Lost jobs deal raises questions about state incentives

Posted November 23, 2011

— North Carolina is consistently ranked one of the most business-friendly states in the country. But the state jobless rate, at 10.4 percent, is well above the national average of 9.1 percent, and the state only added 700 private sector jobs last month.

Nearly twice that many jobs slipped away last month because state leaders disagreed on what those jobs were worth.

A deal, code-named Project Soccer, with Continental Tire was on track to bring a new plant and 1,300 jobs to Brunswick County, but state leaders couldn't agree on an incentive package, and the jobs went to South Carolina instead.

Politicians blamed each other when the deal fell through. Senate President Pro Tempore Phil Berger, R-Rockingham, blamed "pay-to-play politics" by Gov. Bev Perdue for the loss.

But emails between lawmakers and Perdue officials show that politics didn't have much to do with it. What killed the deal was its bottom line. The state and local incentives that the company wanted added up to about $100 million – about $77,000 per job.

That's not the most the state has ever paid. In 2007, Google got nearly $1 million per job. But Google has to keep its employees for many years to recoup that money through tax breaks.

Continental Tire wanted an unprecedented $45 million up front to help build its new plant. Had it failed to produce the jobs it promised, the state would have had difficulty recouping the money. 

Berger said no, and the deal fell through.

State Commerce Secretary Keith Crisco says states compete aggressively for new jobs, and North Carolina can't afford to "unilaterally disarm." 

Lost jobs deal raises questions about state incentives Lost jobs deal raises questions about state incentives

"It's just a decision we have to make as jobs continue to be precious and competition's revved up," he said. "Do we meet competition?”

States, however, don't even know what other states are bidding. Only the company knows what each state is offering. That's because records for economic development deals aren't made public until the deals are closed. 

Berger declined to be interviewed for this story, but has previously said that he "didn't think it was the best use of taxpayer dollars" in a tight budget year.

North Carolina Institute for Constitutional Law director Jeannette Doran couldn't agree more.

"These specially crafted backroom deals – that's crony capitalism, and it stinks to high heaven," Doran said.

Doran's group fights incentives in court. She says that the state shouldn't be handing out money to a few chosen businesses while taxpayers foot the bill.

"That's fundamentally unfair, and the public knows it. I think other businesses know it," she said. "If the state thinks that the way to stimulate the economy and promote job growth is some kind of incentive program, then one would think they'd want to offer that incentive to everybody."

Doran says economic development programs like the One North Carolina Fund and the Job Development Investment Grants are fairer because anyone can apply for them. 

Other critics of incentives, including presumed 2012 GOP gubernatorial contender Pat McCrory, say the state should put the money it spends on incentives into cutting tax rates for all businesses instead. 

Commerce Secretary Crisco agrees that a tax cut would help the state recruit businesses. "But to say we’ll do that and nothing else, and ignore every other factor in economic development, would be a mistake," he said.  

The big question, Crisco says, is what future companies will ask for in return for new jobs.

"If this trend continues," Crisco asked, "if it goes 20 more years, what’s the end game? I don’t know. We need to have that discussion." 


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  • whatusay Nov 25, 2011

    My Dad always told me, "work for what your need, don't depend on anyone else". But today, gov't says.......don't work, we will pay you to not work...and all the illegals that come don't have to work...we will pay them also. Our gov't have brought down America.... But the ignorant democrats keep re-electing he same people....why??? Same with the republicans... I will nevr vote again to re-elect a sitting congress member..... never.

  • whatusay Nov 25, 2011

    Liberals are leaches....they want to take from those who have succeeded... Liberals believe that what you have earned belongs to them. Liberals believe if you have wealth you are evil, you have more than your are entiled. Doesn't matter how hard your worked for your wealth.....it should be distributed them .....for doing nothing...

  • whatusay Nov 25, 2011

    the democrats are corrupt. They support their own political agenda....bankrupt america... I welcome any liberal counter comments to prove me wrong. What does the democrats propose that will help this country???? Any takers????? What do the liberals propose??? I can tell you... nothing....

  • geosol Nov 25, 2011

    Somebody needs to tell the little REPUBLICAN hypocrites that keep voting for these incentives in their districts to stop doing this right away!!!! Truly the only way to get rid of "tax incentives" is to put up national legislation in the U.S. Congress to eliminate them so that all states are on equal footing. Don't see any REPUBLICANS in the House introducing any such legislation now that they control it. Wonder why?

  • dumbhick Nov 25, 2011

    jrfergerson: "You think maybe just maybe that companies that wish to come here see the corruption of the back room deal. Perhaps they would consider locating here if this type stuff would quit."
    Corruption in the public sector exists to benefit the private sector. Back room deals are what companies are looking for. In the private sector it's called "networking" or "relationships", in the public sector it's called corruption. In the private sector wining & dining is SOP, in the public sector it's bribery.

  • whatusay Nov 25, 2011

    If NC wants to attract businesses all we have to do is lower our corporate tax rates.....Reduced taxes produce more income if businesses know they will get long-term savings.

  • whatusay Nov 25, 2011

    When the process is corrupt and the politicians offer incentives to line their own pockets it's better to let these companies go somewhere else.
    The stimulus money Obama handed out cost the US $278,000 per job created....was that a good use of our taxes??

  • Tax Man Nov 24, 2011

    Any incentive offered to any out of state company must also be available on equal footing to companies already in NC. It is just wrong to pay people to come to NC when you ignore those who are already here hiring people. So there should be a NC constitutional amendment that requires NC to give the exact same incentives to any NC employer that any "recruited" out of state employer gets. So if they offer Google big bucks they need to offer me the same big bucks! The best solution is to just reduce taxes all employers pay in NC so that we can compete against other states. Our taxes are among the highest in the entire US - that is employment, sales, property, franchise, corporation, highway, unemployment - we just need to cut them to compete! Lord knows our state wastes about 50% of the taxes it collects anyway. Give us a break!

  • luckn4u2 Nov 24, 2011

    South Carolina sure didn't have no problem welcoming the new plant,,it's not only about tax incentives in NC,it's about the kickback money they want in return later on down the road and eveidently NC once again lost in both directions..Im sure this tire company left with a bitter taste,they should have known upfront they would be dealing with hard core democrats who dont budge and are a major problem in why north carolina's unemployment rate is so high.

  • jrfergerson Nov 24, 2011

    You think maybe just maybe that companies that wish to come here see the corruption of the back room deal. Perhaps they would consider locating here if this type stuff would quit. You know the saying if one would use a back room deal to get my corporations here - would that same type back room deal be held to be against my corporation. just a though