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Deal breaker

June 01, 1999|By KERRY LYNN FRALEY

The cost of tapping into Washington County's sewer service may have been the deal breaker in a large milk processor's decision to build a new plant elsewhere.

But to other manufacturers, a higher sewer hookup fee could easily be outweighed by better tax breaks, easier interstate access or other pluses over a competing site, say local, state and national economic development experts.

Whether an area's water and sewer fees and rates are one consideration among hundreds or an overriding factor in a company's decision to locate somewhere depends on the industry, they say.

Some manufacturers - food processors, for example - are heavy users of water and sewer service. Other manufacturers aren't.

State economic development officials are concerned Washington County's water and sewer costs have become a stumbling block in attracting the kinds of industries that will help keep those costs from spiraling upward.

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In a March 18 letter to the Washington County Commissioners, Maryland Department of Business and Economic Development Secretary Mike Lewin said the county's fees to connect to and use the water and sewer systems had steered away two manufacturers.

The letter, which said Lewin was told tap-in fees were the "sole reason" HP Hood didn't build an $80 million milk plant in the county, proposed a meeting between state and county officials to discuss ways to resolve the problem.

He said the company's treasurer told him the county's tap-in fees, quoted at around $900,000, were nine times greater than the nearest competitor.

The letter said water and sewer costs were also a factor in the recent loss of another manufacturer and jeopardized negotiations with yet another. Neither was named.

Lewin later said St. Paul, Minn.-based Ecolab's decision to build an $18 million manufacturing facility in Berkeley County, W.Va., rather than in Washington County was swayed by high water, sewer and pretreatment costs. Ecolab makes anti-bacterial products.

"It is obvious that we are wasting staff time and resources on industrial recruitment in Washington County until the issues are resolved," Lewin's letter said.

Weighed down by debt

The county is dealing with more than $50 million in debt that the Washington County Sanitary Commission incurred before it was taken over by the Washington County Commissioners in December 1995.

The debt includes expenses to build the Conococheague Wastewater Treatment Plant and pretreatment plant, which together cost about $27 million.

The more customers the county can get for its plants, the sooner it can get out of debt, Lewin said during an interview.

Meanwhile, the higher water and sewer costs have put Washington County at a disadvantage in attracting companies with big water and sewer demands, said Thomas B. Riford, marketing specialist for the Hagerstown-Washington County Economic Development Commission.

However, such costs don't have a significant effect on a large segment of prospects, including many manufacturers and other companies with jobs that pay well, Riford said.

"There are plenty of manufacturers and plenty of high-tech companies and plenty of service-type companies with no water needs at all except toilet flushing," he said.

While he can't give out names or details about current or past prospects, Riford said there were a couple of cases where the county's water and sewer rates or tap-in fees were higher than another site's and blocked a deal.

"If everything else is equal and one thing is more expensive, we lose," he said.

Many factors to assess

More often, water and sewer costs are just part of a long list of considerations, and Washington County can offset them by offering tax credits and its location at the intersection of Interstates 70 and 81, Riford said.

"I still consider myself fortunate that I have this county to market," he said.

The milk processing business would fall into the category of industries that have compelling needs that almost dictate everything else in the site location process, said national economic development expert Danny Lam.

Other examples would be an aluminum smelter, which needs a lot of cheap electricity, or a semiconductor wafer plant, which needs lots of water, said Lam, a research fellow at the Economic Development Institute at Auburn University in Auburn, Ala.

Toshiba's semiconductor wafer plant in Virginia uses 3 million gallons a day, Lam said.

Most industries don't fall into that category, he said.

Neither are there many, percentage-wise, in need of an industrial pretreatment plant, Lam said.

For most businesses, water and sewer availability is more important than costs, he said.

Advantages such as good transportation and work force availability and productivity could easily offset high water and sewer costs, Lam said.

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