Make or break: Challenges to manufacturing in the Berkshires
Sunday January 29, 2012
PITTSFIELD -- When the Pittsfield Economic Development Authority recently announced it was pursuing a retail complex for a prime parcel at the William Stanley Business Park of the Berkshires, it seemed to underscore the difficulty in bringing manufacturers to the county.
PEDA, the quasi-public agency in charge of developing the Stanley Business Park, said it pursued the 170,000-square-foot shopping center plan that will include a "big box" tenant and could bring 150 jobs to the city partly because it was having trouble landing manufacturers at the 52-acre site.
The decision to pursue the Needham-based developer's proposal came under fire from those who say the 14-year-old agency's original mission is to attract light industrial and manufacturing firms to the site -- not retail tenants. PEDA had to obtain a waiver from General Electric to allow the shopping center, because retail is technically not one of the uses permitted for the business park.
A number of regional business officials say it's difficult to lure those kinds of manufacturing companies to the Berkshires. They cite issues with transportation, the high costs of energy in this region, the challenge in finding the right sites to put businesses, and a competitive disadvantage versus other states that offer cash incentives to new manufacturers.
There's also an unskilled work force at play. In his State of the State speech earlier this week, Gov. Deval Patrick called on the state's community colleges to help close the gap between the number of job openings in the state and the number of unemployed.
Yet, some believe those obstacles can be overcome.
Duncan Cooper, the co-owner of Pittsfield Plastics & Engineering on West Housatonic Street, a small manufacturer that employs 96 workers, said manufacturing can work in the Berkshires. He cites several programs run by the government, utility companies, and regional economic development agencies that have helped his business grow by 22 percent last year.
He believes it's "incorrect" when people say it's hard to attract manufacturing here. Cooper said Pittsfield Plastics has managed to minimize its freight costs, which makes it more advantageous to stay in the Berkshires.
The company also studied the cost of relocating from the Berkshires to be closer to its customers in the South. "And we can't make the numbers work," Cooper said.
Find the right niche
Michael Graney, the senior vice president of business development at the Economic Development Council of Western Massachusetts in Springfield, said the "traditional, commodity-based heavy stuff" normally associated with New England manufacturing "is not going to make a lot of sense here" due to the high costs associated with labor, energy and doing business in this region.
But Graney believes that small, well-run manufacturers who make products for a specific or "niche" markets, such as Pittsfield Plastics & Engineering, can succeed.
"As a blanket statement that manufacturing is dying, I don't buy it," Graney said. "It's the kinds of manufacturing that work here."
In a survey conducted by CNBC, Massachusetts ranked No. 6 among the 50 states in 43 measures of competitiveness, as defined by input from groups like the National Association of Manufacturers and the Council on Competitiveness.
The television network ranked Massachusetts among the top 10 states in the categories of quality of life, education, technology and innovation, and in access to capital. But the same study found Massachusetts to be 41st among the 50 states in the costs of doing business, and 29th in infrastructure and transportation.
The competition factor
Luring manufacturers to the Berkshires hasn't been easy, and PEDA isn't the only county entity finding it difficult.
Last August, WCW Inc., a mattress-maker based in Hoosick Falls, N.Y., decided to relocate to Manchester, Vt., rather than North Adams, costing the Northern Berkshires the prospect of 100 jobs. The news was a blow to North Adams, where unemployment is 8.5 percent, two points higher than the state average.
WCW, which had trouble paying its taxes in New York, chose Manchester over North Adams because it all came down to money, said North Adams Mayor Richard J. Alcombright.
The state of Vermont offered WCW $500,000 in cash as an economic development incentive. Massachusetts provides tax breaks, but not a cash component.
"At the end of the day, there was more cash that came out of Vermont," Alcombright said. "Everything in North Adams was framed around tax credits and incentives."
Another factor: North Adams has the 10th-highest commercial tax rate in the state (just 2 cents lower than Pittsfield's), while Manchester has the 16th-lowest tax rate in the state of Vermont, according to its town manager, John O'Keefe.
"My understanding is that even with the incentives that Massachusetts offered, our [Manchester] tax rate was still comparable," said O'Keefe, who worked in the Massachusetts governor's office and for MassHighway before going to Manchester.
WCW's president, Jeffrey Wilkinson, did not return a telephone call seeking comment.
In Massachusetts, state Secretary of Housing and Economic Development Gregory Bialecki said the Legislature has approved tax incentive packages sponsored by the governor's office. But when it comes to cash incentives in economic development packages, he said "there's not a lot of interest in that" from the Legislature.
"The general consensus is we don't want to get into these bidding contests" with other states, said Bialecki, who is familiar with the WCW situation. "We may lose one from time to time, but that's the nature of the game. Economists feel a good overall package is the most effective way to do economic development."
Location, location, location
In Pittsfield, PEDA board Chairman Gary S. Grunin said the board has spoken with manufacturers in the past, but decided to pursue the retail complex because the developer is interested in investing in Pittsfield. The board also believes the complex will help revitalize the Morningside neighborhood, which is one of the city's poorest neighborhoods.
Grunin said it's a "misnomer" that PEDA has given up on manufacturing, pointing out that a section of the park that has access to the railroad is being reserved strictly for that purpose. PEDA, which has two tenants and is negotiating leases with two more, is also in the running to receive state funding to construct an incubator building for small businesses and startups.
But Grunin says manufacturers have expressed concerns about the difficulties transporting goods in and out of the center of Pittsfield. According to PEDA's website, the closest entrance to the Massachusetts Turnpike from the William Stanley Business Park is 13 miles away.
Berkshire Chamber of Commerce President and CEO Michael Supranowicz said the farther Berkshire communities are from the Massachusetts Turnpike, the harder it is for them to transport products.
"What hurts in Pittsfield and in the north [Berkshires] is limited access to highways," Supranowicz said. "The PEDA site has access to rail, which is fantastic, but it's still 35 or 40 minutes to the nearest highway. The closer you get to Lee, to the Turnpike, makes it attractive. The farther north you go, it's harder."
Richard H. Vinette Jr., the executive director of the Community Development Corp. in Lee, said close access to the MassPike has helped that town attract and maintain a variety of small manufacturing companies.
In Lee, "we probably have the best geographic position in Berkshire County," Vinette said. "I don't know if the location next to the Pike would be the only reason for some of our manufacturers to be here . But certainly, for some of our distributors, I'm sure that figures into their overall business plan."
But Vinette points to two reasons why manufacturers find it difficult to relocate to the region.
No. 1: "Because of the geography of Western Massachusetts, the ability to offer nice, flat parcels of any size is diminished," he said.
No. 2: "Some of those parcels have been built on historically as older textile mills and paper mills," he said. "If we are to reposition those mills, they present their own challenges."
Prospective manufacturers must also build their own facility if they relocate to the William Stanley Business Park, which only adds to the cost of moving here, according to PEDA's Executive Director Corydon "Cory" Thurston.
By contrast, WCW, the mattress-maker from New York, was able to choose between two existing buildings in North Adams and Manchester.
"It's an additional challenge," Thurston said. "I'm not trying to make excuses for anything or anybody, but one of the obstacles that you face here is that it has to be all new construction. The price is quite high."
Stuart Chase, the president of 1Berkshire, said most of the manufacturers that have contacted his agency about doing business in the Berkshires since he took over in May have been looking for existing facilities.
"They don't want to build, the ones that we've talked to," he said.
Therein lies the ‘challenge'
Pittsfield Mayor Daniel L. Bianchi, who recently joined the PEDA board, views bringing manufacturing to his city as more of a "challenge" than a handicap.
"I don't like to use words that suggest it's impossible because I don't believe that it is," Bianchi said. "There's all sorts of manufacturing. In some places, there's high-tech, biomed, or research that doesn't look like the manufacturing that you would typically see in New England.
"Manufacturing is different than it was years ago," he said. "The difficulty is that in certain areas economic development projects are much more aggressive than ours. There are energy costs, and other places in the country where it's much cheaper."
Bialecki, the state secretary of economic development, said there are tax incentives for manufacturers interested in coming to Massachusetts, and the Patrick administration has lowered the state's corporate tax rate three times in the last three years, most recently to 8 percent on Jan. 1.
But some of those pluses are negated by the high costs of energy.
Nathaniel W. Karns, the executive director of the Berkshire Regional Planning Commission, says energy costs in Berkshire County are high even for Massachusetts, which, the Berkshire Chamber's Supranowicz says, has one of the highest electricity rates in the country.
"Any manufacturer that uses a great deal of electricity in their process finds it difficult to set up in New England," Supranowicz said. "You look at the difference between New England and Pennsylvania. In Pennsylvania, they burn coal. The rates are half of Massachusetts."
Find the resources
Pittsfield Plastics & Engineering recently added 12,000 square feet of manufacturing space when it expanded into an area of the plant that used to be occupied by Sinicon Plastics. Pittsfield Plastics grossed close to $1.5 million last year, according to Plastic News, a trade publication. Cooper said the company frequently fields offers to move elsewhere.
When Cooper and co-owner Thomas Walker bought the 44-year-old business in 1997, electricity costs were 5 percent of Pittsfield Plastic's total expenses. With help from the Western Massachusetts Electric Co., Cooper said electrical costs are now down to 3.5 percent.
"We want to double [the business] in the next 10 years," Cooper said. "If we can figure out a way to do that, people -- from the mayor, to the community development people, to the Western Massachusetts Electric Co. -- have all lined up and said, ‘We will support you.'
"When we put an expansion on here in 2000, people at MassDevelopment [a quasi-public statewide economic development agency] put together a program with Berkshire Bank so that our costs in financing were competitive.
"There's a resource out there," Cooper said.
To reach Tony Dobrowolski:
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Challenges to manufacturing ...
Here are some of the challenges that local officials say are first and foremost in the minds of prospective manufacturers considering locating to the Berkshires in general:
n The cost of electricity/energy: Electricity costs in New England are some of the highest in the nation.
n How to ship products out: Manufacturers want direct transportation access to major highways or rail.
n What's on the table: Some states offer cash incentives to businesses. Massachusetts does not, but it does offer tax incentives.
n If you don't build it, they might not come: Some manufacturers look for existing facilities in which to locate; they're not looking to start new construction.
n The lay of the land: If manufacturers build the plant from scratch, it helps to have flat land.
n The labor and the work force: Labor costs tend to be more expensive in the Northeast, and in some cases, the work force isn't ready for work in certain industry sectors.
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