The News & Observer

Raleigh, N.C.

August 17, 1995

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Incentives pay off, study says

Paul Nowell, The Associated Press

Copyright © 1995, The News & Observer

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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.

"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 development.

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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