In today’s competitive landscape, the corporate site selection time frame from project onset to when the facility is put into use continues to tighten. Decision makers expect sites selected for new construction or a building chosen for a new operation to have the necessary utility capacity in place from the beginning. Therefore, utility providers can add tremendous value to the site selection process by working with communities, site selectors and their clients to have plans and approvals in place for system or capacity expansions. While utility cost and capacity are not ranked as high as workforce, transportation and labor costs, one could argue that utilities and their associated costs are just as important when deciding to locate a new and/or expand a manufacturing or distribution facility.
When utility providers are included in the very beginning of the overall site selection, they can be a huge asset to the overall process and flow of the project. Outlined below are several ways in which utility providers can be of benefit in the site selection process.
Availability and Cost
By far the most important way the utility company can assist with site selection is by fully understanding the service availability and excess capacity to all sites and available buildings in the community and communities they serve. If there is no current excess capacity, the utility company needs to have a plan in place to expand that capacity in a given area depending on growth patterns. Installing new service or adding capacity is not an overnight process; it requires weeks, and in most instances months, to complete the entire process which includes several layers of approvals, cost benefit analyses and easement procurements. Specifically, it is easy to fall into a trap, because a site has “access” to a certain utility, however that doesn’t mean that the utility can serve the site. Knowing up front what the project requires in terms of electrical, water, sewer, natural gas and telecommunication demands will easily vet the site to determine if that location should be considered for the project. All potential sites should be thoroughly vetted before a tour is put together. Keep in mind that any costs extending utility service or adding capacity are typically passed along to the client and these costs need to be calculated up front to determine the feasibility of the project. The last thing you want to do is visit the site and then realize that the water pressure is inadequate and there needs to be a water tank installed on the site to accommodate the sprinkler system in the building.
Economic Development Incentives and Grants
Should the proposed project require adding new or expanded service to meet a minimum demand, many states and communities offer incentives to eliminate or defray costs to the company or developer preparing the building or site for the occupant. The grants can be paid upfront or over a certain period and are paid directly to the company. Types of eligible expenditures for the grant can be anything from the extension of water, sewer, natural gas or rail service to obtaining and installing a transformer for electrical service. Typically, these incentives are performance-based and the company taking advantage of these grants will be required to create and maintain new jobs and investment for a specified time period. Other incentives from utility companies could include rebates (often on a sliding scale over a certain time period) based upon the company’s utility usage which certainly can be advantageous for a company during the beginning stages of a project.
Again, knowing up front what the project requirements are is paramount in maximizing any incentives or grants that could be made available for the project.
Site Evaluation Assistance
One of the more common value adds that a utility company provides to a state or community, which in turn assists the company considering a site, is the assistance in evaluating a potential site and determining if it is suitable for development. As development of a site is a timely process, most corporate site selection projects will quickly eliminate sites that do not have even the basic information readily available. This is where the utility companies are helpful in bridging the gap. Many utility companies provide funding to communities and or local economic development organizations to assist with having the basic due diligence activities performed on the sites within a county or city in which they provide service. Typically, the due diligence will include verification of zoning, location of electricity, water, sewer, and natural gas along with their corresponding capacities. Additionally, high level mapping will be provided that outlines any possible wetland, easements and topographical challenges. Taking the process one step further would be a Phase 1 environmental site assessment and some limited geotechnical testing to determine the suitability of the underlying soil on the site.
Having these deliverables readily available at the initial request for information phase and initial site visit will certainly help in understanding the site much quicker and perhaps keep it from a quick elimination.
A community might have all the attributes for a new plant or distribution center (labor availability, transportation, favorable labor cost, etc.) but could fall short on a property with the required utility service to house the new location. Being prepared with specific knowledge of utility extension, capacities and approvals in place can help in winning the project.
Conversely, companies working with site selection professionals need to fully understand their utility needs not only for the project at hand but for some level of growth of the new facility. Even if a community can handle the utility needs of today, if they do not allow for growth, the project may need to consider alternative locations.
About the Authors
This article was written by Don Moss and Grant Miller who specialize in site selection, incentive negotiations and industrial real estate. They have partnered with numerous companies on procuring state and local incentives for new locations and plant expansions.