When companies are considering job and investment site locations or expansions of existing facilities, they begin their analysis with an assessment of the skill and depth of a community’s workforce and other strategic assets, such as the caliber of its school system, infrastructure and quality of life. Typically, they identify several finalists - locations which offer those “must have” attributes. In these highly competitive situations, they then turn their attention to the economics of the project, and incentives can be the pivotal “tie breaker” in winning the project.
To help North Carolina compete for the leading industries of today and continue creating well-paying jobs, we must use all the tools available to us.
Reinforce the Job Development Investment Grant program to win more projects and bring good jobs to North Carolina.
In recent years, the reorganization of North Carolina's business recruiting operations, staff turnover and uncertainty about legislative support for incentives – as well as a perceived preoccupation with social issues – left site selection consultants and corporate decision-makers unclear about the state’s reliability and value as a partner. After much delay, North Carolina lawmakers finally enacted legislation in 2015 to increase the JDIG cap. We don't know how many jobs we lost due to political bickering.
The JDIG program may not be perfect, but it is a well-crafted tool that includes several built-in protections. Most importantly, the program includes a strong clawback provision that requires companies to pay back taxpayer money if the company fails to produce the jobs as promised. JDIG also requires companies to provide health insurance and pay good wages. Finally, the program must pass a cost-benefit analysis designed by N.C. State economist Mike Walden. Each project must be create a net-positive economic return to the state.
As the JDIG program has a net-positive impact on state revenue, state policy makers should consider an even more generous cap on JDIG awards. The state should not have to turn down investors looking to create jobs in North Carolina—especially in economically distressed regions—because of an arbitrary cap.
In addition to a higher cap, North Carolina should push back the sunset date, currently set at three years. A longer sunset date will reassure potential investors and site selection consultants that North Carolina is committed to being a reliable business partner.
Invest at least $50 million in the Site Infrastructure Development Fund to prepare locations for major manufacturers.
An automaker or other major manufacturer locating in North Carolina can transform our state’s economy. The impact that BMW has had in upstate South Carolina is undeniable. As of 2013, BMW employed over 7,500 people in South Carolina and supported another 23,000 jobs indirectly. BMW has increased South Carolina’s economic output by more than $16 billion.1 In addition to direct and indirect economic impact, BMW has become a leader in the community, an investor in the public education system and a major corporate philanthropist.
Attracting an automaker or similar manufacturer to North Carolina should be a top priority, but it will take more than just tax incentives. For a major manufacturer there are only a handful of possible site locations that have enough clear, contiguous acres, appropriate connections to utilities and direct access to roads, rail or ports. In fact, the incentive package is probably the last item on its list of must-haves. The first item is location.
To attract a car manufacturer or other major employer, North Carolina should invest in potential sites. North Carolina already has several mega-sites (over 1,000 acres) in different stages of development.2 Preparing these or other sites for potentially transformational employers is a sound investment.
North Carolina already has the vehicle for this investment—the Site Infrastructure Development Fund—on the books. The program was create to lure a Merck vaccine plant to Durham in 2004 and was funded only once specifically for that project. Since that deal, Merck has created invested approximately $1 billion and employs 1,500 people at its Durham campus.
In order to compete with neighboring states, North Carolina should put a minimum of $50 million into the fund to stand ready for an employer. North Carolina lost a bid for a Volvo plant in 2015 to South Carolina.4 South Carolina’s incentive package included $123 million for infrastructure improvements for a project expected to bring 2,000 jobs to the Charleston area.5
1 Darla Moore School of Business, University of South Carolina. (December 2014). BMW's Impact in South Carolina.
2 Zachary, Kristen. (May 7, 2015). "Automaker pursuit: Where is N.C.'s fourth megasite?" Triad Business Journal.
3 North Carolina Department of Commerce. Job Development Investment Grant 2011 Annual Report.
4 Wren, David and Jeremy Borden. (May 11, 2015). "Volvo cites worker training, Port of Charleston in decision to locate in S.C." The Post and Courier.
5 Adcox, Seanna. (June 2, 2015). "Volvo incentives package for Charleston area plant could cost $87M more." Associated Press.