News
Email
Print
Experts ponder how to keep Wells Fargo
Journal Illustration by Richard Boyd II
ADVERTISEMENT
Published: November 14, 2008
Securing a major Wells Fargo & Co. presence in Winston-Salem could require that local and state officials pony up a major incentives package, economic analysts said yesterday.
Or not -- if the costs outweigh the benefits, some local officials said.
The planned Wells Fargo takeover of Wachovia Corp. by year's end has most Wachovia employees, including the 2,900 based locally and about 20,000 in Charlotte, anxious about their fates and their roles in a merged bank.
Because at least half of the local Wachovia jobs are not tied to any specific geographic base, incentives could be pivotal to any retention strategy, some analysts said.
Especially for a Wells Fargo that is pursuing at least $5 billion in cost savings over three years.
"In many instances, the best offense is a good defense," said John H. Boyd, the president of The Boyd Co., a site-selection company in Princeton, N.J.
"These are jobs that have been held for years, if not decades, in the local community. That makes for an argument that it's the right thing to do to offer incentives as a strategic economic-development move. I imagine that the state will fight vigorously to keep as many Wachovia jobs in North Carolina as possible given the economy and the turmoil in the financial sector," Boyd said. "It behooves local officials to step forward and do the same."
Most local officials, led by Mayor Allen Joines, say they believe that a "very valid and compelling economic case" can be made for why Wells Fargo should keep the wealth-management, information-technology and general-banking jobs in Winston-Salem. Joines presented John Stumpf, the chief executive of Wells Fargo, with a pamphlet Wednesday that stated the local case.
"We haven't had any specific discussions on that matter, and we don't know what Wells Fargo's expectations may be for incentives," said Bob Leak Jr., the president of Winston-Salem Business Inc.
"When you look at our costs for real estate, labor, operations, we believe we compare favorably to most other places," Leak said. "We also know there are fewer economic projects out there nationally, and it's easier to retain jobs than replace jobs."
Although most incentives are provided to businesses based on job creation and capital investment, the local community and North Carolina have recent examples of offering money to retain jobs.
The city provided B/E Aerospace Inc. with $150,000 in incentives in November 2001. The offer came two months after the Sept. 11 terrorist attacks and at a time when B/E already was struggling with a slump in the aviation industry.
The slump caused B/E to cut its local work force by 110 employees to 430 from November 2001 to March 2003, as well as close five plants and eliminate 1,000 jobs companywide.
But in the past 5½ years, the company has made a remarkable turnaround, becoming a preferred supplier to most of the major domestic and international airlines and global aircraft manufacturers. It has nearly doubled its local work force to 850 in that time span.
In May 2002, the city provided $500,000 in incentives -- and Forsyth County forgave $346,000 in liens -- to Sara Lee Corp. as part of consolidating several offices into an Oak Summit campus. Sara Lee had considered out-of-state sites for the $35 million expansion.
A third example came in 2005 when the city made US Airways Group Inc. eligible for up to $300,000 in incentives over three years for retaining jobs at its Hanes Mall Boulevard reservation center. Winston-Salem was competing against Pittsburgh for the jobs. Derwick Paige, the assistant city manager, said that the city paid $113,783 to the airline. "If these offers are done right, and help retain critical positions, they can benefit the community," he said.
On the state level, the biggest job-retention deal took place in September when $30 million each was provided to the Goodyear Tire and Rubber plant in Fayetteville and Bridgestone Firestone in Wilson to upgrade operations and keep existing jobs. Both plants employ more than 4,000 people.
From an economic standpoint, there's little distinction to be made between creating a new job and saving a job that would otherwise have disappeared, said John Hood, the president of the John Locke Foundation, a conservative-leaning research group in Raleigh. "Once you start choosing some jobs to retain with special tax breaks, you either have to keep expanding the program -- which starts to look like a general tax cut -- or you have to exclude some hometown companies from benefiting, which is unfair and possibly counterproductive."
Dan Besse, a member of the Winston-Salem City Council, said that incentives for Wells Fargo could be brought up during a special council meeting at 6 p.m. Tuesday at Joel Coliseum.
The meeting is intended to give residents a say on economic-development priorities for the community.
"If Wells Fargo wants to talk about bringing extra jobs and investment to the community as part of their integration of Wachovia and benefiting from what we offer here, we can certainly discuss incentives that would pay for themselves," Besse said.
But he and some economic officials said they would pass on incentives that would not provide a net positive for the taxpayers.
"I'm not trying to turn a cold shoulder to our local Wachovia employees," Besse said. "I just don't think this is an instance where per-job incentives are going to change Wells Fargo's mind if it decides it's better for its organization to relocate any Wachovia division."
■ Richard Craver can be reached at 727-7376 or at rcraver@wsjournal.com.
Have your say
Winston-Salem residents will have a chance to tell city officials what they think should be done about the local economy at a special meeting at 6 p.m. Tuesday at Joel Coliseum. In addition to listening to suggestions from residents, city officials are planning to talk about how they plan to keep -- and attract -- businesses and jobs.
Past local deals
2007
Baseball stadium
City: $25.4 million
County: $12.5 million Total: $37.9 million
2006
Wake Forest University Health Sciences
City: $4.8 million
County: $6.7 million
Total: $11.5 million
2004
Dell Inc.
City: $18.9 million
County: $18.3 million
Total: $37.2 million
2004
Lowe's Cos.
City: $1.5 million
County: $2.1 million
Total: $3.6 million
Email
Print
