In a cavernous, nearly empty red brick
building that once housed the offices of a subsidiary of
U.S. Steel, two small businesses are flourishing like
seedlings taking root in the stump of a fallen forest giant.
That image readily comes to mind as you make the rounds of
northwestern Pennsylvania counties with William R. Steiner,
executive director of the Northwest Pennsylvania Regional
Planning and Development Commission, a local development
district (LDD) based in Franklin (Venango County). Although
the area has its share of fallen or relocated corporate
giants, you can also see new, locally based businesses at
every stage of growth—from tiny start-ups sending out
new market feelers to mature but still growing firms selling
goods and services to Fortune 500 companies.
"Economic development is an evolutionary
process," says Steiner. "You cannot be happy with what you
have today. If you are, the world will pass you by. You've
got to look for new entrepreneurs."
Finding and nourishing entrepreneurs has
been a top priority at the Northwest Commission since the
early 1980s, when the Pennsylvania Department of Commerce
(now the Pennsylvania Department of Community and Economic
Development) responded to cuts in federal programs with an
effort called the Enterprise Development Program. Over time,
it has evolved into a cluster of related programs.
Pennsylvania Governor Tom Ridge, noting
that small businesses constitute 98 percent of the state's
economic base, points out that corporate downsizing makes
state-local partnerships more important than ever. Among his
initiatives to assist entrepreneurs he counts the Job
Creation Tax Credit, which is heavily oriented toward firms
with 25 or fewer employees; reform of the state's workers'
compensation systems; and a large tax cut.
"Bill Steiner," Governor Ridge says, "has
worked in close partnership with my administration as we
help businesses prosper in an increasingly competitive
marketplace."
David Black, deputy secretary for
Community Affairs and Development, adds: "Given the great
diversity of Pennsylvania, we at the state level believe it
is important to remain flexible in our work with local
entities. Local officials know best the needs of their
communities. Bill Steiner has embraced this concept, and
[his district has] become a model for other regions in the
state."
The Northwest Commission does in fact use
a great many economic development tools.
For example, since 1983 the agency has
operated a Procurement Technical Assistance Center, one of
114 such centers nationwide, to help regional firms compete
for business from federal, state, and local governments.
Dianne McCartney, the agency's procurement specialist, says
that the center's assistance has resulted in more than 2,000
contracts worth more than $200 million. She estimates it has
created or preserved more than 1,500 jobs.
Similarly, the Northwest Commission is
helping some 700 companies reach markets in other countries.
Its Export Trade and Development Assistance Program works
actively with about 50 companies per year, helping as many
as 20 per year attend overseas trade shows. This kind of
exposure pays off. For example, one Warren County firm
(Hardwood Products International), although only two years
old, already sells almost 90 percent of its products
abroad.
Like all LDDs, the Northwest Commission
helps entrepreneurs find the best loan programs for their
needs. Since the inception of its Enterprise Development
Program, the agency has helped firms in its eight-county
area secure 425 loans with a total value of over $33
million. This has resulted in the creation or retention of
an estimated 12,000 jobs.
As you'd expect, success stories come in
all sizes. One recent loan recipient is Oil Creek Supply, in
Titusville, which makes heavy-duty aluminum windows and
other building products. Plant manager Thomas L. Welton
describes how the firm, started in 1995, has grown to ten
employees, a number he expects to double soon. He says the
loan "helped us a lot when we were severely
undercapitalized."
Similarly, John Homer, president of the
HomerWood Corporation, also in Titusville, says that in
April 1991 he faced a crisis when his entire milling
operation burned to the ground. "We were totally wiped out,"
he says. "The bank looks at this kind of thing
statistically. The people who come back from a catastrophic
loss are, like, one in ten."
Back in Business
Despite those odds, the Northwest
Commission staff considered him a good risk and helped him
get loans for new equipment. HomerWood was back in operation
by October. Homer decided to specialize in hardwood
flooring, including decorative medallions, and his firm now
employs 29 people.
Finally, Seneca Printing and Label is a
mature firm by any standards. It has approximately 200
employees, most of them at a Franklin plant equipped with
high-speed, six-color presses capable of handling jobs
requiring copies by the millions. For nationally known
manufacturers, Seneca prints just about everything: cereal
boxes, soft-drink labels, and specialty items such as jigsaw
puzzles. Dennis Pascarella, its chief executive officer,
says Seneca evolved out of a newspaper's printing
operation.
"When we started," Pascarella says, "we
were, to be honest, not the best credit risk. Northwest
helped us a lot. As we grew, there was this partnership
relationship all along the way."
"Sometimes the government needs to be the
risk taker," Steiner says. "But you have to keep it
focused."
Keeping it focused mostly means
concentrating on finding people with strong entrepreneurial
instincts and business skills, but it also means trying to
achieve a certain kind of entrepreneurial synergy.
Altogether, the eight-county region
served by the Northwest Commission has 11 business
incubators (with two more on the drawing boards) and roughly
15 industrial parks. Seneca Printing and Label occupies most
of an industrial park, and Oil Creek Supply is a tenant in
an incubator in Forest County—another of those
buildings vacated by a former corporate giant. The old U.S.
Steel building in Oil City is being turned into an incubator
by the city's economic development office.
One of the area's special resources is
the National Institute of Flexible Manufacturing (NIFM), the
nation's first shared-used "teaching factory," which has
facilities in both Erie and Meadville. It's equipped with
state-of-the-market machines, whose average cost approaches
$250,000, and staffed with industrial engineers. Stanley
Shelly, NIFM president, explains that the operation is
unique in that it not only trains workers but also permits
businesses to rent time for actual production.
A concrete measure of NIFM's success is
that national equipment manufacturers are willing to rent
their newest machines to NIFM at roughly one-third the usual
rate. The reason: during the past six years, 46 companies
that have used the NIFM facilities have bought 65 machines
of their own at a total cost of more than $5 million. By
keeping costs low and customer demand high, the NIFM now
gets only about 15 percent of its budget from the
Commonwealth of Pennsylvania and earns the rest from
training and rental fees.
"We could not exist without the support
of someone like the Northwest Commission," Shelly says. "We
work hand in glove with them. They mention us to industrial
prospects considering locating here. They are constantly
referring customers to us."
A Cooperative Effort
For his part, Steiner is at pains to
emphasize that economic development is a cooperative effort
based on many partnerships with both public and private
participants. He notes, for example, that the Appalachian
Regional Commission assisted at almost all incubator and
industrial-park sites, either with planning grants or with
infrastructure help. And he says that the incubators are all
owned by agencies other than the Northwest Commission,
usually a city or county government or other local
authority. Years ago, his board rejected a proposal to
operate incubators directly, a vote Steiner says was
"probably the best decision [the board] ever made."
"In retrospect," he says, "I think we
accomplished more by helping the communities put these
projects together than by being the owner-operator of them.
The communities in our region take a great deal of pride in
being the owners and developers of these incubators. Their
credibility is on the line."
Officials in Forest County are proud of
their incubator, still under development. In addition to
housing tenants, it will be the site of a new enterprise
center, which will provide fax and other office support
services, Internet access, and a conference room, all
available both to tenants and to community groups. This
accessibility is especially important in places like Forest
County, Pennsylvania's least populous county (only 4,800
residents). "We're the only county in the state that doesn't
have a single red light," says Gerald L. "Skip" Cussins Jr.,
a county commissioner.
"In a small county like ours," adds
Farley Wright, the county's director of community and
economic development, "I can't imagine how that project
could have come off without Dale [Dale F. Massie, associate
director for the Northwest Commission]. My background wasn't
economic development, but I had immediate access to someone
who knows economic development like the back of his hand."
The mayor of Oil City, Malachy McMahon,
offers an almost identical observation on the renovation of
the old U.S. Steel building: "Many times cities of our size
don't have the resources to compete. But it's been a real
good working relationship all along. And we're laying the
groundwork for a comprehensive rural telecommunications
network."
Mayor McMahon is referring to Oil City's
ambitious plans for that huge building (18,000 square feet
of office space), now being renovated. It will be equipped
not only with conventional office support services but also
with high-capacity telecommunications linkups. One of its
two initial tenants is an Internet access provider; the
other, a financial courier service.
Increasingly, incubators in the Northwest
Commission service area are being designed to penetrate
particular markets—not just glamorous fields like
telecommunications but the underappreciated ones as
well.
For example, a "niche incubator" in food
processing is scheduled to open next spring in New Castle
(Lawrence County). It will be equipped with commercial
stoves and refrigerators and will capitalize on the rich
gastronomic heritage of the area's smorgasbord of ethnic
groups—Italian, Polish, Syrian, Greek, Jewish, and
eastern European.
"When Linda [Linda Nitch, director of
community development for New Castle] put this in her
community development block grant," Steiner recalls, "the
phone rang off the hook. 'I've got this sauce I make. . . .'
'I've got a recipe for pickles. . . .' "
"It was a cooperative effort," says
Nitch, ticking off a list of agencies and private
individuals involved in the planning, beginning with the
Northwest Commission, which used ARC funding to send her and
another local planner to a seminar in Idaho on food
processing incubators. "And people really did come out,
whether it was for their pickles or their chili sauce
recipe. If they find out that they don't really like the
business part—which happens—there isn't a lot
of public money involved. But we hope to grow at least two
to three companies who'll outgrow the incubator and relocate
here or in one of the region's nearby counties."
Recipe for Growth
The incubator's recipe for growth already
seems to be paying off. Nitch is talking with several
potential tenants, including a candy manufacturer and a firm
"that wants to do something really unusual—gourmet
hot dogs." Moreover, Rocca's Italian Foods, a producer of
frozen pasta specialties, has indicated that it will locate
a plant at an adjacent site. Rocca's intends to use the
incubator facilities to test new product lines.
Reflecting on the food processing
incubator brings Steiner around again to his main
point—the necessity of change. Economic development,
he says, no longer means "chasing smokestacks." Branches of
large firms are always welcome, but capturing them "doesn't
create loyalty."
"Nowadays," he says, "firms will pick up
and move with the change of a CEO or president. If you
homegrow businesses, they're more likely to stay with your
economy."
All those homegrown startups in the area
suggest considerable success at that, but even so, Steiner
is hardly complacent.
"We've done probably as much of a job as
we can do with the emerging entrepreneur of the '80s," he
says. "A lot of that growth was based on defense
subcontracts and on entrepreneurs who came out of big
companies that were downsizing. They were people who already
had skills and management expertise. Now we have to go out
and really make entrepreneurs happen."
He's bristling with ideas on how to do
that. For example, he hopes the Northwest Commission can
find a way to take equity positions in promising
ventures—that is, to become a public-interest
entrepreneur in its own right by investing capital in
promising firms. He also has in mind projects for
identifying and training new entrepreneurs, people who have
good ideas and risk-taking instincts but may lack certain
business skills.
However these specific plans develop,
Steiner emphasizes that the strategies and tools that worked
a few years ago will not necessarily work as well tomorrow.
The Northwest Commission must, like the firms its staff
works with, evolve. But there is one constant: a focus on
what former giants like John D. Rockefeller, Henry Ford, and
Andrew Carnegie had in common.
"They were once," Steiner says, "just
people who had an idea."
Fred D. Baldwin is a freelance
writer based in Carlisle, Pennsylvania.
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