ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Sunday, March 30, 1997 TAG: 9703310008
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: CHRISTINA NUCKOLS THE ROANOKE TIMES
Kanawha County is trying to persuade Kroger to reverse its decision to close a warehouse there.
Kanawha County, W.Va., officials, staggering from the loss of 250 jobs at a Kroger warehouse in their community, have accused Roanoke County of "stealing jobs."
Local officials, in a letter responding to that accusation, said the $1.78 million incentive package they are giving Kroger is more responsible than millions of dollars in tax breaks Kanawha County has given the grocery chain in the past 15 years.
Kroger's decision to close its warehouse near Charleston, while expanding the one in Roanoke County, has ignited a debate between the two communities over incentives.
Kanawha County commissioners fired off a protest letter to Roanoke County supervisors last week; Charleston newspapers have criticized the $1.78 million incentive package on their editorial pages; and Kanawha County Prosecutor Bill Forbes filed a request for information on the agreement with Kroger, telling the Charleston Daily Mail: "I don't mind having a battle with Roanoke County."
Roanoke County Administrator Elmer Hodge said he's been surprised at the ferocity of the reaction from West Virginia.
"We've never done that and never had another locality to do that," he said.
But Kanawha leaders are doing more than just putting their frustration down on paper. They visited Kroger's regional headquarters in Roanoke on Friday in an effort to persuade company officials to change their minds. They're also asking the West Virginia Legislature to develop a pact with surrounding states pledging not to use incentives to compete for each other's industries.
"It's bad public policy sitting on different sides of the state line using money to steal jobs," said Kanawha County Commissioner Kent Carper.
Neither effort is likely to succeed.
"I signed an agreement with Roanoke County, and I intend to honor everything I've signed," said Dave Osborne, president of Kroger's Mid-Atlantic Marketing Area.
As for the interstate compact, similar efforts have been tried elsewhere in the country, said Timothy Bartik, an analyst with the W.E. Upjohn Institute for Employment Research, a nonprofit organization in Kalamazoo, Mich.
"None have been successfully implemented for any length of time," Bartik said.
Carper said the experience with Kroger is forcing Kanawha County to rethink its incentive policy, although no specific proposals have been adopted.
Kanawha County issued $11.5 million in tax-free bonds to buy land for three Kroger grocery stores in the past 15 years. Two of those stores were allowed to operate for 10 years without paying real estate taxes.
Virginia prohibits cities and counties from offering tax breaks to industrial prospects. Hodge said that kind of incentive would be "too risky" even if they were legal. New roads, water and sewer extensions and drainage improvements are a better alternative, he said.
Bartik agreed. "When the company leaves, it's not as if you're left with nothing. The company cannot realistically take the roads and utility lines with them."
Osborne said Kroger's decision to close the Kanawha warehouse had nothing to do with incentives. He said Kroger completed a five-year nationwide study last year that recommended consolidating warehouses into large, modernized distribution centers. Three warehouses were identified as obsolete. They are located in Fort Wayne, Ind.; Little Rock, Ark.; and Kanawha County.
Kanawha had several strikes against it. One of the two warehouses Kroger uses there is leased by the company. Neither warehouse can handle frozen foods, meat or dairy products. Those foods already are shipped to Kroger's West Virginia stores directly from Roanoke County.
Most importantly, Osborne said, Roanoke County is in a central location for Kroger's mid-Atlantic region, which covers Virginia, North Carolina and part of West Virginia.
Kroger and county officials have made contradictory statements on what was said during incentive negotiations.
Hodge said Kroger never threatened to move if it didn't get incentives. However, he said he feared the grocery chain might move to North Carolina, a growth area for Kroger.
Osborne said the issue was broached during negotiations.
"What we said to them was we need to decide whether to build a new facility or whether to expand the facility in Roanoke County," he said, adding that the move would not have taken the warehouse out of the region.
Kroger was buying land around its warehouse about the time incentive negotiations began with Roanoke County.
Hodge said he was aware of that activity, but he also knew Kroger was having trouble buying a parcel it needed for road improvements.
County officials had a more immediate worry than whether Kroger might move. Kroger was demanding that the county return $890,000 in back taxes paid on its warehouse for Business, Professional and Occupational License levies.
The warehouse had been designated as a wholesale dealer for 20 years, but in reality it serves only as a distribution center for its own stores. State tax officials agree distribution centers don't fall under BPOL.
Hodge said incentive negotiations actually began when he suggested the two sides settle the BPOL dispute by using the money for incentives. He only got half his wish - $445,000 was returned to Kroger to spend as it chooses - but Hodge said that's what negotiations are all about. The bottom line for him, he said, is that 330 jobs will stay in Roanoke County.
"My first responsibility is to the companies and the workers here in the Roanoke Valley," he said.
LENGTH: Long : 105 lines ILLUSTRATION: GRAPHIC: Kroger's incentive package. KEYWORDS: MGRby CNB