Charlotte leaders in recent years have approved hundreds of thousands of dollars in incentives to bring low-wage jobs to the city – a change that may accelerate after the Keith Scott protests and riots.
Tax dollars have been given for manufacturing jobs paying less than $30,000. Call center jobs averaging $33,000. Amusement park jobs at $8.25 an hour.
The city’s and county’s old policy was to subsidize only high-paying positions that boosted the tax base. They first loosened their economic development requirements after the recession in an attempt to lower unemployment.
As Charlotte tries to improve economic mobility, and to address concerns from the Scott protests, the city may become even more aggressive in recruiting low-wage jobs to help the city’s poorest residents.
“This ties into the whole economic opportunity conversation,” said Charlotte Chamber president Bob Morgan, who supports recruiting jobs that pay below the area’s average wages. “If you (give incentives for) jobs paying $200,000 a year, why would you not for a call center job? For many people, that’s higher than where they are.”
But some caution that offering subsidies for low-paying jobs can hurt the city in the longer term, especially in times of low unemployment, as Charlotte is in today, at 4.5 percent.
Josh Goodman, who studies tax incentives for the Pew Charitable Trust, said subsidizing jobs may encourage more people to move to Charlotte.
“You could have people moving up the economic ladder,” Goodman said. “But if people already have jobs, you may be attracting people to your city to fill the new ones.”
In some cases, Mecklenburg County studies show the people holding the new jobs would pay less in taxes than they use in services like schools and hospitals.
The unemployment rate is way down, but there are still a lot of underemployed people.
Republican City Council member Ed Driggs
Change in direction
The city of Charlotte’s old policy was to subsidize only jobs that provide “high quality of life” for the worker.
The city and Mecklenburg County wanted jobs to pay at or above the area’s average salary, which is just under $49,000.
But after the recession, local government said a new business needed only to pay above the average wage in that sector.
A year ago, the city, county and state agreed to give Republic Services, the Phoenix-based trash and recycling company, $926,000 to bring a call center to University City. The city’s and county’s share was just under $217,000.
The center will soon be staffed with 350 people.
The city and county are focused on improving the prospects for those at the bottom. A 2015 Harvard study found Charlotte ranked last in economic mobility among the nation’s 50 largest cities.
Ana Bonilla, 25, one of Republic’s new hires, was born in Honduras and moved to Charlotte when she was 11. She now earns $16 an hour – $33,280 a year. She can also earn overtime.
Her first job was a cashier at the Burger King near the old Eastland Mall. Her next job was at a call center, where she said she worked in a windowless building with a small desk. She said she wasn’t allowed to have her personal cellphone at her desk because it might have been distracting.
“This is much better,” she said. “I can put a picture on my desk. Here it’s more open. I can be myself.”
The Republic office doesn’t look like a stereotypical call center. Instead of rows and rows of small cubicles, it could pass for a tech firm. There is free fruit. Sofas for breaks. Windows with views of uptown in the distance.
Republic said it has hired 300 people, and that nearly 3,000 people applied for those jobs. More than 4,500 other people applied for other jobs with the company in Charlotte.
Tom Kenny, who runs the center, said most of the applicants have some kind of customer service experience.
“You have to be an extrovert to talk on the phone,” he said. “They worked in retail, they were bartenders, waitresses. You have to have the gift of gab.”
Kenney says he pays more than other call centers. In the overall Charlotte economy, the average wage for all Republic jobs, including managers, is $41,311, according to the city.
When Mecklenburg commissioners met in closed session about Republic, staff told them the Republic jobs wouldn’t ripple through the economy, creating other new jobs.
When the county estimated how much new tax revenue the Republic expansion would produce – from the employees buying things, and paying property taxes themselves – the project showed the county losing money in four years. Staff estimated that county expenses – including social services and schools – would exceed those new dollars.
At first the county projected Republic would give the county a financial boost. But by 2020, officials believe, the Republic deal would produce a cumulative $14,000 loss. The trend lines suggest that loss would widen over time.
After the recession, one of the first companies rewarded under the city and county’s change in philosophy was Stanley Black & Decker, which was bringing manufacturing jobs from Mexico to the United States. In 2014, the city and county agreed to give the company $181,208 in exchange for expanding its factory on Choate Circle in southwest Charlotte.
Stanley Black & Decker planned to add 250 new jobs. The average wage, however, was $29,926, according to the city.
That salary was actually lower than the average wage for “production jobs,” but council members and commissioners approved the incentives anyway.
Three years ago, when the incentives were approved, the company told the Observer the actual pay from the jobs would be higher, in part because of projected overtime.
The county’s own analysis showed the county would take a significant financial loss from the deal. Over a six-year period, the new Stanley Black & Decker jobs would cost the county nearly $942,000.
Under the county’s previous economic development manager, John Allen, county staff believed that new jobs needed to pay roughly $60,000 a year to provide more in revenue to the county than the cost for services.
But the city and county are focused on improving the prospects for those at the bottom. A 2015 Harvard study found Charlotte ranked last in economic mobility among the nation’s 50 largest cities.
Greg LeRoy, executive director of Good Jobs First, a Washington D.C.-based group that promotes accountability in incentive programs, said cities should have a program to track whether minimum-wage workers are moving into better jobs.
“Absent such (a system), the call center job takers could just as easily be dislocated workers ‘skidding’ into lower wages, or service-sector workers moving sideways through high-turnover jobs; there would be no way to know,” he said.
LeRoy added that subsidized jobs should not have people reliant on other government programs, such as the Supplemental Nutrition Assistance Program, the federal program formerly known as food stamps.
In Charlotte, some of the new jobs can be filled by people who are also eligible for city-funded affordable housing. For instance, someone making $32,160 with a child is eligible for a subsidized apartment.
Goodman, of the Pew Charitable Trust, said the success of an incentive depends on a city’s goal. Is it to increase revenue and make the city wealthier? Or is it to increase social mobility?
Will trend continue?
In the last four years, the city and county have also approved incentives for projects that have been long considered lucrative, for companies like Corning Optical and Electrolux.
But there also are incentives for lower-wage jobs: Snack-maker Snyder’s-Lance ($45,000); pharmaceutical and plasma storage company Octapharma ($47,900); and marketing company Red Ventures ($48,930).
Other cities are taking a similar approach. Soon after Donald Trump was elected president, the state of Indiana announced a $7 million incentive package to save 730 jobs that pay an average of $22 an hour. That’s just under $46,000 a year.
LeRoy, of Good Jobs First, said he believes other states loosened their requirements after the recession for subsidies.
In 2015, the City Council approved in closed session $278,000 in incentives for a Walmart support center, where 90 percent of new jobs would pay $32,200.
In the presentation, city staff showed council members a ledger listing the amount of property taxes the company would pay after the tax credits expired. No information was presented that estimated what the new residents would cost the city for roads, police, fire, trash collection and other services.
The county rejected the incentive package because some commissioners believed Walmart could afford to pay its employees more. The company opened the support center in Charlotte anyway.
After the Keith Scott protests and riots, council members have discussed changing the incentive program again, with possible requirements for minority and women-owned business hiring. The city also might continue a focus on jobs that help people move up the economic ladder.
Republican City Council member Ed Driggs said the city wants to also help the city’s poorest residents.
“What I think members of council are responding to is that a lot of people just can’t get work,” he said. “The unemployment rate is way down, but there are still a lot of underemployed people.”
It’s unclear how far the city might go.
Four years ago, the city and county approved $922,000 in incentives for the owners of Carowinds to entice the company to build the Fury roller coaster in Charlotte and not at another park. The company told the city the new jobs would pay only $8.25 an hour, but because the roller coaster added $33 million in taxable property, the county estimated the project would add more than $500,000 to the county tax rolls over six years.
Driggs said he supports the city’s efforts to bring all types of jobs to the city. But he said the city should take a close look at the costs as well.
“If we make ourselves too attractive to people who are users of city programs for housing and county programs, that just adds up to a bigger burden,” he said.
Other recent incentives
Since the City Council began its Business Investment Grant program in 1998, the city has awarded 60 grants, or property tax rebates. The city and county combined have awarded $55 million in property tax rebates.
In 2011, the city and county began awarding grants to companies whose jobs might be below the average wage. But they have also awarded incentives for what have been long considered lucrative expansions and relocations.
Last year, Corning Optical received $1.19 million from the city and county in exchange for a $38 million division headquarters and 650 new jobs with an average wage of $90,900.
In 2015, the city and county approved $204,722 for Albemarle Corp., a manufacturer, which moved its headquarters to Charlotte from Baton Rouge, La. The company didn’t making a large capital investment, but said it would bring or create 120 new jobs with an average wage of $187,350.
In 2013, MetLife received $3 million from the city and county, along with an $87 million grant from the state. The company created 1,866 new jobs with an average wage of $68,000.