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Why the public should be angry about Bristol Compressors

Bristol Compressors is the largest private employer in Washington County, Virginia and has done what companies across America are doing: Exploiting the taxpayers for millions in tax breaks and outright cash payments to buy and keep jobs then produces layoffs instead. While this I don't believe was intentional, the public should be angry and call local government to account for this.

The News York Times article Anger Over Tax Cuts as Jobs Leave Towns shows how companies such as Maytag and Sykes get millions in union concessions, tax breaks, and corporate welfare. They simply exploit communities by draining tax coffers then pull out. While they haven't pulled out of Bristol as of November 2004, there is no better example of this than Bristol Compressors. It wasn't Bristol Compressors at fault, but stupid local government.

This whole sorry layoff saga began in Allegheny County, N.C. Bristol Compressors closed a 7-year-old plant, firing 440 workers, around 2001 claiming "weak economic conditions and overseas competition." At almost the same time according to local press reports, company officials announced new production lines in Washington County, Virginia.

N.C. officials knew they had been had and sued Bristol Compressors saying it breached a $15.5 million economic incentive contract. Bristol Compressors got the trial moved to neighboring Wilkes County and won.

Bristol Compressors said it would invest $45 million in tools and machinery in its Washington County plant and add 350 full-time employees which, employed about 2,300 at the time. In 2001, Bristol Compressors received $500,000 of Tobacco Commission funds, $250,000 from the Governor's Opportunity Fund and $250,000 from Washington County to help with its proposed expansion. But why would a local/state government give a million dollars for job creation to a company that just fired 440 workers in a neighboring state because of an economic slowdown? This should be looked into. The agreement obtained by me from Washington says clearly Bristol Compressors is in default on the agreement and must pay back the funds. Other news reports claim the county doesn't want to even try to get the money back.

Yet state and local officials waffle on the issue. “We regret to see this (layoff), but we’re hoping the company will rebound before the April 1, 2004, deadline,” said Ellen Qualls, a spokeswoman for Gov. Mark Warner back in 2003 when over 300 layoffs occurred. Now we have an additional 320 layoffs in 2004 and nowhere near what is needed to keep the $1 million shelled out by state and local taxpayers.

Quoting Assistant Washington County Administrator Christine Parker, "the county and Bristol Compressors may have some flexibility, however." “Obviously, we want (Bristol Compressors) to succeed, and it doesn’t help anybody if they have to repay this money.” “We’ve never had a company not honor a performance agreement. It is a legally binding agreement, but there is room to work.” An extension of the grant agreement is one option."

As usual, why were local officials in the dark about the latest layoffs? We should note these layoffs involve full time positions and workers I know from the plant claim the company is replacing them with temps at lower pay and no benefits. Bristol Compressors is also reputed to be among the lowest paying employers in Bristol and suffers a high turnover rate. The company wouldn't verify this and I will state that Bristol Compressors has done nothing illegal.

Including those jobs lost in North Carolina, Bristol Compressors has fired almost 1500 workers and with rising electricity and materials costs, more are sure to come. There seems to be some conflict as to how many employees they still have. (1000)

Local government in Bristol and Washington County must be held accountable for stupid decisions such as these and rethink their economic development policies. Bristol Compressors website is at www.bristolcompressors.com.

Press reports claim the following:

Washington County News Nov 5, 2003 announces 300 layoffs at Bristol Compressors. To quote, "will employ 1,900 after the layoffs...Company President Wayne Kennedy said poor market conditions and competitive pricing by foreign manufacturers led to the layoff decision...Officials promised to rehire workers as jobs become available, but...the layoffs "permanent, for now."

Bristol Herald Courier October 22, 2004 announces "Bristol Compressors will lay off 320 full-time employees. Company officials blamed the cuts on lower-than-expected sales and increased costs of raw materials and energy..."These layoffs are being treated as permanent layoffs...City Manager Paul Spangler said word of the layoffs came as a surprise to him, while attempts to contact Washington County officials were unsuccessful..."

The Bristol Herald Courier announced December 14, 2005, "Rumors not true says company president." "Widespread rumors of an uncertain future for Bristol Compressors aren't true, the company president said Tuesday. In recent weeks, the plant, its workers and the community have been inundated with speculation about a plant closure in the wake of the $3.2 billion merger agreement between Bristol Compressors' parent firm York International and Johnson Controls...It was part of York since 1986. "Bristol Compressors has no plans to close its operation here in Southwest Virginia," company President Wayne Kennedy said. Officials continue formalizing plans for next year, and Kennedy said those plans would be shared with employees in early January. Repeated attempts to contact Johnson Controls officials were unsuccessful...During the second quarter this year, Bristol Compressors sales were $108.4 million, compared to $139 million during the same period in 2004..."

Bristol Herald Courier January 21, 2006 announces, "For Sale: Bristol Compressors." "The Bristol area's largest employer has been put up for sale. Officials of Johnson Controls, which recently bought the plant as part of a $3.2 billion acquisition of York International, announced the plans Friday. The news followed a Jan. 9 announcement that nearly 300 of the plant's workers would be laid off by March. The plant has a work force of about 1,650. "We have retained William Blair and Co. to market the business for us," John Barth, chairman and chief executive officer of Johnson Controls, said of the Chicago-based international investment banking, research and brokerage firm. "We expect to begin offering memoranda to interested parties within a week," he said. "We've been working on this for quite some time." He declined to speculate when a sale might occur. Bristol Compressors lost $1.9 million during December. Officials value the Bristol plant at $100 million...

News Channel 11 January 6, 2006 announces, "Bristol Compressors to Lay Off 290" "The Twin-Cities largest employer is undertaking it's third round of layoffs in the past five years. 290 employees of Bristol Compressors were told this morning they will lose their jobs...City leaders are expressing concern tonight...mayors of both Bristols are trying to work together to lessen the economic blow. "We're going to do all we can. I mean the trickle down effect, there's no question about it," said Mayor Doug Weberling of Bristol." It's apparent they didn't see this coming again.

Boucher seeks assistance for Bristol Compressors workers

January 12, 2006 Kingsport times-News

U.S. Rep. Rick Boucher is working to assist the 290 workers who are expected to lose their jobs as a result of layoffs at the Bristol Compressors plant in Bristol, Va. Currently, Boucher is coordinating with Bristol Compressors officials in the submission of a federal petition to the U.S. Department of Labor for workers' assistance...The funds Boucher is working to secure will provide job outreach services, career counseling, job search and job development assistance, a range of job training including classroom training (such as adult basic education and GED completion), meal allowances, and transportation assistance. Boucher is also seeking health insurance assistance under the Health Coverage Tax Credit (HCTC) program, and displaced workers over 50 years of age may also qualify for additional aid through the Alternative Trade Act Assistance (ATAA) program.

Bristol Herald Courier January 7, 2005 announces "Bristol Compressor layoffs won't be temporary." Bristol Compressors announced layoffs affecting about 18 percent of its work force Friday morning after months of speculation about the future of the plant. Bristol's largest employer will lose 290 of its 1,650 workers by about March 1...The move will save money for the Milwaukee-based firm, which acquired the Bristol factory when it bought out York International, the previous parent company, last month. The layoffs won't be temporary...It's a change of strategy compared to previous layoffs. In 2003 and again in 2004, Bristol Compressors laid off about 300 people, and each time, officials announced that some of those who lost their jobs might be rehired if the market improved. Fortune said he was not aware of any of those previously laid off being hired back. For employees, the announcement didn't come as a surprise..."

Another $1 million in corporate welfare

From http://www.reliableplant.com/article.asp?articleid=5103 on their view of this latest "sale:"

KPS Capital Partners LP (KPS) announced March 5 that a newly formed affiliate, Bristol Compressors International Inc., has acquired the assets of Bristol Compressors Inc. from Johnson Controls Inc. Financial terms of the transaction were not disclosed...Bristol's senior management team will implement a business plan developed in partnership with KPS focused on improving manufacturing operations, productivity and supply chain management. The KPS investment will also provide the company with access to substantial capital to continue new product development...

Rick Izor, chief executive officer of Bristol, commented, "This transaction marks the beginning of a new era for Bristol, with a new owner that has a track record of elevating good companies to achieve world-class operating performance. KPS's manufacturing expertise and capital resources will advance Bristol's position as a leading manufacturer and distributor of compressors. I would like to thank our customers, vendors and employees for their continued support."

Anger Over Tax Cuts as Jobs Leave Towns

By TIMOTHY EGAN

October 20, 2004

GALESBURG, Ill. - People in this big-shouldered town, birthplace of the poet Carl Sandburg, say Maytag broke their hearts. After a decade of tax breaks and union concessions to keep the company in a place that has been making refrigerators for more than 50 years, Maytag closed its factory last month, terminating 1,600 jobs. Maytag may be done with Galesburg, but Galesburg is not done with Maytag.

District Attorney Paul L. Mangieri wants to sue Maytag to recoup what he says were excess tax breaks in a broad package of incentives to keep the company here. Much of the money, he said, came from a purse that would have gone to schools in this economically fragile community.

"We gave Maytag these incentives, and they accepted them," said Mr. Mangieri, a Navy veteran who grew up in a small town not far from here in western Illinois. "We did it based on faith and trust. If we don't do anything now, it sends a message that we lack the resolve to treat the rich and privileged the same as everybody else." Maytag says it honored its agreement and took just the breaks to which it was entitled.

There are echoes of Mr. Mangieri's argument in Putnam County, Fla., which gave $4.5 million in cash and tax breaks to attract a call center owned by Sykes Enterprises, only to have it pull up stakes this month after less than five years in Palatka. "We ought to sue them," said Timothy Keyser, a Putnam County lawyer who opposed the tax breaks from the start. "They sold the county a bill of goods."

Galesburg and Putnam are losers in the increasingly cutthroat game of using tax breaks to keep or attract jobs. Across the country, communities are competing with one another to offer the most lucrative incentives to lure good payrolls, from the giant assembly jobs at Boeing to small centers for processing credit cards, despite some studies that question the effectiveness of such tactics. Most communities that lose business afterward lick their wounds and walk away, as Putnam County plans to do. But in Galesburg, some people have decided to take a stand, and it has split this community, showing the challenges of fighting back against a corporation.

After initially cheering their prosecutor for trying to regain some of the money used to keep Maytag, some people say they are afraid that they may scare off future employers. They question whether suing to reclaim tax breaks will hurt the community even more, adding that they have to pay companies to compete and that it is the cost of doing business in a vulnerable town.

"Maytag's leaving town has devastated our community," said Jeff Klinck, a car dealer and the former chairman of the economic development office here. "But I don't think any good comes from revenge. We want to move forward, not move back."

The final decision on whether to sue will be made by November, Mr. Mangieri said. Galesburg, site of a ferocious debate between Abraham Lincoln and Stephen Douglas in 1858, has a fighting spirit. Residents say the current civic gut check may determine whether the town becomes another casualty of the force that has devastated communities throughout much of Middle America.

Next door in Iowa, officials are keeping one eye on the fight while trying to determine whether they should try to recoup up to $25 million in public money given to business partnerships that have not lived up to their agreements to increase employment. In New York, State Comptroller Alan G. Hevesi said in an audit this year that a program that gives millions of dollars in tax breaks to businesses that promise to create work ended up rewarding some businesses that lost jobs. Other state officials disputed those findings.

"We're all in the same boat: we're hungry for business and we need the tax and job base," said Nancy S. Harris, a Putnam County commissioner. "But in the future, I think we have to do better background checks and tie tax breaks to length of stay and number of jobs."

Executives at Maytag and Sykes said they had lived up to their agreements in accepting the tax breaks. In return for cash and reduced taxes, the companies created payrolls that more than made up for the inducements from local governments, they said. "We did not in any way break an agreement," Lynne Dragomier, a spokeswoman for Maytag at its headquarters in Newton, Iowa, said. "We believe we have paid our fair share of taxes in Galesburg." The legal question in Galesburg centers on whether Maytag received excess property-tax breaks. Under Mr. Mangieri's interpretation of the original deal, Maytag was entitled to $1 million in reduced property taxes. That amount grew to $2.1 million without protest from the county because the company was staying, county officials said.

Though the dollar amount is relatively small, the company and Galesburg residents cite a larger principle. Over the years, Maytag benefited from state and local tax abatements, as well as money raised when people agreed to increase the sales tax. According to Mr. Mangieri, Galesburg raised $2.8 million in sales tax revenue to retrofit the refrigerator plant here, the State of Illinois came through with $5.8 million in aid, and Maytag was given 10 years of property tax abatements. Those breaks ended in 1999 and were not to exceed $1 million, Mr. Mangieri said.

Ms. Dragomier said Maytag, which is moving most of the work from Galesburg to a new plant in Mexico, had always been honest in its dealings with Galesburg, population 33,000. "It's very difficult to close a plant like this, and we understand the pain it causes," she said. The company has 11 manufacturing plants in the United Stares, Ms. Dragomier said, and prides itself on its American workforce. But, she said, it is under "competitive pressure" to make some refrigerators at cheaper locations.

At a Labor Day rally here, union leaders decried tax breaks for companies that do not agree to keep their jobs in the United States. They backed a proposal for "patriot corporations" that some lawmakers are circulating. Under that program, a company would receive a tax advantage if it kept production and a high percentage of sales in the United States.

"Maytag betrayed us; everybody knows that," said Dave Bevard, a leader of the International Association of Machinists and Aerospace Workers local here. "What our district attorney wants to do is not a vindictive act. It's an issue of fairness."

In Florida, Putnam County spent more money to lure Sykes, which operates call centers that provide customer service for other companies, than on any other economic development project, county officials said. In addition to the cash, Sykes was given a five-year break from local property taxes. The company opened its center in 2000.

In barely four years, the payroll more than made up for the public cash, said Andrea Burnett, a spokeswoman for the company, which is based in Tampa. "Yes, they gave us $4.5 million, but in return they got a $120 million payroll," Ms. Burnett said. "That's a good return on their investment." The company is closing some of its American call centers while adding jobs to cheaper overseas centers, company executives have said.

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Smaller businesses say there is also a fundamental issue of fairness. Why not give a tax break to the reliable little company that holds a piece of Main Street real estate and never threatens to leave town?

"We let the other taxpayers down if we don't go after Maytag," said Robin Davis, the county treasurer here in Galesburg, who favors a lawsuit to recover taxes from Maytag. "My sense is if people don't want to work here and pay taxes, we don't want them." There are six taxing entities that gave incentives to Maytag, and several have decided not to pursue the company, arguing that it sends the wrong message at a time the town is desperate to attract new jobs.

"When I first heard Paul Mangieri talk about suing Maytag, I cheered," Mr. Klinck, the car dealer, said. "But on further reflection, I thought this would negate our message." Galesburg never tied its tax breaks and cash grants to a long-term stability, but the State of Illinois has since written certain requirements into its laws on enterprise zones. The city has passed a bond issue to build a logistical center that it hopes will attract railroad jobs.

In Putnam County, Mr. Keyser was so incensed at Sykes's receiving cash and tax breaks that he sent a mock bill to county officials asking for a tax break of $25,000 for the one new employee he hired at his law firm. "It's universal blackmail out there," Mr. Keyser said, "with corporations all playing the same game."

2004 The New York Times Company

• Poverty, Rural Area Medical (RAM), and Tourism Hype
• Wise County residents jam RAM Health Expedition
• Flying with Pork-Barrel Airways
• RAM Project update 2003
• RAM Project update 2002
• RAM Project Exposes massive Poverty in Wise, Virginia, 2001
• RAM Project Page

• Local activist working to help displaced trailer park residents
• Bulldozing Clear Creek Mobile Home Park

• Why the public should be angry about Bristol Compressors
• Exit 7 Fiasco
• Travelocity Debacle
• Grundy, Virginia and the $200 million Bridge to Nowhere
• Sullivan County Exposed

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