Politics & Government

NC House jobs bill would double cap on incentive grants

State Commerce Secretary John Skvarla takes questions from reporters after a presentation at the Legislative Building on Tuesday. He was there talking about ideas for the state’s incentives programs, some of which were included a bill filed later in the House.
State Commerce Secretary John Skvarla takes questions from reporters after a presentation at the Legislative Building on Tuesday. He was there talking about ideas for the state’s incentives programs, some of which were included a bill filed later in the House. cseward@newsobserver.com

Republican state House leaders filed a economic development bill Tuesday afternoon that would significantly expand the money available for Gov. Pat McCrory to offer as jobs incentives.

The proposal would infuse more money into the Job Development Investment Grant program, which McCrory has said is nearly out of money. The amount available for the program would double from $22.5 million for the current two-year period to $45 million, allowing McCrory to promise millions to employers before the end of the year. He’s said multiple companies are considering North Carolina but would likely pick other states if no incentives are offered.

“The pipeline is full, folks,” Commerce Secretary John Skvarla told state senators Tuesday. “We’re the only state in the Southeast that doesn’t really have a (jobs incentive) program right now. ... Let’s get what I call the 800-pound gorilla package through the General Assembly and onto the governor’s desk.”

McCrory has said the bill needs to be passed within “weeks, not months” and the issue has been a central one in the beginning stage of this year’s legislative session. Reports indicate North Carolina is in talks with several automakers looking to build a manufacturing facility in the Southeast – a major goal for the governor’s administration.

Rep. Jason Saine, a Lincolnton Republican who helped write the legislation, said the $45 million cap should help accomplish that. “For now, we think that will sustain us,” he said.

McCrory’s plan for more incentives is drawing fire from a range of advocacy groups. The liberal N.C. Justice Center has issued a report arguing the program often fails to deliver jobs.

And Donald Bryson of the conservative Americans For Prosperity says his group will oppose the bill. He points to a News & Observer analysis, published Feb. 15, showing the McCrory administration has promised an average of $19,502 per job created under the program.

“We’re starting to pay more per job,” Bryson said. “Doubling it when we’re pretty unsure if the program even works doesn’t make a whole lot of sense. If we’re looking for alternatives, most legislators will agree that lowering taxes will help a lot of businesses.”

Under the bill, the JDIG program would get a new name: Job Growth Reimbursement Opportunities – People Program. Skvarla has said the JDIG name confuses people because the word “grant” wrongly implies an upfront payment. Under the program, companies don’t get paid until they meet job creation and investment targets.

More money for the program is one of several sweeteners in the House bill that is intended to lure employers who add thousands of jobs. Others include:

▪ $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 and was never replenished.

▪ 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 the company’s tax burden for a lower rate. But under the bill, the formula would only apply to companies investing $1 billion or more in what the state considers a high-poverty county.

“Auto manufacturers have looked here, and this would help incentivize and attract those,” Saine said.

▪ An expansion of electricity sales tax credits for technology data centers. The bill would apply the existing break to centers housing equipment for multiple companies. “While they’re not major job providers, (the industry) has a lot of secondhand effects,” Saine said.

Big break for airline

But House Bill 117 goes beyond incentives for new and expanding companies. The bill also would extend a major tax break that benefits American Airlines.

A law capping jet fuel sales taxes at $2.5 million a year is due to expire this year. American could see its fuel bill rise by $15.5 million in North Carolina next year unless the legislature extends the break, the company has said.

The jet fuel provision could hurt the bill in the Senate, where Republicans are reluctant to approve tax breaks. “We’re not big proponents of special tax preferences,” said Sen. Bob Rucho, a Mecklenburg County Republican. “The other industries that deal with transportation – buses, freight – get no subsidy. We’ll need to look and see if there is any special merit to it.”

Before the Senate gets its say, the bill will likely get debated in the House finance committee next week, Saine said.

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What’s not in the bill

Commerce Secretary John Skvarla was at the legislature Tuesday to pitch the governor’s economic development plan. But not everything he wants is in the House bill:

Crowdfunding: House leaders left out legislation to enable startups to solicit investments from the public, including pitches over the Internet. A Commerce Department spokeswoman said the proposal was separated to make sure incentive funding is approved quickly.

Historic tax credits: Skvarla says restoring credits for historic preservation is “absolutely necessary” to help dying downtowns. But with apparent opposition in the Senate, the governor’s request will wait until his budget proposal.