We're Your Kind of Town

By Anastasia Toufexis

States and communities compete fiercely to lure businesses

Beggars can't be choosers. Alderman Peter Grover of Austin, Minn., was out jogging one morning last fall when over the earphones of his portable radio he heard a report that a meat-packing plant just 40 miles across the border in Mason City, Iowa, had been ordered to close down. The plant was, said a Mason City judge, a public nuisance: noisy and smelly, regularly fouling surrounding streets with blood and animal parts. Grover knew an opportunity when he heard one. Within days, Austin had presented the plant's owners, North west By-Products Inc., with a relocation offer they could not refuse: a bargain rate for leasing a $350,000 building in an industrial park a quarter of a mile away from the nearest residential home.

The plant opened in March, creating 27 new jobs for Austin citizens. Says Thomas Kucera, director of business development for Austin, already home to a Hormel meat-packing plant: "This isn't the kind of town that turns up its nose at a truckload of animal innards."

Indeed, few communities these days can afford to turn up their noses at any enterprise that means work for residents. With unemployment running at 9.8% nationwide, cities and towns across the U.S. are aggressively wooing potential businesses, including some long considered undesirable, with carefully thought out economic strategies, featuring special tax incentives, novel financing arrangements and eased environmental and zoning requirements. Stanwood, Iowa, and Sheffield, Ill., 'are fighting over a planned $35 million hog-slaughtering facility that would provide 600 jobs and a $10 million annual payroll. Three years ago, Illinois could not find a community that would accept a new medium-security facility to house 750 inmates, even though it would have meant 500 recession-proof jobs and a payroll of about $9 million annually. This year more than a dozen Illinois cities and towns are going for it. Among the suitors: Dixon, where Ronald Reagan grew up and worked summers as a lifeguard.

The competition for corporate mates is intense. Portland, Me., beat out Boston for a new $46.7 million shipbuilding facility that will employ 1,000 and create an additional 2,000 related jobs in the community. Among Portland's winning inducements to the Bath (Me.) Iron Works company: $15 million worth of renovations and construction of piers that will be leased to the company. In Colorado, Fort Collins appears to be the victor in a three-town battle for a proposed Anheuser-Busch brewery that would create 500 jobs in the plant and 1,200 elsewhere. While the city of Pueblo offered 409 free acres of land and Greeley put together a land-and-amenities package worth $46 million, the deciding factor was Fort Collins' proximity to an interstate highway.

Even to keep what they have now, some cities are at each other's throats. Fort Wayne, Ind., and Springfield, Ohio, each have their own branch of International Harvester, which has its headquarters in Chicago. But the company expects to keep only one of these two plants open. Says Fort Wayne Mayor Winfield Moses Jr.: "It's a boom or crash situation. If we lose, our unemployment goes from 12% recession to 21% depression. If we win, our unemployment goes down to 7%." The total job swing for the city is 17,000 positions.

Some communities are trying to stimulate economic growth by overturning even long-held social mores. In North Dakota, hotel, bar and restaurant revenues have been boosted dramatically by the state's decision a year ago to legalize public blackjack gambling. Several thousand new jobs have been created, 500 in Fargo alone. Local wags now call the city Las Fargo. City officials in Ashland, Ky., this June won a court decision repealing the prohibition on selling liquor in public. Chamber of Commerce Executive Director Raymond Graeves Jr. says the free-flowing liquor has created 400 jobs in Ashland.

California, which once considered itself virtually recession-proof, has abolished its inventory tax in an effort to halt the flight of the warehousing business, mainly to neighboring Nevada. Pittsburg, in northern California, has utilized what town officials call an "incubator" approach to help hatch new businesses. A particularly successful lure, says Dick Beyer, head of Pittsburgh economic and housing redevelopment corporation, has been an offer to rent "space at cost, a rate about 35% lower than that in surrounding towns." Says Kay Reynolds, deputy director of California's local economic development office: "In the past, cities didn't realize they were in the economic development business."

Some communities court the unusual. Both Leavenworth, Kans., and Independence, Mo., are bidding for the projected Richard Nixon presidential library, with the expectation that it will pump at least $5 million a year into the local economy.

Youngstown, Ohio, struck a bargain last April with a British firm called Wren Skyships to build metalclad dirigibles. To clinch the deal for the $55 million, 300-worker plant, the city sold the firm 110 acres of land around Lansdowne Airport with the stipulation that construction begin within six months. The price: one British pound (then about $1.80).

Beams Skyships Executive Malcolm Wren: "Youngstown was quite aggressive in selling itself to me."

Competition to attract and keep businesses is certainly no new phenomenon. "We were forced into doing state promotion efforts in the South 25 or 30 years ago," points out Bob Leak, director of the South Carolina development board. "We'd spend all this money to educate our children, and then as soon as they graduated, they'd pack up and leave. Selling our states to business was the solution."

But development experts in the South ad mit to astonishment, and some concern, at how the phenomenon has spread nation wide. Says one expert: "The game is getting bigger, and it's always harder to win when there are more players in the field."

-- By Anastasia Toufexis. Reported by Christopher Ogden/Chicago

With reporting by Christopher Ogden

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