N.C. Ranks High in Use of Economic Incentives

By | April 13, 2012

(Source: Richard Craver Winston-Salem Journal, N.C. (MCT) — North Carolina has been listed again as a top-performing state when it comes to overseeing economic-incentive packages.

A study by Pew Center on the States — a division of The Pew Charitable Trusts — ranked North Carolina and 12 other states as leaders in its evaluation of state tax incentives for job creation and economic growth. North Carolina was the only Southeast state chosen.

Pew researchers qualified their praise, saying “no state ensures that policymakers rely on good evidence about whether these investments deliver a strong return. Half the states have not taken the basic steps needed to know whether their incentives are effective.”

The Pew researchers said lawmakers can require more incentive-performance transparency.

Bob Leak Jr., president of Winston-Salem Business Inc., said the Pew report “confirms what other reports have suggested, and that is North Carolina does a good job with its incentive programs.

“Our programs are based on the economic impact that a project is expected to bring, paid out over time, with performance contracts in place.”

Winston-Salem and Forsyth County officials have drawn praise for the strict clawback terms in their incentive deal with Dell, which led to $26.5 million in local incentives being paid back by the company after closed its plant in November 2010.

Economic incentives, whether hailed or railed against, have become a pivotal part of recruiting and retaining corporations in the Triad over the past 22 years.

How important a role — whether critical or icing on the cake when it comes to landing major projects such as Caterpillar Inc., Dell and FedEx Corp. — remains intensely debated.

Pew researchers acknowledge economic incentives are playing an increasingly pivotal role “when most states are trying to rebuild their budgets and many have not regained private-sector jobs lost during the Great Recession.”

For example, South Carolina’s aggressive incentive approach has helped it recruit new or expanded plants from Boeing, Bridgestone Tire, Continental Tire and Michelin in the past year.

South Carolina has received significant criticism for being too lucrative in its incentive package and too lax on overseeing whether the companies fulfill job pledges.

“The Continental Tire recruitment is an example of where a company crossed the line in terms of wanting too much up front for North Carolina’s good,” said Allan Freyer, author of a N.C. Justice Center incentive report released in January.

North Carolina’s General Assembly balked at paying $45 million in upfront incentives in an attempt to land the Continental Tire project for Brunswick County. The overall incentive package was estimated at $100 million.

As a result, the company said in October it was going to build a $500 million plant in Sumter County, S.C., with up to 1,300 employees. The South Carolina deal involved a pledge of $31 million upfront.

“If states do not use incentives or use them well, they may be missing opportunities to create jobs and attract new businesses,” said Jeff Chapman, senior researcher for Pew Center on the States.

There is no easy way to track the number of jobs created by companies receiving incentives. That’s because most incentive packages don’t require keeping the public updated on how recipients are performing during the contract period. Companies tend to cite proprietary and competitive reasons for keeping the numbers close to the vest.

For example, when Dell did provide workforce and production data to local and state economic officials for its Winston-Salem plant, it was often 18 months old.

“Policymakers should know whether these tools deliver a strong return on their investment,” Chapman said. “Regular, rigorous and comprehensive evaluations of tax incentives are critical to their ability to do so.”

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©2012 Winston-Salem Journal (Winston Salem, N.C.)

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Distributed by MCT Information Services

Source: Richard Craver Winston-Salem Journal, N.C. (MCT)

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