Corporate Welfare Weekly - October 9, 2009 – Issue 19

Recent Announcements…

Dell will be closing its Winston-Salem plant after only four years. Perdue wants the company to repay incentives.

After just four years of operation in North Carolina, Dell has decided to close its Winston-Salem assembly plant and eliminate over 900 jobs by January 2010. In 2004, Dell was granted the most generous incentives package in state history – a deal totaling more than $300 million in tax breaks and grants from both the state and local governments. Dell spokesman Venancio Figueroa said, “If you look at it from a holistic perspective, this is a desktop manufacturing facility and we’ve seen the customer prefer laptop computers.” Dell’s decision represents a perfect example of why corporate welfare is not the most efficient use of public funds. Companies will ultimately do what is best for their bottom line, incentives or not. Consumer demand drives business decisions, not government dollars.

Governor Bev Perdue is now insisting that Dell repay “every red cent” to the state. According to BusinessWeek, Dell has agreed to pay $15.6 million back to the city of Winston-Salem and much of the $8.5 million it received from the state.  TheAssociated Press reported that Figueroa said the company will repay the incentives if the contracts require it to do so. However, the article also explains that “millions won’t be returned. In 2004, public agencies paid to prepare the Dell site for construction, widen roads leading to the plant, and equip community colleges to train company workers before the plant opened.”

It is time to rethink the entire public policy strategy for job creation in North Carolina. As a recent iStockAnalyst article reports, too many elected officials cannot answer the most basic economic question: Where do jobs come from? The article explains this simple answer: “jobs are created by small businesses, not by industrial recruitment.”

Local incentives granted to Liburdi Dimetrics from Iredell County Board of Commissioners and the Mooresville Board of Commissioners. The amount of the incentives is not yet known. The orbital welding products manufacturer will move its manufacturing operations from Davidson to Mooresville by the end of 2009.

            ~ Joe Marusak, Charlotte Observer, October 7, 2009

$300,000 to North American Aerodynamics Inc. from the One North Carolina Fund. The national parachute manufacturer will be expanding operations in Person County.  A One NC Fund grant must be matched by the local government.

            ~ Amanda Jones Hoyle, Triangle Business Journal, October 6, 2009

Quotes of the Week…

 “The closure has become a political embarrassment for local politicians who had been urging the state to go further with incentive packages aimed at luring businesses, including a controversial $200 million plus package used to entice Google to build a location in the Blue Ridge Mountains two years ago.”

~ Nanette Byrner, Business Week, October 9, 2009. The quote refers to Dell’s plant closing in Winston-Salem.

“We’re still trying to make sure we have that information…we’re still pulling it together.”

~ Kathy Neal, Assistant State Commerce Secretary, regarding how much money has been disbursed to Dell up to this point.

“It is also important that we take a serious look at and reconsider the various incentives programs which are now North Carolina’s dominant economic development philosophy and program. North Carolina will not be a national leader in job creation and retention through government officials thinking they can pick winners from losers in a dynamic free market economy. The sooner state government moves to reduce the overall tax and regulatory burden on our families and small businesses and concentrates state resources on core government functions like education, transportation and public safety, the sooner North Carolina will be in a position to see a real turnaround in the state’s economy.”

~ North Carolina Senator Phil Berger, October 9, 2009

Quote source: Capital Beat, a News & Record blog by Mark Binker

Around the Country…

Alabama Passes Film Incentives Bill

Birmingham Business Journal reporter Jimmy DeButts wrote in an October 2^nd article that Alabama has caved in to the pressures to offer film production incentives.

“Alabama joins 35 other states that offer film production incentives to shoot within their borders. … Alabama officials hope to entice producers to use Alabama as the backdrop in their films with 25 percent income tax credit, sales, use and lodging tax exemptions and 35 percent payroll rebates for expenses exceeding $500,000 and less than $10 million.”

            ~ Jimmy DeButts, Birmingham Business Journal, October 2, 2009

We Win Some, We Lose Some

Charlotte Business Journal staff writers Erik Spanberg and Ken Elkins wrote in an October 6^th article that a Charlotte-based company, Red Ventures, will be relocating south of the border to South Carolina.

“Sales and marketing firm Red Ventures is crossing the border into South Carolina with plans for a 1,000-job campus in Lancaster County, lured by several financial incentives that include property-tax discounts. … The move includes 18 years of property taxes discounted by 50 percent, with Red Ventures inheriting a 20-year deal originally signed by mortgage firm Senderra Funding two years ago. Lancaster County, through the S.C. Department of Commerce, will also provide a $250,000 grant for infrastructure around the new Red Ventures headquarters. Finally, the company will receive job-development credits based on its ability to deliver on the new jobs promised, says Mark Brodsky, the company’s chief financial officer.”

            ~ Erik Spanberg & Ken Elkins, Charlotte Business Journal, October 6, 2009