East Troy manufacturer moving to Oklahoma
Owners cite incentives, proximity to clients
By Charles Rathmann, of SBT
Custom Mechanical Equipment LLC plans to move from its East Troy site to Ponca City, Okla., this summer.
The company manufactures chillers for HVAC systems, mostly as replacements for equipment in existing buildings. The chillers are sold through contractors in the United States and Canada and go into schools, hospitals and other large facilities.
When CME moves to Oklahoma, about six employees will move southwest with the firm. The other 20 or so employees will be on their own.
"We are working overtime every day," CME president Dick Peitz said. "Unfortunately, we are not having to work Saturdays just yet, but we are quite busy."
The slower construction economy actually helps CME’s business, according to Peitz, as aging plants need replacement mechanicals.
"Replacement actually helps our business," Peitz said. "We do new buildings, but not as many as we do replacements. It is probably 80-20."
The company is relocating for a variety of reasons. According to Peitz, much of the company’s work is shipped to the Southwest, and it makes sense to move closer to the firm’s client base.
Incentives to move
In addition, the people at the Ponca City Area Chamber of Commerce (PCACC) made the decision to move easier, he said.
"They have many different things – tax advantages for a period of years," Peitz said. "They would give six acres of land to build a building on and pay for training of the people – to a certain amount of income – for five years."
According to Tim Burg, PCACC assistant director of economic development, local and state initiatives were leveraged to create an attractive package for the defecting Wisconsin manufacturer.
"The State of Oklahoma is very aggressive," Burg said. "They offer a five-year hiatus on personal property, equipment and real estate taxes for manufacturers. And the state offers tax credits based on what the manufacturer pays out in payroll. They offer a 4-5% rebate if they bring their company here and pay more than $2.5 million in payroll a year. But there is another program, the Small Employer Jobs Incentive Act, that CME will qualify for."
Ponca City also has funds from a .5% sales tax, which are earmarked for economic development and incentives.
The chamber and city have aggressively pursued business relocations since the oil industry in the region declined in the 1980s.
Big scores during the early days of Ponca City’s program to land relocations included poultry processor Thorn Apple Valley Inc., of Southfield, Mich., which employed 600, and Sykes Enterprises, a management solution company that moved a 600-job call center from Miami, Fla.
Recruitment
However, smaller firms such as CME are just as important as the large ones to the Oklahoma community, according to Burg.
"We did a project in Ponca City about two years ago," Peitz said. "The chamber of commerce started visiting with us then. We got a few calls from the lieutenant governor and several people from the State of Oklahoma came to visit with us about the move."
The firm’s new 54,000-square-foot building in Ponca City is under construction. Peitz said the company plans to move from its leased 16,000-square-foot facility in East Troy in the next three months.
"If I were a small business and facing the tax burdens I see in the state of Wisconsin …. The state does not seem very interested in influencing new industry," Peitz said. "If I were a small business owner who paid 100% of the cost of health care – well, this is a high health care area, too – I would be looking around to see what other people would do for me. It is a struggle to keep things going. One important thing for people to have is health care. That runs in the hundreds of thousands a year."
Peitz said he contacted the State of Wisconsin about incentives to stay.
"Unfortunately, we did talk to the State of Wisconsin, and they have nothing to offer," Peitz said. "They offered us an SBA (Small Business Administration) loan, which we don’t need. There are a lot of other states who have some pretty good offerings for moving."
However, Wisconsin Department of Commerce (DOC) spokesman Tony Hozeny said no one from CME ever contacted his agency.
"CME never contacted this department," Hozeny said. "They never approached us about this and asked us about any incentive."
Hozeny stressed that all of the incentives offered up by the State of Oklahoma and Ponca City are available here in Wisconsin – including free land.
"You couldn’t say free land is available in every part of the state," Hozeny said. "If you are a community and you think that is an incentive you need, you are going to use it. … You are probably not going to find free land in Pleasant Prairie or somewhere along the border, but as you look toward the center of the state, you are probably going to find it."
Hozeny stressed that non-policy factors are probably more important to CME in its decision than anything the state or local government could do.
"The fact that most of their customers are in the Southwest, to me, that sounds more like a reason for moving," Hozeny said.
May 16, 2003 Small Business Times, Milwaukee
