rowing up, Derrick Lingle helped his aunt as she puzzled over problems with her personal computer. He hoped to make a living repairing computers himself someday. So to prepare, he took related classes in high school and earned an associate’s degree in information systems.

It worked. Lingle, now 21, is a tech assistant at the new Google data center in Caldwell County. He might have anticipated the Internet search engine locating to Charlotte or Raleigh, but “Lenoir’s just one of those small towns where you just don’t expect something to pop up like that. It took me by surprise,” he says. “I hit the jackpot.”

Lingle’s professional windfall didn’t come too soon, either. Before taking the Google job, he had a pending interview for a computer diagnostic position with a medical company in Lenoir. Apart from that one prospect, his four years of experience as a waiter foretold a bleak professional future if he stayed in town. Now he thinks he may someday pursue a bachelor’s degree in information systems at Appalachian State University.

Google’s choice of Lenoir has certainly surprised others besides Lingle, too. And the issue of who really won the deal, after high-stakes negotiations, is debated. How the multibillion-dollar company ended up in this town of about 18,000 people is a drama with the intrigue that often marks economic development courtships.

The deal’s profile has been raised by the renown of Google—ranked first in Fortune magazine’s 2007 list of the “100 Best Companies to Work for in America”—as well as the project’s scale and the incentives offered by the state and economically distressed city and county.

The relationship began when the North Carolina Department of Commerce contacted county officials in November 2005 about a business prospect. As usual, the company wasn’t identified, but the clues were juicy: a potential investment of $600 million; average annual salaries of about $48,000 (compared to less than $36,000 per household; the county’s average); and more consumption of taxable electricity and water. Eventually the list of sites considered in North Carolina and other states was narrowed. Followed by months of discussions and visits by Google representatives, Governor Mike Easley announced in January 2007 that the company had chosen Lenoir for its data center, which will store information for Internet searches and other applications.

Group Benefits
“Google coming here is the greatest thing that’s ever happened in my lifetime in terms of what it could mean,” says Lenoir Mayor David Barlow. What it could mean translates to about 200 local in-house positions with the company, jobs for construction workers and others involved in developing Google’s 215-acre site, business for restaurants and hotels, and homes built and purchased by Google employees who receive a bonus if they buy or rent a house in Lenoir.

In addition to the tangible benefits, Google, based in Mountain View, California, will enhance the city’s profile, officials and others claim. Stories circulate of how people from other areas now know Lenoir’s name because of Google. “We’re changing the image from a dying furniture town to a new economy,” says City Manager Lane Bailey. “How are you going to put a price on that?” City and county officials can put a price on tax revenues they expect from Google. The city estimates annual real property taxes of about $129,600 after incentives, compared with $19,376 before Google bought the tracts. The tax on electricity use will yield hundreds of thousands of dollars annually for the city. Bailey says he expects Google to become Lenoir’s second largest water customer and taxpayer. The company also will become a top taxpayer in the county. The plant, when in full operation, should generate approximately $250,000 annually in real property taxes on the current site after incentives, compared with about $36,000 before the company acquired the land, explains Herb Greene, chairman of Caldwell County Commissioners.

Loss Leader
The revenue estimates are based on assumptions of about a $600 million investment by Google. In exchange, Lenoir and Caldwell County have given the company tax grants, or waivers, of 100 percent for business personal property and 80 percent for real property for a 30-year period. City and county officials won’t speculate about the incentives, but some estimates put the value as high as $168 million over three decades. State incentives, including sales-tax exemptions, tax credits, and a Job Development Investment Grant (JDIG), also could total millions of dollars. State, city, and county officials note that no money was spent up front on the incentives, most of which represent decreases in future tax revenues from the company. And some of the state incentives require Google to make investments and create a certain number of jobs.

The state commerce department projects that over the 12 years of the JDIG, worth up to a total of $4.8 million, Google will add about $37 million to the cumulative net state revenue and $1.06 billion to the cumulative gross state product.

The incentives given have spurred a lawsuit against the state and Google by the North Carolina Institute for Constitutional Law, which contends the state constitution was violated by offering Google certain tax exemptions. The constitution requires that taxes be “fair and equitable,” says Jeannette Dora, senior staff attorney for the nonprofit Raleigh-based institute. “We can call them incentives all we want, but in the end, it’s corporate welfare pure and simple.” The state and Google have filed motions to dismiss the suit.

Others who object to the incentives favor low taxes and limited government. “The best way to be business friendly and promote the growth of business and the growth of a town is to reduce taxes for everybody, cut spending, and cut regulations so it’s easier for everybody to function,” says Lenoir Councilman T.J. Ruhr, the only city council member who voted against the city’s incentives for Google. He has opposed all incentives offered to businesses in his tenure on the council. Still, Ruhr says he’s glad Google chose Lenoir. “I don’t really blame Google for getting as much as they can. That’s their job. For us to roll over and give them this, I think, was a terrible mistake,” he says. “At the rate we’re going, no corporation will ever pay taxes any time.”

Barlow believes Google wouldn’t have chosen Lenoir without the incentives. “We think we did what we had to do to get the project,” he says. “What would we have if Google wasn’t here?”

Hard Times
What Caldwell County does have is an unemployment rate inflated by the loss of about 7,000 jobs in the furniture and textile industries over the past four or five years when the work went overseas. Still, four of the top 10 employers in the county are furniture manufacturers. Google will inspire some job seekers to train for a sector that’s new in Caldwell, “and that’s not a bad thing,” says George Bernhardt Jr., who owns the downtown hardware store Bernhardt-Seagle Co. But “in the short term, I don’t think Google’s going to make that huge an economic impact,” he says. “It’s not a solution by itself. It’s a step toward a solution.”

That step is toward diversifying the county’s economy. Not far from downtown, the Google plant, with two large buildings under construction, has staked its place—fortressed on a hill that overlooks closed furniture buildings. Google bought one of the tracts from Bernhardt Furniture, which had used the property for a lumberyard. Bernhardt has half the workforce—about 1,100 people—that it had in Caldwell in 2000.

The furniture maker, which in the past received local incentives based on expansion, welcomes Google. “Our belief is and always has been, with Google or any other employer in Caldwell County, in the importance of diversification. We are very supportive of the efforts that city and county leaders went through (to land Google),” says William Howard, vice president of human resources at the family-run company, based in Lenoir since its founding in 1889. “Business is not done in the 21st century like it was done in the late 19th century. You have to adapt and change. Time will tell whether it’s the new economy.”

New economy or not, representatives from Google and other businesses helped develop the curriculum for the Information Technology Institute at Caldwell Community College and Technical Institute. The program prepares students for entry-level jobs that might be available at Google and other companies.

infrastructure is key
In addition to an available workforce, Google officials considered Lenoir because it has plenty of water, land, and electrical infrastructure—and incentives “that made the economics work,” says Matt Dunne, Google’s head of community affairs in North America. “When you put incentives in, that affects the balance sheet when you’re comparing one place to another. That’s the reality of the modern business development process, especially when you have the opportunity to build a piece of infrastructure like a $600 million facility anywhere. We were willing to look at offers from communities all over the country, and this one rose to the top.”

Beyond the incentives, infrastructure was also key to the deal. For a while, water worries were the focus. Plans to expand the city’s aging water-treatment plant were moved forward to accommodate Google. The company donated more than $1 million toward the expansion, estimated at $25 million, and will contribute more to the project as the data center uses more water. The water plant expansion and a Duke Energy substation that sits below the Google site were planned for what officials thought would be a booming furniture sector. “If there’s a silver lining to the dark cloud of the furniture industry leaving, it’s that we had the infrastructure in place,” Bailey says.

Push for reform
State Representative Phillip Frye of Mitchell County, whose district includes Caldwell County, wants infrastructure, not incentives, to play a bigger role in attracting business. He supports “a pact among as many states as possible to agree they would not use tax dollars for targeted incentives,” says Frye. “It would create a level playing field across the country” to entice business by improving roads and water and sewer systems instead of with incentives, he says.

Frye and state Rep. Pryor Gibson of Anson County have introduced the idea to the National Conference of State Legislatures, which will discuss the issue this spring. States are in “a bidding war against each other using tax dollars for incentives. As long as the other states around us can offer them, I am convinced that we have to offer incentives,” says Frye, who calls the benefits for Google “a good package.” Google could help draw other high-tech companies to Western North Carolina, he notes.

Whether or not Google influences other businesses, the company represents change for workers. “You had a region of people who wondered what is going to happen in the future,” says Lenoir Economic Development Director Kaye Reynolds. “It’s a community that’s redefining itself.”

But for now, Lingle likes the job opportunities at Google, a company that offers employees a generous benefits package, as well as free snacks and lunch daily. Last year, Lingle completed the Information Technology Institute and finished his degree at Caldwell Community College and Technical Institute, where he’s pursuing a second computer degree. “I couldn’t ask for anything better. To actually come out with a degree and be in a place where I’m doing something I really love and am passionate about,” he says, “this is definitely like a dream come true.”