Incentives Deal of the Month
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JDIG Aid Helps
NC Land Two High-Tech
Projects, 661 High-End Jobs
by JACK LYNE,
Site Selection Executive Editor
of Interactive Publishing
In only a two-week span, North Carolina’s Job Development Investment Grant (JDIG) program has helped hook two big high-tech fish that will spawn at least 661 high-end jobs and US$359 million in capital investment. The new jobs on average will pay more than
$85,000 a year.
Both companies Cree (www.cree.com) and Network Appliance (www.netapp.com) already had sizable North Carolina operations. Both, though, apparently took long looks at expanding outside the Tar Heel State and that’s a key trigger in awarding JDIG subsidies. According to both firms’ top officials, the JDIG aid clinched the decision to bring the expansions to Research Triangle Park, N.C.
(RTP at www.rtp.org).
Headquartered in RTP, Cree is the first homegrown firm to receive JDIG aid. The company was founded in 1987, when a group of students at Raleigh-based North Carolina State (NCS) licensed patents for 10 silicon carbide-related products developed at NCS.
Virginia, Asia onCree gave major consideration to both Virginia and Asia, company officials said. It reportedly paid particular attention to China, where the company opened a sales office in Hong Kong in 2001.
Cree’s Short List
Asia had unusually strong appeal, given the continent’s surging demand for Cree’s light-emitting chips for cell phones. Asia, in fact, now accounts for almost three-quarters of the company’s total sales.
That reliance was underscored by the absence of President and CEO Chuck Swoboda at the project announcement. Swoboda was traveling in Asia at the time.
The [JDIG] grant and recent changes by the General Assembly have been instrumental in our decision to expand here, Swoboda said in a company statement. I would like to extend my thanks to Gov. [Mike] Easley [D] and the North Carolina Department of Commerce (www.nccommerce.com) for working with us to keep these jobs and this expansion in North Carolina.
Cree picked RTP shortly after the state Economic Investment Committee approved its JDIG aid. If the company hits its hiring targets, the full 11-year grant will total $5.1 million. In each year Cree attains its goals, it will get a grant equaling 65 percent of each new job’s state personal-income withholding taxes. The new jobs will pay $50,000 on average, company officials said.
Easley called Cree a home-grown success story. This is a good example of taking an existing company that’s already known worldwide and giving them this 16th [JDIG] grant.
In considering their expansion options, the company’s choices included not only North Carolina and Virginia but also other areas around the world, the governor added. [Cree’s] addition of 300 high-quality jobs in the Triangle will only deepen their roots in our state.
First proposed by Easley in 2002, the JDIG program can award up to 25 grants a year. To qualify, a project must be one that wouldn’t locate in North Carolina without the assistance, and it must offer benefits exceeding state costs.
The first JDIG grant was awarded in May of 2003. With Cree and Network Appliance, the initiative has now brought in commitments for more than 6,000 North Carolina jobs and $900 million-plus in investment.
Those projects include high-profile deals like Merck & Co.’s 300-employee, $300-million vaccine plant, which went to Durham. JDIG $4.1 million in aid was part of North Carolina’s $36-million subsidy package for Merck. (For more details, see North Carolina’s $36M Incentives Injection Catches Merck’s $300M Vaccine Plant, the January 2004 Incentives Deal of the Month.)
Project Will Increase Cree’s HQ,The Durham County Board of Commissioners in March 2004 approved another $1.5 million in incentives for Cree, which has 964 employees in the city of Durham. The state’s subsidies took another four months to materialize, raising local anxieties.
Manufacturing Space by 45 Percent
Cree’s expansion will also qualify for tax credits from the state’s William S. Lee Act. The Lee Act provides credits for job creation and investments in new plant and equipment.
And Cree expects a lot of that. It’s projecting that the expansion will increase headquarters and manufacturing space by some 45 percent. The plan the company submitted to the city of Durham includes a two-story addition to its chip-manufacturing operation; a new three-story office building; an expanded waste-treatment facility; and a new warehouse.
The company plans to add at least 300 new jobs over the next five years, starting its expansion in the fall, Cree officials said. The company hasn’t yet specified an expansion site, but says it won’t be far
from its headquarters.
Cree was the first U.S.-based firm to make light-emitting diodes. The company also produces UV lasers, radio-frequency and microwave devices, power-switching devices, and wafers used in manufacturing and R&D. Cree, which also has about 120 California workers in Santa Barbara and Sunnyvale, finished its 2004 fiscal year in June with $307 million in annual revenues.
Network Appliance Jobs WillNetwork Appliance, the other recent winner of JDIG grant aid, is a well-known pioneer in electronic data storage systems. The Sunnyvale, Calif.-based company announced on July 27 that it will add 361 new jobs in RTP.
Offer Salaries Averaging $115,000
Most of Network Appliance’s new jobs will be high-skill, high-pay R&D positions. The new jobs will pay at least $115,000 a year on average, said Network Appliance President Tom Mendoza.
After coming to Durham in 1999, Network Appliance now employs 150 local workers in R&D, sales and customer support. Worldwide, the company has some 2,900 employees.
Network Appliance is purchasing three facilities from Cisco Systems that will span some 550,000 sq. ft. (49,500 sq. m.) of space. Cisco began work on the buildings and finished the exteriors. Work stopped, though, during the 2001 tech-sector flameout. Network Appliance will now complete the facilities, which could house more than 1,000 employees. The expansion will cost about $59 million, said Mendoza.
Working capital won’t likely be a problem. Network Appliance had some $1.17 billion in sales during its 2004 fiscal year that ended in June. And its 2004 net income of $152 million marked an annual increase of almost 99 percent.
The company announced its expansion on the same day that its JDIG assistance was approved. The 10-year subsidy has a maximum value of $8.9 million. Network Appliance’s expansion will also qualify for Lee Act credits.
We are delighted that . . . North Carolina has chosen us for the JDIG grant, said Mendoza. This grant will enable us to undertake this project and continue to build and develop strong local ties with our business partners and customers and reap the benefits of a highly talented work force.
Network Appliance also has strong ties with NCS. The company is a top-tier supporter of the university’s ePartners program, which works collaboratively with faculty and students and provides financial support for NCS’s computer science department.
The state’s rural regions will get some support from the two expansions, even though they’re headed to the urbanized Triangle area. The JDIG program requires that part of project benefits go to North Carolina’s industrial development fund for rural infrastructure improvements.
State officials estimated that the Network Appliance project will add some $3 million to that fund, while the Cree project will add about $1.7 million.
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