Part VI: The Hercules Deal
This economic development retrospective covering the years 1945 to 1984 will be serialized as eight parts, running on alternate days on Town Square Delaware.
Wilmington officials were looking for a chairman for the new WEDCO organization and asked Hercules chairman and CEO Werner Brown to take the job. He declined, saying he was preparing to retire, and by the way, his successor, Al Giacco, wanted to move Hercules out of the city to Chadds Ford, PA. A new day, a new crisis for city hall as the scramble began to keep Hercules within city limits. Giacco’s main complaint was about state income tax rates, and his way of driving home the point was to make a veiled threat to pull up stakes and take his company elsewhere. This focused the attention of Gov. Pete du Pont and the state legislature, and in 1979 the state legislature reduced the top personal income tax rate from 19.8 to 13.5 percent. By July, 1979 Giacco had declared his intention to keep Hercules in Delaware, so the choice was now between Wilmington and the suburban land Hercules owned adjoining their country club off Lancaster Pike. Giacco’s condition to consider staying in Wilmington was that the downtown site be made comparable cost wise with his suburban site. At stake were 1,500 jobs now located in the Delaware Trust Building at 9th and Market Streets.
Wilmington was at a severe disadvantage from the outset because Hercules already owned the suburban land and could build a less expensive low-rise office complex there with free parking. Also, the Governor’s Office could easily back off its involvement with Hercules since they were remaining in Delaware under either alternative. To Gov. du Pont’s credit, he and his staff remained actively involved to keep Hercules in Wilmington, in spite of the low regard many state legislators had for the city. The Governor saw the value to the State of Delaware in an economically strong Wilmington and just as important, the liability a financially crippled Wilmington would be to the State.
How does a financially-strapped city close a huge money gap to keep a large corporation in town? Obviously Wilmington could not go it alone and already had a valuable partner in the Governor’s office. Also, there may be more to this than just the money. The DuPont Company had always cast a huge shadow over its Hercules offspring in Wilmington, causing a bit of lingering resentment. And Al Giacco had just bent the state legislature to his will, a prime example of his strong personality. Was there something here Wilmington could build upon?
Hercules and Al Giacco were not going to be swayed into staying in Wilmington by money alone. There would need to be something dramatic. Wilmington’s efforts started with public relations as the Mayor’s Office put together a full-page newspaper ad directed at Hercules, stating how valuable they were to the city and containing the signatures of all the major private employers in town, including the DuPont Company’s CEO Irv Shapiro. Consultants were hired to help craft alternatives that would grab Al Giacco’s attention. If he wanted to make a statement about Hercules he needed a signature building, not one hidden away among the suburban hills. Alternative sites in Wilmington included behind the post office building on Rodney Square, across from the YMCA at Delaware Avenue and Washington, and at the old Brown Vocational School near the banks of the Brandywine. The last one seemed to have some appeal so it became the focus of attention.
The approach adopted was to create an entire downtown Wilmington development plan, with the new Hercules complex as one centerpiece. Called River To River, the idea was for Gateways at either end of downtown, the Brandywine Gateway and Christina Gateway named after the two rivers that bracketed Wilmington’s business district. A model was constructed of a new Hercules headquarters in the Brandywine Gateway, featuring a 42 story cylindrical tower and reflecting pool. The tower was exactly twice as tall as the tallest building then in Wilmington, and a helicopter had hovered at the height of the proposed top of the structure to photograph panoramic views from its penthouse office. The model presented itself, there’s no other way to describe it, as a huge phallic symbol that would dominate the Wilmington skyline. Al Giacco took to it immediately, asking that the model be left behind after city officials had made their presentation. Now the city had to come up with the money, estimated at $30 million, to close the gap between the city and suburban locations. Wilmington turned back to the federal government’s new UDAG program.
Having successfully landed the nation’s first UDAG grant for the Radisson Hotel, city officials wanted to go back to the well but this was a more difficult project. The site selected would require the State to tear down the former Brown Tech School, then home to the Wilmington Skills Center, along with providing street and access improvements. A parking garage would be needed on an adjoining block, and the project itself was located in the midst of several neighborhoods. And the numbers were much bigger. The Radisson UDAG grant was only $1.6 million but this one would need to be many times greater.
Of all the parties involved in these negotiations, Wilmington government really had the least to offer, the fewest options available and the most at stake. The Hercules Corporation could conceivably locate anywhere and not damage their bottom line. The State of Delaware had already won the battle to keep Hercules in the state and could claim little motivation to keep them in Wilmington. The federal government wanted an attractive private sector to public sector investment ratio and community support for the project. That could take place anywhere in the country. The neighborhoods, which typically have difficulty seeing the big picture through the fog of their own immediate concerns, could easily kill the whole effort with a few raucous community meetings. But Wilmington could not afford to lose the 1,500 jobs Hercules provided, nor could it survive the tremendous negative effects on its reputation by losing a major corporate citizen. To make it happen Wilmington would have to marshal all these forces and direct them towards the only solution that worked for the city – Hercules had to stay.
For all the requirements from HUD for UDAG grants to show demonstrable benefits to the community, retention of jobs and like criteria, the awards were still a political process the Carter Administration monitored closely. Unbeknownst to Mayor McLaughlin, a couple of his junior staffers decided in the fall of 1979 to bring the draft Ted Kennedy for President movement to Delaware. Calling themselves the Delaware Democrats for Change, they recruited a list of Democratic notables to the committee and held a press conference in the new Radisson Hotel, built of course with the assistance of a Carter Administration UDAG grant. For a city administration competing against dozens of other cities for desperately needed grants from the Carter Administration, this support of Carter’s archrival was an unwanted embarrassment. Luckily, the local Kennedy boom fizzled before any serious political damage was done, McLaughlin endorsed President Carter the day of the Delaware Democratic caucuses, and Wilmington stayed in the good graces of the Carter Administration.
Months of difficult negotiations ensued – with the State of Delaware to provide half of the development site along with road and park improvements; with the DuPont Company to sell the other half of the development site for their rival’s project; with Hercules to come up with an acceptable design along with job and term guarantees; with the Federal Government’s Economic Development Administration to finance a new parking garage; with HUD regarding elements of the UDAG application; and finally with the three adjoining neighborhoods. The package of deals Wilmington negotiated were both innovative and, in the end, effective.
Wilmington created a new economic development entity called the Brandywine Gateway Corporation to oversee the development and handle the financing. The BGC board was composed of three city and three state government representatives to assure full involvement of State government. The DuPont Company agreed to sell their part of the project land for $3.9 million while the State agreed to demolish the former Brown Vo-Tech School and construct a park between the new building and the Brandywine River, along with significant road and access improvements to the area. The EDA awarded a $1.5 million grant for the new parking garage to be built by the Wilmington Parking Authority. Hercules committed to a 25- year lease for the new building, to be built and owned by the developer, Integrated Resources, and to make good faith efforts to hire economically disadvantaged city residents for any jobs created.
Perhaps the most creative deal was with the three neighborhoods, which had issues with parking, traffic congestion, design and landscape concepts, among others. A city/neighborhood development agreement was signed to address these issues and, most importantly, an Inter-Neighborhood Foundation was formed to allow the neighbors to share in the UDAG loan payback. For the City’s part, their most significant contribution financially was the 10- year real estate tax abatement, which did create a significant savings for Hercules.
The whole package was enough to convince HUD to award a $16 million UDAG to the City of Wilmington for the project. This financed the land acquisition from Dupont and a major part of the construction differential. Part of the loan payback from the developer (on a loan for 25 years at 5% annual interest) would go to the Parking Authority to offset the debt from the new garage, but $300,000 per year would go directly to the Inter-Neighborhood Foundation to spend on neighborhood projects they selected. The design of the new Hercules Building changed radically from the 42- story cylinder to a 12 story, 600,000 square foot green glass box with a dramatic atrium in the center.
Next: A Transformed Downtown
Carol Hoffecker’s excellent book, Corporate Capital Wilmington in the Twentieth Century (1983) gave me a great source for the early post WWII years. I would also like to thank the following individuals who contributed their time, assistance and recollections: Peter Besecker, Joe DiPinto, Elliott Golinkoff, Brian Murphy, Dick Pryor, Fred Sears, Dave Singleton and Stan Soja.