The money North Carolina spends on incentives to grow businesses and create jobs overwhelmingly favors the state’s most wealthy urban areas at the expense of the state’s most distressed—often rural—areas that need the most help, according to a report released yesterday by the Budget & Tax Center.
The state has five major incentive programs that were originally created to target business development resources to economically distressed and rural areas in the state. These programs are known as the OneNC Fund, the Job Development Investment Grant (JDIG), the Jobs Maintenance and Capital Fund, the Industrial Development Fund (IDF), and the IDF-Utility Fund. Unfortunately, the programs have not lived up to their promise and have invested more of these resources in the 20 wealthiest counties (designated Tier 3 counties by the Department of Commerce) than in the poorest 40 counties (designated Tier 1), the report finds.
Specifically, the report looks at the incentive awards made by these five programs from 2007 to 2013 and finds the following mismatches in investment:
North Carolina has awarded more than triple the amount of incentive dollars to projects in the wealthiest twenty counties than projects in the state’s 40 most distressed counties. If the state were truly targeting economic development resources to the regions that need it most, we would have spent more in the counties that are most distressed and need investment the most. Unfortunately, we see the opposite. The Department of Commerce has granted more than $840 million through its major incentive programs, and $592 million—more than 70 percent of the money—went to the state’s least distressed, Tier 3 counties.
The state‘s incentive projects promised to create or retain two jobs in the 20 wealthiest counties in the state for every one job promised to the 40 poorest counties. Given that the distressed Tier 1 counties are the most in need of jobs, effectively targeted incentive programs would attempt to deliver more jobs to these counties than to the wealthier Tier 3 counties. Yet the opposite is happening—the state has implemented incentive projects that promised to create almost 90,000 jobs in the state’s least distressed counties, more than double the 42,235 jobs promised to the most distressed Tier 1 counties.
The state is paying almost twice as much in incentive dollars for each job promised in the wealthiest twenty counties than in the 40 most distressed counties. As typically envisioned, economic development incentives are often used to help more distressed, less economically competitive communities increase their attractiveness for mobile capital, despite the significant body of research finding that that public investments in education, job training, and infrastructure are better strategies for improving a community’s attractiveness to business. As a result, the state could be expected to spend less money on incentives for every job promised in wealthier, more competitive counties than in more distressed, less competitive counties. Over the past five years, North Carolina has spent $6,580 per promised job in the Tier 3 counties—about one-and-a-half times the $4,303 the state is paying for each promised job in the more distressed Tier 1 counties and more than four times the amount paid for every job promised in the moderately-distressed Tier 2 counties.
The majority of incentive deals, incentive award dollars, and promised jobs are concentrated in the state’s most urban and prosperous regions of the state: Asheville/Buncombe, the Research Triangle, along the I-40 corridor in the Triad, and the Greater Charlotte region. In perhaps the most troubling trend in the state’s targeting mismatch, just three counties account for more than 56 percent of the total incentive dollars granted statewide since 2007—Durham, Wake, and Mecklenburg. Mecklenburg alone received more than a third ($303 million) of the entire $840 million granted across the state over this period.
To be clear, these kinds of business incentives should never be the state’s sole method for job creation, but as the long as these programs remain in the state’s economic development toolbox, they should not exacerbate the disparities between urban and rural, wealthy and distressed regions of the state. As a result, the state needs to spend less money on incentives in the most prosperous metros in the state, and start investing more in the roads, schools, and job training programs most likely to create jobs and improve economic conditions in the state’s most distressed and rural communities.