There are a number of reasons why Caterpillar chose Tucson as the headquarters for their surface new mining operation headquarters. It would be foolish to think the attractive incentive plan did not have a huge role in bringing the industrial machinery company to town, but Caterpillar representative John Oliver recently spelled out the other factors which made Tucson the choice.
Landing Caterpillar is seen as a huge coup for Tucson and Southern Arizona. By the time the full move is made, nearly 600 new employees will relocate to the region, with most making at least $90,000 a year. The Rio Nuevo district will also have a hand in building the new headquarters which will be the center piece of the Rio Nuevo Multipurpose Facilities District.
Rio Nuevo will build Caterpillar a $50 million headquarters building located just to the west of downtown. The company will reimburse the cost with a 25-year lease at $2-million a year. The deal also includes an 8-year property tax abatement. The company will also receive money towards its relocation. Most reports have the amount at $2 million, though the Decatur Herald-Journal said the package could be worth up to $6.
About 20 months ago Caterpillar made the decision to restructure a number of divisions and combine all of their surface mining operations into the Surface Planning and Technology Division and the idea was to find a central location for the new group. The operations, including manufacturing, were spread through several towns in Illinois, Milwaukee, Wisconsin and Germany.
“From a business and sustainability point of view we need to form a more corroborative work environment,” Oliver said. “Part of that criteria is that we wanted a corroborative environment that was also an employee destination.”
Although Caterpillar’s corporate headquarters are in Peoria, Illinois, the company considered having the new division leave the region because with several offices in rural Illinois there was trouble attracting young professionals.
The company looked at a number of locations both domestically and internationally, but soon settled on a domestic location. Oliver called it a “competitive process” but the company was close to moving everything to the corporate headquarters, but as the process continued Tucson continued to fill many of the needs.
“Tucson was a very good choice for us as a company,” Oliver said.
While Caterpillar has a number of valid reasons for coming to the region, the proximity to the Tucson Proving Ground and Tinaja Hills Learning and Demonstration Center was a big one. The two facilities are on one site with over 300 employees. The facilities allow Caterpillar to not only demonstrate mining products to potential customers, but train both customers and dealers on operations.
“They can go out and kick the tires so to speak,” Oliver said. “It’s real and it is very different than going out to a factory and seeing the parts. It is a very different experience.”
Considering the facility partners with a local mine, giving them a working mine to test equipment on, it would be nearly impossible to duplicate in other locations. Never mind most of the land near their Illinois facilities is expensive farmland.
The fact the proving grounds is 30 minutes away from the new facility means that Caterpillar can host customers for meetings with designers, then take them out to actually test the equipment and give their feedback.
“Now they can get their technician out from behind the computer and ‘out on the iron,’” Oliver said.
The mining base in Arizona and surrounding areas was also a very important factor for Tucson. Arizona makes up 65 percent of the United State’s copper production, and there are 117 mining sites in the region and Caterpillar has customers in Arizona, New Mexico and Northern Mexico among other locations.
While 350 days of sunshine is a big plus for Tucson, having the University of Arizona in town was a very big factor. The company already has a partnership with the University of Arizona to create a Global Mining certification program, which will start in September and they have already committed to hiring new employees from the school.
What may come as a surprise to many is the fact that Caterpillar found the city and state to be very “business friendly.”
“The state was very competitive,” Oliver said. “It was absolutely a great place to do business. That was very different than other localities that we explored.”
Arizona was very aggressive in trying to make this happen and Oliver gave a lot of credit to the City of Tucson, Sun Corridor, Rio Nuevo, the Arizona Commerce Authority and the Governor’s office.
“I can’t stress enough the collaboration with the local teams,” Oliver said. “This was critical to the selection process.”
A handful of employees are in Tucson now, working out of their homes or hotel rooms, but a temporary facility will be open in September at a refurbished courthouse leased from the city. Slowly but surely, more and more employees will begin to make the move to Tucson.
Although certainly the city of Tucson is a big winner, the entire region should benefit. Marana Mayor Ed Honea has said on multiple occasions that surrounding communities like Marana, Vail and Oro Valley that have higher end housing will be the “big winners” from the deal and he feels that Marana’s proximity to I-10 is a huge plus for them to land many of the new employees. The town is actively marketing to Caterpillar to showcase their neighborhoods, schools and amenities.
Honea said communities the size of Marana and Oro Valley and could not afford to spend the money on the incentives to lure Caterpillar, but that did not mean they would not benefit.
Although Tucson had to spend a lot to land Caterpillar the move is expected to be worth $600 million to the region and marks a shift in the city being a bridesmaid in many of their attempts to land major companies to the region.
For Caterpillar the move made sense strategically, logistically and, in the end, financially.
“We are very happy to be here in Arizona and we feel very welcomed’,” Oliver said. “It has been a great experience so far.”