Partial privatization of the N.C. Department of Commerce took another step closer to reality yesterday when the Economic Development and Global Oversight Committee (or EDGE Committee) reported out updated enabling legislation that authorizes the establishment of a nonprofit corporation to conduct significant pieces of the state’s business development activities. Using last year’s SB 127 as a template, the new version of the bill includes important changes—some for the better, some for the worse, and some that make us go “huh?”
In case you missed it, the McCrory administration took yet another step in recent days to assure that the always opaque and ripe-for-corruption business of bestowing economic “incentives” (i.e. giveaways to corporations) becomes just a little bit more opaque and even more vulnerable to corrupt practices.
As many folks are already aware, McCrory and his Commerce Department Secretary, Sharon Decker, have been moving to privatize the Department’s business recruiting/incentives work for some time. The plan — not yet fully fleshed out because the General Assembly has yet to formally sign off on the deal — is to fire a bunch of Commerce Department employees and then recreate and re-establish their functions in a publicly-funded, private nonprofit. To make matters worse, the whole thing appears to be thoroughly infused with partisan politics as one of McCrory’s top fundraisers has been designated to serve on the board of the new nonprofit (the fundraiser, John Lassiter, finally resigned last week from his position on the renew North Carolina Foundation — a group that exists to generate pro-McCrory propaganda — after months of drum-banging Chris Fitzsimon).
The latest outrage, however, involves the hiring of the new nonprofit’s first executive director. Read more
For years, one area of common ground between conservatives and progressives in North Carolina has been their shared skepticism for business incentives. As analysts and advocates from both camps have shown dozens of times, state and local governments in North Carolina are pouring millions upon millions of dollars down a rat hole on corporate giveaways each year — sometimes just to lure businesses from one county to another.
Over time, the end result is an enormous drain on public resources that breeds cynicism, corruption and special favors and disadvantages homegrown, taxpaying businesses. To make matters worse, virtually every politician who campaigns for public office pledges to reform incentives and then, once in office, finds it impossible to do anything about the problem.
The latest case-in-point is Gov. McCrory who seems bent upon not just using corporate incentives, but dramatically expanding them. If you doubt this, check out reporter Andy Curliss’ article in Raleigh’s News & Observer about the administration’s utterly daft new proposal (given voice by Commerce Secretary Sharon Decker – pictured above) to tax fracking as a way of creating a giant slush fund to attract/bribe corporations: Read more
Later today, Governor McCrory will announce his proposals to convert the Department of Commerce into a public private partnership that administers at least some of the state’s economic development programs. North Carolina taxpayers should be concerned.
Although we won’t know the specifics of this privatization scheme until the Governor’s announcement, we do know from previous public statements that the plan will likely involve the creation of a nonprofit economic development authority that receives financial support from both taxpayers and corporate donations in exchange for overseeing a range of activities related to industrial recruitment, existing industry support, and possibly small business development. This may also include administration of the state’s incentive programs—the Job Development Investment Grants (JDIGs), the OneNC Fund, and the Jobs Maintenance and Capital program for large employers.
Privatizing economic development isn’t new—a number of states have experimented with this approach over the past two decades, and the results are not encouraging. According to one recent report, states that have adopted public private partnerships for their economic development efforts have seen the misuse of taxpayer dollars, questionable incentive awards to failing companies, the appearance of pay-to-play incentive granting to those companies providing financial support to the partnership, and frequent lack of transparency and accountability with how the partnership spends taxpayer dollars.
And to top it all off, many of these partnerships haven’t proven to be very effective in generating the job creation results promised.
The big news on the jobs front the past couple days has been the announcement by Governor Pat McCrory that insurance giant MetLife has agreed to make a new $126 million investment in two North Carolina locations, resulting in the creation of 2,600 jobs.
While the news of any job creation is good news when the state’s unemployment rate is over 9 percent, the price tag attached to these jobs is causing a bit of sticker shock. The deal involves providing $87 million in Job Development Investment Grant (JDIG) incentives to MetLife over the next 12 years—the largest discretionary incentive package North Carolina has ever offered from this program.
Given North Carolina’s tight state budget and persistently high unemployment, the public needs to know as much as possible about the real costs and benefits of the deal—and whether it’s really worth $87 million in taxpayer dollars, or about $33,000 per job.
To that end, here are three questions about the MetLife deal that need answers:
Question #1—How many jobs will go to North Carolina residents? While MetLife has promised to create 2,600 jobs, how many of these employment opportunities will be open to people already living in North Carolina, and how many will be filled by moving the company’s current employees from other locations in California and New England? At a cost of $33,000 per job, it’s hard to understand the justification behind simply providing taxpayer subsidies to cover the relocation expenses of out-of-state residents, unless the overwhelming majority of these new jobs can be filled with North Carolina residents.