Photo by Heather S. Hughes, Daily Press, 2004
A casualty of falling demand, the International Paper (IP) plant in Isle of Wight County will close in spring 2010. The likely long-term effects of IP’s planned closure will be unclear for some time, but two things are sure: job losses at the plant will be spread over the entire region, and the economic “ripples” are likely to be huge.
With 1,100 people directly employed by the mill, the immediate effect on the area’s unemployment rate is likely to be harsh and sudden. But the wider effects could be staggering.
The Virginia Economic Development Partnership (VEDP) estimates that an additional 2,400 other jobs in the region (businesses that provide goods and services) would be lost as a result of the closure, and that just focuses on Franklin, Isle of Wight, Suffolk, Southampton, Surry and Sussex. The report also predicts that 700 more Virginia jobs outside of that immediate locale will be lost as a result of the closure, putting the total expected job loss at 4,200.
Within hours of the mill’s announcement, Virginia’s Department of Labor had been instructed to set up a special “rapid-reaction task force” to determine how the state can help get people back to work. Paul D. Camp Community College and its workforce centers in Franklin and Suffolk as well as Opportunity Inc. will be instrumental in the retraining process.
Also according to the VEDP report, state tax revenues are projected to fall by $20.6 Million, and local tax revenues could drop by as much as $27 Million. Although the mill is located in Isle of Wight County, the city of Franklin shares in tax revenues generated by the paper mill under the terms of a 1986 agreement between the localities and will share in the revenue loss. Through IP’s shutdown, the county will lose $860,000 in real estate tax revenue in 2011, with the biggest hit — $5.2 Million — projected for 2012.
The plant, along with Smithfield Foods, who has recently decided to close one of its plants, was a significant source of revenue for these communities. The closures reinforce the need for diversification of the region’s industrial base.
Fortunately, Isle of Wight has some sound economic development strategies in place, including targeting one of the region’s powerful and growing sectors, port operations. The Intermodal Park welcomes warehouses and distribution centers and, hopefully, manufacturing, to generate new jobs, economic activity and revenue sources.
According to IP CEO John Faraci, the company “did not arrive lightly” at the decision to close its Franklin mill. IP is open to discussions regarding future uses for the site and is committed to working with state officials to “mitigate significant negative economic effects,” but any future uses that include paper-making would be “unsustainable.”
U.S. Senators Mark Warner and Jim Webb have already begun taking additional steps to help the area recover from the mill’s impending closure. The two joined forces to send a letter to U.S. Secretary of Transportation Ray LaHood, asking him to consider the impact of the mill’s closure as he reviews a grant application submitted by the city of Suffolk to make improvements to Route 58 as part of the “U.S. 58-Hampton Roads Intermodal Corridor.” Neighboring Suffolk applied for a competitive grant under the Transportation Investment Generating Economic Recovery program to help support the development of an intermodal warehouse and distribution park.
Even bigger questions are looming: Will Franklin’s city schools lose enrollment because families are moving elsewhere for jobs? Or will they gain enrollment because parents can no longer afford private school tuition? Will the plant closure, paired with the already slow economy, equal double trouble for tax revenue? Will there be a glut of homes on the market that continue to drive down real estate value?
MORE on MANUFACTURING in HAMPTON ROADS:
The International Paper mill outside Franklin – gone by next spring, shreds 1,100 jobs. Also closing in 2010: the Smithfield Foods Packing Co. South Plant in Smithfield and the CooperVision contact-lens plant in Norfolk. Combined, the three shutdowns will cost the region at least 2,300 jobs.
Two years ago, Ford Motor Co. closed its Norfolk Assembly Plant, which at its peak employed 2,500 people to produce F-150 trucks.
Will anything be made anymore in Hampton Roads? Definitely – from power tools to auto parts to Navy warships. Reports of the death of American, and Hampton Roads, manufacturing are greatly exaggerated, say economists and companies. “It’s not the death of manufacturing; it’s the restructuring,” said Peter Shaw, a professor of business and economics at Tidewater Community College.
Hampton Roads, with its substantial military influence, doesn’t rely heavily on manufacturing. Yet as a percentage of “non-farm employment,” the region’s 7% rate for manufacturing exceeds the state’s 6.5%, said Bill Mezger, an economist with the Virginia Employment Commission. More than 40% of the local manufacturing jobs – about 23,000 – are in shipbuilding.
Despite the future closings, the region shows healthy manufacturing signs with manufacturers planning to expand and open in Hampton Roads:
- Sparta Composite Products building in Suffolk employing nearly 200 people by 2014;
- Continental AG closing a South Carolina plant and transfering operations to its Newport News site, adding nearly 320 jobs over the next 3 years; and
- Areva Newport News opens a new plant in 2012, employing 340 people, growing to 500.
This post includes excerpts from the following media sources: Suffolk News-Herald by R.E. Spears III and Nicholas Langhorne; Daily Press by Allison T. Williams; The Virginian-Pilot by Hattie Brown Garrow and Philip Walzer.
Each year since 2003, Regent University has hosted one of the most notable events of its kind in the Commonwealth of Virginia. The Clash of the Titans debate features prominent national leaders discussing timely topics ranging from the Constitutional Authority of the U.S. Supreme Court to whether military force can bring peace to the Middle East.
