More than a year after Gov. Pat McCrory first asked legislators to give him more incentive money to lure major employers to North Carolina, the state Senate unanimously approved additional funding Monday night.
The “N.C. Competes” legislation represents a long-awaited compromise between House and Senate leaders. With a final Senate vote and a House vote set for Tuesday, the bill could be on McCrory’s desk by the end of the week.
The state’s main job incentives and recruiting fund, known as the Job Development Investment Grant or JDIG, has been mostly out of money since last fall. The program has been used to attract companies like MetLife, which received about $94 million in incentives to bring thousands of jobs to Cary and Charlotte.
But House and Senate leaders struggled to agree on new rules for how the program would work, with the Senate seeking restrictions on how much of the incentive money could go to urban counties like Wake, Durham and Mecklenburg. Those counties have seen more than 80 percent of JDIG awards in recent years.
The compromise would increase the cap on incentive awards to $20 million a year. The cap would be increased to $35 million for any year in which the state has a “high-yield” jobs deal where a company invests at least $500 million and adds at least 1,750 jobs.
Those companies would be eligible for more generous incentives. That provision is aimed at attracting a large manufacturer, such as an auto plant.
In the state’s wealthiest counties, local governments would need to add incentives of their own in order to qualify for a JDIG grant. And companies willing to locate in poorer counties could receive more generous awards. In a statement released late Monday, Senate leader Phil Berger said those provisions will ensure the incentive program benefits the entire state.
“We’ve said all along that improving the state’s climate for job growth requires the right balance between expanding tools to recruit new businesses and lowering taxes to reward and retain those job creators already here,” he said. “I’m pleased we have achieved both of those goals this session while balancing support for our major economic centers with policies that will also allow the rest of our state to grow and prosper.”
Sen. Joel Ford, a Charlotte Democrat, suggested that the Commerce Department should be allowed to make unlimited JDIG awards. The program pays companies based on a percentage of the new tax revenue their jobs generate; no money is paid until the company meets job and investment requirements.
“Since JDIG is self-funded, why do we have a cap?” Ford asked, noting that neighboring states don’t cap their programs. “With a limited amount of JDIG money available, we are asking counties to compete with one another in a particular calendar year.”
Sen. Rick Gunn, a Burlington Republican who presented the compromise bill Monday, said incentives work best when coupled with other pro-business policies. He noted that North Carolina will continue to lower its corporate tax rate and will soon begin the “single sales factor” method of calculating corporate taxes, which favors large manufacturers.
“JDIG is just one of the tools in the toolbox,” Gunn said. “Quite frankly, we have put together an incredibly effective package for the state of North Carolina.”
Some Republicans say they’d like the state to eventually eliminate incentives entirely. “Our tax reform is trying to get rid of corporate welfare, and JDIG is corporate welfare at its best,” said Sen. Bob Rucho, a Mecklenburg County Republican.
The compromise bill before legislators this week also extends tax credits aimed at specific industries – part of the original economic development bill the House approved in March.
Aviation fuel, technology data centers and motor sports would all benefit from sales tax exemptions under the bill. Those provisions have been criticized as handouts for favored industries, but supporters say companies could leave North Carolina if the credits were allowed to expire.
In January, McCrory called on legislators to pass an economic development bill within the first weeks of the legislative session. Nine months later, the bill is nearing the finish line in what will likely be the last weeks of the session.
And while the JDIG program was out of money, several major employers snubbed North Carolina in favor of neighboring states. The most notable was Volvo, which looked at three sites here before deciding to build a $500 million plant near Charleston, S.C., which will employ up to 4,000 people.