Civitas Review Online

Graciously, Dell has decided to keep its doors open until July of this year.  You remember Dell, the company that the state gave in excess of $250 million worth of tax incentives and promises to in late 2004 to lure into the state.  With only five years gone by since Dell opened its doors here in North Carolina, I doubt that many of the politicians who pushed for such an ambitious package are proud of the results.

Our elected officials in Raleigh apparently realize that tax breaks will lure more business into the state.  What amazes me is that they do not understand that lowering the corporate tax rate will render these incentive deals unnecessary because the general business climate in the state will be more attractive.

From our good friends over at the NC Institute for Constitutional Law.  More taxpayer giveaways:

$107,170 in tax incentives grants was approved on Monday, February 1, by the Statesville City Council for an unnamed furniture company to expand its local operations.

~ Jim McNally, Statesville Record & Landmark, February 4, 2010

$100,000 to Commonwealth Brands Inc. from the state’s One North Carolina Fund to add a product line for its cigarette tubes. The Corporate Welfare Weekly’s issue #34 previously reported that the company is also eligible to receive an additional $83,207 from the City of Reidsville and $81,600 from Rockingham County.

~ Richard Craver, Winston-Salem Journal, February 4, 2010

$341,000 in local incentives has been approved for Kewaunee Scientific Corporation, a localStatesville laboratory furniture manufacturer. The company is to receive $184,000 from Iredell County and $157,000 from the City of Statesville. The furniture manufacturer announced it will be expanding its operations and renovating its corporate headquarters.

~ Joe Marusak, Charlotte Observer, February 4, 2010

$50,000 in incentives has been approved for Solaris Industries, Inc. from the One North Carolina Fund. The international manufacturer of steel tubing will build a new manufacturing facility in the Cleveland Town of Kings Mountain. All One North Carolina Fund grants require a local match.

~ Chris Baysden, Triangle Business Journal, February 3, 2010

GMAC just announced it will be closing two offices in Charlotte, eliminating 115 jobs less than a year after their opening. Of course, the majority government-owned GMAC received government subsidies in exchange for their promise to “create” 200 jobs in Charlotte (ah yes, the joys of our “free market”).

Gov. Perdue naturally attempted to gain positive exposure for herself during the exciting “new jobs!” pep rally last year:

Gov. Bev Perdue even came to Charlotte to cheer the company on for bringing jobs that pay nearly $100,000 per year.

No word yet on whether the Gov. will travel to Charlotte to cheer on those 115 folks as they get in line at the unemployment office.

Influencing GMAC’s decision to expand in Charlotte was $4.5 million in bribes incentives  from the state and local governments. GMAC posted $5 billion in losses in 2009 fourth quarter alone, so state lawmakers really picked a winner to shower with special breaks – all in the name of “economic development,” of course.

GMAC’s deal, however, pales in comparison with North Carolina’s top ten largest incentive deals.

Following up on Chad’s post, check out this new article at nccivitas.org listing North Carolina’s 10 largest corporate welfare deals. When you begin to add up the promised tax breaks and handouts, the numbers become a bit staggering. The Dell deal tops the list with a total state deal of $260 million (how’d that work out?), followed by the recycling firm Nucor at $161 million. (NOTE: most of these deals also include local government incentives, but those are not included in the totals.)

Adding up the top ten deals, the state of North Carolina has promised more than a billion dollars in targeted tax breaks and handouts to well-connected corporations over the last dozen years. Imagine what that total is for all of the state’s incentive deals.

But as I wrote previously, the cost of the incentives game goes beyond just the dollar figures of the tax breaks and handouts.

The continued use of government business incentives serves to further politicize the economy, distorting the allocation of resources and stifling adaptation and innovation. Worse still, it fosters a dangerously cozy relationship between business executives and politicians, a relationship that should alarm all advocates of liberty and economic progress.

Here’s the latest update from the NC Institute of Constitutional Law on the incentives game that has done NOTHING to help NC’s unemployment rate.

$5,560,000 in total possible incentives has been granted to Celgard LLC to expand its Charlotte campus into Concord. The Charlotte-based company develops and produces the specialty membranes used in lithium batteries. The incentives include $4.6 million in potential tax benefits from the Job Development Investment Fund (JDIG) and $955,000 from the state’s One North Carolina Fund. If that wasn’t enough, the company was also selected to receive a $49 million grant from the U.S. Department of Energy for the expansion. The state grant is contingent upon the approval of local incentives.

~ Salisbury Post, January 19, 2010

A recent Triangle Business Journal article written by Ken Elkins claims the total incentives could reach as high as $18.6 million when it is all said and done.

$1,000,000 has been granted to Reser’s Fine Foods from the state’s One North Carolina Fund. The Oregon-based company will be expanding its current food production plant in Halifax County. The company makes potato salads, mashed potatoes, and other prepared foods. Local incentives will follow.

~ David Bracken, News & Observer, January 20, 2010

The Durham City Council has approved $70,000 in local incentives for ACW Technology, a British contract manufacturing company for international commercial, aerospace and defense customers. ACW wants to build a domestic factory to be closer to their U.S. suppliers and clients. The company has not yet confirmed they will build in Durham County. They are considering sites in Maryland and Virginia, and are also being courted by North Carolina’s Wake and Franklin counties. The N.C. Commerce Department has declined to comment whether the state will pitch in any additional incentives.

~ Jim Wise, News & Observer, January 21, 2010

$164,807 in total incentives has been approved by Rockingham County officials and the town of Reidsville for Commonwealth Brands, a local tobacco manufacturer. The company is eligible to receive $83,207 in incentives from the city of Reidsville and $81,600 from Rockingham County.

~ Journal Staff, Winston Salem Journal, January 13, 2010

$796,280 in combined incentives has been approved for SANS Technical Fibers to expand its Stoneville plant. The synthetic nylon filament and yarn manufacturer will receive $625,000 in state grants to the city for sewer and water improvements, $41,960 from Rockingham County, $39,320 from the city of Stoneville, a $60,000 grant from the state’s One North Carolina Fund, and a $30,000 grant from Duke Energy Corp.

~ Journal Staff, Winston Salem Journal, January 13, 2010

NC’s state and local governmens have used incentives heavily over the past decade.  It can be argued that such policies have actually contributed to a massive loss of jobs. Worst jobless numbers in 30 years! And do our policy makers have an answer?

North Carolina’s unemployment rate hit a historic high of 11.2 percent in December as the tally of jobs lost by the state’s workers since the recession started two years ago neared 250,000.

December’s jobless rate of 11.2 percent rose from 10.8 percent in November, the Employment Security Commission said Friday.

Once again the Governor’s office and NC Department of Commerce feel the need to celebrate the state’s ranking as most likely to give out corporate welfare by Site Selection magazine.

And once again, I will point the readers to a piece written by our own Brian Balfour that seriously calls into question these supposed rankings as nothing more than a scheme for the seekers of corporate welfare to reward states that generously hand out the checks.  From Brian’s piece:

Site Selection’s “best business climate” ranking is actually a measure of which states are engaged in the highest amount of corporate welfare activity. Here is how they develop the ranking: “Fifty percent of the total score is based on a survey of corporate real estate decision makers and fifty percent comes from data associated with actual project activity as tracked by our proprietary New Plant database.”

Neither of these criteria are accurate reflections of a state’s true “business climate”:

• Half of the score is based on a survey of corporate real estate decision makers. What do they rank as the most important issues?
  • Three of the top ten answers are centered on economic incentives (#5 “Availability of incentives”, #7 “State & local economic development strategy”, #8 “Flexibility of incentives programs”)
  • This is the only topic mentioned three separate times. In short, the survey basically reflects which states are most willing to provide corporate handout
    
• The other half of the score is based on their “new plant database,” a list that tells a very incomplete story:

According to their website, the Site Selection new plant database includes only “projects costing at least US$1 million, covering at least 20,000 sq. ft. or employing at least 50 people.” In other words, projects more likely to have received some government incentives are included, while small, independent business starts are ignored

It must also be pointed out, and especially this year, if North Carolina’s business climate is so good, why is our unemployment at 11% and has been for the past eight years been above the national average?  There seems to be some divergence between what the corporate welfare seekers say and what the facts seem to bear out.

Is anyone at all surprised that the Department of Commerce appears to have inflated job creation numbers to paint the best light on the Apple incentives deal?

The N&O calls them out:

The nice folks here at Red Clay want you to know that we are looking out for you. 

The fact that $787 billion of your money is being spent by 537 people who have probably never even met you really troubles us.  We think you know how to spend that money better then they do.  The only saving grace in this whole process is the fact that the 537 people were nice enough to give you a website that you can use to track the money, and how it is being spent…Red Clay already knows what the first item put up for tracking will be.  It will likely look like this:

$9.5 million Spent on Stimulus Tracking Web site

It is interesting that this happens at the exact moment when Red Clay is revamping its blog.  I am told that it will be state of the art, and capable of displaying multiple pie charts and bar graphs (and the occasional picture of Bev Pedue as money).  See, we here at Red Clay World HQ think that you deserve to know what is going on in your government and home state.  We do these things because we care.  And by the way, it is only costing us one intern, one Mountain Dew per day, and an Apple Computer (that is called job creation folks). 

Just here to help.

Dell, Google, now Inspiration Networks joins the list of unfulfilled incentive promises.

Thankfully, this one is South Carolina's problem, not ours.  But it is just one more example of the folly of the incentive game.

South Carolina pledged $26 million in incentives to Inspiration Networks, a non-profit religious broadcaster, to move its campus from Charlotte across the border a few miles to South Carolina.

Turns out, the network's owner is paying himself $1.5 million a year and is currently building a $4 million, 9,000 square foot lake-front mansion.  Not bad for running a non-profit.

Somehow, our state Department of Commerce dropped the ball and didn't ante up to pay to keep the network instate.

The Charlotte Observer has done an entire series on this entity and its failure to live up to the promises that gained it the incentives. 

Here is the first glimpse of something I think you will be hearing a lot more about in the near future: