The News & Observer
Raleigh, N.C.
September 19, 1995
Relocating firms get fewer incentives in N.C.
Poll finds other states much more generous
Dudley Price, Staff Writer
Copyright © 1995, The News & Observer
A new poll of corporate executives says North Carolina lags
behind most other states in offering economic incentives to lure
new companies.
Corporate Finance magazine says 33 states offer more generous
incentives than are available here, but offers a mixed review of
the value of excessive largess.
The fall edition of the quarterly magazine published a survey
of 203 senior corporate executives by KPMG Peat Marwick. The
executives were asked to rank states by availability of
incentives in five categories: income tax and franchise tax
credits, job training grants, sales tax exemptions, property tax
exemptions, and help in finding and guaranteeing financing.
The magazine reported the results in an article entitled
"Gauging the Open-Arms Race." It says states such as Alabama,
which two years ago offered incentives of between $230 million
and $300 million to land a Mercedes-Benz plant, are faring
better than North Carolina in building a reputation among
business planners as top relocation targets.
North Carolina is "not out in the marketplace, based on what
these executives say, like a state like Alabama is," said Doug
McIntyre, editor-in-chief of Financial World, which is Corporate
Finance's parent company. "The second question, which I can't
answer, is 'Do you want to keep up with the competition?' Some
of these states may be giving away too much."
States' willingness to offer financial perks to lure
businesses seemed to have little to do with where they were
located. The states ranked as being most generous were all over
the map: Alabama, California, Delaware, Idaho, Indiana, New
Jersey, Ohio and West Virginia. So were the four least generous
states: Arizona, Maryland, South Dakota and Wyoming.
Some people say the incentives also can prove harmful to the
companies by causing them to make bad decisions.
In an article that accompanies the survey, Watts Carr,
formerly the chief industrial recruiter for the state Department
of Commerce, argues that "incentives are muddying the water and
companies are making decisions colored by incentives instead of
where is the best place to be located.
"If this were not a common practice, businesses would make
their decisions based on labor force quality, wage rates,
quality of work and transportation," said Carr, president of the
North Carolina Partnership for Economic Development.
North Carolina historically has appealed to new companies
because of its low union presence, geography and climate. And
two years ago, Fortune magazine ranked the Triangle as the best
place in America to do business, largely thanks to the quality
of its work force.
The incentive issue may be rendered moot anyway, thanks to a
decision last month by a Forsyth County judge who ruled that
using tax dollars to recruit companies was unconstitutional.
While companies love the money, which they often use to
leverage better deals from competing states, a Winston-Salem
lawyer challenged the practice of using public money for private
development and the judge agreed.
State Attorney General Mike Easley is helping Forsyth County
appeal the decision to the state Supreme Court. The decision has
no impact outside Forsyth County, but Ed Regan, deputy director
of the N.C. Association of County Commissioners, has predicted
local governments will be more cautious about what they offer to
attract industries until the matter is clarified by a higher
court.
Even the state's largest business advocacy group isn't
pushing for more incentives. One reason is that new companies
may compete with other industries that are already here.
"Most of our members think the state is doing a fairly good
job," said Anne Griffith, vice president for government affairs
of the N.C. Citizens for Business and Industry, which represents
about 1,800 companies.
"We feel some states are doing too much," Griffith said. "You
don't want to bring in companies when it takes 25 years to break
even. If none of the states did anything, it probably would be
the best idea."
Used with permission.
All rights reserved. No part of this article may be
reproduced, translated, or transmitted in any form or by any means without
permission in writing from The News & Observer.
Copyright © 1995, The News & Observer.
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