A costly lesson on incentives
Published January 24, 2016
Editorial by Winston-Salem Journal, January 23, 2016.
In the ugly and never-ending incentives competition, we couldn’t be happier that Virginia beat us on landing a manufacturing project that turned out to be smoke and mirrors. But we shouldn’t gloat at the expense of our neighboring state. If it weren’t for some officials here who did their homework, our state could have been the one that shelled out $1.4 million in taxpayer money for nothing.
Lured by promises of jobs and a high return on their investment, Virginia officials gave that money to a sketchy company that failed to deliver, The Roanoke Times, one of our sister papers, reported recently. In the 20-20 vision given by hindsight, it’s hard to believe Virginia officials were so reckless.
But let’s remember how giddy leaders can get, including in our state, over the promise of jobs.
The Catalon Chemical company, based in China, approached Virginia legislators in 2014 with a proposal to create 349 jobs in a $113-million manufacturing project in Appomattox County. The company used a Winston-Salem address as proof of operations in this country. A site consultant vouched for the company.
Virginia officials, right up to Democratic Gov. Terry McAuliffe, were excited about the deal. They’d had success with such big incentives projects.
But after officials gave Catalon a $1.4-million grant as upfront incentives, the project stalled. Officials associated with Catalon reported problems getting equipment into the U.S. and arranging immigration clearance for top company officers.
Eventually, the Roanoke paper reported, the company abandoned its plant, leaving contractors holding the bag for more than $450,000 for partial renovation of the factory office. Virginia eventually discovered that Catalon had copied text and photos for its website from another company and the Winston-Salem address was a sham.
Virginia officials got people’s hopes up for jobs, then crushed those hopes. Now the state faces a long fight to recoup its money.
That could have been us.
The same group approached economic officials in Rockingham County in June 2013, touting a $40-million project that promised 199 jobs in Eden. The group wanted $1.2 million in performance-based incentives.
But former Forsyth County Manager Graham Pervier, who at the time was president of the Rockingham County Partnership for Economic and Tourism Development, did his homework. He personally checked on Catalon’s Winston-Salem address, at Piedmont Triad Industrial Park, and found nothing. So no deal.
Incredibly, Virginia officials were aware of Pervier’s inquiries before they signed their deal, but they moved ahead anyway.
“I think we really got, if you will, seduced because we relied on the representations of a reputable consulting firm and did not do the depth of independent, at least, confirmation of those representations,” Maurice Jones, the Virginia Secretary of Commerce and Trade, told the Roanoke paper.
Jones, who has participated in hundreds of similar deals, has ordered reforms to Virginia’s vetting process.
Well, that’s needed, and so is surrendering giddiness to common sense. May our leaders continue to bear that in mind.
January 24, 2016 at 9:25 am
bruce stanley says:
This story is vindication for Phil Berger, Tim Moore, Bob Rucho and the NC General Assembly for moving away from corporate welfare incentives toward sound pro-business policies in order to attract business to NC and also to keep and reward the existing NC businesses to help them get stronger. As soon as SC got the Volvo plant, the media and democrats jumped all over the GOP legislature in an almost hysterical fashion. Slow and steady wins the race.
January 24, 2016 at 9:46 am
bruce stanley says:
Congratulations to Graham Pervier. Thank you from the North Carolina taxpayers.
January 24, 2016 at 10:29 am
bruce stanley says:
I'm sorry to laugh at the expense of the Virginia taxpayers, however, it is amusing to me that this happened under a democrat governor, Terry McAuliffe, in Virginia, and did not happen in NC under GOP governor Pat McCrory. I might add that NC was duped similarly, if I recall, by Dell Computer for NC taxpayer money under the administration of democrat Bev Purdue. This gives credence to the my following statement. Democrats are weak stewards of the taxpayers money.
http://www.wral.com/business/story/6156112/
January 24, 2016 at 10:49 am
Richard L Bunce says:
Incompetent government bureaucrats just another reason for NC to get out of the incentive game. Just reduce taxes and regulations and legitimate businesses will startup/move to/stay in the State.
January 24, 2016 at 1:08 pm
bruce stanley says:
Amen, Mr.Richard Bunce!
January 24, 2016 at 7:41 pm
Norm Kelly says:
Being redundant isn't fun. But I'm going to add my voice to those already posted anyway.
The moral of this story appears to be missed by Winston-Salem Journal. But not missed by ordinary citizens, those who have already posted their comments.
If our state got out of the give-away scheme COMPLETELY, then we'd never have to worry about making such a costly mistake ever again. Instead of government agents giving away taxpayer dollars to bribe some company to move or expand here, how about our legislature level the playing field for ALL businesses in the state - those already here as well as any that would choose to move here. If every business were treated exactly the same with taxes and benefits, then perhaps the business tax burden could be slightly reduced, which would likely percolate down to lower prices of product/service for all of us in the state.
BTW: when I say 'level the playing field' I feel the need to qualify the meaning. Cuz libs speak of doing this all the time. When libs say it they mean tearing down some one or some group, in an attempt to bring them down to the same level as the person, people, or group that they claim they are trying to help. When I use 'level the playing field' I mean that everyone should be treated exactly the same way, 'fair' as libs say, so that everyone benefits equally. And as far as 'fair' is concerned, again, not lib-speak fair but actual fair. Treated equally, without prejudice, without malice, without the concept of penalizing anyone in favor of anyone else. Not 'fair' as when lib-speak says 'pay their fair share' when referencing taxing the he!! out of 'the rich' so 'the poor' can get more benefits. Next time some lib uses 'level the playing field', 'fair', or 'pay their fair share', some reporter needs to do their actual job and ask specifically what the lib-speaker means. The reporter should force the lib to stop using lib-speak and explain what they mean! Isn't it time we found reporters willing to do their jobs?
