With NC business incentives, secrecy is worse than the spending

Editorial from Lenoir News-Topic, published in News and Observer, September 2, 2014.

The following editorial appeared in the Lenoir News-Topic:

One of the reasons no one particularly likes how financial incentives to businesses are handled is that the businesses generally want their names kept quiet until they are ready to sign a deal.

And by “quiet,” we mean totally locked down. Even the government officials who sign off on the financial details often don’t know to whom they are making promises. The only people who are allowed to know are the specific economic development officials handling the deal.

This benefits no one but the business, which gets to keep its government suitors guessing about what places are competing to land the business and what they are offering.

It would be hard to find anyone else who likes the arrangement.

News organizations certainly don’t like it. We believe that the public has every right to know exactly what is being promised with public tax money and who it is being promised to.

Elected government officials don’t like it, including those who believe incentives are necessary. At best, it’s like they are going on a very expensive blind date, with only the promise of the economic development office that the date is both gorgeous and has a great personality. At worst, they feel they have turned over their authority to unelected bureaucrats, who know everything but won’t share it. There was such grumbling when the Caldwell County Board of Commissioners was voting on the Economic Development Commission’s budget.

But at least at the local level the promises are small. Most often around here, the local incentives involve a promise of $2,000 for every new job created – which is not paid until after the job has been documented – and sometimes a “tax grant,” which pays back to the company a portion of the property taxes on the new property value that the company’s investment creates. The latter doesn’t even really cost any money. It just temporarily keeps the company’s property tax bill from growing as quickly as it otherwise would.

But at the state level, these incentives get to serious money. The most recent prominent example is that North Carolina was prepared to offer Toyota up to $107 million worth of incentives to lure the automaker’s North American headquarters to Charlotte, which would have brought 2,900 jobs with it, the Charlotte Observer reported Thursday. North Carolina lost out to Texas, which offered only $40 million but has no corporate income tax and direct flights to Japan.

North Carolina officials didn’t know to whom they were offering the incentives until Toyota announced it was going to Texas, the Observer reported.

Such incentives are in the spotlight now because the state Job Development Investment Grant program will run out of money by late October, potentially putting the skids on about 30 recruitment projects that Commerce Secretary Sharon Decker says involve a total of 10,000 jobs.

Opponents of the program include some prominent Republican voices in the General Assembly who don’t think government ought to be doling out financial favors like that.

It would be nice if all of the states could get together and set some common rules that everyone would abide by – one of them being an end to the complete secrecy. If governments want to jockey for position and compete for businesses by offering public money, at the very least the public has a right to know what’s being done in its name with its money.

But getting that done probably would make the idea of getting a direct-to-Japan flight from Charlotte look like child’s play.

MCT Information Services