January, 2000
  Incentives Deal of the Month
   from Site Selection's exclusive New Plant database

BSI's Maryland Relocation: Small Operations
Can Also Land Hefty Incentives

Generous location incentives aren't just for the big boys: That's one of the major messages in the recently announced relocation of the Southern Maryland operations of Batching Systems Inc. (BSI at www.batchingsystems.com). With the change of address, BSI is immediately receiving incentives that amount to US$11,300 for employee involved in the move, a particularly substantial subsidy for a short-range relocation. What's more, by locating in a state enterprise zone, the BSI operation will qualify for further incentives as the project unfolds.

For many of the mega-deals normally covered in these pages, that $11,300-per-employee figure alone would produce a staggering total dollar figure. For example, if that incentive had been awarded for Ernst & Young's (E&Y) recently announced consolidation of 4,000 New York employees to Times Square, E&Y would've reaped a whopping $45.2 million in incentives. (For more on the E&Y deal, see Aug. 30's "Blockbuster Deal of the Week" in the archives for the "Site Selection Online Insider" at www.siteselection.com.)

Owings, Md.-based Batching Systems -- a far smaller firm that designs, manufactures and installs of turnkey systems that count, weigh and fill products for the packaging industry -- isn't reaping anywhere near that amount. After all, the company's new 130,000-sq.-ft. (11,700-sq.-m.) Southern Maryland facility will house only 50 employees. Nonetheless, the initial location incentive that the company is receiving is a substantial one: a 10.2-acre (4.1-ha.) tract of free land that's valued at $565,000. And the new site will provide BSI with ample opportunities to expand, which seems a likely scenario.

"Batching Systems is a strong, growing company [that's] a terrific example of how a small business can grow to be a very successful and profitable business," said Terri Wolfley, chair of the Calvert County Economic Development Authority (CCEDA at www.co.cal.md.us/cced).

Many Smaller Companies Miss Out on Incentives, Expert Assert

Many smaller companies like BSI miss out on location incentives, say industry observers.

A 1998 KPMG Peat Marwich study, for example, concluded, "In more low-profile deals, companies often aren't getting a lot of incentives and tax breaks to which they're entitled." BSI, though, qualified for, and capitalized upon, the free land at the Maryland site, plus the additional incentives that come by virtue of its enterprise zone location.

Incentives, though, were only part of BSI's relocation rationale, company officials say.

Park Part of County's 'Free Land Program'

The free land that Batching Systems relocated Southern Maryland operations is receiving is part of the Calvert County Industrial Park, which is solely owned and managed the CCEDA. The only Enterprise Zone in Southern Maryland, The 226-acre (90.4-ha.) business park is located five miles (eight km.) west of Prince Frederick and 32 miles (51.2 km.) from the Patuxent River Naval Air Station.

Batching Systems is the third company to locate at the park as part of Calvert County's Free Land Program. BSI's high-end business niche matches that of the two companies that had previously accepted the county's free acreage:

  • MDL Fabricating, which manufactures precision machine and fabricated components and assemblies for the defense and commercial industries, and
  • Precision Design, a high-tech manufacturing firm specializing in the design and manufacturing of prototype, R&D and short-run production parts for the commercial, industrial and defense industries.

Quid Pro Quos Attached

The park's free land, though, is no mindless giveaway. First, BSI had to qualify by falling within Calvert County's target market industries.

Secondly, the deal comes with a set of quid pro quos that ensure that incentive benefits accrue to both givers and receivers. Specifically, in accepting the free land, BSI agreed to:

  • Begin construction of its new facility within two years;
  • Hire an agreed-upon number of employees;
  • Maintain employment and ownership of the location for 10 years; and
  • Provide an initial investment of $500,000 in Calvert County. If the BSI property is sold or otherwise changes ownership, or if employment levels are not maintained, the company must repay the CCEDA under the terms of the financial agreement originally negotiated between the company and the development agency.

Relocation a Boost for High-Skill Recruiting

At this point, BSI seems a solid bet to handily meet those criteria. The company has already announced its construction and development plans for the site, which will unfold in three phases. And while BSI currently only has 50 employees in its Southern Maryland operation, the company is experiencing rapid growth - one of the main reasons that it relocated those 50 employees, who include engineers, welders, assemblers, electronic technicians and administrative staff.

BSI officials are projecting a significant expansion of the company's work force; and they're hoping that the new site particularly helps in recruiting high-skill employees. Said BSI president, Don Wooldridge, "I am pleased with Calvert County's support of BSI. I hope that this move to a central location in the county will help us with our continuing search for skilled employees, including embedded software engineers, electrical and mechanical engineers, computer design technicians, and electrical technicians."

In addition to the new location's recruiting boost, BSI will receive further enterprise zone incentives, including state property and income tax credits.

For example, the company's expansion of its work force will trigger a state tax credit of $500. Benefits are even higher for hiring employees that fall under the "economically disadvantaged" guidelines established for enterprise zones. Each such hire triggers a maximum tax credit of $3,000 over three years.



©2000 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.