Monday, October 22, 2007

Denver or Milwaukee for MillerCoors?

Milwaukee, and its fledging regional economic development group, M7, have gotten themselves into one heck of a fight. The battle over attracting the newly merged MillerCoors headquarters will pit the upstart M7 against a colossus in the world of regional economic development - the Metro Denver Economic Development Corporation (MDEDC). Led by the highly regarded Tom Clark, the MDEDC was the first group of its kind in the nation and can trace its roots back a full 20 years.

This is a true David vs. Goliath story.

Based on what we know about both organizations, how will each group play their cards to capture the MillerCoors prize?

Quality of life and workforce
Right out of the gate, both sides will predictably advertise their superior quality of life and educated workforce. To be sure, there is plenty to support both Milwaukee and Denver's claim of "most educated" and "most livable." Denver has mountains and modern transit. Milwaukee has beautiful lakes and little traffic. Denver is located in a state that has 35.5 percent of its residents with a bachelor's degree or higher - third highest in the nation. Milwaukee is located in a state that hosts one of the world's best research universities and a superior K-12 system.

At this stage, both regions will have similar approaches - bombard the subject with favorable data on educated workers and livability. However, from this point forward, the strategies of Milwaukee's M7 and Denver's MDEDC could diverge in rather dramatic fashion.

The M7, along with others in the community, will stoically downplay Milwaukee's "reputation for high taxes" while highlighting Milwaukee's lower cost of living.

Conversely, the MDEDC may actually downplay Colorado's low taxes. Such a contrarian strategy would instead highlight the Denver region's recent history of large public investments. Such a move by the MDEDC would draw from an experience the organization had in November of 2005 when their phone rang off the hook after a $3.7 billion "tax increase" passed in Colorado by referendum vote, 52%-48%. Who was calling? It was prospective businesses and, no, they were not mad at the tax increase. They were interested in moving to Colorado because of the anticipated greater dollars that would flow to higher education and infrastructure.

In short, Milwaukee talks costs, Denver talks investment.

The M7, along with Governor Doyle's office, will follow through with a substantial incentives package aimed at "sealing the deal" with MillerCoors. Wisconsin plays the incentives game with gusto.

Conversely, the MDEDC will offer only a modest incentives package for MillerCoors because Colorado has little in the way of incentives to offer. Instead, recruiters will play up the Denver region's recent history of public infrastructure investments. Investment examples that the MDEDC touts:

  • FasTracks - $4.7 billion commuter and light rail build out
  • T-Rex - $1.7 billion freeway replacement project
  • DIA - $5 billion international airport
  • New baseball, football and hockey stadiums in downtown Denver
Again, Milwaukee talks subsidies, Denver talks investment.

End game

All else being equal, what would you take? Milwaukee, which downplays its high taxes but offers an attractive incentives package. Or, Denver, which plays up its recent investments but offers only a small incentives package?

On D-Day (Decision-Day), the MDEDC will presumably lay it on thick to MillerCoors by saying exactly what an MDEDC representative told the crowd at a recent conference in Denver, "incentives don't make a bad deal good." Denver will claim that despite Milwaukee's large incentives package, Milwaukee is actually the quintessential "bad deal" because of its inability (whether true or not) to make strategic investments that are important to the business community. MDEDC will predictably hit on the same theme over and over and over: Investment, not incentives.

If we lose MillerCoors, many will blame Wisconsin's high taxes. However, defeat could just as easily be blamed on an approach that views economic development as simply cutting checks (incentives) and cutting costs (taxes). Economic development is also about investment. Just ask Denver.


Anonymous said...

Let me get this straight...somehow, the gist of your article is we don't need to worry about our high taxes, we need to invest more in our infrastructure...I don't think you can effectively move in that direction until you first lower our crushing tax burden.

Surely, they can focus their pitch on their investments and quality of life elements, but only because the argument on taxes was over before it began. And we have to focus our pitch on incentives, for that very reason. It would be fine to pitch investments and quality of life issues, but that will not be possible until the tax structure in Wisconsin is lowered enough to take that HUGE issue out of the equation. There is only one factor working in Miller's favor, the relative size of the two current operations would make it operationally easier to move functions here. But for quality of life, taxes, isn't even a close call.

My wife and I are already looking for places to relocate as soon as our child finishes hish school, and taxes are the primary reason. And Colorado is towards the top of our list right now.

Anonymous said...

You missed the most important city.
Johannesberg, South Africa

Dave said...

I'm don't know about headquarter operations but the number 1 reason MillerCoors needs to be reminded of when it comes to the brewery operations itself is water. We have water whereas Colorado is facing a water shortage that will only get worse in the future.