WANTED: NEW INDUSTRY

The Welcome Mat Is Out Coast to Coast

IN the wake of the recent disastrous floods in New England, Connecticut's Governor Abraham A. Ribicoff loudly denounced as "ghoulish" reported attempts to lure hard-hit industries to the flood-free South. Actually, no industries have left the state as a result of the floods. But his suspicions were understandable. With industry spending a record $27.3 billion on expansion this year, almost every state, county and city in the nation is hungrily trying to lure new industries. Says Victor Roterus, area development chief for the U.S. Commerce Department: "Competition to get new industry has never been rougher."

To get new plants and payrolls, all but three states (Texas, California and New Mexico) have set up agencies to bring in new companies. In addition, railroads, utility companies, banks and other private organizations are bidding aggressively for new plants. Chambers of Commerce and other promotional groups in more than 5,000 communities are wooing industrial prospects. In more than 700 localities, industrial development corporations will finance an incoming company's land and buildings; cities in eleven states are allowed by law to issue revenue bonds to lure industry with free or low-cost plants. Moreover, taxes on new industries may be scaled down or waived in some states for as long as ten years.

However costly the bait, the industrial fishermen think that the catch is worth it. New payrolls broaden the tax base, raise per capita income and, in turn, attract more industry to diversify and stabilize employment. For example, in Los Angeles County, 1,576 highly diversified plants (total investment: $500 million) have opened their doors since 1945. As a result, Los Angeles has easily been able to weather such economic setbacks as the citrus slump and the sharp postwar cutbacks in the aircraft industry. In ten years, the Cleveland area has brought in more than 200,000 new jobs and $2.8 billion in new and expanded plants, almost entirely as a result of hard-hitting promotion by customer-hungry Cleveland Electric Illuminating Co.

Smaller cities have also had spectacular success in attracting payrolls. In Tyler, Texas, where an industrial foundation supported by local businessmen will build a plant to a newcomer's specifications, and rent or sell it back to him at going rates, 40 new industries have moved in within ten years. In Scranton, Pa., a city development commission has rallied more than 3,400 investors who have contributed $3,500,000 to build more than 25 plants that have added $23 million in new paychecks. In traditionally low-income areas, e.g., Mississippi, where generous inducements have been offered industry since 1936, 99 new plants have been built in five years with the aid of municipal bond issues.

But many industrially attractive areas have found that giveaway gimmicks are not needed to attract sound companies. New England, which lost more than a quarter-million textile jobs to other areas in 34 years, is recouping its losses with new industry, e.g., electronics, by plugging such assets as a pool of skilled labor and top research facilities, notably at M.I.T. and the American Research and Development Corp. Tax concessions to industry are even regarded as a bad policy by many experts. Leo Prince, executive vice president of the Association of State Planning and Development Agencies, warned last week that if tax-cutting "spreads too much, every state would have to allow it simply to protect itself. Eventually, the tax base on industry would be destroyed." Many development officials are well aware that excessive bonuses can boomerang, since they tend to attract footloose, fly-by-night industries rather than companies that can afford to pay for expansion. In Tennessee, a committee of top businessmen is now required by law to screen each industrial prospect before a city may vote bonds to buy the plant site. More and more cities are spending promotion budgets for market research and development of well-planned industrial districts. They recognize that most companies are not interested in short-range giveaway deals but in the long-range possibilities of a new site, such as accessibility to raw materials and markets.

Employers are also increasingly concerned with the kind of communities into which they are moving. For example, Sylvania Electric Products surveys the "potential intelligence" of a community, and its ability to provide for expanded schools, libraries, roads and sewage plants. Said Rayonier Inc. Executive Vice President James T. Sheehy last week: "Obtaining a big, new industry . . . sometimes means a sacrifice for a community. The community also has some responsibilities. It's up to the community to decide whether it's worth it." Cities that are prepared to offer sound, long-term inducements to industry have found that the new payrolls are worth it, and that the companies need no subsidies.

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