Decker offers more details on Commerce Department reorganization
Posted May 29, 2013
Updated May 30, 2013
Raleigh, N.C. — Reducing North Carolina's corporate tax rate won't allow the state to cut all incentive programs, Commerce Secretary Sharon Decker told the House Commerce Committee Wednesday.
Decker appeared before the committee to provide more details about a planned reorganization of the Commerce Department that would turn many of the state's job-recruiting functions over to a public-private partnership.
She cautioned lawmakers that the Senate budget dismantled North Carolina's existing job-recruiting network too quickly. Senators have voted to end funding for the state's regional economic development partnerships on July 1. Decker said those partnerships would need to remain until at least next January and possibly until July 2014.
"It will be a process over the next 12 to 18 months," Decker told lawmakers.
Lawmakers were supportive of Decker's efforts to improve the state's economic-recruitment efforts but questioned whether some businesses might be hesitant to do an economic development deal with the state given the potential changes within the department.
"We've probably lost some deals because of the uncertainty that is here, so the sooner we can get through this budget process, the better," Decker said.
However, any caution by businesses had little to do with how the Commerce Department would be organized than the tools with which it had to work. "The bigger issues that has created uncertainty is around incentives and tax reform."
Both the state House and Senate are touting different versions of a tax reform plan that would lower corporate and personal income taxes in favor of applying sales taxes to more items. However, parts of those plans would zero-out tax preferences for certain industries, and Republicans in both chambers have said they would like to curtail the economic development incentives used to lure business.
No taxes doesn't equal no problems
Rep. Chris Millis, R-Pender, said the idea of continuing to give incentives troubled him. Why, he asked, should one business be taxed so that a competitor can be brought to the state.
"That direct transfer of public dollars to a private individual makes me nervous," he said.
Decker said that North Carolina could not afford to do away with incentives for recruitment and retention of businesses entirely. All such programs administered by the Commerce Department, she said, required companies to produce promised jobs and meet other goals.
"I do think, in today's competitive environment, that we are taken off the list if we don't have those tools in our quiver," Decker said.
Other lawmakers echoed that question.
"Don't you think think tax reform would be the key here?" asked Rep. Dana Bumgardner, R-Gaston. "If we could get to a zero corporate tax rate ... that would make our state incredibly attractive to everybody."
Decker said that idea may be wishful thinking.
"I'd like to think that, but the current facts don't support it," Decker said.
Yes, she said, North Carolina needed to reduce its tax rates, but a zero tax rate doesn't do away with the need for incentives.
"If that were true, the state of Texas would have no incentives, and they've got a huge multimillion-dollar fund," she said, noting that Texas' incentives are cash grants, something that Gov. Pat McCrory has said he would like to avoid.
That prompted Rep. Jeff Collins, R-Nash, to press Decker, asking if eliminating the corporate tax rate wouldn't make North Carolina better off than it is today in terms of job recruiting.
"I don't know if it's better. It's different," she said.
Decker said after the meeting that there are some incentives programs she would like to extend. Among them would be the state tax credit for film incentives that has helped bring productions such as "Iron Man 3" and "The Hunger Games" to the state.
New brand to be unveiled
Much of the material Decker covered was familiar. She and other administration officials have been talking about reorganizing the Commerce Department for months.
Generally speaking, plans for the department include turning most of the state's job-recruitment functions over to a public-private partnership. That partnership would synchronize the work of groups across the state, such as Golden LEAF, a Rocky Mount-based foundation that uses national tobacco settlement money to provide economic development grants. Grants of state incentives would still be overseen by publicly appointed officials, although deals would be put together by recruiters working for the nonprofit.
The new organization would also allow the nonprofit to create a venture capital fund for start-up businesses and a private job-recruitment fund that could be paired with state incentives in order to lure out-of-state companies to North Carolina.
Plans for the reorganization also include a new marketing effort on behalf of the state, Decker said. That branding effort, which would be most visible as a new slogan and tourism recruitment campaign, would be unveiled next year, she said.
"We would love to introduce a new brand at the U.S. Open next summer," Decker said. Both the men's and women's U.S. Open golf tournaments will be held in Pinehurst in 2014.
"It's the perfect time, we think to introduce that brand in a way that would be seen world wide."
The proposed reorganization would require legislative authorization. Rep. Tom Murry, R-Wake, has a bill that would clear the way for the changes, but it has not yet received a committee hearing.