When the call came
in to Joe Bailey at
Arkansas’ economic
development
commission, the whole thing sounded fishy. A consultant for an anonymous company from who-knows-where wanted some information. That wasn’t so fishy. Cold calls to the AEDC happen all the time, and often never thaw out. What sounded fishy was what the consultant said about his client. This supposedly Fortune 500 company was looking to place 1, 200 jobs that paid a minimum of $ 40, 000 in a new permanent facility. And it was a high-tech outfit. Twelve-hundred jobs ? Salaries that started at forty grand ? Internet technology ? Not likely. About the only part that kept Bailey, director of business development at AEDC, from dismissing the call out of hand was the consultant: Hartley Powell from KPMG, a reliable and well-known company that had done business with the state. Indeed, Powell himself had worked Arkansas for other companies. Still, it sounded too good to be true. So Bailey flipped the project, sure to be a dead-end deal, to “the new guy.” He enlisted Bentley Story to work as project manager for Too Good To Be True Inc. This was early February. Story had come over to AEDC from the state’s finance department in November. He’s 26 but could easily pass as a college senior, maybe fifth year, who, thanks to his put-together appearance, confidence and sharp mind, might serve as president of the most popular fraternity on campus.
Bentley Story was the new guy. Bentley Story got Project Sigma.
Okay, it’s probably a bit of an exaggeration to imply that Story got the assignment just because he was young, new and nobody in state government thought this company was for real. But not by much.
According to KPMG’s Powell, Central Arkansas was one of 26 Metropolitan Statistical Areas competing for Mystery Company Inc. —also known as Project Sigma and really known as Hewlett Packard. And it was assumed by those in state government that the three competing cities in the Little Rock MSA, which reaches as far as Conway, were far, far down the list.
But you fills out your RFIs and you takes your chances.
Funny thing about these high-dollar romances—the ones expected to pay are kept on a blind date till the kiss at the door. Ever see the old Dating Game ? The young woman being courted asked questions of her three possible dates, oblivious to their good looks or body language, having only their terribly insightful answers to guide her toward relationship bliss. Flip that scenario and you’d have the courtship of economic development. The courted know everything. The poor suitors are in blind competition.
For the longest, the states don’t know who the company is or their competition. Eventually, of course, the company outs. The competition ? Not always, although this time we have a good idea. From what I can gather, Central Arkansas was competing against sites in Rio Rancho, New Mexico, which ultimately attracted a relocated HP facility itself, and was in play to score the Conway plant, too; an exurb of Atlanta; and a major population center of South Carolina, which narrows it down to either Columbia or Greenville. Here at home, the contenders in Central Arkansas were Little Rock, Benton and Conway.
We know the numbers. That’s been the story so far. We know that the state of Arkansas and Conway put up some $ 43. 7 million in toto, including $ 10 million from Governor Mike Beebe’s quick-action closing fund. We know that the state of New Mexico is in for at least $ 42 million, including $ 12 million from New Mexico’s governor, Bill Richardson, but not including any local incentives from Rio Rancho. But as for the offers from Georgia and South Carolina, this time the state and Conway were left in the dark.
“Sometimes consultants and companies will play states off each other and tell you what somebody else is offering,” says Beebe. “We were [once ] talking about a super project, 200 million dollars counting bonding authority and local matches and all those things. And they were very upfront and said they had just been offered 400 or 500 million dollars from Louisiana, 700 or 800 million from Alabama. Well, there wasn’t any point in us talking to them. We were never gonna do that. We couldn’t do that.”
The governor is sitting in his office almost two weeks after he announced that Hewlett Packard was bringing jobs to Conway with starting salaries about 33 percent higher than Arkansas’ percapita income. He’s riding a political high. About the sharpest criticism of Beebe these days is of the indirect variety—that some in the press doth praise him too much.
But, today, Beebe revels.
“There’s a certain intangible about [landing ] a company like Hewlett Packard... particularly if your state hasn’t been known for that,” he says. “If a new startup transistor chip company goes in Silicon Valley, it doesn’t raise anybody’s eyebrows. They’ve got fifty of ’em, a hundred of ’em. But if it comes to Moss Point, Mississippi, then it makes a headline. Same thing when Hewlett Packard came to central Arkansas. It sent a message to the world about something going on here. And the more of that we can do, the more we can change those expectations. We know we’re pretty good. Our trick is to let the rest of the world know that.”
If $ 43. 7 million seems steep for eyebrow-raising and message-sending, consider a few deals in other states. In 2004, North Carolina coughed up $ 242 million in tax incentives to land a Dell computer plant. In 2000, Nissan motors struck what would become a $ 363 million deal with Mississippi. And in ’ 05, Texas’ governor, Rick Perry, handed out $ 400, 000 from his Texas Enterprise Fund for an outdoor retail store called Cabela’s. Four-hundred grand for a store. All told, Cabela’s raked in state and local incentives worth some $ 61 million, promising 225 full-time employees. It has yet to hit its job targets.
LATE APRIL: THEY’RE HEEERE ! Bentley Story had been working on Project Sigma almost ’round the clock, and it cost him his dream house. As project manager, Story was in daily contact with Project Sigma’s consultants. He obsessed over the deal, wallowed in it. Before the project became all-encompassing, Story put an offer down on a house in Little Rock. Somebody else made an offer, too. Story had to go out of town for Project Sigma, and the house sold while he was gone. The disappointment was tempered by a conference call in mid-April. Story found out that Central Arkansas had made the cut down to the final five or six, and that his mystery client was Hewlett Packard, the computer giant.
Maria Haley, executive director of the AEDC, is on vacation when I ask to sit down with her and her folks. So I visit with Becky Thompson, AEDC’s deputy director of global business, as well as Bailey and Story.
Thompson is recalling the first visit to Arkansas from Team HP in late April—after more than a month of baiting Hewlett Packard with data and dollars and waiting for a strikeand she starts to giggle. “You can tell Bentley is a fraternity man,” she says. “He approached the visit like it was rush” the notorious pledge week for frats and sororities when they try to impress potential new members.
Story arranged for a van to pick up the crew from HP at the airport and then take a circuitous route to the chamber of commerce in downtown Little Rock. The van went through the River Market, past the Clinton Library, past the new buildings going up east of Interstate 30, along Markham where Robinson Auditorium was hopping, all the while avoiding decaying embarrassments like Main Street and Capitol Avenue.
“He must have paid every extra in town,” Thompson jokes, noting all the folks on the sidewalks that lovely spring day.
It worked. So did a pre-lunch tour of neighborhoods, including the Quapaw Quarter near the Governor’s Mansion. Consider that Hewlett Packard’s executives work in and live near the company’s headquarters in Palo Alto, California, nor far from the pricey San Francisco Bay, and that HP’s real-estate man is from Manhattan and that its facilities expert is from Houston... these people aren’t used to Arkansas housing costs. Other than KPMG’s Powell, none of them had been to the state before.
“They’d point to a big nice house and say, ‘how much for that ?’” Bailey says. “And we’d give them an idea and they were just shocked.... Visually, Arkansas was not what they thought it would be. They didn’t expect the rolling hills, the river running through the capital, the geography, even the cosmopolitan feel of Central Arkansas.”
After lunch at the chamber, the group representing HP split up to check out potential sites. Some looked at existing buildings in Little Rock. Some headed up I-40 to Conway, where they toured the Conway Development Corporation’s still-new technology park and drove through the campus at UCA.
“HP likes the university-community model,” says Tab Townsell, Conway’s mayor for the last 10 years. “They said Conway reminded them of Corvallis, Oregon, and Oregon State University.”
During the site visit, Townsell took a chance by telling the HP officials, “We can make this happen quicker.” He meant that the city of Conway could commit some $ 5 million for street and site improvements.
“Of course I didn’t have the council’s approval yet,” the mayor says. “But I felt I could get it.”
So at this point, Hewlett Packard was shown a ready-made site, told it would have the facility built for it by the CDC and leased back, told it would have the city take care of any extra site and street needs, and knew it had at least $ 6. 5 million (and counting ) from the governor, as well as tax-based incentives from the state. As for frills, the CDC promised free health screenings, discounts at a fitness center and help finding spouses’ of new employees a job. All standard-issue corporate baksheesh, says Brad Lacy, president of the Conway Development Corporation, who also secured $ 125, 000 from a local good-suit club called the Conway Committee of 100. The reps for HP met back in Little Rock, had dinner at Sonny Williams steakhouse in the River Market district, where they talked business with Townsell and others, then spent the night at the Hilton along I-630 and University before flying out the next day. Nobody in Arkansas had a clue if they were really interested.
THE MEADOWS “We started preparing for this eight years ago,” says Lacy as he drives his SUV toward The Meadows technology park about 10 minutes south of downtown Conway. He has been president of the Conway Development Corporation for 10 years, just before The Meadows was developed as a recruitment tool unique to Arkansas, but he’s only 36. His staff who worked on the HP project are all in their twenties.
“None of us are from here,” says Lacy, a native of Ida in Cleburne County and UCA graduate. (He earned his degree in geography. ) His other staffers on this project are from Nashville, Atkins and Rogers. “But Conway is a college town where kids stay.”
Did the team’s relative youth—and accompanying youthful enthusiasm, which sometimes might not quite mesh with the buttoned-up world of a corporate giant like HP—help or hurt ?
He considers the question. “It helps reinforce the point,” Lacy says, “which is that every year 3, 500 newly degreed graduates in Conway are looking for a job.”
First impression: The Meadows looks too picturesque to be downgraded to a technology park. Lush, green waves of hills and a small lake just past the landscaped entrance of native Arkansas stone create 181 acres of natural beauty. Not so long ago, a fair slice of the acreage was home to the Russ Dairy Farm—just about where HP’s new building will rise.
That’s Russ as in the family of Stanley Russ, the former state senator from Conway who now lives just down the way on—what else?—Stanley Russ Road.
“It’s a beautiful piece of property,” Russ says from his Conway home. “I have mixed emotions for sure. I was born and raised there. To see it turned into a technology park is sad, but progress is such that it would be developed anyway.”
That said, Russ considers landing Hewlett Packard in Conway a possible watershed moment for economic development in Arkansas.
Lacy traces the moment back to 2000, when his non-profit development corporation spent about $ 60, 000 to hire out some consultants from the Wadley-Donovan Group in New Jersey. Wadley-Donovan usually specializes in finding sites for business looking to relocate. Like HP. In this case, Conway’s bigs asked Wadley-Donovan to look around and tell them what was wrong with their city.
The consultants found plentyfrom the absence of restaurants selling booze to the deficiency of computerscience faculty members at UCA to the aesthetics of the place. Especially the heart of downtown. And of course the city needed a place for high-tech companies. So CDC bought the farm, so to speak, and Mayor Townsell worked on the aesthetics. To wit:
The city banned additional billboards in much of the city. It passed an ordinance mandating monumentstyle signs. It created design standards for new buildings. (No metal buildings in the city center. Brick fronts and block backs are prohibited. ) It even required that parking lots have islands of trees, not just shrubs. More sidewalks, roundabouts and streetscaping popped up. Conway was getting ready.
THEY’RE BAAACK (MEMORIAL DAY WEEKEND ) When the crew from HP returned, it was Mike Beebe’s job to sell Arkansas. There would be a meeting at the Governor’s Mansion. On the guest list: Beebe and some members of the governor’s staff; Mike Roberts, a senior director of something called Global Location Strategy for HP, and some of his staff; Tim O’Brien, HP’s real-estate man; Lu Hardin, president of UCA; Mary Good, dean of the Donaghey College of Engineering and Information Technology at UALR; Conway’s Lacy; Joey Dean of the Greater Little Rock chamber of commerce; representatives from Pulaski Tech and Hendrix; and Maria Haley and some of her staff from AEDC.
It wasn’t a dinner. These people weren’t here to eat. This was all business. By this time, the money and incentives were more or less on the table. Beebe, after some cajoling from Haley, had upped his offer from his Quick Action Closing Fund from $ 6. 5 million to $ 10 million. Hewlett Packard was granted eligibility by the state for any number of incentives, including the key Create Rebate program. Create Rebate provides a tax rebate of up to 5 percent based on the number of quality, full-time jobs created by a company like HP. All of the competing states had similar rebate programs. Without the Create Rebate, Arkansas would not have made the cut.
So the showdown at the Governor’s Mansion was less about the hard-sell numbers than the soft-sell intangibles. In this dating game, the time had come to see if the parties involved had chemistry.
Beebe remembers that HP’s Mike Roberts did most of the talking, and he and the Arkansas contingent did the answering. At one point, Beebe took a chance on real candor: “We want you badly in Arkansas,” he said. “But you can’t hop a plane and go to Rome out of Little Rock.”
At another point, Beebe struck up a conversation with one of the people on Roberts’ team. The fellow lives in Oakland and is a big fan of the NFL’s Oakland Raiders. Well, wouldn’t ya know ? The top draft pick of the Raiders last spring was none other than ex-Razorback and Little Rock’s own Darren McFadden. And wouldn’t ya know again ? The Raiders’ rookie of the year last season was a fullback named Oren O’Neal from Arkansas State, the governor’s alma mater.
In guyspeak, this is known as male bonding. Later, Beebe and Gary Fazzino of HP would find another sports connection. Fazzino, a former mayor of Palo Alto, is a graduate of Stanford University and, naturally, a fan of the Cardinal. Back in 1988, Arkansas State played Stanford in basketball in the National Invitation Tournament. Turns out, both Fazzino and Beebe attended the game.
Male bonding, take two. The corporate courtship had advanced to a personal level. Next step: The Close.
“Economic development is a sport where there’s a winner and a loser every time,” says Lacy. “At some point, CEOs want to deal with other CEOs. The CEO at Hewlett Packard doesn’t want to talk to Brad Lacy, he wants to talk to Mike Beebe.”
The CEO of Hewlett Packard, Mark Hurd, never did visit Arkansas. He did speak to Beebe by phone.
“I’d rather you ask Gary [Fazzino ] this question,” Beebe says, “and let him be quoted on this. He said the deal was clinched when Hurd and I hung up the phone.” HP’s bigs didn’t want to be interviewed for this story, according to company spokesman Dave Berman.
As to what Beebe said to Hurd that put Conway over the top, not even the governor is sure. It may be less about what is said than who is doing the talking. There’s a certain cachet in going right to the top. Access is the currency of powerful people. But even in an age when almost every governor of every state has an economic-development fund and recruits companies like a head football coach after a blue-chip quarterback, some governors just won’t make the phone call.
CROWDED IN CONWAY Over the Memorial Day weekend, Roberts & Co. head back out to The Meadows and Conway, along with Bentley Story and others from AEDC. They’re to meet Townsell and Lacy and the Conway crew. But when they show up, the park is packed with cars. Realestate salesmen are circling like sharks in bloody water. Word had outed that a Big Company was looking to relocate in Conway. HP’s real-estate man in New York had phoned his real-estate contact in Memphis to get the lowdown on housing in Central Arkansas. The Memphis realtor didn’t know, so he phoned a real-estate contact in Little Rock / Conway. Et voila ! A welcoming committee of salesmen. “There were so many people there,” Lacy remembers, “I got confused as to who was with HP and who wasn’t.” Given that party at The Meadows, it’s a wonder the HP story didn’t break in the press for almost another month. After the site tour, and because of the changes to downtown, the city swells were able to wine-and-dine their prey at Michaelangelo’s, directly across from the mayor’s office. The thought of entertaining any client in downtown Conway just a few years before would have been unthinkable. By the time, Roberts and his team left, it was clear Conway was HP’s first choice in Arkansas.
SPRINGING A LEAK Lu Hardin’s daughter Mallory works for KARK-TV, Channel 4, in Little Rock. The Monday before the announcement on Thursday, June 19 th, Hardin’s wife Mary was at their daughter’s apartment. Mallory was on the Internet when she came across an item on the web site of Arkansas Business. “Oh, look,” she said. “Conway is getting 1, 200 new jobs. Dad’s gonna be so happy. Call and tell him, mom.” When Lu Hardin heard, “I was sick to my stomach.” You’d think an international company that had made its mind up about a new location wouldn’t be swayed by a mere leak in the press just three days before the announcement. But companies have changed their minds over less.
“Absolutely I was worried,” says Brad Lacy. “The ability to instill confidence and keep a confidence is important in this job. I was a little nervous for a couple days. But when I talked to them again and found out they hadn’t canceled their trip on Wednesday, I knew we had it.”
Coincidentally, Lu Hardin and Sheffield Nelson—the former head of Arkla, former GOP gubernatorial candidate and former chairman of what was then the Arkansas Industrial Development Commission—had dinner with Beebe at the Governor’s Mansion the Tuesday before the announcement.
Hardin remembers the dinner as having no real agenda. Perhaps it was a thank you for Nelson and Hardin’s support for cutting the severance tax. Anyway, one topic was the leak.
“There was concern because this was obviously one of the biggest [developments ] in the state’s history,” Hardin says.
In the end, the only thing the leak accomplished was ramping up intrigue in the announcement. Lacy’s group sent out brown paper bags as invitations, billing the event at UCA’s Reynolds Performance Hall as Arkansas’ Most Exciting Press Conference *. The asterisk notation implored recipients to “keep this bag in the event of hyperventilation.”
Hyperbole is a strong suit among recruiters. But it’s hard to blame them too much. These development Ahabs had landed their corporate whale. And folks came out in big numbers to see the catch.
They almost filled all 1, 200 seats at Reynolds Hall. That’s a lot of interest in what’ll go up on the old Russ Dairy Farm.
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