‘Project X’ revisited-Smiles, applause as GE breaks ground, but old questions remain

November 25, 2013 Asheville , News Stories 1438 Views
‘Project X’ revisited-Smiles, applause as GE breaks ground, but old questions remain

New G-E Plant Sweeten Creek Road-RS

Architects’ rendering of the completed General Electric CMC plant on Sweeten Creek Road.

By Roger McCredie-Last week, in the brilliant sunshine of a perfect autumn day, dignitaries from across the state and county and senior officers of General Electric Company gathered to break ground for the latest jewel in GE’s crown: its new jet engine parts plant off Sweeten Creek Road.

“First in flight once again,” the Asheville Citizen-Times headlined in covering the event, where a grinning Gov. Pat McCrory hailed the plant’s launching as a part of a “Carolina Comeback” after the slings and arrows of the 2008 economic downturn. And County Commission chairman David Gantt said, “This is what it’s all about: jobs, jobs, jobs,” a reference to the projected creation of 52 new positions at the revamped facility, bringing the total workforce there to 340.

But in some quarters there was a return to the skepticism that surrounded “Project X” — the name under which the deal had functioned until its identity was officially disclosed in June – in terms of what it was costing to bring the then anonymous entity to Buncombe and just how much, ultimately, now as then, the county can expect to get out of it.

The Back Story

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. The numbers were later revised: the actual investment, commissioners said, would amount to $126 million over a period of time, and while the new facility would employ a total of 370, only 52 jobs would be created, not all of them necessarily filled by Buncombe County applicants.

The county also made it clear that the company had absolutely insisted on remaining anonymous until consummation of the deal, threatening to close its existing facility and move elsewhere, taking its 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.)

Despite objections as to how a public hearing could be properly conducted when the name and purpose of the company under discussion were unknown, Project X coasted to approval. Commissioners announced they had put together a total package amounting to $15.7 million (not $4 million as reported by some local media) for land purchase and new construction, plus $2.7 million in additional incentives.

In late May an informed source, speaking on condition of anonymity, gave the Tribune the following narrative regarding the anatomy of the deal:

Unison Corporation, a GE subsidiary, had 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 was due to expire this month.

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 added up to the $15.7 million figure approved by county commission.

And on June 12, two weeks before approving the first city tax increase in a decade, Asheville city council sweetened the GE incentive pot with $1.58 million in municipal funds. At that time, “Project X” was revealed as the new GE facility.

The Tribune broke the story of Project X’s identity on June 6, but city and county officials refused to confirm or deny the report. Following the disclosure, both GE and local government officials said the heavy-handed secrecy surrounding the deal was necessary to protect information about the product to be manufactured at the new plant, which is ceramic matrix composite (CMC), a revolutionary new material used in jet engine components. In fact, county sources said, GE had threatened not only to yank the deal away from Asheville, but to move its existing facility, with its 270 jobs, to another town if security were breached.

Also, GE said, it timed the announcement of the Asheville deal to coincide with the Paris Aviation Show; accordingly Asheville mayor Terry Bellamy and other local dignitaries were flown to Paris to be on hand for the announcement.

So … now what?

Several insiders who had tracked the GE negotiations from the beginning criticized both the way the package was configured and the county’s rosy estimate of the positive economic impact it will have on the local economy.

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

“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.”

Another source questioned the validity of GE’s claim that it will eventually invest a total of $126 million on its new plant, and that it will create a total of 52 new jobs “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 [of projected annual income for the county]. . 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. Subsequent reports, however, estimated that the new plant would pay about $1.2 million a year in property and other taxes.

County tax director Gary Roberts told the Tribune last week that the GE facility would indeed pay “Somewhere between $1.2 and $1.3 million in city and county taxes a year” once GE attains its stated investment level of $126 million. How long it will take for the plant’s taxable property to reach that level has not yet been projected, but based on the city’s and the county’s total investment of $17.28 million, statistics show it would take a minimum of 14 years to amortize at that rate.

The county’s lease with GE on the building it is constructing for the operation is set to run for 15 years.

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