Gov. Pat McCrory’s N.C. Competes plan for jobs incentives heads to the full state House later this week after clearing its first hurdles Tuesday in two committees, despite opposition from several top Republicans and Democrats.
The vote tally was 30-9 in the House finance committee on a plan that includes doubling the money available in what is now known as the Job Development Investment Grant. The fund, used to lure major employers to the state, is largely out of money but would get a $22.5 million infusion if legislators approve.
The McCrory administration has worked closely with House Republicans to draft the bill, and Commerce Secretary John Skvarla was on hand Tuesday to lobby for the measure as it also passed in the House appropriations committee.
“Nobody likes incentives,” Skvarla told legislators. “But the practical reality is that our competitive pool is not only just the United States but foreign countries. There is no question that incentives are the first box checked by anyone looking at North Carolina.”
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Some legislative leaders voted no, including the Republican speaker pro tem, Rep. Paul Stam of Apex, and House Democratic Leader Larry Hall of Durham. Among the complaints: the incentives primarily benefit urban counties like Wake and Mecklenburg.
“Doesn’t it make sense that that kind of incentive would need to be for my kind of county, and not for the wealthiest?” said Rep. Jonathan Jordan, who represents Ashe and Watauga counties. “This is welfare for corporations.”
Backers of the JDIG program point out that incentives for wealthier counties include a contribution toward infrastructure in poorer counties. JDIG’s utility fund has provided $37.2 million for projects across the state.
Stam proposed an amendment that would have limited grants in wealthy counties to 60 percent of total grant funding. His suggestion was voted down amid concerns it could harm the program. House members did, however, approve a provision that would require cities and counties in wealthier areas to provide matching grants. Another provision added Tuesday would increase the contribution to the utility fund from grants in the wealthiest counties.
Despite the changes, some Republicans said they’re fundamentally opposed to incentives. “I actually believe in free markets and competition and a level playing field,” said Rep. Bert Jones, a Reidsville Republican. “A better weapon is a better tax climate for everybody.”
For Democrats, the objection stemmed from two tax credits attached to the bill. One caps sales taxes on jet fuel at $2.5 million per year and benefits American Airlines and its Charlotte hub. Another offers a break on electricity taxes for technology data centers.
“There’s a lot of average middle class people who drive a lot, and we’re not giving them a break on their sales tax,” said Rep. Paul Luebke, a Durham Democrat.
Rep. Charles Jeter, a Huntersville Republican, said the credit aids the Charlotte airport, where American could avoid the extra tax. “The money won’t be there because they won’t buy fuel here anymore, because they’ll buy it in South Carolina,” he said.
Tuesday’s committee vote tally indicates the bill will likely pass the House later this week. It could face more opposition in the Senate, where Republicans are already voicing concerns. The Senate’s finance committee will hear a report Wednesday from the UNC Center for Competitive Economies, which has been tracking the effectiveness of incentives.
Also in the plan
▪ $20 million in funding for an infrastructure grant program that helps companies build new industrial sites. That fund – the Site Infrastructure Development Fund – was largely depleted by a 2004 grant to lure Merck Pharmaceuticals to Durham. Rep. Susan Martin, a sponsor of the bill, said the idea is an alternative to the unpopular “closing fund” proposed last year that would have given extra money to the governor to close job deals.
▪ A narrowly tailored tax break for major manufacturing facilities locating in one of the state’s poorest areas. The so-called “single sales factor” modification recalculates a company’s tax burden to a lower rate. Under the bill, the formula would only apply to companies investing $1 billion or more in what the state considers a high-poverty county.