To help attract new businesses, the city of Charlotte has proposed making it easier to give companies tax dollars to expand or relocate – even if their employees are paid significantly less than the area’s average wage.
To be eligible for public subsidies today, the city requires that a company’s new jobs pay at or above the regional average of roughly $44,000.
Charlotte proposed this week that companies only must meet or exceed the average for their field.
That would allow the city to target more manufacturing firms whose average wage might be $35,000, city officials said.
Economic development director Brad Richardson said Friday the change is in response to the city’s “stubbornly” high unemployment rate, as well as requests from City Council members that incentives be offered to more blue-collar jobs, rather than focusing on more high-paying, white-collar work.
In addition, as cities nationwide compete for new business, the amount of money firms are demanding is increasing.
The Charlotte Chamber has told council members in past closed-session meetings that competition to attract businesses is increasing and that Charlotte must be willing to offer larger-than-usual incentives.
The city’s economic development office’s current philosophy is that tax dollars should be used only for jobs that “have a quality of life for the worker.” That has led to the requirement that subsidized jobs pay at or above the regional average.
But allowing subsidies for lower-paying jobs could open the door for subsidies of other business, such as entertainment complexes or large shopping centers.
Richardson said that’s possible, but he said city staff plans to use the flexibility only for manufacturers.
“We think this wage flexibility is for manufacturers, and we will stop there,” Richardson said. “We don’t feel like we should apply incentives to companies that would be here anyway. Retail, restaurants wouldn’t be eligible. We don’t want to set bad policy.”
The City Council’s economic development committee discussed the proposals Thursday.
Richardson said the city has discussed the need for wage flexibility with other manufacturers but has granted only one waiver for its Business Investment Grant program.
In 2010, the city awarded a Business Investment Grant to GEO Plastics, a manufacturer in southwest Charlotte. The company said the average pay of its new hires would be $40,000, which exceeded the manufacturing average of $32,408.
City subsidies have recently been given to companies with white-collar jobs, such as Chiquita and United Technologies Corp., which is moving its new aerospace division headquarters to Charlotte.
But some manufacturers have met the current city standard of paying the regional average.
In 2009 and 2010, Siemens received roughly $18 million in local and state incentives for a large expansion at its Westinghouse Road facility. The average pay of those jobs is $65,000, and the company is committed to more than $200 million in capital investment.
Output vs. intake
Mecklenburg County’s economic development office has said that county government can lose money on new residents who earn less than $60,000 a year. Much of the county’s mission is social services, such as schools, which are cost-intensive.
The idea is that a resident earning $35,000 a year would, on average, use more county services than they would pay in local taxes.
Richardson said the city views the cost and benefit of new jobs through a different lens.
“The county has a high human service cost, and we don’t,” Richardson said. “We look at it through the lens of filling vacant space. And growing a diverse base of jobs.”
The economic development committee also discussed other proposed changes to its Business Investment Grant program.
The grants today are a rebate of property taxes paid by companies that expand or relocate. The program favors firms that make large capital investments, such as a new factory.
In two recent corporate moves – Chiquita and United Technologies – council members had to break with policy, offering those companies additional incentives other than property tax rebates. The reason is that those companies weren’t making large capital investments but were instead bringing hundreds of high-earning employees.
The city is proposing to make it easier for council members to offer such incentives for corporate relocations.