State News

Economic Incentives Compromise Is Law

Posted September 11, 2007 12:03 p.m. EDT
Updated September 11, 2007 5:13 p.m. EDT

— The General Assembly on Tuesday approved and the governor signed an expanded economic incentives package for large manufacturers, particularly two tire companies, signing off on a revised version of another bill that Gov. Mike Easley had vetoed as fiscally unsound.

The new bill, approved 61-44 in the House and 25-16 in the Senate, amended legislation initially written to target only a Goodyear Tire & Rubber Co. plant in Fayetteville.

Easley signed the new bill into law Tuesday afternoon.

"This tool is a fantastic statement by the General Assembly that North Carolina is focused on the future and determined that our citizens will compete and win in the new world economy," Easley said in a statement. "It requires huge investments – each more than $200 million – by companies that accept the challenge to build world-class facilities here that are the most technologically advanced on the globe."

The new version makes it easier for Goodyear rival Bridgestone Corp. to also receive cash grants for making improvements at its plant in Wilson. It also increases the total cost of the grant program from $40 million over 10 years to $60 million.

Fayetteville and Wilson-area lawmakers argued the bill was needed to preserve a combined 5,000 high-paying jobs in their economically distressed regions. They are worried that without the incentives, the companies might decided not to upgrade the plants and ultimately close them.

"This bill is about preserving jobs long term," said Rep. Rick Glazier, D-Cumberland, told colleagues during a House committee debate. "People will dramatically suffer if we do not support them and their workers and their work force right now."

Goodyear could get more than $24 million and Bridgestone $22 million in incentives over the next 10 years as part of the compromise, according to House Speaker Joe Hackney's office. The program would allow three more companies to receive grants, but it's unclear if other businesses in those two or any other economically distressed county could qualify.

Companies would have to have a minimum of 2,000 workers, invest $200 million over a six-year period and maintain average wages that are 40 percent higher than the local average to qualify. A company would lose a portion of its annual grant if the plant's overall employment level fell. If employment fell by 20 percent, the company would lose its entire grant for that year.

Easley vetoed the original bill, in part, because it would have allowed Goodyear to lay off about a quarter of its work force and still qualify for the state grants.

"The bill ensures workers' job security, wages, benefits and advanced training as part of the incentives. It is performance-based with clear criteria for earning any incentive,” he said in the statement Tuesday.

The House rejected an amendment offered by Rep. Paul Luebke, D-Durham, that would have required the recipient to return all grants ever received under the program if employment fell by 20 percent.

Luebke complained the Legislature was making a big policy change by giving financial assistance to companies that not only are not creating new jobs, but might make job cuts in the future.

"We are taking a major step backward today," he said.

Supporters argue the Fayetteville area, already hurting from the overseas deployments of Fort Bragg soldiers, would be harmed if the Goodyear plant closed. It employs about 2,750 workers.

Goodyear has said the incentives are a key component in the company's plans to retool the plant and produce high-grade tires. The company has been offered similar financial assistance for similar renovations in Alabama.

Several Republicans said during House and Senate debate the General Assembly shouldn't be choosing which company benefits from targeted assistance and instead should help all companies equally by lowering taxes.

"We're talking about a $60 million program that requires no new jobs and does not require the company to pay (additional) state taxes," said GOP Sen. Fred Smith of Johnston County, a candidate for governor in 2008. "These targeted incentives for a few businesses are not fair for all our people."

Lawmakers had returned to Raleigh on Monday so the General Assembly could attempt to override Easley's veto. Instead of taking a vote, lawmakers recessed for several hours and held closed-door negotiations on a compromise. House members and aides to Easley agreed Monday night on the revised legislation and called a different special session so they could vote on a new bill.

Lawmakers have never overridden a governor's veto in North Carolina, which 10 years ago became the last state in the country to give its governor that authority. Easley, who has issued eight vetoes, is the only governor to have used the power.