Lawmakers poised to turn business recruitment over to nonprofit
Posted June 4, 2014
Raleigh, N.C. — Commerce committees in both the House and Senate approved legislation Wednesday to turn the state's job-recruitment efforts over to a nonprofit company that would contract with the state but be able to keep more of its activities private.
The idea for a public-private partnership has been something Gov. Pat McCrory's administration has been pushing since before he took office. During the 2013 legislative session, legislation to lay the groundwork for the new business recruitment entity stalled.
In the bills given committee approval Wednesday, lawmakers anticipate spending $17.5 million per year on the new nonprofit, about 5 percent less than what currently is put toward the business recruitment, film development, tourism and other functions that will transfer to the new nonprofit. Nearly 70 employees who work for the state are expected to transfer to the nonprofit.
As part of proposed contracting requirements, the nonprofit would have to raise $6 million in private donations over its first five years in operation.
Lawmakers did not object to the public-private setup itself, but some did raise questions about transparency and the potential for pay-to-play transactions.
For example, companies that give donation to the partnership will be able to apply for state incentives.
"So, it sounds like we will be encouraging, or at least accepting of, people paying and playing," said Sen. Angela Bryant, R-Nash.
Bryant said that sort of a arrangement would raise questions in her rural and poor part of the state as to whether better-heeled communities have an inside track on landing incentives.
Staff members and backers of the bill said the nonprofit would only facilitate applications, not make recommendations as to who might get incentives. It would be government officials, not the nonprofit board, who would make the final decisions on grants, they said.
Bryant said that sounded naive.
"It's like smoke and mirrors to say these people don't know each other," she responded.
Sen. Harry Brown, R-Onslow, one of the bill's primary drafters, said, "Sen. Bryant, I live in eastern North Carolina too, and if I felt like this bill would do that, I wouldn't be bringing it forward."
The logic behind creating a public-private partnership is to make the state's business recruitment functions act more like private industry.
"I've learned in public life we do not always move as fast as we do in the private sector," said Commerce Secretary Sharon Decker.
But private companies can also keep information private that is currently available to the public from the Commerce Department. Under current law, records submitted to the Commerce Department as part of a business recruitment effort become public after the company relocates to the state or goes somewhere else.
Early drafts of the bill would have submitted the public-private partnership to the same level of scrutiny. But the versions approved Wednesday would exempt many records from public view. The nonprofit would have to turn over records it collected on a business only if that company applies for and receives incentives from the state. In the case of businesses that apply for incentives and either are denied or refuse the grant, only the proposal submitted to the state would be public.
For those businesses that never apply for incentives, nothing the nonprofit does or collects would become public.
"If public funds are never obligated, then this is private sector activity," said Rep. Tom Murry, R-Wake.
Decker explained to the Senate committee that her department frequently gets requests for public records after unsuccessful recruiting efforts. For the department, she said, it can be awkward to have details of an incentive package released. Other companies, she said, might use it to try to maneuver for a better deal.
"Recruiting is private business in a lot of senses," Brown said.
Many companies that might otherwise look closely at North Carolina, he said, would not want details shared with the state – or even the fact they were thinking about a move shared with the public.
At least one economic developer has blamed job recruiting failures on the state's open records law.
But some lawmakers said the nonprofit should be transparent, especially because it was funded with public money.
"I think the public has a right to know what is being done in it's name," said Sen. Josh Stein, D-Wake.
Those records, he said, could explain why the state lost its bid for some companies to other states.
Decker said that, if the state had a string of lost opportunities, that would be "a lack of performance," and the state would then have reason to terminate the nonprofit's contract.
Confidence in Lindenmuth
The state has already created the nonprofit it will use to handle business recruiting. As its chief executive, McCrory and Decker have chosen Richard Lindenmuth, a veteran executive and political adviser.
Questions about Lindenmuth have been raised by a report in N.C. Policy Watch, a liberal-leaning publication that relied on bankruptcy filings and other documents to question Lindenmuth's job-recruiting credentials.
Despite those questions, Decker said she still anticipates Lindenmuth will head the new nonprofit.
"He was very forthright," she said, adding that he was "fully vetted" during the hiring process.