Donald W. Reynolds National Center For Business Journalism

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Can a factory change a city’s image?

June 22, 2015

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Reno, Nev., has been known primarily for three things through its history: as gold-rush town, a place to get a divorce, and gambling.

Now, it hopes Tesla’s $5 billion gigafactory will help it become known as a modern manufacturing center. Bloomberg says locals are already talking about the “Tesla effect” and that the plant may change its image as a “downmarket Vegas.”

JetBlue Airways has launched its first direct flights from Reno to New York. The new Whitney Peak Hotel, a non-smoking luxury property, has become Tesla’s unofficial headquarters. Home prices have begun to rise.

Actually, I’ve been to Reno a number of times, to work with students at the University of Nevada, Reno. I found Reno was already on its way before Tesla announced the project, which will build battery packs for Tesla cars and home batteries Tesla hopes will revolutionize the energy business.

Yes, Reno’s casino corridor looks a little seedy, and the town was hit hard by the real estate collapse of the 2000s.

But, Reno has a sparkling minor league ballpark within sight of the casinos. Its food scene was already having a renaissance, led by restaurants like Campo, and bakeries like Homage, which makes outstanding scones and coffee.

And, the city has long touted itself as a cheaper alternative to towns in California, whose border is just an hour away.

That brings up a question: can a big hit of economic development be the catalyst to finish that recovery?

Over the past 30 plus years, cities and states across the United States have bet that it can. There has been stiff competition, not just for the gigafactory, but for other major economic projects. Think of General Motors’ Saturn plant in Spring Hill, Tenn., for which 1,100 mayors, governors and city officials made bids.

The latest of these announcements is set for Tuesday in Chattanooga, Tenn., home to Volkswagen’s newest U.S. assembly plant (it originally built cars in Pennsylvania, before closing that plant two decades ago.) The Wall Street Journal says Spanish auto supplier Gestamp will unveil plans to build a factory to supply VW.

It’s easy to understand the appeal of big projects: they bring jobs, plus investments by satellite suppliers. That creates a spillover effect.

Since the Tesla deal was announced, commercial, residential and rental real estate values in the Reno area have surged, Bloomberg said. The May 2015 median home price was $284,900, up 19 percent from $240,000 in May 2014, according to the Reno/Sparks Association of Realtors.

Story ideas abound when your area is trying to woo a major company. You’ll want to look for sources in local real estate firms, which handle commercial properties, in city and county government, and at the state level.

If you do get the project, watch for local economic impacts. Is the company hiring the number of people it said it would? How are local real estate sales and rental prices(many newcomers will rent before they commit to a purchase)? Are restaurant owners spotting new faces among their customers?

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