Perdue defends business-recruitment incentives
Posted October 8, 2009
Raleigh, N.C. — A day after Dell Inc. announced plans to close its computer manufacturing plant in Forsyth County and lay off all 905 workers, Gov. Beverly Perdue defended the state recruiting incentives that helped lure the company to North Carolina.
Dell opened the $100 million plant four years ago after state and local officials promised about $279 million in tax breaks and other incentives to attract the Texas-based company.
Much of the incentive money was tied to certain hiring and investment goals, and state Department of Commerce spokeswoman Kathy Neal said Thursday that the state has paid the company about $8.5 million to date in grant money, tax credits and work force training credits.
State lawmakers passed a computer manufacturing credit in 2004 to help lure Dell, and it was expected to account for the bulk of the incentives, Neal said. So far, it has generated only $100,000 for the company, she said.
In announcing the shutdown, a Dell vice president said Wednesday that the company would honor its agreements with North Carolina and Forsyth County and pay back any incentive money that it doesn't deserve.
"Every red cent of incentive money has to come back to the people of North Carolina," Perdue said. "The state has yet to put up the hundreds of millions (of dollars) that were committed because it was a five-year payout based on jobs."
Dell is the 12th company not to fulfill its obligations under a Job Development Incentive Grant from the state. Five others withdrew from the program, three declined the grant once it was offered and three had their grants terminated.
Under JDIG grants, the state refunds a portion of the payroll tax paid by the company on its new employees. The grants can last for up to 12 years, but a company much meet pre-determined hiring goals each year to get its annual refund.
North Carolina has awarded 95 JDIG grants since 2003. Together, they were expected to generate more than 34,000 jobs and $6.2 billion in corporate investment.
Former state Supreme Court Justice Bob Orr, who unsuccessfully challenged the Dell incentives package in court, said the state shouldn't be picking which companies should or shouldn't get incentives. He also said companies will locate plants according to their best interests, regardless of incentives.
"It's a bad deal because we're using the public's money to do things that are going to happen anyway," said Orr, who now is director of the North Carolina Institute for Constitutional Law. "We're simply being played for suckers, and that's what's so frustrating about it."
Perdue said tying incentives to job creation and investment means there's little risk for the state in the deal, so they make good economic sense.
"When 49 other states are using incentives, if you want to compete (you have to as well)," she said. "Maybe the people of North Carolina want to pull up the rug and say we don't want jobs, but I'm not at that place. I think we need to be aggressive on jobs, and as long as I'm governor, we're going to be."