When it arrived two years ago, customer relationship management firm Sykes Enterprises seemed like a perfect fit for the employment-starved region around Eveleth and Virginia, MN.
Sykes received $3.7 million worth of taxpayer-funded incentives to open an inbound customer call center at Progress Park, an industrial park run jointly by the two towns. Now, unless it finds a new client in a few weeks, the center will close Dec. 7, and Sykes gets to keep the property.
The episode has left local government authorities and lawmakers stunned and, in some cases, angry. Sykes did not return calls from DM News about the issue.
Carolyn Gentilini, mayor of the town of Virginia, called the deal with Sykes “outrageously foolish.” However, she acknowledged that the community, faced with deepening unemployment due to the closure of area mines that were the backbone of the region's economy, played a role as well.
“Bringing in high-tech companies is our goal,” she said. “Maybe we were a little overanxious to make that happen.”
The Virginia-Eveleth Economic Development Authority, which operates Progress Park, courted Sykes Enterprises in 1997, initially to no success. When Sykes three years later agreed to open a call center in the park, the deal seemed like a godsend, promising hundreds of jobs to the “Iron Range,” as the region is known locally.
“We were desperate for something to come into the park,” recalled Bill Siegel, president of the economic development authority.
The Iron Range Resources and Rehabilitation Board gave Sykes a cash incentive of $2.875 million, and the economic development authority contributed 22 acres — among the last pieces of developable land in a region overtaken by mine dumps and pits — and $835,000 for infrastructure improvements. It was a no-strings-attached grant.
However, the call center, which had been built for 400 workers, reached only 300 at its peak, Siegel said. Later, the work force shrank to 210 employees, and then, in early October, Sykes informed employees that the call center's sole client was departing and that they were being given 60 days notice that the center likely would close.
On Oct. 12, the Mesabi, MN, Daily News in an editorial called the agreement “without a doubt one of the worst deals” the Iron Range board had ever made. State lawmakers began calling for rule changes to provide government agencies with increased security when they offer financial incentives for economic development.
The impending closure of the Progress Park call center is particularly frustrating for Virginia and Eveleth because Sykes in August announced plans to open a 255-seat call center — in Bangalore, India.
“It came as quite a shock,” Siegel said of the closure. “We were unaware that there was anything happening.”
The future of the Progress Park call center is uncertain. Sykes has promised to maintain the call center site and reopen it once it gets more business, Siegel said.
According to Siegel, the economic development authority hopes that Sykes will return 11 of the 22 acres it received that remain open and originally were earmarked for a second call center. However, Siegel acknowledged that Sykes has no obligation to local authorities.