The ongoing debate over the value of economic incentives in North Carolina has been settled, at least for the next two budget years. Months of haggling culminated last week in the passage of House Bill 117, which restores funding for the Job Development Investment Grant (JDIG) program.
It will provide up to $35 million total in tax credits to businesses, based on the number of jobs created. The legislation was adopted despite strong objections from some lawmakers who said incentives are counterproductive and allow states to “pick winners and losers” in deciding which companies deserve them.
Rep. Rick Catlin, R-New Hanover, has been consistent in his opposition to incentives and was among 24 House members — 18 Republicans and six Democrats — who voted against the bill.
“I and 23 others voted no to be fair to all taxpayers,” Catlin said in a text message. “It is not fair to take money from loyal businesses and citizens and hand it to rich business owners bribing to come here. Permanent business locations are never technically decided due to incentives. The cost of this bill will be hundreds of millions of dollars each year that should go to education and public infrastructure.”
But supporters say as long as other states use tax credits and cash payments to lure new businesses, North Carolina cannot afford to opt out.
The bill limits total JDIG spending to $35 million in years when the state lands a “high-yield” project — defined as one in which the business agrees to invest at least $500 million and create at least 1,750 eligible positions — and $20 million during other years.
That may not be enough for North Carolina to compete with nearby states, such as South Carolina, that have been spending “hundreds of millions of dollars” to attract new businesses, said Rep. Susi Hamilton, D-New Hanover, who voted in favor of the bill.
Uncertainty over the future of economic incentives has affected the state’s ability to attract major employers to the state, she said. Over the past several years the state has lost a number of large manufacturing operations to South Carolina and Georgia, most recently the Volvo plant that had been courted by North Carolina but chose to locate north of Charleston.
The plant is projected to eventually employ 4,000 people.
While businesses consider many other factors in choosing a location, economic development recruiters say incentives do matter. Scott Satterfield, chief executive officer of Wilmington Business Development, which handles economic development recruiting for New Hanover County, said the legislation will make it easier to bring companies to southeastern North Carolina.
“It clearly sends a message that North Carolina is serious about bringing projects to the state,” he said.
States must use every available tool to attract businesses that will provide good, steady jobs, Satterfield said.
“This is a very competitive business,” he said. “We need to be operating on all cylinders … just to have a chance.”
The General Assembly also agreed to spend up to $30 million for film grants for the next two budget years, up from $10 million allocated this year but half of what the state spent in 2014 under a tax credit program that was allowed to expire.
In addition to the cash grant, the job-grant bill involves tax exemptions that benefit specific industries, such as NASCAR and the airline industry, that reduce state revenue.
Incentives supporters resisted Senate efforts to prevent job grants from going to companies that locate in the wealthiest counties. The provision, intended to encourage companies to look at rural counties that desperately need good jobs, was inserted after lawmakers learned that 80 percent of past job development grants went to businesses that located in Wake and Mecklenburg counties.
As a compromise, the wealthiest counties — a category that includes New Hanover — would have to offer local incentives to leverage the state grants. New Hanover County and Wilmington have previously been willing to offer local incentives.
For that reason, Satterfield said he isn’t worried about it. He said most projects that merit JDIG consideration would be ones that city and county officials would likely sweeten the pot by offering incentives.
Hamilton worries the mandate could discourage companies from calling if the provision is not implemented carefully. Most incentives-related discussion happens behind closed doors, but a governing body must approve an incentives offer in public.
“It is hard to make business decisions with a lot of eyes on you,” Hamilton said.
But she is more concerned that the state is not doing all it can, noting the legislature scuttled some tax incentives that had been successful, such as the solar tax credit that helped the state become a leader in solar energy development.
“We’re just not investing in our future,” Hamilton said.
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