Corporate Welfare Weekly - June 1st, 2010 – Issue 52

 

Recent Announcements…

 

$92,800 in potential incentives to WhiteRidge Plastics. The Reidsville plastic blow molding company has been granted $45,000 from the state’s One North Carolina Fund and could receive $23,637 fromRockingham County as well as $24,134 from the City of Reidsville to expand its Reidsville plant. This is yet another example of state and local governments offering incentives for low-paying jobs.

                ~ Richard Craver, Winston-Salem Journal, May 27, 2010

 

$15,500,000 in tax credits was granted to Frontier Spinning Mills back in March by Lee County Board of Commissioners to expand its manufacturing facility in Lee County. The Sanford-based yarn maker is just now beginning the expansion that could add 45 jobs.

                ~ Leo John, The Triad Business Journal, May 26, 2010

 

$15,500,000 for 45 jobs? That’s $344,444 per job! Is this really an effective use of public funds?

 

North Carolina legislators tentatively approve increase in tax breaks

 

The Asheville-Citizen Times reported on May 27, 2010 that North Carolina legislators have tentatively passed legislation to increase tax breaks in order to attract two computer data centers to the state.

 

“The North Carolina Senate is willing to give additional tax breaks to attract a few businesses interested in building in the state, potentially creating more than 1,500 jobs.

 

The Senate gave tentative approval Thursday to an incentives package that could cost $39 million through 2015 if companies build and apply for the reductions.

 

Sen. Dan Clodfelter of Charlotte said the bill is aimed at closing the deals on persuading companies to build two computer data centers, an energy turbine manufacturer and a plant converting wood pulp to paper. The Senate hasn't identified any of the companies by name.

 

The bill passed 39-4. Sen. Ellie Kinnaird opposed the bill, saying quality education and transportation are among the things that attract companies most.

 

A final Senate vote is expected next week.”

 

Speedway Motorsports suit against local governments set for Wednesday

 

The Charlotte Observer reported that the Superior Court hearing for Speedway Motorsports vs. the local city and county governments is set for Wednesday.

 

“The speedway and its parent company, Speedway Motorsports Inc., sued the city of Concord and Cabarrus County in September, demanding, among other things, that the governments pay them back faster for $4million worth of road work and other improvements around the Concord track and nearby zMax Dragway.

 

The city and county filed motions to dismiss the suit shortly after.

 

A Cabarrus County Superior Court hearing on those motions is scheduled for Wednesday..

 

The court battle stems from an agreement in late 2007. Speedway owner Bruton Smith had threatened to move the sprawling track out of the county after the city voted to block his plans for the new zMax drag strip, citing noise and traffic issues.

 

In response, city and county officials offered an incentives package, and the two sides agreed that Smith would build the $60 million drag strip and complete $200 million in speedway upgrades in exchange for road and other improvements estimated at $80 million.

 

In 2008, government officials proposed a formal agreement with more detailed terms, including a payback period of up to 40 years. Smith, insisting the money was due within three to five years, rejected it.

 

To date, Speedway Motorsports has made about $4 million worth of road improvements and sound mitigation work, according to its lawsuit.

 

City and county officials have said they have not reimbursed him for the work because the parties have not reached a formal agreement about who should pay for what - or even which projects are part of the incentives package.

 

They say paying all the money over such a short period would severely damage their budgets and drive local taxes sky-high.”

 

Did American Express set a new standard?

 

A recent editorial in the Greensboro News & Record raised the possibility that companies seeking to relocate to North Carolina in the future will have a tougher time asking for incentives from state and local governments after American Express committed to NC without even asking for incentives that were clearly available to them.

 

“American Express probably hasn't put an end to corporate incentives in Guilford County, but it's made it harder for other companies to ask.

 

The financial services giant chose eastern Guilford County locations for a $600 million data center last week and never asked for millions of dollars in incentives that the Greensboro City Council and Guilford CountyBoard of Commissioners were prepared to consider. Amex found other reasons to make its selection.

 

That's in keeping with the company's character. It's been a great corporate citizen since opening a call center near the airport in 1985, where it employs 2,000 workers. It operates on an ethic of giving to the community, not taking from it, and now it has enhanced that reputation many times over.

 

Even so, all companies are in business to make a profit. Incentive money was practically there for the taking, and Amex really couldn't be blamed for seeking the best deal it could get, here or somewhere else. It's practically unheard of for a firm offering a project of this magnitude not to ask for, and get, tax breaks and other inducements. It showed uncommon altruism by declining to press its advantage.

 

Now, thanks to the Amex decision, the future advantage may shift a little.

 

The next company asking for incentives can be held to the American Express standard. Why should it receive tax breaks when Amex, with its mega-investment and willingness to pay its full tax obligation, declined? Why can't the next company see the same benefits of locating in Guilford County that Amex saw?

 

The American Express decision should strengthen the resolve of local officials who worry this area can't attract new businesses without trowing money at them. Some were willing to make a lucrative offer to Amex, for good reason. There was a lot to be gained. But it turned out to be unnecessary to conduct business as usual with American Express, and now there's hope that a new business as usual is possible.

 

Amex isn't the first big company to locate in Guilford County without incentives. One, Lenovo, opened a computer distribution center without a deal in 2008. But it's the biggest. And it has shown how to establish goodwill at the start of a relationship.

 

Companies that drive a hard bargain, playing one competing state or region against another -- Dell comes to mind -- foster mixed feelings from the beginning. The jobs and investment are welcome, but it's often uncertain that they're worth the price. Resentment increases when the business doesn't produce everything promised.

 

Now, the feeling across the Triad and North Carolina will be that every company should come in like American Express -- finding a healthy business climate, good quality of life, willing work force, outstanding higher education and other benefits -- and asking for little other than the opportunity to thrive.

 

Why can't that become the expectation from now on?”