June 19, 2018
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Kestrel as case study in how Maine should woo

By Peter DelGreco and Matt Jacobson, Special to the BDN

Now that the political posturing around Kestrel Aircraft Company’s decision to abandon Maine for a sweeter deal in Wisconsin has died down, it’s time for an honest look at economic development in Maine. That’s important, because many have been quick to draw exactly the wrong conclusions about what Maine should do to grow our job base.

Our experience in business attraction has taught us time and again that in the long run, building relationships yields far better results than having a gun put to our heads and caving in to unreasonable demands for financing and incentives.

When Kestrel came to Brunswick in 2010, Maine should have been skeptical. The history of this company, going back to its origins in England, is troubled at best. At the same time, however, the Kestrel opportunity seemed like a good fit. The former Naval Air Station has hangars, runways, and modern infrastructure. And Kestrel’s prospect of manufacturing jobs was certainly seductive.

But from the beginning Kestrel demanded funding. Since the company had not been successful in attracting enough money from the private capital markets, it used the only leverage it had — a promise of 600 jobs. All we had to do was come up with a few tens of millions of dollars that Maine didn’t have.

As it turns out, there also are runways and hangers in Wisconsin and lots of other places, and some other state or country will always have more money to throw at these risky opportunities than we do.

We should learn from this experience. When a company with expansion or growth plans comes along and their first question is about how much money Maine can give them — either in the form of cash or tax incentives — they are most likely not a viable opportunity, and, at the very least, we should proceed with caution, if at all.

The biggest lesson here: There are no shortcuts to job creation. It takes time, hard work and sound public policy. To attract, retain and grow jobs in Maine we need to focus on five key areas:

Costs. Companies evaluate locations based on cost. If Maine costs more, chances are jobs will go somewhere else. Tax policy is important, and those that matter most are personal income, corporate income, business property and capital gains. Similarly, in the manufacturing and production world, energy costs are an important driver in site selection. Minimizing costs as they relate to taxes and energy should be our goal.

Education and work force. Companies need to believe that our education system will produce the talent they need. How can we create a dynamic that keeps a company’s entry-level pipeline full of qualified applicants? Similarly, how can we do a better job of both retaining and attracting skilled workers in the 18–34 demographic? Our economic future depends on our ability to improve the educational attainment and skill level of our work force.

Regulatory speed. Every project we’ve seen at Maine & Company for the last few years has required that regulatory matters be approved or rejected within 10 business days of receiving an application. Before we are even formally presented with an opportunity, we need to have a good idea as to whether we can say yes or no. Once presented, we need to move fast and efficiently.

Incentives. Incentives, grants and loan guarantees are all important tools. However, no amount of incentives will make a bad deal into a good one. Targeted incentives that are competitive with other states will be the “tiebreaker” and will help bring jobs to Maine — provided all the other questions around work force and costs are answered satisfactorily.

Priorities. In a world where resources are limited, establishing priorities is critical. Does it make sense for Maine to direct its limited resources toward risky companies like Kestrel, or to focus our resources on companies with a better track record and that complement our strengths here in Maine? We can’t be all things to all people. We have to prioritize our use of resources.

Let’s use the Kestrel experience to teach the right lessons. We can’t attract jobs by blaming officials when we are losing a bidding war we never could have — nor should have — won. We need to give those on the front lines of business attraction and job creation the right tools to be successful.

And in this case, we should congratulate our economic development officials for not taking the bait from a company who has been making the same hollow promises on two continents for more than a decade.

Peter DelGreco is CEO of Maine & Company, a private, nonprofit organization that provides free and confidential consulting services to businesses looking to relocate to Maine or expand within Maine. Matt Jacobson is the organization’s former CEO, who now serves as Chief Operating Officer at Resilient Tier V Corporation in Brunswick.

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