4/29/10

Will Other Firms Centralize Administrative Departments? Cities Are Paying Cash to Those That Will!

One of the big questions that rolled around in my head about WilmerHale's centralization of their Administrative Departments into one Ohio office was "How can they afford to move all these people and relocate to a place where they don't have an existing office??"  Well, it turns out that the State of Ohio, Montgomery County, and the city of Kettering are laying out huge cash grants and tax credits to lure WilmerHale to the Dayton suburb.  According to the Manufacturers Group Inc.:
(WilmerHale) has been awarded a 65 percent job creation tax credit for an eight-year term as a result of the company’s project in the City of Kettering (Montgomery County). The value of the tax credit is estimated at $1,456,570 over the term, and the company would be required to maintain operations at the project site for at least 11 years. WilmerHale has more than 1,000 lawyers, with offices in 12 cities in the United States, Europe, and Asia. WilmerHale provides legal representation across a comprehensive range of practice areas that are critical to the success of its clients. This $3.4 million project is expected to create 187 jobs. (emphasis added)
The Springfield News-Sun also mentioned the large cash and tax incentives that WilmerHale got for moving its folks from New York, Boston and Washington DC:

There was also a list of financial incentives, most significantly a $1.46 million job creation tax credit approved Monday, April 26, by the Ohio Tax Credit Authority.
The Montgomery County Commission approved a $250,000 economic development grant April 20, and the city of Kettering and Miami Valley Research Foundation each pledged $500,000 in support. (emphasis added)
I've actually got to tip my hat to the WilmerHale partners like Jay Westcott for taking advantage of a down economy and governments that are willing to pay you to move to their towns. According to the Springfield News-Sun, Westcott looked at 32 cities for the centralization and the Dayton suburb apparently struck the right deal with the firm.  Westcott said, "Of all the places we looked, this was the place we were most comfortable, that had a strong labor pool and really a very cooperative group of people who worked with us."

In an area that has businesses like LexisNexis, NCR there has to be a great labor pool.  I'm sure that the fact that their moving into the old Deloitte Consulting offices along with a few million dollars in grants and tax incentives made the move a no-brainer.

Everyone knows that BigLaw is notorious for being a "monkey-see, monkey-do" industry. If WilmerHale shows that local governments are willing to pony up millions of dollars for a couple hundred jobs, then it can be assumed that more firms will start to centralized their operations. Firms will no longer need to house administrative employees in Class-A real estate offices in high-cost cities.  Soon you might find that many of your IT or Accounting staff is located in cities like Kettering, Ohio, or Tupelo, Mississippi, or Lincoln, Nebraska. Places where economic times are tough and the states are betting that paying millions for a few hundred jobs now can help their struggling economies rebound out of the current recession.

The WilmerHale deal is for ten years.  This makes me think of those Wal-Mart incentives that cities give for a few years, and then after they expire Wal-Mart looks to the next city for another deal and leaves the initial town with an empty building.  Perhaps firms can leverage these few hundred jobs every few years and find local governments willing to pay them to come to town. Get ready to 'centralize'!!

Bookmark and Share

7 comments:

Jason said...

It's a no brainer isn't it?

For admin functions it makes perfect sense. A lot of the UK BigLaw firms run most of their global IT function from a central point (and some of those keep costs lower by locating that site outside London).

Now whether we can get UK local government (or national government) to put up the money to relocate firms outside London I don't know. But with an election imminent maybe now is the time!

Jason said...

Greg,

I'm wondering when law libraries will end up centralized (and I mean "pooled"), with law librarians being housed in call centers to handle lawyer's requests from membership firms. Is such a vision even probable? Large law has found a way to centralize other aspects of business (e.g., self-insurance pools), why should access to legal content be any different?

Greg Lambert said...

Jason,

That's a good question... and one that I can only theorize on at the moment.

I imagine that there would be some barriers to pooling a research center like this (especially through the vendors that sell subscriptions directly to firms.) But, I wouldn't be surprised to see something evolve over the next few years from companies like Integreon where they work out the logistics of pooling a library together.

This type of operation might also help smaller firms as well... if a dozen firms in a close proximity pool their resources together, then perhaps they could focus on expanding their ability to access professional researchers or expanded collection because of the reduction in duplication among the member firms.

It's something to think about...

Joe Hodnicki said...

When I read about WilmerHale's "business center," the first thing I did was look to see how close any WilmerHale firm office was. None. Seems like a first for a US firm to relocate admin functions a very far away from the home office. Tax incentives a sound move on the firm's part. Why not, everyone else gets them to relocate.

My second thought, Dayton? (actually Kettering as you reported). A short 5 or so miles from LexisNexis US Regional HQ in Dayton. Makes me wonder about there being some sort of connection here.

Anonymous said...

Certainly not the first firm to move its admin operations to a city that is not near any of their main offices. Orrick moved its admin operations to Wheeling, WV in 2001! This whole notion of centralization by law firms is old news.

Greg Lambert said...

You're right... it isn't the first (nor probably the last) to centralize. However, my point was that there is a lot of incentive (read: cash & tax breaks) that are available for firms that are also thinking about this. Not sure that Orrick got such a sweet deal (although I could be wrong.)

Cuboid Master said...

I read in another blog that 32 other cities were being considered. Any idea which cities they are? I am *very* anxious to know.

 

© 2014, All Rights Reserved.