Corporate Welfare Weekly - October 16, 2009 – Issue 20
Oct 16th, 2009
The Dell fiasco continues…
By: Shelley L. Gonzales
Graduate Student in Economics, North Carolina State University
Apparently, our legislators think it’s acceptable to gamble with public funds. NC Senator David Hoyle confessed that incentives deals are just that, a “gamble.” All we have to do is “roll the dice,” as the senator puts it, and hope for the best. Senator Hoyle, the primary sponsor of the Dell incentives deal, remains insistent the deal was necessary and he does not appear to be deterred from giving similar deals to other companies in the future.
Senator Hoyle, Governor Perdue, and other legislators are confident the state and local governments will recoup most of the money disbursed to Dell, but they are mum when it comes to the 900 people that will be jobless in the next couple of months. What about them? Are they not a cost? It is reasonable to assume the soon-to-be-jobless Dell worker does not feel as triumphant about the situation as our legislators seem to feel. Dell’s closure of its Winston-Salem desk-top computer plant should spur state leaders to reevaluate the state’s economic development policies. While state and local leaders are trying hard to soften the blow, over 900 people will be out of work by January, no matter how carefully legislators craft their responses. I must ask…where is the outrage?
Even as the turmoil of the plant closure is unfolding in Winston-Salem, State and local leaders shamelessly advocate more incentive giveaways. Governor Perdue’s response has been to defend the state’s corporate welfare policies. WRAL quotes the governor as saying:
“Maybe the people of North Carolina want to pull up the rug and say we don’t want jobs, but I’m not at that place. I think we need to be aggressive on jobs, and as long as I’m governor, we’re going to be.”
Wait a minute Governor Perdue. Don’t you work for the people of North Carolina? If they want to “pull up the rug” on incentives deals then that’s what you should do. As a result of your “need to be aggressive on jobs,” over 900 people are out of exactly that, a job! These workers are forced to seek new employment not only during a deep recession, but very close to Christmas and the holidays.
I would like to thank the state legislators and local committee members for looking out for the little guy. It seems the very ones you claim these incentives deals are helping are too often the ones getting hurt in the end.
Recent Announcements…
$4,090,000 in maximum benefits granted to Premier Inc. from the Job Investment Development Grant (JDIG). The health care alliance company is expanding its headquarters to Charlotte. The JDIG will enable the company to retain up to 60% of its state personal income withholding taxes derived from the creation of new jobs each year for nine years.
~ Office of Governor Bev Perdue, Press Release, October 14, 2009
$220,000 in state and local incentives to Shalag Industries. $110,000 in state incentives from the One North Carolina Fund and $110,000 in matching funds from the local governments. The Israeli company makes nonwoven fabrics used in the production of wet and dry wipes, diapers and hygiene products.
~ Chris Baysden, Triangle Business Journal, October 12, 2009
The City of Charlotte may purchase the Eastland Mall site for up to $50,000,000. “With no one willing to take it over, redevelopment might be easier if Charlotte owned it.” Might be easier? Property tax revenue will also be lost as long as the city owns the property.
~ Steve Harrison, Charlotte Observer, October 1, 2009
Encouraging Tidbit…
Cree, a light-emitting diode (LED) manufacturing company, plans to add 575 workers to their Roxboro plant without seeking financial incentives from the state. “Incentives are not the drivers of this business decision. This is about meeting demand from the customers,” says Cree’s CEO Chuck Swodoba. Although the company is not asking the state for financial help with the recent expansion, it was granted over $5 million in state incentives for a previous expansion in 2004, in which only $1.6 million of the grant has been claimed.
~ John Murawski, News & Observer, October 9, 2009
Quotes of the week…
“They could have succeeded. It’s a gamble. …You take a chance and you roll the dice.”
~ NC Senator David Hoyle of Gaston County, as quoted by the Associated Press regarding Dell’s recent plant closure announcement
“Small business creates many more jobs – often a few here and a few there – and they are already in the state paying taxes, and yet they get no similar tax breaks.”
~ NC Senator Tom Apodaca, representative of Buncombe, Henderson, and Polk Counties, as quoted by Blue Ridge Now regarding Dell’s recent plant closure announcement
Discouraging Tidbit…
As If Dell’s plant closure isn’t enough bad news for Winston-Salem
The Winston-Salem Journal reporter Wesley Young wrote in an October 4th article that the city’s 2007 baseball stadium deal with developer’s Billy Prim and Andrew “Flip” Filipowski has taught it a lesson:
“…city leaders are thinking about how to avoid getting entangled in future projects that could end up costing a lot more than planned. … City officials say that in hindsight, they are realizing some steps they could have taken to avoid problems that they did not foresee in November 2007. … City leaders say they didn’t know that Billy Prim, the co-owner of the Winston-Salem Dash and the developer leading the project, would lose his business partner, Andrew “Flip” Filipowski, who was going through an acrimonious divorce. Filipowski was married to the sister of Prim’s wife. …”
“…One of the biggest issues that upset critics is how the cost of the stadium rose from $22.6 million to the current $40.7 million. Including the city’s cost of buying land for the stadium, the total stadium bill is now $48.7 million. ‘When we began our initial talks with the city, we had not designed the stadium,’ Prim said last week. ‘We did not have a design and any bids. We took a ‘plug’ number by asking Samet (Corp.), who build the stadium in Greensboro, what was the cost of building Greensboro. Of course, the Greensboro stadium was built in 2003-04. Then we hired architects to design our stadium.’…”
“…Architectural estimates, which came in after city officials had already agreed to provide the initial $12 million, put the cost in the range of $31 million to $32 million, Prim said. That number was never released publicly. …”
“…By late 2008, the stadium cost had risen to $38 million, which included $8 million in improvements…”
~ Wesley Young, Winston-Salem Journal, October 4, 2009
Baseball Stadium Quotes…
“There has never been city oversight in projects like this.”
~ Denise Bell, finance director for the City of Winston-Salem, as quoted by the Winston-Salem Journal
“The financial health of this city was put at risk over a deal that was based on whether someone was happily married or not. … I mean, that’s not how transactions are supposed to be put together.”
“The city has no ability to say ‘no’ ever again to anything. And I suspect that the people who are running this project have always been two steps ahead of the taxpayers who were supposed to be protected by the elected officials and staff, and I suspect they’re still two steps ahead of us in ways we don’t even realize yet.”
~ NC Representative Dale R. Folwell, as quoted in a recent Winston-Salem Journal article regarding Winston-Salem’s baseball stadium debacle. Due to lack of oversight from city leaders, the city was forced to pay almost double the amount of the original agreement.