City prepares for possible hard times

By Thomas Wilson

STAR STAFF
twilson@starhq.com

   Bedroom community.
   A term used frequently to describe a town, county or township noted for well-manicured lawns, where residents frequently cross the county line to jobs in neighboring counties or cities.
   In the past 18 months, three industries have announced plans to close their operations in Carter County. The closures account for more than 500 jobs with the closures of Frank Schaffer Publications, Alcoa Extrusions, and the Cendant Corporation, which is scheduled to end its call center operation next month.
   "Some of these business shutdowns are effected by the national economy," said Charles Stahl, city manager of Elizabethton. "Some of these, if not all, are clearly beyond the community's control."
   The McGraw-Hill Company purchased Frank Schaffer Publications in April 2001. Two months later, the company announced the decision to close the Elizabethton facility.
   Alcoa announced in December that it would close the aluminum extrusion plant in Elizabethton by the end of June 2002. A slow demand in the soft alloy extrusion industry precipitated the plant's closure, according to company officials.
   The 220 employees of Cendant Corporation in Elizabethton are scheduled to take their final hotel reservation call on January 24 after the company announced plans to close the facility two days before Thanksgiving.
   Cendant's stock price had tumbled during 2002 falling from to almost $20 a share in March to under $9 per share in October.
   Cendant and Alcoa are publicly traded firms, while Frank Schaffer Publications became part of the publicly traded McGraw-Hill publishing conglomerate.
   "What we need to do and what we're working to do with the Economic Development Commission, city and county, and EES is recognize that additional industrial land is necessary to move forward on industrial recruitment," said Stahl.
   While the city administration's function was not industrial recruiting, Stahl said the cooperation between the county government and the Economic Development Commission.
   A multimillion-dollar expansion of the city's wastewater treatment plant last year coupled with other infrastructure projects had set the table for new industrial growth.
   "That is something we need to be continuing in terms of infrastructure improvements," Stahl said.
   Commercial and industrial property such as machinery, tools and equipment are taxed as personal property.
   Alcoa Extrusions paid personal property taxes of $101,182 in the 2001 tax year and $105,638 for 2002, according to city tax rolls at the city.
   "When we lose one like that, we lose that property tax and the county loses the property tax," said Bradley Moffitt, the city's director of Finance. "Our water and sewer department loses whatever water and sewer they were using for their operations."
   The company also paid over $90,000 in both personal property tax and real property tax to Carter County government in 2001, according to the county trustee's office.
   "A lot of this is leased equipment in the name of Alcoa that they are being taxed for personal property on. You lose sales not from the company but from the employee payroll checks assessed on the amount of rollover in the Elizabethton economy," said Moffitt, who noted that estimating overall effect was extremely difficult to predict. "That hits both the general fund of the city and county and the school systems."
   Frank Schaffer Publications had agreed to an in-lieu of tax schedule to pay $1,000 of personal property tax for five years and then to be picked up on the city's tax rolls, according to their agreement with the city.
   Each company also loses employees who reside in or outside Carter County.
   Lost jobs also translate to lost payroll checks and fewer people spending their money -- and paying local option sales tax.
   "The school systems lose in this, too," said Moffitt. "They get a pro-rated share of the property tax, and local option sales tax."
   The Elizabethton Electric System calculated a $200,000 net loss of revenue due to the closing of Alcoa earlier this year. However, that loss was effectively offset since the system was buying less electricity from the Tennessee Valley Authority, said Andi Talbert, director of Finance with the electric system.
   Talbert said the EES would absorb a revenue margin loss of roughly $19,000 annually from the departure of Schaffer Publications. "At the same time that electricity won't be used so it is electricity we won't be using from TVA," she said.
   Despite the recent exodus of jobs and industries, Siemens Industrial Automation, Snap-On Tools, Summers-Taylor, Inc., and Inland Paperboard and Packaging remain among the community's largest industries employing 200-plus workers.
   The city and county are also home to a handful of mid-sized industries such as Siemens Westinghouse, J.W. Ritescreen and with employees ranging from 25 to 110 employees.
   Stahl remained upbeat that, despite the departures, the community had picked up valuable industrial citizens in recent years.
   "We have to be thankful for what we've gained in recent years and existing industry expanding in some cases," he said. "The Star Building Systems and A.Y. McDonald remind us that there are folks that have located here."