Business

Losing PayPal may have cost Charlotte more jobs than announced

John McCabe, left, senior vice-president of Global Operations at PayPal, holds up a carved wooden bowl presented to him by Gov. Pat McCrory, right, after McCrory at the announcement of the company’s Charlotte expansion plans in March.
John McCabe, left, senior vice-president of Global Operations at PayPal, holds up a carved wooden bowl presented to him by Gov. Pat McCrory, right, after McCrory at the announcement of the company’s Charlotte expansion plans in March. dlaird@charlotteobserver.com

On March 18, officials gathered at the Charlotte Chamber for a triumphant moment: After a more than six-month courtship, they had landed a PayPal global operations center – and 400 jobs – for Charlotte.

The Silicon Valley payments company was seemingly a perfect fit for the nation’s second-biggest banking hub. But a little more than two weeks later, the company scrapped its plans to come to the city after the governor signed into law legislation known as House Bill 2 that limits protections for LGBT individuals.

It was the first big blow in the corporate backlash over a state law that overturned a Charlotte nondiscrimination ordinance, beginning a wave of businesses, musicians and others boycotting the state.

Interviews with multiple players in the recruitment process show that landing PayPal was the culmination of years of interest in the state by the company and that its departure likely cost more jobs than the 400 announced that day.

According to closed-session Charlotte City Council minutes, the company initially proposed to add 500 jobs over five years, but a shorter time frame was used under the state’s incentives program. And at the chamber announcement in March, a PayPal executive alluded to more potential hiring.

In a sign of its strong interest in the city, the company chose Charlotte over Tampa, Fla., and Chandler, Ariz., even though it could have received bigger incentives for the Arizona site, according to closed-session minutes from a Mecklenburg County commissioners meeting.

PayPal, a $9 billion company based in San Jose, Calif., that lets customers move money electronically, has said it has reopened its search for a new facility. Other states are already trying to land PayPal’s new operations center – in private and in public.

“Tampa is, & always will be, proud of our diverse community,” Tampa Mayor Bob Buckhorn tweeted the day PayPal backed out. “We invite @paypal to open their global ops center here!”

North Carolina eyed PayPal for years

The recruiting effort that nabbed PayPal’s expansion for Charlotte began last summer, said Christopher Chung, the CEO of the Economic Development Partnership of North Carolina, the public-private venture that recruits businesses to the state. But PayPal had been eying potential operations in the state longer than that.

The company explored North Carolina five or six years ago when it was still part of online auction company eBay, said Peter Zeiler, Mecklenburg County’s economic development director.

In addition to the state partnership and the Department of Commerce, officials from the Charlotte Chamber, the city, the county and other organizations worked to bring PayPal to the city. The code name for the effort was “Project Oscar 2.0,” a reference to a code name used when the company had previously looked at the state, Zeiler said.

In December, Ellen Tai, an official with the state partnership, sent an email to a colleague saying PayPal was interested in applying “ASAP” for a state Job Development Investment Grant, North Carolina’s main incentives program for bringing jobs to the state.

“They are aiming for a mid/late January decision,” she wrote in the email, which was obtained by the Observer under a public records request.

In the end, PayPal chose Charlotte over Tampa and Chandler, according to minutes from a March 1 closed-session meeting of the Mecklenburg County commissioners. In picking Charlotte, it was eligible for $2.9 million in state and local tax incentives – more than it could have received in Tampa but less than what Chandler offered, according to the minutes, which were tweeted out by commissioner Bill James. PayPal apparently also considered Salt Lake City at some point during its search, Chung said.

In a March 9 email, Don McDaniel, a PayPal executive, emailed state officials to say the company was “excited” to proceed with the project, subject to the final approval of the incentives.

In making its decision, PayPal was particularly attracted by the city’s pool of financial services workers, officials said. Being on the East Coast was also an important factor.

The company already had strong ties to the city, even though it didn’t have an office here. More than a dozen executives live in the Charlotte area, according to a LinkedIn search, mostly with past ties to Bank of America and Wachovia. The company is a sponsor of an annual charitable event on Lake Norman.

“Overall, PayPal was impressed by the quality of Charlotte’s tech-savvy workforce and ties to the financial community,” said Chung, of the Economic Development Partnership.

In a five-minute meeting on March 18, the Economic Investment Committee of the N.C. Department of Commerce formally approved an incentives package for PayPal, and the chamber hosted the official announcement later that day.

“The state of North Carolina is proud to add this prominent name as a major operations center right here in Charlotte-Mecklenburg,” an enthusiastic Gov. Pat McCrory said at the event.

At the event, PayPal executive John McCabe, a former Wachovia executive who has a home in Cornelius, alluded to potential growth beyond the 400 jobs, which were to have an average salary of $50,929.

“Like all of the operations centers we have, we always look to grow them,” he said. “Hopefully, that will happen here as well.”

Zeiler, Mecklenburg’s economic development director, said the company hinted more jobs were possible but didn’t promise any more.

“There was some brief discussions that this was part of an overall long-term strategy that may result in some unnamed amount of jobs in the future,” he said. “But it certainly wasn’t tied specifically to coming to Charlotte. It was sort of talked about in a generalized corporate strategy.”

Political firestorm

The state was celebrating PayPal’s decision just as a political firestorm was about to erupt.

On Feb. 22, the Charlotte City Council had approved its nondiscrimination ordinance, and opposition was heating up, particularly over a provision to allow transgender individuals to use the bathroom to which they identify. On March 23, the legislature went into session and quickly passed HB2. McCrory signed the bill that evening.

The next day, PayPal sent out a tweet that said the company was “disappointed” by the new North Carolina law and that it was “proud to champion LGBTQ equality in N. Carolina and around the world.”

It was an ominous sign for the Charlotte expansion, and a little more than a week later the company officially announced its decision to walk away from the city. The company never got around to officially signing the paperwork for its incentives package.

“The new law perpetuates discrimination, and it violates the values and principles that are at the core of PayPal’s mission and culture,” PayPal CEO Dan Schulman said in a statement that day. “As a result, PayPal will not move forward with our planned expansion into Charlotte.”

PayPal said it notified the governor’s office of the move, but not all of the other parties involved in the recruitment heard from the company. Charlotte and Mecklenburg County officials learned of the decision through the media.

Critics of the law praised PayPal’s stance and blasted the governor and legislature for costing the state jobs. Others took aim at PayPal, saying it was hypocritical for the company to abandon North Carolina when it operates in countries where homosexuality is illegal.

Officials have had communications with PayPal since their decision to drop Charlotte, said John Lassiter, chairman of the state’s economic development partnership. But he said he hadn’t heard of any recent talks. PayPal did not respond to a request for comment.

The economic development partnership has acknowledged that other companies have expressed reservations about coming to the state because of HB2, but some projects are moving forward, Lassiter said.

“We have a compelling story for any company looking to expand on the East Coast,” he said. “I would hope that corporate America understands that.”

Rick Rothacker: 704-358-5170, @rickrothacker

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