Rhode Island, Virginia vie for Toray Plastics expansion

By Andy Smith
Journal Staff Writer

NORTH KINGSTOWN — Toray Plastics (America) has an expansion plan that could mean a $200-million investment and up to 200 news jobs. Toray president and CEO Richard R. Schloesser says the new jobs will either stay in Rhode Island or go to Toray’s other manufacturing plant in Front Royal, Va.

Schloesser said he’s already had calls from economic development officials in Virginia. In the meantime, Toray representatives and the state Economic Development Corporation have been in meetings to discuss tax breaks, work-force training grants, land acquisition and other incentives that would persuade Toray to expand its business in Rhode Island.

Competition between states to land jobs is how the economic-development game is being played these days, said Jeff Finkle, president and CEO of the International Economic Development Council in Washington, D.C.

“If we did nothing, we would continue to lose companies to other states,” said state EDC Executive Director Keith Stokes. He said that’s unacceptable in a state with a 10.9-percent unemployment rate, third-highest in the nation, with 62,000 people out of work.

Schloesser, who is looking to make his decision by the end of the year, said he’d prefer to expand here. But he’s concerned about the cost of doing business in Rhode Island. “It’s a very expensive state to do business in,” he said.

He said Toray Plastics, a subsidiary of Japanese company Toray Industries, has not contacted Virginia, but Virginia officials have been calling him. “We know we will get help out of Virginia,” Schloesser said.

He noted that Virginia’s governor, Bob McDonnell, visited Toray Industry executives in Japan during a recent trip to Asia.

Suzanne West, a spokeswoman for the Virginia Economic Development Partnership, said her agency does not comment on any project before it’s announced.

In Rhode Island, Schloesser met with Stokes and Governor Chafee at Toray’s North Kingstown facility on April 19.

“Do I [expand] here, or do I do it in Virginia?” Schloesser said he asked them.

Since then, Toray executives have met with EDC staff and Stokes on May 16 and June 21, with another meeting scheduled for this month.

Stokes said Toray might be able to qualify for tax credits under the state’s provisions for manufacturing research and development, and another for job creation. He said officials from the Quonset Development Corporation have also been involved in the discussions about land acquisition.

“Companies are making their decisions based on costs,” Stokes said. “It’s not lifestyle. It’s not loyalty. It’s costs.”

Stokes said certain costs –– utilities, health care, land and taxes –– are higher in Rhode Island than in other states. What the EDC is trying to do for Toray, he said, is come up with a package to make Rhode Island cost-competitive.

One of Toray’s big concerns is energy. The company is the largest consumer of electricity in the state, and it went to court to appeal the power-purchase agreement between National Grid and Deepwater Wind, which plans to build wind farms in the waters off Rhode Island. Toray contended the agreement would drive the price of power too high.

In an interview last week, Schloesser said the court’s decision will have “some impact” on the company’s expansion plans.

On Friday, the Rhode Island Supreme Court upheld the power agreement, ruling against Toray and fellow plaintiff Polytop Corp. Schloesser could not be reached for comment Tuesday.

Stokes said the EDC has worked with Toray frequently over the past 20 years. In 1992 and again in 2006, the Rhode Island Industrial Facilities Corporation issued bonds to help finance previous Toray expansions. Last year, Toray received $500,000 in low-interest loans and an additional grant of $250,000 to install solar panels.

Some economic-development experts say offering incentives to individual companies is a bad idea.

“It’s an unseemly business, this incentive game” said Finkle of the International Economic Development Council in Washington, D.C.

“Is it the right decision for the state, or are you doing it because any job is worth subsidizing right now? I hope the state doesn’t get stupid, and open up the wallet too wide.”

Stokes said that in a perfect economic world, Finkle has a point. Rather than a whole set of incentives and inducements, Rhode Island would be better served by a lower corporate-tax rate, a stable budget and a predictable business climate.

But, said Stokes, we’re not living in that perfect world. Stokes said that when it comes to economic development, keeping existing companies, particularly an expanding company, is even more important than luring new ones.

Stokes said the incentives under consideration for Toray are not “deals,” but ways of compensating for the higher fixed costs of doing business in Rhode Island.

Schloesser said he is worried about the long-term economic climate in the state. He said some of Chafee’s tax proposals, particularly a 1-percent tax on manufacturing equipment, could have been a deal-breaker for Toray. But that idea never made it through the General Assembly.

“We’d like to have the expansion here, but we have questions about what will happen to the state. Is this going to be a good place to do business in the next five years?”