Originally published in Business Digest, August 1998

Building Business

Vermont's economic development strategy is a blend of nurturing existing businesses and attracting new ones from out of state

by Craig C. Bailey

Diana Carminati & Bruce Seifer When Specialty Filaments Inc. in Burlington questioned whether it should close its Pine Street plant, Diana Carminati, president of Burlington's Community and Economic Development Office, says the economic development community's reaction was representative of the cooperation inherent in the system. The state, CEDO, GBIC and others worked with the Andover, Mass.-based company, which intends to make its decision by the end of the summer. Also pictured: Bruce Seifer, CEDO assistant director for economic development.

Bruce Seifer believes business in Burlington is the best he's seen it in 14 years: "There are a lot of fertile opportunities right now, and business is booming." As assistant director for economic development at Burlington's Community and Economic Development Office (CEDO), Seifer's spent the last dozen-plus years beefing up economic opportunity for the people of the Queen City. "That entrepreneurial spirit is pretty high in this area," he says -- a sentiment commonly echoed by people working for Vermont's economic development.

Demand for start-up and growth space for local businesses is high, but the introduction of out-of-state businesses into the Green Mountains is more spotty. A dozen economic development corporations across the state and other organizations are focused on the task -- analyzing Vermont's advantages and limitations to develop strategic initiatives to bring the best businesses within our borders.

Oh, Canada!
A lot of significant developments occur across one border in particular: the one into Canada. Seifer, one of 15 staff members of CEDO based in City Hall, says the Burlington area provides a stepping stone for Canadian businesses looking to expand into the United States. The area is close enough to Canada to provide easy access to north-of-the-border management, and is within UPS's one-day shipping range to Boston, an advantage over Plattsburgh, N.Y., for example.

"Border trade's a relevant and valuable feature of our economy," according to Tim Soule, president of the Franklin County Industrial Development Corp., a two-person operation typical of Vermont's 12 economic development entities. "We're not limited just to Canada," Soule says, "but the geographic proximity to Montreal certainly is a strategic advantage for us."

As a recent example Soule says, "We were delighted to announce a little over a year ago, the arrival of Vermont Fasteners Manufacturing," a Quebec-based business that has been up and running in its Swanton facility since May 1997. The $1.4 billion firm that makes industrial fasteners has invested $10 million in the area and brought 24 jobs to Swanton, but its arrival might have been overshadowed by the near-simultaneous announcement of Canada's Husky Injection Molding Systems Ltd. to locate in Milton. "We hope for further expansion of this site and possibly another location here in the county," Soule offers.

Not only does Franklin County provide a "wonderful staging area" for Canadian businesses to expand into America, according to Soule, but access to the port of Montreal has brought the European market closer to northern Vermont by allowing easy transport of goods and people. "That is the least expensive port along the Atlantic seaboard," he says of Montreal. "It's the shortest shipping point to Europe."

The quest for Canadian satellite businesses doesn't stop with Vermont's northernmost regions. The Central Vermont Economic Development Corp. (CVEDC), a 22-year-old non-profit Montpelier corporation, recently established an initiative to attract business from north of the border to Washington and Orange counties. "We've had two meetings and seem to be developing an action plan," says CVEDC executive vice president Richard Angney, who's been on the job less than two years but boasts 30 years of local experience in the banking sector. Targets include businesses in Drummondville, Granby and Sherbrooke, Quebec, that are looking to create 20 to 50 jobs in satellite operations, the type of smaller projects CVEDC believes the central Vermont area has the workforce to accommodate.

Slow going
"From outside the area, we've not attracted a business in quite some time," laments Angney, who says the task is a slow one and "probably the most difficult to carry out."

"Development is actually very slow in terms of prospects from out of state," confirms Herb Durfee, president of Colchester Community Development. "There are definitely people who want to come in," he says, "but Colchester hasn't fit their particular specifications.

"Many other states can offer financial incentives that Vermont just can't, because of its population base. A dollar in Vermont means a lot more than a dollar in New York state," Durfee continues. "They just raise the tolls a penny or something and add billions of dollars to their funds every year. We don't have that competitive strength.

"If you're going to give somebody an incentive financially, it usually means that someone's pocket has to be picked somewhere. That's the difficulty with the financial incentive package.

"We try to say that we're here to help you through the permitting process -- to expedite that process, which, in essence, saves them some of the dollar stuff." Nonetheless, Durfee concludes, "If New York State wants to throw money on the table, I can't compete. Period."

New incentives

GBIC's Frank Cioffi says legislation passed as part of H-577 in March constitutes "the most comprehensive set of financial incentives in Vermont's history." The series of tax credits designed to reward existing Vermont companies that invest and expand their operations is the result of two years of work on behalf of the Vermont Department of Economic Development, Gov. Howard Dean and various development corporations across the state. "From a taxing standpoint, this does not affect any existing revenues of the state of Vermont," says Cioffi. "It's all based on new economic activity, so it's a very plus-plus scenario."

Cioffi is former commissioner of Economic Development who's been president of the Greater Burlington Industrial Corp. (GBIC) since January 1998. The GBIC is often the second entity a prospective business encounters after contacting the Lake Champlain Regional Chamber of Commerce: Both have offices at 60 Main St., Burlington, along with the World Trade Office and representatives from other development offices. "We're trying to create a resource center where someone can come in and get all their questions answered," says Betsy Cabrera, director of membership services for the chamber, which is often the community's first contact with prospective businesses.

The new incentives might be an indication of what Cioffi says is the state's focus on serving the businesses that are here before pursuing outside businesses -- a concept that accounts for why so many economic development heads, including Cioffi, agree that outside development is slow. "The basics of a good, sound economic development policy are rooted around the foundation of making what you call your home businesses competitive," he says. "Then you will have other opportunities to bring in other businesses." Put another way, he says, "You paint your own fence before you go paint your neighbor's.

"Vermont is not in the business of going out to try to be everything to everybody," Cioffi continues. "We will not go after any business just to bring them in to the state of Vermont. We will seek to recruit businesses that will not be competition to our existing businesses."

"I think Vermont has a strong tradition of really supporting its own and growing its own businesses. I think that over time what we've seen are businesses that were born in Vermont and grew in Vermont have an allegiance to the state," says Diana Carminati, CEDO director since 1989. "Frank is probably right -- that it needs to be kind of a slow process."

Economic clustering
"The most consistent strategy of recruitment of shoring up your base of existing companies is to recruit the subcontractors, suppliers and customers of your existing businesses," says Cioffi, adding that IBM's facility in Essex Junction has attracted approximately 80 subcontractors to locate within the Green Mountains. It's a prime example of the type of "economic clustering" the state encourages. Husky's announcement to locate in Milton led Webco, a subcontractor that designs and installs internal cranes for the manufacturer of heavy equipment, to establish a base in the Catamount Industrial Park. Many people expect more subcontractors and the like to follow in coming years, though Cioffi says a concerted effort has not been started.

Major facilities encourage growth in another way, too. Dawn Francis, assistant town manager for Essex, says, "We often send prospects over to IBM to talk with them about the business environment. We find that is a definite asset."

In June the town received a $35,000 Vermont Community Development Grant to be matched by $10,000 from Essex, GBIC and others to establish new incubator space to house Essex fiber optic company TeraComm Research Inc. and other high-technology firms. "We're off and running in terms of identifying potential sites," adds Francis, who says structures in Essex will be researched before the decision to build is made. Ownership of the building could take the form of a partnership among Essex, GBIC and the University of Vermont, with businesses leasing space. With a rich talent pool of IBM retirees and other underemployed people with technology backgrounds in the area, Francis says, "We have a real ripe environment for this type of endeavor."

"There's a huge demand for incubator-type space in our community," according to Seifer. "I'm working with a lot of (local) companies that are looking to expand right now -- more than ever. Twice or three times more than ever."

Cooperation's the key
Like the town of Essex, CEDO also puts existing businesses to work encouraging outsiders to relocate. Carminati says it's very important for outside businesses to see businesses within Vermont succeeding. "It's one thing for someone working in the economic development field trying to get businesses to think about the region," she offers. "It's another thing to sit down with somebody who has started or expanded a business here, and ask, 'Well, so what can I expect?'"

She says CEDO has been formalizing a long-practiced plan that involves referring prospects to the area to established Burlington businesses: Team Burlington is focused on the service and retail sectors. Carminati sums up, "The people who know it best are the folks who have done it."

Cooperation in recruiting business to Vermont is common not just within business communities, but between them as well. "If business from out of state or out of country comes to Vermont, everyone's going to benefit to some degree," says Angney. "We all know that's what we're in business for: to create jobs for Vermonters."

"When you're selling Vermont, you're selling Vermont," offers Cioffi. "A business will tell you where they want to be after they take a look at you as a state. That's the way we need to work."