ECONOMIC DEVELOPMENT/County’s giveaway draws business, boosts economy
When Calvert County, Md., designed and developed an industrial park in the mid-1970s, officials thought they had a sure way to attract business. The park’s convenient location to Washington, D.C., Baltimore and the Patuxent River Naval Air Station was expected to boost the property’s value.
The county bought 226 acres of land and made infrastructure improvements to the property. The park was divided into 46 lots over 134 acres, and land was offered to businesses for $55,000 to $75,000 per acre, depending on location within the park.
But, for many years, sales were stagnant, according to Jim Shepherd, business development specialist for the Calvert County Economic Development Authority (EDA). Around the summer of 1997, 16 lots sat vacant. Determined to fill the space, the EDA decided to try attracting investments with a classic strategy: free land.
“It probably was the oldest incentive in the book,” says Shepherd, who oversaw the program. “When the United States wanted to populate Oklahoma, they had land grabs. It’s an old system, but you don’t see it too much these days.”
To qualify for free land, companies had to fit one of the Standard Industrial Classification (SIC) system categories for high-technology businesses, which the county was targeting. (SIC has since been replaced by the North American Industry Classification System.) Target market industries included computer programming, software development, defense-related services and non-defense professional services.
Companies signed 10-year notes with the county, although no principal or interest was due. The notes would be forgiven if, after a decade, the businesses had: * Constructed a new facility within two years; * Hired an agreed-upon number of workers; * Maintained employment levels and ownership for 10 years; and * Made an initial capital investment of $500,000 in the county.
If any of those goals were not met, the notes would come due. The county subordinated its notes to banks that were financing construction of new buildings for companies taking advantage of the program. That method helped firms secure loans, according to Shepherd.
The county had nothing to lose. If the companies succeeded, then jobs were created and investments made. If the companies failed, the banks would assume the property and pay taxes until the banks could find new owners.
Since the program’s inception, three businesses have taken advantage of the free land incentive. They have created 77 jobs in the park so far, and each company plans to expand after it becomes established in its new location.
One company executive found the incentive too good to pass up. “It [had] a great deal of influence on our decision,” says Don Wooldridge, president of Batching Systems, an automated equipment supplier. “As a matter of fact, it made [relocating] affordable for a company like mine.”
The company plans three phases of construction that will translate into more than 140,000 square feet of production space. The initial phase, which began in June, entails 56,000 square feet and an investment of $2 million to $3.5 million, including the cost to move from its current location 13 miles away. It has 56 employees and could triple by the time construction is finished later this decade. The free land program also has created interest among other, non-qualifying companies, allowing the county to make sales. “That marketing strategy was pretty successful,” Shepherd says. “It got a lot of attention. I did a lot of conventional land sales [at the park] just because of interest in the program. We sold more lots than we gave away.”
As a result, the number of vacant lots in the park has dropped from 16 to just three. The incentive program has been discontinued.
Paul Kalomiris, managing editor of Economic Developments, a publication of the Council for Urban Economic Development, Washington, D.C.