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What Happened After the Last HQ2 Competition

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“Automobile Alley in Oklahoma City” by katsrcool/Flickr. Licensed under CC BY 2.0

When I traveled to Oklahoma City for the first time a few years ago I was shocked to discover that in the civic narrative of the city’s transformation – it’s origin story if you will – the triggering event for change was losing a competition for a United Airlines maintenance facility in 1991 to Indianapolis.

This United Airlines maintenance base was like a Foxconn or HQ2 of its era. It was a big deal because the thousands of jobs would be very high paying union mechanics and there were going to be a lot of them. It was anticipated that many people would be moving from the San Francisco area, where UA’s main maintenance base was, to this new facility. Here’s how the Chicago Tribune described the deal back at the time.

Score another one for Indianapolis. United Airlines chose Indiana’s capital Wednesday for its $1 billion aircraft-maintenance center, ending a 21-month bidding war among several states for the economic plum.

It was the latest of several recent development coups establishing Indianapolis as the pre-eminent growth city of the Midwest.

Just two weeks ago the U.S. Postal Service chose Indianapolis over 30 other Midwestern cities for its Express Mail sorting facility, which is expected to create up to 700 jobs. Four years ago the city, which has become the national center for amateur sports since the construction of the enclosed Hoosier Dome stadium in 1984, hosted the Pan American games.

The United maintenance hub, however, is by far the largest economic development project captured by the central Indiana metropolis in several decades.

The 3 million-square-foot complex of airplane-maintenance hangars and other buildings, to be built on a 300-acre site at Indianapolis International Airport, will employ up to 7,000 workers paid an average of $45,000 a year.

It will be, in fact, one of the largest aircraft-maintenance facilities in the world.

In addition, the center, to open in late 1994 to service United`s growing fleet of Boeing 737 jet aircraft, is expected to generate another 5,000 jobs at Indianapolis firms that will provide supplies and services to the center and its employees.

Construction of the facility, scheduled to begin next August, also will provide jobs for about 5,000 construction workers and will funnel millions of dollars of additional revenues into the tax coffers of Indianapolis and Indiana.

At the time this competition was ongoing, Oklahoma City had been struggling during an energy bust. The city went all in to win it, putting $300 million in incentives on the table. They made it to the final two, only to be told they’d lost out to Indianapolis.

The city pressed UA to give them a post-mortem analysis on the loss, and the airline eventually told them that even though they had the best bid, their employees had given Oklahoma City the thumbs down. They were unwilling to move there.

Ron Norick, the mayor at the time, went to Indianapolis and saw the downtown developments there. I can assure you, downtown Indianapolis was not that great in 1991. Most downtowns weren’t. However, the level of activity they did have – the relatively new to town Colts, the Pan Am Games, the restored Union Station – was much better than many other places of that era.

Norick ended up proposing what became the first iteration of MAPS – Metropolitan Area Projects – in which city taxpayers agreed to a limited time sales tax increase to fund downtown improvement projects. It was only after MAPS passed that the 1995 bombing occurred, and completing the projects was part of the city’s healing process from that trauma.

What I find interesting about this is that an event which looms so large in the leadership consciousness of Oklahoma City is completely unknown in Indianapolis. I never even knew that it was OKC Indy had beaten to win the deal in the first place. Presumably almost no one in Indianapolis did. Nor did they know the transformative impact this loss had on OKC.

But there’s a reverse side to that. The people I talked to in OKC also had no idea what had become of that maintenance facility in Indianapolis. As it turns out, that United base never achieved its promise. In fact, United closed it only a decade after it opened in 2003. According to the New York times from that era:

A huge, light-gray building, trimmed jauntily in blue, rises from the rolling, grassy fields on the far side of the runways at Indianapolis International Airport. From the approach road, the building seems active. But the parking lots are empty and, inside, the 12 elaborately equipped hangar bays are silent and dark. It is as if the owner of a lavishly furnished mansion had suddenly walked away, leaving everything in place.

That is what happened. United Airlines got $320 million in taxpayer money to build what is by all accounts the most technologically advanced aircraft maintenance center in America. But six months ago, the company walked away, leaving the city and state governments out all that money, and no new tenant in sight.

The shuttered maintenance center is a stark, and unusually vivid, reminder of the risk inherent in gambling public money on corporate ventures. Yet the city and state are stepping up subsidies to other companies that offer, as United once did, to bring high-paying jobs and sophisticated operations to Indiana. Many municipal and state governments are doing the same, escalating a bidding war for a shrunken pool of jobs in America despite the worst squeeze in years on their budgets.

The buildings have subsequently be re-leased, but last I checked the city was still paying off the bonds it issues for the gigantic subsidies it had doled out to win the deal. From the Indianapolis perspective, the deal was a big underperformer and arguably a money loser.

It’s very interesting to me that a shared event of that nature can have such an impact yet produce no shared consciousness.

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