The News & Observer
August 17, 1995
Incentives pay off, study says
Paul Nowell, The Associated Press
Copyright © 1995, The News & Observer
North Carolina's controversial business recruitment incentives have
paid off handsomely by bringing in thousands of high-paying jobs and increased
revenue to the state, the author of a study said Wednesday.Used with permission.
"In theory, a lot of people would like to do away with them,"
said John Rees, an economic geographer at the University of North Carolina
at Greensboro. "But since we choose to play the game, which I believe
is a wise move, we have to do this or allow these jobs to go to places like
Georgia or South Carolina or Virginia."
Last Thursday, a Forsyth County judge ruled that the incentives were
unconstitutional, saying tax money cannot be used as an economic incentive
for businesses. The decision by Superior Court Judge Julius Rousseau has
sweeping ramifications for local governments across the state.
Lawyer William Maready filed a lawsuit against Winston-Salem and Forsyth
County in February, challenging the practice of using public money for private
Michael Robinson, Maready's law partner and counsel for the lawsuit,
said Wednesday the study did not appear to take into account expensive services
such as police and fire protection and education that a community must provide
when an industry moves to town.
And the North Carolina Supreme Court ruled in 1968 that such incentives
were unconstitutional, he said.
"If the people of North Carolina want to do it, they need to amend
the constitution," he said.
Rees looked at 30 of the 51 companies that located or expanded in North
Carolina in 1993 and 1994.
He found that for every $1,000 spent from the Governor's Competitive
Fund to attract companies to the state, average workers took home between
$23,000 and $46,000 in yearly wages.
The study found, the workers generated $57,000 to $200,000 in value
added to their employers.
Rees, who is a member of Gov. Jim Hunt's Task Force on Industrial Incentives,
said the study was an independent research program at UNC-Greensboro. He
based his calculations on data from the North Carolina Department of Commerce
and the federal Bureau of Economic Analysis.
Companies that received money from the state's Industrial Recruitment
Fund made invested $2 million to $40 million when they moved to North Carolina,
Rees found. Annual payrolls ranged from $500,000 to $37 million.
The new or expanded businesses also had a ripple effect, he said. For
example, when a plant opened in western North Carolina, another 1,200 jobs
were created across the state through supplier chains.
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Copyright © 1995, The News & Observer.
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