The Business Journal

Charlotte, N.C.

March 20, 1995

N.C. incentive rules changing

Kelly Greene, Staff Writer

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

The N.C. Commerce Department is pitching new guidelines for Gov. Jim Hunt's discretionary fund to state legislators in hopes of securing another $10 million to snag new and expanding companies.

The proposed rules include complicated formulas to rank employers who say their projects would create jobs and change the way the state doles out the cash.

But in a press conference March 15, much of the talk did not focus on how the guidelines would work. Instead, commerce officials seized the chance to defend the fund's $300,000 investment in Seffi Industries Inc., the Charlotte-based furniture maker that shut earlier this year, three months after renovating a Sampson County plant and hiring the first 50 of a promised 375 workers.

Just 18 months before commerce officials awarded the company its grant, Seffi's first chief executive, John Gioioso, was forced to resign as chief financial officer of C-B/Murray Corp. Inc. when it realized its finances were muddled.

He was later sued by the grocery distributor's landlord after the company closed in late 1992, and he has two Chapter 7 bankruptcy cases filed in Charlotte.

But Commerce Secretary S. Dave Phillips says: "It looked pretty impressive on paper." Commerce officials were impressed with a hefty credit commitment from Creditanstalt Bankverein, which shut Seffi down when it could not start paying back $16 million it borrowed.

To try to avoid losing money again, a task force of professors recommends that the state pay incentive money in installments after the jobs materialize. It is part of what they've termed a "performance agreement," in which the companies also agree to keep all their N.C. operations running and provide employment reports.

The companies also would have to divulge competing offers from other states -- in writing.

And the guidelines create a ranking system using mathematical formulas to weigh job quality, industry quality, statewide economic impact and local economic impact.

Some factors would give the companies a boost in the competition for state taxpayer dollars, such as locating in distressed counties, creating an unusually high number of jobs, or bringing "exceptional" technology here.

The verdict so far from House Speaker Harold Brubaker's camp: "It's astep in the right direction, but there are still many clouds hanging over the possibility of that fund getting $10 million," says press secretary Don Follmer.

"They obviously know they have a problem with their perception, if nothing else, or they wouldn't have come forward with these guidelines."

Phillips assembled the task force of seven professors a year ago and charged them with improving the fund's guidelines. He rushed them to finish their work March 13 so commerce officials could take the guidelines to the General Assembly along with Hunt's $10 million budget request.

Republican legislators worry that the fund, despite the new guidelines, "is too loosely construed," he says. "It's taxpayers'money, not (Democrat) Jim Hunt's money."

Still, Watts Carr III, the state's top recruiter until taking a new commerce job recently, argues the money has cinched deals the state would have lost. "We are really hamstrung," he says.

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

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