Amid noise of its prominent closures, Eau Claire continues to grow

David Fettig | Editor

Published April 1, 1993  | April 1993 issue

Two years ago, when Uniroyal announced that it would close its Eau Claire plant and eliminate 1,375 jobs, Craig Carlson, executive director of the Eau Claire Area Industrial Development Corp. (IDC), told the fedgazette: "Life goes on. We'll survive this."

Since that time, Cray Research in nearby Chippewa Falls has laid off about 300 workers and, in January of this year, Supercomputer Systems Inc. (SSI) lost its financial backing with IBM and 320 highly skilled workers were suddenly jobless.

Today, in retrospect, Carlson says that the period following Uniroyal's announcement was perhaps more difficult for the city than he had anticipated. And he says that Eau Claire's recent troubles, especially the SSI closing, will continue to negatively impact the community in the near term. But he quickly qualifies that by recounting the city's efforts to counter the recent closings and by expressing optimism for the future.

Growth despite bad news

Of course, part of Carlson's responsibility is to be positive about Eau Claire's economic future. But he says his optimism is justified by Eau Claire's recent economic performance, and says too much media attention has focused on Uniroyal and SSI and not enough on the city's good news. For example:

  • Despite the Uniroyal closing, employment grew by nearly 3,000 jobs in 1992 and the unemployment rate in the Eau Claire metro area dropped from 5.5 percent in 1991 to 5.2 percent in 1992.
  • The city's $65 million in construction for 1992 (including $12.9 million of industrial development) was a record for Eau Claire.
  • A number of new businesses announced plans in 1992 to move to Eau Claire, including Allen-Bradley Co., with plans for 75 new jobs; American Coating Technology, 40 jobs; International Chute Specialists, 75 to 100 jobs; and Nortech Systems, about 50 jobs.
  • Existing businesses expanded their facilities and added jobs, including Phillips Plastics Corp., 90 new jobs; Nestle Food Co. more than doubled its plant size and its manufacturing crew to 150; and the merger of Luther Hospital and Midelfort Clinic, both of Eau Claire, with the Mayo Clinic of Rochester, Minn., will mean the addition of up to 40 physicians, along with support staff, over the next few years.

To reinforce Carlson's point that Eau Claire continues to grow despite its recent setbacks, Daniel Dieck, IDC development specialist, says that during the same week SSI closed he received calls from three Eau Claire businesses that were planning major expansions within the next two years. "But people don't always hear about that good news," he says.

Perhaps the best news for Eau Claire in the wake of the Uniroyal closing has been the immediate revitalization of the former Uniroyal plant. Purchased by local developers and property managers last year, the plant was renamed Banbury Place and within six months about half of the 1.9 million square feet was leased, mostly as industrial and warehousing space. One tenant, American Phoenix, also purchased some remaining Uniroyal equipment to produce rubber and recycled rubber products.

Aside from providing services to displaced workers, the status of the huge Uniroyal plant was the city's top concern following the company's announced closure. There is no greater economic development eyesore for a community, says Carlson, than a large, abandoned industrial building surrounded by chain-link fence and pocked with broken windows. "This community would be in tough shape if that building were empty," he says.

Aiding employees while creating employment

Because the Uniroyal building was quickly put to use, city officials didn't have to spend time debating its fate; rather, they focused their efforts on aiding the displaced workers and trying to create new job opportunities, according to Mike Schatz, the city's economic development specialist.

Eau Claire was not a novice in the plant closing and recovery game when Uniroyal announced its closing in 1991; losses in the 1980s at an Armour and Unisys plant of 125 and 100 jobs, respectively, meant that the city already had a Plant Closing Task Force at the helm. Made up of public and private members, the Task Force immediately created special committees to deal with specific issues, such as employee assistance and job creation strategies.

"One of the smartest things we did was establish an employee assistance center at the Uniroyal plant," Schatz says, where employees could review job postings, check on the status of their unemployment benefits, receive counseling and plan training options. "It was a comfortable place to get information without having to call on individual agencies," Schatz says.

Most of the displaced Uniroyal workers had to accept lower-paying jobs or take training courses. Very few were able to find high-paying, low-skill jobs like the ones they left at Uniroyal, Schatz says. "They couldn't find those types of jobs because they don't exist anymore."

About 700 of the former Uniroyal employees have taken at least one course at Eau Claire's Chippewa Valley Technical College, and about 200 have enrolled in two-year programs at the school.

When it comes to job creation, Eau Claire has aggressively marketed its location (proximity to Duluth/Superior, the Twin Cities, Rochester, La Crosse and Madison), educated workforce (in addition to the Technical College, Eau Claire has a branch of the University of Wisconsin and a private college, Immanuel Lutheran) and its many financial incentive programs.

Part of that litany of business growth and expansion listed above was financed, in part, by an array of incentives that not only includes state programs but also local plans. In addition to traditional finance tools like a locally funded economic development program, a federally funded revolving loan program, industrial revenue bonds, state Department of Development assistance and Small Business Administration loans, Eau Claire has a bank loan program that is unique in Wisconsin.

Called the Eau Claire Bank Loan Pool and formed by the area's financial institutions, the fund totals $11.5 million. The loan pool, which is managed collectively by the participating institutions, is meant to provide funds for development of manufacturing and industrial space. Below- market interest rates are available, but are determinant on a number of factors, including the perceived value of the project to the community. All of the pool financial institutions participate in each loan, subject to each institution's credit approval process.

In addition to its financial packages, Eau Claire also has three industrial parks and has built two speculative shell buildings to lure outside businesses, both of which were quickly leased. Also, the city has developed a business plan competition called Creating Your Own Business. Winners receive a cash grant and may become eligible for an interest-free loan.

Even though officials say that the first goal of their economic development efforts is to retain and expand existing businesses, Eau Claire also makes no secret of the fact that it tries to lure outside companies to move to the Chippewa Valley. The IDC's annual report proudly lists its marketing efforts in the Twin Cities, and the IDC's Dieck says that the IDC has targeted Twin Cities' businesses through advertising, phone calls and personal visits.

Among other selling points, Dieck says he pushes Eau Claire's business climate to prospective newcomers. The IDC nurtures its existing businesses, he says, through regular contact and through such special events as appreciation dinners. This type of supportive attitude is generally lacking in some larger cities, he suggests, and adds that the first question that site selectors ask the IDC is: What is the business climate of the city?

In an imperfect world, public funds are at risk

Schatz admits that "in a perfect world," Eau Claire and other communities wouldn't be involved in competitive economic development to the point where public funds are risked on private ventures. But as long as one community or state gives financial incentives, he says others are forced to respond in kind. Schatz says that Eau Claire residents and elected officials have been supportive of the city's economic development efforts. "If your community wants you in economic development, you've got to play the game and you've got to take some risks."

One of the bigger risks that Eau Claire has taken involves SSI and IBM, to which the city originally lent $3 million. In late March, the Eau Claire City Council agreed to forgive the city's $3 million in outstanding loans to SSI and IBM in exchange for ownership of the former SSI building. City officials hope to lease the building's 124,000 square feet to high- tech firms . They have already received a proposal from nine former SSI employees to lease 44,000 square feet to develop an electronic packaging plant. "Anybody faced with the same situation would do it again," Schatz says of the SSI loan. "Everybody knew it was a high-risk venture."

By mid-March, SSI, renamed SuperComputer International by SSI's founder, Steve Chen, had been denied a special loan or grant by the state, and former employees had begun to seek employment elsewhere. Schatz says the former SSI employees were in great demand by other companies from around the country, and that none of the employees would have trouble finding similar employment if they were willing to relocate. In an earlier interview, Schatz expressed hopes that some employees would decide to stay in Eau Claire and perhaps open new businesses, or that some of the many companies that arrived to interview former SSI employees would establish companies in Eau Claire. "We're hoping that a miracle does happen. We're hoping we don't lose them all."

Miracle or not, Schatz, like the IDC's Carlson, says the city will dwell on its successes, not its recent problems. "We're not happy this happened," Schatz says of the SSI closing. "But look what we've done in the meantime. We will go forward."