With Dietz & Watson transaction, city looks to kickstart reindustrialization

GMCS Editorial:  With the continued popularity in “reshoring” our once lost manufacturing sector of the economy coupled with the resurgence of manufacturing throughout the region, including the Lehigh valley, it’s great to see that Philadelphia is making adjustments to take advantage of this great opportunity for regional economic development.  With a large and accessible workforce at the ready and accessible transportation infrastructure from roads, rails and marine, reestablishing this region as a manufacturing powerhouse is a realistic and attainable vision.

Early last September, an 11-alarm fire destroyed a 300,000-square-foot meat-packing plant in Delanco, New Jersey, owned by Dietz & Watson, a 75-year-old company headquartered in Northeast Philadelphia. Firefighters fought the blaze for more than 24 hours, and it took several more weeks for the company to remove millions of pounds of rotten meat from the site, according to news reports.

The day after the fire, the company got a call from city officials in Philadelphia.

“‘You’re in crisis mode,’” said Mike Cooper, a former vice president at the Philadelphia Industrial Development Corporation (PIDC), recounting the conversation. “‘What do you need?’”

Dietz employs around 700 people at its Philadelphia plant, which sits just north of the shuttered Frankford Arsenal on the Delaware River, and around 130 employees worked at the plant in New Jersey. Over the next few months, Cooper said, PIDC showed the company a handful of industrial properties it owns around the city.

Meanwhile, New Jersey officials were working on a package of incentives to convince the company to not only rebuild its plant there but to bring its entire operation across the river. In February, the Inquirer reported that Dietz was offered more than $30 million over ten years to set up shop in New Jersey.

By that point, it was clear that the only viable way to keep Dietz in Philadelphia was to let the company expand at its current location, according to Tom Dalfo, a real estate broker for PIDC. And its current location was constrained by the privately-owned but undeveloped Frankford Arsenal, and by a thin strip of land owned by the Pennsylvania Fish & Boat Commission that allowed access to a riverfront boat berth. If Dietz were to stay, it would need to build on those properties.

BOMBS & AMMUNITION

The Frankford Arsenal was established in 1816, and workers there produced bullets, bombs and missiles discharged in foreign wars for more than 160 years. In 1938, according to a story in the Philadelphia Bulletin, the arsenal was paying out an annual wage of $3.8 million to more than 3,100 employees, including “adjusters, assemblers, belt adjusters, blacksmiths, carpenters, coremakers, electricians, enginemen, furnacemen, gang bosses, grinders, gunners …” and a long list of other positions.

“Every employee is fingerprinted,” the paper noted, “to keep out undesirables …”

By 1941, the arsenal employed 12,500. By 1943, it employed 19,000 and, again according to the Bulletin, “incredible as it might seem, almost half … [were] women.”

Dietz & Watson transaction in a nutshell:

• PIDC buys 40 acres of property on and near the Frankford Arsenal for roughly $12 million
• Dietz & Watson pays roughly $6 million to PIDC for 22 acres of land to expand its Philadelphia headquarters
• Dietz qualifies for up to $14.35 million in state aid
• PIDC maintains 18 acres of new industrial land to market to other users
• New public waterfront trail space at Orthodox Street and the Delaware River

At its World War II peak, the arsenal employed 22,000 people in more than 200 buildings. Today, according to a manufacturing report released in April, the total number of manufacturing jobs in Philadelphia is 23,000.

Employment at the arsenal steadily dwindled after the war, to 10,000 in 1952 and 6,000 in 1966 and, by the time the closing of the operation was announced in 1974, employment was down to 3,500 people working mostly on research projects. The federal government announced it would consolidate its regional arsenal operations at two other sites. According to a column in the Bulletin, both sites were in smaller towns with lower rates of unemployment. 

Despite Mayor Frank Rizzo’s last-minute attempts to offer other sites in Eastwick and Byberry to the government, the arsenal was closed in 1976. By 1982, Mayor Bill Green said the land had a “negative value” of $3 million and offered to buy it from the government for $1—the deal didn’t happen. The 100-acre site has been controlled since the early 1980s by Hankin Management Company, which has been pursuing a retail shopping center there. Dozens of buildings on the northern end of the property, nearest to the Dietz headquarters, have already been demolished.

REINDUSTRIALIZATION

In May, I sent an email to 6th-District Councilman Bobby Henon’s office to ask if he’d show me around the Frankford Arsenal property and another site that used to house the Philadelphia Coke Company, a coal processing plant. That site, an 87-acre parcel at 3101 Orthodox Street,  is owned by the energy company National Grid and known to Bridesburg residents as Cokies.

I’d been following the Arsenal transaction since Henon had introduced two incompatible rezoning bills in Council in April that would impact the site. One of the bills would designate a large portion of the site for industrial use; the other would designate an overlapping portion for commercial use.

Henon agreed to show me around, but he wanted to add a few other stops at local manufacturers in the area.

Henon took office in 2012 after winning his Council seat with the support of the Electricians Union Local 98, headed by John Dougherty, who has orchestrated the union’s evolution into one of the most powerful political forces in the city and state, donating more than $25 million to political campaigns since 2000, according to the Inquirer. Henon, an electrician, previously served as political director for Local 98.

Since taking office, Henon has been hoping to foster a manufacturing renaissance in his district and citywide. He was a co-chair on Mayor Nutter’s Manufacturing Task Force, which issued its growth-strategy report earlier this year and which Henon helped create. He declared National Manufacturing Day in Philadelphia in October. In 2012, he traveled to Washington with At-Large Councilman David Oh to meet with the White House Office of Manufacturing Policy, a meeting that helped produce the idea for the local task force.

Around the same time, he introduced a bill to rezone the privately-owned Philadelphia Coke Co. site, along with a small strip of waterfront property controlled by PIDC, back to an industrial zoning category. The property had previously been subject to a proposal from developer John Westrum to build 700 homes, which fell through after the recession began in 2008. Henon said at the time that there was no user in mind for the parcel; he wanted it rezoned for industrial use to “generate a buzz” and attract potential manufacturers to the city.

But Bridesburg residents cried foul. The former Coke Company had received numerous complaints for polluting the air in the neighborhood, and the site had been vacant since the company left decades ago. Local teenagers partied on the property, and a dead body was found hanging from a tree there in 2011. Neighbors were offended that the rezoning had been introduced without their input and wanted to have a say in whatever use was put on the site next.

After some feeble attempts to engage the community in planning a new use for the site—at one community meeting, Henon’s office essentially gave neighbors a blank slate to say what they’d like to see developed on the site, which the city does not control; many said they’d been longing for a waterfront park—Henon dropped the bill.

“At least with manufacturing and industry, it’s something I’ve carried with me since I was young,” Henon later wrote in an email. “My father worked for two Philadelphia institutions—Yale & Towne and the Budd Company. They offered family-sustaining, neighborhood jobs. Both times he lost those jobs because the plants closed. And in some ways, Philadelphia hasn’t recovered from that. For the first time in a long time, you can see hope that those jobs are coming back. And so are the neighborhoods that they support. But it’s a growth that we need to nurture and support.”

Henon says he hopes to introduce a proposal in the coming months that would put a “sunset provision” on zoning approvals that convert industrial land to another category. If industrial land is rezoned and the property sits vacant for a certain amount of time, it would revert to the industrial zoning category. The provision would prevent landowners from speculating on viable industrial property, Henon said. He also plans to create an “industrial protection corridor” along the North Delaware, where the Arsenal and Dietz are located, that would prohibit certain non-industrial uses currently allowed in the I-2 and I-3 zoning categories.

OWNERSHIP & INCENTIVES

While Henon’s bills rezoning the Frankford Arsenal site were working through City Council, rumors were bubbling that the industrial client the city was hoping to court was in fact Dietz & Watson: its headquarters were right there, and after its New Jersey plant burned down the company said it was waiting on a counter-offer from Pennsylvania.

PIDC, Henon’s office, Deputy Mayor Alan Greenberger, the brand new Office of Manufacturing & Industry and state officials were all working on purchasing and consolidating the arsenal property and putting together a package of tax incentives to convince Dietz to stay.

“This was one of the most complex economic development transactions in the history of the city,” said Mike Cooper, who in April was appointed to direct the Office of Manufacturing & Industry, of which he is currently the only staff member.

“Mike’s right this one was a bit complicated,” said Tom Dalfo, the broker for PIDC, in an email.

Why so complicated?

“Two reasons,” Dalfo later said in an interview. “The timing to put the transaction together, and the number of parcels that ended up needing to be involved.”

Dietz & Watson needed 20 acres of property in order to rebuild its Jersey operation at its Philly headquarters. Those 20 acres were owned in part by Hankin Management Corporation, the City of Philadelphia, and the state Fish & Boat Commission. They weren’t zoned for industrial use. And New Jersey had offered $30 million to take Dietz out of the city.

State officials worked on the incentives while local officials worked on assembling and rezoning the parcels. Dietz wasn’t interested in moving its whole operation to a new site, because if it had to do that it might as well move to Jersey.

“Once you have to move your product,” Dalfo said, “you lose your operational efficiency.”

MANUFACTURING IN THE NORTHEAST

Efficiency.

Over the last month, the industrial rezoning of the Arsenal site was approved by Council, the news of the Dietz transaction was reported in the Inquirer, and the city made it official with an announcement outside City Hall last Tuesday.

The next morning, I met Councilman Henon and a handful of other city officials for a tour of manufacturing outfits in the area surrounding the arsenal. By that point, I’d fully ceded control of the agenda.

We met at Microcision, a small plant employing 60 people that produces medical implants in a residentially-zoned building on Keystone Street in Tacony. The building is surrounded on two sides by rowhouses and on a third by an auto repair shop. Right away people started talking about “efficiency.”

Bob Kramer, the owner of Microcision since 1991, said someone in an administrative position like his is not a “value add” to the company; it makes all its money on “machining.” In the last six months, Microcision—which manufactures tiny rods for maxillofacial reconstruction, human-tissue-compatible spine fusion plates, thousands and thousands of color-coded screws—has spent $1.5 million on new equipment, Kramer said.

He showed us around the plant. A hallway had been converted into office space. A former closet held two workers and a $100,000 machine. Seven engineers worked all day in a trailer in the parking lot.

“This is a perfect example of why we need to preserve industrial land,” said Councilman Henon, visibly excited.

We then went to Globe Dye Works, an abandoned and repurposed dye factory that’s emblematic of the kinder, gentler type of industry that officials say the city wants to attract. The factory has been converted into dozens of separate offices and artists’ studios. It houses woodworkers and soapmakers, caterers and chocolate-makers. Tookany/Tacony-Frankford Watershed Partnership (TTF) is headquartered there. In another room, a young guy in mesh shorts and a t-shirt was roasting coffee beans for Rival Bros., which describes itself on its website as “an ode to Philly's authentic and hard working personality.”

NEW WATERFRONT PARKLAND

This is the result of the “most complex” economic development transaction in the history of the city.

In order to satisfy all parties, PIDC purchased 40 acres of the Frankford Arsenal property for $12 million from Hankin. It provided an easement across that property so the Fish & Boat Commission can access the boat berth on the waterfront. It ceded some city-owned parkland adjacent to the Fish & Boat parcel. This required the approval not only of the city but also of the state Department of Conservation and Natural Resources and the National Park Service.

In exchange, PIDC transferred to the city an industrial parcel it owns on the waterfront edge of the Philadelphia Coke Co. site. That parcel, which will now come under the control of the local Dept. of Parks and Recreation, will become part of the trail that the city hopes will one day stretch the length of the Delaware River from the northern city line to the mouth of the Schuylkill.

“In the end what you’ll end up having is three green facilities along the river of some scale,” said Tom Dalfo, describing the Fish & Boat property, the new trail space adjacent to Cokies, and a boat launch further north in Tacony as a string of pearls that will connect with trail space on the Central Delaware.

In addition, Dietz & Watson got 22 acres to expand its facility, and PIDC ended up with an additional 18-acre parcel that it plans to market to other industrial clients.

Dietz will pay PIDC roughly half of the $12 million it spent to purchase the property from Hankin. In addition, the state has kicked in $2 million in the form of a Pennsylvania First grant and a $125,000 for workforce training. Dietz can also apply for up to $12.25 million in state loans from the Machine and Equipment Loan Fund, the Pennsylvania Industrial Development Authority, and a grant through the Redevelopment Assistance Capital Program (RACP).

“It works out as a win/win/win, and that’s why we fought so hard to try to make it work,” Dalfo said.

But the Cokies property still sits vacant, lined on most sides with residential houses. Though the property is still zoned for residential use, officials said its owner, National Grid, is now marketing the property to industrial clients. Henon and PIDC are involved in that endeavor.

“My constituents need to fit into this—I represent them,” Henon wrote in an email. “The Coke site is a great example. It’s a huge, abandoned and blighted property that’s been in search of a solution for years. It can’t remain empty, and the community needs to be a part of the process of what happens with it.”

Mike Cooper said the hardest part about attracting industry to the city is convincing both companies and residents that the city can handle industrial uses alongside residential and commercial ones.

“The perception that Philadelphia can’t do both is what we constantly try to keep educating folks about,” Cooper said.

“People don’t believe that,” he added.

Cooper and Henon both said that the Planning Commission and community groups should be involved in deciding what happens to the Cokies site down the line. The Planning Commission has slated the North Delaware for a future district planning process through part of the Philadelphia2035 citywide remapping.

“You can’t have a site this big [Cokies] in a city as densely populated as this sit vacant permanently,” said Cooper.

ARSENAL OF LUNCHMEAT

In 1942, a Bulletin reporter wrote a story about 19 grandmothers who were employed in the cafeteria at the Frankford Arsenal making lunch for thousands of workers.

“One way of looking at it,” the story began, “the sandwich is as mighty as the monkey wrench.”

The final stop on the tour was Dietz & Watson. In a conference room on the second floor we met CEO Lou Eni, who’d agreed to show us around the plant. Since the Jersey plant was destroyed last September, Dietz has been storing extra product at the Philadelphia site. The space is overloaded, Eni said, and the company needs to expand. Its new development on the arsenal properties will bring 110 new workers to the city.

I couldn’t bring my camera or notebook into the plant, but I took these notes as soon as I got home.

We suited up in blue lab coats, hairnets, beardnets, and mesh shoe covers and our tour guide took us down to the plant. We began at the end of the process, in a room where boxes were being pushed across conveyor belts to be labeled. When we walked in, I was reminded of a job I worked briefly in college at a suburban grocery store, particularly of unloading delivery trucks with a mechanical pallet mover. It was the faint smell of meat and cure, salt and vinegar that reminded me.

From there we moved into a room where beef roasts were being removed by hand from the bags they were cooked in, covered in a spice mixture. The meat, top round beef cuts, was pushed onto a conveyor belt to be vacuum sealed, labeled, and sent to delis for slicing to order.

Then there were hot dogs being removed from their casings and vacuum-packed for sale. Through a door—the floors between each room are covered roughly with a cleaning agent to kill bacteria that might otherwise travel between rooms and cross-contaminate raw food and cooked food—we came into a room full of hot dogs, sausages, and other forcemeats hanging in long strings from portable shelves. These links were in synthetic casings; elsewhere there were hot dogs and sausages in natural casings.

Eni’s voice quickened here as he pointed us to the process of removing the synthetic casings from the links. Each long string of links, carrying probably two dozen links apiece, was dumped onto a tray, one at a time. Then a worker fed the first link into a machine that uses tiny razor blades to peel the casings off the links. As the machine started working, the pile of links flew quickly off the tray where it was resting, like a coil of rope racing off the deck of a boat after someone drops the anchor. This is Eni’s favorite part of the process.

Onto the blast chillers, rooms set at 15 degrees fahrenheit where meat was stored immediately after leaving the oven, in order to stop the cooking. Like a chef dunking vegetables in ice after blanching them to maintain the color, Eni said. He then showed us hams being glazed by hand with a mixture of cinnamon, cardamom and other spices.

Then, through a puddle of antibacterial, to the raw room.

Dozens of red briskets sat in piles in plastic carts. Hams marinated—ham upon ham in a mixture of salt, water, spices and nitrates—in giant open-air drums. I have never seen so many hams. One worker was cranking a wheel to open the valve of what looked like a giant cement mixer, releasing hundreds of hams streaming into a cart. The mixer was used to massage the hams. If you picture a hundred hams sliding out of a cement mixer, you are picturing this correctly.

Then a machine that sliced ham thin and laid the slices in weighted piles, passed them down a conveyor to be packaged, and passed the packages onto a giant robot that sucked them up and laid them neatly in cardboard boxes.

We saw how sausage is made. Large cuts of meat chopped up in a giant blender and set off in piles to be forced into their casings.

There were also carts full of gray-brown hot dog mixture, a slurry of meat so finely processed that it looked like puddles of melted ice cream or wavy piles of unrisen bread. In fact the word Eni used to describe the mixture was “dough.”

Finally we walked through a room used to store spices in secret mixtures and out into the parking lot, overlooking the half-demolished Frankford Arsenal.

When we got outside, Holly Reagan, a staff member in Councilwoman María Quiñones-Sánchez’ office, who had joined us on the tour, which spanned parts of the 7th District as well as the 6th, said something like, “I thought I would be grossed out by that, but I still kind of want to eat a hot dog.”

So did I.

Source:  PlanPhilly