Three years ago, Republican lawmakers balked at a deal put forward by Democratic Gov. Bev Perdue to offer a company cash incentives to lure 1,300 jobs to North Carolina.
Now, with a Republican governor at the helm, some GOP lawmakers want to expand state incentives and create a so-called “closing fund” that will allow cash grants to seal a deal with large corporations that promise to add jobs.
The job development measures were tucked at the end of a bill to limit local governments’ authority to levy sales taxes and received little debate Thursday before passing the state Senate by a 32-16 vote that crossed party lines. But the new direction is clear.
The bill would direct $12 million toward a company that owns a Western North Carolina paper mill, add $14 million in grants to recruit companies and start a new fund that would allow the state Commerce secretary to offer upfront cash grants to companies.
The closing fund, controlled solely by the state commerce secretary, is expected to get $20 million to $30 million in the still-developing state budget. Senate lawmakers said it would be a one-time appropriation.
The legislation next goes to the House, where incentive programs have faced opposition from Republicans who are ideologically against what they deem “picking winners and losers” in the market.
What softened the philosophical opposition in the Senate, Republicans leaders said, is the new administration and the opportunity to win a major economic development project in the next year.
“We have a commerce secretary that’s been very aggressive,” Senate Majority Leader Harry Brown said, referring to Sharon Decker. “She’s doing a great job, and I think our caucus trusts her to do a great job.” The Jacksonville Republican said “not as much trust” existed under Perdue.
Senate Commerce Committee Chairman Rick Gunn said “the dynamics of the market have changed” and North Carolina recruiters needed to be able to compete against other states.
“This is a huge tool in the tool box,” the Burlington Republican said. “I think the timing is right. We have been told from any number of sources in economic development recruiting that the next five-year window is when every state is going to see the biggest opportunity for growth. I want to be in the game, and I want to win the game.”
The potential to land what job recruiters called a “game changer” didn’t sway Senate Republicans in 2011 when Perdue’s administration asked them to approve a $100 million incentive package for Continental Tire.
The German manufacturer wanted to build a $500 million plant in southeastern North Carolina, but the Senate wouldn’t agree to the $45 million in cash incentives it requested. The company picked South Carolina instead.
Brown said North Carolina is once again a contender for a big economic development project, and that helped spur support for the legislation among Senate Republicans. He said the state is trying to draw an auto manufacturer to the state, or possibly another tire plant.
“I think we need to be in a position to recruit one of those if possible, and this is a way we can give (the secretary) a tool to maybe do that,” he said.
Paper mill to get $12 million
The state’s Economic Development Board recommended the creation of a closing fund earlier this year as part of its 10-year job development plan.
Gov. Pat McCrory has emphasized the need to make North Carolina competitive against other states, such as South Carolina and Texas, that can offer more lucrative packages to lure companies.
But in his 2012 campaign, McCrory expressed reservations about upfront cash incentives and opposed the Continental Tire deal.
McCrory visited the Legislative Building on Thursday but declined to talk about the incentive legislation. The governor’s office said he is still reviewing it.
The bill also would add $14 million to the Job Development Investment Grant program, which is a key tool the governor used to persuade Sealed Air to relocate its headquarters to Charlotte this week and bring 1,300 jobs.
Another provision would give a $12 million grant to Evergreen Packaging, a paper products manufacturer owned by a New Zealand-based holding company that reported $1.7 billion in revenues last year.
The company operates a paper mill in Haywood County that is struggling to comply with federal Environmental Protection Agency regulations on air pollution. The bill rewrites the requirements of the state’s Job Maintenance and Capital Development Investment Fund to make the company eligible for taxpayer money to offset the cost of the upgrades.
Sen. Jim Davis, a Franklin Republican who represents the area, said the money is needed to ensure the future of the plant and its 1,200 jobs.
“I’m not a big fan of picking winners and losers, but if the government is going to impose all these regulations on them at least the government can be part of the solution,” he said. “I think a $12 million investment by the state is a small price to pay to keep a $240 million investment in our community.”
Closing fund includes limits
The new closing fund – officially named the job catalyst fund – includes a number of restrictions on how the money would be spent and puts a July 2015 deadline on the McCrory administration to make the grants.
Under the bill, eligible companies that move to economically distressed areas would need to create at least 500 jobs, invest $20 million, meet average local wage levels, provide health insurance and adhere to tax and workplace safety rules. The obligations increase if a company chooses to locate in a less distressed area of the state.
The commerce secretary would receive sole authority to give companies the money, directed through local governments. The companies could use it to acquire land, develop facilities or make capital investments, such as acquiring equipment.
Decker was not available for comment. But Commerce Department spokesman Graham Wilson said Decker supported the move. “She looks at it as a closing fund that is going to give us some flexibility,” he said. “When you get to the end of those negotiations you need that flexibility.”
Even with the safeguards on the closing fund, some House Republicans are concerned.
“To me, I think it’s very harmful, this provision,” said Rep. Chris Millis, a Hampstead Republican.
He said he supports using tax dollars to improve public roads and other infrastructure to lure companies, but not the incentives in the Senate bill.
“I’m all about creating an environment where jobs can grow. I’m just not about subsidizing it by taking public dollars and giving it to private (companies),” he said.