RECRUITERS, INCENTIVES GO HAND IN HAND
The announcement could come any day now.
04/23/05
George A. Chidi
A major company will move to Edgecombe County. The governor will speak, with flags waving in the background. He will declare the greatness of the moment and reaffirm the importance of the administration's job-creating policies for rural North Carolina. The state will cut a check.

Hopeful signs have begun to emerge. The Cheesecake Factory plans to build a bakery in the area (although not in Edgecombe County as originally reported). West Corp., a call center company from Nebraska, will move into offices abandoned last year by a failing telemarketer. The gray, empty hulk of Tarrytown Mall — perhaps the most visible symbol remaining of the flood — will make way for a Sam's Club to be constructed this year. And the Ford's Colony retirement community looks like it will sell out its first run of lots in the $250 million subdivision.

Other deals, such as one for a $100 million Gatorade bottling plant in Edgecombe County, which could be worth 200 jobs and $100 million in capital investment to Edgecombe County, are in the works but haven't been formally announced.

But the often-secretive process can leave lawmakers at the mercy of development officials when they evaluate proposals. Decisions are made behind closed doors to protect companies' competitive advantages. Businesses on the move have enormous leverage to bargain in a state with two islands of fast-growing urban centers — Raleigh and Charlotte — floating in an ocean of high unemployment. The incentives game, pitting one North Carolina town against another, is beginning to rankle some lawmakers.

New Standard Corp., a privately held metal stamping and fabrication manufacturer based in Pennsylvania, found itself outgrowing its surroundings last year.

The company's executives started calling around to neighboring states, settling on North Carolina and South Carolina as prospective locations for a new $10 million facility, said Ralph Hockman, senior vice president of finance. The company wrote off South Carolina early, he said.

"What we were wanting to do was to keep the distance (short) ... a five-hour drive from our facility," he said. "The state was our initial contact, and they're the ones who really drove this until we settled on a prospect."

Hockman had little regard for private real estate agents in location-scouting.

"They're going to have specific buildings that they're going to want to try to sell you," he said. "(The state) wants to create new jobs. I think the $10 million was not as big an influence as the jobs."

Rocky Mount's local economic development office — the Carolinas Gateway Partnership — didn't get involved until the company had essentially made up its mind to move to Rocky Mount, he said. At that point, the partnership began coordinating the state and local packages of incentives offered to the company.

Lawmakers describe the incentives as a necessary evil.

"I personally dislike the system," said Nash County Commissioner Robbie Davis, "Incentives themselves don't set well with me. But ... they're a necessary evil. Corporate America has been trained to go look for those things now. We just have to do it."

In a meeting closed to the public, Davis and other commissioners hashed through the proposals. They learned of the kind of business New Standard was in. They learned how much money the company made, and how much it would spend on salaries and property improvements. For the most part, they had to trust their staff and the Carolinas Gateway Partnership staff to have vetted the company, however.

"As elected officials, we can only rely on what staff brings to us," Davis said. "I haven't known staff to let us down. ... We're given pretty concrete numbers as far as employment. We're given good numbers on type of training and on salaries."

The inducement process seems to grate on elected officials.

"I think often times we get played back and forth against each other," said Rocky Mount Mayor Fred Turnage, describing competition between his city and other areas of the state. "Sometimes the company may have already made its decision, and is just making counteroffers."

Such was the case with RJE Telecom, which was looking to start a computer-assisted drafting shop to employ between 25 and 50 people.

"The initial place we looked at was Hickory," said Al Berg, vice president of RJE's mid-Atlantic region, from his offices in Raleigh. Travel would have been more difficult for him to Hickory — a three hour drive. "It's quite a ways from Raleigh. But I was prepared to do that. By coincidence, one of my employees heard a radio advertisement that Rocky Mount had a significant unemployment rate. ... There's an ulterior motive there, in that the economic depression can help the wage scale. But I wasn't looking for farmers. I was looking for technical skills."

Berg called Alan Matthews of the Rocky Mount Area Chamber of Commerce, who brought him to Carolinas Gateway Partnership. Unlike many of the contacts for Carolinas Gateway Partnership, Berg essentially walked through the front door on his own, rather than being led to Rocky Mount by the state Department of Commerce.

Incentives were part of their first conversation, he said.

"The incentives were important to me, because it demonstrated that the community would be involved," he said. I did tell them up front that we were looking at Hickory. I said that competition is out there, and you need to beat them."

Carolinas Gateway President John Gessaman said that it's relatively rare for a company to play one city off against another.

"That was a rare case, because perhaps everything was equal," he said.

The lack of robust inducements wouldn't have been a show stopper, Berg said.

"High Point offered us financial incentives. I asked if (the partnership) could meet or beat those, and they said absolutely."

RJE received no state-level inducements to locate in Rocky Mount, he said. Nash County and the city will help train workers at the community college. However, the computer company's local incentives carry no clawback provision — a clause in their agreement returning money to the public if it doesn't meet employment or investment goals — he said.

By coincidence, a local drafting company has gone bankrupt late last year, Berg said. The facility still had drafting equipment in it, and a labor pool would presumably be available.

"If it happened fairly recently, these people are still job hunting," he said.

To test the waters, Gessaman offered to place a blind ad for RJE, Berg said.

The ad ran in the Telegram on a Sunday in January, asking for applications for CAD drafters at an hourly salary of $10 to $12 an hour for an unnamed prospective company. Training would be provided, the ad said.

More than 100 applicants sent resumes by Tuesday, Berg said.

New Standard will receive $375,000 from the One North Carolina Fund — Gov. Mike Easley's "hip-pocket money" for infrastructure incentives to lure business. Rocky Mount will provide $55,000 a year for five years to the company as part of the agreement. The agreement between the city, Nash County and the Carolinas Gateway Partnership calls for the purchasing company to invest $10 million in the facilities and hire 40 people a year for five years. A quarter of the new jobs must go to women, minorities and people with low income to earn Rocky Mount's incentive.

The deal also calls for 200 new jobs at an expected average salary of $13.70 per hour plus benefits.

"They're all incentive-based inducements," Hockman said. "If we don't achieve, we don't get the funds."

Compliance is simple, said Nash County Manager Bob Murphy.

"We put on stocking caps and paint our faces black and go in at midnight to look at their books," he said, deadpanning the joke. Actually, the companies must submit a certification from a certified public accountant of their finances each year to collect the bounty for job creation, Murphy said.

New Standard is not the only company earning financial incentives in Nash and Edgecombe County. American Food resources in Nashville received $75,000 upon occupancy and will receive $75,000 for four years. Universal Leaf's deal called for $250,000 a year for five years. Nash County has made two payments, he said.

It's not the only incentive deal under way in Nash and Edgecombe counties. American Food Resources in Nashville received $75,000 upon occupancy and will receive $75,000 for four years. Universal Leaf's deal called for $250,000 for five years. Nash County has made two payments, Murphy said.

The Department of Commerce gave New Standard the guided tour of the state when it first decided to look here. Executives looked at locations in four counties, mostly in economically depressed areas such as New Bern in Craven County, before settling on the 117,000-square-foot Fontaine Fifth Wheel building on Church Street in Rocky Mount.

Like Tarrytown, the Fontaine building has been an abandoned eyesore for years. Unlike Tarrytown, it fell victim to Mexico's labor draw rather than the flood.

The building had become a brownfield - an old, presumably contaminated facility which would not normally be appealing to industrial customers. But it worked for New Standard.

"We found the building that met our needs," Hockman said. "This was a brownfield site. The fact was ... it brought issues along with it. Typically, with a brownfield, you'll have to do more work on the environmental side."

Ironically, because it was a brownfield the state was able to provide additional assistance to help lower the effective purchase costs, he said. Other locations weren't competitive.

Being close to customers such as appliance maker Bosch Siemens and Thomas Built Buses, as well as to major highways, made a difference as well, he said. The company wanted to be within a two-hour drive to key customers.

"Freight costs are certainly something," Hockman said. "This was not a haphazard walk for us. To be successful in the future would be to locate close to the customer. We can't do that a full shift (an eight-hour drive) away."

But the combined package of incentives from the Department of Commerce and the Carolinas Gateway Partnership also may have had influence over their decision, he said. "To say that it wouldn't have influenced us would have been wrong," Hockman said, "(but) our prime motivator was to find the right facility and the right package."