State ads try to lure Illinois, Michigan businesses

January 7, 2008

Indiana's friendly economic development rivalry against Michigan and Illinois is heating up. Confident that its business costs are lower, Indiana has begun a six-month advertising campaign designed to attract companies across the state line.

"You don't have to go very far," Indiana Secretary of Commerce Nathan Feltman said. "You can go right across the border and find a more competitive environment."

The campaign, which debuted last month, features a series of billboards placed at key locations, such as the Chicago Skyway and the Indiana Toll Road. Each bears the slogan "Come on IN," and touts Indiana's lower taxes, business and housing costs. Feltman said Gov. Mitch Daniels, a Republican, conceived the slogan himself.

Indiana's advertising also includes a series of morning and afternoon drive-time radio spots in Chicago and Lansing, Mich. The Indiana Economic Development Corp. is following up with a flurry of direct mail and targeted inquiries to corporate executives and site-selection consultants. IEDC's foundation is underwriting the campaign, which has an initial cost of $75,000. If successful, it could be expanded to include other states.

"We think we're going to get a lot of bang for our buck," Feltman said.

Indiana's pitch is based on its business costs, which IEDC claims are consistently lower than those in neighboring states. For a company with 100 employees, IEDC calculates that annual business taxes are nearly $100,000 lower in Indiana than in Michigan or Illinois. By IEDC's estimation, Indiana's expenses for Worker's Compensation, unemployment insurance, utilities and cost of living are all significantly lower, too.

Ball State University economist Michael Hicks said he's been fielding questions from economists in Michigan and Illinois about the new IEDC campaign. Because each state has a relatively similar geography, population and economy, he said, government policy is one of their key differentiators. And because Indiana's total cost of business is clearly the lowest, he said, Hoosiers would be crazy not to press their advantage.

"I think it's a nifty idea," said Hicks, director of the university's Bureau of Business Research. "I have to tell you, I've gotten many, many calls chuckling about this from my colleagues in Illinois and Michigan."

Several recent decisions by Michigan and Illinois officials could soon further tip the scales in Indiana's favor--another reason IEDC is attempting to strike while the iron is hot. For example, Michigan in October increased its personal income tax and also expanded its state sales tax to include service businesses. The twin tax hikes are expected to raise $1.4 billion to support Michigan government.

Meanwhile, Illinois officials are considering changes to property assessments in the Chicago area that could shift hundreds of millions of dollars in property taxes from homeowners to businesses. Local officials there are also contemplating stiff hikes in sales, gas and parking taxes.

Indiana's property tax system is in turmoil, too. But Feltman said he expects the Legislature to correct its problems this year. And he said Indiana's property-tax solution will likely give IEDC yet another subject to tout.

Hicks thinks the moves by Michigan and Illinois officials might shore up government budgets in the short term. But in the long run, higher business costs will hinder those states' economies--and make Indiana more attractive.

"It's almost Economics 101," Hicks said. "You don't raise taxes profoundly in a recession, and you certainly don't do it in the area most likely to create investment: business and incomes."

In addition to the statistics about business costs, IEDC is publicizing a series of recent economic-development wins, large and small, against Michigan and Illinois.

For example, Charleston, W.V.-based oil industry equipment distributor McJunkin Red Man Corp. said in December that it will move a distribution center from Harvey, Ill., to Munster and create 60 jobs by 2010.

IEDC announced a much bigger deal two months earlier, when Arcadia Healthcare, a provider of medical staffing and medical supplies, agreed to move from Southfield, Mich., to Indianapolis and create 400 jobs over two years.

"In the last couple of years, we've seen that our state has been chosen in competitive situations at a pretty high rate," Feltman said. "The businesses themselves were telling us [about Indiana's cost advantage] because of their interest."

The campaign's advertising materials were developed internally by IEDC. The marketing effort is "direct and to the point," said Tom Hirschauer, president of Publicis Indianapolis, who reviewed the materials at IBJ's request. Rather than rely on humor or gimmicks, he said, the campaign emphasizes a handful of facts about hot-button issues likely important to business executives.

Hirschauer gave IEDC high marks for its multi-tiered approach. Indiana should achieve better results, he said, because its billboards and radio spots are supported by direct mail. And all the printed materials refer people to a new supporting Web site: www.IndianaSmartMove.com. Advertisers call such campaign coordination "lift."

"The fact that they're trying multiple media I think is the right approach," Hirschauer said.

Economic development officials in Michigan don't sound worried about Indiana's campaign. Their counterparts in Illinois did not return repeated calls.

"The focus on Michigan confirms our status," said Bridget Beckman, public information officer for the Michigan Economic Development Corp. "We should be flattered."

Beckman said her state is ramping up its business-attraction efforts, as well, through a campaign dubbed "the Upper Hand." She highlighted Michigan's $2 billion "21st Century Jobs Fund" program and pointed to several business and property taxes Michigan claims are lower than Indiana's.

Beckman also touted a series of recent Michigan job expansion announcements in life sciences and information technology.

But Hicks said Michigan's unemployment rate--which, at 7.4 percent, is far higher than Indiana's 4.7 percent--shows which state has more momentum. Illinois' unemployment rate stands at 5.2 percent.

"In Great Lakes states, Indiana sticks out as a green thumb of growth," Hicks said. "In a sense, we ought to be paying Illinois, Michigan and Ohio as our economic developers, because they're surely making our life easier."

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