State and local officials provide incentives to keep the plant in North Kingstown after a planned move to Connecticut falls through.

01:37 AM EDT on Friday, June 24, 2005

BY ANDREA L. STAPE
Journal Staff Writer

It took a year and a half of deliberating, but Brown & Sharpe Inc. will stay in Rhode Island.

The foreign-owned remnant of one of the state's former industrial giants announced in February that it was moving more than 200 employees from North Kingstown to North Stonington, Conn.

Yesterday, though, Hexagon Metrology North America -- Brown & Sharpe's parent -- said it will instead build a new $15-million manufacturing facility in the Kiefer Park section of the state-owned Quonset Business Park in North Kingstown.

The 115,000-square-foot building will house Hexagon Metrology North America's headquarters as well as the Brown & Sharpe division.

Although Hexagon had conditionally purchased $2 million worth of land in Connecticut, the company couldn't to come to terms with that state on an incentive package, according to William Fetter, a spokesman for Hexagon.

Consequently, the company decided to take advantage of a package of tax breaks and incentives that the Rhode Island Economic Development Corporation had put on the table earlier this year.

"Financially, it worked out more or less equal to Connecticut," said Fetter. The company hopes to break ground on the new building next week, he said.

"It wasn't our intention to play one state off another," Fetter said. "We were trying to find a place to live . . . ."

The site will replace a leased facility in North Kingstown that Hexagon Metrology currently calls home. In 2001, Swedish-based Hexagon AB purchased Brown & Sharpe Manufacturing Co. The business, which makes industrial measuring tools, was renamed Brown & Sharpe Inc. and made a part of the Hexagon Metrology North America division.

Under the terms of the deal, Rhode Island will sell Hexagon 14 acres at Quonset for $1.4 million. It will be an installment sale, with Hexagon paying at least $100,000 a year. In addition, the company will get a $1,000 credit toward those payments for each employee it has above 228 workers. So if the company adds 100 employees and gets a $1,000 credit for each new employee, it would be exempt from making its annual land payment as long as it maintained that level of employment.

Hexagon will pay to build the facility itself.

The company's manufacturing jobs in Rhode Island pay an average of $54,400 a year, according to an EDC analysis. The salaries range from $26,672 to $239,990.

However, if Hexagon's employment drops below 228 workers, Hexagon will have to pay a $2,000 annual penalty for every lost employee. That penalty would be in addition to the $100,000 land payment, according to the EDC, which brokered the deal. The company has already added 27 jobs, according to the EDC, and currently employs 255 in the state.

"There's absolutely no risk to the state -- we only give up [the land] if the jobs are there," said Michael McMahon, EDC executive director.

In addition, the company will also be exempt from paying sales taxes on the building materials it buys to construct the new facility and for the new machinery it buys for it. This is an incentive the EDC regularly extends to expanding companies. And Hexagon will be able to reduce its corporate tax rate if the company continues to add jobs over the next three years.

Hexagon has also worked out a property-tax deal with the Town of North Kingstown. The company's building will be assessed at zero value for the first year, and the assessment will rise 10 percentage points a year for 10 years, according to Rich Kerbel, North Kingstown's town manager. The company will be taxed at the amended assessment.

The company expects to be finished with the new facility by the middle of next year, said Fetter.

IN NOVEMBER 2003, Governor Carcieri offered to have the state finance the construction of a $12-million facility for the company if it would keep its employees in Rhode Island. Although Hexagon agreed to pay the annual debt on the building for at least 15 years, the House Finance Committee rejected the deal. The committee said it was concerned that the company could walk away, leaving the state on the hook for the 116,000-square-foot manufacturing facility.

At that point the company, which said its North Kingstown site was aging and couldn't accommodate growth plans, started to cast around for other options.

"When the original deal with Rhode Island failed to materialize, we had to go looking," said Fetter. "We had to find something. If there was suitable existing [industrial] space, we would have been there already. We had to go looking for someplace to move ourselves to."

In February, Hexagon announced it was moving to Connecticut. The company was expecting to get a $4-million loan from that state to build a new headquarters, and the Town of North Stonington was going to receive a $2-million state grant to improve utilities at the site. That was a blow to Rhode Island. The 171-year-old Brown & Sharpe name has long been synonymous with accuracy and quality in tools and once was one of Rhode Island's most widely known businesses, with about 11,000 employees just after World War II.

DESPITE THE ANNOUNCEMENT, Rhode Island's EDC kept talking to Hexagon, said McMahon. A few months ago, legislative leaders in Rhode Island worked with the EDC to put the land sale deal on the table, said McMahon. It was Rhode Island's "best and final offer," he added. In the meantime, Hexagon bought 13 acres in Connecticut for $2 million, conditional on the deal with Connecticut coming to fruition, said Fetter.

That didn't deter Rhode Island, said McMahon. In case Hexagon changed its mind, the EDC's board approved the deal last month in a closed session. Also last month, the North Kingstown Town Council approved the tax deal in a closed session. (Both bodies will have to vote again, in open session, to ratify the deal.)

Hexagon's deal with Connecticut wasn't working. Last week, the company called Carcieri about taking Rhode Island up on its land offer, said McMahon.

"We thought we had a very substantial assistance package in place with them. We were working with them as late as even today. For whatever reasons we couldn't come to an agreement," said Jim Abromaitis, Connecticut's commissioner of economic and community development. "It's the game that's played -- companies negotiate with a lot of states at times."

Yesterday, Carcieri spokesman Jeff Neal acknowledged that keeping Brown & Sharpe wasn't a smooth process, but that the governor was pleased Rhode Island was able to save 255 jobs.

And, Fetter said, this time the company is staying in Rhode Island.

"Frankly, the best message that we can send that we're staying is that we break ground and move forward with the site," he said.