Duped and dumped by Dell

by Jim Longworth

Last week Dell computer announced that it was shutting down its Forsyth County plant in January, deleting over a thousand people from the Triad workforce. The local media treated the announcement as a major news story. But to those of us who smelled a rat six years ago, the plant closing wasn’t news, it was just the expected outcome of a flawed deal brokered by na’ve politicians.

Local and state governments used to be the entities where prospective industry would come for information on workforce preparedness, available housing, environmental regulations and permits. But somewhere along the way, governing bodies have become desperate, overly trusting bankers willing to give away the chicken farm just to get one perishable egg. Where Dell was concerned, the farm was $300 million in state and local incentives, and the egg was a promise of high-paying jobs. The deal would give Dell $200,000 in tax credits for every job created. But in a plant where the average salary was projected to be $28,000, that could have given Dell a net gain of over $170,000 per worker. There was also no promise of full health benefits, and none at all for family members. The agreement also allowed Dell to slash up to 40 percent of its workforce and not lose a penny of perks. The state agreed that so long as Dell didn’t close the plant before October 2010, it would only have to return up to half of the tax credits it had earned.

Gov. Mike Easley and his Secretary of Commerce Jim Fain knew the deal was one-sided, but they let Dell strongarm them into believing that the plant would take its jobs to Virginia if NC didn’t act immediately. According to a report by the Winston- Salem Journal, Dell’s Vice President for Global Manufacturing Kip Thompson told Fain, “Two thousand jobs — shouldn’t you be happy with no revenue?” Then he added more pressure by saying, “If a state like North Carolina can’t get after this, I’m worried for our country. There’s a certain amount of patriotism here.”

And so during the first week in November 2004, patriot Easley presented the Dell deal to state lawmakers as a time-sensitive matter. The package passed quickly, but later, many legislators complained that they were given less than a day to read through, analyze and discuss the terms.

Easley and Fain should have told Dell that we needed more time, and lawmakers should have refused to rubber-stamp the deal. They didn’t, and not long afterward we discovered that Virginia had offered Dell a mere $30 million in perks. Our state had been flim-flammed in the worst way by agreeing to pay 10 times what we needed to in order to attract the plant.

Thompson’s strongarm tactics and the revelation coming out of Virginia should have told us what to expect from Dell. Despite an incentives package that was based on full disclosure, and driven by performance and workforce levels, Dell began laying off people then refused to release job data to city officials. The height of arrogance occurred in March 2009, when Dell spokesperson David Frink unashamedly announced, “We are no longer providing specific site employment totals.” Well, now they are providing specific numbers. By January there will be zero people making desktop computers in Forsyth County, and the building will be vacated.

Dell says the plant closing is due to the downward trend in demand for desktops andan increasing market for laptops. But any first-year marketing studentcould have foreseen as far back as 2005 that laptops were the preferredproduct, at which time Dell could have reconfigured their plans toconvert local production to the more viable product. Instead, Dell willmake their laptop computers in Mexico, where they can pay slave wagesand make huge profits. Translation: Dell could have remained in NorthCarolina and made a respectable profit. Instead, local officials areleft with trying to put a good face on a bad situation.

Winston-SalemMayor Allen Joines announced that city taxpayers will recoup all of theincentive monies, which Dell must repay within 30 days after the plantcloses. But the Mayor’s statement is flawed in two ways.

Idon’t believe Dell will write a check for $15 million and hand it overto Joines by February. Nor do I think they will re-pay Forsyth County’s$7.9 million investment on time. After all, Dell is the company whoscammed us into helping them build their plant then hid employmentfigures from us so we wouldn’t be suspicious when they shut it down.

AndJoines’ assessment of full reimbursement is rather provincial becausecity residents are also state taxpayers, and the state is on the hookfor a great deal of money — at least $8.5 million by some estimates.For example, according to the North Carolina Capitol Monitor wewill be stuck with the out-of-pocket costs for road improvements andfor round-the-clock police presence at Dell’s facility. We also fundeda community college training program worth nearly $4 million andprovided $10,000 per year tuition deductions for Dell employees whotook classes at Wake Forest University. The state commerce departmentalso estimates at least $3.3 million worth of other incentives that wemight not recover. And, as the Monitor points out, theone-sided agreement may ultimately result in Dell not having to pay anystate corporate income tax for the next 30 years.

Thereare a few of us who could say to local and state governing bodies thatwe told you so. Former Judge Robert Orr, Rep. Dale Folwell and myselfare among that group. But none of us who fought against the Dell dealand accurately predicted the outcome are taking any pleasure in theloss of 1,200 jobs or of the economic impact those losses will have onTriad area vendors and suppliers. We are all losers, all of us exceptfor Dell which will continue to profit from third-world labor. As JudgeOrr once warned, “Big corporations based out of state only have loyaltyto their bottom line, not to the community.”

Butthis sad saga isn’t over so long as the same officials who approved theDell deal still defend it, and boast that they would do it all overagain. That isn’t na’ve, that’s just stupid. First, our elected leadersmust learn how to better perform due diligence. If not, they willcontinue to put our tax dollars at risk as they have with Skybus, Delland the Dash ballpark. Next, Gov. Perdue needs to make good on apromise she made while campaigning. During her 2008 appearance on my“Triad Today” television program, I asked if she would be willing tolobby the National Governor’s Association to enact a moratorium onindustry incentives and corporate welfare. Perdue said she would. Ofcourse, she also said she would return to “Triad Today” and debate PatMcCrory, and she said she would be the education governor. She dodgedthe debate and she raided our education lottery funds, so I guess I won’t hold my breath for incentives reform.

Andso it is up to us locally to safeguard our own coffers without impedingeconomic development. The two goals are not mutually exclusive. Andgoing forward, we should adopt the same mantra that former PresidentGeorge W. Bush so eloquently mangled: “Fool me once, shame on you. Foolme, and you can’t get fooled again.”

JimLongworth is the host of “Triad Today,” airing on Fridays at 6:30 a.m.on ABC 45 (cable channel 7) and Sundays at 10 p.m. on WMYV (cablechannel 15)