Basnight weighing industry perks

After Google's $260 million deal, Senate leader wants examination of how state uses incentives

An influential lawmaker said Thursday he wants the state to review its use of incentives in luring companies to North Carolina. He made the decision after the disclosure that Google could get as much as $260 million in tax breaks and other perks to come to Caldwell County.

Sen. Marc Basnight, who leads the N.C. Senate, expects to examine the state's recruiting successes and failures, how enticements are applied and whether any adjustments need to be made. He plans to charge the Senate Finance Committee with the task next week.

The goal is to "understand what we're giving and what we're getting," said Basnight, a Manteo Democrat. "It has to benefit the people of the state. If we give away $100, we'd certainly like to get more than $100 back."

While the initiative came after a News & Observer report on the Google project, Basnight said he is not passing judgment on that deal.

"I don't have any of the information that would tell us the cost versus the benefit of Google," he said. "We have to get that."

Google received one of the richest packages of incentives ever awarded in the state as officials sought to win a computer center for Lenoir. Last month the company, which runs the world's most-used Internet search engine, agreed to invest as much as $600 million and create up to 210 jobs.

To win the operation, city and county leaders agreed to waive 100 percent of Google's property taxes and 80 percent of its real estate taxes for 30 years. The breaks could cause the governments to forgo $165 million in revenue.

In addition, state lawmakers last year exempted Google from paying sales tax on electricity and equipment purchased in North Carolina. That provision could save Google $89 million in taxes over three decades. A separate, $4.8 million grant also was approved by the state to get Google.

While the total value of the incentives depends on how much Google actually invests, the potential illustrates just how far leaders will go to attract jobs.

The deal also shows that legislators don't always know how much is at stake.

Sen. David Hoyle, one of the sponsors of the state legislation that benefited Google, said he was unaware of what perks local officials were developing to win the expansion. Hoyle, a Gaston County Democrat, said that he signed on to the bill at the behest of the Commerce Department -- which said legislation was needed to win a major project -- and never talked directly with Caldwell County officials.

Also hurting communication in the Google project was a strict requirement for secrecy. Citing fears that competitors could gain an advantage, Google representatives demanded the company's name never be linked to North Carolina. They threatened to walk if word got out.

Sen. Jim Jacumin, a Caldwell County Republican who also sponsored the state legislation, has said he had to work in the dark as the bill was crafted.

'But they've got jobs'

"It's almost unconscionable what these companies are asking for," said Hoyle. "But they've got jobs, and jobs are what we need."

North Carolina's economy has been hammered by declines in manufacturing. As textile, furniture and other production work moved overseas, leaders have worked aggressively to attract new industries.

Hoyle said that he is convinced companies such as Dell, which won as much as $280 million in state and local perks to build a manufacturing plant in Winston-Salem, and Google would not have come without incentives.

But he questions whether the packages are nearing a limit.

"Somewhere along the way, we're going to have to draw a line in the sand," he said.

He co-leads the Senate Finance Committee and will have a hand in the review that Basnight wants.

It's unclear just what effect that undertaking could have. The largest economic incentives have been commitments approved by the legislature, not through standing incentives programs. And as the Google project illustrates, some of the most lucrative offers can come from local governments.

What's more, recruiters contend that incentives are needed. If North Carolina lacks tax breaks and other enticements, companies will go to South Carolina, Virginia or other locations that do, developers say.

Then there are political considerations. Constituents expect politicians to bring in new jobs.

"If you don't do it, you get criticized," Hoyle said. And if officials offer incentives, "you get criticized. I tell you, sometimes you have to hold your nose."