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American Express incentives could total $13 million

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Tuesday, April 20, 2010

(Updated 3:41 pm)

By Donald W. Patterson and
Richard M. Barron
Staff Writers

GREENSBORO — Guilford County and Greensboro will likely be asked to give American Express between $11 million and $13 million in incentives if the New York-based company builds a $400 million data center in the eastern part of the county.

An official familiar with Greensboro’s proposed package — expected to be presented to the City Council in executive session tonight — put the figure at between $5 million and $7 million.

Details of the package could not be determined Monday but would likely include water, sewer and road improvements.

On top of that, Guilford County will be asked to put up $6 million, which would be the largest incentives outlay in the county’s history.

Since 1993, the county board has approved less than $14 million in financial incentives. The biggest outlay — $2 million — went to RF Micro Devices in 1999.

“This would be the largest by far,” said Rob Bencini, a former Guilford County economic development official and a consultant for business development and governmental policy. “That’s how big this is.”

The board will hold a public hearing May 6 to consider the request.

American Express wants to build a data center that would employ between 125 and 150 people. The company, best known for its credit card and travel operations, is also reported to be considering an unspecified offer from Des Moines, Iowa.

After 20 years, local officials say, the company investment could surpass $1 billion.

“I can’t really overstate the impact of a project like this,” Bencini said. “This is a huge project.”

The commissioners learned about the project at their meeting last Thursday.

“Historically, in all of these requests that I have seen, the participation of the city has been about the same as the county,” Commissioner Billy Yow said. “Typically, they feel like they are offering the same thing to the city they are to the county.”

The American Express project would involve two buildings on two parcels in eastern Guilford: about 100 acres in Rock Creek Center and part of a 700-acre tract owned by developer Roy Carroll near Knox Road and Birch Creek Road.

The Carroll property would be annexed into Greensboro, allowing the city to share in the incentive offering and benefit from the promised boost to the tax base.

In 2004, Carroll offered to donate 100 acres of the eastern Guilford tract for the incentive package that Greensboro put together to recruit Dell, the giant computer company that decided to build in eastern Forsyth County.

Although his land wasn’t ready for development at that time, Carroll said in 2005 that it had been prepared so it could be construction-ready in four months.

Carroll was unavailable for comment Monday.

Iowa officials are tight-lipped about their efforts to recruit the company. The proposed project has gotten no media coverage there.

Des Moines is a major insurance and financial-services business region, according to a professor at Des Moines’ Drake University.

“Outside Hartford, it’s the biggest insurance center in the nation,” said Tom Root, an associate professor of finance.

Root hasn’t heard about the American Express project, but based on what he knows about the economy, economic development officials there would be very interested in the company.

“I would say that yes, they would be targeting that industry. Absolutely,” Root said. “In general, when you think about the area and the industry here, that’s a really good fit.”

The Iowa legislature passed a bill in 2009 to give major incentives to companies building data centers after it recruited centers from Microsoft and Google.

Under that law, the biggest incentives would include permanent sales-tax exemptions on equipment and electricity for those investing $200 million over six years.

How City Council members and county commissioners respond to the proposed packages remains to be seen.

Yow says he plans to vote against the incentives “even with the state of the economy.”

He added: “The performance of these big companies coming in and asking for money hasn’t been that great lately. Look at Dell.”

Contact Donald W. Patterson at 373-7027 or don.patterson@news-record.com

Contact Richard M. Barron at 373-7371 or richard.barron@news-record.com

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Norm*

April 20, 2010 - 5:01 am EDT

Iowa is a beautiful place for jobs with no assigned value and can be replaced by folks on the other side of the planet. Let's not spend too much money investing in jobs that can be moved to Pakistan or India at the drop of a hat.

maxinedog

April 20, 2010 - 9:35 am EDT

If American Express could operate this facility oversees, I am sure that option has not escaped them. I have to believe they have investigated that option more fully than Norm has investigated it, they are choosing the two sites based on their ability to accomodate the infrastructure. I doubt they are choosing a US site as opposed to an overseas site based on the incentives when the incentives amount to 3% of the upfront cost. If overseas sites were such a great option, I am sure that 3% could be made up in operational cost savings given the salaries alone.

Norm*

April 20, 2010 - 6:57 am EDT

Got to thinking some more about this. Has Mr. Carroll created a new business model where you assist in the recruitment of corporations to look at property you've stockpiled, apply to gov't for incentives to make your property look more attractive and then sell to make your profit? Fascinating, and it can be made to sound like you are doing the community a favor by having them invest. Not unlike the downtown hotel projects where everyone cashes out up front and the taxpayers are left holding the bag. Mr. Yow is even making sense but he hasn't tapped into the notion that some folks are profiteering through these gov't incentives.

williag_1998

April 20, 2010 - 8:37 am EDT

Seems like there has got to be some empty buildings around here that already have the required infrastructure. These government incentive packages need to stop. This practice should be outlawed. Government is getting way too big and getting involved in way too much and this is one area they should have no business being involved.

maxinedog

April 20, 2010 - 9:11 am EDT

If the numbers in the article are accurate, then the Mr. Yow and the reporters are missing a very important and material fact. Based on 400 million of investment, the company would pay $3 million in property tax every year, meaning that there would be a 1% increase in property tax revenue. If the reporters know this but fail to mention it, that is a travesty, if Mr. Yow thinks that paying $6 million to someone who offers to pay you $3 million per year is a bad investment, then he should be automatically disqualified from serving as a County Commissioner. Let's hope, for our sake, that they are both merely ignorant.

jstevenh1952

April 20, 2010 - 9:32 am EDT

Ahh the ignorance card. Good move! Not much of a Yow supporter, but he has good points. Do the math. Corporate incentives almost never achieve their desired intent. Frankly speaking, our county and city don't have much of a track record of sucess. Corporate incentives for non-manufacturing jobs rarely produce the desired economic output. Incentives for manufacturing generally do.

It is past time that the leaders of the city and county stop using the taxpayers wallets as funding for corporate handouts. Sure it would be nice to have American Express expand their corporate foot print in the area, but t what expense? The number of jobs and 5 year economic impact do not add up. Do the math.

maxinedog

April 20, 2010 - 9:43 am EDT

It's not the jobs, it's the property tax revenue, sorry for not making that more clear. Rather than making generalized statements like "incentives never achieve their desired intent," how about doing the math on this deal. If you point to Dell as a bad example, I can point to RF Micro as a good example, we can cherry pick our examples, but we really should address the matter at hand.

If we follow your moral advice and stand on the principle that Guilford will no longer offer incentives, then our neighboring communities will be pleased with that decision. It's been said here many times, nobody likes incentives, but as long as they are legal and are practiced by other municpalities, we have to play the game or we will ride our high moral horse into further unemployment. I wish all incentives were outlawed across the country, but until that happens we need to offer them if we want to stay on the map for these projects.

maxinedog

April 20, 2010 - 12:48 pm EDT

Based on that reasoning, you can make a very good case for not investing in the stock market which also requires an initial investment on the hope of a stream of future returns on that investment. And like the stock market, one can find numerous examples of bad investment decisions and good investment decisions to bolster either side of that argrument. The question is whether we want to invest with the hope of returns, or to sit by and watch as other communities invest.

jph81

April 20, 2010 - 9:33 am EDT

Hey, let's stop the incentives for big companies and just be content with our 12% unemployment rate and county and city budget deficits. Maybe one day a big company will just decide to help out Greensboro and will locate here without asking for incentives or pitting us against another area of the country because they feel sorry for us and want to help us out.

Let's stop being idealistic about "how it ought to be" and face reality - If we want to lure a $1 billion investment in our area it will cost us. The jobs will help, but the investment in this area is the largest benefit. Once a company makes that, they cannot just move it to India overnight.

When you look at a complex that will require more than 100 acres of land, what "empty building" is sitting around that could be used for that? There is nothing in Guilford County that could even come close to accommodating such a project.

newtogso

April 20, 2010 - 9:36 am EDT

I'd like to hear more about why some vacant lots in far eastern Guilford County are more feasible than an infill location in Greensboro where we already have the infrastructure. Instead of spending dollars on new infrastructure, the City and County could instead use those dollars to retrofit an existing location. Our economic development incentives continue to be in direct contradiction to the goals stated in Connections 2025.

maxinedog

April 20, 2010 - 9:49 am EDT

I am not too familiar with the Connections 2025 report, so I have no comment there. But to better understand the requirements for data centers, google "data center requirements." The standards are very stringent, redundant power sources with substations, hurricane and tornado proof structural engineering, setbacks from highways and major thoroughfares, and so on. Again, I have to believe that Amex would have taken these into consideration in its national search and has narrowed it's choice to Des Moines and GSO accordingly. If an existing building would work, it would have been in their best interests to buy it given the depressed commercial real estate market.

haztwo

April 20, 2010 - 11:44 am EDT

Fortunately it probably won't be an issue. N/R broke the story before the company was prepared to make an announcement. Most likely won't come here anyway. Can anyone say airplane finishing company/Yvonne Johnson? Why do you think we didn't get that one?

maxinedog

April 20, 2010 - 12:54 pm EDT

I agree with the sentiment, it would have been far better to keep this confidential and maintain the trust of the company here, I hope it does not play into their decision. However on the example of the aircraft operation and former Mayor Johnson, that deal died on the economy. Yvonne was always a tremdous asset for our community when it came to business recruitment, her enthusiasm was key to landing many companies for this area.

realitychecks007

April 20, 2010 - 12:31 pm EDT

I am trying to fathom why any elected official would already publicly state that the vote he/she would offer for a $400 million economic development project would be a 'no.' Maybe I missed the memo but I am not familiar with a great line of companies and economic development project possibilities banging on Triad's doors to have us consider them such as the American Express project. Maybe I'm just thinking of how weak the economy is and how hard it is to find employment in our state...even harder than most states in our country.

There have been a great number of business men and women working hard to find economic development opportunities like this for our area for years!!! This is NOT an easy process. It is way too soon to say, 'no.' I am hopeful that our government officials will take the time to hear every bit of the proposal. I wouldn't want to be known as the 'NO' region, meaning we don't accept economic development projects here that provide a growth in tax money to our city and county and bring real jobs for our residents who continue to wonder 'when will this living with no job end?'

Let's not be like the third man in the parable about the three bags of gold. He decided to stuff his master's money in a hole and do nothing with it. Let's be a region of forward thinkers, doers and people wanting to bring big business to our area to the sum of $400 million. If no one wants a piece of that, I'll just extend my plate out on my own behalf.

Thank you, American Express for considering our fine area, rich with land, necessary utilities and upstanding citizens eager to be employed once again.

jxsanders

April 23, 2010 - 6:54 pm EDT

What is the proposed tax value of the Amex property? How is that value calculated? How many square feet of building, how much land?

Let's see if the values are realistic. If buildings and land cost on average $100 per square foot and this is supposed to $400 million - are they building 4 million square feet of space? That's about the size of all of downtown Greensboro. I doubt it!

What if the property tax value comes in at 4 million - are we paying 100 times more in incentives than we should.