Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, July 10, 1994 TAG: 9407120011
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: By LON WAGNER STAFF WRITER NOTE: Above
DATELINE: LENGTH: Long
JOHN Boardman, president of Sam Moore Furniture in Bedford, won't be getting a lucrative payout from the state when the chair manufacturer expands for the 11th time in the company's history.
And he doesn't want one.
"I have never asked for a dime, don't want a dime and don't think I should be given a dime," Boardman says. "I don't think a well-run, well-managed business should be going around getting state aid.
"I think it's wrong. I think it's a very thin line between bribery and incentives."
Boardman has taken his anti-incentive campaign to local and state officials, but inducements to lure businesses to Virginia and to keep companies here apparently have become a permanent part of the industrial recruitment landscape.
For the most part, those who work to recruit industry are pleased.
"Before we had this tool, I think we were all just throwing up our hands and saying, 'What's the point?''' said Beth Doughty, executive director of the Roanoke Regional Economic Development Partnership.
Economic developers in Virginia stood handcuffed throughout the 1980s as neighboring states such as North Carolina, South Carolina and Kentucky doled out larger and larger incentive packages to recruit industries from overseas and the Northeast. During Gov. Douglas Wilder's administration, Virginia officials realized that incentives had become more than just a piece of bait used to reel in a recruit after the final sites had been narrowed to two or three.
"It used to be [incentives] were a criteria only considered in the final checklist, but now it's one of the first things asked, along with right-to-work and other basics," Secretary of Commerce and Trade Robert Skunda said.
"I don't like it, but I acknowledge that it's an environment that exists. There's no sense complaining that you don't like the way the game is played."
Western Virginians need to look no farther than Dublin to Volvo GM Heavy Truck Corp. for an example of business incentives that paid off.
This spring, rumors swirled suggesting the custom truck-maker might not only build an expansion nears its headquarters in Greensboro, N.C., but might just move its whole operation there.
Fears that one of the New River Valley's largest and highest-paying manufacturers would move out of state were quelled in late March when Gov. George Allen announced in Richmond that the plant would stay put - thanks to a state and Pulaski County incentive package estimated to top $30 million.
The Volvo GM incentive package, like most business inducements, was laid out to help the company build its expansion, improve roads, train workers and pay less in taxes. Advocates of incentives argue that the package not only meant adding as many as 175 jobs at the plant but saving the 1,200 jobs already there.
Yet it also gave critics of companies that posture for incentives one more round of ammunition. They point out that Volvo GM played the game just right: It let everyone know it was about to expand, got some headlines to wave around and show that it might move out of state, and waited for the offer to roll in.
"Part of it relates to how you market yourself," said John Wampler, president of Pulaski Furniture, the New River Valley's largest manufacturing employer. "In other words, you can come in with a pretty heavy-handed approach to the state. You can say, 'Look, I can build it in North Carolina or South Carolina or Alabama; we're a Swedish company, we really don't care.'''
When it expanded this spring, Pulaski Furniture took the wrong approach. Wampler told the state that Pulaski Furniture was a locally grown company and wanted to stay put. It added 160 jobs, about the same number Volvo GM promised to create, and Wampler said the plant could add another 140 jobs over several years. Pulaski Furniture got just a fraction of the $5 million Volvo GM will get from the Governor's Opportunity Fund, the name for Virginia's enticement pocketbook.
"We did not take a threatening stance with the state that we would leave," Wampler said. "If I was going to build another factory in five years, I have to be honest with you, I would."
That companies have learned to milk the incentive cow is little surprise. The $8.5 million Virginia will dole out through the opportunity fund this year is minimal compared to other states. Consulting firms now specialize in helping businesses get all they can by pitting neighboring states against each other.
Some members of the General Assembly have criticized the Allen administration for handing out money without having guidelines that spell out what makes a company qualify for incentives. Senate Finance Committee Chairman Hunter Andrews, D-Hampton, called for a uniform policy after the Volvo GM deal.
"I'm not objecting to what he's done, but at some point we've got to have a policy," Andrews said. "Where do we draw the line, unless we print money?"
The handouts from the governor at times have made clear the need for a policy. This spring, for instance, Yokohama Tire Co. in Salem received $135,000 for help with a plant expansion. The odd part was that Yokohama had begun adding on to its plant before it asked for the grant. Allen awarded the grant anyway, but with a warning to put in the request before beginning construction next time.
Skunda said the Allen administration has heard the criticisms and wants to develop a policy. He would like to see an incentive policy geared toward expanding the state's competitiveness in key sectors of the economy.
Though Virginia's $8.5 million fund seems low-key compared with the $100 million warchests of other states, Jeffrey Finkle, executive director of the Council for Urban Economic Development, says the state's deal with Walt Disney Co. puts it at the top of the heap.
Finkle has called for a "cease-fire" in the incentive war among the states. He points to the $163 million deal Allen made for Disney's America project in Prince William County as a payout that made no sense.
"Virginia has been very successful in the past without incentives, even with Kentucky, North Carolina and South Carolina using them," Finkle said. "What changed? Disney already had the land optioned when they came to Virginia. This deal became a gift."
Early last year, 10 governors and as many business leaders gathered in Washington, D.C., for a roundtable on incentives. For a time, it seemed as though Finkle would get the cease-fire he had been advocating.
But after coming up with an outline for a "code of mutual cooperation," the participants agreed that compliance with the code would be voluntary. Within a year, Alabama unveiled an incentive package to land a Mercedes Benz factory that let the other states know the competition might only be beginning.
Alabama shelled out $253 million in incentives for infrastructure, site development, education and training, and other start-up costs. Critics with calculators quickly figured out that the incentives amounted to $168,667 for each of the 1,500 jobs Mercedes pledged to create.
Still, those who put together the deal argued it was worth it. John Hansen, director of the Economic Development Association of Alabama, said the state had to do something to dispel the national and international image the state had in the 1960s because of its racial problems.
"For years, Alabama wasn't even on any company's long list, much less their short list," Hansen said. "People felt the Southern part of the United States was still kind of backwards."
For that reason, said Ted vonCannon, president of the Metropolitan Development Board in Birmingham, Ala., laying out the Mercedes deal by putting dollars in plus and minus columns isn't appropriate.
"I'm sure people in Ohio, Pennsylvania and New Jersey would say, 'Why on earth would a world-class company like Mercedes be going to Alabama?''' vonCannon said. "This is one we needed to do. In my opinion, if we had to do it twice it would have been worth it, because you can't pay for that publicity."
But Finkle argues that Virginia's reputation couldn't be compared to Alabama's, so why would the state pay $160 million to a company after it had already decided to locate there?
"What about existing businesses?" Finkle says. "Are you just going to say to King's Dominion, 'We're going to give Disney an unfair advantage over you by doing all this?'''
Skunda argues that Disney got about $20 million to $30 million in incentives, and the remaining $130 million will go toward improving roads, such as Interstate 66, that needed widening even before Disney announced its plans.
Skunda said he thinks Virginia's status as a right-to-work state, its quality of life and its higher education system should enable the state to compete for big projects without allowing the incentive war to get out of hand.
But, he said, don't look for the state to let a good industry slip out of its grasp because a neighbor outbids it.
"Incentives are now a way of economic development life," he said, "but I wish we would get to a point soon where incentives would not be the most important thing."
by CNB