Come On Down! Fast!

By Janice Castro

It's quite a spectacle: eager Governors, U.S. Senators and state economic directors in their best blue suits traipsing out to the headquarters of United Air Lines in Elk Grove Village, Ill. Ever since word got around that United plans to build a new $1 billion aircraft-maintenance center somewhere in the U.S., some 90 cities, states and other public entities have been strutting their stuff in hopes of winning the facility. Dozens of schoolchildren from Oklahoma City have written to chief executive Stephen Wolf, beseeching him to provide jobs for their parents. Suitors have sent flowers to UAL executives and bombarded them with commercials on a local Chicago radio station. A huge red-white-and-blue billboard near UAL's offices reads, UNITED, COME FLY THE FRIENDLY SKIES OF OKLAHOMA!

The United deal is only the latest -- and most spectacular -- to send hearts fluttering in city halls and statehouses across America. From Seattle to Boca Raton, Fla., government officials are gunning for the economic growth that new companies can bring. Local officials have long poached upon sister cities and states, of course, by snatching away their businesses. But now, with most local governments caught in a crunch between rising costs and shrinking federal subsidies, the practice has become a heated struggle.

In Texas, the Greater Houston Partnership, a public-private combine, wields a $2 million annual budget and a staff of 20 in a downtown high-rise, casting for new industries to balance the state's volatile energy base. "We tell people that humidity is good for the skin and that you can work on your golf handicap all year round," says Houston development chief John Brock. "It's hardball now. As bad times hit, everyone is discovering the benefits of economic development."

More than 9,000 city, state and regional entities are aggressively seeking new industry, according to Robert Ady, president of PHH Fantus, a corporate relocation firm in Chicago. Armed with generous tax breaks, low-interest loans and job-training subsidies, not to mention four-color brochures boasting cheaper housing, better schools, prettier sunsets and friendlier neighbors, they are pitching their hearts out to major corporations and medium-size manufacturing firms as well. Localities will spend hundreds of millions this year to lure companies away from their established bases, twice as much as they laid out 10 years ago.

The competition for UAL has grown frantic now that the carrier has narrowed its search to nine sites, scattered from Denver to Martinsburg, W. Va. Pitchmen in the farm town of Rantoul, Ill., have put together $300 million worth of free land and other incentives, hoping to substitute UAL for nearby Chanute Air Force Base, slated to close in 1993. In January a special session of the Oklahoma legislature approved a new 1% sales tax to pay for tax concessions, job-training subsidies and other lures. Boasts Ed Bee, Oklahoma City's economic development director: "We have a done deal." Well, not quite. Colorado has assembled a package worth at least $427 million, including 30 years of tax breaks, in hopes of landing the UAL jewel for the new international airport Denver is building. Governor Roy Romer will call his state legislature into special session next month to approve the goodies. UAL is expected to announce its decision by midsummer.

America's rich industrial states are the best hunting grounds for corporate trophies. Tennessee scored the biggest hit of the past several years in 1985, for example, when General Motors decided to build its $1.9 billion Saturn plant there. Raiders from the Southern, Southwestern and Central states have set up permanent outposts in California, determined to pick off high-tech and manufacturing companies. Even Pueblo, Colo., has an economic development office in Orange County.

ALABAMA IS OPEN FOR BUSINESS, a bright green-and-white billboard crowed recently beside a Los Angeles freeway. Grim commuters stuck in traffic have plenty of time to write down the toll-free number on the bottom. In nearby Laguna Hills, Jay Allbaugh runs a one-man Sooner office whose slogan is THE OKIES ARE RETURNING! Says he: "The smog, traffic and high cost of living all work in our favor. Businesses are telling me their profit margins are getting squeezed so much they must move to stay profitable."

Bank of America announced last month that it will move 600 credit-card- proces sing workers from San Francisco and Pasadena, Calif., to Phoenix. Zero Corp., which makes equipment cases for musicians, photographers and scientists, is leaving Los Angeles for Salt Lake City. Says CEO Wilford Godbold: "The negative perception of business in the state legislature has made it harder and harder for us to operate here. The environmental regulations were conflicting, confusing and costly." Geoffrey Gordon, chairman of Atlas Pacific Engineering, a small machinery maker, says he misses the Oakland Symphony now that his company has moved to Pueblo. "But we only went twice a year anyway. I'll just go out and buy a CD."

Things are far worse in New York City. It has lost 200,000, or 38%, of its manufacturing jobs and more than 50,000, about 20%, of its financial jobs since the 1987 stock-market crash, and the pace of departures doesn't seem to be slowing. In the past four years, J.C. Penney sold its 45-story office tower and moved to Plano, Texas, for a loss to the city of 3,800 jobs, while Exxon followed with a move to nearby Irving (2,100 jobs). Salomon Brothers is transferring its domestic operations division to Tampa (700 jobs). City officials, who claim they don't keep track of the corporate exodus -- which is inexcusable, if true -- had no idea that W.R. Grace was thinking of leaving until it announced last January that it would move most of its operations to Boca Raton. Says a dispirited Sally Hernandez-Pinero, New York's deputy mayor for finance and economic development: "It's pretty hard to combat no income taxes and palm trees."

Now stalwarts of the financial industry at the heart of New York's economy are getting restless. Merrill Lynch will send 2,500 operations workers to New Jersey in 1992, while Smith Barney and Morgan Stanley are considering moves to Connecticut. The temptations are everywhere. Atlanta Mayor Maynard Jackson and Georgia Governor Zell Miller hosted a lavish lunch at Manhattan's "21" Club not long ago for representatives of 200 top New York firms. Said John Gilman, a Georgia development official: "Our highest target is the New York area."

Note the word area. Even the outlying towns and suburbs that had cherry- picked companies from cities like Los Angeles, San Francisco, Detroit and New York during the 1970s are now losing them to less expensive climes. Says Miles Friedman, executive director of the National Association of State Development Agencies: "They'll go out the back door as fast as they came in the front." United Parcel Service, which moved from Manhattan to Greenwich, Conn., in 1975, announced two weeks ago that it will ship its 1,000-worker headquarters to Atlanta. UPS also considered Baltimore, Dallas and Cincinnati, then chose Atlanta, in part on the basis of cheaper housing ($68,000 for a median-priced single-family home, vs. $165,000 in southwestern Connecticut).

Big companies are often surprised when they look closely at the benefits of rapidly developing regional economies. Airline deregulation, for example, has spawned handy new international hubs in places once better known for their bus terminals. Atlanta has played its airport trump card effectively, one reason Holiday Inn is in the midst of moving there from Memphis. Says Memphis Chamber of Commerce president David Cooley: "We don't have a nonstop to London, and Atlanta does."

Broad changes in the U.S. economy are enlivening this free-for-all. As the U.S. shifts from manufacturing to service industries and the so-called knowledge economy, locations near waterways, railheads and raw materials -- traditional spots for great cities -- have become less important. Computers, fax machines and improved telecommunications have enabled large corporations to shift back-office operations out of expensive downtowns and into small towns and suburbs.

In his forthcoming book, The New Corporate Frontier, author David Heenan, chief executive of Hawaii's Theo. H. Davies conglomerate, argues that a vast new American migration is under way as companies abandon big cities and old- line industrial regions. Says he: "The corporate downsizing of the 1980s proved that you don't need a Pentagon-size bureaucracy to run a business. Downsizing led to outsourcing of suppliers, and has now led to a movement to ship out the whole company. After all, with new technologies, you can run even a global business out of a small town." He's right. Just ask IBM (Armonk, N.Y.) or General Electric (Fairfield, Conn.).

Many corporations place an especially high premium on education and skills when they relocate. They're looking for workers who won't require much extra training, on which U.S. companies spend billions each year. Economic development officials from Tennessee, North Carolina and Kentucky have found that big corporate fish rise quickly to the bait of their strong university research assets and skilled workers. "The No. 1 issue is education," explains Ady. "Jobs are changing so fast that companies need completely adaptable, flexible work forces. Ten years ago, two-thirds of our clients would locate in the lowest-cost town. Now that's rare."

At a time when every place from Dallas to Park City, Utah, is primed to put a salesman on a plane to snag business, many companies try to search quietly for new homes. When Salomon Brothers decided to move its processing division, the firm conducted secret scouting missions in 72 cities before making a peep. Sure enough, when word got out in January that the company had narrowed its choices to Tampa and Columbus, Salomon was besieged with promoters. Tampa offered Super Bowl tickets; Columbus brandished seats for the Final Four. Says Salomon managing director Marc Sternfeld: "I heard from every personality in Florida and Ohio."

Tough competition calls for unfamiliar methods. Members of the Greater Cincinnati Chamber of Commerce are not the sort of people who skulk around to clandestine meetings, but the city is hungry for new business, and, by golly, they're willing to do what it takes. When a relocation consultant brought a corporate team to town to see what Greater Cincinnati could offer, the visitors insisted on complete secrecy. No problem! Eight Cincinnati corporate leaders gathered in a small club dining room to sing the praises of their town to "Bill, Bill, Bill and Mike," four strangers identified only as "top level" executives of a "really big company" in another city. The meeting went well. Ten months after Bill, Bill, Bill and Mike took a look around, H.J. Heinz moved its Pet Products subsidiary from Long Beach, Calif., to Cincinnati.

With reporting by Mary Cronin/New York and Richard Woodbury/Houston