The Business Journal

Charlotte, N.C.

March 20, 1995

N.C.'s meager incentives push jobs over line
State having slow year recruiting new industry

Sougata Mukherjee, Triangle Business Journal

Copyright © 1995, The Business Journal (Charlotte, N.C.)

Despite a concerted effort from state and local communities, North Carolina is losing the incentive war for new industry and the thousands of jobs that go with them.

Already gone are several of the largest economic development projects state recruiters have ever worked on.

And more disappointments appear imminent. N.C. economic development officials are fighting for at least two projects that collectively promise thousands of jobs and more than $150 million in capital investments.

Perstorp AG, a Swedish company, is looking at the Triangle and upstate South Carolina for its U.S. divisional headquarters. And AMP Inc., a Pennsylvania conglomerate, is looking at Cabarrus County and York County for a 1,000-plus-worker shop.

Sources close to the negotiations say both projects are down to incentives -- and North Carolina is losing both battles.

If lost, those projects would would join a growing list of companies that slipped through the hands of state economic developers over the issue of incentives and other money-related factors including high utility rates.

For example, Kwikset Corp., a subsidiary of Black & Decker Corp., received a hefty $15,000-per-job tax credit from Georgia, and quickly removed North Carolina from its short list, N.C. officials say.

Parkdale Mills, citing North Carolina's high utility costs, decided to move to Virginia. And Micron Technology, after considering Durham for a $1.3 billion computer-chip plant, decided on Utah where it will net as $300 million in incentives.

Knollin Haws, a Lehi, Utah, city councilman who helped broker the deal, recently told a newspaper that for at least 10 years, 70% of Micron's property taxes essentially will be reimbursed in the form of road, water-main, power-line and sewer construction.

The state also granted a sales-tax exemption for certain Micron equipment purchases. Lehi also is going to create a redevelopment authority to raise the roughly $35 million it expects to need to cover its share of infrastructure and other costs.

That North Carolina is losing some of the projects solely because of its incentive shortfall is clear. And the state appears to be falling further behind as other Southeastern states add to their warchests.

North Carolina's constitution prohibits the state from offering financial assistance through exotic packages such as bonds, tax abatements and property tax givebacks.

"In the past two years, the use of incentives has grown more competitive," says Watts Carr, who until recently spearheaded the state's economic development efforts. "The states we compete with have added new and aggressive programs such as issuance of bonds and other financing tools."

Kentucky was at the forefront of the incentive game, initially successfully targeting industry in bordering states for relocations. Mississippi, Alabama and now South Carolina have quickly fallen into line to both protect their turf and attract new industry.

Such incentive battles are being lost by North Carolina. But Carr adds the state still ranks atop the projects that are not incentive-driven.

But it appears to be losing a plum on that front, too. Virginia seems ready to grab the $1 billion Motorola semiconductor plant that promises 5,000 jobs in six years. N.C. officials say that project is not incentive-driven.

Talk to other Southeastern states and they believe the ball game may have changed but the principles of relocation remain the same.

"The value of the projects today are much greater than the value we saw 10 or 15 years ago. Consequently, the company's requirements are greater," says Wayne Sterling, Virginia's economic development head. Sterling was hand-picked by Virginia Gov. George Allen after staking a reputation in South Carolina, where he headed up the BMW recruitment.

Sterling says the incentives that are being offered to companies are appropriate to the size and value of the projects.

That's not what North Carolina's lawmakers think.

Rep. Leo Daughtry, the House majority leader, says incentives should not play a part in recruitment efforts. "It (incentives) seemed to contradict the idea of the existing industry we already have here, and I don't see a lot of support for a lot of money in a pot for the governor to have what they call 'walking around money' or a large pot of money to induce industry to locate here," he says.

Daughtry's comment probably would set well with Gene Strong, head of Kentucky's economic development effort who says that lucrative tax breaks and financial assistance have generated jobs for his state.

"We are forgiving future tax revenues instead of existing tax revenues," Strong says. "But the taxes we are forgiving were not here to begin with and would not have been here anyway."

Strong says incentives are closing deals. But Carr's concern relates to a bigger issue.

"We always have viewed ourselves as being so successful in the past year and yet our average wages remained steady at $15,000 a year for years," he says. "This is not a winning battle. Sometimes, I think , we pat ourselves a bit too much, just to look good."

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Copyright © 1995, The Business Journal (Charlotte, N.C.).

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