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Easing Small Town Debts - 2002-10-27

Manufacturing is a way of life in rural communities across North Carolina. And for decades, towns have done everything possible to keep their biggest employers happy from offering financial incentives to upgrading public utilities to meet the factories' needs. But even this wasn't enough for many businesses, which couldn't survive the pressures of free trade and globalization. Last year, North Carolina lost more textile and apparel jobs than any other state. Manufacturing layoffs accounted for 87-percent of job losses in rural counties. That was a double blow for many communities, which lost tax revenue and faced big bills for the water and sewer improvements meant to help the manufacturers stay in business. In the small textile town of Valdese, a group of community leaders is lobbying government to help bail them out.

When you drive into downtown Valdese, you're greeted by the smell of fresh-baked bread. The old Waldensian Bakery is a main-stay on main street, named after the Italian immigrants who founded the town in 1893. The Waldensian name still appears on the front of the building, but over the door is an awning reading "Sara Lee," its latest owner.

Like the bakery, many of the large employers in Valdese have re-located, closed or sold their businesses. Town leaders have tried to prevent this exodus by modernizing and improving public utilities,. As manufacturing swelled in the late 1980s and early 90s, towns like Valdese expanded the capacity of their water and sewer plants to accommodate the factories. Large dye and finishing houses use millions of liters of water a day. Just a few years ago, Valdese officials spent $3 million to expand the town's water plants even more:

"And we had to do that to accommodate 90-percent of our water and sewer users, says Valdese town manager Jeffrey Morse. He says this waste water treatment plant has been churning at half capacity ever since the town's largest water customer, Island Textiles, closed last year. That's meant a loss of nearly $400,000 for the town so far. Since not as much water is being used, not as much is being sold.

Mr. Morse says towns like Valdese are crying out for the same help displaced workers get when companies close down or move to other countries for cheaper labor: "What the federal government haven't recognized yet is, what effect are NAFTA policies or international trade policies are having on those communities who supported those companies and the debt we've gone into to support these companies," he says. "So when they get up and leave, we're still stuck with the debt."

To make up for lost revenue, town officials say they would have to increase water rates by at least 30-percent. That would be bad news for companies still in Valdese, like Carolina Mills. Jerry Finney is general manager of the dye and finishing plant, one of the biggest employers in town. "It would mean jobs. If you got a 20 or 30-percent increase, it would be 40,000 50,000 a month in costs. All of that would come right out of our profits," he says.

This leaves Valdese facing a major dilemma: how to pay the bills without pricing out struggling manufacturers?

"Hello, Yes. Oh Joanie, can I call you back, I'm in Raleigh at the General Assembly begging for money," says Mr. Morse. Last month, the town manager spent a couple of days in the state capital, to lobby the General Assembly for passage of a half-cent sales tax increase. "Because when an industry closes like a large water user, we not only lose the revenue from the water sales and the sewer sales. We also lose the property tax base. So both funds are hit."

Valdese isn't alone. A dozen hard-hit communities across North Carolina have formed a coalition. They're asking the federal government to help struggling textile towns pay for water and sewer upgrades and repairs as their largest water customers continue to disappear one-by-one.

The U.S. Senate Appropriations Committee has said no, but that answer could change. The House Appropriations Committee just said "yes" to Valdese and a couple of other small manufacturing towns. It will be months before there's a final answer from Congress. Until then, officials like Jeffrey Morse will continue to lobby the federal government to adopt trade policies that won't leave small towns high and dry.