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N.C. County OKs Bid for 400-Worker Caterpillar Plant

Fri August 06, 2010 - Southeast Edition
CEG



WINSTON-SALEM, N.C. (AP) North Carolina officials are assembling a package of tax breaks and other incentives worth up to $75 million to lure a new Caterpillar Inc. factory that would employ nearly 400 workers.

At stake is a proposed $426 million factory where Caterpillar would manufacture and test earthmoving and agricultural equipment. The plant would employ about 390 as well as about 120 contract workers, the Winston-Salem Journal reported.

Forsyth County’s board of commissioners voted unanimously July 12 to offer Caterpillar $10.2 million in incentives.

The state Commerce Department would not confirm any discussions business recruiters were having with any particular company.

“The kinds of companies that we’re competing for are very good employers that create quality jobs and restore tax breaks in our communities,” Deputy Commerce Secretary Dale Carroll told The Associated Press.

Winston-Salem is competing with Montgomery, Ala., and Spartanburg, S.C., for the plant the heavy-equipment maker would build on 100 acres beside the ill-fated Dell Inc. computer-assembly plant, the newspaper reported.

Dell chose the site in 2004, lured by more than $300 million in incentives in exchange for a pledge to create at least 1,500 jobs. Four years after opening, Dell announced it would close the plant, putting 900 people out of work. Most state incentives were never paid, and Dell refunded local governments their $26 million in upfront payments.

Since then, Dell has postponed the plant’s closing date four times, pushing it into next year.

Winston-Salem and Forsyth County are requiring Caterpillar to meet capital-investment and job thresholds or pay back incentives — a lesson learned after the experience with Dell.

Winston-Salem’s share of the incentives package would be about $13.4 million. The city also would seek $1 million from the Golden Leaf Foundation to buy manufacturing equipment that the city would lease to Caterpillar. The state-created foundation is responsible for distributing half of the $4.6 billion North Carolina is expected to receive from cigarette companies to help areas hurt by the tobacco industry’s decline.

Caterpillar may be one of several companies with well-known names considering North Carolina for expansion.

Lawmakers recently passed a series of tax breaks and other incentives sought by companies that recruiters want to bring to North Carolina. They included special accommodations for data centers, film and television producers, an energy turbine manufacturer and a plant converting wood pulp to paper.

Hours before adjourning around dawn July 10, lawmakers unveiled a last-minute offering that would give 15 years of special tax treatment for an unnamed company promising to invest $500 million in one of the poorest counties and commit to the deal within the next two months.

Advocates argue that the size of incentives are dwarfed by the revenues new business creates with its payroll, property taxes and local economic dynamism.

But research into corporate decision-making indicates incentives may play a role only in tipping otherwise roughly balanced scales after executives decide the best combination of location, investment climate, transportation routes, work force and living standards, said Andrew Brod, an economist at University of North Carolina at Greensboro.

“It’s very hard to conclude that if a company that is getting incentives from State X wouldn’t have gone to State X anyway,” Brod said.

On the other hand, offering incentives to lure companies gives politicians the chance to claim credit at little risk they’ll be blamed for a deal that falls short of its promise, Brod said.

“It’s very important for them, especially in times like this, to appear to be doing something,” Brod said. “It’s easy to do something whose rewards and benefits are hard to assess than to just do nothing.”