Corporate Welfare Weekly - October 30, 2009 – Issue 22

 

October 30, 2009 – Issue 22

 

NCICL Defends North Carolina Taxpayers…

 

North Carolina Institute for Constitutional Law attorneys Bob Orr and Jeanette Doran recently argued an appeal in a lawsuit challenging a corporate welfare package given to Google in connection with the construction of an internet data center in Lenoir County. That package included direct grants and special tax exemptions. The State Constitution requires that taxes be imposed in a uniform manner, but the State created tax exemptions narrowly tailored for Google’s benefit. The trial court held that the plaintiffs who are three individual taxpayers were not legally permitted to bring a lawsuit challenging the tax exemptions created for Google. On appeal, however, NCICL has focused on appealing the trial court’s decision that ordinary taxpayers lack standing and so cannot challenge specially crafted tax exemptions.

 

Justice Bob Orr is quoted by the News and Observer as saying…

 

“How are people going to challenge the acts of government that they feel are unconstitutional if, as taxpayers, the courthouse door is shut?”

 

Much has changed since the initial 2007 filing of the case. The closing of Dell’s Winston-Salem plant, the film credit expansion, and Winston-Salem’s baseball park construction debacle are a few examples that have inflamed the anti-incentives sentiments of many.

 

Recent Announcements…

 

$800,000 in incentives granted to Fiserv Inc. from the One North Carolina Fund. The Wisconsin-based financial services tech company will also receive matching incentives from the city of Hickory and Catawba County.

                ~ John Dayberry, Hickory Daily Record, October 28, 2009

 

Dell has repaid in full more than $1.5 million in JDIG grants to the state of North Carolina and is in the process of repaying $26 million in local incentives to city and county governments.

                ~ Associated Press and WRAL, October 27, 2009

 

Dell contractor to lay off 55 workers. Diversco, a cleaning and maintenance provider, is planning to lay off the 55 workers as a direct result of Dells plant closure. The workers are part of a service contract with Dell. While Dell will be returning most of the money received from state and local governments, there are many more consequences that will play out as a result of this botched deal.

                ~ John Murawski, News & Observer, October 30, 2009

 

Hanesbrands Inc. will shut down their Forsyth County plant by the end of 2010 due to the drop in demand for sheer hosiery. The company will lay off 240 employees. Hanesbrands has already closed facilities in Gastonia, Forest City, Rockingham and Eden. A Winston-Salem Journal article printed in May, 2007 reported how Hanesbrands, Inc. had received $117,000 in incentives from the city of Winston-Salem and $66,000 from Forsyth County.

                ~ Capital Broadcasting Company, WRAL, October 27, 2009

 

Discouraging Tidbit…

 

FedEx is late delivering jobs!

 

As on-the-ball as FedEx usually is when it comes to delivering your packages on time, an article printed in the November 2009 issue of Business North Carolina magazine explains they are not so on-the-ball when it comes to delivering jobs on time. The article states:

 

“When the $350 million project was announced in 1998, FedEx said it would open in 2003 with 1,500 employees. But not until earlier this year did workers complete the million-square-foot hub building. By then, FedEx, suffering from a cutback in shipping during the recession, had lowered employment estimates – first to a range between 600 and 800 and now to about 350. So far, the only workers in the building are about 160 that were moved there in June from other sites at the airport. …

 

The region’s boosters are happy that the long wait is over and that they can finally say the hub is open. But even after the runway is cleared, state and airport leaders won’t have the package they thought they would be getting when they put together incentives that included $115 million in tax credits on top of millions in infrastructure and other improvements.”

 

Around the Country…

 

And the Winner Is…

 

Tacoma, Washington’s News Tribune reported in a blog post written by John Gillie on October 28, 2009 that Boeing has chosen Charleston, South Carolina for its new Dreamliner production facility, which may leave behind some bad blood with the IAM union. The article states:

 

“The irresistible attraction of lower wages, a big state incentive and a non-union environment lured The Boeing Co. to announce this afternoon that it will build a second 787 Dreamliner production line in South Carolina. … Boeing had sought no-strike concessions from the Machinists as part of the consideration for putting the second line in Everett … But despite negotiations between the union and the company last week, the two sides were unable to reach an agreement.

 

The union representing Boeing’s machinists was blunt in its criticism of the company. ‘We tried very hard to reach an extended agreement with Boeing,’ [said Tom Wrolblewski, head of the International Association of Machinists Union District Local 751]. ‘We listened closely to what executives said, and suggested ideas to meet their needs. We offered concrete, real-world solutions,’ he said. ‘But I can tell you now, no matter what Boeing says or implies, the truth is this: We did offer Boeing a 10-year contract, and even offered to go longer than that. And when we did, they seemed stunned, and stopped talking. It was obvious to me that Boeing wasn’t really interested in working with us. … It’s now clear that Boeing was only using our talks as a smoke screen, and as a bargaining chip to extort a bigger tax handout from South Carolina,’ he said.”

 

A previous article written by the Associated Press explained those big state incentives South Carolina officials offered to Boeing:

 

“The five-part legislation, which expands existing law, includes sales tax incentives that would exempt fuel used in test flights and flights to transfer aircraft between manufacturing facilities. It would also exempt computer equipment purchases and allow a qualifying company to immediately pay no sales tax on construction materials, rather than wait for a 2011 phase-in. …

 

It would ensure the company could negotiate with state officials to pay little corporate income taxes for 10 years. It deletes the minimum pay requirement from the break already allowed for companies investing less and creating fewer jobs. …

 

The proposal would also allow the state to issue up to $170 million of economic development bonds that would allow a company to build using a lower interest rate, making the project cheaper, if approved by the Legislature on a two-thirds vote. …

 

Senators did not discuss a price tag for the incentives, and business leaders declined to do so.”

 

North Carolina was initially among five states competing for Boeing’s second Dreamliner plant, but was eventually dropped from consideration. North Carolina was also in the running for Boeing’s first 787 Dreamliner assembly line in 2003. North Carolina promised $534 million in economic incentives, but ended up losing to Everett, Washington’s $3.2 billion incentives offer.

 

Quote of the week…

 

“It is now clear that Boeing was only using our talks as a smoke screen, and as a bargaining chip to extort a bigger tax handout from South Carolina.”

 

~ Tom Wrolblewski, head of the International Association of Machinists Union District Local 751 in the state of Washington, regarding Boeing’s apparent lack of interest in negotiating with the Washington-based Union. Union concessions were purportedly a major factor in whether Boeing will house their second 787 Dreamliner production line in Charleston, SC or Everett, WA.

As quoted by Tacoma, Washington’s News Tribune.