Incentives Deal of the Month
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$17 Million in Incentives Help Maine LandBy JACK LYNE Site Selection Executive Editor
of Interactive Publishing
LEWISTON, Maine - "Project Quality" -
Wal-Mart's (www.walmart.com) 400-employee, US$40.5 million food distribution facility - has landed in Lewiston, Maine, thanks in part to a $17 million city-state incentive package.
Code-named Project Quality by area economic development officials, the 485,000-sq.-ft. (43,650-sq.-m.) facility will service the retailer's booming grocery business in New England.
No. 2 on the Fortune 500, aggressively expanding Wal-Mart picked the 130-acre (52-hectare) site in Lewiston over a number of other undisclosed sites in New England, according to Wal-Mart officials. The center will employ 150 workers in its first year of operations and will expand to some 400 employees, they said.
"More and more customers are making Wal-Mart their destination for groceries," Rollin Ford, Wal-Mart senior vice president of logistics, said as the project was announced. "The Lewiston distribution center will play a significant role in helping Wal-Mart meet the growing needs of our customers across New England. We are delighted to have the opportunity to enhance our presence in Maine - as a partner in both commerce and community."
Wal-Mart's presence in Maine was already substantial. The company ranks Wal-Mart as Maine's fourth-largest employer. It employs more than 6,000 Maine residents in the 16 Discount Stores, four Supercenters and three Sam's Clubs that it operates in the state.
Wal-Mart is appreciably expanding its New England operations. The company, for example, has already announced plans to open five more Supercenters in Maine alone by the end of this year.
Governor: Incentives 'Leveled Playing Field'The Lewiston site, however, wasn't initially the lowest-cost location for the Wal-Mart project, according to officials for Maine & Company (www.maineco.org), a private non-profit group that promotes Maine as a business location.
The city and the state, however, came up with a 20-year, $17 million incentive package that enhanced the Lewiston site's competitiveness.
"It levels the playing field" in a "high-tax state," Gov. Angus King said of the incentives at a press conference at Lewiston-Auburn College announcing the project.
The city is providing some $10 million of the incentives, including water and sewer upgrades and a tax-increment-financing package. Lewiston also donated the 130-acre site to Wal-Mart. The vacant acreage was producing only some $2,400 per year in property taxes, city officials said. The state's some $7 million in incentives will include reimbursing Wal-Mart for personal property taxes on machinery and equipment and 50 percent of employee state income tax withholdings.
In addition, the state will provide $360,000 in funds for customized employee training. In conjunction with the Maine Turnpike Authority, the state will also make improvements to the interchange area and the adjacent Alfred Plourde Parkway. As many as 300 trucks a day will enter and leave the center, city officials estimated.
"I think that it's despicable that this company chose to avoid public disclosure," Carignan said at the public meeting. "People can say that's not the way it works. Well, not in my world." Despite his criticism, however, Carignan voted for the incentives, joining the other council members in a 6-0 vote. The council's unanimous endorsement of the Wal-Mart incentives drew a standing ovation from the audience attending the meeting.
The Wal-Mart project will add significant state and local revenues, Maine & Company officials asserted. The state, they said, will receive an annual average of $1.2 million in net new tax revenue and $512,000 in new turnpike toll revenue over 20 years. Over the same period, Lewiston will get a $493,500 net in new property tax revenues each year, they added.
"This is a great opportunity for the Lewiston-Auburn area," said Kaileigh Tara, mayor of Lewiston, which has a population of some 36,000. "Not only does it mean hundreds of jobs with great benefits and a payroll exceeding $9 million per year, but it also means nearly $500,000 per year in net new tax revenue for Lewiston." (Tara later left office when her term expired in January, as Laurier Raymond assumed the mayor's post.)
Tony Fuller, Wal-Mart vice president, real estate, alluded to the incentives dustup at the project announcement.
"You will never have to duck around the corner" to avoid criticism of the incentives package, Fuller promised. The Wal-Mart executive also called Lewiston "a community where we can be a part of economic growth, a place we believe we can call home for a long time."
The incentives package is designed to facilitate further expansion. Wal-Mart can add 400,000 sq. ft. (36,000 sq. m.) to its Lewiston distribution center and still retain the city incentives outlined for the company's 20-year commitment to the area. Wal-Mart's agreement with the city requires the retailer to create at least 350 positions for employees working at least 30 hours per week.
'Text-Book Site Selection'More than incentives, however, made the deal work, Wal-Mart officials said. "Maine had a lot going for it, including the team of economic development professionals that helped us make this project happen," said Fuller. "It was a text-book example of how the site selection process should work."
Part of that textbook process involved speed.
For example, Mike Mullis, a site location consultant and a principal with J.M. Mullis, Inc. (www.jmmullis.com), contacted Maine & Company on behalf of Wal-Mart on a Monday. Mullis requested detailed labor, site and incentive information by Friday of that week. A week later, Mullis had the data and was in Maine, taking an aerial tour of potential sites.
Wal-Mart also liked Maine's large tracts of affordable land, its fast permitting, and, particularly, its work force, company officials said.
"Wal-Mart officials were pleasantly surprised by their human resource visits," explained Joe Wischerath, executive vice president of Maine & Company. "The Lewiston-Auburn area met and exceeded the labor needs, both in terms of quality and quantity."
Said King, "I continue to be proud of Maine's top-notch work force which, both in terms of quality and quantity, has proven once again that we can compete for large-scale projects." Wal-Mart officials projected that the Lewiston center will open in April of 2004. The facility is part of Wal-Mart's aggressive growth plans for its new fiscal year, which begins on Feb. 1, 2002. President and CEO Lee Scott has called Wal-Mart's expansion designs for the new fiscal "the largest square footage increase in the company's history."
The food business has been a big part of Wal-Mart's growth. The Bentonville, Ark.-based power has become the nation's top-selling grocery, generating some $57 billion annually in food sales. Kroger Co. has more grocery stores - 2,400 to Wal-Mart's less than 900. Kroger, however, ranks No. 2 in food sales, with some $49 billion annually.
Editor's note: Watch for Site Selection's incentives analysis in the May 2002 issue.
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