The News & Observer

Raleigh, N.C.

February 15, 1996

State board approves business incentives

The Associated Press

Copyright © 1996, The News & Observer

Gov. Hunt says the state needs the tools to compete with other states for firms.

CHARLOTTE - A state board, acting just two days before the Supreme Court hears arguments about the constitutionality of business recruiting incentives, on Wednesday approved an enhanced package of such incentives.

The North Carolina Economic Development Board approved the incentives after hearing a pep talk from Gov. Jim Hunt.

Hunt told the panel that Virginia and South Carolina have won at least 30 major prospects and thousands of jobs at North Carolina's expense in the past three years.

"That has got to stop," Hunt told board members, who were meeting in a Charlotte hotel. "We can't be in a position where we are consistently losing those battles and those jobs."

Hunt urged the board to give recruiters the tools to compete against other states.

"The people of North Carolina want us to get jobs," he said. "There are a few out there who are afraid we might taint our lily-white hands, but most want us to do what it takes to compete."

Before adjourning, the panel approved the incentives in a voice vote.

Last fall, a board task force proposed the changes to the state's industrial recruiting program, including expanding tax credits to economically distressed parts of the state.

In November, the board agreed in principle to a "modest expansion" of North Carolina's incentives. The proposals included:

- Extending an existing corporate income tax credit to all counties and increasing the credit in the 25 poorest counties from $2,800 to $4,000 for each job created.

- Allowing non-manufacturing companies to qualify for credits if they make at least 75 percent of their sales outside North Carolina.

- Expanding exemptions from a 3 percent sales tax on energy costs and a 1 percent sales tax on machinery and equipment.

- Creating new credits for research and development and for training new workers.

- Reducing the state's corporate tax rate to less than 7 percent. It is now 7.75 percent.

The package now goes to Hunt, who can recommend part or all of it to the legislature, which has the final word in any changes in the state's industrial recruiting programs.

The board also heard a fiery speech Wednesday morning from state Commerce Secretary Dave Phillips.

"This is a week that's going to define the future of economic development in this state," he said, referring to both the package before the board and the lawsuit before the North Carolina Supreme Court.

On Friday, the high court hears arguments in a suit by William Maready. The Winston-Salem lawyer is challenging the constitutionality of a state law that allows local governments to use taxpayer money to recruit private corporations.

In August, Forsyth County Superior Court Judge Julius Rousseau agreed with Maready that the financial incentives violate the state Constitution. The high court agreed to hear the case, bypassing the appellate courts.

Attorney General Mike Easley will argue before the seven-member court on behalf of the state, the city of Winston-Salem and Forsyth County. Maready will be represented by his law partner, Michael Robinson.

Although Rousseau's ruling does not carry any weight outside Forsyth County, state and local business recruiters claim that some potentially lucrative prospects have written off North Carolina because of uncertainty over the incentives.

Phillips said about 80 percent of the incentives that go to a company that moves to or expands in North Carolina come from local governments. "If Maready prevails, all of that will be done away with," he said. "It all will come to a standstill."

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Copyright © 1996, The News & Observer.

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