Sources in position to know say G-E’s Unison Corp. is “Project X”

Published on June 8, 2013 in Asheville, City - County Gov., News Stories, Roger McCredie

GE-(Unison)-plant-sign

By Roger McCredie –

Apparently the company involved in the mysterious “Project X” for which Buncombe County Council recently approved $15.7 million in taxpayer-funded incentives to expand its local operations is Unison Corporation, a wholly-owned subsidiary of General Electric that has operated in Buncombe County since 2007.

The identity of the company was revealed to the Tribune by two separate and independent sources who spoke on condition of anonymity and who have been either directly involved in or have had knowledge of the pending Unison/GE deal for several months.

Efforts to contact Buncombe County as well as Unison officials were unsuccessful at press time. One Tribune source said County Manager Wanda Greene “would neither confirm nor deny” the reports and quoted her as saying, “You can read about it in July” when the transaction is completed.

Positive identification of the company receiving the County’s incentive money would climax months of intense speculation raised by the company’s insistence on an unprecedented amount of secrecy about its expansion plans.

Early in February, county commissioners met in closed session to discuss an incentive package for “an existing company” they said was prepared to make a $300 million investment in new operations in the county, and to create 270 jobs in the process. Commissioners eventually disclosed they had put together a package amounting to $15.7 million for purchase of land and new construction as well as $2.7 million in additional incentives. By that time, documents showed the company was offering to invest $126 million over time, and to create 52 new jobs.

The county also made it clear that the company has absolutely insisted on remaining anonymous until consummation of the deal and has even threatened to close its existing facility and move elsewhere, taking its existing 270 jobs with it, if the secrecy surrounding the plans were to be broken. Thus, on May 14, when Commission held a public hearing on the project as required by law, both the company’s identity and the details of the transaction were referred to as “Project X.” (Apparently state law does not require that the actual names of companies involved in such hearings be revealed.)

Then, on May 29, a private source gave the Tribune the following information:

Unison has been leasing and operating out of the old Pepsi-Cola building on Sweeten Creek Road, which had been briefly tenanted by Smith Aerospace Corporation. Unison’s five-year lease expires this November.

In January, several weeks before Commission’s closed-door session, county officials asked if Unison’s landlord would be willing to sell the property to the tenant. The landlord expressed interest and the property was appraised at $3.65 million.

The county then changed its mind and went next door to Old Dominion Freight Lines, offering that company $1.1 million for land and $3.5 million in additional compensation to construct a new trucking terminal for its project. The county then offered to spend $11 million on property and a 125,000 square foot facility which it then plans to lease to Unison’s parent company, G-E, for $580,000 a year for 15 years.

The $4.7 million investment proposed for the trucking terminal plus the $11 million G-E package adds up to the $15.7 million figure approved by county commission.

Meanwhile, Asheville City Council is looking into sweetening the secret project’s pot still further. At its regular June 11 meeting Council will hold a public hearing “on the question of authorizing certain expenditures for economic development purposes, and entering into an agreement to provide economic development incentives for Project X.” according to the resolution authorizing the hearing. City Public Information Officer Dawa Hitch said the staff report on Project X will be posted on the city’s website Friday.

“The identity of Project X will be considered public once a contract is signed.  At this point in time, we don’t have an estimate of when that would be,” Hitch said.

Public reaction to Project X has ranged from bewilderment over the economics of the deal — based on such facts as have been made public — to outrage over the cloak-and-dagger nature of the proceedings.

“Look at the economics,” said the source who identified GE/Unison as the entity behind Project X. “The county is spending $15.7 million in taxpayer money to acquire land and build a building. Then they’re going to lease it to Unison for $580,000 a year for 15 years. That only comes to $8.7 million. That leaves the county, at the end of the contract, seven million dollars in the hole and with a 125,000 square foot building on its hands if Unison pulls out after that. And if the contract is renewed or a new contract is drawn up, how will it amortize that leftover seven million?”

The source said Unison is leasing its current 100,000 square foot premises for just under $400,000 a year, or roughly $40 per square foot, as opposed to about $88 per square foot it will be paying in rent for its new building, exclusive of the trucking terminal. “They could have stayed where they were, added a 25,000 square foot terminal, and the county would still have come out way under $15.7 million.

“But,” the source added, “no local commercial developers had the opportunity to look at this deal. Would that be because it’s not economically viable?”

Another source familiar with the proposed transaction assailed the sunny economic impact figures for Project X set out by county officials.

“[Unison/GE] is saying it will create 52 new jobs,” this source said. “and that the county’s return on investment will be $8.5 million per year. Assuming that $8.5 million return includes $580,000 in rent, that still leaves almost $8 million. To make up the deficit in terms of jobs, each new job would have to be worth more than $150,000. But we’re told these jobs will actually pay about $40,000 a year. Even if you throw in 59 more ‘indirect’ jobs the county says will be created at an average of $30,000 a year, you still fall way short. All those [jobs] at those salaries plus the rent equals about four and a half million, a little more than half of what they claim. Can they not do basic arithmetic, or do they think the public can’t? As for the $126 million they claim to be investing, I’m sure that’s for their own capital equipment and internal improvements. I seriously doubt if the county will see a cent of that,” the source said.

Source #1 wondered why an incentive package for expansion of a company that has been operating in the county for several years would even be necessary. “It’s not as though GE, a Fortune 50 company worth billions and billions of dollars, can’t afford to build itself a new facility. If they wanted to finance, they could do it in-house. GE Capital is one of the biggest lenders in the world. I can see giving them good faith incentives like tax breaks to show appreciation for staying here, but buying them land and building them a building with taxpayer money, especially when the numbers are so out of whack, is ridiculous. But they [commissioners] are real proud of themselves. And now the city is getting ready to jump right in.

“If that’s how they do business, I’ve got some prime real estate in Florida I’d like to talk to them about,” the source said.

 

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