The ones that got away

State not always a winner in stiff competition for businesses

When Genzyme Corp. started expansion of its plant in Allston in September, the biotech company attracted a crowd of dignitaries, including Governor Deval Patrick. Days later, Patrick turned up in Andover to publicize the promise by biotech firm Wyeth to add 100 jobs at its center. And earlier this year, he traveled to Springfield for an event detailing Liberty Mutual Group's plans to add 300 jobs.

But for every major corporate expansion heralded by the governor, other firms considering Massachusetts have quietly decided to go elsewhere instead. For example, in recent months, two makers of solar panels, XsunX Inc. and Schott Solar Inc., and a healthcare company, Athenahealth Inc., have all picked other states to build operations involving hundreds of jobs.

While local officials are quick to highlight Massachusetts' assets - including a cadre of elite universities, an educated workforce, and large industry clusters in finance, high tech, and life sciences - the lost opportunities illustrate the challenges it faces from other states considered more welcoming to businesses.

Indeed, as a place to do business, Massachusetts has consistently ranked below average in national surveys. Forbes magazine last summer put it 36th among the 50 states. The Tax Foundation, a nonprofit Washington research group, pegged Massachusetts at 37th based on its "business tax climate." And Chief Executive magazine ranked the state as the 4th worst for business, based on its survey of chief executives.

Securing new business is competitive, said Patrick Cloney, who runs the Massachusetts Office of Business Development, which is charged with trying to persuade companies to come here. While Cloney said the state fights hard for every project, he said Texas, North Carolina, and some other states typically spend more money on recruiting - including advertising, attending trade shows, and contacting companies directly. In that respect, Cloney said, 'We are laggards."

Beyond recruiting, Cloney's agency is working on a host of programs to make the state more attractive.

Lawmakers are close to giving final approval for Patrick's $1 billion life-sciences initiative, which includes $25 million a year in tax incentives for biotech companies and other firms. House Speaker Salvatore DiMasi has pitched a $50 million plan to buoy the clean energy industry. The state is considering further expanding subsidies to the film industry. And it is teaming up with local towns to pre-approve large tracts of land for construction, so companies can count on being able to build immediately.

Massachusetts is currently chasing two significant projects, code-named Project Sunshine and Project Blue Moon. In both cases, the unidentified companies are working through site-selection consultants to conceal their identities.

But economic-development officials have learned that Project Sunshine is another solar-panel company, which could ultimately create as many as 1,000 jobs. The company is scouting for 40 to 50 acres and is believed to be eyeing several states in addition to Massachusetts.

Blue Moon is reportedly a large high-tech manufacturer interested in building a technology-development center and a headquarters of up to 600,000 square feet, employing more than 2,000 people. It is looking for 5 to 15 acres in Bedford or Burlington.

Development officials say they are also competing daily for an array of smaller projects that won't make headlines.

"We don't get up every morning and go elephant hunting," said Cloney, noting that most economic development opportunities are modest endeavors - he calls them "squirrels."

Overall, state economic officials say they are vying for projects totaling more than 31,000 new jobs and $7.7 billion in potential investments.

But some executives and business consultants say Massachusetts can't always compete for larger projects - the "elephants," as Cloney calls them - because of the relatively high cost of doing business here and the larger tax breaks offered in other states.

"The state is fairly responsive," said Jack Troast, managing director of T3 Advisors LLC, a site-selection-consulting company in Waltham. "My impression is they want to make these deals. The question is whether they have the tools," he said, referring to help such as tax incentives that encourage companies to expand.

Companies cited several reasons for going elsewhere. For instance, XsunX, a solar energy startup based in Southern California, considered Massachusetts, but decided to build its new $100 million manufacturing complex near Portland, Ore. The facilities, which will make solar panels for utilities and large companies, are expected to employ as many as 320 workers by late 2010. XsunX chief executive Tom Djokovich said Massachusetts was lacking in two areas: energy prices and tax credits. He said Massachusetts' electricity rates, among the highest in the country, would have added as much as $7 million a year to operating costs. Also, he said, Oregon offered tax incentives for green-energy companies that Massachusetts could not match.

"We were looking for more support" from the state, Djokovich said.

Schott Solar, a solar company that already has about 150 employees in Billerica, initially considered 15 sites across North America, including Massachusetts, for a new factory. The plant is expected to cost $100 million and create 350 jobs. But Schott eventually hopes to invest $500 million and hire 1,500 workers.

Schott Solar, a unit of German-based Schott AG, toured sites in Westfield and Westminster under the code name "Ajax," according to economic development officials. But it ultimately chose Albuquerque, where it broke ground for the plant last month.

Schott spokesman Brian Lynch said the company wanted something Massachusetts couldn't offer: a 100-acre site that was flat and "devoid of trees" to speed construction.

Athenahealth, which has nearly 600 employees at its Watertown headquarters, considered several nearby sites for a new operations center, including Western Massachusetts, upstate New York, Maine, Vermont, and New Hampshire, where the cost of living is lower than the Boston area. The company, which helps manage electronic records for medical groups, quickly narrowed the list to Maine and Vermont because they offered better tax incentives and other assistance, said Carl Byers, the company's chief financial officer.

"The incentives were very important to us," Byers said. He said the company ultimately picked Belfast, Maine, after finding a real estate deal too good to pass up. He said the company was able to buy a building for just $6.1 million that MBNA Corp. spent $30 million to build. In addition, Byers said, MBNA (now part of Bank of America) had trained many workers to do similar work before shutting down its call and service center two years ago, leaving a large pool of skilled workers in the area. Athenahealth said its operations center, slated to open April 7, will initially have 100 workers by the end of this year, but could employ as many as 600 to 700 within five years. Byers said the company will also continue to add more workers at its Watertown headquarters, where it employs programmers, executives, and other higher-paid professionals.

But Cloney, who worked as a private-equity executive before joining the state economic development agency, said he doesn't dwell on the losses. "There are some deals that no matter what we do we are not going to win," he said. "What I want to do is fight for every one of them."

Todd Wallack can be reached at twallack@globe.com.