Corporate Welfare Weekly - December 11, 2009 – Issue 28
Dec 11th, 2009
Dell is determined to keep tax credits…
So far Dell has been cooperating with state and local governments and has agreed to repay a total of $26.5 million to city and county governments, and $1.5 million to the N.C. Department of Commerce. Dell officials said yesterday however that the company will not be reimbursing the state for the tax credits it received from 2005 through 2007 or for the additional $3.6 million the company received in workforce training funds. Dell spokesman David Frink was quoted in a recent Winston-Salem Journal article as saying:
“Our belief and our understanding is that we met the performance thresholds required for those incentives during those years, and no, we are not obliged to repay those. Nor have we received any request from anyone at the state level of North Carolina to do so.”
According to the article, “the company’s position is that it qualified for tax credits in previous years by creating jobs and meeting other criteria during those years. Those credits can’t be taken away after the fact, the company says.” But the state’s revenue secretary, Kenneth Law, said in a recent interview that “because Dell no longer meets the criteria used to determine the tax credits, the state can now require the company to repay the money.”
Governor Perdue has vowed to fight!
“I will fight them if they want to fight about this,” Perdue said. “They made some agreements. We offered some incentives. The locals offered some incentives, and they need to live up to their side of the bargain. If that means going to court, I guess we will.”
Perdue’s aides clarified her fighting words, conceding that Dell may in fact be entitled to keep some of the tax credits earned while they were in operation.
(Advice to Governor: read the law before making promises.)
The dispute lies in the vague wording, or lack there-of, of Senate Bill 2, the 2004 legislation that gave the “large computer manufacturer” $250 million in incentives to build their Forsyth County desktop computer plant. The News & Record noted in a recent article that the 2004 legislation was signed into law without a provision allowing the state to revise the tax credit benefits retroactively. State Representative Skip Stam introduced an amendment for SB2 that would have provided some clarity to these terms, but unfortunately, the amendment did not pass.
Recent Announcements…
$900,000 in total taxpayer incentives has been approved for LabCorp, a medical-testing company, to consolidate its billing operations in Greensboro. $248,791 in incentives has been approved by Guilford County commissioners, $373,000 from the city of Greensboro, and a $275,000 grant from the state.
~ Alan M. Wolf, Charlotte Observer, December 9, 2009
$200,000 has been awarded to Marves Industries from the One North Carolina Fund. Governor Perdue announced Wednesday that the Mexico-based maker of non-woven textile cushioning was eligible to receive the state grant to open a new facility in Burke County. These grants require and are contingent upon local matches.
~ David Horn, North Carolina News Network, December 9, 2009
Even after a deadly explosion at the Slim Jim plant in Garner, town leaders are considering givingConAgra Foods financial incentives to keep the damaged plant open. The company has not even asked the state or local governments for assistance. ConAgra is not a stranger to government assistance. In 2007, Garner awarded the company $332.063 in tax breaks over 10 years.
~ Sarah Nagem, Charlotte Observer, December 9, 2009
Dr. Lindsey deGuehery, owner of the former Carolina Theater on Tarboro Street in Wilson, is seeking a financial incentives package that would help offset the $1.3 million cost of renovating the buildings and open the theater to the public. The incentives would “encourage” other people to invest and take the risks involved in redevelopment.
~ Rochelle Moore of the Wilson Daily Times, Charlotte Observer, December 9, 2009
If private individuals are not willing to invest and risk their own wealth on this redevelopment project, why would the government even consider risking taxpayer money with the same uncertain investment?
$20,000,000 has lured Talecris Biotherapeutics to choose Clayton to expand its local production capabilities. State and local officials have been announcing various incentives pledges over the course of several weeks. The Triangle’s largest biotechnology company is expected to announce their decision to expand in Clayton on December 11. The incentives are expected to come from the state, Johnston County, and the town of Clayton.
~ Alan M. Wolf & Sarah Nagem, Charlotte Observer, December 9, 2009
Quotes of the Week…
“The best thing to do is just stop, rethink, and say we’re going to grow our economy here by what all businesses like, which is a predictable playing field with lower marginal rates and you actually will get more business, but it will be spread out if you gave up that so-called game.”
~ Representative Skip Stam’s comments from a May, 2009 interview with NBC17’s Michael Barnard. State lawmakers had just approved the tax code change that was meant to benefit Apple Computers.
“And no comment on economic development incentives would be complete without mention of the fact that once these deals are done you can more often than not find that the business people behind the deals have made extraordinary political campaign contributions to the key state players involved in funneling taxpayer money to the companies.
It seems to us that what we have here is legalized extortion. Give me money and I'll do you a favor. Don't give me the money and I'll go somewhere else. That's no different from the school yard bully that takes lunch money from the other kids. Let them get by with it and you are guaranteeing that it will happen again.
The issue here is not whether Dell should pay back what the state gave them. Certainly they should. The real issue ought to be how much more they should have to pay back than they received. That would help put a stop to some of this mess. And while we're at it, there ought to be a law against any politician taking a political contribution from anyone who received a state taxpayer funded handout.”
Encouraging Tidbit…
The Triangle Business Journal reported in a December 9 article written by Amanda Jones Hoyle that Credit Suisse is planning to add 300 more jobs and is not requesting any additional incentives from the state or county; at least not this time around.
“Investment banking firm Credit Suisse will be expanding its operations in Research Triangle Park starting in January with plans to add about 300 workers in the first six months of 2010. …
[Credit Suisse site executive Jim Captain says] the bank will not be seeking additional grants or incentives from North Carolina or Wake County for the expansion. ‘We have not talked about going back to the state for anything additional,’ Captain said. …
Credit Suisse was lured to the state in 2004 with $14.4 million in state and local incentives. Two years later, the company announced it would be adding 400 jobs to its site in Research Triangle Pard and could qualify for another $12.7 million in state incentives”
It is certainly notable that Credit Suisse will not be asking for more incentives, even though they would surely qualify.
South Carolina lures away local firm…
The Asheville Citizen Times reported in a December 6th article written by John Boyle that a local North Carolina business has jumped ship and decided to expand their business in South Carolina instead of North Carolina.
“Sometimes in business, the deal is just too sweet to turn down.
Jim Stike, president of Fletcher-based Materials Innovation Technology, says that was the case in his company’s decision to locate a sizable expansion project – and 120 good-paying jobs – in South Carolina instead of North Carolina.
Though he would have preferred to expand here, Stike said South Carolina’s incentive package was so good ‘only a crazy businessman’ could have turned it down. …
Florence County, SC, offered $1.65 million worth of renovations to an existing building to make it usable for MIT – on top of about $1.4 million the county already had invested in the property.
South Carolina and Florence County, which is east of Columbia along Interstate 95, also offered training grants, tax abatements and other incentives that Stike estimates at ‘approaching $5 million over a 10-year period.’
Stike, who’s lived in Hendersonville for 21 years and has deep roots in the community, said MIT will keep its headquarters and its research and development center in southern Buncombe County. …
‘Somebody’s got to change the law if we want to compete with South Carolina,’ he said.”
Here we go again! North Carolina is still not offering enough in corporate welfare. The incentives war between the states is a losing proposition, a slippery slope. There is no end to this madness. This “price war” is not, and will never be, a sustainable economic development practice. In this example, South Carolina won the battle, but North Carolina or another state will win the next.
Across the Nation…
The Associated Press reported in an article written on December 9 that Long Beach, California has approved an offer to give financial incentives to Tesla Motors, an electric carmaker, for a new assembly plant.
“The Long Beach City Council has approved a proposal to offer $28.6 million in financial incentives to Tesla Motors as the electric carmaker decides where to build its assembly plant.
Tuesday’s vote intensifies bidding by Long Beach and nearby Downey to bring the plant, and with it hundreds of new jobs, to their cities. Nearly two weeks ago, Downey officials approved an $8.9 million deal to facilitate a lease deal between Tesla and the owner of a 60-acre property.”