Linamar comes at a price, but Asheville-area officials say it's worth paying

Written by Mark Barrett

SKYLAND — Forget about a free lunch. There is no such thing as getting a big employer for free either.

Buncombe County and Asheville officials say they had little choice but to offer Linamar Corp. $9 million in incentives in addition to the $2.7 million coming from state government if they hoped to persuade the Canadian manufacturer to bring 400
jobs to the former Volvo Construction Equipment plant here.

Linamar could have chosen to build on free land in the Greenville, S.C., area instead, officials said.

“It got down to us and another state. You don't have many chances to get a plant like this,” said Jon Creighton, assistant Buncombe County manager.

“When you start competing with South Carolina, you've got to get real serious,” he said, because the Palmetto State offers so many tax breaks and other incentives.
Buncombe County's unemployment rate is 7.5 percent, and job growth following the recession has, as in much of the country, been relatively anemic.

In that kind of atmosphere, Buncombe County Commissioner K. Ray Bailey said deals like the Linamar project — projected to offer workers an average annual wage of $39,752 — are exactly what his constituents want.

“People here (want) jobs so our young people can stay in this community,” Bailey said.

Workers will machine metal parts for axles of giant off-road mining trucks that Caterpiller will manufacture in Winston-Salem and for tractor-trailer power trains that another division of Volvo, ironically enough, makes in Hagerstown, Md.

Production is to start by the end of November, although a company official said it will take most of 2012 for the plant to get up to full speed.

For nearby businesses hurt by Volvo's exit, that will happen no time too soon.
The plant shut down in early 2010, putting 228 people out of work, although employment figures had been higher in previous years.

“When Volvo closed, we lost a lot of good customers,” said Sergio Torres, a supervisor at Tucson Southwest Grill on Hendersonville Road. Linamar is “going to be awesome for us.”

Deal maker?
Whether Linamar might have come here without incentives is a tough question to answer — although it's an academic one, since virtually every locality is offering them.

Getting started quickly was important to the company, and having an empty industrial building available was a big lure, said Nick Adams, a group president for Linamar.

South Carolina's offer only involved raw land where a building would have to be constructed, local officials said.

Speaking at Thursday's announcement of the deal at the Asheville Area Chamber of Commerce's annual dinner, Adams and Gov. Bev Perdue said factors like a workforce with substantial experience in precision metal machining, the availability of training by the community college system and proximity to customers were also big parts of the deal.

“Everybody made it possible,” Adams said. “We couldn't say no, I guess.”
Bob Orr, a former state Supreme Court justice who now heads the N.C. Institute for Constitutional Law, said before the deal was announced that officials often overestimate the impact that incentives have.

“No matter how sweet a deal, particularly if it's a big company with a big operation, they're going to make a business decision based upon all the other factors and not on incentives,” he said.

Orr objects to incentives, saying other taxpayers have to pay them to benefit a private interest.

“It skews the marketplace to begin with in that you've got government picking and choosing which companies get subsidized by public money,” he said.

Buncombe County's purchase of the Volvo plant is also troubling because it amounts to the county giving a higher priority to manufacturing than to other uses, Orr said. County officials say other buyers had looked at the 65-acre site as a site for retail uses or for apartments.

“One wonders how smart it is for government to jump into the marketplace (and) pull a piece of property out of circulation,” he said.

Making it

Government officials make no apologies.
Manufacturing is and has historically been one of the area's best-paying sectors. Average annual earnings for manufacturing workers in Buncombe County last year were $47,410.

That's more than twice the $23,148 the average retail worker got and almost three times the average of $15,941 for those in hospitality and food service.

Perdue drew loud applause from the crowd at the Chamber of Commerce meeting when she told them Linamar “is a company that makes things again. We're manufacturing products in North Carolina.”

Creighton said that under the county's incentives policy, he would ordinarily have recommended that the county pay Linamar about $3.5 million.

But, a larger figure was needed to compete and, “The perception here is this company's got a real potential to grow,” he said.

Linamar's agreement with the county says it must invest at least $125 million in the Skyland plant by 2020 and create 400 jobs to receive the entire $6.8 million net incentives payments the county has agreed to.

Planned state and local payments are tied to Linamar meeting job and investment goals.

“There's no upfront cash” from North Carolina, said Tim Crowley, a spokesman for the state Department of Commerce. “It's based on performance. If they don't create the jobs, they won't get the money.”

Two officials at the Economic Development Coalition for Asheville-Buncombe County board predicted that Linamar will be here longer and create more jobs than the agreement requires.

There's plenty of land available at the 65-acre site, said Bailey, chairman of the EDC board as well as a county commissioner.

“In my opinion, (Linamar) will create as many as 800 jobs over time at that site … and indirectly, many, many more,” he said.

“I do know they have long-term contracts that have spurred this investment, so we feel very comfortable about their long-term commitment here,” said Ben Teague, EDC executive director.

He noted that the Volvo compound comprises three buildings.

“They envision filling up one building with this investment, and they envision filling up a second building and maybe even building a third building. They'll be seeding and growing here for a long time,” Teague said.

Linamar will not by itself produce enough tax revenue to the county to repay the county's incentive payments unless it adds more jobs, according to county figures.

The county calculates that the $125 million investment and 400 jobs will result in $2.4 million in property tax revenue and $1.4 million to Buncombe County.

But economists say that a manufacturing job results in another 1.6 or so jobs created because of spending by the plant and those who work there, Teague said. That in turn will result in additional tax revenue, he and other officials said, as well as other benefits.

“You have to look at the restaurants near the plant, the grocery stores, the sales tax revenue the city will get,” Asheville Mayor Terry Bellamy said. Then there's the impact on individuals: “A family that has Medicaid now can afford health insurance with this job,” she said.

Staff writers John Boyle and Romando Dixson contributed to this report.