House lawmakers preparing economic development bill

Posted February 13, 2015

NC Flag, Legislative Building, Raleigh

— Members of the state House will roll out an economic development package next week that includes a revamp of the JDIG job recruitment fund and pave the way for small investors to help fund startup companies, according to multiple lawmakers with knowledge of the bill. 

"Largely, this will be the economic recruitment tools that the governor asked for in the State of the State," said Rep. David Lewis, R-Harnett. House leaders will likely unveil the package during a news conference Tuesday afternoon or Wednesday. 

More growth coming Despite big job promises, incentives often fail to deliver Gov. Pat McCrory has been saying since January that he needs more tools to keep and attract big businesses for North Carolina. During the State of the State address earlier this month, he said the lack of a cohesive strategy was hurting North Carolina when compared with other states.

As of Friday, the final pieces of the House package were still being put together. However, Rep. Jason Saine, R-Lincoln, a senior Finance Committee chairman, and others working on the bill said it would have three main pillars: 

  • "Expanding the capacity" and revamping the Job Development Investment Grant, or JDIG, program that is already focused on large employers expanding or relocating to North Carolina. "As we look at auto manufacturers, that could play a huge role there," Saine said.
  • A crowd-funding proposal that would allow startup companies to gather capital through small, in-state investors without making formal stock offerings. This is a provision that Commerce Secretary John Skvarla has been touting since the beginning of the year. 
  • A change in the way taxes on businesses are calculated. Currently, state taxes are levied based on a calculation involving three factors – sales, payroll and property holdings. House lawmakers are considering a switch, for at least some businesses, to a single-factor apportionment that would be based on sales. Such a single-factor system would be an boon for manufacturers, which tend to have large amount of taxable property and higher payrolls. 

"We don't know exactly what that will look like," Saine said of the single-factor apportionment measures.

Both House and Senate lawmakers have looked at different versions of the idea over the past few years, some of which apply to most big businesses and others that focus on manufacturers. 

Democratic leaders filed what they said was an omnibus economic development bill earlier this week. But it is unlikely to be the vehicle for a major policy initiative in the Republican-dominated House and Senate. 

The yet-to-be unveiled Republican-drafted package is somewhat reminiscent of a broad economic development bill that failed after tense negotiations between the House and the Senate at the end of the 2014 legislative session. However, it will not include a so-called "closing fund" that McCrory and former Commerce Secretary Sharon Decker sought last year.

Historic tax credit McCrory plans to restore historic tax credit "That's going to be JDIG. It would take on a different kind of role," Saine said.

JDIG, he said, will continue to amount to a tax rebate granted based on how many jobs and how much investment a company brings to the state, and the revamp will continue to include strong "clawback" provisions to cancel incentives for companies that don't meet their obligations.

At this point, House members involved in drafting the bill say they're uncertain as to whether a re-launched historic preservation tax credit sought by McCrory will be part of the economic development bill or run separately. As of Friday morning, lawmakers said it may be part of the broader package or show up in a standalone bill.

"Any historic credit that comes from the House is going to be a more tightly crafted program than what we had in the past," Lewis said.

The credit program, which expired at the end of 2014, offers developers a tax rebate for turning old warehouses and factory buildings into modern offices, stores or apartments. As envisioned by House leaders, the revamped credit would cap the total amount available to developers so that its total cost would be more predictable. 

Also up in the air is which version of crowd-funding legislation will be included in the bill that is rolled out. Different versions of the proposal, including one that looks like a version of the bill that passed both the House and the Senate last year, have been filed. 

Saine said that some senators had been looped into the House discussions and that the corporate tax apportionment measure was constructed specifically to appeal to members of the Senate. But key senators were careful to say Thursday that there had been no formal discussions with their House counterparts.

"We have not engaged in direct dialog at this time," said Sen. Rick Gunn, R-Alamance, co-chairman of the Senate Commerce Committee.

Gunn and Senate Majority Leader Harry Brown, who has been deeply involved in economic development legislation, said that senators were just in the early stages of discussing their own economic development bill. 

"Incentives are difficult, they're just tough," Brown, R-Onslow, said.

In particular, Republicans have generally opposed breaks for specific industries. This anti-incentive stance has been particularly strong in the state Senate relative to the House.

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  • Robbie Beck Feb 14, 2015
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    "In particular, Republicans have generally opposed breaks for specific industries."

    Not really true. Ideologues who call themselves Republicans oppose incentives, but moderate Republicans, in both the House and Senate, approve of them.