Is the Cost of Doing Business in King County Getting Too High?

Will other firms follow Kent manufacturer Flow and leave King County?
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This article appears in the June 2018 issue. Click here for a free subscription.

The waterjet is a marvel of industrial engineering. Using a beam of water no thicker than a human hair, jacked up to pressures of 94,000 pounds per square inch, it can slice through materials as tough as titanium or granite and as diverse as frozen food and giant rolls of paper.

But it now appears the waterjet has run up against a material even it can’t cut: the cost of doing business in King County.

Shape Technologies, the private-equity owner of Kent-based Flow International, is moving Flow’s manufacturing operation to Kansas, resulting in the loss of 110 jobs locally.

“The cost of doing business in the Seattle area has changed dramatically over the last few years, and the cost of manufacturing in the region continues to climb,” Shape President and CEO David Savage said in a statement. “As we look into the future, we expect these operating challenges to continue to increase, and we are taking the step now to combine operations in order to remain competitive in our marketplace.”

By numbers alone, the Flow announcement isn’t tremendously significant, even within manufacturing (which accounts for about 100,000 jobs in King County). As hugely disruptive as the loss of a job is on a personal level, this is one labor market in which those with skills and experience in advanced manufacturing are likely to be grabbed up.

It’s dangerous to build an entire trend line from one data point or anecdote. Shape already owns another waterjet manufacturer in Kansas, so consolidation of certain operations makes financial sense. (Shape also owns a Tumwater-based maker of waterjet parts and accessories.) And the company says it’s keeping Flow’s management, design, engineering, commercial and financial operations in Kent “for the long term.” In fact, it plans “investment in new facilities in Kent in 2019 to support our continued growth,” although it’s not specifying what that might be.

But the announcement does matter, and not just to those who need to find new jobs. Flow was a pioneer in the development of waterjet technology and a foundational company in the region’s advanced-manufacturing-technology sector long before anyone thought there was such a thing. It spun off multiple companies, including competitor Omax, which remains in Kent and is in growth mode.

Even more significant is what the announcement portends about manufacturing’s long-term viability in the Puget Sound region. Shape isn’t the first to sound the alarm about the cost of doing business here, but many of those complaints have come from companies trying to make it in places like Seattle’s SoDo neighborhood. In Kent’s industrial zone, manufacturers are dealing with higher taxes, higher labor rates, higher utility rates and traffic congestion, as well as competition from warehouse tenants helping to drive up real estate lease and acquisition costs.

Whether or not Seattle cares, Kent is definitely paying attention. “We can’t take the diverse mix of things that happen in the Kent industrial valley for granted,” Bill Ellis, the city’s economic development director, told the Kent City Council right after the Flow announcement. “There are market pressures that can make our Kent industrial area less vital and less the productivity-rich area it is today. The locus of production can surely shift.”

That development would not be good for those who work at those manufacturing jobs, or for governments dependent on their tax revenues, or for the region’s manufacturing ecosystem in which multiple industries, not just aerospace, thrive on having a cluster of companies close to each other.

The cost-of-living issue may prove as resistant to remedies for manufacturing as it has been for residents. But as Flow’s decision to move to Kansas shows, there are answers, drastic though they may be. And they’re not ones this region will wind up liking.

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