IEDC ups pressure on Shelbyville's Intelliplex park

October 15, 2007

Shelbyville leaders and residents are grumbling about restrictions the Indiana Economic Development Corp. just slapped on Intelliplex, their $22.8 million certified technology park.

Meanwhile, 40 miles to the north, Anderson officials are cheering IEDC's simultaneous decision to renew the $12 million Flagship Enterprise Center as a certified technology park. Recertification will allow Anderson to keep state sales and personal income taxes generated within its borders for park reinvestment and qualify the center for future state grant money.

The contrast between the two high-tech business parks couldn't be clearer to Indiana Secretary of Commerce Nathan Feltman.

"Anderson was really in our view a model for a park that is not connected directly to a research university," he said. "They have put all their efforts into creating a lot of high-tech jobs, but in a way that makes so much sense in playing off the region's assets in the auto sector."

"Shelbyville was a little more challenging [to] review," he continued. "The bottom line is both Shelbyville and the state have not been satisfied to date with the creation of high-technology jobs."

Intelliplex now has two years to comply with a list of seven IEDC demands. They include building new research space and hiring a private adviser for marketing assistance. Most important, IEDC expects the largely undeveloped, 141-acre park to attract at least 50 full-time high-tech jobs.

The IEDC's decisions, reached Oct. 4, will reverberate well beyond Anderson and Shelbyville. Indiana has 18 certified technology parks. Some are thriving, but others are struggling. IEDC wants to maximize the impact of the millions of dollars in grants it doles out under the program by concentrating on parks that are proven successes, or likely will succeed. As a result, each park soon will confront Shelbyville's economic development crossroads.

"Every park will face the same questions," Feltman said. "All parks are on notice. The state of Indiana wants to have a certified technology park program that everybody can be proud of and be recognized nationally as a system that works and means something."

Marathon or sprint?

The program began under Democratic governors Frank O'Bannon and Joe Kernan, who certified 15 parks around the state. Some were urban. Others rural. Since Mitch Daniels took office, Indiana has certified just three more.

Shelbyville broke ground on Intelliplex in September 2003, with plans to focus on life sciences startups. It was the state's third certified technology park, joining the Flagship Enterprise Center and West Lafayette's Purdue Research Park.

IEDC also recently reviewed West Lafayette's park and gave it high marks. Thanks to its Purdue affiliation and abundance of related high-tech activity, recertification never was in doubt.

Flagship also wasn't on the bubble. That park, which opened in May 2005, was funded by grants from General Motors Corp., the federal government and local bonds. Founders believed the community's biggest challenge--wrenching change in the U.S. auto industry--also could become an opportunity.

Anderson has seen auto-plant jobs disappear by the thousands over recent decades. But there still are plenty of experienced engineers and former plant managers living there. The Flagship Enterprise Center aims to apply their expertise toward innovations needed by the modern auto industry, such as clean and safe battery power for hybrid electric cars.

The 16-acre park now has 1,646 employees with an annual payroll of $58 million, according to its CEO, Charles Staley. The city has managed to win several competitive business deals to bolster that total--including a call center of Dallas-based Affiliated Computer Services Inc., whose 200-person work force is expected to grow past 500, and a new Nestle advanced manufacturing plant that plans to hire 350.

"We used to have hundreds of GM jobs," Staley said. "Those jobs aren't here anymore. The one lesson we've learned loud and clear is that diversification is the key to economic health."

Intelliplex can't boast of similar successes, though it isn't empty. Major Hospital built an obstetrics/gynecology facility there. The park also is home to an Indiana Wesleyan University extension campus and Makuta Technics, a small manufacturer of molded medical-device parts. Other occupants include a Santa Fe Steakhouse and professional offices for accountants, physicians and attorneys.

Major Hospital CEO Tony Lennen said Shelbyville has been working diligently to attract high-tech startups to Intelliplex. It just hasn't happened as quickly as anyone hoped.

"This whole thing is a marathon, not a sprint. Change in the Indiana economy is not going to happen overnight," he said. "It's really easy to sit back when you're not involved and criticize. I don't think the city, the hospital, the county, the state or anyone associated with this project ever said we thought we'd fill that thing up in three years."

Lennen also said that earning the certified technology project designation was never the project's driver. In its long-term planning, Major Hospital saw the need to secure land near Interstate 74. Someday, he said, the hospital's expansion might lead it to move inside Intelliplex. Lennen said certification and attracting startups was a secondary opportunity that emerged only after Major Hospital began rolling on its plans.

"My [eventual] successor will be thankful we had the foresight to lock some land down on the interstate at reasonable prices well in advance," he said. "This was not done as a CTP gambit."

The state, though, wants more from its investment. Intelliplex was awarded $1.2 million of the more than $15 million in grant money the state has provided since the program's launch.

In addition, Intelliplex, like other parks, can capture up to $5 million in taxes for reinvestment. But because of the scarcity of development so far, it's collected only $220,000. Losing certification would wipe out the potential of capturing the remaining $4.78 million.

Imposing restrictions

For now, the state's putting Intelliplex on a short leash. The IEDC granted it certified technology park status for two more years, rather than the standard four. IEDC also issued a "memorandum of understanding" laying out its expectations. Intelliplex already has met the first, hiring CB Richard Ellis to market the complex.

Shelbyville Mayor Scott Furgeson said Intelliplex should also be able to meet IEDC's second major requirement: erecting a flexible-use facility, preferably one offering laboratory space. Once it's complete, he said, startups and high-tech jobs likely will follow.

"Good times are on the horizon for us," he said. "We shouldn't have any problem getting anything done in the next year or so."

But IEDC isn't alone in asking questions. Shelby County Councilor Tami Grubbs complains that so far only low-tech businesses, like the accounting and law firms, have moved from Shelbyville to Intelliplex. Their moves mean less tax money for city and county government. And those aren't the kind of fast-growing firms the community had hoped to see take root.

"I think it speaks volumes that Anderson and Purdue were both recertified for a full four years," Grubbs said. "If it's the state or national economy causing all these problems, why aren't Anderson or Purdue having them?"

John Mutz, chairman of IEDC's policy committee, shares Grubbs' concerns.

"[The IEDC] is not as pleased with the technology parks as we would like to be. There are some notable successes, like the one in West Lafayette, and the one in Anderson is turning out like that, too," said Mutz, a former Indiana lieutenant governor. "But many of them have turned out to be real estate developments, not really high-tech centers."

Patient approach

Eileen Walker, executive director of the Tucson, Ariz.-based Association of University Research Parks, warned against giving up too quickly on a struggling tech park. She said patience is critical.

"Looking for job growth in a two-year frame, that might be unrealistic," she said. "They are long-term investments in the future of a community, and they need to be looked at that way."

Walker, who studied Indiana's certified technology park program before Daniels took office in 2005, calls Indiana a national leader in the field. In general, she said, parks need "knowledge partnerships" with universities or other sources of innovation to become successful. The better they can leverage such relationships, the more opportunities they find.

Mutz noted that such opportunities exist beyond the state's large urban areas. Rural communities can be centers of high technology, he said, pointing to Warsaw's world-renowned orthopedics hub.

But IEDC has limited resources. And while Mutz agrees that the state shouldn't surrender on any park too soon, it can't be patient forever.

"I wouldn't want to discourage a creative community. There's a lot of ways to skin the cat, and I'd be reluctant to say little towns shouldn't try," he said. "But we have to let the results speak for themselves. Some parks will lose their designation. I'm not making that as a threat, but that could very well happen."

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