NC Budget and Tax Center

Halfway home, still a long way to go on economic development incentive accountability

Despite its many flaws, the recently enacted biennial state budget took an important step forward in ensuring the performance and effectiveness of the state’s economic development efforts. Tucked into the spending plan is a provision that expands and strengthens job creation performance monitoring for those businesses that receive state-funded incentives for location or expansion, requirements that represent an important step on the longer road to more accountable—and effective— economic development incentive policies.

Economic development incentives are publicly funded subsidies, tax breaks, or infrastructure improvements offered to businesses to entice them to locate, expand, or retain facilities (and jobs) in the state. Unlike many of its neighbors in the Southeast, North Carolina already has fairly strong performance standards and enforcement measures attached to these incentives, requiring incentivized businesses to meet promised job creation targets by specific timetables or be forced to forfeit current and future incentive dollars.

Unfortunately, the monitoring mechanisms for these current enforcement provisions are somewhat lax, incompletely reported, and with results unavailable for public review. As a result, the new provision in this year’s budget requires incentivized firms to make quarterly reports to the Department of Commerce on their progress in meeting their specified job creation and investment performance targets.

Additionally, these firms are required to report a detailed list of project-specific information allowing Commerce to comprehensively monitor and assess firm performance. Equally importantly, these new reporting requirements give Commerce enough information to make informed comparisons between incentive deals and to assess overall performance and effectiveness of the state’s incentive-granting efforts. Moreover, the Department Commerce is now required for the first time to publicly report these assessments each year and submit their results for review by the General Assembly.

Although these new reporting requirements go a long way towards ensuring the officials in both the Department of Commerce and the General Assembly have sufficient information to track and evaluate these incentive deals, the state still has a long way to go in ensuring true public accountability and transparency in the incentive-granting process. While negotiations between the state and private companies over incentive deals almost always require complete secrecy until an agreement is reached, in a democracy, the public needs to know the specific details of incentive deals once they’ve been signed and the progress each incentivized company is making towards its job creation targets. One such vehicle for producing transparency and accountability is a publicly searchable online database of all firms receiving incentives from the state.

Without this kind of public transparency, the new budget moves the states closer to home in terms of accountability of economic development incentives, but leaves the state with a long way yet to go.

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