The Kellogg Co., in a move unprecedented in the annals of corporate-community relations, has told Battle Creek, the httle city it made famous, that it will pack up its headquarters and leave town unless the city and a large suburban township vote Tuesday to merge their governments.
Delivered to a dumbfounded community last May, the big cereal maker's ultimatum has set off a fierce political battle. Support for the merger is solid in the city of Battle Creek (population 35,724), but not in Battle Creek Township (population 20,615), where a majority vote is required and opponents are charging corporate blackmail and "horrendous intimidation."
Yet even township voters hesitate to vote "no" when they contemplate the staggering blow that a Kellogg pullout could mean to this deeply depressed Michigan area already beset with 15 percent-plus unemployment.
How did Kellogg, which ranks 175th on Fortune's list of the 500 largest industrials, decide to make its corporate location hinge on a local governmental reform vote?
In 1978, said Gary Costley, Kellogg vice president and point man on the merger, the company began a major expansion and bought seven acres in downtown Battle Creek. It intended to announce construction of a new $20 million-$30 million worldwide headquarters there. But Kellogg delayed, watching Battle Creek decline as city and township officials bickered over several development projects. The company was also having difficulty recruiting executive personnel to move to no-growth Battle Creek.
Finally, Kellogg decided to move its 700-odd headquarters staff to another unspecified city.
"But we said to ourselves," Costley relates, "'We've been here 70 years. Is it fair just to pull up stakes and leave without giving the citizens of this community a chance to do something about what we regard as a fixable problem? Why not give Battle Creek and Battle Creek Township a chance to come together -- to cure the political division that was splintering the area's economic development efforts?'"
Kellogg looked around the metropolitan areas that have coalesced and achieved major growth -- Toronto, Nashville, Jacksonville, Minneapolis-St. Paul and others -- and noted that all had first achieved city-suburban unification. Indeed, Indianapolis, with its "Unigov," and Columbus, Ohio, which has annexed vigorously, are rare standouts for growth in the Northeast and Midwest. For an area "to have a single-minded thrust for jobs" and economic development, Costley suggests, "you need a group of leaders not quarreling among themselves -- and not caring just where in the area the jobs are."
Kellogg secretly commissioned an Ann Arbor, Mich., law firm to study the procedures and precise timetable for a city annexation of the township to be voted on in November.
Then, with no advance notice, it uncorked its proposal in May. To minimize opposition and make it more "a merger of equals," Kellogg suggested equal city and township representation on an expanded council. No current council member would lose his or her seat until at-large elections are held in the enlarged city in 1984-85.
And then Kellogg added an extraordinary offer. If the merger is approved, taxes in the two jurisdictions will be equalized, with the city's decreasing and the township's increasing. Kellogg figures the resulting savings on its city properties at $1.6 million over five years and has pledged to put that money into a seed fund for small business creation in Battle Creek. Other firms would pledge, too, for a total close to $4 million -- which, Kellogg contends, could be used as leverage to obtain other private and federal funds, creating an $8 million kitty that would generate 1,435 new jobs.
On top of that, Kellogg indicated that if the merger passes it will go ahead with its new downtown headquarters and work to revive Battle Creek's distressed downtown mall and old central business district.
"If the public and private sector form a partnership for economic development, this area can become economically vibrant," Costley argues. Kellogg, he says, would push biogenetics and try to make Battle Creek into a "baby Silicon Valley." Yet if his firm leaves, he asserts, Battle Creek will be dealt a "staggering blow" and suffer an "economic tragedy."
All this leaves some people wondering if Kellogg has a hidden agenda in demanding the merger. It has been noted that this corporation, once very inward-looking, became "radicalized" by the decade-long -- and eventually victorious -- cereal antitrust battle it fought with the Federal Trade Commission. It emerged determined to fight for its interests in all forums.
So today the mighty corporation finds itself -- somewhat to its shock, it appears -- in a knockdown, dragout fight with the Battle Creek merger opponents.
The "anti" argument is that equalizing tax burdens will increase the tax rate for township residents and lowerthe city rate -- facts both sides admit. Many township residents, indeed, would just as soon have less service and fewer government unions and let the city's taxpayers -- poorer and blacker than the township's -- continue to bear all costs of Battle Creek parks, airport and industrial park.
Every U.S. metropolitan area will hear familiar echoes in the Battle Creek debate. Could government consolidation someday lead to merging city and suburban schools? Should a township forsake its dedicated volunteer fire force -- or could volunteers be merged into a professional city force? Can small suburban governments continue to operate on a shoestring? Battle Creek Township Assessor Al Ivany answers the last question with a negative: "We're in a dilapidated township building we overgrew 10 years ago. If the fire marshal did his business, he'd kick us out."
For Battle Creek, Tuesday's vote may well spell the difference between an economic Dunkirk and a promising new cooperative venture for job creation. But the vote may have wider repercussions. If Kellogg triumphs, other corporations may be prompted to a new, critical look at the metropolitan government fragmentation that hamstrings so many areas.
For years, good government groups, lacking clout, have fought a lonely battle for metropolitan consolidations and rarely succeeded. But if forward-looking corporations enter the ring, the odds could start to change dramatically. CAPTION: Picture 1, Kellogg's general offices: The company estimates a savings of $1.6 million in taxes on Battle Creek properties if a city-township merger is approved, By the Battle Creek Enquirer and News; Picture 2, The Kellogg plant in Battle Creek: Relocation would deal a staggering blow to the deeply depressed Michigan area, By the Battle Creek Enquirer and News (1970 photo)