Macy's to Open Distribution Center - 1,500 jobs

[nathanm]

Firstly, the agreement is for 1,020 FTEs with 367 actual full time employees, not 1,500 as was initially reported.

Does anyone actually know how much we are subsidizing these jobs? The original TW article spoke of $500,000 from Owasso, and a quick Google found this more recent report that says Tulsa County is forgoing about $8.75 million in property tax and the state somewhat less, with total incentives around $21 million. Is that really everything, or are there incentives not being fully disclosed as there have been with other projects elsewhere in the state? What is the total projected payroll (not the BS "total economic impact," which is necessarily lower than a locally owned business hiring 1020 FTEs at the same wage) and how does that compare to the total subsidies?

Is there a clawback provision in case they decide to close up shop early or choose not to hire the agreed upon number of employees?

And one last, more philosophical, question: Should we really be making Macy's competitors (and everyone else in the state) subsidize their business? To the tune of over $20,000 per job?

Don't get me wrong, I'm happy to see more jobs in the area, I'm just not happy about handing out bribes to get them, especially when they are of the low skill and relatively low wage variety. We should have some sense of self worth and limit our bribes to those bringing jobs with a wage higher than our current average, not lower.

P.S. It costs money to provide services to this distribution center. It costs money to rebuild and maintain the roads that the trucks will use. It costs money to provide police and fire protection. The costs the rest of us bear are not small, so this is just epically stupid:

[Commissioner Smaligo] noted that Macy's will be obligated to pay property taxes — estimated at about $10,000 a year — on the base value of the land at the start of the project, meaning the county is not out any money.

Or maybe he's right and the county doesn't actually do jack smile in exchange for all the tax money we send them, in which case yeah, the county isn't out anything. Way to look at the big picture, bud.

[Conan71]

This is what states and communities are doing all over the country, in order to compete you have to compete on a level playing field.  This is what economic development funds are for: bring new jobs to the area.  Is this the type of job we want to land? It's not high tech nor the highest paying, however, there are people who will do this work and spend their paycheck throughout the community.  Really not bad pay for someone right out of high school who doesn't know what they want to do with their life yet or as a second household income.

[Ed W]

It's an economic reality because if the incentives aren't offered here, they'll surely be available somewhere else. Yet you have to wonder why a politician offering a businessman money is an "incentive" but when the positions are reversed it's called a "bribe."

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[swake]

I read that as 367 full time people and another 1,020 FTEs or a total of 1,387 FTEs. Am I wrong there?

My guess is that the 367 are management, facilities, HR, IT/IS and other professional support function and the 1,020 FTE are the $10.50 an hour flunkies that pull crap off of shelves and package it for delivery.

My large concern is with how long those 1,020 will be needed. As robotics get better and cheaper these are jobs that will be probably be permanently eliminated over the next 5-10 years. And then a related portion of the 367 support and management staff. A near future automated warehouse like this would probably have less than 100 employees, if that many.

This is my concern for our economy as a whole. We are on the verge of automation ending a huge percentage of our jobs in the near future. Warehouse people and delivery drivers being prime positions to disappear. What are we going to do when many millions of fewer jobs are needed?

Jeff Bezos is already talking about automated delivery using drones to deliver packages to your door for Amazon within 30 minutes of the time when you make the order. That model could kill almost every retail job there is. Which is of course his plan. This warehouse is part of Macy's attempt to compete with Amazon. As Amazon automates, Macy's will have to as well.

[TheArtist]

If you are going to do economic incentives, I would think the bigger bang for your buck would be for them to go to local companies headquartered here.  That way you not only get the wages of the "general workers", but more of the higher paying executive/creative wages, and profits, corporate donations/largess, deeper interest in improving the community, etc.  Also it would help those companies potentially expand to other areas of the country and world, and thus funnel money from those areas back to Tulsa.  

I of course with a small retail business see how being a bigger company can afford you all kinds of benefits.  Larger buying power alone gives them a competitive edge.  And that's fine.  I hope to create a big company here in Tulsa someday.  So then the first thought I have is, if they have X amount of dollars say to use as economic incentives (though I realize that's not "exactly how it work, essentially it is)... why not use that to help me the local guy, lots of local guys (and gals), create just as many if not more jobs here?  And ultimately have a greater economic benefit?  $20,000 per person... I will start opening businesses and hiring people here left and right lol.

[rebound]

I read that as 367 full time people and another 1,020 FTEs or a total of 1,387 FTEs. Am I wrong there?

My guess is that the 367 are management, facilities, HR, IT/IS and other professional support function and the 1,020 FTE are the $10.50 an hour flunkies that pull crap off of shelves and package it for delivery.

My large concern is with how long those 1,020 will be needed. As robotics get better and cheaper these are jobs that will be probably be permanently eliminated over the next 5-10 years. And then a related portion of the 367 support and management staff. A near future automated warehouse like this would probably have less than 100 employees, if that many.

This is my concern for our economy as a whole. We are on the verge of automation ending a huge percentage of our jobs in the near future. Warehouse people and delivery drivers being prime positions to disappear. What are we going to do when many millions of fewer jobs are needed?

Jeff Bezos is already talking about automated delivery using drones to deliver packages to your door for Amazon within 30 minutes of the time when you make the order. That model could kill almost every retail job there is. Which is of course his plan. This warehouse is part of Macy's attempt to compete with Amazon. As Amazon automates, Macy's will have to as well.

No comment on the incentives part, as I'm in the "that's just how it works" camp.  Don't like it, but it is the way it is.

But with regard to the number of employees, automation, drones, etc., I can comment.   Distribution is what I do, and I've designed DC's, sold and installed automation and WMS software solutions, and consulted on these type facilities for virtually my entire career.  (I wish there was some way to get involved directly with Macy's on this one, but they use a competitor's product right now.)  I say all that just as validation to my opinion related to automation, etc.   Macy's (and this would be true for the majority of big-box Retail companies) is already on the cutting edge of automation and DC design, and whatever they go with will already have many of the latest operational improvements and efficiencies built-in.  I will be very interested in seeing what they install in this new facility, and specifically how automated it is.  Recent years have seen a trend away from fully-automated DCs (with huge automatic storage and retrieval installs and miles of conveyor) and back to a more semi-automated overall solution.  This type solution allows for more flexibility as the market forces and distribution demands change over time.  Based on the number of FTEs they are quoting it looks like they are doing some form of this hybrid approach, as a fully-automated DC would not require as many FTEs.

Even Amazon, who many (at least in the media) hold up as the new current bell-weather of distribution models, isn't fully automated.  Just a few years ago, they were so enamored with a new automation solution (Kiva systems) that they bought the company outright rather than purchase the product.  But while they continue to use the Kiva solution, they have not rolled it out to all their DCs, which says something about the overall move to fully-automated DCs in general. In particular, for their book distribution operations, heavy automation has not shown to be the best fit, as this picture of one of their DCs shows:  http://cdn.csgazette.biz/cache/r620-c4dc3f85ac8a540752321e2b3ef75991.jpg

Also, related to the drone delivery scenario,  don't hold your breath.  While the technology for an individual drone delivery may be close, any roll out of this offering to a large market is years away due to technical, and (more importantly) political and regulatory hurdles.  Instead,  look for a greater integration of direct-from-store shipping combined with tight integration with local delivery companies. (or, at least local facilities of national shippers)  Which is good for the local economy as well.

[dbacksfan 2.0]

 Recent years have seen a trend away from fully-automated DCs (with huge automatic storage and retrieval installs and miles of conveyor) and back to a more semi-automated overall solution.  This type solution allows for more flexibility as the market forces and distribution demands change over time.  Based on the number of FTEs they are quoting it looks like they are doing some form of this hybrid approach, as a fully-automated DC would not require as many FTEs.

Every time I hear about fully automated distribution, I think of the giant mothballed baggage system the installed at Denver Int'l. Never did work right.

As for the drone delivery, when George works for Spacely Sprockets, and Jane doesn't have the flying car.

Incentives? Isn't that what brought Whirlpool to Tulsa almost 20 years ago? Just look at the ads NY State is running nationally about incentives.

[Rookie Okie]

A quick and dirty back of the envelop calculation shows that if you compare the tax subsidy cited here amounting to $20K per employee to the average annual wage of $21K (based on the $10.50/ hr for 1,020 employees), that leaves only $1K/ yr per employee to funnel back into the local economy.  Makes you go hmmm?

Nonetheless, I'd like to know what is the actual tax budern that Macy's would be responsible for after you subtract the over $9 million in incentives that it will recieve from TC, Owasso, and the state?  I didn't see an estimate of such an amount in the TW article.  Perhpas there isn't much if any balance remaining, but the taxpayers should know this information.

[rebound]

Every time I hear about fully automated distribution, I think of the giant mothballed baggage system the installed at Denver Int'l. Never did work right.

Oh good Lord that was a cluster...   I interviewed to go in and try and fix that, but didn't get the job, thank goodness. 

[dbacksfan 2.0]

Oh good Lord that was a cluster...   I interviewed to go in and try and fix that, but didn't get the job, thank goodness. 

Interesting study of how and why DIA failed.

http://www5.in.tum.de/~huckle/DIABaggage.pdf

[nathanm]

If you are going to do economic incentives, I would think the bigger bang for your buck would be for them to go to local companies headquartered here.  

+1

I still don't like the idea of forcing people to subsidize their competitors, but at least it's not bad for the community as a whole when it is a local company being supported. I'm not even against incentives as a whole. I do mind incentives on the scale that this deal has, though. $20,000 a job is ridiculous, especially when they don't pay much more than that. I'd rather offer 10 or 20 local startups looking for second or third round funding a million or two each. Even better if it was a revolving loan fund. Hell, spending $20 million on open access fiber would probably give us a better return.

When we blindly follow everybody else into a dark alley, we run the risk of ending up face down in said alley. And when we do things that underline how little ambition we have, we make it that much harder to attract the types of employers we really want.

Also, we're apparently paying to train their new employees as well, which I don't believe is included in the $21 million.

[guido911]

Sheesh, 1500 jobs coming to the area and there are criticisms about it. Nate, how many jobs are you creating this year? How many have you ever created?

[cannon_fodder]

Guido, I believe the debate is centered on the tax payers subsidizing those jobs.  If you gave me $21,000,000 I could easily create some jobs.  The debate is fair. At $10 an hour mostly part time the jobs will largely be occupied by people who qualify for government assistance ($15k a year).  If we had 10000 such jobs pop up it probably wouldn't actually help the overall standard of living in our community.

Dillard's operates 2 stores in Tulsa and via rent, pays property tax.  They are being forced to subsidies Macy's new distribution center.

Im not saying we got q good deal or we got hosed, but Since when is extorting tax payers a conservative ideal?  The tax extortion racket needs to be shut down at the federal level. It is a form of bribery and is a zero sum game for US taxpayers.

[Conan71]

I thought earlier in this thread the average hourly for this facility was going to be $15/hr or $30K/yr.

[swake]

I thought earlier in this thread the average hourly for this facility was going to be $15/hr or $30K/yr.

367 jobs at $60k per year plus 1020 FTEs at $10.50 per hour ($22k per year) averages out to $15.35 per hour.