Dell plant draws fire for $300m tax breaks

Dell on Wednesday opened a controversial $100m manufacturing plant in Winston-Salem, North Carolina, despite a lawsuit that could force the company to pay back nearly $300m in state and local tax breaks.

The 750,000-square-foot facility, now the largest of Dell's three US plants, drew fire from critics who are angered that North Carolina taxpayers are subsidising the plant with tax credits and property tax abatements.

The North Carolina General Assembly authorised a record $242m in tax incentives for Dell in November 2004. This was followed by an additional $37.2m in subsidies from Winston-Salem and Forsyth County. The incentives were provided to Dell as a motivation to open its plant in North Carolina rather than elsewhere.

Dell chairman Michael Dell and North Carolina governor Mike Easley were on hand for the ribbon-cutting ceremony but neither mentioned the subsidies. Dell said he expects the plant to be able to assemble a computer every five seconds by the end of the year.

Easley said the Dell project will provide more than $700m in net revenue to the state over 20 years.

Despite promises that the plant will create 1,500 local jobs, the North Carolina Institute for Constitutional Law filed the lawsuit on behalf of seven small business owners in Forsythe County. The not-for-profit group, led by former North Carolina Supreme Court justice Bob Orr, charged that construction of the plant violated state law because officials spent public funds on a record-setting tax package to benefit an individual private business.

Orr said at the time that he and his group were not against Dell moving in but they questioned the methodology.

Dell, the state of North Carolina, the city and mayor of Winston-Salem, Forsyth County, and three not-for-profit organisations are named in the suit. The North Carolina Institute for Constitutional Law is now awaiting a response from Dell, the state and the city to an amended complaint filed on 9 September, according to staff attorney Jeane Doran Brooks. A court date is pending.

A representative for Dell declined to comment on the litigation.

As a goodwill gesture, Dell said it had donated the first systems from the initial test production run to local science and technology museum SciWorks and to regional and local governments in the state.

The Winston-Salem facility will produce Dell's OptiPlex and Dimension desktop computer products for eastern parts of the nation.

Dell's new plant currently has 300 employees, with 700 more expected to punch in by this time next year. Dell expects to have 1,500 workers at the plant within five years.

The number one computer maker has opened new customer-contact distribution facilities in Oklahoma and Ohio and enhanced operations in Austin, Texas and Nashville, Tennessee, over the past year.

CNET News.com's Michael Singer contributed to this report