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Mayor, officials confident about safety of original Dell deal
By Wesley Young | Journal Reporter Even though it laid off 150 of its workers in Forsyth County this week, Dell Inc. so far does not stand to lose any of the incentives that the city of Winston-Salem and Forsyth County granted the company when they lured it here in 2004. Next year could be a different story. Dell must have 1,700 workers on the payroll of its local computer-assembly plant by October 2010 to get the maximum amount of economic-development incentives promised by the city and county. If Dell doesn't have that many workers on the payroll by then, it would have to repay a percentage of the local incentives it has received and would see future payments reduced. Before the layoffs were announced, Dell had about 1,400 workers at the plant, according to Mayor Allen Joines of Winston-Salem. Joines said he got his information from Mehran Ravanpay, the plant manager at Dell. Dell corporate officials would not comment on the number of employees or the layoffs. Officials from both the city and county expressed their confidence yesterday in the protections that were built into the incentives agreement. "We had a very strong agreement that protects us, that if they don't hit the job numbers, then we get a repayment of a portion of the monies that we paid," Joines said. "When we negotiated it back years ago, we had no idea we would see this significant economic downtown. But you always have to protect yourself for the worst case." Joines and Dave Plyler, the chairman of the Forsyth County Board of Commissioners, both said that incentives remain an important part of bringing in new business. "If ever we needed to continue bringing business into this community it is now," Plyler said. So far, the city and county have paid $22.2 million in incentives toward the Dell project. Most of that money -- $14.5 million -- was in site-preparation costs that the city and county shared. Dell would not have to give back all of that money unless it actually closed down by October 2010. The city paid $8.5 million in site preparation, and the county paid $6 million. The remaining incentive money represents payments that the city and county are making to Dell annually under a 15-year agreement. Those payments are tied to Dell's commitment to invest $100 million and hire 1,700 workers within five years of starting operations. The jobs have to be full time or the equivalent, paying an average of at least $28,000 a year. According to the 15-year schedule of payments, the city and county each typically pay from about $500,000 to about $800,000 to Dell. Dell's right to half of each payment is protected because it met investment requirements, but the other half can be reduced to the extent that Dell falls short of its 1,700-person hiring goal.

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If Dell met all its goals, it would collect up to $13.9 million from the city and up to $8.8 million from the county over the 15-year period of annual payments. At the same time, Dell is also reaping job-development grants and tax credits from the state. Dell collected $567,000 in job-development grants from the N.C. Department of Commerce in 2006, a year that the company ended with 1,031 workers on the payroll. In 2007, Dell collected $945,000, with year-end employment at 1,129. The grants are tied to employment goals the state has established for Dell, so any shortfall in hiring would affect Dell's receipt of the grants. If a company fails for two years in a row to meet state job-creation requirements, the state can revoke incentives for any future years. Supporters and opponents of incentives say they haven't changed their minds because of the Dell layoffs. "Without incentives, you're not even in the game," said Gayle Anderson, the president of the Greater Winston-Salem Chamber of Commerce. "I still think they are a vital part of what we do." Forsyth County Commissioner Debra Conrad, a supporter of incentives, said that Dell had attracted supplier companies to the area. Dell arrived "at a turning point in Winston-Salem," she said. Furniture, clothing and tobacco jobs were disappearing. If an incentive is small and makes a difference it could be a good idea, said Robert Whaples, an economics professor at Wake Forest University. But on the whole, Whaples said, incentives packages have a weak track record. Plus they pit communities against each other in bidding wars, he said, so that the winner is the "person who overvalues everything." That makes it hard for the benefits to outweigh the cost, he said. Commissioner Gloria Whisenhunt, who cast the county's only vote against the Dell package, said the Dell experience may be in the back of commissioners' minds when they think about future incentives. Joines expressed confidence that Dell is here to stay. After talking with Dell officials, he said, he does not think the local plant is likely to close. "They feel like they've got a very efficient operation there," he said. "This (layoff) is due to a worldwide economic slowdown, so hopefully when that starts turning back up we'll be able to see Dell starting to get jobs back to us." ■ Wesley Young can be reached at 727-7369 or at wyoung@wsjournal.com. ■ Laura Graff can be reached at 727-7279 or at lgraff@wsjournal.com. ■ James Romoser can be reached at 919-833-9056 or at jromoser@wsjournal.com.

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