David P. Ransburg is chairman of L.R. Nelson Corporation, one of the world’s leading manufacturers of lawn and garden sprinklers and accessories. Prior to purchasing the Peoria company in 1972, he worked for IBM as a systems engineers and management services representative; for United Technical Industries in aircraft research and development; and for Keene Corporation, a New York based diverse manufacturer, as vice president of administration. His education includes a B.S. in engineering sciences from Purdue University and an M.B.A. from Harvard University.
He has served as chairman for the Peoria Civic Center Authority for approximately five years and has been a member of numerous boards of directors of local organizations. He currently serves on the board of directors of the Illinois Manufacturers Association and the Irrigation Association.
Selected in 1984 as Illinois’ Small Business Person of the Year, he has also served on numerous state task forces including the Governor’s Task Force on Workers’ Compensation, Governor’s Small Business Advisory Council, Illinois Export Council, Illinois Manufacturers Association Small Manufacturers Action Council and Illinois Chamber of Commerce Small Business Council. He co-chaired the Illinois delegation to the 1986 White House Conference on Small Business. He is running for Peoria’s 5th District City Council seat, and will relinquish his leadership of the Civic Center Authority if the campaign is successful.
You recently announced that L.R. Nelson would consolidate its Peoria area operations in a new plant at Route 150 and Trigger Road. What led up to this?
When I bought the company in 1972, we had several operations in the Peoria area. There was a parts plant in Pioneer Park, an assembly plant in Princeville and two different sales offices in Junction City. The headquarters was located on Russ Nelson’s farm in Brimfield; engineering was across the road in a farmhouse; the Pioneer Lane building included purchasing, accounting and service. We also had a plant in Manning, Iowa.
We have been experiencing company growth through the years by consolidating operations, utilizing the same square footage. Our team has been very clever in being more productive with the space and people we have, but we have finally run out of room. Some of our big customers have become concerned about our ability to keep up with their growth. We’ve had the good fortune of growing with some of the leading retailers in the country. We are the major supplier for Wal-Mart, Target and Venture; we have picked up a major share of the True Value account; we sell to Ace and Home Depot. They are all growing, and they are concerned about us keeping up, so we felt we had to make a substantial investment in our future to assure them we could take care of their needs. That’s when we decided to fulfill a twenty-year dream and consolidate our Peoria area facilities in one location.
We feel the timing is good. Interest rates are low compared to what they were a few years ago. We thing construction costs will be low, since the market is very competitive.
Why was this site chosen?
We have tried to run this like a family business. We have tried to make it a friendly place to work. But we have three facilities now and it makes it a little hard to have contact with everyone. I have to make a conscious effort to go to Princeville. I enjoy it but I don’t’ get out there as much as I should. In our new facility we will all be together within the Peoria city limits. We located the new facility in a place that is “our in the country” but still within the city limits. Our goal in relocation was to maintain as much of our existing work force as possible by locating between Princeville and Peoria.
Did you consider moving the entire operation out of Peoria in your relocation process?
Sure. We did have a lot of other offers. Several local communities made some very attractive offers in terms of land, TIF districts or tax abatements. For various reasons – either we thought we would lose our workforce, or we thought we would be too far from the airport – we settled on the selected site.
Back in the eighties the southern states with high unemployment tried to make is very attractive for industry to move south and create jobs. The industrialized northern states have seen a deterioration in the industrial base. Manufacturing jobs have steadily fallen off; they have been replaced by service jobs or medical jobs. In recent years the northern states have tried to be more competitive and have engaged in some serious bidding wars. Look at the money that was spent to get Diamond-Star in Bloomington-Normal. I think some people question whether or not that is good long-term public policy, and I think a lot of states have pulled back from that a bit.
But there are still a lot of incentives being offered, if we would have wanted to move. Our primary incentive for staying here was our workforce. We have some super people who are bright, hard-working, caring and honest. Unfortunately you can’t show people on your balance sheet. I know a lot of horror stories where companies and moved to other place and lost their workforce. Maybe the labor was cheaper and they had other benefits, but the productivity was lower and quality was poor. Moving our of state is not a panacea. We talked about it and decided to stay here.
Was the labor union climate in the Peoria area ever a factor in your decision? How do you view the area’s labor climate?
We have some super workers; they are non-union but I think that’s because they didn’t see the need for a union. We work well together; we produce a good product; and we give good service in a very competitive market.
We will probably pay more for putting our plant here than if we would have gone to another state. If we have to pay twice as much for a plant in order to stay here, we won’t be able to compete in the marketplace, and the construction industry understands that.
We’ve had very good relationships with the unions we have worked with. We signed an agreement with TRICON when we put the exhibit hall expansion on the Civic Center, and they have produced very high quality work – without interruption, on schedule and on budget.
If union means lack of productivity and high pay for little output, then I think it’s wrong; but I sense that the construction unions here work very hard to make sure their members understand the importance of the apprentice programs, increasing skill levels, being productive and seeing if they can use fewer people through new methods of doing the job more efficiently.
Gene Moore and Greg Hasty, both of whom are labor leaders and worked with me at the Civic Center, have endorsed my candidacy. I am not anti-union. I don’t hate unions. I hate irresponsibility. If someone does something that is malicious, unproductive or anti-growth, I’m going to be against them. I don’t care if they are union or non-union, black or white, man or woman. I have talked to union people who make plenty of good sense and are trying to do some good things. I don’t understand where some other union people are coming from – and if I do understand where they are coming from I don’t like it – because I think it is self-motivated and unhelpful to society. I am pro-productivity; I am pro-people; I am a builder; that’s my life.
How do the problems between Caterpillar and the United Auto Workers affect Peoria’s business and labor climate?
I travel a lot, since we are an international business, and I find the image Peoria has is very poor because it is viewed as a very strong union town in the militant sense, not in the quality/productivity sense. Whenever there is a big flap between Caterpillar and the UAW it gets international press. As I travel around, nobody has ever heard of L.R. Nelson, but everyone has heard about Caterpillar. They see the Cat-UAW news in Europe and form their opinion of Peoria accordingly, which is unfortunate. I think it misstates the problem.
Caterpillar and the UAW have a long-standing relationship. When I came here twenty years ago, everyone wanted to work at Caterpillar. Caterpillar has historically paid approximately twice the national average for manufacturing jobs. I don’t know whether that is because Cat has been particularly effective in the marketplace, or whether it’s because the UAW has just done a terrific job of negotiating for their people, or some combination. What it clearly did was set the level of wages and benefits for the area. The real problem when I came here was when Cat would hire 500-1000 people, we would lose workers. They would go to Caterpillar for the good money, great benefits and supposed lifetime employment.
In the eighties things definitely turned around. Cat is now roughly half the size in the Peoria area that is was at its peak. My guess is Caterpillar will continue to fill in holes, consolidate, invest in productivity, outsource, etc. I don’t’ see Cat coming back to 35-40,000 workers here – ever. That has taken one kind of pressure off some of the rest of the employers. It’s put a different kind of pressure on the business community to try to replace some of those jobs, which were very high paying jobs. There’s nothing wrong with flipping hamburgers, but that doesn’t create wealth.
What does the Peoria area have to do to create wealth through better-paying jobs?
What we have to do is find more manufacturing and more services which can be sold outside the area – also more tourism attractions. We need things to bring dollars in. If we are all lawyers and accountants and cut each others grass, we don’t’ produce any wealth – we just move money around. Wealth creation is producing a product or service that you can sell to somebody in another state or another country. That’s what we’re doing.
As a manufacturer, what will be the keys to your success in the next decade?
We have to focus on the marketplace and be aware of the major changes that are occurring in demographics. We have to be aware of the changes occurring in distribution and retailing. Most of our products are sold through retailers or contractors. We have to be very conscious of things happening in the rest of the world.
The U.S. has been an incredibly dominant power for years, but Japan has emerged as a major power. Germany as emerged as a major power and, taken together with the Common Market (although that is happening slower than some anticipated), will constitute a giant market. We are going to have much more global competition. We currently compete with companies in high-labor cost companies like Germany, but we also compete with companies from China where they pay workers practically nothing. We are in a very competitive business and we sell to people who are very tough negotiators – if you don’t want to do it on their terms, they have someone available who will.
What is your philosophy on world trade? What can we expect from the Clinton administration?
As a businessperson I get mixed signals. Philosophically I support the concept of free trade if you tack on “fair trade.” Because the U.S. has been such a major industrial power since World War II, we have been very generous in terms of opening our markets to help other people get started, putting Japan and Germany back on their feet, as well as helping underdeveloped countries. We have been very liberal in terms of letting people in but we haven’t been very tough in insisting that is be reciprocal.
Free trade may in fact mean some discontinuities for some industries and companies, but, over time, we as consumers and taxpayers will be better served than by protecting companies that are very inefficient. For example, in Spain there were a bunch of local producers of our kind of product who were protected by 40 percent tariff barriers. We couldn’t fight that. They have no taken the duties off to get into the Common Market; there is a five percent equalized duty to get into the Common Market. We can compete with that; we have a better quality product. The same is true in Mexico where there were some local producers making some fairly shoddy products; but if you weren’t’ a local producer, you couldn’t get in. Yes, some jobs will cross the border just like jobs cross from Illinois to Indiana or Arkansas, but over time we will be better off. There are some issues in terms of tariffs, human rights, and environmental issues that the government needs to deal with.
It seems to me that American industry has taken two approaches to the free trade issue. Some industries have really thumped the drum for protectionism (the steel industry comes to mind), saying, “Keep them out; give us a change; we’ll get organized.” My impression is some of them have. Some of the steel companies have become very efficient, picking out a niche and investing in new technologies. But some apparently haven’t and are still struggling. Much of the textile industry in the U.S. moved from New England to the south to the Far East. I know a company in South Carolina that decided they were staying. They backed up and went to their customers saying, “What do we have to do to stay?” They learned how to do set-ups in fifteen minutes that used to take two days. They worked very hard on quality, automation and getting their people involved. They didn’t just say “Protect us the way we are.” They looked at the world, saw that it was changing and said, “Hey, we better get with it. We should do a better job.” That’s what we have tried to do.
How will the new family leave legislation recently signed by President Clinton affect L.R. Nelson?
The interesting thing is, as part of being a good employer and making this a family-oriented place, w have had a family leave policy for years. We give people unpaid leave for most reasons. I guess my problem with family leave legislation as I understand it is that it is poor public policy. Philosophically I think it’s great, but you can’t say that it comes at no cost. For a large business with thousands of jobs, perhaps it’s not a major problem. But if a business with 50 employees has to keep a job open, or hire an additional person to fill a job while a key person is gone, or everyone else has to do additional work, it is a problem. What happens when a company hires one worker to fill the job of someone on leave, when that person comes back? Do they fire the new person, or do they keep someone on that they don’t now need?
What troubles me is the concept of mandating family leave. I don’t think it’s serious; I don’t think it’s going to be catastrophic or make American industry non-competitive by a single stroke. What bothers me is that the government has said, “Okay, we have a new scheme. Instead of giving an employer incentives to enact family leave, we’re just going to mandate it. We’ll just write a law and say, ‘You must.’”
When you start mandating things it just keeps going. Next we’ll mandate family leave for companies with over 25 employees. Then we’ll mandate paid leave; then this; then that. It’s great politically, but people don’t realize that it is a cost to business. The calculus of it is very complicated, but there is a definite cost. If they also start mandating healthcare and pensions and a lot of other things, it will make us more non-competitive as a nation. If people wonder why companies go to Taiwan or Mexico or other places, it’s because all of these things add up when a company is trying to compete in the marketplace.
I have much greater faith in the marketplace than a lot of politicians have. A lot of people who are kind of demagogues have put this forth and they thing they are the champions of the people. That’s ridiculous. I’m the champion of the people because I provide jobs; and I’ve kept this place in business in a very competitive market where some of our competitors have either moved out of the U.S. or gone out of business. In a small way, I’m much more a champion of the people because we’ve kept this place alive.
Nick Owens assumed the position of president and chief operating officer for your company in December 1992. What has he meant to L.R. Nelson?
I had tried a few years ago to pull myself back from the business and hire a chief operating officer. It looks like maybe the third time is a charm, since we had a couple of experiences which just didn’t work out. It’s too bad because it was traumatic for the organization and I’m sure it was traumatic for the individuals.
There are a lot of people who know Nick and me who said that it wouldn’t last six months. We’re both strong-willed people with different personalities; Nick is more outgoing while I am more introverted; he is a very good operating man and I’m more of a visionary. Nick is a super guy, very bright and results-oriented. He is an excellent people person. We share a lot of the same values about how to run a business and how to treat people – what’s right and what’s wrong. I knew of Nick for a long time, but didn’t know him that well until he became a commissioner on the Civic Center Board. Then I asked him to come on L.R. Nelson’s board of directors. It was sort of like dating – we got to know each other over a period of time. We developed respect for each other. Anyone who knows us knows we don’t agree all the time, but that’s healthy.
Having a partner to run the daily operations has allowed me to work on business development. We have the relocation, which is a major project, and we have purchased a couple of new product lines that add to our capabilities. We are working on a number of things in Europe. All of these things require time and being gone from the daily operations of the company. If they are successful, they bring in money to the company, add to our diversity by product and geography, and ultimately end up brining jobs and money to Peoria.
Peoria sometimes gets a reputation of having a negative business climate via over-regulation of lack of responsiveness by local government. What is your opinion of the business climate in Peoria? What are the pluses and minuses of being a manufacturer in the Peoria area?
Having lived in Peoria for twenty years, I think it’s a mixed bag. As a place to live and work, Peoria is a very nice place. It’s a very friendly town. Until recently we haven had a major crime or drug problem. Our children received a good education in the public schools.
There are some great workers here. We had a plant in California, by contrast, where when the surf’s up people don’t show up. They stole; they did all kinds of things. For our business the geography is good. We are centrally located and many of our customers are in the Midwest. Those are the pluses.
However, based on personal experience and the experience of others, it appears that while Peoria may not be unfriendly, the Peoria bureaucracy doesn’t appear to be very helpful to business. I sense that in terms of development, they don’t know exactly what to do to attract businesses; zoning codes can be very cumbersome and not particularly commonsensical. I think Peoria has, in fact, driven some businesses away. Unfortunately we have made it a little difficult for people to do business here. That’s one of the reasons I’m running for City Council. Based on business experience and Civic Center experience, I’d like to see if I could make a difference in the city.
What kind of help have you received from the City of Peoria in making your decision to relocate and consolidate operations?
We made a conscious decision as a company to stay in Peoria. My experience with the city in trying to build this new plant is that they are cheering us but are not being particularly helpful. We don’t have any incentives to locate here; we are not in a TIF district or an enterprise zone. As far as I know they are not paying for anything; we are probably going to be paying property taxes of a quarter-million dollars a year. In contrast to what we could get by locating someplace else, we are paying a real price to stay here. That’s unfortunate.
Not a single city councilman has called me and said, “Gee we’re really glad you’re staying.” I haven’t received a letter or a note or anything – it’s just kind of “ho-hum.” And this is probably the biggest industrial investment in Peoria in a long time. Nobody did anything to get it, but they are cheering publicly like it was their idea or like they did something. They really didn’t.
How responsive were city leaders as you led the effort to put the Peoria Civic Center on a solid financial footing?
The same thing was true with the Civic Center. We had to work very hard behind the scenes at the Civic Center to get proper financing and get some things done in the building. I won’t go public with it, but some crazy things went on. I asked myself, “Don’t they really care? Don’t they realize what an asset it is? We’ve got to make it work.” I think the City Council members as individuals were very pro-Civic Center; they didn’t’ want us to shut it down, but nobody knew what to do to make it work, so there was all this carping and criticism. Finally, when we had a plan put together, there was support, but it wasn’t forthcoming initially.
I got involved in the stadium affair because the Civic Center Authority was the conduit for the state money. What a nightmare! There was no leadership or vision. Everybody was pulling different directions, discussing it through the press and getting very territorial. The city didn’t want to put the stadium in Southtown because they said they wouldn’t get any payment for the land or any tax revenue. I said, “We will pay you the same amount per square foot that Kepple paid you. We will work a payment in lieu of tax program right into the lease – we’ll work it out.”
It looked like Southtown was the ideal location, but the city clearly didn’t want it in Southtown. I don’t know why; they haven’t put much else in Southtown. Their plan was to put it on the riverfront. There were several problems with that; one was it didn’t fit. They said, “We’ll build it over the railroad.” So we met with the railroad people and they about passed out. They said, “My God, can you imagine what would happen to us if a train derailed in there and knocked down the stands and injured 2,000 people.” Well, that wasn’t a good idea, so they said, “Let’s put it out on the river.” Well, now you have to deal with the Corps of Engineers and the Illinois Department of Conservation. It was an incredible mess.
At one point we were going to put the stadium in the Civic Center parking lot just so we wouldn’t lose state funds. We had to pick a site and we were all arguing. In my opinion the way it was handled was unconscionable. I stepped into the middle of it and said, “Okay, we’ll have a survey done; we’ll go get some people who have built these things before.” Then we were criticized because the consultant said it ought to be in Southtown. He gave good reasons, but nobody listened. I felt like there was a big dog dragging me around town because nobody really cared about anything but their own selfish interests. For this and a lot of reasons I decided to run for public office. It’s possible I won’t get elected because I’m too direct.
Tell us more about your time as Chairman of the Civic Center Authority. What do you see for the future with the exhibit hall expansion?
The future is very bright. When I became Civic Center Chairman four and a half years ago we had a $65 million building on which we had only spent about $165,000 a year, and it was in just terrible physical condition. We didn’t have any money; we had a fifty percent turnover in staff; and the Rivermen were losing two hundred thousand dollars a year. The press was on our case continually. Some people weren’t performing particularly well. We had an accounting system that was unreliable. The year before I became chairman there was a $200,000 negative adjustments to the books. It was just a mess.
Now I think we have it on track. We replaced the comptroller with a man who has not has a single adjustment since becoming financial director. We cut the deficit in half for the Rivermen and sold the Rivermen; I think Bruce Saurs has done a terrific job running the team. The first meeting I chaired included a vote on whether we should keep hockey. We were ready to shut it down. The vote was four to three. I cast the deciding vote in favor, or we wouldn’t have hockey today. I think we’ve been vindicated.
We have found ways, without raising taxes, through a new intergovernmental agreement, to spent about $3 million over the last four years to substantially improve the Civic Center. We stopped the operational bleeding and substantially reduced the operating deficit. We got SMG to manage it; we got Volume Services to run the food services; we’ve gone from a negative working capital to $1.5 million positive working capital.
The exhibit hall expansion is major opportunity. We will double the amount of exhibit space; we will more than double the amount of meeting space. We have found that trade shows and conventions today do a lot more “break out” meetings; they need more meeting space. At last count we already had 43 dates scheduled for the new exhibit hall and it’s not even done yet. Because it is going to be on budget and on time – which is refreshing for a public building – we will probably produce some revenue from it yet this fiscal year, which will help meet or beat our budget.
Can the Civic Center eventually pay for operation without tax revenue?
Next year, with the exhibit hall, we have a good chance of moving toward my goal of no operating deficit. It is feasible in the near future for the Civic Center to run in the black apart from the hotel, restaurant and amusement taxes. When I became chairman, I said in three to five years I thought that we could. We’ve reduced a $750,000 operating deficit to $300,000. We still have a ways to go, but it’s moving in the right direction.
When we announced the exhibit hall expansion, we didn’t ask, “What can we build for $4 million.” We asked, “What should we build long-term, so what we do now allows us to do something intelligent in the future?” After we expand the exhibit hall the next move will be to go up two floors and out with a very attractive lobby like the theater now has. We will then have a first rate convention center. We will have a very cost-effective facility for regional or small national trade shows and conventions. Our hotel costs are substantially below those of big cities. Our transportation leaves something to be desired, which is another issue. But I think that without a magnet to draw people here, the transportation people aren’t going to be induced to improve the transportation. The Civic Center is a real jewel.
Would you have run for mayor had Mayor Maloof decided not to seek another term?
I might have. Many people did urge me to run for mayor, saying that it was time for a change – that because I have run a good-sized company and done some good at the Civic Center, I might be able to provide that needed leadership. I’ve always tried to have a vision and I like to solve problems. I think I’ve demonstrated the ability to do that, and I think we need a shot of that at City Hall.
My feeling was, however, that running for mayor would have involved a very negative campaign – saying some unpleasant things publicly and naming names – and that’s not my style. I’m a builder, not a burner; I’m not into attacking people. Maybe I won’t make a very good politician. My way is “Here’s who I am; here’s what I’ll do; I’ve got a good track record; if you think I can do the job, elect me.”
There were already four announced candidates for mayor and I just thought it would be a mess. Plus, to the extent that it is a local election, people have to live with the negative things that happen in a campaign. Bill Clinton and George Bush go on with the rest of their lives. When you have to continue to live in the community it’s different. Look at what happened with Dorothy Sinclair and Jim Maloof; I don’t’ think they ever got over it. Even if I would have won – and I think I might have – it would have been a very expensive and bitter campaign.
What about running for mayor four years from now?
I don’t really know. I’m excited about representing the Fifth District. I’m a problem-solver. I’ve convinced myself that I can probably do 95 percent of the things that I want to do from a Fifth District seat without being mayor. The mayor has one vote, just as I have as Civic Center Chairman. Maybe in a leadership role you have more of a chance to speak on the issues, but when it comes down to an important vote. If you want to get things done, you have to exercise leadership on a one-on-one basis, and get other people to support you. That’s what I’ve done at L.R. Nelson and the Civic Center. It’s not because I’m particularly bright; I’m really fairly simple-minded. It’s the idea – “Here’s a problem. Here’s where we want to go. What do we have to do to get there? Let’s go do it.” I think we could do more of that at City Hall. IBI
He has served as chairman for the Peoria Civic Center Authority for approximately five years and has been a member of numerous boards of directors of local organizations. He currently serves on the board of directors of the Illinois Manufacturers Association and the Irrigation Association.
Selected in 1984 as Illinois’ Small Business Person of the Year, he has also served on numerous state task forces including the Governor’s Task Force on Workers’ Compensation, Governor’s Small Business Advisory Council, Illinois Export Council, Illinois Manufacturers Association Small Manufacturers Action Council and Illinois Chamber of Commerce Small Business Council. He co-chaired the Illinois delegation to the 1986 White House Conference on Small Business. He is running for Peoria’s 5th District City Council seat, and will relinquish his leadership of the Civic Center Authority if the campaign is successful.
You recently announced that L.R. Nelson would consolidate its Peoria area operations in a new plant at Route 150 and Trigger Road. What led up to this?
When I bought the company in 1972, we had several operations in the Peoria area. There was a parts plant in Pioneer Park, an assembly plant in Princeville and two different sales offices in Junction City. The headquarters was located on Russ Nelson’s farm in Brimfield; engineering was across the road in a farmhouse; the Pioneer Lane building included purchasing, accounting and service. We also had a plant in Manning, Iowa.
We have been experiencing company growth through the years by consolidating operations, utilizing the same square footage. Our team has been very clever in being more productive with the space and people we have, but we have finally run out of room. Some of our big customers have become concerned about our ability to keep up with their growth. We’ve had the good fortune of growing with some of the leading retailers in the country. We are the major supplier for Wal-Mart, Target and Venture; we have picked up a major share of the True Value account; we sell to Ace and Home Depot. They are all growing, and they are concerned about us keeping up, so we felt we had to make a substantial investment in our future to assure them we could take care of their needs. That’s when we decided to fulfill a twenty-year dream and consolidate our Peoria area facilities in one location.
We feel the timing is good. Interest rates are low compared to what they were a few years ago. We thing construction costs will be low, since the market is very competitive.
Why was this site chosen?
We have tried to run this like a family business. We have tried to make it a friendly place to work. But we have three facilities now and it makes it a little hard to have contact with everyone. I have to make a conscious effort to go to Princeville. I enjoy it but I don’t’ get out there as much as I should. In our new facility we will all be together within the Peoria city limits. We located the new facility in a place that is “our in the country” but still within the city limits. Our goal in relocation was to maintain as much of our existing work force as possible by locating between Princeville and Peoria.
Did you consider moving the entire operation out of Peoria in your relocation process?
Sure. We did have a lot of other offers. Several local communities made some very attractive offers in terms of land, TIF districts or tax abatements. For various reasons – either we thought we would lose our workforce, or we thought we would be too far from the airport – we settled on the selected site.
Back in the eighties the southern states with high unemployment tried to make is very attractive for industry to move south and create jobs. The industrialized northern states have seen a deterioration in the industrial base. Manufacturing jobs have steadily fallen off; they have been replaced by service jobs or medical jobs. In recent years the northern states have tried to be more competitive and have engaged in some serious bidding wars. Look at the money that was spent to get Diamond-Star in Bloomington-Normal. I think some people question whether or not that is good long-term public policy, and I think a lot of states have pulled back from that a bit.
But there are still a lot of incentives being offered, if we would have wanted to move. Our primary incentive for staying here was our workforce. We have some super people who are bright, hard-working, caring and honest. Unfortunately you can’t show people on your balance sheet. I know a lot of horror stories where companies and moved to other place and lost their workforce. Maybe the labor was cheaper and they had other benefits, but the productivity was lower and quality was poor. Moving our of state is not a panacea. We talked about it and decided to stay here.
Was the labor union climate in the Peoria area ever a factor in your decision? How do you view the area’s labor climate?
We have some super workers; they are non-union but I think that’s because they didn’t see the need for a union. We work well together; we produce a good product; and we give good service in a very competitive market.
We will probably pay more for putting our plant here than if we would have gone to another state. If we have to pay twice as much for a plant in order to stay here, we won’t be able to compete in the marketplace, and the construction industry understands that.
We’ve had very good relationships with the unions we have worked with. We signed an agreement with TRICON when we put the exhibit hall expansion on the Civic Center, and they have produced very high quality work – without interruption, on schedule and on budget.
If union means lack of productivity and high pay for little output, then I think it’s wrong; but I sense that the construction unions here work very hard to make sure their members understand the importance of the apprentice programs, increasing skill levels, being productive and seeing if they can use fewer people through new methods of doing the job more efficiently.
Gene Moore and Greg Hasty, both of whom are labor leaders and worked with me at the Civic Center, have endorsed my candidacy. I am not anti-union. I don’t hate unions. I hate irresponsibility. If someone does something that is malicious, unproductive or anti-growth, I’m going to be against them. I don’t care if they are union or non-union, black or white, man or woman. I have talked to union people who make plenty of good sense and are trying to do some good things. I don’t understand where some other union people are coming from – and if I do understand where they are coming from I don’t like it – because I think it is self-motivated and unhelpful to society. I am pro-productivity; I am pro-people; I am a builder; that’s my life.
How do the problems between Caterpillar and the United Auto Workers affect Peoria’s business and labor climate?
I travel a lot, since we are an international business, and I find the image Peoria has is very poor because it is viewed as a very strong union town in the militant sense, not in the quality/productivity sense. Whenever there is a big flap between Caterpillar and the UAW it gets international press. As I travel around, nobody has ever heard of L.R. Nelson, but everyone has heard about Caterpillar. They see the Cat-UAW news in Europe and form their opinion of Peoria accordingly, which is unfortunate. I think it misstates the problem.
Caterpillar and the UAW have a long-standing relationship. When I came here twenty years ago, everyone wanted to work at Caterpillar. Caterpillar has historically paid approximately twice the national average for manufacturing jobs. I don’t know whether that is because Cat has been particularly effective in the marketplace, or whether it’s because the UAW has just done a terrific job of negotiating for their people, or some combination. What it clearly did was set the level of wages and benefits for the area. The real problem when I came here was when Cat would hire 500-1000 people, we would lose workers. They would go to Caterpillar for the good money, great benefits and supposed lifetime employment.
In the eighties things definitely turned around. Cat is now roughly half the size in the Peoria area that is was at its peak. My guess is Caterpillar will continue to fill in holes, consolidate, invest in productivity, outsource, etc. I don’t’ see Cat coming back to 35-40,000 workers here – ever. That has taken one kind of pressure off some of the rest of the employers. It’s put a different kind of pressure on the business community to try to replace some of those jobs, which were very high paying jobs. There’s nothing wrong with flipping hamburgers, but that doesn’t create wealth.
What does the Peoria area have to do to create wealth through better-paying jobs?
What we have to do is find more manufacturing and more services which can be sold outside the area – also more tourism attractions. We need things to bring dollars in. If we are all lawyers and accountants and cut each others grass, we don’t’ produce any wealth – we just move money around. Wealth creation is producing a product or service that you can sell to somebody in another state or another country. That’s what we’re doing.
As a manufacturer, what will be the keys to your success in the next decade?
We have to focus on the marketplace and be aware of the major changes that are occurring in demographics. We have to be aware of the changes occurring in distribution and retailing. Most of our products are sold through retailers or contractors. We have to be very conscious of things happening in the rest of the world.
The U.S. has been an incredibly dominant power for years, but Japan has emerged as a major power. Germany as emerged as a major power and, taken together with the Common Market (although that is happening slower than some anticipated), will constitute a giant market. We are going to have much more global competition. We currently compete with companies in high-labor cost companies like Germany, but we also compete with companies from China where they pay workers practically nothing. We are in a very competitive business and we sell to people who are very tough negotiators – if you don’t want to do it on their terms, they have someone available who will.
What is your philosophy on world trade? What can we expect from the Clinton administration?
As a businessperson I get mixed signals. Philosophically I support the concept of free trade if you tack on “fair trade.” Because the U.S. has been such a major industrial power since World War II, we have been very generous in terms of opening our markets to help other people get started, putting Japan and Germany back on their feet, as well as helping underdeveloped countries. We have been very liberal in terms of letting people in but we haven’t been very tough in insisting that is be reciprocal.
Free trade may in fact mean some discontinuities for some industries and companies, but, over time, we as consumers and taxpayers will be better served than by protecting companies that are very inefficient. For example, in Spain there were a bunch of local producers of our kind of product who were protected by 40 percent tariff barriers. We couldn’t fight that. They have no taken the duties off to get into the Common Market; there is a five percent equalized duty to get into the Common Market. We can compete with that; we have a better quality product. The same is true in Mexico where there were some local producers making some fairly shoddy products; but if you weren’t’ a local producer, you couldn’t get in. Yes, some jobs will cross the border just like jobs cross from Illinois to Indiana or Arkansas, but over time we will be better off. There are some issues in terms of tariffs, human rights, and environmental issues that the government needs to deal with.
It seems to me that American industry has taken two approaches to the free trade issue. Some industries have really thumped the drum for protectionism (the steel industry comes to mind), saying, “Keep them out; give us a change; we’ll get organized.” My impression is some of them have. Some of the steel companies have become very efficient, picking out a niche and investing in new technologies. But some apparently haven’t and are still struggling. Much of the textile industry in the U.S. moved from New England to the south to the Far East. I know a company in South Carolina that decided they were staying. They backed up and went to their customers saying, “What do we have to do to stay?” They learned how to do set-ups in fifteen minutes that used to take two days. They worked very hard on quality, automation and getting their people involved. They didn’t just say “Protect us the way we are.” They looked at the world, saw that it was changing and said, “Hey, we better get with it. We should do a better job.” That’s what we have tried to do.
How will the new family leave legislation recently signed by President Clinton affect L.R. Nelson?
The interesting thing is, as part of being a good employer and making this a family-oriented place, w have had a family leave policy for years. We give people unpaid leave for most reasons. I guess my problem with family leave legislation as I understand it is that it is poor public policy. Philosophically I think it’s great, but you can’t say that it comes at no cost. For a large business with thousands of jobs, perhaps it’s not a major problem. But if a business with 50 employees has to keep a job open, or hire an additional person to fill a job while a key person is gone, or everyone else has to do additional work, it is a problem. What happens when a company hires one worker to fill the job of someone on leave, when that person comes back? Do they fire the new person, or do they keep someone on that they don’t now need?
What troubles me is the concept of mandating family leave. I don’t think it’s serious; I don’t think it’s going to be catastrophic or make American industry non-competitive by a single stroke. What bothers me is that the government has said, “Okay, we have a new scheme. Instead of giving an employer incentives to enact family leave, we’re just going to mandate it. We’ll just write a law and say, ‘You must.’”
When you start mandating things it just keeps going. Next we’ll mandate family leave for companies with over 25 employees. Then we’ll mandate paid leave; then this; then that. It’s great politically, but people don’t realize that it is a cost to business. The calculus of it is very complicated, but there is a definite cost. If they also start mandating healthcare and pensions and a lot of other things, it will make us more non-competitive as a nation. If people wonder why companies go to Taiwan or Mexico or other places, it’s because all of these things add up when a company is trying to compete in the marketplace.
I have much greater faith in the marketplace than a lot of politicians have. A lot of people who are kind of demagogues have put this forth and they thing they are the champions of the people. That’s ridiculous. I’m the champion of the people because I provide jobs; and I’ve kept this place in business in a very competitive market where some of our competitors have either moved out of the U.S. or gone out of business. In a small way, I’m much more a champion of the people because we’ve kept this place alive.
Nick Owens assumed the position of president and chief operating officer for your company in December 1992. What has he meant to L.R. Nelson?
I had tried a few years ago to pull myself back from the business and hire a chief operating officer. It looks like maybe the third time is a charm, since we had a couple of experiences which just didn’t work out. It’s too bad because it was traumatic for the organization and I’m sure it was traumatic for the individuals.
There are a lot of people who know Nick and me who said that it wouldn’t last six months. We’re both strong-willed people with different personalities; Nick is more outgoing while I am more introverted; he is a very good operating man and I’m more of a visionary. Nick is a super guy, very bright and results-oriented. He is an excellent people person. We share a lot of the same values about how to run a business and how to treat people – what’s right and what’s wrong. I knew of Nick for a long time, but didn’t know him that well until he became a commissioner on the Civic Center Board. Then I asked him to come on L.R. Nelson’s board of directors. It was sort of like dating – we got to know each other over a period of time. We developed respect for each other. Anyone who knows us knows we don’t agree all the time, but that’s healthy.
Having a partner to run the daily operations has allowed me to work on business development. We have the relocation, which is a major project, and we have purchased a couple of new product lines that add to our capabilities. We are working on a number of things in Europe. All of these things require time and being gone from the daily operations of the company. If they are successful, they bring in money to the company, add to our diversity by product and geography, and ultimately end up brining jobs and money to Peoria.
Peoria sometimes gets a reputation of having a negative business climate via over-regulation of lack of responsiveness by local government. What is your opinion of the business climate in Peoria? What are the pluses and minuses of being a manufacturer in the Peoria area?
Having lived in Peoria for twenty years, I think it’s a mixed bag. As a place to live and work, Peoria is a very nice place. It’s a very friendly town. Until recently we haven had a major crime or drug problem. Our children received a good education in the public schools.
There are some great workers here. We had a plant in California, by contrast, where when the surf’s up people don’t show up. They stole; they did all kinds of things. For our business the geography is good. We are centrally located and many of our customers are in the Midwest. Those are the pluses.
However, based on personal experience and the experience of others, it appears that while Peoria may not be unfriendly, the Peoria bureaucracy doesn’t appear to be very helpful to business. I sense that in terms of development, they don’t know exactly what to do to attract businesses; zoning codes can be very cumbersome and not particularly commonsensical. I think Peoria has, in fact, driven some businesses away. Unfortunately we have made it a little difficult for people to do business here. That’s one of the reasons I’m running for City Council. Based on business experience and Civic Center experience, I’d like to see if I could make a difference in the city.
What kind of help have you received from the City of Peoria in making your decision to relocate and consolidate operations?
We made a conscious decision as a company to stay in Peoria. My experience with the city in trying to build this new plant is that they are cheering us but are not being particularly helpful. We don’t have any incentives to locate here; we are not in a TIF district or an enterprise zone. As far as I know they are not paying for anything; we are probably going to be paying property taxes of a quarter-million dollars a year. In contrast to what we could get by locating someplace else, we are paying a real price to stay here. That’s unfortunate.
Not a single city councilman has called me and said, “Gee we’re really glad you’re staying.” I haven’t received a letter or a note or anything – it’s just kind of “ho-hum.” And this is probably the biggest industrial investment in Peoria in a long time. Nobody did anything to get it, but they are cheering publicly like it was their idea or like they did something. They really didn’t.
How responsive were city leaders as you led the effort to put the Peoria Civic Center on a solid financial footing?
The same thing was true with the Civic Center. We had to work very hard behind the scenes at the Civic Center to get proper financing and get some things done in the building. I won’t go public with it, but some crazy things went on. I asked myself, “Don’t they really care? Don’t they realize what an asset it is? We’ve got to make it work.” I think the City Council members as individuals were very pro-Civic Center; they didn’t’ want us to shut it down, but nobody knew what to do to make it work, so there was all this carping and criticism. Finally, when we had a plan put together, there was support, but it wasn’t forthcoming initially.
I got involved in the stadium affair because the Civic Center Authority was the conduit for the state money. What a nightmare! There was no leadership or vision. Everybody was pulling different directions, discussing it through the press and getting very territorial. The city didn’t want to put the stadium in Southtown because they said they wouldn’t get any payment for the land or any tax revenue. I said, “We will pay you the same amount per square foot that Kepple paid you. We will work a payment in lieu of tax program right into the lease – we’ll work it out.”
It looked like Southtown was the ideal location, but the city clearly didn’t want it in Southtown. I don’t know why; they haven’t put much else in Southtown. Their plan was to put it on the riverfront. There were several problems with that; one was it didn’t fit. They said, “We’ll build it over the railroad.” So we met with the railroad people and they about passed out. They said, “My God, can you imagine what would happen to us if a train derailed in there and knocked down the stands and injured 2,000 people.” Well, that wasn’t a good idea, so they said, “Let’s put it out on the river.” Well, now you have to deal with the Corps of Engineers and the Illinois Department of Conservation. It was an incredible mess.
At one point we were going to put the stadium in the Civic Center parking lot just so we wouldn’t lose state funds. We had to pick a site and we were all arguing. In my opinion the way it was handled was unconscionable. I stepped into the middle of it and said, “Okay, we’ll have a survey done; we’ll go get some people who have built these things before.” Then we were criticized because the consultant said it ought to be in Southtown. He gave good reasons, but nobody listened. I felt like there was a big dog dragging me around town because nobody really cared about anything but their own selfish interests. For this and a lot of reasons I decided to run for public office. It’s possible I won’t get elected because I’m too direct.
Tell us more about your time as Chairman of the Civic Center Authority. What do you see for the future with the exhibit hall expansion?
The future is very bright. When I became Civic Center Chairman four and a half years ago we had a $65 million building on which we had only spent about $165,000 a year, and it was in just terrible physical condition. We didn’t have any money; we had a fifty percent turnover in staff; and the Rivermen were losing two hundred thousand dollars a year. The press was on our case continually. Some people weren’t performing particularly well. We had an accounting system that was unreliable. The year before I became chairman there was a $200,000 negative adjustments to the books. It was just a mess.
Now I think we have it on track. We replaced the comptroller with a man who has not has a single adjustment since becoming financial director. We cut the deficit in half for the Rivermen and sold the Rivermen; I think Bruce Saurs has done a terrific job running the team. The first meeting I chaired included a vote on whether we should keep hockey. We were ready to shut it down. The vote was four to three. I cast the deciding vote in favor, or we wouldn’t have hockey today. I think we’ve been vindicated.
We have found ways, without raising taxes, through a new intergovernmental agreement, to spent about $3 million over the last four years to substantially improve the Civic Center. We stopped the operational bleeding and substantially reduced the operating deficit. We got SMG to manage it; we got Volume Services to run the food services; we’ve gone from a negative working capital to $1.5 million positive working capital.
The exhibit hall expansion is major opportunity. We will double the amount of exhibit space; we will more than double the amount of meeting space. We have found that trade shows and conventions today do a lot more “break out” meetings; they need more meeting space. At last count we already had 43 dates scheduled for the new exhibit hall and it’s not even done yet. Because it is going to be on budget and on time – which is refreshing for a public building – we will probably produce some revenue from it yet this fiscal year, which will help meet or beat our budget.
Can the Civic Center eventually pay for operation without tax revenue?
Next year, with the exhibit hall, we have a good chance of moving toward my goal of no operating deficit. It is feasible in the near future for the Civic Center to run in the black apart from the hotel, restaurant and amusement taxes. When I became chairman, I said in three to five years I thought that we could. We’ve reduced a $750,000 operating deficit to $300,000. We still have a ways to go, but it’s moving in the right direction.
When we announced the exhibit hall expansion, we didn’t ask, “What can we build for $4 million.” We asked, “What should we build long-term, so what we do now allows us to do something intelligent in the future?” After we expand the exhibit hall the next move will be to go up two floors and out with a very attractive lobby like the theater now has. We will then have a first rate convention center. We will have a very cost-effective facility for regional or small national trade shows and conventions. Our hotel costs are substantially below those of big cities. Our transportation leaves something to be desired, which is another issue. But I think that without a magnet to draw people here, the transportation people aren’t going to be induced to improve the transportation. The Civic Center is a real jewel.
Would you have run for mayor had Mayor Maloof decided not to seek another term?
I might have. Many people did urge me to run for mayor, saying that it was time for a change – that because I have run a good-sized company and done some good at the Civic Center, I might be able to provide that needed leadership. I’ve always tried to have a vision and I like to solve problems. I think I’ve demonstrated the ability to do that, and I think we need a shot of that at City Hall.
My feeling was, however, that running for mayor would have involved a very negative campaign – saying some unpleasant things publicly and naming names – and that’s not my style. I’m a builder, not a burner; I’m not into attacking people. Maybe I won’t make a very good politician. My way is “Here’s who I am; here’s what I’ll do; I’ve got a good track record; if you think I can do the job, elect me.”
There were already four announced candidates for mayor and I just thought it would be a mess. Plus, to the extent that it is a local election, people have to live with the negative things that happen in a campaign. Bill Clinton and George Bush go on with the rest of their lives. When you have to continue to live in the community it’s different. Look at what happened with Dorothy Sinclair and Jim Maloof; I don’t’ think they ever got over it. Even if I would have won – and I think I might have – it would have been a very expensive and bitter campaign.
What about running for mayor four years from now?
I don’t really know. I’m excited about representing the Fifth District. I’m a problem-solver. I’ve convinced myself that I can probably do 95 percent of the things that I want to do from a Fifth District seat without being mayor. The mayor has one vote, just as I have as Civic Center Chairman. Maybe in a leadership role you have more of a chance to speak on the issues, but when it comes down to an important vote. If you want to get things done, you have to exercise leadership on a one-on-one basis, and get other people to support you. That’s what I’ve done at L.R. Nelson and the Civic Center. It’s not because I’m particularly bright; I’m really fairly simple-minded. It’s the idea – “Here’s a problem. Here’s where we want to go. What do we have to do to get there? Let’s go do it.” I think we could do more of that at City Hall. IBI
