Incentives Deal of the Month
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Rhode Island Settles Land Spat, Clears Way for $100M Dow, Fidelity ExpansionsBy JACK LYNE Site Selection Executive Editor
of Interactive Publishing
SMITHFIELD, R.I. Not all location incentives travel the relatively straightforward route of we-provide-some-of-the-moolah/you-expand/thank-you-very-much.
Incentives on a road less traveled were Rhode Island officials' solution in recently keeping not one, but two, US$100-million expansions on track. In the process, those incentives resolved the uber-pickle of a problem that was facing the state and local officialdom.
The predicament: Two of the state's highest-profile corporate citizens were squabbling over which would expand where on a state-owned 350-acre (140-hectare) property in Smithfield, R.I. (www.smithfieldri.com). And for a while there, the two projects seemed to be on a collision course that would altogether derail one of the expansions.
The contestants in Rhode Island's large-scale land dispute:
In one corner, wearing the financial-services trunks, was Fidelity Investments(www.fidelity.com). Fidelity had already spent a reported $100 million in Smithfield since 1996 in building a 1,600-employee operation at its two-building, 525,000-sq.-ft. (47,250-sq.-m.) complex. Fidelity's operation had made it the largest employer in Smithfield, a city of some 20,000 residents located roughly 11 miles (17.6 kilometers) northwest of Providence. The Boston-based firm's long-term designs, however, were even more ambitious. Its master plan called for adding at least three other facilities, swelling its Smithfield work force to as many as 5,000 employees.
In the other corner, wearing the bio-pharmaceutical trunks, was Dow Chemical Co. (www.dow.com). Dow first came to Smithfield in 2000 when it acquired The Collaborative Group's Biotechnology Services Division. The Midland, Mich.-based giant also had ambitious aims for northern Rhode Island expansion. It planned to build a $100-million, 200,000-sq.-ft. (18,000-sq.-m.) bio-pharma operation in Smithfield. The new R&D/manufacturing facility, which would turn out vaccines and related products, could eventually employ more than 600 workers, company officials said.
The rub in the scenario was where Dow wanted to expand. The No. 2 U.S. chemical company wanted to locate its bio-pharma operation only some 200 yards (182 meters) from Fidelity's existing complex.
Projects' Proximity Breeds DiscordDow three years earlier leased two parcels near Fidelity's campus. Things only began to get earnestly squirrelly, though, in June of last year, when Dow announced specific expansion plans for the property.
Fidelity quickly objected. Dow's bio-pharma R&D/manufacturing operation, Fidelity asserted, was incompatible with its financial services operation, as well as with adjacent educational and residential uses.
Not an auspicious beginning for a dialogue. And the relationship progressively deteriorated from there. By late last year, Fidelity officials said that Dow's bio-pharma plans had prompted the world's largest mutual-fund company to altogether rethink its Smithfield expansion plans.
Both firms seemed locked into all-or-nothing positions - an unpalatable outcome that prompted state officials to step in.
The Dow/Fidelity contretemps was likely headed for a "quasi-judicial" local-area decision that "we did not think was going to be beneficial," Gov. Lincoln Almond said in explaining his intervention in the squabble.
Eminent Domain Facilitates
And after a while, the medicine took. By early May, in fact, the once-snowballing squabble had turned into a veritable love fest. Dow and Fidelity joined state and local officials at the State House to confirm their expansion plans for Smithfield.
"Everybody got what they wanted," Charles Swartz, Dow business development manager, said at the ceremonies in Providence. "Biotechnology and financial services are very compatible."
"We're very happy," said John Muggeridge, vice president and general manager of Fidelity's Smithfield Regional Center. "Today, Rhode Island opens the door even wider for Fidelity to grow jobs and expand our investment at Smithfield for many years to come."
The magic bullet behind the sudden outbreak of sweetness and light? Eminent domain.
The Rhode Island Economic Development Corp. (RIEDC at www.riedc.com), working through Rhode Island Superior Court, exercised its eminent domain powers to acquire up to 12 lots in Smithfield. The lots cover roughly 40 acres (16 hectares), state officials said. The state will lease some of the land to both Dow and Fidelity, and the two companies will also exchange parcels. In addition, the settlement creates a buffer zone between the Dow and Fidelity operations.
"Dow wins with an even larger site for a new bio-pharmaceutical facility," Almond explained at the State House ceremonies. "Fidelity wins with its own campus expansion and incentives to bring thousands of new jobs to Rhode Island."
The land will be purchased with up to $10 million in economic development bonds issued by the RIEDC. Fidelity's rent for the state-owned property in Smithfield will cover the annual debt service on the bonds, state officials said. The agreement also obligates Fidelity to fund a $4-million access road that will run to the parcel that Dow will now occupy.
Fidelity's expansion, however, may enable the company to recoup substantial revenues. Once Fidelity employs 2,500 workers at its Smithfield complex, the state will award the company $500 for each fulltime employee added thereafter. The $500-per-new-employee payments top out at 4,300 workers.
Holdout: 'I'm Ready for a Fight'A potentially significant fly, however, remains in the ointment. Eminent domain in economic development remains a highly contentious issue. And so it is in Rhode Island.
Joseph Mollo Jr., owner of the Breezy Hill Farm Garden Center that's located on the condemned land, plans to put up a fight. The Mollo family has owned the 11-acre (4.4-hectare) property since 1911. Mollo also lives in a nearby house on the property, and rents out another home that sits on the acreage.
The state has offered Mollo $850,000 for his land, the ex-Marine told The Providence Journal.
"My question is: Who appraised this? I'm ready for a fight," said Mollo, a onetime boxer. "I will go all the way. . . . They can keep their $850,000. I'm going to get $2 million for this, or I'm going to tie them up for years over it."
The two other businesses on the condemned acreage, a pub and a restaurant, haven't indicated that they'll contest the takeover.
The state has offered each affected resident $10,000 in relocation expenses, an allocation not required by condemnation law. Owners of the property will be given a year to vacate. During that period, they won't have to pay taxes or rent.
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