port is essential for a company like GE — and Florida ports have the additional benefit of providing easy access to other continents, said Chad Moutray, chief economist for the National Association of Manufacturers.

“Jacksonville has a lot to offer, and Florida is a great gateway for trade with Europe and South America,” Moutray said. “Export sales are an important part of the Florida manufacturing economy. When you think of Florida and its location, geographically it’s a nice opportunity for trade.”

The existence of the port was key in GE choosing the area, Carter said — a necessity for a company looking to both bring in supplies and ship out goods.

The other logistics benefits that are often trotted out by those looking to sell the city — the two highways that meet nearby, providing access to the north, south and west; the aviation assets at Jacksonville International Airport and at Cecil — also played a role.

A number of the GE personnel who showed up at the Friday announcement are involved with the company’s supply chain management, including DeWane .

“When you think about what makes a product line competive, it’s all about the cost position and your ability to deliver with speed to your customer,” DeWane said. “From that perspective, not only the port, but the other tranporation options that exist in this area were big criterias for us in chosing Jacksonville.”

***

Now that the announcement has been made, the big question facing Jacksonville’s economic development community is this: What comes next?

Part of the answer might lie in the reason GE is looking to expand at all.

(Although setting up the plant in Jacksonville will result in the closure of facilities in Elk Grove and Salt Lake City, the number of workers handling the two projects lines coming here will grow overall.).

GE was looking at Jacksonville – and the “49 other states and other countries” it says were on the list — because of a sea change in the American manufacturing economy.

The fact that GE Oil & Gas is in the energy industry is a big win for Florida, experts say.

“You’ve got to be pleased that this is in one of the most important growth areas in the U.S., which is energy,” said Don Sabbarese of Kennesaw State University. “They make products in the energy industry, which has strong growth in the market. It’s a strong sector in the economy with fairly high-paying jobs.”

“The oil and gas industry – petro chemicals of all kinds – has just gone nuts in the South,” said Michael Randle, publisher of Southern Business & Development magazine. “We’re so far ahead when it comes to oil and gas, we’re looking at this manufacturing renaissance. It’s not going to stop any time soon.”

Part of that is the need for more equipment being used in the energy industry, a side affect of the hydraulic fracking boom that has transformed domestic energy production.

At the same time, cheap natural gas is luring other manufacturers back to the U.S.

“Because of shale exploration throughout the country, North America has become dominant in energy production,” Chad Moutray, chief economist for the National Association of Manufacturers. “It has major implications not just for the U.S., but for manufacturing. There’s a lot of manufacturing in the oil and gas space. It makes sense to take the advantages and be more competitive.”

Over the past four or five years, reshoring — the opposite of off-shoring, in which companies bring their factories back from the far-flung locales they moved to — has become the trend in the industry, with the South and Mexico major beneficiaries.

“There are companies dismantling multi-billion dollar plans around the world, putting on them on ships and moving to Louisiana and Texas,” Randle said. “Companies like GE, they have the resources to benefit from this.”

***

And, with GE Oil & Gas’s decision to pick Jacksonville, the First Coast could see other benefits as well.

Although the area has seen some big manufacturers making big announcements before — Bridgestone Firestone North American Tire LLC announced it was putting a distribution center at Cecil in 2007 and Saft America opened a battery manufacturing plant there in 2011 — the GE announcement has overshadowed them.

In part that’s because of the size of the project; GE’s plant will have about the same number of employees as Bridgestone and Saft combined.

More importantly, though, there’s a sense that this could be a tipping point, the long-awaited holy grail of a company that brings with it suppliers and spin-off companies and customers, all of who would also call the area home.

“If you have got one company moving in an area, it may be indicative you have the so-called ingredients to attract other companies,” said Don Sabbarese, past director of econometrics at Kennesaw State University. “The Southeast states are very attractive and very competitive with each other to attract these types of manufacturers.”

Experts say the potential is there for Jacksonville to build on the GE announcement. “Companies look at a lot of things before they move in,” Sabbarese said. “Jacksonville may have the factors and variables people look at.”

The tenor of conversations with other prospects has already started to change, the mayor said.

“When we’re marketing the city now,” Brown said, “and companies are looking to see if we have the capability to be an advanced manufacturing city, will they have the skilled workforce, will there be a good quality of life, is the city pro-business, will the state work with them — the answer is yes, a resouding yes.”

Catherine ByerlyColleen JonesAndrew Thurlow and Jensen Werley contributed to this story.

Timothy is editor in chief of the Jacksonville Business Journal.

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