This year’s budget goes big on economic development incentives. Forsaking previous General Assemblies’ libertarian hostility to targeted business investments, the state’s proposed spending plan creates a fat new program to land “transformative projects” (like a rumored Apple headquarters) and expands existing programs to provide more benefits to companies. Critics often deride these programs as ineffective, so the budget also opens the door for the Department of Commerce to assess the true economic impact of these programs at the county level after incentives are granted—an undeniably positive development.
The Latest Attempt to create a “Transformative Project” incentive program
The biggest move in the portion of the budget funding the Department of Commerce is the creation of a new “Transformative Project” category within the existing Job Development Investment Grant (JDIG) program. Rumored to come in response to a potential deal to land an Apple headquarters in the Triangle, this new JDIG program is broadly intended to support large-scale projects with thousands of jobs and significant private investment—the fourth such program in the last five years.
The problem is that this new program looks to be too generous in terms of what it gives to the company and too stingy in terms of how it benefits North Carolina:
- Effectively eliminates the recipient’s corporate income tax liability for 30 years. The heart of the program allows companies to receive grants equal to 100 percent of their employees’ withholding taxes for 30 years, more than twice the normal JDIG grant period of 12 years.
- Allows companies 10 years to ramp up, double the standard rate of 5 years. Recipients would now have an entire decade—rather than the current five years—before they have to show proof of job creation and investment to the Department of Commerce.
- Makes it easier for companies to qualify as “transformative.” In the program’s current form, transformative projects would need to invest $4 billion and create 5,000 jobs to qualify. This year’s budget lowers these thresholds so that a company could qualify if it invests $1 billion and creates 3,000 jobs.
But the biggest problem with the “transformative project” program is that its definition of “transformation” isn’t terribly “transformative.” Read more