Industrial Development

Tips to simplify your expansion:
Understanding Regional Economies
Make the State an Investor in Your Expansion


Site Selection Simplified
Why an industrial park may be the right answer
to your company's expansion questions


By Lawrence Bivins

Most plant managers don’t get the welcome that Steve Maggard enjoyed when he showed up in Northampton County. But most transplants don’t bring a $64 million distribution center like the one Lowe’s Corp. is building in the town of Garysburg.

“I really like the people here,” says Maggard (left), whose latest move was his fifth in 15 years with Lowe’s. “They’ve been very helpful and have made my family and I feel at home.”

With competition for new industry keener than ever, it takes more that down-home hospitality to recruit a company such as North Wilkesboro-based Lowe’s, now one of the nation’s largest retailers. The company selected Northampton County as the site of its newest distribution center a year ago after an exhaustive search. Once fully operational, its technology-driven shipping, receiving and conveyoring systems will employ 600 workers. “The county had the right people, access to the interstate, proximity to our stores and good incentives from the state and county,” says Maggard, whose sprawling 1.4 million-square-foot facility — large enough to accommodate 29 football fields — is set to open later this year. “You’ve got to have them all.”

Not every economic development project comes with such unique requirements. In its case, Lowe’s needed a large, undeveloped greenfield site. If your company is considering expanding or relocating, you might have other needs, including on-site training facilities, high-quality utilities, a ready-to-move-in spec building — all on a quick turnaround basis.

“These days, time is definitely of the essence,” says Bob Leak Sr., a Raleigh-based partner of Leak-Goforth, LLC. The firm assists companies and communities in site selection and industrial recruitment. While large “process” industries such as a paper mill or major manufacturing site have little choice other than a greenfield site, most projects turn to more off-the-shelf acreage at an industrial park.

Such was not always the case, Leak says. “Ten to 15 years ago, industrial clients didn’t want to be in a park because they didn’t want to be near other companies.” The fear was that environmental, labor or other problems from a neighboring firm might spread too easily. Today, the benefits of a park more than outweigh any concerns along those lines.

If an expansion is on the horizon at your company, one of the best places to look for a site is at an industrial park, for the reasons cited below.


Why Parks Are Attractive

To begin with, industrial parks are “under control,” explains Leak, meaning county development officials either own the land outright or have an option to purchase it for a set price. “The days have passed when you can show a prospect a piece of ground that you think the owner will want to sell,” he says. Nor will zoning problems arise, as parks have already been zoned for industrial use.

Land at industrial parks typically comes with basic infrastructure already in place. Paved access roads have been cut. Water and sewer lines have been extended. Industrial-quality electricity and natural gas are there, as is high-speed Internet capacity. And most parks have convenient access to major transportation arteries such as an interstate-standard highway or rail link. Some even come with their own airstrips.

There also are intangible advantages for companies to locate operations in an industrial park. “If a client is making a large investment and there’s a certain image they’d like to project, I show them a park,” says John Chaffee, executive director of the Pitt County Development Commission in Greenville. That typically starts with a visit to the attractive, tree-shaded campus of Indigreen Corporate Park in Greenville. The 285-acre park, home to a variety of companies, is considered an asset to tenants when it comes to attracting and retaining quality employees. Indigreen also has protective covenants in place that secure a company’s investment, Chaffee says. “That can be a considerable benefit to firms sinking $35-$50 million into their site,” he notes.

Some parks come complete with their own vacant buildings. Known as shell buildings, these structures offer another headstart to arriving industry. Consisting of little more than a foundation, four walls and a roof, the buildings are easily customizable to a tenant’s specific needs, but shave several months off the construction process.

For Barnes Foods, a shell building helped the family-owned company and its 66 employees remain in Goldsboro after its acquisition by Texas-based Mission Foods Corp. in 1999. Barnes, a maker of dumpling and tortilla products, had operated at a location near downtown Goldsboro since its founding in the late 1980s. When its new owners set out to expand operations, they decided to relocate the plant to Allentown, Pa. “The company was set to leave when we received a call,” recalls Joanna Thompson, president and chief operating officer of the Wayne County Economic Development Commission. Upon seeing the county’s vacant shell building at ParkEast, a neatly landscaped industrial and business park off Highway 70, company leaders dropped plans to relocate to Pennsylvania and expanded operations at ParkEast instead.

The 78,000-square-foot building had been vacant for three years, and critics had already begun grumbling that the county’s $1.2 million investment had become a “white elephant.” But those with experience in economic development say that shell buildings serve a larger promotional purpose for their communities. “Two other companies looked at our shell building and wound up settling elsewhere in the county,” explains Thompson. Both remain in the community and have even expanded. “So, the shell building actually got us three companies.”


How Incentives Can Help

In the case of Mission Foods and countless others, the decision to enter, remain and expand — or not to — is influenced by the availability of financial incentives offered by local, regional and state agencies. Criticized by opponents as corporate welfare, incentives actually support companies in their drive to ramp up new operations, remain competitive and help them productive industrial citizens in the community. For their part, developers and public officials base their incentive offers on the expectation that companies will bring good jobs and investment dollars, and that local and state tax coffers ultimately will grow.

“Companies today are bottom-line oriented,” says Stewart Dickinson, director of the Commerce Finance Center, a one-stop-shop for North Carolina communities and industrial clients needing financial assistance with infrastructure and project development. “They’ve got alternatives — not just in other states, but globally.” Dickenson says the state’s incentives policy strives for the flexibility to support both newly arriving industry and companies already here.

Though controversial, the practice is effective. After Mission Foods’ interest in the building at ParkEast was piqued, it discovered a potential dealbreaker at the site in the form of an open drainage ditch running the length of the lot. It represented a likely health concern for the food processing firm, though sealing the ditch would cost money.

Enter state, county and municipal officials with the nearly $200,000 required to get the job done. An additional $50,000 received from the Governor’s Competitive Fund (now known as the “One North Carolina” fund) helped Mission up-fit the site to meet its specific needs. The company continues to benefit from tax credits available through the Bill Lee Act. Each new job returns $7,000 to the company — $3,000 of it based on Wayne County’s status as a Tier 3 county and the balance owing to ParkEast’s location inside a state development zone. Finally, a $25,000 “flex-grant” from the Global TransPark Commission (now North Carolina’s Eastern Region), which was matched by the county, provided the company with additional support to cover the costs of relocation.

“The flex-grant helped us close the deal,” Thompson says. “Anything we can add that makes it easier for a company to say ‘yes’, we try to do.” She believes the real value of incentives may be symbolic. “More than anything else, it means the county, region and state are making a commitment to them,” she says.

While there are no incentives as such for locating in an industrial park as opposed to a standalone building or a greenfield site, Thompson explains that there are ways a county can spice up its recruitment package when a park is under consideration. Because her county owns much of ParkEast, pricing can be rolled back for projects that offer exceptional appeal. In some cases, land is even donated. Generous leasing terms might be negotiated, should the company not want the assets on its books. Such leeway is unlikely when dealing with a private landowner.

In determining incentives packages, Wayne County and most others look closely at the expected return on their investment. Economic impact estimates are considered. Direct and indirect job creation is calculated, with consideration paid to wage levels and benefits. Public hearings are held. A vote is taken. “Our county commissioners typically look for a return on investment by year six,” Thompson says. “Any bank would tell you that’s a good business decision.”


Utilities Eager to Help

Beyond government and economic development groups, support for new and expanding firms can come from utility providers. Depending on a company’s unique needs, electricity, gas and telecommunications providers often step in to lend a hand. “With all the new technologies driving today’s manufacturers, power quality has become a sensitive issue,” according to Sandy Jordan, vice president of economic development at Progress Energy. He says utilities are particularly supportive of industrial park development because they enable providers to concentrate their infrastructure at a single central location.

At times, Progress Energy’s support for industrial customers has meant making large investments in capacity and reliability. That was the case when the company installed a substation at Columbus County’s Southeast Regional Park in order to improve the power quality of park tenants, including Conflandey, a French manufacturer of high-quality wiring whose North American operations are based there.

“The company’s production called for the most reliable electrical flow possible,” says Phyllis Owens, executive director of the Columbus County Economic Development Commission. “The slightest disruption will stop an entire run.”

Support for economic development by companies such as Progress Energy, which now serves communities in North Carolina, South Carolina and Florida, is based partly on enlightened self-interest. “We have a vested interest in the economic prosperity of all our communities,” Jordan says. “When they do well, we do well. And so does everyone else.”

Among the resources the Raleigh-based utility offers local developers is generous support for shell buildings. The company will invest as much as $400,000 — or a third of the total cost, whichever is less — to support the completion of a shell building. One such building is now on the market at Southeast Regional Park. The company also will consult with new and expanding firms regarding their electrical needs, and it offers communities an array of research and marketing support. “Of course, the most important way we support economic development is by continuing to provide adequate and affordable power across our service area,” Jordan says.

Along with its other assets, Southeast Regional Park also offers convenient access to workforce training resources. Adjacent to the park is Southeastern Community College, which, like each of the state’s 58 community college, offers custom tailored training to both new and expanding industry through a program that has become a model for the nation. Colleges provide trainers, materials, equipment and space at no cost to either employer or employee. Given the demands of today’s “Knowledge Age,” that spells big savings for firms doing business here.

“Flexibility and responsiveness make North Carolina’s workforce development system exemplary,” says Martin Lancaster, president of the North Carolina Community College System. In recent years, the system’s New and Expanding Industry Training (NEIT) program has received accolades from the likes of The Wall Street Journal and the Chronicle of Higher Education. “When workforce needs come up, our system can turn a new program around very quickly,” Lancaster says.

At times, even more is needed, and education and philanthropic leaders from across the state are responding to the special workforce needs that some companies have. When Singapore-based Flextronics narrowed its search for a consolidated eastern U.S. outpost to Atlanta and Youngsville, it considered the benefits that an innovative and well-funded Georgia educational partnership known as “Yamacraw” offered its workforce. Nothing comparable existed in North Carolina. So local, regional and state officials sought and secured a $1.975 million grant from the Golden LEAF to establish one. The Rocky Mount-based foundation is now financing a unique training partnership between Vance-Granville Community College and N.C. State University. While Flextronics, which ultimately selected Youngsville, will benefit from the program, so too will electronics companies across the state.

Golden LEAF support for workforce programs was also vital in the case of Lowe’s in Northampton County. “Training is extremely important to us,” says Maggard, who would like to be able to send his new hires to similar Lowe’s sites for training at a fully-operational facility. He notes that seeing such a serious commitment by development leaders and the Golden LEAF helped his company narrow its choice to Northampton County. “From a symbolic standpoint, that was huge,” says Maggard.


Look for Site Certification

Since its founding in 1999, the Golden LEAF has taken a leadership role in transforming the economies of the state’s rural communities. The role has included making grants to communities for certified sites.

Site certification, be it for a park, spec building or greenfield site, was launched statewide last year in order to give industrial prospects added confidence that sites will be ready for them from Day One. The program, run by the state Department of Commerce, bestows a stamp of readiness akin to the Good Housekeeping Seal of Approval, guaranteeing that archaeological, environmental, geo-technical and related surveys are complete. It certifies that access roads meet state standards and all relevant zoning and land-use issues have been satisfied. To be certified, a site’s pricing must be established and the property otherwise primed for consideration by industrial prospects and site selection consultants. In short, there should be no ugly surprises to throw the brakes on site development.

“There’s a checklist of 31 requirements for certification,” says Bill Stephens, manager of industrial recruitment and chairman of the Certified Site Initiative at the N.C. Department of Commerce. “That’s 31 things the client won’t have to worry about.”

There are currently 25 certified sites across the state, Stephens says. He’d like to see as many as 100, potentially one in every county, if possible. But certification isn’t always cheap. It can cost a community up to $50,000, Stephens says, and the cash-strapped state budget has been unable to help. That’s why Golden LEAF has stepped up to the plate with grant funds for certification.

“With permitting and development in today’s environment, it can take from 12 to 18 months to develop a site, assuming it can even be developed,” explains Gordon Myers, the former NCCBI chairman who, as a real estate executive for Asheville-based Ingles Markets and head of the AdvantageWest regional economic development organization, first recognized the need for a certification program. That process involves zoning, drilling, testing, wetlands permitting and other tasks, all of which take time and dollars. “To have all this done on the front end of a project means you can reduce development time by as much as a year, and save considerable money,” Myers says.

Columbus County’s Owens, who has certified two of her county’s industrial parks, says the process brings unforeseen value to communities in the way it raises awareness about the ingredients that go into a marketable site. “As much as anything, certification helps educate local leaders about the importance of having good industrial product.”

Back in Garysburg, opportunity never sleeps. Officials there are now developing an industrial park around the Lowe’s site, which they are in the process of getting certified. The 210 acres of sandy ground, which currently boasts a thick carpet of soybean plants, will be known as Lowe’s Commerce Park. Lowe’s Maggard looks forward to having neighbors. “We’re eager to see this community grow and prosper,” he says.

As other companies discover the county, new labor will inevitably migrate in as well, giving Lowe’s an even stronger talent pool to select from. It will also grow the local tax base, Maggard continues, thus giving education and public services in Northampton County a shot in the arm. Those benefits, in turn, will help industrial recruiters draw in even more industry — proof positive that in economic development as in life, nothing succeeds like success.





Understanding Regional Economies
Below: Lowe's $64 million distribution center is nearing completion in Northampton County
Gone are the days when economic developers could take a shotgun approach to bringing new industry into their communities. Global competition for new jobs and investment require today’s development leaders to think carefully about what they can offer specific companies. In the Research Triangle Region, the basis for setting such a strategy can be found in an exhaustive analysis of industry “clusters” recently completed by the Washington, D.C.-based Council on Competitiveness.

The council examined the economy of the Triangle along with those of Pittsburgh, San Diego, Atlanta and Wichita using a common set of survey tools and a cluster mapping program developed by Harvard Business School professor Michael Porter, a well-regarded expert on clusters. He defines clusters as “geographically close groups of interconnected companies and associated institutions in a particular field, linked by common technologies and skills.” The study found biotechnology-pharmaceuticals, communications equipment, chemicals, plastics, textiles and information technologies comprise the Triangle’s leading clusters. More surprising was the study’s inclusion of “knowledge creation” — basically, research, instructional and technology-transfer organizations — on the short list. 

“Going into it, I didn’t expect the higher education institutions to have the impact they did,” explains Pedro Arboleda, a consultant with the Boston-based Monitor Group, which helped gather and examine the research. While impressed with the Triangle’s universities, Arboleda says that more is needed here when it comes to transforming research and ideas into actual companies and new jobs. “There is a disconnect between university-based research organizations and startups in the region,” he points out. 

While the Porter study contained positive findings about the university role in economic development, it was critical of the region’s K-12 schools, calling them “lagging.”

“We’ve made great progress in K-12 education in recent years,” says UNC System President Molly Broad, who serves on the executive committee of the Council on Competitiveness and urged the organization to study the Triangle. “We’ve raised the college-going rate to the national average, but that’s still not good enough.”

Broad, an economist by training, says the study contains points that are applicable statewide. “If educational institutions can provide skills and infrastructure, companies will follow.” In the western part of the state, that could mean pulling together bio-infomatics research at area universities with the resources of the North Carolina Arboretum to grow a herb-based biotech cluster. Advanced coastal research taking place at UNC Wilmington could spur a viable marine sciences cluster in that region, she says.

The Council on Competitiveness recently formed a partnership with the National Governors Association to extend cluster methodologies to more communities. Broad anticipates the council will soon examine rural regions under the same approach, and she plans to do her best to steer researchers back to North Carolina.

“The cluster study is the best effort I’ve seen thus far to understand the nature of regional economics,” says John Chaffee, executive director of the Pitt County Development Commission and a member of the North Carolina Economic Development Board. “I’d recommend all of our regions undergo a study like this.”

That’s not to suggest that economic problems can be analyzed away. The Monitor Group’s Arboleta says that Pittsburgh underwent 45 separate economic development studies over the past four years, not including the council’s. The absence of effective regional leadership was at the root of the problem. “There was never any implementation,” he says.

To ensure that the Triangle’s “Clusters of Innovation” report won’t gather dust on closet shelf, officials at the Research Triangle Regional Partnership, a sponsor of the study, assembled a panel of business, academic and public-sector leaders under the chairmanship of former Gov. Jim Hunt to keep the momentum going. “We must focus our resources in the region on actions that will have an impact for the next 30 years,” he says. “Improvements in workforce training, strengthening the collaboration within our existing clusters, benchmarking our progress toward specific goals are all actions that we can start tomorrow.”

Hunt’s task force is establishing a 60-month action plan containing specific steps needed to address some of the challenges and opportunities detailed in the report. “Raising the standard of living in a region does not just happen,” Hunt says. “It takes vision, resources and a lot of hard work.”   — Lawrence Bivins



Make the State an Investor in Your Expansion
The North Carolina Department of Commerce provides qualified companies, both relocating and existing employers, with financial programs and advantages that lower the costs of doing business. If your company is expanding or relocating, you should be aware of the advantages available to you through these programs:

Bill Lee Act tax credits. This landmark legislation, enacted in 1996 and amended several times since then, provides tax credits that may be taken against state income, franchise or gross premiums tax burdens. These credits for job creation, investment, worker training and research and development are available in all 100 counties and based upon a county’s level of economic distress.

Industrial revenue bonds.  IRBs may be used by companies engaged in some type of manufacturing for the acquisition of real estate, facility construction and/or equipment purchase. IRBs fall under three issuance types: tax exempt, taxable, and pollution control/solid waste disposal bonds. Regulations governing bond issuance are a combination of federal regulations and North Carolina statutes. The amount each state may issue annually is designated by population.

North Carolina Small Cities Community Development Block Grant Program. These grants may be obtained by local governments (municipal and county) to be used for projects involving a specific business that will create new jobs. With a participating bank, loans may be made to private businesses to fund items such as machinery and equipment, property acquisition or construction. Assisted project activities must benefit persons (60 percent or more) who were previously (the most recent 12 months) in a low or moderate family income status.

Industrial Development Fund. IDFs assist municipal or county governments with financing for industries eligible through the Bill Lee Act in areas of the state designated as Tier I, II and III areas. The amount funded depends on the number of new, full-time jobs created and may be used by local units of government for infrastructure improvement (in the form of grants) or for building renovation and equipment (in the form of loans). The fund may not be used for acquiring land or buildings or for constructing new facilities.

Business Energy Loans. These loans may be used by businesses for facilities or projects that demonstrate energy efficiency or the use of renewable energy resources resulting in energy cost savings.

Industrial Access/Road Access Fund. Administered by the Department of Transportation, this program provides funds for the construction of roads to provide access to new or expanded industrial facilities.

The Rail Industrial Access Program. This provides grant funding to aid in financing the cost of constructing or rehabilitating railroad access tracks required by a new or expanded industry that will result in a significant number of new jobs or capital investment.

For more information, call 919-733-4977 or visit www.investnc.com.


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