Tacoma vs. Seattle: fight over Russell Investments worth millions
Tacoma springs into action as city's longtime treasure considers moving to Seattle.
Seattle Times staff reporter
Russell InvestmentsRussell Investments provides financial services to investors and institutions in 47 countries, and manages more than $136 billion in assets.
Founded: 1936, in Tacoma
Tacoma-based employees: 900
Total employees worldwide: more than 1,800
Sold: 1999, to Milwaukee-based Northwestern Mutual
TACOMA — From its 12-story headquarters with a sweeping view of Commencement Bay, Russell Investments has long dominated this city's downtown as its largest private employer and a major civic leader.
But as Washington's third-largest city, Tacoma has periodically fretted that Russell — a global financial firm with offices from London to Tokyo — might someday outgrow its hometown.
That nagging worry has made the care and feeding of Russell a key part of the job description for Tacoma leaders. In the 1990s, when Russell chirped about leaving the state because business taxes were too high, Tacoma legislators pushed through a special tax break.
In recent years, though, Russell's ties to Tacoma have eroded, with the sale of the company to a Milwaukee-based insurance giant and the departure of several top local executives.
In April, the company jacked Tacoma's fears higher when new CEO Andrew Doman announced Russell was pitting Seattle against Tacoma in its search for a new headquarters. He gave both cities until the end of May to submit their "final bids."
Even before that announcement, Tacoma made it clear it was all-in to keep Russell and its 900 employees.
Led by U.S. Rep. Norm Dicks, Tacoma has pledged a package worth more than $148 million. That includes federal, state and local tax breaks, a publicly financed parking garage, a new park-and-ride and streetscape improvements. Gov. Chris Gregoire has promised to throw in $700,000 from a special state-lottery fund.
As the May 31 deadline approached, Tacoma sweetened its bid even more with energy rebates, low-interest loans and free parking — benefits worth at least another $4 million.
"We're doing everything we can," said Tacoma City Manager Eric Anderson.
The company is expected to make an announcement by October.
In Seattle, city officials seem spooked about even discussing Russell. They have not announced tax breaks or promises of state money.
However, there has been an effort to land the company, led by the Downtown Seattle Association (DSA) and private landlords eager to fill skyscrapers left vacant by the recession and the collapse of Washington Mutual.
And Seattle city officials have quietly lent support to that effort, according to documents released last week in response to a public-disclosure request.
Seattle's reluctance to be seen as poaching Tacoma's company could be explained partly by neighborly politeness.
But it may also have something to do with pressure from Dicks, the state's senior member of Congress and a high-ranking member of the House Appropriations Committee, who has let Seattle leaders know he wants Russell to remain in Tacoma.
"I've urged them to remember their friend Norm," Dicks said. "I've tried to delicately remind people that, hey, this is very important to me personally and that I hope they'll take that into account."
He added: "Seattle doesn't need Russell."
At least not like Tacoma does.
Russell "put us on map"
Founded by Frank Russell in 1936 as a small brokerage firm, the company was transformed under his grandson, George Russell, who secured J.C. Penney as his first client and built the company into a renowned pension-fund manager.
George Russell and his wife, Jane, became major benefactors for Tacoma, funding charities and civic assets such as the Museum of Glass.
"As Tacomans, we feel Mr. Russell put us on the map," said Brian Ebersole, a former Tacoma mayor and former state House speaker.
Today, even after recent layoffs, the company has more than 1,800 employees worldwide and manages more than $136 billion in assets. Its Russell 2000 stock index is one of the most-watched in the world.
With its high pay and benefits, the company has frequently made Fortune magazine's annual list of the "100 Best Companies to Work for in America."
Russell has also maintained connections to powerful politicians.
It hired two former chiefs of staff to Gov. Gary Locke, Joe Dear and Fred Kiga (both have left the company). Last year, Russell hired Patricia Akiyama, former chief of staff to U.S. Sen. Patty Murray, as its director of corporate and government relations.
This isn't the first time Russell has wielded its political clout for special treatment.
In the 1990s, when Russell complained about its taxes and made noise about leaving, the Tacoma legislative delegation responded: The state lowered the business-and-occupation (B&O) tax rate on "international investment-management companies" — in other words, Russell — by 84 percent.
That tax break, now claimed by 41 companies, reduces all their B&O taxes by an estimated $15 million this year, according to the state Department of Revenue.
That's nothing compared with the $148 million package assembled by The Tacoma Partnership, a group of Tacoma leaders chaired by Dicks. They developed the offer last year, after Russell first said it was considering a move.
Tacoma leaders say they want to use a new or renovated Russell building to revitalize downtown through the creation of an International Financial Services Area, a special zone benefiting from tax breaks and public spending. The Legislature this year passed a bill authorizing $500,000 a year in state sales taxes to help pay for improvements in the financial zone.
"We like to see it from a bigger perspective. It's more than one company," said Tacoma Mayor Bill Baarsma. But Russell is the key.
Among the major enticements being offered:
• Tacoma will eliminate its local B&O tax on financial companies — saving Russell an estimated $16.5 million over 15 years. The city also has promised $15 million toward a 500-space underground garage if Russell builds a new headquarters.
• A state sales-tax exemption on construction of Russell's new building and parking garage would be worth an estimated $33 million.
• Dicks has promised to help Russell qualify for a $3.3 million federal income-tax deduction through the Department of Housing and Urban Development. Tacoma would help Russell obtain additional federal income-tax credits worth another $6 million.
• Tacoma also says it wants to spend $66 million — with federal aid — on downtown improvements, including streetscapes, storm drainage, better roadways and a new park-and-ride lot to connect Russell with Sound Transit's light rail.
• Gregoire has personally pledged $700,000 from an economic-development reserve account funded by unclaimed state-lottery winnings to pay for "public infrastructure improvements."
Quieter effort in Seattle
No comparable effort is visible in Seattle, where officials are reluctant to talk openly of pursuing Russell.
"Russell means an awful lot to Tacoma and you sort of have to respect that. They're our neighbors," said Alex Fryer, a spokesman for Seattle Mayor Greg Nickels. He added that "at this point there is nothing on the table in terms of a subsidy" for the firm to move to Seattle.
Fryer later asked to change his statement to the official line of the mayor's office: "No comment."
But documents released by the city late last week, in response to a public-disclosure request, show some involvement by the mayor's office to bring Russell to Seattle.
Nickels has spoken twice with top Russell executives by phone in recent months, including with CEO Doman on May 26, according to the mayor's calendar.
And officials with the city's economic-development office created a brochure for Russell executives touting the "wonders of living and working in Seattle."
Russell has divided the Seattle business establishment.
Randy Hurlow, a DSA spokesman, confirmed DSA representatives had met with Russell to pitch Seattle. "We believe downtown has a lot to offer," he said, declining to give further details.
Seattle city officials refused to say whether any city representatives took part in that meeting.
The more regionally oriented Greater Seattle Chamber of Commerce has shied away. "We're not part of that dialogue," said George Allen, the chamber's senior vice president for government relations.
Meanwhile, Russell has hired two Seattle firms, Kinzer Real Estate Services and Seneca Real Estate, to aid in its search for some 300,000 square feet of office space.
Russell representatives have toured the WaMu Center, the downtown office tower developed as part of the Seattle Art Museum expansion, said developer Matt Griffin, who is helping to find a new tenant to replace Washington Mutual.
Seattle real-estate sources said Russell has also been interested in 1111 Third Avenue, another downtown building vacated by WaMu; West 8th, a new 28-story office tower at Westlake and Eighth; and 1918 Eighth Avenue, another new building at Eighth and Virginia.
Tacoma's worries grow
In Tacoma, the dread of losing Russell has increased in recent years.
Russell was sold in 1999 to Northwestern Mutual, the Milwaukee-based insurance giant that advertises itself as "The Quiet Company."
George Russell stayed on as chairman of the Russell Investments division until 2002, when he stepped down. The company also sold its headquarters building, which it now leases.
"It became someone else's company and someone else's building," said Ebersole, the former mayor, who said Russell's civic engagement has not been the same since George Russell sold.
Last June, Russell CEO Craig Ueland resigned after 25 years with the company. His replacement, Doman, came from London.
Earlier this year, several longtime local executives left and Russell laid off about 200 local employees as part of a global reduction.
"Kiss Russell Goodbye, Tacoma," warned a headline on a pessimistic piece in April by Dan Voelpel, a business columnist for The News Tribune newspaper.
"I've lost my punch," George Russell said last week, explaining he can't influence the decision at all.
"If it leaves Tacoma, it leaves a big hole in the ground," he said.
The recession may give Russell a chance to get a bargain on a prime Seattle location — even if the city doesn't offer tax breaks or other incentives, say local real-estate brokers.
"Seattle has the name, the image, the prestige, where they may not have to offer some of the things that Tacoma has to offer," said Oscar Oliveira, managing director of the Broderick Group. "It is a rare opportunity for them to strike a good deal and to get the Seattle address that comes with it."
As for Tacoma, Ebersole said he understands why Russell is tempted to leave, and why Tacoma leaders are fighting hard to keep the company.
"I don't think there are any good guys and bad guys in this drama," he said.
But Ebersole said he wishes sometimes there could be more public debate about bending over backward for one company. "It deserves a lot more civic debate and discussion than it gets," he said. "We're a bit buffaloed to even talk about it."
Those involved in the effort to keep Russell at home don't have time for such theoretical concerns. "This is classic economic development. You deal with the situation in front of you, not the situation in the abstract," said Bruce Kendall, president and CEO of the Economic Development Board for Tacoma-Pierce County.
"They're a leading global company in a cluster we want to grow — financial services. If we didn't have them, and they came calling, we'd love to bring them here."
Staff reporters Kristi Heim and Eric Pryne contributed to this report. Jim Brunner: 206-515-5628 or firstname.lastname@example.org
Copyright © 2009 The Seattle Times Company
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