The Charlotte Observer

April 11, 1993

The new buffalo hunt
North Carolina is recruiting industry under new rules, but the state ought to debate how to play the game

Copyright © 1993, The Charlotte Observer

Two things ought to be said at the outset of North Carolina`s ardent courtship of German automaker Mercedes-Benz: If this state is willing to bid high enough, it probably can land the plant, designed to employ 1,500 people to make four-wheel-drive vehicles. But there is a point where it`s not worth pursuing an industrial giant if incentives outweigh the payoff.

Just ask other states and cities that have been badly burned by huge giveaways that have backfired. For instance, Mack Truck got $17 million in tax breaks to build a plant in Winnsboro, S.C. in 1986, but today that plant operates at less than half its capacity - and it`s been sold to Renault. In Michigan, General Motors got a $13.5 million incentive to build station wagons in Ypsilanti; the company is about to move that operation to Texas. Paybacks sometimes are long in coming; sometimes they don`t come at all.

Gov. Jim Hunt has quietly pursued the Mercedes-Benz plant for weeks; in fact, he was in Michigan Tuesday to talk with company officials the day after the automaker announced it was looking for an American site. Mr. Hunt is motivated - properly, we believe - by the opportunity to lure so many high- wage jobs to this area.

But the public may not be aware that the industrial recruiting war changed in North Carolina just a few weeks ago. Gov. Hunt helped the state recruit the Pepsi-Cola Co. for a new customer-service facility in Winston-Salem at a building owned by Wake Forest University and already occupied by another business. The cheers for that facility, with its projected 1,000 jobs and annual payroll of $16 million, are drowning out concerns about how the state landed that prospect: It talked local governments into providing costly - and, until recently, unheard of - incentives.

Before they fell out of the running, Wake County and Raleigh quietly agreed to build a $1.2 million parking facility, taking the money from funds already allocated to other purposes. Winston-Salem and Forsyth County agreed to put up $1 million to move tenants of the facility that Pepsi really wanted - and got. It`s not unreasonable to wonder if Pepsi used the Raleigh/Wake County offer to manipulate Winston-Salem/Forsyth County into arranging what the company wanted.

These are new rules, and North Carolina is making them up without first debating how the game is to be played. Gov. Hunt has asked the legislature for a $15 million Industrial Recruitment Competitive Fund and has assigned former Lt. Gov. Bob Jordan to consider what other states do and what incentives North Carolina should offer. But the governor hasn`t spelled out how he`d use the money. Before the legislature signs off on this deal, Mr. Jordan`s report should prompt a broad debate on what kinds of incentives the state should offer - and which ones it should avoid.

Used with permission.
All rights reserved. No part of this article may be reproduced, translated, or transmitted in any form or by any means without permission in writing from the Charlotte Observer.

Copyright © 1993, The Charlotte Observer.

| Click here to go to The Charlotte Observer homepage. |

| Top | Case Home | Roundtable | Briefings | Guide | Out-Box |