Spring 2006 issue of Horizons

A P u b l i c a t i o n b y R u b i n B r o w n L L P

Economic Development MISSOURI'S ECONOMIC DEVELOPMENT CHIEF SEES SUCCESS THROUGH MARKETING. Page 5

Q&A WITH RCGA'S DICK FLEMING 13 THE URBAN OUTLOOK: KANSAS CITY, ST. LOUIS CITY AND COUNTY 7 THE LIFE CYCLE OF YOUR BUSINESS 17 AND MORE

PLUS

horizons

CONTENTS ii Welcome 1 Promotions and Hires 3 ASK RubinBrown

5 State of Missouri Outlook 7 City of St. Louis Outlook 9 St. Louis County Outlook 11 Kansas City Outlook 13 Client Spotlight - The RCGA 17 The Life Cycle of Your Business - Starting Your Business

19 Growing Your Business 21 Selling Your Business

Industry News 25 AUTOMOTIVE

27 CONTRACTORS 29 HEALTH CARE 31 HOME BUILDERS 33 LAW FIRMS 34 MANUFACTURING & DISTRIBUTION 35 MORTGAGE BANKERS

37 NOT-FOR-PROFIT 39 PUBLIC SECTOR

INFORMATION Editor: Eric Gutberlet Graphic Design: Millennium Communications Marketing Assistant: Laura Garanzini

Horizons, a publication of RubinBrown LLP, is designed to provide general information regarding the subject matters covered. Although prepared by professionals, its contents should not be construed as the rendering of advice regarding specific situations. If accounting, legal or other expert assistance is needed, consult with your professional business advisor. Please call RubinBrown with any questions. Located in St. Louis and Kansas City, Missouri, RubinBrown has become one of the largest accounting and business consulting firms in the Midwest. www.rubinbrown.com

Welcome We live during a period of expansion. The Midwest region is growing from investments made by companies, organizations and individuals who are looking ahead. RubinBrown is investing in the region as well. In November 2005, RubinBrown expanded beyond our one-office location in St. Louis to reach the other side of the state and into Overland Park, Kansas, by merging with Henderson, Warren and Eckinger, PC, PA. The merger has been and continues to be successful because our services and business philosophies complement each other extremely well. RubinBrown-Kansas City provides high-level client service, demonstrates expertise in key industries, and continues to grow its client base, which is built upon long-term business relationships. We were looking for a firm with a similar corporate culture, and we found the ideal partner. Todd Pleimann is the office managing partner in Kansas City and is assisting in introducing RubinBrown to the community with the help of our Kansas City partners: Bill Eckinger, Glenn Henderson, Mary Ramm and Ed Warren. With the KC team's expertise, personal integrity and established commitment to delivering unmatched client service, it has been easy to project the RubinBrown experience into that market. In this issue, we celebrate the successes in our region and focus on the opportunities for continued business growth. We also want to stimulate your thoughts on how to start a business, what you need to consider in growing your organization, and finally what you need to know when selling your company. I invite you to read this publication and offer us your feedback. Our goal is always to satisfy you, our clients and friends. We hope to hear from you - john.herber@rubinbrown.com. Pleasant reading.

St. Louis office RubinBrown

One North Brentwood St. Louis, MO 63105

Kansas City office RubinBrown 9300 West 110 th St. Ste. 600 Overland Park, KS 66210

ii • spring 2006 issue

RubinBrown New Hires and Introductions

Introducing Our Kansas City Partners

New Hires

Bill Eckinger, CPA, Audit Partner. Bill’s areas of concentration include assurance services, business consulting and litigation support, focusing these specialties in the construction and manufacturing industries. Other industries served include not-for- profit, automotive and benefit plans. He is a member of the American Institute of Certified Public

Eileen T. Bradley, CPA, joined RubinBrown in February as a manager in its Tax Consulting & Compliance Group. Based in the firm's Kansas City office, she brings to RubinBrown more than 12 years of experience in accounting and tax man- agement. In her new position, Eileen is responsible for providing consultation on federal, state and local tax issues. Eileen holds a bachelor's degree in accounting from Oakland University in Rochester, Michigan. Michelle M. McCormick joined ABACUS Executive Recruiting in November as a recruiting manager. Michelle brings more than 10 years of experience in account management, sales and executive recruitment to ABACUS. In her new position, she is responsible for facilitating executive and professional career placements of qualified candidates in the St. Louis metropolitan area. Michelle holds a bachelor's degree from Eastern Michigan University.

Accountants, Missouri Society of Certified Public Accountants, Overland Park Chamber of Commerce, Heartland Business Capital, the Builders’ Association and Association of General Contractors. Bill is a graduate of the University of Missouri, Columbia with a bachelor’s degree in accounting.

Glenn Henderson, CPA, Tax Partner. Glenn has been specializing in tax planning and as an invest- ment advisor for individuals and closely held businesses for over 30 years. He is licensed in all areas of general securities and life insurance. He is a member of the American Institute of Certified Public Accountants, Kansas State Society of

Certified Public Accountants, Associated Builders and Contractors, Inc., the Builders Association of Kansas City and the Financial Planning Association. Glenn graduated from Kansas State University with a bachelor’s degree in accounting.

Jennifer A. Plaisted, CPA, joined RubinBrown in December as a manager in its Wealth Management Services Group. She brings to RubinBrown more than eight years of experi- ence in accounting and business management. Jennifer is affiliated with the American Institute of Certified Public Accountants and the Missouri

Mary Ramm, CPA, Tax Partner. Mary provides tax planning for a wide variety of clients, including auto- mobile dealerships and health care organizations. Licensed to practice in both Kansas and Missouri, her memberships include the American Institute of Certified Public Accountants, Kansas Society of Certified Public Accountants, Missouri Society of

Society of Certified Public Accountants. She holds a bachelor's degree in accounting and business from Illinois State University.

Gregory R. Ranalletta, CPA, joined RubinBrown in December as a manager in its Wealth Management Services Group. Greg brings to RubinBrown more than 26 years of experience, specializing in individual income tax, estate and trust taxation and planning, and related issues. He holds a law degree from Marquette University Law School in Milwaukee and a bachelor's degree in accountan- cy from the University of Illinois-Urbana.

Certified Public Accountants, and the Central Exchange. She also holds the NASD Series 6 and Series 63 licenses. Mary graduated from the University of Missouri, Kansas City with a bachelor’s degree in accounting.

Ed Warren, CPA, Tax Partner. As a tax specialist and investment advisor, Ed focuses his practice in taxation (individual and business), retirement plan- ning and investment services. Licensed to practice in both Missouri and Kansas, he is a member of the American Institute of Certified Public Accountants, Kansas Society of Certified Public Accountants,

Missouri Society of Certified PublicAccountants, the Eastern Kansas Estate Planning Council (past president), the Financial Planning Association and the Kansas City Businessmen's Club. Ed holds the NASD Series 6 & 7 licenses as well as his insurance license in life and variable contracts. He graduated from the University of Missouri, Columbia with a bachelor’s degree in accounting.

1 • spring 2006 issue

Upcoming Events

• RubinBrown Benchmark Series Kansas City Tuesday, May 16, 2006 • New Markets Tax Credit Conference Kansas City Wednesday, May 17, 2006 • Financial Executive Series St. Louis Thursday, June 8, 2006 • Small Business Cornerstone Series St. Louis Wednesday, June 21, 2006

2 • spring 2006 issue

INDUSTRY PUBLIC SECTOR Deposit and Investment Risks ASK Rubi Brown

tage that will translate into greater credits and incentives in the long run. Before you get to the negotiating table, you need to research the avail- able incentives and their potential magnitude. Unless your business involves obtaining and negotiating tax credits and incentives for others, it would be wise to contact those who regularly perform these services. This could be an accountant, tax advisor or attorney with whom you have an existing relationship or a professional whose practice is limited to incentive consulting. Starting with one of these professionals will allow you to maintain a certain level of anonymity so that you have future leverage in negotiations with government agencies. Any of these professionals will have direct experience with obtaining credits and incentives for other clients or will be able to make the contacts to facili- tate the research required before you contact those local or state gov- ernment representatives. Regardless of which professional is used, engaging them early in the process will result in a greater level of ben- efits. In obtaining tax credits and incentives, the winning negotiator doesn't reveal the strategy to the local or state officials until it is absolutely necessary. As much as a taxpayer may want to boast about the prosperity of his business and future plans, to do so greatly hinders any advantage in optimizing the tax credits and incentives available. Once an expansion or relocation plan is announced, the governmental authority knows exactly the parameters in which it must operate. Recently, a large corporate entity that needed additional office space revealed in a press release the actual competing communities, which were located in Michigan and Missouri. By doing some simple research, Missouri was able to determine the maximum benefit the corporation would receive in Michigan, then pared back its incentive offering to become marginally better than Michigan. The full disclosure by the cor- poration effectively cost it additional incentives. Use a Phased Approach In response to some taxpayers not living up to their commitments regarding employment levels or length of commitment to the communi- ty, most incentive packages now contain a “claw-back” provision. Those previously provided incentives received over a period of years must be returned to the government - usually in one lump sum - when the com- mitments are not achieved. Most of the current generation of credits or incentives are frequently tied to a level of newly created or retained jobs. It is important that the taxpayer be conservative in setting the bar for expectations. The penalty for failure to attain the promised employment goal is often severe. Businesses often find that expansion creates additional expansion opportunities. In negotiating the original package, it is best not to create an atmosphere of mistrust, as you may want to seek additional credits and incentives before the term of the initial set expires. Most govern- mental agencies are willing to use a series of phases to achieve the final project. Unless there is a change in the enabling legislation that authorizes the credits and incentives, the second or third set of incent-

Negotiating for State and Local Tax Incentives Requires a Process and Strategy

Harlan J. Kwiatek, CPA, JD, LLM Robert D. Neu, CPA Eugene C. Hendrickson, CPA

State and local governments have devised numerous tax and non-tax incentive programs to attract business enter- prises, fueling economic growth of a state or a particular region within a state. Some of these incentives are widely known, while others are designed to benefit only a limited number of taxpayers and slip through the legislative process with little or no fanfare. Representing the former is Michigan's Act 198, a 50 percent property tax exemption enacted to mitigate the property tax expense related to new capital expenditures taxpayers were experiencing when they expanded their Michigan manufacturing facili- ties. An example of the latter is Missouri's reduction in its assessment ratio for tooling and equipment acquired to expand or enhance a product line located within an enter- prise zone. This change was designed to aid Ford Motor Company's two Missouri assembly plants located within enterprise zones, well away from the usual urban setting for enterprise zones. Soon, other taxpayers realized the application of this tweak to the property tax laws and also benefited from the 25 percent reduction in tax. For many years, the battle for business pitted one state against another state. Today's state against state battle for business investment continues, but now this battle often pits one local government against another local govern- ment. The key to attracting incentives lies in taking advan- tage of these battles to maximize the offer of business incentives. Business development executives must have a process and strategy for pursuing incentive packages available to businesses that are expanding or relocating. Know the Players The more knowledge a taxpayer garners regarding the tax credits and incentives game and its players (both visible and invisible), the better a taxpayer can gain an advan-

3 • spring 2006 issue

ives should be available and are often as lucrative as the initial offering. It is better to build slowly rather than attempt to accommodate an expansion that proves to be excessive to your actual needs. Above all, once an incentive package is received, make sure that someone takes responsibility to comply with any and all periodic (usually annual) reporting requirements to maintain the package. Quite often incentive packages are lost because the taxpayer fails to do the simple mundane task of reporting. This task should be calendared the same as any tax compli- ance. Maintain Flexibility Many of the credit and incentive programs have specialized requirements that were incorporated to narrow the pool of eli- gible businesses. It pays to read the statute and any regula- tions. For example, Missouri offers a business incentive tied to new employee tax withholdings. In the legislation, certain busi- ness operations were excluded from the eligible list. In review- ing the legislation and discussing a taxpayer's situation on an anonymous basis, the taxpayer's consultant was able to qual- ify the administrative segment of the otherwise ineligible busi- ness activity. It is important to use all available avenues to seek credits and incentives. While most taxpayers focus on state level agen- cies, they miss the capabilities of local representatives or politi- cians to facilitate access to local credits and incentives. Exposure Once the expansion or relocation project is underway, there will be publicity. If the taxpayer has followed the rules and maintained the high road, the publicity will be positive. When the media finds that the taxpayer has been either less than forthcoming or overly threatening during the negotiations, the publicity will be negative. Remember that politicians, other governmental officials and generally those segments of the public affected have long memories. If your story is positive when it makes the front page, the process employed was successful. Available Programs The list of tax credits and incentives varies by jurisdiction. Within each jurisdiction, there will be areas (zones) that quali- fy for more credits than other areas within the same jurisdic- tion. Most programs fall into the same categories:

• Capital funding arrangements for investment in real or personal property, usually in the form of Industrial Revenue Bonds (IRB) • Training or retraining of the work force, usually in conjunction with the efforts of a community college • Increase or retention of employees, which can lead to credits against income tax or in the form of rebates • Grants to fund specific governmentally desired activities, such as purchasing recycling equipment • Offsets of tax liabilities for capital investment or work force, usually applied to income or sales/use taxes • Rehabilitation of Blighted Areas or Environmental Remediation, which include redevelopment efforts or Brownfield credits • Property Tax Abatements/Exemptions for expansion of business • Sales/Use Tax Exemptions/Credits for expansion of business • Infrastructure funding mechanisms such as Tax Increment Financing (TIF) • Utility rate concessions including water, natural gas or electri- cal energy Depending upon the jurisdiction, business activity and magni- tude of the expansion, there exist various forms and combina- tions of the above. If you feel that your project may be too small, have your representative investigate alternative pro- grams tailored after state mandated programs that may be sponsored by large local government agencies for smaller investments. Review the Offer Once an incentive package is offered by a jurisdiction, it is essential that it be thoroughly reviewed to determine fluff from substance. What appears to be innocent language may be the clause that causes the taxpayer to regret the deal some years later. Did the jurisdiction really offer any incentives beyond those that are a right of any business located in the jurisdic- tion? For example, some states will point out that a taxpayer's inventory will not be subject to property taxation when in fact that jurisdiction's property tax law exempts all inventories from taxation. Another pitfall can be the jurisdiction's incomplete stating of exemptions. For instance, the jurisdiction may state that all expansion property is not subject to the jurisdiction's property tax levy but fail to mention that this exemption does not include the taxes levied by the local public school. A review of the credit and incentive packages by your trusted business advisor should account for most, if not all, of the con- tingencies that will arise in your business. If the review is done from an objective viewpoint and issues with the package of incentives are discussed with the appropriate governmental agencies, a complete win-win package will be the result.

4 • spring 2006 issue

FEATURE ARTICLE

State of Missouri Outlook

Missouri's Economic Development Director Pins Growth to Aggressive Marketing of State

Missouri's success at attracting out-of-state firms will rely more heavily on marketing the state in targeted national markets where major corporations and firms are short on growing room, according to Gregory Steinhoff, direc- tor of the Missouri Department of Economic Development (DED). Steinhoff

and his team in Jefferson City are assembling a package of programs designed to boost Missouri's profile out of state. Notwithstanding this push to attract out-of- state businesses, the state is committed to assist Missouri business owners with in-state growth opportunities.

Gregory Steinhoff

During a recent interview with Horizons, Steinhoff said his team is work- ing on tackling several economic business challenges for the state, but he believes Missouri's success will come from following a few key strategies. “In order for Missouri businesses to succeed, we need to be effective in three areas,” Steinhoff said. “We will focus on promoting entrepreneurism by assisting everyone from small businesses to major industry; putting more DED representatives in the field to communicate with business own- ers; and creating new funding mechanisms to finance professional busi- ness attraction and recruitment efforts. Our goal is to do a better job of selling Missouri for what it is - a great place to conduct business, find an educated labor force, buy affordable energy, and have an enjoyable quality of life with great educational opportunities and an attractive cost of living.”

Steinhoff explained how the first goal - building and supporting entrepreneurism - will be supported by achieving the DED's other two primary objectives. “First we need to help the businesses we have here in Missouri,” he said. “More than 80 percent of the state's job growth comes from businesses that choose to expand in the state. We are increasing the number of DED representatives in the field in order to bring the department closer to the communities we serve. We want to know everything Missouri business owners need to succeed. We want to educate them about various tax incentives and job growth initiatives that could impact their bottom line. We want them to know about special low interest rates and small business loan programs because these are the tools that will help them grow their businesses and create more jobs.” On a macro scale, Steinhoff said, he would like the DED representatives to compare information within Missouri by region. For example, the Kawasaki plant in Maryville in the northwest corner of the state is expanding by 300 jobs, but the labor pool in that region isn't big enough to support the demand. Meanwhile, Steinhoff added, there are not enough good paying jobs in Missouri's Bootheel region. “We need to take the Department of Economic Development to all of the state's business communi- ties, like Moberly, Kirksville and Macon as well as St. Louis, Kansas City and Springfield,” Steinhoff said. These virtual “house calls on business owners” can help bridge gaps by using state resources on a macro scale, making specific regions even more attractive to out-of-state businesses. Selling the “attraction factor” is an effort that needs to be stepped up, Steinhoff said, and it's the focus of the DED's third strategy for bringing more business to Missouri. “There are 500 people employed in various state level economic development positions throughout Missouri, but we do not currently have individuals promoting the state to site selection decision makers in the major metropolitan areas,” Steinhoff said. “Currently, we are not in a position to meet regularly with site location managers and

5 • spring 2006 issue

corporate decision makers who want to expand growing firms in new locations. We have a highly compelling story to tell them - our quality of life and our cultural, educational, sports and entertainment attractions - but the challenge becomes how do we get that story in front of them on a consistent basis. Let's look at what the South did when it lost textile jobs to overseas competition and the tobacco trade to changing times. These southern states had to re- invent their economies in a very short amount of time. They had to engage their private business sectors to raise funds so they could market their states to private industry.” The states' economic development teams privatized, Steinhoff said, due to restrictions placed on how public funds are used, particularly for entertainment purposes and out-of- state travel. In Missouri, Steinhoff said the DED is looking to breathe new life into the Hawthorne Foundation. “It was set up by then-Governor Kit Bond in 1981 to pay for gifts for visiting dignitaries. We'd like to ramp up funding to $1 million a year so we can hire four to six people to market Missouri in other states. We want to create a sales culture among these state marketers that ties their pay to performance.” Steinhoff sees the out-of-state Missouri sales force working with regional DED contacts to find the right location for an incoming company based on the firm's needs. The Hawthorn Foundation board is going to receive a for- mal proposal this spring. The plan is being developed with a budget and operating policies by economic development advisers from across the state. The goal is to launch the program at the beginning of the state's 2007 fiscal year in

“Our business climate is ranked 10th in the country based on measurable factors,” Steinhoff said, “but recently CEO magazine rated it 40th. When I called the magazine to ask them what metrics were used to make that low assessment, I learned the poll was not based on objective criteria but subjective reactions to Missouri sent to them via e-mail messages. The reality is top 10, but the perception is 40th. A vigorous, privately funded marketing effort can change that perception,” Steinhoff added, “and the work already has begun with both the Hawthorne Foundation and the Promote Missouri Fund.“ Steinhoff recommends business owners and their advisers review other state economic incentives that can impact a firm’s bottom line, such as Missouri historic tax credits, Missouri Enterprise Zone status and state Brownfield tax initiatives. To find out about qualifying for these programs and other economic development tools, contact the Missouri Division of Economic Development (573-751-4962) and ask for Business and Community Services.

July. In addition to the Hawthorne Foundation fund, the DED worked with Governor Blunt and legislators to help create and build the “Promote Missouri Fund.” The general assembly approved a 2 percent fee to be applied to several of the department's tax credit programs in order to raise money to help market Missouri as a good place to do business. The funds

are starting to accrue. “Currently, the state budget has only $181,000 earmarked for marketing Missouri to attract new businesses,” Steinhoff said. “This fund will allow us to have a greater presence in cities where decision-makers of major companies live and work.” Steinhoff said that Kansas already has a full-time marketer in Atlanta.

6 • spring 2006 issue

FEATURE ARTICLE

St. Louis City Outlook

St. Louis Puts Economic Development Tools to Work - and It Shows

Barbara Geisman

7 • spring 2006 issue

Mayor Francis Slay believes that St. Louis can be a great city. “Great” means making St. Louis a city where people affirma- tively choose to live, work, play and do business. This goal is the foundation for all of the city's economic development initia- tives. The city has faced many challenges. Now, with hard work, teamwork, a “can do” attitude and strategies for address- ing the wide variety of city issues all at once, we are firmly on the road to becoming a great city. I am proud to be part of the mayor's team. Transformation isn't happening overnight. But every day, more people wake up to the treasures St. Louis City has to offer. Attitudes are changing - in the city and all around us. Changing attitudes are key to attracting new businesses and residents to city real estate - and they are key to keeping our existing busi- nesses in place and growing. Momentum is growing because we've reached out - to the region, to the business community, to our elected officials and to our citizens - and invited every- one to become a part of the teams that are getting things done. More and more people, from residents and developers to busi- ness owners and bankers, now believe that the city has a bright future and are acting on that belief. For the first time in five decades, our population is growing. Corporate executives, “boomers” and Generation “X-ers” and “Y-ers” are discovering there's a lot to like about city living – in historic homes, new homes and new lofts downtown. We are slowly but surely losing our historic inferiority complex as more and more people realize we've got a lot to be proud of here in St. Louis. And it's helped that outsiders recognize our progress. When we hosted the International Economic Development Corporation convention and the national Brownfield conference, 7,000 attendees were amazed at our progress and at what we have to offer. The New York Times and the Boston Globe described the City Museum as proof that St. Louis had been hiding an unsuspected streak of mirth and mystery. We received a Partners for Livable Communities award in recognition of what journalist Neal Peirce recently described as one of the most remarkable center city transformations in the nation. Over the next five years, we will focus on key goals directly related to economic development: adding 10,000 new jobs, cutting unemployment in half, and doubling high school grad- uation rates.

miles. Professional service firms and corporate headquarters are renewing their leases. Other businesses are actively look- ing for city locations - some have already found them, others are eager to make our city home. Manufacturers are expand- ing here because they appreciate our centrality, workforce access, and things to do. Retailers are locating and expanding within the city because they know we have a great untapped demand for their services. To add jobs, we must attract new businesses to the region. The Missouri Department of Economic Development's new statewide business attraction organization and Missouri's Quality Jobs program will be of great help in these efforts. We also will grow new businesses from within, capitalizing on our wealth of brainpower. CORTEX, CET and our technology incu- bator are important tools in these efforts. We will continue our push for retention and expansion of existing businesses. We will continue to work with minorities, women and “New Americans” to help their businesses grow and break down the barriers to growth. We want businesses to locate here because it's good business - and we want them to make money in our city. For now, it is sometimes necessary to use incentives like tax abatement, TIF and New Markets Tax Credits to get residents and busi- nesses to give the city a try. We need to retain these incentives to ensure that we can attract new investment to our distressed areas, but we are reducing incentives neighborhood by neigh- borhood as the market for city real estate grows. Cutting unemployment in half and doubling high school gradu- ation rates go hand in hand. School choices are improving as educators make tough decisions that make more education dollars directly available for children and their teachers. Our public schools now have a great new superintendent with ideas, experience, and the willingness and determination to put new solutions in place. Dr. Creg Williams is focused on making sure our children graduate with skills for jobs with a future. He also wants to ensure that our children know that a wide variety of career opportunities exist and that they can claim these opportunities if they graduate with the necessary skills. We look forward to working with RubinBrown and its clients as we move closer and closer to our goal of a great city of St. Louis.

Barbara Geisman is executive director of development for the City of St. Louis.

Right now, we're holding steady at roughly 220,000 jobs - more than 8 percent of Missouri's jobs - in our tiny 61 square

8 • spring 2006 issue

FEATURE ARTICLE

St. Louis County Outlook

St. Louis County Economic Council Reports Track Record of Recent Success for Year

Denny Coleman Last year was a tremendously successful one for economic development in St. Louis County - the best year since 2000 for growth in our communities. Our 2005 accomplish- ments laid the groundwork for much of our 2006 focus. In November, we broke ground for the Express Scripts headquarters at University of Missouri-St. Louis, retaining 1,100 jobs. (See sidebar story on next page.) Express Scripts is the first company in the United States to establish its headquarters on a university campus, and both organizations expect tremendous benefits from the synergy.

The benefits of the NorthPark development also will be out- standing for the county and the local municipalities of Berkeley, Kinloch and Ferguson, creating 12,000 jobs and generating $387 million in tax revenue over the life of the project. A total economic impact of $7 billion for St. Louis County will result from the NorthPark effort. West St. Louis County also experienced a key groundbreak- ing event in November when Pfizer selected our county as the location for its $200 million expansion - a state-of-the-art research facility. Our success with this project will result in the retention of 1,000 high-paying life sciences jobs, with room for future growth and employment. Pfizer selected us as the only location where it will expand in the next decade worldwide. In south St. Louis County, Pinnacle's River City broke ground on a project that will remediate long-deserted property along the Mississippi River. The entertainment, retail and gaming

9 • spring 2006 issue

facility will create 2,000 permanent jobs, 1,000 construction jobs, $14 million in annual tax revenue for the county and $6 million in annual tax revenue for local schools and other taxing jurisdictions. We recently reached an unprecedented agreement with the U.S. Air Force and the U.S. General Services Administration for transfer of the deserted site of the National Imagery and Mapping Agency (NIMA) in Lemay, enabling envi- ronmental remediation of that site and the ability for Pinnacle to construct the road required by the Missouri Gaming Commission. Another major victory was the $1 billion investment Chrysler will make at its Fenton location. Chrysler will create a top-qual- ity automotive facility in southwest St. Louis County - one that could have been located anywhere, but Chrysler chose us. In addition, we've kicked off the new Regional Automotive Partnership to retain and grow the automotive industry across the St. Louis region. When it comes to creating or preserving jobs – like it did when dealing with the possible move of a Fortune 500 company from St. Louis County – state and regional officials are working as one team to create economic incentive pack- ages that keep Missouri firms in the state. That teamwork was exemplified in the concerted effort to keep Express Scripts in the St. Louis region. St. Louis County Executive Charlie A. Dooley joined forces with Governor Matt Blunt and the Missouri Legislature to craft the Missouri Quality Jobs Program. The bill was designed to ensure that when area firms are considering a move to another region or state, those firms will receive tax incentives comparable to those offered to firms being wooed into Missouri. The joint effort began two years ago when Express Scripts, then located in Maryland Heights in St. Louis County, began weighing offers from other states and regions for a new headquarters location. The stakes were high for the firm that manages pharmacy benefit plans: a new 320,000-square-foot headquar- ters building was needed to house 1,100 Express Scripts employees. The Missouri Quality Jobs bill meant that eligible companies could retain 50 percent of their state withholding taxes for five years to invest in facilities and business. This plan enabled Missouri firms to grow and create new jobs for the state - and St. Louis County. Express Scripts qualified for the incentive plan because its employees are paid more than the county average wage, which is approximately $42,000 per year. To date, more than two dozen firms across the state have used the incentive to expand or update facilities.

These successes are built on our retention/attraction efforts, our business-friendly culture, and our strong economic base. That base includes the U.S. Census Bureau naming St. Louis County as one of the top 10 suburban counties in the nation in employment and payroll, the number one county in the state for business starts, and the regional leader in private, interna- tional, public, life sciences and high-tech companies. These are just the major highlights of our economic develop- ment efforts and successes. Keeping our community strong and growing always will be top priorities of the St. Louis County Economic Council, and you can expect to hear more from us as we move forward in 2006.

Denny Coleman

is

president

and

chief

executive

officer of the St. Louis County Economic Council.

County, State Officials Work Together to Create Economic Retention Package for Express Scripts

The county also put together its own package of incentives for Express Scripts, including a 50 percent tax break on real and personal property, 100 percent tax relief on construction materials, and a streamlined construction permit process designed to keep work on the headquarters building on schedule.

Ground was broken in late 2005 for the firm's new location on the campus of University of Missouri-St. Louis. Occupancy is expected next year.

For Dooley, the economic incentive package developed by state and county leaders was needed to retain Express Scripts, “a crown jewel among St. Louis County's Fortune 500 companies.” Dooley pointed to a recent U.S. Census Bureau report naming St. Louis County as fifth in the nation in number of jobs and ninth in the nation in total annual payroll, among counties located near major cities. “We're extremely proud that a company of Express Scripts' stature has decid- ed to remain and grow in St. Louis County, confirming our position as a lead- ing suburban County in the United States,” Dooley said. “You don't get to be a leader, or stay a leader, without a lot of effort.”

10 • spring 2006 issue

FEATURE ARTICLE

Kansas City Outlook

The reality of economic development is that we are engaged in a daily process of elimination. Corporate decision makers are regularly searching for reasons to shorten their list of options when considering places to expand or relocate their business. A two-state region, like the Kansas City area, with 18 different counties and more than 50 major communities, can appear to outsiders an insurmountable obstacle to the attraction of major corporate investment and jobs. In Kansas City, however, we've turned this challenge into incredible opportunity. By creating a stronger regional partnership across state, county and city lines through the development of the OneKC branding campaign, the Kansas City region has improved its ability to compete - resulting in the attraction of more than 4,200 new jobs, $184 million in new capital investment and $166 million in added payroll since 2004. This success, paired with the unprecedented $7 billion development boom taking place in the region, presents Kansas City with a once-in-a-generation opportunity. As we look to the future, it's critical that we seize our great- est opportunities for continued economic growth. The national media have been relentless in their reports of our nation's inability to compete in the global marketplace. By elevating and supporting industries in which we already excel, as well as preparing our future workforce to better compete, Kansas City has already begun to lay the groundwork for a prosperous and exciting future.

Economic Development in the Kansas City Region

Robert J. Marcusse President and CEO Kansas City Area Development Council

11 • spring 2006 issue

The United States is the recognized global leader in animal health. This is an industry, and a highly talented and educat- ed workforce, that we must protect. Already in Kansas City, 40 percent of total sales and 26 percent of worldwide sales within the $14.5 billion Animal Health industry are generated from companies that have a presence in the region. This critical mass includes corporate, education and non-profit leadership that provide an unprecedented animal health network comparable only to Silicon Valley and Research Triangle Park. Beyond animal health, in the broader life sciences arena Kansas City's model of collaboration among 10 major region- al scientific research institutions has been recognized nationally and has more than doubled the amount of private and federal research funding awarded to the region since 1999. Kansas City also is home to the Stowers Institute for Medical Research, the second largest endowed research institution in the U.S. at $2 billion. Our region's central location provides us with critical corridor connections placing Kansas City at the center of global sup- ply chains. This spring, KC will open the first Mexican Customs clearance facility for U.S. exports. The facility will allow U.S. exports destined for Mexico to receive full clear- ance by Mexican Customs in Kansas City, avoiding the delays and congestion at the border. And due to our relation- ship with Kansas City Southern Railroad, KC is the final des- tination point for all inbound freight originating from the deep water port of Lazaro Cardenas, Mexico. This route provides an immediate alternative for Asian freight entering the U.S., bypassing congestion at traditional ports. What does all this mean? Kansas City, America's Inland Port, saves companies time, money and resources by providing immediate access to one of the most efficient, reliable and strongest international trade routes in the U.S. This is an advantage no other community in the U.S. can claim and provides one of the most significant opportunities our region has for future growth. Manufacturing, distribution and warehouse facilities will be especially interested in the improvements Kansas City is making in its trade infrastructure. Over the next two years, 72 percent of KC-area manufacturers expect to expand their operations, and 68 percent expect to hire new workers, due to expansion, retirements and/or turnover. These numbers represent a tremendous opportunity for the Kansas City region.

however, unless we invest in our regional workforce. Kansas and Missouri already lead the Midwest for college graduates and our region has a higher percentage of college graduates than the U.S. average. Most recently, an unprecedented OneKC effort resulted in a $15 million grant from the U.S. Department of Labor. This grant, called OneKC WIRED - Workforce Innovation in Regional Economic Development - will train area residents for careers in high-growth industries such as health care, biotechnology and advanced manufacturing. OneKC WIRED will produce a more educated and qualified workforce for growing industries that heavily rely on math and science education. Additionally, it gives Kansas City yet another important advantage in the race to attract new investments and jobs to our region. From the OneKC WIRED grant to thousands of new jobs and hundreds of millions of dollars of new investments, OneKC has helped create a new Kansas City. This NewKC is a place with greater regional unity, more new jobs, respected diver- sity and a world-class lifestyle. OneKC represents the NewKC: unlimited opportunity for all of us who call this place - 18 counties, countless communities and two states - home.

The Kansas City Area Development Council (KCADC) was one of the first regional business recruitment organizations in the United States with near- ly 30 years of experience in attracting investment and jobs to the Kansas City area. With nearly 2.2 million people within 18 counties and more than 50 commu- nities, sharing a unified vision of OneKC, we've developed with our partners a highly focused marketing initiative designed to generate new wealth and jobs for our area. Since our inception in 1976, we have directly assisted more than 500 com- panies and organizations in selecting the Kansas City area as a site for new and expanding facilities. These firms have directly and indirectly affected more than 54,800 jobs and have utilized approximately 22.3 million square feet of space.

None of these industries will be successful in Kansas City,

12 • spring 2006 issue

CLIENT SPOTLIGHT

RCGA Launches Bold

With each issue, Horizons inter- views a client to discuss his/her organization and to share his/her successes. For this issue, which is focused on economic development, we thought it only appropriate to invite our client, the St. Louis Regional Chamber and Growth Association, to share with us what's new at the RCGA.

HORIZONS had an opportunity to sit down with Richard C.D. Fleming, President and Chief Executive Officer of the St. Louis Regional Chamber and Growth Association. The discussion centered on St. Louis, the RCGA's new brand platform and the area's invigorating new economic development campaign.

Q :

What role did research play in developing the new brand platform?

A : It all started with some broad research presented by the Council on Competitiveness in conjunction with Washington University. There was a February 2005 summit where several competitors were represented, including Denver and Austin, Texas, and it marked the launch of our own brand research. We recruited The Wilson Agency from Washington, D.C., to conduct more than 300 30- to 45-minute interviews

13 • spring 2006 issue

New Brand

with C-level executives from national site selection firms, real estate firms, venture capitalists and headhunters. After an extensive selection process in which 30 agencies participat- ed, we selected Fleishman-Hillard to perform the internal research and assist with brand development. Among our own stakeholders, we learned that artic- ulating the brand internally is as important as articulating it externally. Non-natives seem to be better, more positive ambassadors for our region than are natives. CEOs who have worked in Chicago, New York and other large metros had a favorable view of quality of life in St. Louis. In terms of overall business image, relatively few negative images are out there. We also learned that decision makers want to receive regular, substantive online updates followed by in-depth printed materials. So, an engaging and comprehen- sive Web site became a priority. We're really starting with a clean slate. Fifty percent of the 300+ external interviewees have neither a positive nor negative image, while 5 percent think of us as a rustbelt city. More than 40 percent of those polled had a positive impres- sion and could single out particular attributes with lots of specifics. In fact, Wilson said it had never seen so many specifics mentioned. In our external interviews, quality of life ranked highest among the most important reasons to invest or locate here and was second only to our ability to retain and attract a quality workforce. In our internal interviews, quality of life scored at the top of our credibility chart, but again, the ability to maintain a quality workforce scored high- est for importance. Location was a positive across both groups. Q : A : What were the main 'take-aways' from the interviews? Q : A : What else did you learn from your research? So, how did the brand evolve from what you learned? Clearly, three issues surfaced immediately - quality of life, quality workforce and, finally, location/economic diversity. These issues became the three pillars for our new brand. I think an executive from Atlanta said it best: “Some cities may have a few more cultural assets. Some cities may have a comparable ease-of-living. No other city offers the combination of both.” There's great diversity in our lifestyle - something for everyone. St. Louis is affordable, solid and safe. We have access to big-city amenities without the big- city hassle. We have a quality of life comparable to major cities and actually superior to our peer markets. Q : A : Q . A . Let's talk about St. Louis' quality of life.

Q . Workforce seems to be a constant theme. What did you hear? St. Louis offers broad-based skills from which to draw, we have strong work ethics and strong values like hon- esty and integrity. Quality workforce is not perceived as our strongest attribute, but we lack credit for what we do have. A . How is our location and economic diversity another strength? St. Louis offers an extremely diverse business base; we're not dependent on one or two industries. In economic development, we're also able to capitalize on options and programs offered by two states. That's definitely a strength. Our central location also is viewed as a strong positive. We're still considered a hub, 2-4 hours from almost anywhere. Our location is not a primary differentiator but provides a distinct advantage. A . So how exactly did all this research evolve into the RCGA's new brand platform? We started by grouping together some issues, like quality of life, workforce and location. You can have it all here - access to workforce and different lifestyles - big-city ameni- ties without the hassles, a sense of being connected, and a community that's “centered” in both location and character. In other words, St. Louis provides the ideal balance between living and working. We tested different brand platforms with several groups and “Perfectly Centered. Remarkably Connected.” was the overwhelming choice. One of the busi- ness leaders surveyed said it very well: “Perfectly centered says the location is perfect to get to all markets. Remarkably connected says it has everything from technology to transportation to workforce…it has whatever you need.” Personally, I really like the exclamation point because it emphasizes the fact that we do have a competitive advantage. It drives the message home. We found that the exclamation points also work well with the logos for many of our economic partners, like St. Charles, St. Clair, Franklin and Madison counties. A . Q . A . Any value-added benefits to the new logo? Q . Q . A . Are there any additional issues? Definitely. It's the matter of being business friendly. This is an emerging opportunity for St. Louis and means dif- ferent things to different people. We need to define our story and promote a positive regulatory and legislative environment. Q .

14 • spring 2006 issue

CLIENT SPOTLIGHT

RCGA Launches Bold

Q . A .

How did you roll out the new brand?

hopefully, will see great results. Our goal is to drive more prospects that choose to relocate to St. Louis or grow their current businesses here. We are taking a very entrepreneur- ial approach. What other things does St. Louis have going for it? We continue to be a strong headquarters city, among the Top 10 in the country with a total of 19 Fortune 1000 headquarters. We also are seeing net additional jobs in man- ufacturing and, in the last three years, we've seen a growth in advance manufacturing jobs. Even with the challenges we have with the closing of the Ford plant, Daimler-Chrysler is investing more than $1 billion in its two St. Louis locations. As suppliers from around the world zero in on St. Louis to locate here and to serve Chrysler, that will advance job growth. Also, by virtue of our location and infrastructure, we have a gold mine in the transportation and distribution sector. Southwestern Illinois has several very attractive sites. We already have global headquarters and strong growth in the life sciences, plant sciences and medical fields. Monsanto, Pfizer and Glaxo-Smith Kline continue to be world leaders. And Pfizer, which has announced $4 billion in worldwide cuts between now and 2008, just invested $200 million for an expansion in Chesterfield. We also see wonderful opportuni- ties in technology and IT. We have two life science incuba- tors, the Center for Emerging Technology and the Nidus Center, and an IT incubator downtown. With all of these St. Louis headquarters, IT support is essential. I'm not sure it was even called a brand, but it func- tioned as one. Sold on St. Louis was created back in 1988- 89. There have been other economic development cam- paigns, running from 1995 to 2000 and then 2000 to 2004. As we interviewed our investors, they demonstrated a strong desire to take a fresh look at our image in the marketplace and to promote the substantial amount of improvement that has taken place in St. Louis. Q . A . When did St. Louis have its last branding effort? Q . A .

We initially rolled out a set of eight local ads featuring business leaders from diverse industries, like Andy Taylor and Brenda Newberry, telling their stories about the quality of life. We also loaded 500 pages of new data into our Web site. Then, we developed the first of a suite of new printed mate- rials, which we can combine right into our proposals. There's also a more detailed insert that readers can take out and real- ly get in-depth information. Already, we've tripled traffic to our Web site. And, we can track a recent headquarters selection by Isle of Capri direct- ly to our Web site. The site selector told us that he did his initial search online and narrowed it to three sites, based strictly on information he found on the Web. That represents a $1 billion publicly traded company and 150 new jobs for St. Louis. We are launching a widening array of implementa- tion activities, both nationally and locally. We also plan to pro- mote our brand to executives through a national media rela- tions program taking place from March - December 2006. We are targeting 300 specific national reporters and have devel- oped a set of a dozen story lines. This media relations effort parallels our national advertising efforts. Our $4 million annual campaign encompasses both print, radio and electronic media and has a heavy emphasis on vertical markets and industry sectors, including life sciences, advanced manufacturing, IT, financial services and transporta- tion and distribution. We also are working with local media, enlisting them as partners to communicate our brand locally. Q . A . What has been the impact of the new brand? Q . A . What's ahead for the rest of 2006? Q . A . What type of paid advertising are you planning?

Q . A .

What is your ultimate goal?

This is the most research-based marketing effort that I have seen. It grows out of some real rigor from which we,

15 • spring 2006 issue