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IMPACT OF HERBALIFE PLANT UNCLEAR

There has been much hype surrounding Winston-Salem’s new Herbalife plant, but will it live up to it?

daniel@yesweekly.com @Daniel_Schere

If you went by the new Herbalife plant at 3200 Temple School Road in Winston-Salem last Friday, you would have seen a line of people that stretched out the door, well into the parking lot. They had come to interview for 200 job openings, which included manufacturing, packaging, warehouse and others such as customer service and marketing positions.

Although the job fair did not start until 10 am, Human Resources Director Joanna Williams said the first applicant had been standing in front of the doors since 6:30 am. By 10:30 am, more than 100 people had lined up.

Winston-Salem resident Purvis Morris found out about the event through a friend and said he is looking for anything available.

“I worked for RJ Reynolds Tobacco Company before I was laid off so that’s one of the reasons I’m here today,” he said.

Chris Taylor of Walkertown has backgrounds in management and customer service, which he hopes translates into a job at Herbalife.

“I’ve been in the insurance industry but I’m looking to change and kind of reinvent myself,” he said. “You have to reinvent yourself every now and again so I’m excited for change.”

The large turnout at the job fair may be a side effect of the excitement brought about by the announcement in 2012 that Herbalife would be building a plant in Winston-Salem that would create 500 jobs. Winston-Salem Business Inc. President Bob Leak said the city offered them a $2.25 million incentive package over seven years and Forsyth County chipped in $1.19 million.

Leak also said the state provided a performance-based package of $10.5 million.

“It’s based on them hiring people and paying a salary then a portion of the payroll tax which is earmarked back over a period of time,” he said.

Herbalife spokesman Julian Cacchioli said the company chose Winston- Salem over Atlanta because the old Dell plant was conducive to their needs and would allow them to avoid having to build another plant.

“While North Carolina was a little bit bigger than what we were looking for, in time we felt that it also gives us great scope for expansion,” he said.

Cacchioli also cited the state’s unemployment rate as a factor in the decision to move.

“We just felt that taking the facility there would have a greater impact on that community than in the Georgia community,” he said.

Cacchioli also said the incentives played a role, as did the value of the site. According to the Forsyth County online property assessor, the building’s value is $17.1 million and the land is valued at $2.6 million. The plant is only the second for Herbalife in the United States, and the first in the southeast.

Yet Herbalife’s entrance to the Triad has not been met without criticism. Winston Salem State University economics professor Zagros Madjd- Sadjadi said giving money to companies, such as tax incentives, means it is being taken from someone else. He said even if a company promises a certain amount of jobs, it is important to consider how many jobs were not created, and whether the public will truly feel the impact.

“If you were going to build an interstate like I-73 or I-74 that’s going through here, that’s something that’s going to benefit a large number of businesses,” he said. “So things that benefit a large group of people really fall into the category of public good.”

Madjd-Sadjadi is concerned that a bad business deal could potentially lead to a loss of future economic development money for the region. He cited American Express and Dell as recent examples of much-anticipated arrivals to the Triad that ultimately went south.

“You don’t want to start feeding all this money just because a company’s promised you they’d create these jobs,” he said. “I’m a big proponent of certain types of economic development, don’t get me wrong. But I am against handing over money to companies.”

Madjd-Sadjadi said deals such as the Herbalife one often make the assumption that people in the company will move to Forsyth County and drive up property taxes.

“You’re basically on the hook for a lot of money,” he said. “You’re betting that somehow this is going to pan out in the end because the property taxes are going to be such that everything’s going to get increased. And what you’re denying yourself is that maybe they’ll be another company in two or three months that will do it without incentives.”

Madjd-Sadjadi said he favors incentives for small businesses because they are more reliable than large corporations, and ultimately have a more substantial economic impact.

“Guess what happens when they close down,” he said. “You lose 500 jobs. So I would much rather create low tax bases, low regulation, low intrusion, so that your small businesses can grow. Because those are the ones that are going to grow, and prosper, and develop the region. You’re talking about $3 million for Herbalife for creating 500 jobs, why not $30,000 for creating five? You’ll never see them do $30,000 for creating five because it’s not good for the politicians.”

Since December 2012, Herbalife has been facing allegations made by hedge fund manager Bill Ackman that it is running a pyramid scheme. A look at Herbalife’s 2013 compensation chart shows that out of 71,535 employees worldwide, 89.7 percent made less than $5,000 while 0.8 percent of employees made more than $250,000 and 1.8 percent made more than $50,000.

Madjd-Sadjadi said he is not sure if Herbalife is running a pyramid scheme, but that the deal made with Winston-Salem’s leaders is indicative of a bad business model.

“The basic idea is, you put up money in the hopes of selling it to get it back later and then you get other people down the line to contribute and dig into it in order for this to occur,” he said. “Doesn’t that sound like this incentive package?” !

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