RALEIGH – As the political and now legal debate continues on the issue of economic-development incentives, here is a fact worth chewing on: when a company says that it won’t locate or expand a jurisdiction unless a government subsidy is forthcoming, don’t assume that it’s true.
I don’t mean to cast aspersions. Perhaps the misstatements of corporate leaders, lobbyists, and developers are entirely accidental. Perhaps they truly intend not to go to places where incentives aren’t offered, but then find themselves pushed along by economic currents beyond their control. Perhaps one hand doesn’t know what the other hand is trying to grab. Whatever the reason for the discrepancy between what they say and what they do, it clearly exists.
The most recent example is to be found in Greensboro, where a firm engaged in redeveloping the old Carolina Circle Mall stated that it would not be able to locate a new Wal-Mart there unless it received incentives worth $300,000. The Greensboro city council, in a remarkable display of fortitude, sent a clear signal a few weeks ago that it was not inclined to comply. The project would be “dead” without the incentives, said the idea’s main backer on the panel, Councilman Robbie Perkins.
On Wednesday, the News & Record of Greensboro reported that a firm representing Wal-Mart has purchased the property, for $3.3 million, apparently with the intention of building a store anyway. Tom Phillips, another councilman and an opponent of the proposed incentives, explained the outcome to the paper this way: “They make their decision about what they want to do and they see what they can get from us.”
Exactly. I’m willing to grant that there are exceptions, but in general I tend to think that Phillips’ point applies to most incentive requests. Companies are going to try to drive the best bargain they can, if they think their size and the community’s need give them a strong negotiating position, but for the most part site locations are based on issues of proximity, labor quality and availability, and long-term cost expectations. Carolina Journal has documented many cases in which incentives seem not to have determined decisions in the way claimed by politicians or recruitment consultants. For example:
• Verizon Wireless got $7 million in incentives to locate a new call center in Wilmington after it had already begun construction work on the site.
• Harris Microwave relocated its headquarters from Northern California to Durham last year, receiving $4 million in incentives for the move. Yet two states with which North Carolina was supposedly competing for the project denied they had ever heard from Harris Microwave about it, and there is evidence that the headquarters had already moved or begun to move to North Carolina before the incentives were awarded.
Are companies and individuals in North Carolina in spirited rivalry with their counterparts in other states to sell land, services, or labor to new or expanded industries? Absolutely. The business-recruitment industry is highly competitive. But there are many ways for North Carolina policymakers to respond to competition without selective tax breaks or other subsidies, such as improving the quality of schools and roads or cutting taxes and regulations for all businesses, large and small.
Among the most important things for officials to do is to maintain their skepticism.
Hood is president of the John Locke Foundation.