Opinion Columnists
Email
Print
Dell debacle is a good lesson, if we dare to learn
ADVERTISEMENT
Related Links
Recent Related Documents
October 23, 2009
» Mayor Joines' Oct. 19th Letter to Dell about City's Reimbursement
» Dell's Oct. 20th Response Letter to Mayor Joines about City's Reimbursement
>More coverage...
Published: October 9, 2009
Dude, we had a Dell.
Not quite for five years, but we at least had the plant, and a few hundred people worked jobs that they might not have had otherwise.
Now, though, we citizens (and taxpayers) led down a primrose path alleged to be lined with hundreds of high-paying, high-tech jobs don't end up with much to show for more than $300 million in state and local incentives other than an empty plant and 90-plus acres of what was once perfectly good farmland.
"The city is well-protected and will be repaid every penny of its up-front costs and annual incentive payments," Mayor Allen "One-More-of-These-Boondoggles-With-My-Fingerprints-All-Over-It-And-My-Head-Might-Explode" Joines said after the news broke Wednesday.
Forgive the skepticism, but I'll believe it when I see it. To put it nicely, recent history shows that city officials don't have a good track record when it comes to negotiating with private companies.
Somehow, it seems as if we wind up losing money.
Public interest protected?
Once upon a time, officials in Alleghany County were brimming with optimism about the economic possibilities of landing a manufacturing plant from Bristol Compressors Inc., a company that made compressors for heating and air-conditioning equipment.
Hundreds of high-paying manufacturing jobs would come with the 180,000-square-foot plant.
The local economy would benefit as other businesses sprang up to supply and support the savior.
Alleghany officials fell all over themselves to land the great white whale.
The county, the town of Sparta and other backers agreed in 1993 to provide about $15.5 million in incentives provided that certain employment and investment benchmarks were met.
Sound familiar?
But Bristol Compressors hit a rough patch. The company announced in August 2001 that it was closing up shop and that more than 400 workers would lose their jobs.
In August 2002, Alleghany County and the other interested parties filed a lawsuit claiming that Bristol had breached its agreement and owed them $7.3 million. The company said that a $440,000 check it wrote in late 2002 was sufficient payback.
Alleghany County, et al lost. Jurors decided in April 2004 that the incentives contract was too vague.
Afterward, Patrick Woodie, an Alleghany County commissioner, had this to say: "We thought we had a contract that protected the legal interests of the county. What we found out was that it was an ambiguous contract."
Learn or repeat history
The lawyers who worked on the contract with Dell Inc. did more with so-called claw-back provisions to recoup our investment compared with what happened in Alleghany County.
But we would do well to remember who we are dealing with here.
Dell is the same company that played states (and counties) off of each other to drive up the incentives asking price. This is the same company that earlier this year refused to hand over employment figures to local elected officials after a round of layoffs.
Notes taken by Jim Fain, the N.C. secretary of commerce when the deal with Dell was done, spell out exactly who we went to bed with.
"Two-thousand jobs -- shouldn't you be happy with no revenue?" Fain quoted Kip Thompson, Dell's vice president for global manufacturing, as saying during negotiations.
And this: "If a state like N.C. can't get after this, I'm worried for our country -- there's a certain amount of patriotism here."
Our contract is better than the one with Bristol Compressors, and it certainly is possible that the city of Winston-Salem and Forsyth County will be repaid in full for the incentives and site work they have shelled out. But if it's more cost-effective for Dell to play hardball, don't be shocked if lawsuits are filed.
For sure, hindsight is 20/20, but we might as well have invested millions in a buggy-whip factory or an eight-track-tape manufacturer.
Five years ago, it shouldn't have taken a team of economists to figure out that desktop computers were going the way of the dodo. Nor should we have overlooked what happened up the road with Bristol Compressors before we tossed bags filled with cash at Dell.
Unfortunately, if we learn anything from the Dell closure it's probably going to be this: We never learn. The Bristol Compressors snafu was wallpapered with red flags as early as 2002, and nobody heeded a single one.
ssexton@wsjournal.com
727-7481
Email
Print
