The Charlotte Observer

June 16, 1993

Creating jobs for North Carolina
These subsidies and incentives would help our state add jobs and attract industry

Gov. Jim Hunt, Special to The Observer

Copyright © 1993, The Charlotte Observer

From 1990 to 1992, N.C. economic developers landed more international facilities than any other state. That`s largely due to our business climate, environment, dedicated workforce and top research universities.

But we rank near the bottom in average wages, so we must become more competitive in attracting high-skill, high-wage jobs. That`s why I`ve proposed a jobs incentive package as part of our overall economic blueprint for long- term growth and prosperity.

North Carolina must create tomorrow`s jobs by modernizing and expanding existing industry, encouraging new companies and recruiting new industries. The conservative use of financial incentives will help North Carolina compete even more effectively for high-skill, high-wage jobs in the global economy.

Here`s an example of how the Industrial Development Fund and the Jobs Tax Credit programs would benefit an existing N.C. company:

A company - call it Acme Sportswear, located in the Piedmont - wants to expand its sportswear manufacturing operation. Company officials want to add sewing machines, enlarge the building and increase the work force from 100 to 175. Because the company is located in one of the state`s 50 economically distressed counties, it will benefit from the Jobs Tax Credit and the Industrial Development Fund.

Through the Jobs Tax Credit, which has been signed into law, creating 75 new jobs would allow the company to get a $210,000 state income tax credit over a four-year period. That`s $700 per year per new employee.

Under the proposed increase in the Industrial Development Fund, which is pending in legislative committees, Acme Sportswear could also get $180,000 in grants and loans. Again, the number of new jobs is the key. If the legislature approves the increase I`ve recommended, the fund would provide $2,400 per new employee.

The company could use the $180,000 in different ways: $50,000 to upgrade sewer lines, $65,000 to buy new sewing machines and $65,000 to install air conditioning. The $50,000 for sewer line upgrading would be a grant to the local government for the company, rather than a loan.


Lure industry to N.C.

* The Industrial Recruitment Competitive Fund is a popular incentive used by other states to recruit industry. I have proposed that the legislature create a $15 million fund for North Carolina. The Senate has approved it, but it`s not in the House budget at the moment.

Here`s how it would work:

Acme Electronics, an out-of state company, is about to decide whether to locate a new plant in North Carolina or Louisiana. The company will employ 125 people in a county with a 9 percent unemployment rate. The cost of moving the equipment to North Carolina is about $900,000, while the cost of moving to Louisiana is only $250,000.

The N.C. county has committed the site at no cost to the client and has agreed to extend water and sewer lines at no charge. The state Department of Transportation has approved $450,000 for access and road improvements.

The client has asked that the state or the county help with the difference in moving costs. The county`s economic development committee raises $100,000, and if the industrial recruitment competitive fund is approved, the state would be able to advance them $150,000.

The flexibility and tailoring to the particular needs of this client is a key to locating the firm in North Carolina and reducing unemployment in this county from 9 percent to 8 percent.


Tax increment financing

* Economic Development Financing, also known as tax increment financing, is another incentive tool North Carolina needs. Approved by the Senate, it`s pending in the House. If it passes, voters would have to approve it in a statewide referendum. Here`s how it would work:

Acme Consumer Products is looking at several states, including a rural area in central North Carolina, to locate a major warehouse and distribution center. Since the company would not be eligible for the Jobs Creation Tax Credit or the Industrial Development Fund, Economic Development Financing is the only available incentive this rural community can offer Acme.

Location of this company in North Carolina would mean a $10 million investment and 100 new jobs. Without the investment, the property the company is considering is valued at $100,000 and is generating about $800 in annual property tax revenue. With the $10 million investment, the new property tax assessments will produce about $890,000 annually in additional revenue.

The Economic Development Fund allows the community to set aside the additional $80,000 to issue a bond valued at $830,000 that could be paid over a 15-year period at a 5 percent interest rate. The bond proceeds could be used by Acme Consumer Products for infrastructure development or construction of the facility - or both.

Economic Development Financing is used in 36 states, including South Carolina. The city of Rock Hill used it to convert an old textile mill into an industrial park. The funds from the bond issue were used to provide public facilities and make other improvements. Over a six-year period, the industrial park grew from 20 businesses with 48 employees to 90 businesses with 611 employees. The tax base grew 851 percent and tax revenues increased 946 percent. This is the kind of tax increment financing Charlotte business leaders have been seeking for years to promote development.

It is time we put these tools to use in North Carolina as well so we can compete for good jobs and improve the lives of our citizens.

Jim Hunt is governor of North Carolina.

Used with permission.
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Copyright © 1993, The Charlotte Observer.

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