Bidding for Caterpillar

Ahigh-stakes incentives game is quickly heating up, with Winston-Salem and Forsyth County; Spartanburg County, S.C.; and Montgomery, Ala.; competing for a Caterpillar manufacturing plant. Winston-Salem, Forsyth County and the state could offer an incentives package of up to $57 million, with most of the money coming from the state, for a plant that would employ as many as 500 people with an average salary of $36,000 annually. With a ready-made site and the returned Dell incentive money sitting in the bank, officials are in a good position to win this competition.

Caterpillar, a $32.4-billion, heavy-equipment company based in Peoria, Ill., announced Friday that it's considering putting "a significant component manufacturing facility" in one of the three areas.

The "location analysis" will continue through the summer, said Caterpillar spokesman Jim Dugan, and a final decision is expected by August. There's little doubt that much of the "location analysis" will involve seeing which area can give Caterpillar the sweetest incentives deal. We could know within a few weeks whether Winston-Salem is the top contender.

"There is a certain line in the sand you have to draw," Mayor Allen Joines told the Journal Monday. "There has to be a reasonable return of investment for the city, obviously."

Dave Plyler, the chairman of the Forsyth County commissioners, agreed, and believes the return would be a good one. Commissioners discussed the matter in closed session Thursday, he said, and most are in favor of offering incentives to Caterpillar. He said commissioners hope to take the matter up at their July 12 meeting. The city council's finance committee could discuss the issue at a meeting the same day.

City officials would like to have a tentative agreement with Caterpillar by then, one which they'd vote on following public hearings. Releasing the city's offer before such an agreement could mean other locations would sweeten their deal to beat out the city.

Winston-Salem and Forsyth County would be willing to offer Caterpillar at least $3.5 million each, the Journal's Richard Craver reported yesterday, and sources who asked not to be identified said the state is willing to provide up to $50 million. The state's offer would be its third highest for a Triad project, but would still be far behind the $267 million it offered Dell and the $115 million that went to the FedEx cargo hub at Piedmont Triad International Airport.

The state's incentives for Caterpillar would likely come from a combination of Job Development Investment Grants, which are performance based, and One North Carolina Fund money the governor can provide to companies that are expanding or adding new operations in North Carolina.

The city and county money would come from incentive refunds received from Dell when it announced it would close its computer plant here. It makes sense that that money be used to land another company to replace those jobs.

"The bottom line is we've got this money … if they're talking about 500-plus jobs, we feel comfortable with (using) it," Plyler said. He said the incentives could easily be recovered in taxes paid by the company, which he said would make either motorized parts or an entire motorized system for large, heavy-equipment trucks.

Joines said Monday that the city signed a confidentiality agreement with Caterpillar in February that would apply until the project entered the public-meeting process. Caterpillar is obviously worried about its competitors hearing about its plans. But with the project at this stage, and with the very real possibility that public dollars could soon be offered to land the plant, it's time for the confidentially agreement to end.

Joines and Plyler said that the city and county aren't just "a stalking horse" that Caterpillar is using to get Spartanburg and Montgomery to sweeten their incentives packages. Alabama and South Carolina have traditionally tried to outbid other states for major economic projects.

Winston-Salem has the advantage of a site, near the Dell plant, that has utilities in place and is ready for construction. Caterpillar said it wants to start construction by late summer and open the plant by November.

And Plyler said that Caterpillar officials were impressed with the manufacturing training operations at Forsyth Technical Community College. There's also a strong quality of life here, as well as an excellent transportation system. Caterpillar already has several other plants in North Carolina.

City and county officials, with state support, should make an aggressive offer that includes the same tough claw-back provisions that ensured the Dell incentives money -- public money -- would be returned if the company failed to meet its goals. And now that this new project has been announced, we urge officials to require that the process be transparent for the public from start to finish.

These are the earmarks of responsible economic development. And it's the right way to win.