NC's $1.6B incentive offer to Toyota-Mazda filled with perks
Posted February 6, 2018 2:03 p.m. EST
Updated July 13, 2018 1:48 p.m. EDT
Raleigh, N.C. — A dedicated state employee at the Commerce Department. A $1 million international campaign to attract parts suppliers. A free 1,500-acre megasite outside of Greensboro, valued at $48 million.
Had Toyota and Mazda not passed up North Carolina last month for the site of their new joint car plant, the auto manufacturers would have nabbed these perks among a package of incentives worth $1.6 billion, documents released this week by the state Department of Commerce show. The auto partnership, codenamed "Project New World," instead chose Alabama for its new facility, expected to employ about 4,000 when it opens in 2021.
Alabama offered a reported $800 million in incentives to the two companies, although it's unclear what kinds of incentives that number includes and whether it's comparable to North Carolina's package.
Economic development experts and state officials have largely attributed the loss of the plant to a problem of geography – Alabama sits in a corridor of established auto parts suppliers and has easier access to the domestic market.
But the records released by the Commerce Department late Monday show the lengths North Carolina officials went through to overcome that obstacle, marshaling resources from the legislature, utility companies and the community college system to offer the most expensive incentive package in North Carolina's history. The documents also shed light on the largely secretive process – shielded by law from public view – to recruit companies with taxpayer dollars.
Tax reform takes plays prominent role
North Carolina's pitch leaned heavily on the state's recent tax reforms, implemented by Republican lawmakers with the goal to entice more businesses to the state and boost job creation.
"Seeing as other states may have a higher face-value to their incentive package, someone (maybe the Secretary) should emphasize the lower total cost of doing business in North Carolina (i.e. our incentives may not be as much as other states, but our taxes are also much lower than other states like SC)," Chris Chung, chief executive officer of the Economic Development Partnership of North Carolina, the public-private organization that works with the commerce department to recruit businesses to the state, wrote in an email to Commerce Secretary Tony Copeland.
Valued at $565 million, the tax savings alone make up more than one-third of the incentive package. That emphasizes the point tax reformers have been making for years, says Joe Coletti, a senior fellow at the conservative John Locke Foundation who reviewed the incentive offer Tuesday.
"When you cut taxes for everybody, you're not picking winners and losers," Coletti said. "It's the high point in this package."
Cash grants to the companies from state and local governments accounted for more than $500 million, based on hiring. The offer from Randolph County amounted to $100 million alone.
Coletti, whose organization is opposed to incentive grants, said that figure is a massive one for a single local government. By comparison, a 2015 tally by John Locke researchers showed all of North Carolina's counties committed a total of $284 million over five years.
"I don't know that Randolph County can afford spending money on this," Coletti said. "Everybody else in county is going have to cover that cost."
A call to Randolph County Manager Hal Johnson for comment was not immediately returned Tuesday.
|Workforce and Training incentives||Talent Identification and Selection||Screening and Assessment - In-kind services provided by NCWorks for employee screening based on job requirements and specifications developed by the company, ensuring the company only receives referrals who meet the job requirements.||NCWorks||$2,000,000|
|Workforce and Training incentives||NC Community Colleges - Customized Training||Customized Workforce Training helps attract and retain skilled workforce to new or expanding companies. No other states have more experience assisting companies with this crucial matter than North Carolina. The State of North Carolina pioneered this free, customized job training for new and expanding businesses in 1958, and continues to provide the nation's most-recognized, cutting edge job training service. This program provides customized education, training, development of instructional materials, and supporting services at no cost to eligible companies.||NC Community College System||$16,400,000|
|Workforce and Training incentives||Golden Leaf - Specialized Training Center||Golden LEAF will consider applications to assist eligible state, regional and local economic development entities with grants to support permissible activities that lead to job creation in tobacco-dependent or economically distressed areas. Estimated value to be determined on best use of funds towards training-related assistance.||Golden LEAF Foundation||$25,000,000|
|Workforce and Training incentives||Apprenticeship Program||ApprenticeshipNC helps workers learn new specialized skills needed in today's workforce through its apprenticeship programs. Apprentices train for an industry by receiving a combination of classroom instruction and on-the job training. Participants are paid for their work, and their wages will increase as they progress in the program.||NC Community College System||$3,000,000|
|Workforce and Training incentives||Japanese Saturday School Start-up||The North Carolina education cooperative and the North Carolina General will offer a grant and collaboration to begin a Japanese Saturday School program in North Carolina at a mutually agreeable location between company and state partners.||State of NC||$100,000|
|Site Preparation||Real Estate - Land Conveyance||Site will be conveyed to end user at no cost.||North Carolina Railroad, Randolph County and Greensboro Megasite Foundation||$48,000,000|
|Site Preparation||Site Infrastructure Development Fund||Site infrastructure fund is an infrastructure and site readiness fund reserved for the most transformational projects. Funds go toward all site development and readiness expenses.||State of NC||$76,000,000|
|Infrastructure Development||Public Water and Sewer Improvements||Golden LEAF Foundation and the City of Greensboro are committed to the needed water/wastewater improvements at the Greensboro-Randolph Megasite to faciltate the location of Project New World.||Golden LEAF, City of Greensboro, NC Commerce||$37,252,000|
|Infrastructure Development||Rail Access and Infrastructure Improvements||Norfolk Southern in conjunction with DOT and the North Carolina Railroad Company will provide "on site" rail infrastructure to the client company.||Norfolk Southern and North Carolina Railroad Company||$18,000,000|
|Infrastructure Development||Road Access Improvements||Funds are available through the NC Department of Transportation to construct roads to provide access to new or expanded industrial or manufacturing facilities, including mills, processing facilities and laboratories and other industrial research operations.||NC DOT||$78,950,000|
|Infrastructure Development||Electricity Infrastructure||Value encompasses commitment by Duke Energy to move 500Kv line to accommodate user on Greensboro-Randolph Megasite, as well as value for construction of separate 100Kv line and the Duke Energy Economic Development fee rider.||Duke Energy||$53,200,000|
|Infrastructure Development||Natural Gas Infrastructure||Value encompasses commitment by Piedmont Natural Gas to serve the Greensboro-Randolph megasite to include 7 miles of pipeline extension and an additional 6.5 miles of upstream pipeline looping. May include utility fees negotiable between Piedmont Natural Gas and end user.||Piedmont Natural Gas||$63,200,000|
|Cost Reduction Incentives||Corporate Income and Franchise Tax Savings||North Carolina's business climate and tax structure is unmatched in the United States. Combining 2.5% coporate income tax, single sales factor apportionment and one of the lowest franchise taxes in the united states makes for a tax savings advantage that is second to none.||State of NC||$565,650,000|
|Cost Reduction Incentives||Sales Tax Exemption on M&E||Manufacturers, certain recyclers, research and development companies, and eligible datacenters are exempt from sales tax on purchases of machinery and equipment. Estimated value based on projected personal property investment.||State of NC||$54,000,000|
|Cost Reduction Incentives||Sales Tax Exemption on Building Materials||Manufacturers, certain recyclers, research and development companies, and eligible datacenters are exempt from sales tax on purchases of machinery and equipment. Estimated value based on projected personal property investment.||State of NC||$27,000,000|
|Cost Reduction Incentives||Job Development Investment Grant||A performance-based, discretionary incentive program that provides cash grants directly to new and expanding businesses to help offset the cost of locating or expanding a business facility in the state. These cash grants for "high yield" projects are disbursed annually, for up to 20 years, and can be used by the company for whatever purpose desired and are not tied to qualified expenses or other such requirements.||State of NC||$215,000,000|
|Cost Reduction Incentives||One North Carolina Fund||The One North Carolina Fund is a discretionary program that provides direct cash reimbursements to new and expanding high-impact competitive projects that create new jobs. Awards are based on job creation, economic impact of the project, the importance of the project to the state, and quality of industry and environmental impact.||State of NC||$200,000,000|
|Cost Reduction Incentives||Property Tax Grant||Local property tax grant based on new jobs and/or capital investment.||Randolph County||$100,000,000|
|Supplier & Supply Chain Incentives||Supply Chain Summits||Initiative to bring together in-state and out-of-state potential auto suppliers to ensure a robust supply network in North Carolina.||State of NC with NC Commerce and EDPNC||$100,000|
|Supplier & Supply Chain Incentives||Supply Chain Resource Collaborative Initiative||Initiative with NC State University experts to focus an executable recommendations to provide solutions to real-world supply chain problems to improve supply chain performance, resulting in quantitative or qualitative returns.||NC State University||$150,000|
|Supplier & Supply Chain Incentives||Upgrading Skills and Equipment for existing NC Suppliers||Funding to NC Community Colleges to support customized training and training equipment to ensure North Carolina's existing supplier network is on the cutting edge of industry needs.||NC Community Colleges and Golden LEAF Foundation||$5,000,000|
|Supplier & Supply Chain Incentives||International Marketing to Suppliers||Initiative to make potential automotive suppliers aware of advantages of North Carolina location to serve Project New World and collaborative supply network in North Carolina.||NC Commerce and EDPNC||$1,000,000|
|Project Management||Dedicated Project Management||NC Department of Commerce is committed to providing the companies a dedicated point of contact whose singular focus is to serve their needs.||State of NC with NC Commerce||$250,000|
Other perks sweeten the pot
A substantial portion of the incentive package addressed both job training and apprenticeship through the community college system. That included $100,000 for a "Japanese Saturday School Start-Up." The state also touted water, sewer, energy and road access improvements for the $48 million Greensboro-Randolph County megasite, which Toyota and Mazda would acquire free of charge.
Another $6.3 million would be dedicated to "supply chain incentives," like summits to attract new suppliers and an international marketing effort to build capacity for parts makers.
Coletti said some of these efforts may not require new money and instead involve existing divisions at the commerce department and EDPNC.
But also among the package was $250,000 to provide "dedicated project management," where Commerce officials would provide "a point of contact whose singular focus is to serve their needs."
Coletti said a perk like that probably points to a larger need for reform.
"If you need to hire somebody to help them navigate the state, then we should probably take a look at the regulations and see what's hampering every business in the state," Coletti said.
Yet, there are hints that the state's incentive efforts went a long way toward convincing Toyota-Mazda to keep North Carolina in the running, despite the drawbacks of location.
In mid-September, Chung told his colleagues to expect guidance on "what gaps we should be prepared to address on the incentives front."
"It's been implied that, if we can get close to the target number they suggest, we will be in a strong position at least from an incentives standpoint," Chung wrote. "That still assumes we can address any site viability issues."
'Feel the love'
The effort to recruit went beyond monetary incentives. Chung provided state officials with detailed notes and advice from the companies' site developer on how to handle representatives from Toyota and Mazda on visits and phone calls to ensure they "clearly 'feel the love' about how important this project is to North Carolina."
"This needs to come across loud and clear in language, tone, verbal and nonverbal communication," Chung wrote to Copeland and others on Sept. 19.
That included suggestions of direct contact from Gov. Roy Cooper, who was encouraged to make it clear "the state wants both companies to call it home."
"If you are able to persuade the governor to personally greet the top two Toyota executives at the FBO and ride with them (in a Toyota) to the Residence, this would allow even more time spent together," Chung wrote.
Other talking points included Toyota's emphasis on veteran hiring, its "zero waste to landfill" concept and its pivot to seeing itself as a "mobility company" rather than just a car company.
"Mobility is in the context of both physical (helping people get from Point A to Point B) but also how that availability of mobility solutions helps people be more socially and economically mobile," Chung wrote ahead of the company's site visit in September.
Days before the story broke in early January that Toyota and Mazda passed North Carolina over, state economic developers were still holding out for good news. Chung had already drafted a marketing outreach plan for the effort to attract parts suppliers and shared it with Copeland.
The plan included a targeted Japanese website and investment seminars meant to sell the state with the help of Toyota and Mazda. Although he acknowledged it was a rough outline, Chung told his colleagues he wanted the ability to act quickly when the two companies made their decision.
"Cost-wise, we are confident we can raise additional private funds to help with much of this outreach effort," Chung wrote on Jan. 3, exactly one week before the announcement about Alabama. "Thanks, and I hope this is helpful information. Fingers crossed!"