CHICAGO -- More than 200 communities are vying for thousands of federal jobs as the U.S. Defense Department tries to cut costs by consolidating its finance and accounting centers to a handful of sites.

The department in March had solicited incentive packages from communities hungry for the economic boon that many local officials expect will result from the centers. Last Monday was the deadline, and officials expect to announce the chosen sites in March 1993, spokeswoman Jean Marie Ward said.

In exchange for locating thousands of jobs in chosen communities, the federal government expects to receive office facilities for free or at low costs. To pay for construction or renovation of buildings, many cities have proposed using bond proceeds.

Ms. Ward would not say how many sites would be chosen as consolidated Defense Finance and Accounting Service centers. However, spokesmen from several cities that submitted proposals said the list would be narrowed to between three and six cities.

Between 4,000, and 7,000 jobs paying an average salary and benefit package worth $35,000 a year would be located at each center, according to the Defense Department's request for proposals.

Pentagon officials declined to name the communities that submitted proposals or to comment on any individual proposals. But officials in several cities say their communities have submitted proposals.

Those cities include Cleveland; Denver; Detroit; Evansville, Ind.; Fort Wayne; Ind; Houston; Kansas City, Mo.; Milwaukee; Racine, Wis.; and St. Louis.

Joint proposals submitted include Columbus and Whitehall, Ohio; Indianapolis and Lawrence, Ind.; and the Quad Cities area on the Iowa and Illinois border, the officials say.

The finance and accounting division, which services all military agencies, currently operates in hundreds of locations nationwide. Most of the offices employ less than 100 people, but five -- in Cleveland, Columbus, Denver, Indianapolis, and Kansas City -- have more than 1,000 employees.

Cost will be very important in the selection of sites, according to the Defense Department's request for proposals. The availability of a sizable labor force, high-quality schools, and average or low-wage rates will also be considered, the request says.

In some cases, the bonding featured in proposals would be partly paid off with income tax revenues from the facilities or lease payments from the federal government, according to officials with some of the governments involved.

For example, the Quad Cities area, consisting of 14 communities on the Iowa-Illinois border, proposed renovating the Rock Island Arsenal, a Defense Department facility that houses the U.S. Army Corps of Engineers and weapons operations.

Iowa Gov. Terry Branstad recently signed a bill that would allow the state to capture 2% of the revenues brought in by the state's 3% income tax from employees at the proposed facility, according to Richard Vohs, the governor's press secretary.

The money would be used to pay off revenue bonds issued to finance part of the cost of the $45 million renovation project, Mr. Vohs said.

The Quad Cities proposal also calls for part of the plan to be financed by proposed increases in local property and sales taxes, Mr. Vohs said.

Detroit is willing to renovate a vacant department store at a cost of about $80 million, using proceeds from revenue bonds, according to Bob Berg, Mayor Coleman Young's spokesman. Other financing details have not been worked out yet he added.

Detroit's bid reportedly has the backing of Gov. John Engler of Michigan, who went to Washington last week to lobby for the city's proposal.

Kansas City has submitted four proposals ranging from $60 million to $100 million, according to Robert S. Pierce, director of the Kansas City Economic Development Corp.

"We stand to lose if we don't gain," Mr. Pierce said, pointing out that a Defense Finance and Accounting Service office currently based in Kansas City employs about 1,200 people.

Three of the Kansas City plans involve renovating government or private facilities. The fourth would require building a new complex on city-owned land.

If Kansas City is chosen, Mr. Pierce said he expected proceeds from taxable bonds, issued by the city or a special authority, would be used to finance the project.

The bonds would be taxable because they would be backed with lease payments from the federal government, Mr. Pierce added. He said proceeds from income taxes, coupled with matching funds from the state, could also be used to pay off the bonds.

Being picked as a site is widely expected to be an economic boon.

"It would attract 4,500 new jobs [to the Quad Cities]. Those jobs would produce payroll proceeds of $121 million a year," said John Gardner, president of the Quad Cities Development Group.

The development group, in conjunction with Iowa, Illinois, and seven local municipalities, helped draft the Quad Cities proposal.

Kenneth Mayland, chief economist at Society Corp. in Cleveland, said the influx of thousands of federal jobs would provide a stable source of revenues for a particular area.

"It would improve local real estate, income tax revenues, and general economic activity," Mr. Mayland said. "It's no surprise they're being hotly contested."

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