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Calling it money well spent

| Sunday, March 23, 2003

One year ago last week, the Pittsburgh Regional Alliance paid $2,235 to rent a luxury suite at Philips Arena in Atlanta to host 17 site-selection consultants and corporate real-estate directors at a hockey game between the Pittsburgh Penguins and the Atlanta Thrashers. Another $1,556 was spent on food and beverages, and $49 on gifts for guests.

The party was part of a two-day mission to convince those southern movers and shakers that Pittsburgh is a good place to do business. The Penguins didn't help, though, beating the Thrashers, 4-2.

The hockey game was part of the economic development group's "Prospecting Mission" to the Atlanta and Greenville, S.C., area, where Pittsburgh Mayor Tom Murphy and Regional Alliance President Ronnie Bryant and two other staff members also courted an unidentified Atlanta company that today still is thinking about placing an operation in this area. The Pittsburghers also met with editors and reporters of Site Selection magazine, an influential trade publication.

Overall, the trip cost $6,108. It was one of a series of national and international trips on the itinerary of Regional Alliance executives and staff last year.

To some, the luxury box, food, drinks and gifts might seem expensive, but Regional Alliance officials say they're a necessary and expected expense in the high-stakes, competitive world of economic development. Such trips, local leaders say, is a key part of their mission to pitch the region to businesses in hopes of persuading those who'll listen to open new facilities, move or expand their operations here.

The Regional Alliance is the prime organization charged with building the economy in 10 southwestern Pennsylvania counties.

Such trips are paid for with money from a combination of corporate, foundation and public sources. Regional Alliance spokesmen say travel expenditures in 2002 totaled $146,489, only a modest 3.9 percent of the agency's total budget of $3.76 million. And the sources of that money said they are statisfied that it is being spent wisely. And independent audit backs that up.

"We are very judicious in the way we manage our fiscal resources," Bryant said in a recent interview, discussing the Regional Alliance's travels in 2002, which included eight foreign missions to one or more cities, including visits to Manchester, Sheffield and South Yorkshire in the United Kingdom and Dortmund, Germany.

Staff members also made 12 domestic trips to attend trade shows and conferences or to meet with company prospects and site-selection consultants, in such cities as Washington, D.C.; San Jose, San Francisco and Anaheim in California; Atlanta; and Nashville, Tenn., among others.

Separately, Bryant himself made five trips last year, including meetings with legislators in Harrisburg, several development and prospect meetings, and a public speaking engagement in Washington.

This year, Regional Alliance executives and staff have already concluded a mission to England led by Mayor Murphy in January, and for the fall, a trade mission to France is among the domestic and foreign trade missions envisioned in projected planning for 2003. Part of the funding for the trip to France, and a number of other international initiatives will come from a $31,000 grant from the state announced in February.

"Our objectives are to facilitate foreign and direct investment, and to open other markets to our existing businesses," said Bryant, who worked with a similar economic development organization in St. Louis before coming to Pittsburgh in June 2001 to head the Regional Alliance. "To meet those objectives, we must get Pittsburgh on the radar screen."

Although southwestern Pennsylvania has made great strides in revitalization in the years since the downturn of the steel industry, Bryant said the region still is playing catch-up to many other areas of the country in terms of economic growth and is facing competition from comparable cities that are spending even more on travel and marketing efforts.

He said the region must do what it can, within the confines of its available resources, to compete for new business opportunities, including making the region better known to site-selection consultants, who annually represent a major percentage of the top companies looking for sites to expand.

"Basically, our board leadership is saying, 'Get out of the office and do more of these international fairs, do more of these site-selection trips,'" said Richard Stafford, chief executive of the Allegheny Conference on Community Development and the Regional Alliance.

The Allegheny Conference, which is headed by the region's corporate and business leaders, basically is the holding company for the Regional Alliance and two other economic development organizations -- the Greater Pittsburgh Chamber of Commerce and the Western Division of the Pennsylvania Economy League.

Stafford said that under the new reorganization of the groups, the PRA has been directed to pay more attention to increased foreign and domestic business opportunities, as well as help existing businesses expand within the region.

As part of its hopes to make sure the region is ready to take advantage when the national and world economies rebound, the Regional Alliance's proposed 2003 budget envisions spending $5.1 million overall, including a projected increase in travel expenses to about $217,000. The organization's corporate sponsors are being asked to boost their contributions to cover the increase, in view of expected declines in available money from both state and foundation sources, Stafford said.

Among the foreign excursions led by the organization last year was a six-day, four-city investment mission to the United Kingdom and Germany. The June 25-July 2 trip included a 13-member delegation headed by Murphy, Bryant and four other staff people.

The total cost for the trip was $17,397.

According to a summary, highlights of the trip included "Pittsburgh Forum" for 22 companies in Dortmund, Germany; 10 meetings with potential U.K. investors, a luncheon speech by Murphy to 17 London business leaders and a dinner for more than 200 business leaders at Christ Church University in Oxford, England.

Regional Alliance officials stressed they closely monitor expenses.

The organization's expense policy encourages use of coach or economy class on airplane flights and the use of "moderately priced" hotels or restaurants for lodging and dining. Reports are prepared prior to trips with estimates of projected costs and afterward, reimbursement depends on a review that goes through various steps, Stafford said.

Staff members are required to submit expenditures to their immediate supervisors, and then their receipts and other records of spending are subject further review by financial personnel working under chief financial officer Dan Wilson.

In addition, the Regional Alliance's operations are subject to a yearly outside audit and scrutiny by members of its board of directors. The most recent audit, dated July 31, 2002, by Frank E. Sparr & Co., a Pittsburgh certified public accounting firm, gave the Regional Alliance's financial statements and internal controls a clean bill of health.

A spokeswoman for Auditor General Robert Casey said the state had not received any complaints about the Regional Alliance's spending of state funds. In 2002, about $1.24 million -- almost one-third of its budget -- came from the state through the Department of Community and Economic Development.

Representatives of several companies that provide some of the funding for the Regional Alliance voiced support for the organization's strategy.

"We support the PRA's efforts to market the region, which necessarily requires spending time and money for some travel," said Mike Dixon, spokesman for U.S. Steel Corp. "We don't have any reason to believe they are not spending our money wisely."

Vaughn Gilbert, director of public relations for Westinghouse Electric Co. in Pittsburgh, said little time was wasted when he and other business representatives joined Allegheny County Chief Executive Jim Roddey for a Regional Alliance-sponsored trade mission to Manchester and Sheffield, England, last summer.

"It definitely was almost all business," he said of the July 30-Aug.4 trip, which cost $11,996, according to Regional Alliance records.

International business relationships are important to both the company and the region, Gilbert said, noting that Westinghouse, owned by U.K.-based British Nuclear Fuels Limited, has about one-third of its more than 9,000 employees in the Pittsburgh area.

Bryant maintains the strategy is working.

He said a Regional Alliance tally shows the number of active potential business attraction and expansion projects increased from 55 in 2001 to 68 in 2002.

Also, the Regional Alliance was lauded by Site Selection Magazine for its attraction of Siemens-Westinghouse fuel cell facility to the Waterfront in Homestead in 2001.

And in 2002, the Pittsburgh area just missed landing a new regional processing center for institutional securities planned by Morgan Stanley, a New York-based major investment banking and brokerage firm -- a facility that ultimately could have created upwards of 600 new jobs. The region came in second to Baltimore for the center, which won out, according to Morgan Stanley officials, because of better state incentives from Maryland, work force availability and closer proximity to its headquarters in New York.

Others' views are mixed about whether the organization is producing satisfactory results, particularly outside of Allegheny County.

The Regional Alliance reported it had a part in the attraction or retention of some 21 companies in the region in 2002, the same as in 2001. But the total of new and retained jobs for those projects was 3,038, down slightly from 3,099 jobs in 2001, and all but one of the projects was in Allegheny County.

For example, Art Cordwell, economic development director for Butler County, said he supports the national and international marketing role played by the alliance, although he would like to see more prospects land in outlying counties.

"Their job is external sales for the region, and that is what they should be doing," he said.

"They are working hard to generate prospects, but so far we haven't gotten any projects from the PRA," said Larry Larese, planning director for Westmoreland County. "But they are doing are the right things. There may not be a prospect that fits Pittsburgh for a year or two, but you want to plant an image about Pittsburgh in their memory bank, and hope it pays in the long run."

Jake Haulk, president of the Allegheny Institute of Public Policy, a local think tank, said it's difficult to judge the progress of the Regional Alliance in view of current economic conditions that are affecting corporate expansion decisions across the nation, including in Pennsylvania.

"The fact is that Pennsylvania is doing very poorly in attracting new companies, but the nation as a whole also is not doing all that well," Haulk said.

Louis Oliva, a commercial real estate broker with Grubb & Ellis Co., said he has noticed there are more leads coming through the organization's efforts.

"Right now, given the global and national economic conditions and the real estate market in general, it would be premature to give anybody a proper evaluation," Oliva said. "I definitely think what they are doing is setting us up for some successes down the road."

Byron Stauffer, director of economic development and planning for Indiana County, said that a Regional Alliance trip to a telemarketing trade show last year did produce a benefit for his county after a call center operation closed down an operation employing about 100 people.

He said information from Regional Alliance staff member Patty Horvatich helped officials find a new call center company, Intermedia Marketing Solutions, to occupy the vacated site in downtown Indiana.

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