If it looks like an economic incentive, walks like an economic incentive, and quacks like an economic incentive, then it must be an economic incentive.
That may be stretching the cliché, but it was the gist of the debate surrounding a controversial policy just passed by the Guilford County Board of Commissioners.
The plan, initially touted as a way to help small businesses, would provide a tax rebate for property improvements in excess of $10,000. It would cost the county between $1 million and $3 million per year, with commissioners carving out $1.3 million in the 2009-10 budget.
Adding to the controversy is the fact that the plan was authored by Commissioner Steve Arnold, who has been a strong opponent of the many incentives requests to come before the board in his nearly 20 years as a county commissioner.
In fact, Arnold recently criticized economic incentives when Dell announced it was closing its Forsyth County plant. He told local media the multimillion dollar package used to lure Dell was another example of “politicians subjectively picking winners and losers in the marketplace.”
But, when defending his plan, Arnold said tough economic times demanded action.
“Guilford County and the rest of the nation are in a deep, dark recession. Arnold said. “Things are tough, and there needs to be an effort made to do something about it. What we need to do is in effect reduce marginal taxes on businesses and that’s what this is — a targeted tax cut for business growth and expansion.”
While the plan passed by an 8-3 vote, commissioners had a wide variety of complaints: It’s no different than other incentive plans; it varies too radically from other incentive plans; it has no requirement to add jobs along with property improvements; it unfairly excludes residential development; and it might not stand up in the courts.
“I still don’t see where there’s any criteria to produce any jobs,” said Commissioner Paul Gibson. “We’re not trying to get anybody to do anything that they wouldn’t do ordinarily.”
Commissioner John Parks quizzed county attorneys on the legality of the plan, which was presented for a formal vote on the eighth draft after consultation with legal experts.
“I just want to make sure if we pass something it’s going to hold up legally,” Parks said.
Attorneys assured Parks that the plan had elements of other incentives policies in the state that have stood up to legal challenges.
Board Chairman Skip Alston addressed the legality issue, saying that applications should stipulate that money received would be returned should the policy be ruled unconstitutional.
Parks also inquired about the definition of “public good” included in the plan’s language, asking that it shouldn’t mean job creation.
Such a definition “should be at the discretion of the board,” attorneys replied.
Another issue that Parks and Commissioner Mike Winstead addressed was the fact that the plan did not cover residential development, including homes, apartment complexes, or additions.
Ernie Pearson, an attorney representing the county, said state statute addresses only industrial and commercial development.
“I hear what you’re saying — it sounds like there’s some will on the board to include multifamily [housing],” Pearson said. “But I just can’t get comfortable with that from a legal point of view.”
Winstead, a developer, expressed disappointment with the way the plan has evolved.
“I’ve gotten less and less excited about this plan,” Winstead replied. “When we first started, it seemed like a unique plan — something no one else in the state was doing. We’ve slowly started knocking folks out, and now — in my opinion — we’re only helping one group.”
Commissioner Kirk Perkins said the plan was “disguise for a rebate, which I don’t think is fair.”
“I just think this is poor policy from top to bottom,” Perkins added. “This board is trying to do the right thing, but they’re trying to do it in the wrong way. There’s no way I can support it, knowing what our bills and obligations are.”
Arnold further defended his policy as being different from other economic incentives, saying that Gibson’s charge that the policy won’t create jobs “is a judgment that is absolutely impossible to make.”
Arnold pointed out that larger incentives packages to companies don’t necessarily incentivize their behavior, because commissioners don’t know if they don’t know if a package offered up was the ultimate deciding factor in whether or not to locate in Guilford County.
Besides, Arnold explained, additional value to the tax base — not jobs — was the focus of the plan, although more jobs could very likely be a residual factor.
But probably the harshest criticism of Arnold’s plan came from Commissioner Billy Yow, who has been Arnold’s ally in opposing economic incentives. In fact, Arnold and Yow were the only two commissioners to vote against awarding Dell $7.1 million in economic incentives in 2004, when Guilford County was making its own pitch to land the company.
Yow added that the plan doesn’t address the realities of the economic meltdown, because property improvements are going to be minimal until the banks start lending money again.
Interestingly enough, Yow’s criticism appeared to echo Arnold’s later comments about the Dell incentives — that it was indeed a case of politicians subjectively picking winners and losers in a tough economy.
“If you want to talk about fairness, it’s ‘one for all, and all for one.’ And if it ain’t that way, I can’t support it,” Yow said.
Sam A. Hieb is a contributor to Carolina Journal.