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Working in Northwest Indiana: doing business on Indiana's North Coast.

For decades since the steel industry first established its beachhead on the edge of Lake Michigan, the economic fortunes of Indiana's North Coast have been linked to the giant mills that loom over the Indiana shores.

The steel industry's presence in Lake and Porter counties is an impressive one, both physically and financially. Five mills owned by LTV Corp., Inland Steel Co., USX Corp., National Steel Co. and Bethlehem Steel Corp. virtually line the shore of Lake Michigan between Portage and East Chicago. Together, the five industrial complexes make more than a fifth of the steel produced in the United States. No region in the country can boast such a share of the industry. The mills employ more than 35,000 workers, according to recent statistics.

All the steel companies have made huge investments to upgrade their Indiana facilities, and they plan to continue that trend. 1991, for example, saw the completion of $260 million worth of expansion and improvement at the USX mill, known as USS Gary Works. In all, in the past five years the area's mills have invested $5 billion in modernization projects.

Charles Oberlie, president of the Northwest Indiana Forum, predicts that in the next year, however, the region's highly respected health-care industry will overtake steel in employment.

Oberlie works out of a small office tucked into an out-of-the-way side street in Merrillville. From there, he directs the effort to expand and diversify the economy for a seven-county area. Most of the growth is centered in the three northernmost counties--Lake, Porter and LaPorte--along the southern edge of Lake Michigan. The remaining four counties--Jasper, Newton, Pulaski and Starke--are rural areas with much smaller population bases than their three neighbors to the north. Nonetheless, they support a diverse industrial base in addition to the agricultural-services industry.

Oberlie's business bible--indeed the bible for the entire recruitment effort in the region--is a study on target marketing completed in 1991 by the consulting firm PHH Fantus, which is the nation's leading company in the field of corporate location strategic planning. Fantus examined the region and its entire demographic and economic picture and selected 10 manufacturing industries suited for the region. Oberlie and the forum whittled the list down to five realistic targets and hit the road on an intense recruiting trip. Selected for emphasis were food processing, automotive parts and accessories, fabricated metals, control instruments and plastics industries.

"Northwest Indiana is an excellent area for businesses," says Bob Buhle, vice president of Centier Bank in Whiting. "We've got tremendous transportation facilities that businesses need."

"You couldn't find a better location in the Midwest," agrees Terri Petras of the forum staff. "In terms of accessibility to markets, Northwest Indiana is prime. It is within 500 miles of 40 percent of the U.S. consumer market and that's as simple as an overnight truck trip for most products." Northwest Indiana is crisscrossed by interstate highways that run coast-to-coast and from north to south. There also is extensive rail and air service and shipping through the Port of Indiana at Burns Harbor in Porter County.

And, perhaps most important, a new airport to serve the Chicago area will be built in or near Northwest Indiana. The building and operation of the airport will bring thousands of jobs to Northwest Indiana wherever it is located and the business development opportunities are almost endless.

Oberlie says the ideal mix of incoming businesses would include many smaller businesses and perhaps a few large ones.

Two recent arrivals in the region provide prime examples of the good fit Northwest Indiana can provide.

William J. Peters is CEO of Tinplate Partners, a firm that buys rolls of steel from the Northwest Indiana mills and cuts them into sheets for the packaging and paint industries. Tinplate Partners leased space in a vacant transmission plant in Gary and invested $10 million in equipment and training for 40 employees. The company processed 35,000 tons of steel in its first year of operation.

"For us the closer to the steel mills the better off we are and the five mills in the area are all within a stone's throw of our plant," says Peters. "We also looked at Ohio and Illinois as alternatives but between the tax abatements and proximity to the mills, they didn't hold a candle to Gary." Tinplate Partners got low-interest loans through the Lake County Economic Development Commission, enterprise-zone status from the state and a loan guarantee from the U.S. Small Business Administration.

The steel service center business that Peters runs is ideally suited to the Northwest Indiana area. The area provides the raw materials close at hand that Tinplate Partners needs as well as an extensive transportation network that allows the company to ship its product from coast to coast in the United States as well as to such far-away locales as the Far East and the Caribbean. Peters already has plans to expand his plant in Gary and add second and third processing lines.

Robert T. Bourg knew he had to expand his plastics firm because the equipment he was using was antiquated and the building housing it was in bad shape. Bourg says Bennett Industries looked throughout the Chicago area, going as far north as Wisconsin and also exploring the suburbs that ring the city before choosing the Montdale industrial park on U.S. 30 east of Valparaiso. The company will make shipping containers at the facility when it opens in March. "We needed to be close to our market in Chicago," Bourg says. "The composite of the rural setting and the cooperation that we got from the local government there made the selection a natural one."

Oberlie and others in Northwest Indiana say the growth in the area will come mostly from companies that relocate to the area rather than new businesses. Many hope the real growth comes in the form of migration from Chicago and its Illinois suburbs. "There's already been an almost imperceptible shift in the center of industry to the east from Chicago," says James Hartung, director of the Port of Indiana at Burns International Harbor. "Chicago isn't the broad shoulders or the stacker of wheat or the butcher to the world that it used to be. That's becoming Northwest Indiana."

"I think companies there have grown tired of the politics of the city and the high tax base and they are starting to look at coming here," affirms Bruce L. Dahltorp, chairman of Gainer Bank in Merrillville.

But why pick up stakes and move an operation into Northwest Indiana? There are more advantages than just proximity to Chicago and a wide range of transportation options.

The tax structure in Northwest Indiana, for example, is one of the most advantageous in the nation. Indiana's worker's compensation taxes are the third-lowest in the United States. Compare Indiana's 5.4 percent rate with 6.4 percent in Illinois, 7.3 percent in Ohio, 9 percent in Michigan and Kentucky and 10 percent in Tennessee. Property taxes are far lower in Northwest Indiana than in Chicago or in its suburbs.

Large enterprise zones that offer a wide variety of tax abatements have been set up in Hammond, East Chicago, Michigan City and Gary. The presence of the huge Burns International Harbor facility in western Porter County also allows for foreign trade zone designations throughout the area. The designation can give businesses tax breaks and incentives. In the last year, about 2 million tons of cargo passed through the port.

The various city and county governments in Northwest Indiana have been aggressive in recruiting businesses and doing what they can to ease the costs of relocating. Most local governments readily offer packages of tax abatements and loan assistance to help industries interested in moving to the area. The cost of constructing new buildings is lower in Indiana than in Illinois, Michigan and Ohio.

"We have the best facilities at the most reasonable cost. We think it's quite a bargain to locate a business around here," says Maxine Young, president of the Gary Chamber of Commerce. "When it gets too hard for businesses to operate in the high-rent district, we offer an alternative."

Another of the region's strengths is its large and diverse work force. "This is a work force that is conditioned to work around-the-clock in three shifts rather than only during the daylight hours like in many parts of the South," says Young.

An examination of the work force over the last 10 years provides a glimpse at the direction the economy in Northwest Indiana is heading. In 1980, 43 percent of the labor force was involved in manufacturing and 57 percent in the service industries. By 1990, the mix had shifted to 29 percent in manufacturing and 71 percent in service. The shift is due in part to steel-mill modernization.

"This influx of people from Illinois is creating a service industry here," explains Gainer Bank's Dahltorp.

The U.S. Labor Department reports that the seven-county work force numbers about 345,900 workers. The labor force in Northwest Indiana has a high skill level that makes the workers ideal targets for incoming businesses. Marilyn Dartz, executive director of the Hobart Industrial Economic Development Corp., says she sells prospective businesses by pointing out that the skills learned in the steel mills or steel-related industries transfer well into other types of manufacturing.

The region is served by a number of local agencies that train individuals for companies, including Kankakee Valley Workforce Development Services and Lakeshore Employment and Training Partnership. A coalition of businesses has joined forces with the Gary campus of Indiana Vocational Technical School to facilitate employee training as well. The coalition includes Gainer Bank, five steel companies, Northern Indiana Public Service Co., the Northwest Indiana Forum and a variety of employment- and labor-related groups. Through the group's efforts, the Ivy Tech campus has made its schedule more flexible to accommodate worker retraining.

Nearly 800,000 people live in seven-county Northwest Indiana. Because the population is concentrated in the northern sections of Lake, Porter and LaPorte counties, there are vast spaces available for industrial and commercial development. The relatively low cost of buying and building in Northwest Indiana coupled with lower property taxes are other reasons why the region is attractive to businesses looking to expand or relocate.

The Northwest Indiana Forum reports there are more than 50 industrial sites and parks available for development and 12 million square feet of space in stand-alone and multitenant buildings.

The largest category of available space is commercial and office space. Lease prices for the area's industrial space range from $1.75 per foot for large spaces with more than 100,000 square feet up to $3.75 for smaller spaces, according to the Northwest Indiana Forum.

For industrial space, there are a wide variety of options available to companies who want to move into the area. Hammond, East Chicago, Gary and Michigan City, for example, offer vacant industrial sites. Some of the buildings are quite large and can be subdivided.

Meanwhile, new industrial parks seem to grow weekly in the area. Land is plentiful, and cheap. Full-service industrial-park land in the area is available starting as low as $10,000 an acre. Lower property taxes than those in neighboring Illinois make the investment even more worthwhile.

In Porter County, the picture on industrial land is bright as well. Due to low vacancy rates, prospects are encouraged to build. That's a good idea in Porter County, where vacant industrial land goes for $10,000 to $30,000 an acre and where building costs range from $25 to $35 a square foot.

The development of Northwest Indiana as an economic center has followed a pattern of west to east. The first companies that came in settled in places such as Hammond, Highland and Munster. Now firms are beginning to look at Hobart and Valparaiso. Prices for land and building space tend to drop as one moves to the east. Development experts predict that the eastern push will last another 10 years. "Portions of western Lake County have already been discovered. We hope that we are in the path for that same development," says Dartz of the Hobart Industrial Economic Development Corp.

Joining the efforts of Dartz and the other local economic development officials in the area is the Northern Indiana Public Service Co., which provides gas and electric service to the entire region. "We have wanted to take a more proactive approach in our destiny and in the destiny of our communities," says Randall C. Jacobs, director of economic development. "It's good business for us but it's also good for the communities if we have more customers who can provide jobs for the people who live there."

The utility is ready with a wide range of incentives of its own. There are, for example, economic development rates and special discounts for customers who shift some of their heaviest use to off-peak hours. NIPSCO also has energy incentive plans and financial assistance for selected companies. NIPSCO's overall capacity is more than 3 million kilowatts of electricity. The utility has 33 billion cubic feet of storage space and is Indiana's largest distributor of natural gas.

NIPSCO's rates are competitive with other utilities in the region and boast an added advantage, according to Jacobs. All utilities and major industries will face stricter federal clean-air standards in the next four years. For most, that will mean construction of new equipment and higher rates to pay for it. But NIPSCO already has done its construction so there won't be higher rates when the new regulations take effect. "Most of them will see their rates climb 30 to 40 percent, but not ours," Jacobs says. "Our rates are trending down."

With Lake Michigan right next door, water availability isn't a concern for businesses looking to locate facilities in Northwest Indiana. The Northwest Indiana Forum reports that most of the water utilities in the region are operating at only 50 percent of capacity so they can accommodate any economic development that might come their way.

Another segment of the region's business community that actively courts new industrial development is the banking industry. While the banks in other parts of the country have soured and retracted, they remain strong in Northwest Indiana. Dahltorp of Gainer Bank in Merrillville believes there are several reasons. "Our economy has been buoyant in the last several years," he says. "And if the banks are managed well, they tend to do well when the economy is doing well." Contributing to that is the family management of almost every bank in the area. "When you have family in the office every day, it forces you to be a better manager."

Indiana's fiscally conservative banks tend to do business close to home and avoid business that is too risky, says Bob Tonkovich, CFO and senior vice president of Mercantile National Bank in Hammond. "We get our funds here and we spend them back into the community here."

Most of the banks in Northwest Indiana are distinguished by their conservative lending postures as well. But the conservative nature has not closed off lending as it has at many larger banks. "We've never been greedy as far as earnings go," Dahltorp says. "We want to make money, obviously, but we don't need to be the most profitable bank in the United States. We don't want to be that."

The banks are prepared to help companies doing business in Northwest Indiana. "There are a number of special programs that are available through financial institutions to help, such as loans from the Small Business Administration and Indiana Statewide Certified Development Corp. There also are state-sponsored loans that provide special types of funding for businesses," says Buhle of Centier Bank. "It's our goal to help our communities and this is one way we can do that."

Dahltorp says the banks in the region have excelled because they get themselves involved in their communities through service groups and volunteer activities and by paying attention to what is going on around them. "When you are involved and you know what's going on you can be there to offer your services when someone new comes into the picture."

Northwest Indiana offers a gold mine of opportunity for new businesses looking to get started and for existing businesses looking to relocate or expand. The region is close to Chicago and within a day's drive of almost half the consumers in the United States. It is served by an extensive array of transportation options. And there's a willing and able labor pool that is ready to go to work.

"The impetus for development so far has been residents and businesses from Illinois," observes Dartz of the Hobart Industrial Economic Development Corp. "They've decided it's just cheaper and better to live in Indiana."

"When people hear what is here," says Oberlie, "they are impressed."
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Title Annotation:Indiana's North Coast: Living & Working in Northwest Indiana
Author:Blum, Peter L.
Publication:Indiana Business Magazine
Date:Jan 1, 1992
Previous Article:Indiana's business furniture industry.
Next Article:Why Northwest Indiana?

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