PSI: Gambling for jobs - WBTV 3 News, Weather, Sports, and Traffic for Charlotte, NC

PSI: Gambling for jobs

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There is an arms race going on this country. It's an incentive war being fought state-to-state, county-by county.  The goal is to bring in new business and new jobs.

In North Carolina, it's been estimated three cents of every state budget dollar goes to fund a business incentive program. It's not up front money, but future tax breaks.

"I don't think anybody likes them," said Burke County Economic Development Director Scott Darnell. "They are a necessary evil."

Why? Because everyone is doing it and the stakes are getting higher as the competition to bring jobs intensifies.

"It is out of control and nobody wants to be the first to unilaterally disarm," said Bob Orr.

Former Supreme Court Justice Bob Orr has argued against tax incentives for 20 years. He says public money shouldn't be used to subsidize private companies.

"I mean every politician is frantic about being perceived as helping to bring jobs," said Orr.

He says the resulting scramble means an important question is sometimes left out. Are the incentives even necessary?

"Truthfully I think in very few cases are the decisions actually driven by the incentives," said Orr.

"You can point to projects where incentives made a big difference," said Darnell. "You can point to projects and you're thinking in the back of your mind well, that was going to happen anyway."

And sometimes the company is just moving a short distance.

"We are out space," said Ric Raines standing outside his Burke County office.

Raines' company Baker's Waste has been operating in Burke County for years. He wanted to expand from 80 to 150 jobs, but he couldn't find a suitable location. So the company is moving, one county over.

"Caldwell County worked very hard and made the thing happen," said Raines.

Baker's Waste could realize up to $800,000 in tax breaks. He says Caldwell County and the state had to step up because South Carolina was sniffing around.

"So, we looked there and they were aggressive," said Raines.

John Allen is Mecklenburg County's economic development specialist. We asked him how you know if you're really in a competition.  

"You can't always," said Allen. "You just try to analyze each situation as best you can."

Allen was involved in luring Chiquita from Cincinnati to uptown Charlotte. The county's analysis of the project shows the tax incentive package deal means the county will lose money over the first two years. Benefits start showing up in year three.

The incentive money does not come directly from other tax payers, but the deals do mean counties and the state bring in lower tax revenues in the future, which do have to be offset. Not easy in increasingly tight budgets where governments struggle to pay for roads, schools and police protection.

"Typically a particular project has multiple locations that can work equally," said Allen. "Often times the incentives do become the tie breaker."

Even then there are no guarantees. Allen says 20% of proposed grants in Mecklenburg County aren't paid out because the company didn't create all the jobs, or make the investment required. Some counties have seen years where two out of three proposals fall through.

"You never bat 100%," said Darnell. "You do the best you can."

Now there is talk of changing the system as part of a bigger effort to revamp the state's tax code.

Some would go as far as eliminating all incentives, trade them for overall lower tax rates and easing of regulations.  John Allen says that would go too far.

"I think we would be putting ourselves at a huge competitive disadvantage," said Allen. "We would kill ourselves."

Economic developers say this an uneasy time for them until they see what lawmakers in Raleigh decide. One opinion that you would think really matter is new Governor Pat McCrory. WBTV asked repeatedly for an interview to talk about the topic. So far our requests have gone answered.

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