The Job of Selling Businesses on Orange County Grows More Difficult : Revived Economic Development Corp. Has Its Work Cut Out
When Microelectronics & Computer Technology Corp., known as MCC, launched a search for a home base two years ago, scores of cities across the United States competed to lure the research consortium and the hundreds of high-tech jobs it would bring.
Eager to attract MCC to Austin as part of a plan to wean itself from an oil-dependent economy, Texas went all out to bring the microchip consortium to the Lone Star state. A special task force, named by the governor and headed by the state economic development commission, swung into action to make the firm an offer it couldn’t refuse.
The successful $28-million package Texas developed included a new, $20-million research facility on the grounds of the University of Texas, essentially rent-free for 10 years, and other incentives, such as assistance with start-up costs for the company, which by next year will employ 500 people.
Though Orange County was already established as a base of high-tech industry, it was left far back in the pack of 57 competitors hoping to attract MCC. Observers said Orange County simply lacked the well-oiled machinery necessary to compete successfully with Texas and other growing areas of the nation to attract the most sought-after businesses.
That may soon change.
Like the phoenix, the Orange County Economic Development Corp. is rising from its ashes.
Although the private, nonprofit agency created to bring new business to the county has been in existence in one form or another for almost a decade, the EDC has spent more time in mothballs than in promoting industrial growth in Orange County.
Latest Resurrection
Lack of funds, a sufficient membership base and sense of direction are among the factors frequently cited as contributing to the agency’s ineffectiveness.
As a first step in the latest resurrection, the EDC’s executive committee, which includes the heads of some of Orange County’s biggest companies, hired a new executive director, Frank Smith, whose last job was running the Olympic Village at UCLA.
The next step will be for Smith to convince more local business leaders that such an organization is necessary, and that the job can’t be done without the financial support of their businesses.
But focusing its financial resources has often been as troublesome as raising the funds, said Smith, who assumed the reins of the EDC in February.
In 1984, Smith said, “the county’s major economic issue was transportation, and the major transportation issue was Proposition A. A lot of the funds that could have been used and should have been used to support an economic development corporation were channeled into the Proposition A battle and, as a result, the support base dwindled.”
Bill Duffy, who headed the EDC for a brief time last year, said 1984 was “a very heavy political year,” and as a result, lack of capital afflicted the organization and led to its demise in August. Competing with the presidential and other political campaigns for donations last year, he said, kept the EDC from even coming close to reaching its 1984 revenue goal of $300,000. The EDC, Duffy said, “never even got off the ground.”
Problem Is Compounded
The problem is compounded by the different visions the EDC’s supporters have of what the agency should accomplish. Ron Birtcher, one of the partners of Birtcher, a Laguna Niguel commercial developer, sees part of the corporation’s mission as collecting the complaints of local businesses. “Unless there is a sounding board or a collection post for complaints, there aren’t going to be any solutions,” said Birtcher.
Other members fear that without the narrow and clearly defined focus of attracting new business to the county, the EDC will likely crumble again. One member of the EDC’s executive committee said privately that he wasn’t sure what the body would accomplish, because in the past, he said, it had served as little more than a forum for members “to talk about how great they were.”
Smith acknowledges that the EDC is still some distance from realizing its goal of bringing new business to Orange County.
“Right now, without an economic development corporation functioning, we’re not in the competition,” said Smith. “We may get some people to locate their companies here, but not the biggies. We’re simply not in the running.”
Earlier this year, Orange County failed to attract the Software Productivity Consortium when it embarked on a nationwide search for a base of operations. Asleep at the switch, Smith said, Orange County was too slow to get in on the bidding.
“We as a county did not even know this search was going on until such time as we tried to throw our hat in the ring,” he said. “We were told by the head of the site search committee it was too late.”
A Strange Idea to Some
The idea of actually having to push Southern California as a place to establish businesses seems a strange idea to some. After all, the region has sun, fun and an established industrial base.
“It never really dawned on us that people would not want to relocate to Southern California,” said Sue Johnson, director of the California Economic Development Commission, a state-supported body of legislators and business people.
But California is being forced to compete for industries with other parts of the country that are aggressively seeking new industry and are offering attractive incentives.
Other regions that cannot compete with California’s life style are rolling out the red carpet. Hefty tax breaks, cheap land, research assistance and other incentives directly affecting a company’s bottom line have contributed to making once out-of-the-way locations attractive.
Laura Koenig, an official of the Texas Economic Development Commission, said that while several other Texas cities wanted to be the home base for the MCC group, “the main idea was to bring it to Texas.”
$20 Million From Private Sector
Of the $28 million in incentives provided to MCC, $20 million was from the private sector, which was also eager to have the company relocate to Texas.
Although MCC has only been in Austin since late 1983, the tag-along effect Texas was hoping for has already begun manifesting itself, Koenig said. “There have been several mini-firms that have been attracted to the Austin-San Antonio area since,” she said. “This is what we wanted.”
“I think we have to take a lesson from Texas,” said Johnson of the California EDC. “We can’t rest on our laurels forever, we have to become more aggressive.”
According to Jim Vaughn, director of business development for the California Department of Commerce, a 2-year-old effort to promote California, begun under Gov. George Deukmejian, is already beginning to pay off. “In the last five months, this office was successful in bringing eight new companies to California to build manufacturing facilities,” he said.
“Eight years ago, you couldn’t have squeezed an airline ticket out of the state for anyone to go to something like a convention or trade show” to sing California’s praises, said Dan Pegg, president of San Diego’s Economic Development Corp., widely regarded as being one of the best economic promoters in California.
“I think there is a much higher level of awareness and a sense of urgency in terms of economic development at the state level,” he said. “We’re delighted to see that because it makes our jobs easier.”
Goes Where Action Is
Like the state, San Diego’s EDC tries to go to where the action is. Operating on a $900,000 annual budget, it employs personal visits to prospects in addition to advertisements in major business publications and direct-mail campaigns.
For nearly a decade, the San Diego EDC has sent delegations to Japan, seeking new business. It maintains an agent there to establish friendly contacts with the Japanese.
“Over the years, we’ve developed a number of good relationships and have seen our Japanese business community grow,” he said. “We have several Japanese companies, such as Sony, Sanyo and Fujitsu, operating in San Diego.”
Of the 43 new businesses to locate in San Diego since 1978, Pegg said, 12 were foreign, and most of those were headquartered in Japan. Of the more than 10,000 new jobs created by businesses new to San Diego, nearly a quarter were generated by foreign firms, he said.
But Orange County’s effort won’t be nearly as grand in scale or scope, Smith said.
With an anticipated budget of $300,000 this year--all of which he expects to come from the companies forming its membership--the county’s EDC plans to pay for advertising in “certain select” trade journals and other magazines.
Word-of-Mouth Approach
But mostly, the Orange County EDC will rely on members using the word-of-mouth approach to pitch potential new businesses, he said.
“We don’t want billboard . . . advertisements for Orange County,” he said. “I don’t want to get into competition with other economic development commissions, where you have page after page of advertisements.”
Instead, he said, attendance at trade shows and conventions and membership in key organizations will provide executives employed by EDC member companies opportunities to make one-on-one promotions for Orange County.
Although he acknowledges that traffic congestion and higher-than-average housing costs are serious drawbacks to promoting Orange County as a place to build a business, Smith said the region still has substantial advantages over many other parts of the United States.
“Orange County can offer a lot of things beside the weather and the life style and the ocean, which are the things we tend to portray,” he said. “Who wouldn’t want to live here? But the businessman who is bottom-line oriented may not want to live here merely for those reasons, so we have to take a look at the economic reasons.”
‘Strategic Location’
An already established high-tech industry, “strategic location” between Los Angeles and San Diego, access to five major airports and three seaports are a few of the advantages to being in Orange County, Smith said. “It’s tough to do business with the Pacific Rim when you are in Roanoke, Va., or Austin, Tex.,” he said.
Smith also said Orange County’s universities and colleges, particularly UC Irvine, which is swiftly becoming a major center for research, can make the county more appealing to firms like the microchip consortium, which found Texas’ universities a powerful motivator for moving there.
Another attractive feature, Smith said, is Orange County’s labor pool, which called “highly educated, highly motivated” and far more productive than labor in other parts of the United States.
Smith admitted, however, that working in Orange County and being able to live here do not automatically go hand-in-hand.
“There is no question that the cost of housing is tough,” he said. “You either pay them more, which raises the cost of goods sold, or they commute, which means they live in Riverside or San Bernardino . . . that means time off the job and time on the freeway, which leads to complaints about clogged freeways.”
Roger Stanton and Harriett Wieder, two county supervisors who belong to the EDC’s executive committee, said some progress is being made toward alleviating the shortage of affordable housing.
Both cited a report recently submitted to the Board of Supervisors by the Environmental Management Agency. It said voluntary construction of low-cost housing had exceeded the goals set when the board scrapped the county’s affordable-housing program.
Still, as Stanton said, “You’re never going to have 100% of the population living in houses with white picket fences. There will always be a need for rentals.”
Keep Business From Leaving
In addition to luring new business, the county EDC’s mission is also to keep business from leaving Orange County.
Smith said that while many firms talk about quitting Orange County, few actually do.
“There is a problem with people aspiring to relocate because of the cost of doing business in Orange County, or the perceived lack of reception on the part of cities and the county to keeping them here, or the perceived additional items they would get if they went somewhere else,” he said.
“There is a always a percentage of businesses considering relocating, but when it comes down to it, do they or don’t they? I don’t think as many relocate as tend to talk about it, because when it comes down to it, a lot of people don’t want to leave.”
Roger Stanton
