Negotiations to get Caterpillar Inc. to put a regional headquarters in Tucson began more than six months ago and involved dozens of players, multiple site visits and more than $50 million in incentives pledged.
Gov. Doug Ducey announced Tuesday the addition of Caterpillar’s Surface, Mining & Technology Division to downtown Tucson with up to 600 executive jobs over the next five years and an estimated economic impact of $600 million.
The state has offered Caterpillar, a heavy-equipment manufacturer, a $4 million Arizona Competes Fund grant and is in the process of finalizing the agreement, said Susan Marie, a spokeswoman for the Arizona Commerce Authority.
At a special board meeting Wednesday, May 4, the Rio Nuevo Multipurpose Facilities District will vote on a proposal to pay Caterpillar $2 million for relocation costs. Rio Nuevo is also proposing to buy city-owned land west of Interstate 10 and Cushing Street to build the company’s regional headquarters.
Rio Nuevo’s budget for the construction is estimated at around $50 million, and Caterpillar would enter into a 25-year lease, Rio Nuevo Board Chairman Fletcher McCusker said.
“What Rio Nuevo intends is to build the headquarters facility for Caterpillar on the original Rio Nuevo site,” he said. The five-acre site was where a University of Arizona Science Center was proposed years back but not built.
“Rio Nuevo is exempt from the gift clause so we don’t have the challenges that you see with World View,” McCusker said, referring to the Goldwater Institute’s challenge over the legality of Pima County’s $20 million incentive package to the near-space exploration company. The “gift clause” in the state Constitution limits government aid for individual companies. Last summer, Arizona Attorney General Mark Brnovich ruled that Rio Nuevo is exempt because it is a “tax levying public improvement district.”
The size or look of the future Caterpillar building has not been determined, but typically about 250 square feet per executive staff member is allotted. If the company does grow to 600 or more employees, the building would be at least 150,000 square feet and have multiple stories.
“They want the building to be iconic, something that represents Caterpillar but is not ostentatious,” McCusker said.
He said the $50 million could be secured by Rio Nuevo through direct bank financing or by issuing bonds.
“This is huge for Tucson,” he said. “We’re just really happy to be a part of it.”
SALARIES $90K and up
The majority of the jobs will be filled by relocated employees from around the globe in executive management, engineering, product development and support positions. Salaries are in the $90,000-plus range.
“In addition to bringing jobs and capital investment to Southern Arizona, a project of this level will have a ripple effect throughout the community and state,” Ducey said.
Moves are set to begin in the coming weeks.
Between 40 and 60 employees will relocate into a county-owned building at 97 E. Congress St., while the new facility is built.
Caterpillar has a proving ground near Green Valley that opened in 1990. It recently installed a hybrid solar and diesel power micro grid system.
Caterpillar also has a large plant in Monterrey, Mexico, and suppliers throughout northern Mexico.
“The ability to get closer to our customers and tightly collaborate across all aspects of the business is at the center of our strategy,” Tom Bluth, Caterpillar’s vice president who oversees the Surface Mining and Technology division, said of the decision to move to Tucson. “Southern Arizona is a growing region known for a workforce rich in mining, technology and engineering expertise as well as an attractive quality of life for both families and young graduates.”
Tucson Mayor Jonathan Rothschild said Caterpillar is eligible for the city’s Primary Jobs Incentive Program, which allows job-producing businesses to qualify for building-fee exemptions.
The criteria is for a business to create or bring 25 non-retail jobs to the city that pay 125 percent or more of the average annual earnings in Tucson.
That program, coupled with “the county’s flexibility in providing short-term lease space and the potential of the Rio Nuevo District, is bringing top-paying jobs to Tucson,” Rothschild said. “I couldn’t be more thrilled.”
The company specifically wanted to be downtown to offer employees all the amenities of public transit and varied dining options, said John Moffatt, Pima County’s director of strategic planning.
He said everyone came together with the shared goal of sealing the deal.
“This was really a community effort,” Moffatt said. “I can’t emphasize enough how well the city and county worked together on this.”
REGIONAL PITCH
Caterpillar was looking at Tucson, along with Phoenix, Denver and cities in the Midwest, as possible sites for its new facility.
After meeting Caterpillar’s site selector at a governors’ conference in Las Vegas last fall, Ducey turned up the heat.
“The governor made a very strong pitch for the region and the benefits of Southern Arizona,” said Daniel Scarpinato, Ducey’s spokesman. “The meeting was very positive, and then the governor instructed the Arizona Commerce Authority to make sure we remained in a competitive position and worked very closely with our partners in Southern Arizona.”
Having the state’s support when negotiating for projects in Pima County has been a repeated plea from the business community.
“He’s been very aware of the need to be aggressive to make sure Southern Arizona is on the table,” Scarpinato said. “He knows there’s a world outside of Maricopa County.”
Joe Snell, CEO of Sun Corridor Inc., said Caterpillar executives visited Tucson “more than any other client before.”
His team also traveled to Milwaukee, where Caterpillar has a division headquarters, several times to learn the business.
Caterpillar wanted detailed information about Tucson’s labor force, real estate and amenities.
“It’s a very open company, and their employees mean the world to them,” Snell said.
Sun Corridor will coordinate a transition process for employees who will be new to Tucson.
“We’re going to have webinars with all of their employees — a Tucson 101,” Snell said. Also, Sun Corridor’s directors will be assigned Caterpillar families to help them with information about schools, medical care and recreation.
“It’s neat to see how hungry this community is and how welcoming we are,” Snell said. “I hope that people get this — this is the biggest deal in 25 years.
“They don’t get any bigger than this for us.”