Volvo reflection: Most NC job grants stumble

When Volvo Construction Equipment announced this month it would shutter its Skyland plant, just three years after deciding to expand the plant with the help of millions of dollars from state taxpayers, the about-face was abrupt — but not unusual.

Many companies celebrate receiving one of North Carolina's top two kinds of economic-development grants, only to never fulfill enough of their job-creation promises to collect the money.

The state has closed the books on 26 One North Carolina Fund grants targeted to Western North Carolina jobs, but only six companies walked away with all or most of the money touted when the grant was announced, a Citizen-Times analysis found.

In more than half of the grants, 14, companies ended up without a dime of state money.

“Here's the conclusion that you have to draw from that: that the money was insignificant or irrelevant to the company's decision,” said Bob Orr, an opponent of incentives whose group, the N.C. Institute for Constitutional Law, has sued the state over aid to companies.

“All it was,” said Orr, a former state Supreme Court justice, “was a PR deal for the politicians to say, ‘Oh, look what we're doing to bring jobs to Western North Carolina.'”

Just months ago, in February, toolmaker Snap-on said it would expand its Murphy plant, add 40 jobs and earn a $120,000 state grant.

But the manufacturer quickly realized it would lose the grant. The plant has added five full-time jobs this year, said Richard Secor, spokesman for Kenosha, Wis.,-based Snap-on.

“We have created a modest number of jobs, and we had aspirations to create more, but the recession's been longer and deeper than I think any of us expected,” Secor said.

The economy has taken a toll on results, but even in 2007 before the recession began, many companies weren't meeting incentives goals. A Citizen-Times analysis that year of the seven grants that had been closed out at the time found that four of them fell short of goals.

Even without a global recession, many factors affect a company's expansion plans, said Dale Carroll, an economic developer whom Gov. Bev Perdue lured out of regional agency AdvantageWest this year to take a lead role in her new administration's business recruitment.

The good news, said Carroll, who oversees incentives programs as deputy commerce secretary, is that no money will go to companies that fall short.

“We pay them following the performance or the lack of it,” he said. “It's a built in safeguard.”

Mixed results

The state announced 319 One North Carolina Fund grants through September worth up to $69.7 million, including 40 for WNC sites.

A newer program provides larger aid, as much as $25 million for a single company. The state has awarded 97 Job Development Investment Grants, including six for WNC.

None of those larger grants has reached a conclusion, but of three awards on which companies have started reporting on their progress, only one has succeeded in the job growth it promised.

Volvo fulfilled only enough of its growth to collect $69,247 of the up to $3 million it won, and now, with the plant closing down in March, the state will try to recoup even that fraction.

Results for Maverick Boat Co. were more mixed: The company created 90 of 131 planned jobs at its McDowell County plant in the first two years of a grant worth up to $2.36 million, allowing it to draw $130,716.

Altec Industries, however, met a target of creating 200 jobs at its Burnsville plant through
this year and received $251,000 in exchange.

The plant, which makes truck bodies for aerial lifts and derricks used to scale trees and telephone poles, still plans to create the 300 jobs the company pledged in 2004 before opening the plant, general manager Jeff Mooney said.

Altec could get $1.9 million if it meets that goal.

The company played it conservative in estimating job growth at the new plant, Mooney said.

And the recession hasn't hurt its customers, including utility companies, as much as other industries.

“We've been able to weather the storm pretty well,” Mooney said.

Worth the effort?

The Commerce Department makes sure companies have a reasonable chance of meeting targets, officials say. They scour their financial statements and credit history and do other background research.

But things can turn around fast, like for Janesville Acoustics' Old Fort plant, which in 2007 hoped to add 29 jobs and collect $35,000 from the state.

“Just about when the grant was approved, we were going to expand and then the bottom fell out of automotive,” operations manager Roy Heeralall said.

Instead, the maker of car insulation started laying off workers. It has called some of them back and returned to 2007 levels, Heeralall said.

One North Carolina grants are too small to make a difference to a company's decision to go ahead with an expansion or relocation, Orr said. They could better be spent on mental health care or education.

“If it's a billion-dollar corporation, does $50,000 mean anything? It means nothing,” the former Asheville lawyer said.

Carroll, though, says incentives are worth economic developers' time and effort. North Carolina is competing with other states that offer similar grants.

“Without those types of economic development tools, we would essentially be stepping out of line in the recruitment of new jobs,” Carroll said. “We just simply can't do that.”