Commentary

Senate JDIG proposal costs too much, yields too few jobs in return

Following sharp questioning of Commerce Secretary Skvarla in a Senate Finance Committee hearing Tuesday, it was readily apparent that the Senate would take a different tack on economic development than the House, which passed its own much-criticized package last month. In a surprise press conference yesterday afternoon announcing their own “jobs package” , however, Senate leaders made it abundantly clear that “different” didn’t mean “better” when it comes to growing an economy that benefits everyone in the state. While the bill does take a few positive steps forward on improving our state’s incentive programs, on balance, the bad outweighs the good and does not represent the most effective approach to economic development.

Most importantly, the proposal doubles down on tax cuts and company-specific tax incentives, instead of policies that benefit companies by adding economic value to communities. We’ve known for decades that North Carolina’s competitive edge in the global economy rests on providing companies with the skilled workforce and infrastructure they need boost to their productivity and ensure long-term profitability.

Unfortunately, the proposed changes to the Job Development Investment Grant (JDIG) program ignore these time-tested strategies for robust economic development in favor of budget-busting tax cuts and corporate incentives that have proved more expensive and less effective than advertised. In fact, 60 percent of JDIG projects have failed to live up to their promises of job creation or investment since the program began in 2002, and JDIG is out of money because the state spent more than half the available funds on a single project in Charlotte.

At a time when North Carolina needs to create at least 400,000 new jobs just to meet the needs of growing population, now is not the time to double down on ineffective economic development.

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Commentary

The hard reality of governing modifies a Tea Partier

In case you missed it earlier this week, Raleigh’s News & Observer is featuring Chris Fitzsimon’s excellent column from earlier in the week under the headline “In NC, a Republican lawmaker finds room to rethink.”

In it, Chris highlights the recent comments of conservative GOP state representative Bob Setinburg who, amazingly enough, stood up in public recently and admitted that the facts he had learned while governing in Raleigh had forced him to rethink one of his hardline, ideology-based positions — this one on business incentives. Let’s hope it’s just the start. As Chris writes:

“Steinburg used to think that but he knows better now because he has been meeting with constituents, hearing from his community leaders and local businesses and people who are looking for jobs.

Their struggles are more important to him than an economic treatise by a right-wing scholar on the shelf of a Raleigh think tank. And they ought to be.  That’s why Steinburg and his colleagues in the House and Senate are in Raleigh, to represent the people in their districts.

Think of how much better off we’d all be if Steinburg’s reasoning for rethinking his view of incentives was expanded to other issues facing the General Assembly.

Imagine if Senator Bob Rucho and his fellow lawmakers spent some time with folks who are still looking for a job and who have lost their unemployment insurance that used to help keep their lights on and gas in their car. Read more

Commentary

New jobs bill takes wrong turn on incentives

North Carolina needs serious policy solutions that create real jobs, but if the new economic development legislation unveiled yesterday is the route the state is going, it looks like jobless workers are going to be kept waiting awhile.

After weeks of closed-door negotiations, the House unveiled the NC Competes Act (HB 117), legislation which included a provision doubling the amount of money the state could spend on the state’s primary business incentive program, the Job Development Investment Grant and renaming it the Job Growth Reimbursement Opportunities People Program. This program provides public dollars to “incentivize” private sector firms to create jobs and increase capital investment.

Unfortunately, the program has not always delivered on its promises, and until it is fixed, it is unlikely that spending more money on it will improve its effectiveness in creating jobs.

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News

New report: Data show that majority of NC business incentive programs don’t work

As Chris Fitzsimon reported in this morning’s “Monday numbers,” analyst Allan Freyer of the N.C. Justice Center has released a new and damning report today on North Carolina’s business incentives programs. This is from the release that accompanied the report (“Picking Losers: Why the Majority of NC’s Incentives Programs End in Failure”):

“If North Carolina continues to use incentives to pick winners and losers in economic development, the state needs to do a much better job of picking winners. More than half of all firms receiving incentive awards from the state’s Job Development Investment Grant (JDIG) program since its inception in 2002 have failed to live up to their promises of job creation, investment, or wages. These failed projects have forced the Department of Commerce to cancel those grants and even occasionally take back funds already given to these underperforming firms, according to an analysis of program reports.

Given the troubling number of failed projects, now is not the time to accept recent proposals to expand JDIG and create a new “catalyst fund” for closing new incentive deals. All told, the state has cancelled 60 percent of JDIG projects after recipient firms failed to honor their promises, with even higher rates of failed projects in the rural and most economically distressed areas of state. The disparity in performance between projects in urban and rural counties is even more striking in light of the signifi cantly lower incentive investments made in those rural areas—rural counties are seeing more project failure despite having fewer and smaller investments.

To address these problems, legislators should resist adding to the state’s incentive programs and instead focus on strengthening the performance standards that hold recipient fi rms accountable for the promises they make. Without these critical accountability measures, each one of these unsuccessful projects would have continued to receive millions in public subsidies, despite failing to create promised jobs and investment. Additionally, policy makers should improve the evaluation process for prospective JDIG projects. Currently, the cost-benefit analysis every project must undergo is clearly letting too many bad projects slip through the cracks. Future incentive grants should go to firms in targeted industries that are poised for robust growth rather than those that are in decline, and grants should be designed to bring infrastructure development and job training resources to the rural counties that most need assistance. Lastly, there is no need to create a new “closing” fund because there is already a similarly designed incentive program that governors have traditionally used to help close projects—namely, the OneNC program.”

Click here to read the entire report.

News

Former state Rep. LaRoque pleads guilty to federal charge

Stephen LaRoque, the former state representative accused of stealing $300,000 from federally-funded non-profits he ran, entered into a plea deal Monday.

LaRoque-PC

Former state Rep. Stephen LaRoque in 2011.

LaRoque, a Kinston Republican, plead guilty to one count of theft of $150,000 from a program receiving federal funds. The remaining 11 counts he faced will be dismissed, according to the court docket.

LaRoque also agreed to pay back $300,000 in restitution to the non-profit he once led, the East Carolina Development Corporation, according to a news release from the U.S. Attorney’s Office for the Eastern District of North Carolina.

The plea was offered Monday at the federal courthouse in Greenville. No prior announcement of the hearing was made on the docket for LaRoque’s case.

LaRoque, a co-chair of the powerful House Rules Committee, resigned from the legislature in July of 2012, shortly after he was indicted on the federal charges.

His sentencing will be on May 12, at the federal courthouse in Greenville before Senior U.S. District Court Judge Malcolm Howard.

The charge LaRoque plead guilty to holds a maximum punishment of up to 10 years in prison. He could also be ordered to pay a fine of up to $250,000, according to a spokesman for the U.S. Attorney’s Office.

LaRoque had been scheduled to go to trial next week, after convictions a jury handed down in a 2013 trial were set aside because of juror misconduct.

The federal investigation into LaRoque began shortly after a 2011 N.C. Policy Watch investigation that found improprieties in his management of two economic development non-profits that received millions through a U.S. Department of Agriculture rural lending program. The non-profit’s board of directors, which approved generous pay packages for LaRoque, consisted of himself, his wife and brother for several years.

His indictment on federal charges accused him of taking more than $300,000 from the non-profit to buy, amongst other things, a Greenville ice skating rink, replica Faberge eggs, jewelry and cars for his personal use.

Up until Monday, LaRoque had maintained he was innocent of criminal wrongdoing, and that the money he was accused of stealing was owed to him.

Shortly after his indictment, he said he wanted to seek revenge and “make heads roll” at USDA if he managed to get a political appointment heading the state office of the agency he was accused of stealing from.

This post has been changed from the original to correct the maximum fine LaRoque could face, up to $250,000. The post may be updated as further information about Monday’s plea deal is made available.