The Charlotte Observer

November 19, 1995

Invest in industry and jobs - without giving away the store

Dave Phillips, Special to The Observer

Copyright © 1995, The Charlotte Observer

North Carolina has evolved over the decades from a predominantly agricultural state to a growth center for high-technology industries. Our economy has diversified into the automotive, biotechnology, computer and transportation industries.

North Carolina has built this strong economy with incentives - worker training through the community college system, world-renowned universities and research parks, a state-maintained highway system, a AAA bond rating, strong financial resources and infrastructure such as water, sewer and road improvements.

In the last three years, the Hunt administration has offered modest financial incentives to help create new jobs. These include the Industrial Recruitment Competitive Fund, which provides modest cash incentives to help close a deal on new or expanding industry; the Jobs Creation Tax Credit, which provides a $2,800 tax credit for each new job created, and an expanded Industrial Development fund, which gives counties up to $2,400 for each new job created in order to renovate buildings or provide infrastructure to industrial sites. Gov. Hunt has also championed major changes in the tax code that benefit business and industries in North Carolina.

The Maready case argues that business incentives provided by governments to companies are not used for a public purpose. When a Forsyth County Superior Court judge agreed with Maready in August, the ruling made headlines across the nation. When a Transylvania County Superior Court judge ruled on a similar local challenge to incentives eight weeks ago and said incentives were indeed constitutional, there was little news coverage. The two rulings indicate the different opinions held on incentives.

So it has always been. Even in 1968, our Supreme Court had divided opinions - and that of Chief Justice R. Hunt Parker was far-sighted. In an important dissent to an opinion striking down an economic incentives act, Justice Parker wrote: ``We have moved into a jet age, characterized by gigantic mergers of corporations and struggles between the states of this Nation to get new industry; and, in the language of the legislative findings and purposes, this Act is necessary for the State's progress and growth in order to meet the challenge of attracting new industry through legislative enactments in other jurisdictions and to continue the State's progress in industrial development.' In this jet age conditions for industrial development are critical or urgent, and, in Mr. Justice Cardozo's words, What is critical or urgent changes with the times.' North Carolina's efforts to attract new industry will be hampered . . . if the majority opinion becomes the law in this State.''

We believe that incentives benefit the public in a significant way - by bringing jobs. Incentives are investments in our economy and in our work force; our strong business economy is proof that we have made wise investments.


A great record

North Carolina has recruited many good companies because we have offered modest financial incentives. The Industrial Recruitment Competitive Fund, set up by the General Assembly in 1993, is North Carolina's only cash incentive. It has brought nearly 10,000 new jobs and more than $1 billion in investment to North Carolina. Over a three-year period, the General Assembly's investment of $12 million in the fund has helped 55 companies create new jobs. That is compared to an $86 million incentive package provided by Virginia to Motorola.

Mr. Maready should talk to the thousands of North Carolinians who have completed worker-training programs to get good jobs at the companies here because of incentives. He should talk to rural North Carolinians who can work in their counties only because of water, sewer and road improvements that helped land the company there.

Mr. Maready should talk to North Carolinians in largely rural Person County about the Competitive Fund that helped bring Wolverine Tube Inc., 200 new jobs and a $37 million investment.

It is ironic this lawsuit is pending in North Carolina courts when neighboring states are escalating the use of incentives daily. A recent poll by Financial World ranks North Carolina 34th among the 50 states that provide financial incentives.

Over the past three years, North Carolina has lost more than 30 major companies to Virginia and South Carolina - and lost thousands of jobs for North Carolinians. Those companies include Black & Decker, Isola Werke, AMP and American Koyo Bearing - all now in South Carolina; and IBM/Toshiba, Motorola and Solarex - all now in Virginia.


Drawing the line

Unlike South Carolina and Virginia, North Carolina has refused to give away the store. We have refused to offer giveaways like tax abatements extending years into the future and industrial construction paid by deductions from wages of the workers. That's where we draw the line.

Last spring, before the Maready case, Gov. Hunt asked the N.C. Economic Development Board to take a hard look at North Carolina's incentives, compare them to other states and recommend changes. Last week, the board's task force detailed incentives packages used by competitor states, recommending that North Carolina use our modest incentives more strategically to compete for high-wage jobs. A final recommendation to Gov. Hunt will come in February.

North Carolina's economy is strong - with record numbers of new jobs in the last two years - because the Hunt administration has been aggressive about recruiting new jobs. Now, we face crucial questions: Do we forfeit the game and forfeit good jobs for our people, or do we seek ways to play wisely?

The people of this state need good jobs, and we need to pursue economic development strategies that will help us recruit new jobs without giving away the store. North Carolina will fight to keep its competitive edge, including modest incentives. Gov. Hunt will continue to push for a more competitive business climate with better schools and lower taxes, and he will continue to look for ways to bring high-skill, high-wage jobs to all areas of the state. The people of this state deserve no less.

Dave Phillips, a High Point businessman, is N.C. Secretary of Commerce.

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Copyright © 1995, The Charlotte Observer.

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