Disclosure earlier this week of plans by Hecht's to move its corporate headquarters from downtown Washington to Arlington raises serious questions about the effectiveness of the District's business retention program. It also raises some questions about the celebrated deal that the District engineered to ensure retention of Hecht's flagship departm
Hecht's plans not only represent a serious setback for the city's business retention program, but also, taken along with departures from the District by other major firms, could hurt efforts by economic development officials to attract new businesses to the city.
News of the impending relocation of Hecht's headquarters to Arlington's Parkington Shopping Center seemed particularly galling to some key government officials engaged in economic development activities. Their chagrin was made deeper, some indicated, because they were unaware of the decision before reading about it in last Monday's Washington Post.
Whatever Hecht's motives for the decision (actually made in St. Louis by Hecht's parent organzation, The May Co.), some District officials were well aware of the company's plan to separate its headquarters from its downtown department store.
In fact, the plan was "an issue that was discussed during negotiations" that resulted in an agreement calling for Hecht's to build a replacement store downtown at Metro Center, recalled James Clay, former director of the D.C. Department of Housing and Community Development. The District's agreement to sell the Metro Center property to developers last year contained a provision calling for construction of a new $40 million Hecht flagship store on one of the parcels. D.C. officials expedited the agreement in the belief that Hecht's would abandon downtown if it were unable to find a suitable site for a new store by 1985.
It generally had been assumed, indeed by most D.C. government officials, that Hecht's also would retain its headquarters in downtown Washington. But that assumption lost sight of a key conclusion in a business retention study that the D.C. Office of Business and Economic Development commissioned in 1981. "The District does not provide an optimistic prospect in the case of important factors affecting business location -- with the one exception of the outlook for sales," the study concluded.
"We had several discussions with the May Co., but they made it perfectly clear that the decision had already been made at corporate headquarters," Clay recalled. "That does not mean that we didn't try to get them to change their minds."
Somehow, Hecht's decision to relocate its headquarters never was communicated to OBED, the District agency that is responsible for implementing the city's business retention program. "I know that the city has been in constant touch with Hecht's, but this comes as a surprise to me," acknowledged OBED Director Kwasi Holman.
Holman's office maintains close contact with at least 200 District firms as part of an outreach program to bolster business retention. Critical to that program is OBED's ability to identify and try to resolve special problems that may cause businesses to consider moving out of the District.
Whether OBED could have developed a strategy attractive enough to induce Hecht's to maintain its headquarters in the District is uncertain. It does seem, however, that there was a breakdown in communications in the economic development cluster that includes OBED and the department of housing. If that seems strange, consider this comment from an official in the department of housing: "It was a surprise to me. Nobody that I've talked to recalls any discussion with Hecht's about moving their corporate headquarters."
Even now, it still isn't clear to most D.C. officials why the May Co. opted to move Hecht's headquarters and 400 jobs to Parkington. Neither the May Co. nor Hecht officials would give definitive answers to questions raised in calls to their respective offices. Perhaps the answer lies in the findings of the 1981 business retention study by Brimmer & Co., a Washington economic and financial consulting firm.
Many firms in the District believe that space costs are too high for their businesses, the Brimmer study found. Another substantial group feels "that space costs will become more important in their relocation decisions," it added.
What is more, 60 percent of the firms that responded to a survey on business retention viewed the District as "having a less favorable outlook than areas outside the city in the case of labor costs, business property taxes, business income taxes and local government regulation," the study concluded.
A viable business retention program obviously has to address those concerns. Developing one that does is a priority for the District. In the meantime, one of the city's most sincere and justifiable efforts to retain the headquarters of a major retail firm has been rewarded with the equivalent of "what have you done for me lately?"