NorthPark Partners is showcasing its corporate campus (under construction) this morning.
The unique development partnership – including two major local developers, St. Louis County and several North County municipalities – hopes to show off its progress and entice new corporate tenants.
NorthPark – the largest reinvestment project in St. Louis County history, according to County Executive Charlie A. Dooley – also is providing the entire region with another kind of showcase.
The developers, a brokered partnership between McEagle and Clayco, are building-out on land that largely was abandoned for noise-abatement. Jets roar overhead, day and night, in transit to or from the nearby airport. The air traffic fractures old basements and rattles walls.
The remnants of ruined basements and rattled walls needed to be ripped from the ground before the land could be graded and primed for development. Developers rely on tax abatement and other incentives to defray those sorts of expenses.
St. Louis County (under Dooley and his predecessor, the late George “Buzz” Westfall) came to the table. The County was eager to invest its taxpayers’ money in opening up for development 550 acres of highly accessible property alongside Interstate 70, just a half-mile east of Lambert-International Airport.
In the current business and political climate of St. Louis, the developers then encountered a new set of expectations – and, they say, expenses – attached to the taxpayer support.
Public subsidy, thanks to a past generation of African-American political leadership, means inclusion goals. If taxpayers are defraying the expenses of development, a previous generation of political leaders argued successfully, then the dollars invested in development need to be spread evenly throughout the region’s demographics.
Though it has become common corporate-speak to value diversity as good for business, contractual obligations for inclusion in development projects were won through political muscle.
Mike Jones is executive assistant to St. Louis County Executive Charlie A. Dooley and the savvy policy wonk of the St. Louis County Economic Council. He has decades of experience in negotiating between business, government and constituents.
He also has a colorful and candid way of expressing himself.
“Politics is the guy in the room with the gun,” Jones said, recognizing the political power-playing that went into the establishment of goals for economic inclusion.
From the proposal process on, NorthPark Partners set goals that have become standard for this region, when public subsidy is involved: 25 percent inclusion for minority-owned business enterprises (MBE) and 5 percent inclusion for women-owned business enterprises (WBE).
These goals for subcontracting also were applied to workforce participation, with the same respective levels of inclusion expected for labor hours (oddly, since including women is part of the goal, everyone in the field still speaks of “man hours”).
Apart from the political obligations tied to public subsidy, the developers said, the inclusion goals made sense for NorthPark because of the demographics of the area under development.
“The communities of Berkeley, Ferguson and Kinloch have largely African-American populations,” said Chris McKee, president of McEagle.
“To try to develop in those communities without inclusion would be a very big mistake, in my opinion.”
Though Clayco is considered an area leader in workforce and subcontractor inclusion, McEagle is based in St. Charles County and was coming to this type of brokered arrangement cold.
Walle Amusa of A.D.E. Consulting Services was brought aboard before NorthPark had even won the project, McKee said.
“Walle was part of the original team that put the winning proposal together,” McKee said.
“We needed someone who could dedicate the time, manage the process, get the word out to subcontractors, and track participation and trends.”
NorthPark by the numbers
The numbers to date are encouraging, according to Amusa, who has been preparing monthly reports since October 2006. Through the end of April 2008, Amusa said, NorthPark is exceeding its inclusion goals for both business enterprises (subcontracting) and workforce participation (hours on the job).
Of $33.6 million contracted on site infrastructure, Amusa reports, 26.65 percent (or nearly $9 million) has gone to minority-owned business enterprises (MBE) and 5.07 percent (or $1.7 million) to women-owned business enterprises (WBE).
On a smaller $5.67 million job building-out a 120,000-square-foot business center on the site, Amusa reports, 28.3 percent has gone to MBE and 6.9 percent to WBE.
NorthPark’s completed projects include Vatterott College’s new $15 million national headquarters. A Hilton Garden Inn also is under construction on the site, but Amusa said procurement has not been completed so numbers were not available.
Amusa also said cumulative workforce inclusion was ahead of the goal through the end of April, with 29.73 percent of labor hours on site infrastructure going to minorities and 7.47 percent of workforce hours going to women.
(NorthPark Partners also has completed work on Express Scripts headquarters on the UM-St. Louis campus, with more work to be done there. Inclusion on that project will be scrutinized in a future piece in this series.)
Push early
Amusa credits the relative success of the inclusion effort at NorthPark to the “sincere commitment” of the developers, but said strategy is needed to make good on that commitment.
“On the business side, you’ve got to make a really strong and heavy push on the general and prime contractors early,” Amusa said.
“There has to be an up-front, very strong, pre-bid, pre-award process designed to translate the earnest commitment of the developers into reality.”
McKee said it was critical to have a consultant like Amusa running point throughout the process, spotting trends and working on aspects of the inclusion effort that look weak before it gets too late in the build-out to make adjustments and bring up the numbers.
Enforcing the inclusion goals in workforce participation, Amusa said, is the most challenging. Again, he said, the only way to meet the goals is to start before the project breaks ground.
“We plan ahead with a workforce utilization projection, where we analyze the projected workforce hours at peak,” Amusa said.
“Then we tell the contractors, ‘You’ll have this many labor hours. If you need 5 percent of women in your workforce, how many women will you need?’ And if they don’t have enough, we work with them using our database or other databases that are available.”
St. Louis being a heavily unionized business environment, especially in the construction trades, changing the complexion of the workforce often means working within the unions.
“Different unions have different rules and procedures, and you work within them,” Amusa said.
“It is very, very difficult.”
Everyone agreed that sustaining high inclusion numbers at NorthPark will become difficult as more skilled labor becomes a higher share of the work, compared to the grunt work on site infrastructure.
The traditional resistance of many skilled trades to including blacks and women remains a factor, everyone agreed. And because historically in St. Louis, blacks and women have not had access to skilled jobs in the trades, few blacks and women have been exposed to them and are less likely to pursue these trades as a career.
McKee – the son of a developer (Paul McKee Jr.), who got his first union card as a teenager and knows job sites from the ground up – is something of an evangelist for the trades.
“I like to tell young kids – African-American or white, I don’t care – that construction trades are a great career,” McKee said.
“Get into a union, and if you survive until you’re a journeyman, you’ll have a job.”
Inclusion is expensive
As a developer helping to manage a joint venture with $400 million in total contracts, McKee has learned that – in the present state of development for local minority businesses – inclusion is expensive.
“I had heard that on pricing it was more expensive to be inclusionary – and, as it turns out, it was, but not by a small amount,” McKee said.
“I didn’t expect it would be so high – the cost was in the millions, not the hundreds of thousands.”
Jacqueline Wellington, executive vice president of the St. Louis County Economic Council and the daughter of a minority contractor, said there are “different costs of doing business” for MBE.
She said black-owned businesses are likely to be small in size, pay more for materials and insurance, and struggle with credit and bonding. As a result, she said, they have higher overheads and therefore require a greater profit margin to stay in business.
McKee also pointed out that much of the NorthPark bid process coincided with a boom in local development, with Pinnacle tying up many MBE and WBE.
He said of minority and women subcontractors at that time, “They were charging a premium, which is their right to do – I don’t begrudge that of anyone.”
Of course, developers trying to compete and grow can be expected to try to avoid additional expenses, even for minority inclusion, unless political pressure forces them to take demographics into account.
Mike Jones said, “Everything revolves around self-interest. Nobody falls off the donkey on the way to Damascus. There has to be a political imperative.”
The “Anatomy of Inclusion” series will continue periodically until the July 24 edition of the American, when it will culminate in the “Diversity: A Business Imperative” special section.