States and cities are dangling ever-bigger
inducements to attract companies, and the digital giant knows how to
drive a hard bargainLenoir at first seems
an unlikely place for a high-tech outpost of the hottest brand on the
Web. Nestled beneath the Blue Ridge Mountains of western North Carolina
and a two-hour drive from the nearest commercial airport, the quiet
town and its neighboring communities have reeled from the closure of
seven furniture factories and the loss of more than 2,100 jobs in the
past three years. But down-on-its-luck Lenoir has just about everything
mighty Google Inc. (GOOG
) wants. The digital titan,
based in Mountain View, Calif., has been hunting for places to plant
new server farms: vast, immaculate warehouses filled with row upon row
of computers that allow Google to offer faster online searches and
advertisements. Lenoir (pronounced like the woman's name Lenore) boasts
resources at the top of Google's list: cheap, abundant electricity;
excess water capacity to keep the computers cool; and lots of
inexpensive land.
Just as Google has pushed the boundaries of its Internet business, it
plays the real estate game aggressively. Beginning with an anonymous
approach in late 2005, the company elicited a stream of promises from
local and state officials in North Carolina, all frantic to lure a
major tech company, even before they knew which one. During months of
negotiations over Google's shifting requirements, the company never
failed to remind those officials that it could go elsewhere. In the
end, the North Carolinians agreed to a package of tax breaks,
infrastructure upgrades, and other goodies valued at $212 million over
30 years, or more than $1million for each of the 210 jobs Google said
it eventually hoped to create in Lenoir.
Some felt bullied. "It's simply unconscionable from an ethics
standpoint for this company to go in from this very unfair bargaining
position," says Robert F. Orr, a former North Carolina Supreme Court
justice running for governor. "These are business decisions by the
smartest businesspeople in the world, and it's just exploiting a
desperate town."
But that's not the majority view in Lenoir. Most see Google's arrival
as a vital morale booster, if not a full replacement for the lost
furniture factories. "I would have voted for a 100% tax incentive if
that's what it would have taken to land them," says Herbert H. Greene,
a commissioner of Caldwell County, of which Lenoir is the seat.
THE SPOILS OF BIDDING WARS
Business-development incentives,
while hardly new, are proliferating as never before, and the dollar
values are soaring. Lenoir's courting of Google offers a case study of
how elaborate the inducement ritual can get. Today it's not just
carmakers promising thousands of jobs apiece that are getting rich
deals. From New York to Washington State, IT, biotech, and
financial-services companies have incited frenzied bidding for their
business and the spirit-elevating buzz they bring. States and
localities bruised by globalization view these knowledge-based fields
as the foundation for economic rebuilding. Reliable current estimates
of the number of deals don't exist, but those who study the field all
agree that the total is rising. Peter S. Fisher, a professor of urban
and regional planning at the University of Iowa, pegs the aggregate
value of incentives at about $50 billion a year.
Competitive
anxiety compels the handouts: the fear that without lucrative
enticements, companies will go elsewhere. And the bidding war is being
escalated further by sophisticated corporate consultants expert at
playing jurisdictions against each other and deploying databases that
allow companies to compare the baubles offered by various suitors.
All of these factors came into play in Lenoir, population 17,000. It's
a place that clings to tradition: Wednesday night outdoor movies in the
main square, a blackberry festival each July, and a Civil War battle
reenactment in August. But the world is changing, and Lenoir has been
devastated by the departure to China of its core business, the
manufacturing of bedroom sets.
Just two miles from downtown sits Bernhardt Furniture, one of the
largest local employers, whose payroll has shrunk by half, to 3,000, in
recent years. From the window of CEO G. Alex Bernhardt's office, you
can see the shuttered factories. Two belong to his company; the other
five, to friends and competitors. In 2000 the unemployment rate in
Caldwell County was less than 2%; by 2005 it had hit 13%. Today it's
7.3%, three percentage points above the national average. "When our
globalization came," says Bernhardt, "it came with lightning speed."
That's why the town fathers reacted with nervous excitement when they
learned in December, 2005, that a major tech company was shopping for a
place to build a big new facility. The first of many auditions came two
weeks before Christmas, when Caldwell's Economic Development Commission
sent two representatives south to Charlotte to pitch Rhett L. Weiss.
Google's top site negotiator, Weiss didn't identify himself as a
company employee. In fact, it would be months before Google's name
surfaced in North Carolina. At that first meeting, Weiss handed out
business cards from Dealtek Ltd., the Los Altos (Calif.) consultancy he
founded in 1999 and has continued to run, though at a scaled-back pace,
since joining Google in 2005.
"PROCESS OF SURVIVAL"
If any one person embodies the boom in
business-incentive deals, it's Weiss, 46, a lawyer by training who
wears button-down shirts, khaki pants, and wire-rim glasses. After
working for Big Four accounting firm KPMG, he opened Dealtek to focus
on corporate site selection. The firm advises both migrating companies
and localities seeking new business. It is one of about 200 firms that
sell such services and have national reach. Dealtek tries to
differentiate itself in an increasingly crowded field by selling
software--"a consultancy's proverbial 'Black Box,'" the firm calls
it--which compares competing site-selection opportunities.
The
Lenoir offer certainly had much to recommend it. Electricity, for one
thing, costs only 4.5 cents to 5 cents per kilowatt-hour on average in
North Carolina, vs. 6 cents to 11 cents in some comparable locales.
With furniture makers gone or downsized, there was excess capacity.
Duke Energy Co. (DUK
), the utility hoping to sell the cheap power, hosted the introductory session in Charlotte.
Weiss gave half an hour each to three North Carolina counties that day
and was done before noon. "This is a process of survival," says Alan
Wood, senior development manager for the Caldwell County Economic
Development Commission. "They look for reasons to eliminate sites."
Wood had first met Weiss the previous April at MerleFest, a bluegrass
festival in Wilkesboro, N.C. Local business-development scouts use the
musical gathering as a chance to mingle with consultants like Weiss,
who come at their invitation. Explaining that he hadn't given Weiss a
hard sell at the festival, Wood says: "You don't usually ask someone to
marry you on the first date."
Three months later, after touring North Carolina in a plane supplied by
the state's Commerce Dept., Weiss asked a roomful of people from Lenoir
gathered in a meeting room in Raleigh whether anyone could guess the
corporation for which he worked. One tentatively suggested Google. When
Weiss, smiling, confirmed it, Lenoir Mayor David W. Barlow recalls
thinking: "There's no way in the world this will ever happen." Google's
size and success seemed beyond the town's grasp.
But Weiss was serious, requiring everyone in the town and county who
knew Google's identity to sign confidentiality agreements so rival
companies wouldn't learn that Google was on the prowl. During
negotiations over the next 10 months, Weiss combined a calm demeanor
with an obsessive attention to detail, never committing Google to
building in Lenoir. "He plays a good game of poker as well, I'm sure,"
says Barlow.
Despite his doubts, Barlow threw himself into the competition. A
Realtor and part-owner of a car dealership, the mayor is married to a
retired schoolteacher and lives doors away from their children and
grandchildren. He saw the possibility of Google's arrival as a way to
restore civic self-respect. "I didn't think there would be a lot of
[economic] spin-off value," he admits. "Psychologically, the impact of
this for our community would be greater than the reality." Google never
formalized its suggestion that it might one day employ 210 people in
Lenoir; nor did the company say how many jobs might go to locals, as
opposed to computer techs Google would bring in.
EXPANDING WISH LIST
To keep Weiss interested, the Lenoir City
Council voted in closed session on Mar. 21, 2006, to expand the tax
incentives then on the table. An initial offer of 100% off local
property taxes and 75% off real estate taxes, both for 15 years, grew
to 100% and 80%, respectively, for 30 years. Fine, said Weiss, but
there were other issues.
When negotiations began, he had seemed
satisfied with a 127-acre site that includes a former lumberyard. Now
he demanded more. In March, Mayor Barlow and a fellow Realtor began to
piece together a larger plot. Nights and weekends they knocked on
doors, asking people to sell. One parcel was owned by 57 heirs,
including a long-estranged couple. As part of the deal, the county paid
for their divorce. "I never, ever thought this was going to work," says
Barlow. He cobbled together a total of 216 acres out of 51 parcels. He
took no commissions.
There wasn't much time to celebrate the real estate coup, because by
June the deal seemed to be falling apart on another front. In Raleigh,
the state legislature was working on a Google-driven bill that would
exempt server farms from sales tax on the copious electricity they use.
On June 13, Weiss sent an e-mail to Jim Fain, the state's commerce
secretary, complaining that the legislation "has remained cursed with
unfortunate and petty dickering from the legislative drafting
side--mainly refusing to reinsert better word choice." If North
Carolina didn't quickly enact "sales tax exemptions that make it
competitive with other states in which the project could locate, the
project simply will not come to North Carolina," Weiss wrote. He
continued to let officials know he was talking to several other states,
including South Carolina and New York, according to documents and
interviews. The legislation passed in July.
Amazingly, Google's interest in coming to North Carolina surfaced in
the press only once, in an article on July 21, in Charlotte's News
& Observer. Weiss hit the roof over what he saw as a breach of
confidentiality, according to e-mail and interviews. Fain himself
mollified Weiss during a previously scheduled encounter at a McDonald's
(MCD
) on Interstate 95, where the commerce secretary met Weiss, his wife,
and four children, who were finishing a vacation at the North Carolina
shore.
One of the final issues, negotiated through the fall and into December,
was water. Afraid that Google's plan would drain Lenoir's water
capacity, Mayor Barlow wanted Google to commit to staying in town long
enough to justify a $24 million municipal upgrade. Several times,
locals thought the deal would die over this point, though Weiss says he
didn't think so. In the end, Google agreed to pay $1.05 million toward
the water expansion, but it never locked itself into operating in
Lenoir for a minimum period.
In an interview, Weiss explains that the company's changing demands
reflected evolving technological requirements and experiences at other
company computer facilities. Google, he adds, will help the struggling
town. The large construction project will provide temporary employment
and produce tax revenue on building materials. In addition to helping
pay for the municipal water upgrade and the closure of a rail line on
its land, the company has offered to reimburse local expenses related
to the long negotiations, he says. (One memo puts those costs at more
than $300,000.)
Rather than focus on Google's expected annual tax rebate of $5.87
million on a bill of $6 million, Weiss points out that what the city
will collect--some $130,000--is a lot more than what it received on the
property before the company's improvements. All told, Google plans to
invest $600 million in the Lenoir server farm.
Since the company's plans in Lenoir were announced in January, Weiss
has struck similar deals for new computer centers in South Carolina,
Oklahoma, and Iowa. Google won't say how many server farms it operates
nationwide.
In Lenoir, some residents still resent the tactics used by the
out-of-town technology giant. "There were 18 or 20 drafts of contracts,
a lot of ticky-tacky stuff," says T.J. Rohr, an attorney and member of
Lenoir's city council. "And a lot of the time it seemed like they were
saying, 'It's our way or the highway.'"
But Rohr was the only member of the seven-person council to vote
against the final deal. Mayor Barlow says the important thing "is that
we were selected, and we have something to offer." Google, he adds,
"put us on the map."
The Google site in Lenoir now bustles with tractors, bulldozers, and
contract workers. A large silver-roofed building is going up behind
fencing, a retaining wall, and a 200-foot buffer of trees. Visitors
aren't allowed. As of early July, Google had hired one full-time
employee: a site manager who came from out of town.
inducements to attract companies, and the digital giant knows how to
drive a hard bargainLenoir at first seems
an unlikely place for a high-tech outpost of the hottest brand on the
Web. Nestled beneath the Blue Ridge Mountains of western North Carolina
and a two-hour drive from the nearest commercial airport, the quiet
town and its neighboring communities have reeled from the closure of
seven furniture factories and the loss of more than 2,100 jobs in the
past three years. But down-on-its-luck Lenoir has just about everything
mighty Google Inc. (GOOG
) wants. The digital titan,
based in Mountain View, Calif., has been hunting for places to plant
new server farms: vast, immaculate warehouses filled with row upon row
of computers that allow Google to offer faster online searches and
advertisements. Lenoir (pronounced like the woman's name Lenore) boasts
resources at the top of Google's list: cheap, abundant electricity;
excess water capacity to keep the computers cool; and lots of
inexpensive land.
Just as Google has pushed the boundaries of its Internet business, it
plays the real estate game aggressively. Beginning with an anonymous
approach in late 2005, the company elicited a stream of promises from
local and state officials in North Carolina, all frantic to lure a
major tech company, even before they knew which one. During months of
negotiations over Google's shifting requirements, the company never
failed to remind those officials that it could go elsewhere. In the
end, the North Carolinians agreed to a package of tax breaks,
infrastructure upgrades, and other goodies valued at $212 million over
30 years, or more than $1million for each of the 210 jobs Google said
it eventually hoped to create in Lenoir.
Some felt bullied. "It's simply unconscionable from an ethics
standpoint for this company to go in from this very unfair bargaining
position," says Robert F. Orr, a former North Carolina Supreme Court
justice running for governor. "These are business decisions by the
smartest businesspeople in the world, and it's just exploiting a
desperate town."
But that's not the majority view in Lenoir. Most see Google's arrival
as a vital morale booster, if not a full replacement for the lost
furniture factories. "I would have voted for a 100% tax incentive if
that's what it would have taken to land them," says Herbert H. Greene,
a commissioner of Caldwell County, of which Lenoir is the seat.
THE SPOILS OF BIDDING WARS
Business-development incentives,
while hardly new, are proliferating as never before, and the dollar
values are soaring. Lenoir's courting of Google offers a case study of
how elaborate the inducement ritual can get. Today it's not just
carmakers promising thousands of jobs apiece that are getting rich
deals. From New York to Washington State, IT, biotech, and
financial-services companies have incited frenzied bidding for their
business and the spirit-elevating buzz they bring. States and
localities bruised by globalization view these knowledge-based fields
as the foundation for economic rebuilding. Reliable current estimates
of the number of deals don't exist, but those who study the field all
agree that the total is rising. Peter S. Fisher, a professor of urban
and regional planning at the University of Iowa, pegs the aggregate
value of incentives at about $50 billion a year.
Competitive
anxiety compels the handouts: the fear that without lucrative
enticements, companies will go elsewhere. And the bidding war is being
escalated further by sophisticated corporate consultants expert at
playing jurisdictions against each other and deploying databases that
allow companies to compare the baubles offered by various suitors.
All of these factors came into play in Lenoir, population 17,000. It's
a place that clings to tradition: Wednesday night outdoor movies in the
main square, a blackberry festival each July, and a Civil War battle
reenactment in August. But the world is changing, and Lenoir has been
devastated by the departure to China of its core business, the
manufacturing of bedroom sets.
Just two miles from downtown sits Bernhardt Furniture, one of the
largest local employers, whose payroll has shrunk by half, to 3,000, in
recent years. From the window of CEO G. Alex Bernhardt's office, you
can see the shuttered factories. Two belong to his company; the other
five, to friends and competitors. In 2000 the unemployment rate in
Caldwell County was less than 2%; by 2005 it had hit 13%. Today it's
7.3%, three percentage points above the national average. "When our
globalization came," says Bernhardt, "it came with lightning speed."
That's why the town fathers reacted with nervous excitement when they
learned in December, 2005, that a major tech company was shopping for a
place to build a big new facility. The first of many auditions came two
weeks before Christmas, when Caldwell's Economic Development Commission
sent two representatives south to Charlotte to pitch Rhett L. Weiss.
Google's top site negotiator, Weiss didn't identify himself as a
company employee. In fact, it would be months before Google's name
surfaced in North Carolina. At that first meeting, Weiss handed out
business cards from Dealtek Ltd., the Los Altos (Calif.) consultancy he
founded in 1999 and has continued to run, though at a scaled-back pace,
since joining Google in 2005.
"PROCESS OF SURVIVAL"
If any one person embodies the boom in
business-incentive deals, it's Weiss, 46, a lawyer by training who
wears button-down shirts, khaki pants, and wire-rim glasses. After
working for Big Four accounting firm KPMG, he opened Dealtek to focus
on corporate site selection. The firm advises both migrating companies
and localities seeking new business. It is one of about 200 firms that
sell such services and have national reach. Dealtek tries to
differentiate itself in an increasingly crowded field by selling
software--"a consultancy's proverbial 'Black Box,'" the firm calls
it--which compares competing site-selection opportunities.
The
Lenoir offer certainly had much to recommend it. Electricity, for one
thing, costs only 4.5 cents to 5 cents per kilowatt-hour on average in
North Carolina, vs. 6 cents to 11 cents in some comparable locales.
With furniture makers gone or downsized, there was excess capacity.
Duke Energy Co. (DUK
), the utility hoping to sell the cheap power, hosted the introductory session in Charlotte.
Weiss gave half an hour each to three North Carolina counties that day
and was done before noon. "This is a process of survival," says Alan
Wood, senior development manager for the Caldwell County Economic
Development Commission. "They look for reasons to eliminate sites."
Wood had first met Weiss the previous April at MerleFest, a bluegrass
festival in Wilkesboro, N.C. Local business-development scouts use the
musical gathering as a chance to mingle with consultants like Weiss,
who come at their invitation. Explaining that he hadn't given Weiss a
hard sell at the festival, Wood says: "You don't usually ask someone to
marry you on the first date."
Three months later, after touring North Carolina in a plane supplied by
the state's Commerce Dept., Weiss asked a roomful of people from Lenoir
gathered in a meeting room in Raleigh whether anyone could guess the
corporation for which he worked. One tentatively suggested Google. When
Weiss, smiling, confirmed it, Lenoir Mayor David W. Barlow recalls
thinking: "There's no way in the world this will ever happen." Google's
size and success seemed beyond the town's grasp.
But Weiss was serious, requiring everyone in the town and county who
knew Google's identity to sign confidentiality agreements so rival
companies wouldn't learn that Google was on the prowl. During
negotiations over the next 10 months, Weiss combined a calm demeanor
with an obsessive attention to detail, never committing Google to
building in Lenoir. "He plays a good game of poker as well, I'm sure,"
says Barlow.
Despite his doubts, Barlow threw himself into the competition. A
Realtor and part-owner of a car dealership, the mayor is married to a
retired schoolteacher and lives doors away from their children and
grandchildren. He saw the possibility of Google's arrival as a way to
restore civic self-respect. "I didn't think there would be a lot of
[economic] spin-off value," he admits. "Psychologically, the impact of
this for our community would be greater than the reality." Google never
formalized its suggestion that it might one day employ 210 people in
Lenoir; nor did the company say how many jobs might go to locals, as
opposed to computer techs Google would bring in.
EXPANDING WISH LIST
To keep Weiss interested, the Lenoir City
Council voted in closed session on Mar. 21, 2006, to expand the tax
incentives then on the table. An initial offer of 100% off local
property taxes and 75% off real estate taxes, both for 15 years, grew
to 100% and 80%, respectively, for 30 years. Fine, said Weiss, but
there were other issues.
When negotiations began, he had seemed
satisfied with a 127-acre site that includes a former lumberyard. Now
he demanded more. In March, Mayor Barlow and a fellow Realtor began to
piece together a larger plot. Nights and weekends they knocked on
doors, asking people to sell. One parcel was owned by 57 heirs,
including a long-estranged couple. As part of the deal, the county paid
for their divorce. "I never, ever thought this was going to work," says
Barlow. He cobbled together a total of 216 acres out of 51 parcels. He
took no commissions.
There wasn't much time to celebrate the real estate coup, because by
June the deal seemed to be falling apart on another front. In Raleigh,
the state legislature was working on a Google-driven bill that would
exempt server farms from sales tax on the copious electricity they use.
On June 13, Weiss sent an e-mail to Jim Fain, the state's commerce
secretary, complaining that the legislation "has remained cursed with
unfortunate and petty dickering from the legislative drafting
side--mainly refusing to reinsert better word choice." If North
Carolina didn't quickly enact "sales tax exemptions that make it
competitive with other states in which the project could locate, the
project simply will not come to North Carolina," Weiss wrote. He
continued to let officials know he was talking to several other states,
including South Carolina and New York, according to documents and
interviews. The legislation passed in July.
Amazingly, Google's interest in coming to North Carolina surfaced in
the press only once, in an article on July 21, in Charlotte's News
& Observer. Weiss hit the roof over what he saw as a breach of
confidentiality, according to e-mail and interviews. Fain himself
mollified Weiss during a previously scheduled encounter at a McDonald's
(MCD
) on Interstate 95, where the commerce secretary met Weiss, his wife,
and four children, who were finishing a vacation at the North Carolina
shore.
One of the final issues, negotiated through the fall and into December,
was water. Afraid that Google's plan would drain Lenoir's water
capacity, Mayor Barlow wanted Google to commit to staying in town long
enough to justify a $24 million municipal upgrade. Several times,
locals thought the deal would die over this point, though Weiss says he
didn't think so. In the end, Google agreed to pay $1.05 million toward
the water expansion, but it never locked itself into operating in
Lenoir for a minimum period.
In an interview, Weiss explains that the company's changing demands
reflected evolving technological requirements and experiences at other
company computer facilities. Google, he adds, will help the struggling
town. The large construction project will provide temporary employment
and produce tax revenue on building materials. In addition to helping
pay for the municipal water upgrade and the closure of a rail line on
its land, the company has offered to reimburse local expenses related
to the long negotiations, he says. (One memo puts those costs at more
than $300,000.)
Rather than focus on Google's expected annual tax rebate of $5.87
million on a bill of $6 million, Weiss points out that what the city
will collect--some $130,000--is a lot more than what it received on the
property before the company's improvements. All told, Google plans to
invest $600 million in the Lenoir server farm.
Since the company's plans in Lenoir were announced in January, Weiss
has struck similar deals for new computer centers in South Carolina,
Oklahoma, and Iowa. Google won't say how many server farms it operates
nationwide.
In Lenoir, some residents still resent the tactics used by the
out-of-town technology giant. "There were 18 or 20 drafts of contracts,
a lot of ticky-tacky stuff," says T.J. Rohr, an attorney and member of
Lenoir's city council. "And a lot of the time it seemed like they were
saying, 'It's our way or the highway.'"
But Rohr was the only member of the seven-person council to vote
against the final deal. Mayor Barlow says the important thing "is that
we were selected, and we have something to offer." Google, he adds,
"put us on the map."
The Google site in Lenoir now bustles with tractors, bulldozers, and
contract workers. A large silver-roofed building is going up behind
fencing, a retaining wall, and a 200-foot buffer of trees. Visitors
aren't allowed. As of early July, Google had hired one full-time
employee: a site manager who came from out of town.
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Distributed by Hasan Shrek, independence blogger. Also run online business , matrix, internet marketing solution , online store script .
Beside he is writing some others blogs for notebook computer , computer training , computer software and personal computer
--------------------------------------------------------------------------
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