The founder of Phoenix International used to grab a prototype circuit board and rhapsodize about his vision for a company to make electronic controls for farm machinery.
Barry Batcheller made those early sales pitches in rented office space for three employees over a Chinese restaurant in downtown Fargo. Today, 15 years after it was little more than a business plan, Phoenix has 450 employees and an annual payroll of $20 million.
Phoenix International executives acknowledge that the company had help in achieving that rapid growth.
"We were able to do that because of some of the economic development programs that are available," said Sally Bosh, Phoenix International's vice president and controller.
One key component: The firm, now a subsidiary of Deere & Co., is a leading recipient of the North Dakota's PACE low-interest loan program, or Partnership to Assist Community Expansion.
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Over the years, Phoenix received six PACE loans totaling $7.54 million to fund start-up and expansion projects, including its factory and research-and-development center at North Dakota State University.
Other incentives, including local property tax exemptions and Small Business Association programs, also helped Phoenix move from a fledgling to an established company with revenues of $84 million.
"All of these things were certainly helpful to a company just starting out," Bosh said. Expecially one that is capital-intensive: Phoenix has invested more than $30 million in plant and equipment.
In southwestern North Dakota, Baker Boy Bake Shop Inc. in Dickinson offers another example of a capital-intensive manufacturer that has used the PACE program to grow.
Baker Boy, which makes hundreds of products, including bread and cookie dough, used five PACE loans totaling $4 million to finance major expansions. When the firm got its first loan in 1993 it had 40 employees. Now there are 202, or 185 full-time equivalents.
"We're kind of the poster company for PACE," said Guy Moos, Baker Boy president. "I firmly believe without PACE we'd be at half the number of employees, if that. We've been able to make much bolder steps."
Wages at Baker Boy also have increased over time, Moos said. The company's average hourly wage in 1996 was $8.36; today it's $10.95, or $22,776 a year for a full-time worker.
"In the Dickinson area, we're offering much, much more than the average," Moos said. "In Fargo, maybe that doesn't fit."
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At Phoenix, the pay scale ranges from an average of $25,000 a year in wages and benefits for a factory worker to an average of more than $65,000 for technical positions, including manufacturing engineers and software engineers, Bosh said.
"It's depending on the skill level and the degree of experience," she said. Again, many of those jobs were created with assistance from PACE and other programs, she added. "I think it's worked out well for us."
The State Bank of North Dakota reports that 9,735 jobs were created by the PACE program.
While Phoenix and Baker Boy represent two very different success stories for PACE, critics point to dubious examples of the use of incentive programs in recruiting out-of-state companies.
A report criticizing the lack of accountability in North Dakota economic development programs singled out several companies, including Sykes Enterprises, which operates computer help call centers in Bismarck and Minot.
For its Bismarck operation, Sykes received $3.8 million in grants from the Bismarck Vision Fund, as well as land and a five-year property tax exemption from the city. John H. Sykes, the company's president, obtained a $650,000 PACE loan from the Bank of North Dakota. Also, the state granted the company a five-year income-tax exemption, valued at $78,240, when it opened its second center in Bismarck.
The Bismarck call center was to provide 650 jobs when it reached capacity, at starting wages of $7 to $7.50 an hour, according to a report by Good Jobs First. In 1997, Sykes had more than 550 employees in Bismarck; last year, however, it closed half of the operation and filed notice that it planned to lay off 316 employees, although some of them reportedly have been hired back.
Sykes, based in Tampa, Fla., also closed or plans to close call centers in Eveleth, Minn., Scottsbluff, Neb., and Greeley, Colo.
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Meanwhile, Sykes is opening new call centers in India, Costa Rica and the Philippines, where labor costs are much lower.
Bill Wocken, Bismarck's city administrator, said the city's investments in Sykes have paid off, in spite of the layoffs and the closing of one of the two centers. Sykes remains a major employer, and the city bought the closed center for use by another firm.
"We have seen a very strong economic contribution to the community as a result of the Sykes deal," Wocken said. "Sykes has been a good corporate citizen."
Readers can reach Forum reporter Patrick Springer at (701) 241-5522
