ECONOMIC TEAMWORK
Finding an economic path back through collaboration in Mercer County
The Mercer County town of Hermitage is rebuilding a slice of northwest Pennsylvania’s economy by taking a page from the playbook that’s being used 70 miles away in Pittsburgh.
Rust Belt towns like Pittsburgh and Hermitage share a history of heavy industry and dreams of boosting their economies with higher education, medicine and the entrepreneurial spirit. What separates Hermitage’s effort from many cities nationwide with similar goals is the extent of collaboration among government, academia and private investors.
“You don’t have to bring people in from Silicon Valley to innovate,” said Ketaki Desai, executive director of the eCenter@LindenPointe, a sleek 16,000-square-foot business incubator, which is welcoming three startup companies this year. “We can create it here. Talent is everywhere.”
Pittsburgh is nurturing its entrepreneurial talent with the likes of the AlphaLab business incubator in East Liberty and Nova Place coworking space on the North Side, creating jobs as the coal and natural gas industries seem stuck in idle and as reim-bursement for health care services is under pressure.
The heavy industrial foundation of the Hermitage economy began evaporating in 1987 when Mercer County’s biggest employer, Sharon Steel Corp., went belly up, throwing some 2,700 people out of work. In nearby Sharon, the former Westinghouse Electric Transformer Plant, where torpedoes were made during World War II, was shuttered about the same time as other smokestack employers fell like dominoes.
“We got crushed here with the steel recession in the 1980s,” Hermitage assistant city manager Gary Gulla said.
Now, the collaboration among colleges and universities and private investors aims to re-create the region’s economy, one startup at a time.
At the center of the city’s revitalization is the eCenter@LindenPointe, part of a 117-acre industrial park featuring a community college campus, doctors’ offices and outpatient surgery center. Across the way is the 5,200-square-foot Training and Workforce Development Center, which opened in 2008 and made its meeting and training facilities available to all businesses in the region.
The right pitch for grants
The one-time airport site sat idle for years, until the city began looking for government help around the turn of the new century. The timing could not have been better: Grant money was available and the government was looking for partners in economic revitalization.
“We had the right story at the right time,” Mr. Gulla said.
Hermitage partnered with private developer Fred George in 2001 to develop a 117-acre site into a business park located roughly in the middle of the city.
Mr. George put up $2 million, a state grant covered another $2.5 million, and the city kicked in $1.1 million to buy the land and to install water and sewer lines and other amenities. The city and developer wound up as co-owners of the park.
The city owns about 40 acres of the land and continues to sell off lots. Government grant money covered the cost of the eCenter and the training center, leaving the city as landlord of debt-free buildings.
A nonprofit corporation, Linden Pointe Development Corp., oversees the buildings, while the grant money continues to yield benefits: because the buildings are debt-free, eCenter space and ancillary support is available at the unheard of rate of $1 per square foot.
By comparison, prime office space in Pittsburgh can exceed $30 a square foot.
“We were very successful in getting the grants,” Hermitage city manager Gary Hinkson said. “But in the long view, we can’t be concerned by what happens just in Hermitage. We want to use the building to support businesses in the region.”
The eCenter got off to a slow start when it opened in 2012. The recent backing by the colleges and universities is helping the facility get its footing. The eCenter hopes to reach out to entrepreneurs in Pittsburgh, Cleveland and elsewhere with the promise of cheap rents and supportive programs.
For now, the eCenter is full with six tenants.
To attract startups from outside Mercer County, the eCenter is putting together a business contest offering a $25,000 prize. Ben Franklin Technology Partners, the state economic growth investment fund, is providing the prize money and judging is anticipated before June 1, Ms. Desai said.
“We want to see what kind of interest we can draw to the region,” she said.
Meanwhile, fundraising for a second $25,000 prize is being considered, with winners getting 20 rent-free weeks at the eCenter to turn their ideas into business ventures.
Hermitage has also used its tax structure to promote growth by setting higher rates for a resident’s earnings rather than property taxes — the opposite of many municipalities in Pennsylvania. Earned income tax proceeds support most of the city’s operations — outpacing property tax revenue by a margin of 5-to1, about $6.6 million compared with $1.25 million annually.
The property tax rate hasn’t been touched in 26 years. “Keeping the property tax down can be an economic development tool,” Mr. Hinkson said.
Penn State University, which has a campus nearby, became an eCenter tenant in August. Again, timing worked in the city’s favor: The university came with a $50,000 grant, part of its Invent Penn State initiative to spur entrepreneurial development.
“Penn State could play a very large role in the economic development of the state,” said JoAnne Carrick, campus director and chief academic officer. “Capturing ideas at the earliest stages, that was the idea. It’s an exciting opportunity.” The grant money will help pay for a 3-D printer, which is critical to the rapidly expanding additive manufacturing arena. The 3-D printer will be available to everyone who uses the eCenter, Ms. Carrick said.
Butler County Community, Thiel and Westminster colleges, Slippery Rock University and the University of Pittsburgh also have said they want their students to have the opportunity to use the center, Ms. Desai said.
Getting students involved is a way to expand their opportunities while preparing them for life outside academia, Thiel College president Susan Traverso said.
“These are the kinds of real-world learning opportunities that bring student academic programs to life,” Ms. Traverso said.
Meanwhile, students from 10 Mercer County high schools can take grantfunded entrepreneurship classes, taught by eCenter employee Lisa Evans, at the Training and Workforce Development Center. Mr. Gulla, who helped develop the course, fills in as a guest speaker. Hermitage’s strategy may be bearing fruit: Three large businesses in the city announced expansion plans last year in excess of 100,000 square feet, Mr. Gulla said. And work will start soon on 180 residential units in the city.
The eCenter’s appeal is reaching established companies as well. Among the newest tenants is Verdant.Software, a spinoff of Cross IT Services & Solutions LLC in nearby Greenville. CEO John Frangakis, a Linden Pointe Development board member, said the center’s low overhead creates a test kitchen for businesses to try out services and products.
“It allows us to say, ‘let’s see what we can do in a year,’ ” he said. “This is really about giving you that opportunity.”
Industrial Weapon, a digital-sign software company based in the Pittsburgh suburb of Green Tree, has a similar use in mind for eCenter space it leased, Ms. Desai said. Company officials were not available for comment.
“No one is thinking parochially,” Ms. Desai said. “They’re saying, ‘let’s make this a resource that everyone can use.’ We’re really reaching out to the community with open arms.”