Last updated on June 26th, 2019 at 03:45 pm
It is just seven miles from the current Leonardo DRS facility in Milwaukee to the proposed future home of the company in Menomonee Falls, but seven miles can make a world of difference.
At $74,238, the median household income in the company’s future zip code, 53051, is more than double that of the one where the company is currently located, 53216. More than a quarter of the population in 53216 lives in poverty, compared to just 4 percent where the company will be moving, not far from North Hills Country Club.
Figures like those can make it hard to see why the Wisconsin Economic Development Corp. would offer the company, a subsidiary of the Italian firm Leonardo S.p.A, which had around $13 billion in revenue last year, up to $18.5 million in state income tax credits to make the move.
Mark Maley, a WEDC spokesman, said in a statement that DRS was “seriously considering” relocating its Milwaukee facility to the East Coast, potentially taking hundreds of jobs with it. The expansion is for the company’s Naval Power Systems business, which makes power and control technology for the U.S. Navy. The business line has other operations in Massachusetts, Connecticut and Missouri.
“To be clear, WEDC does not steer jobs from one community to another,” Maley said. “Our primary objective was to ensure that a global company made the decision to remain and grow in Wisconsin, not in another state.”
DRS, WEDC and the village of Menomonee Falls announced Monday the company would build a $56 million, 350,000-square-foot engineering and manufacturing facility along with leasing nearby office space. The move will allow the region to retain roughly 450 jobs. While those jobs will be taken out of the city of Milwaukee, Menomonee Falls will gain them and could see the creation of an additional 220 jobs over the next seven years.
“Clearly we would all prefer they continue to grow in the city, but that wasn’t an option,” said Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce. Milwaukee 7, the regional economic development organization that helped DRS in its location search, is part of MMAC.
But Howard Snyder, executive director of the Northwest Side Community Development Corp., questioned why an organization intended to benefit a seven county region would help a company move from one community to another.
“Menomonee Falls can take care of itself,” Snyder said.
The project is set to receive $6.4 million in support from the village, including $4.4 million in annual payments from increased tax revenue and $2 million in support of upgraded electrical service.
Rocky Marcoux, Milwaukee Department of City Development commissioner, said the city’s discussions with DRS did not reach a point of specific incentives, but had the company identified a potential site the city would have put a package together.
“Our packages are pretty site specific,” he said.
Marcoux said Milwaukee officials showed the company existing building options in Midtown, the far northwest side, Havenwoods, near the airport and in the Riverworks area. The company expressed a desire to go with a new build and the city discussed Century City and land adjacent to the We Energies power plant in the Menomonee Valley as options.
Sheehy said Milwaukee 7 exhausted all possibilities for the company in Milwaukee before considering other options, including ultimately Menomonee Falls. He said the company was looking for a location to create a center of excellence for its naval power business and considered at two or three other states.
“We felt if we lost the pitch for the center of excellence it might threaten the jobs that existed here,” Sheehy said.
“Fine, let them go,” Snyder said of the prospect of the company threatening to move to another state. He also suggested the company previously applied for incentives with WEDC but was turned down and questioned the timing of the announcement following Gov. Scott Walker’s loss in the November election.
“It is a bit of coincidence,” Snyder said.
Maley said the agency has been working with the company since November 2017. He said the agency had not received and did not reject a previous request for incentives.
Snyder said the company’s decision hurt him personally, noting someone from DRS and its predecessor companies has served on the NWSCDC board since the 1980s. Michael Friederichs, DRS vice president of operations and the company’s representative on the 2018 board, resigned on Tuesday morning after the deal was announced.
Snyder said his organization and other stakeholders had been meeting with the company and city officials on a monthly basis since October 2017 to address concerns around crime and safety, staffing and potential flooding.
“From everybody’s point of view, things were getting better,” he said.
In a 2016 interview, Vince Stammetti, then vice president and general manager of DRS Power and Control Technologies, touted the company’s involvement in the neighborhood as the reason the business had kept a presence there since the 1950s.
He said flyers and canvassing the area had helped with recruiting new manufacturing employees and the company also regularly contributed to food and school supply drives. DRS also established a substation at its facility to make it easier for police officers to take breaks while on patrol.
Stammetti left the company for Alion Science and Technology earlier this year.
“They did a lot of things because we asked them to,” Snyder said. “We experimented because they were always open to innovative suggestions.”
Mike Mount, DRS senior director of public affairs, said in an email the company looked at sites throughout Milwaukee and Wisconsin that would allow it to serve the U.S. Navy into the future.
“We need a more modern and efficient facility that will allow us to perform to the highest standards our customer expects,” he said. “With our growth and increasing customer expectations it was time for us to move from that facility.”
Snyder questioned the need for a new facility, noting the Milwaukee location underwent extensive renovations within the last decade. The NWSCDC supported the project with a $580,000 loan that the company has since paid back.
The city of Milwaukee supported the $11.5 million project with the creation of tax incremental financing district that included a $1.5 million. The loan is forgivable if the company maintains its employment at 450 through 2018.
The Menomonee Falls facility is expected to be complete by 2020.
Losing DRS is a blow to the 30th Street Industrial Corridor and the city’s efforts to redevelop the Century City business park, once home to thousands of jobs at A.O. Smith and Tower Automotive.
Sheehy said the 84-acre site did not meet the company’s requirements as it was searching for a location. Documents submitted to Menomonee Falls indicate the company wanted a “high-profile site with great visibility” and that the geographic central location of the Menomonee Falls site would help with employee attraction and retention.
“I understand the impact on the neighborhood,” Sheehy said. “There are still going to be people working at DRS that live in the city, that own property in the city, that spend money in the city, so that’s where I say we’re much better off than having this entire operation in another state.”
Redevelopment efforts at Century City have been slow to gain traction after the city put millions of dollars into preparing the site. Spanish train maker Talgo operates at the southern end of the business park and craft brewery Good City has purchased a building at the northern end.
But the site has also been passed over for larger projects, like Amazon’s new distribution center in Oak Creek and now DRS. The corridor has also seen the loss of other companies, like interior finishing manufacturer Glenn Rieder’s decision to relocate to West Allis in 2016.
Despite the setbacks, Cheryl Blue, executive director of The 30th Street Industrial Corridor Corp., said the redevelopment efforts will continue.
“They had to make a business decision,” she said of DRS. “Of course it’s their decision and we have to keep moving forward.”
She said the arrival of Good City is a positive development because the company wants “to expand the renaissance beyond downtown.” She also said there are a growing number of tenants in the former Eaton Corp. building at 4201 N. 27th St. and nearby projects like Sherman Phoenix can also benefit the neighborhood.
“We feel good about the momentum. It’s been slow. It’s been a lot of hands on work and coalition building,” Blue said. “It’s not stagnant, but at the same time it does take time and we don’t know their bottom line in terms of what they had to do for themselves.”
She also pointed to efforts to improve neighborhoods, including a plan for the Garden Homes neighborhood that DRS participated in developing and city grants to restore dilapidated historic homes. Those efforts and others in the corridor will continue, she said.
“We don’t have an option,” Blue said. “We can’t just say we’re going to throw away the 30th Street corridor or that infrastructure of the businesses that are there.”