In the end, it just didn't compute. Despite far-reaching financial incentives from the state -- at the time the most lavish tax breaks North Carolina had yet approved -- Dell turned out not to need the trophy plant that Winston-Salem and Forsyth County had worked so hard to land. The computer assembly business, the company claims, has changed too quickly for its four-year-old facility to keep up. On Wednesday, Dell said all 900-plus employees will lose their jobs by January.
The news, coming so soon after the plant opened, is a bitter disappointment. First and foremost, certainly, to the soon-to-be jobless workers, but also to the hopes of Triad-area officials and citizens who've seen core industries -- textiles and tobacco -- fade, and who grasped at high-tech manufacturing as a replacement. Key elements of those hopes are now on hold.
Then there are the taxpayers, state and local, who now understandably wonder about the public expense involved. This includes the city and county's ground-level spending and the state's incentives package, which essentially allowed the Texas-based company to escape North Carolina corporate and franchise taxes for 15 years. But questions also arise about the wisdom and soundness of subsequent "trophy company" incentives packages such as those for Apple Computer (Maiden, in Catawba County) and Google (Lenoir).
On that score there is some reassurance to be had. Having learned from costly experience, the Commerce Department now entwines most of its incentives with strings attached. In order to get such and such a tax break, companies actually have to create a set number of jobs. So while it's fair to speak of $280 million in potential incentives for the Dell plant, the figure is directly tied to lofty levels of employment that never materialized. Most of the tax breaks that the General Assembly authorized for Dell at a special session five years ago have not been used, nor will they be.
Furthermore, Dell may have to compensate the state for some breaks it did receive if, by closing the plant so soon, it didn't fully comply with the terms. Commerce says that as of a year ago Dell's take was approximately $8 million. Taxpayers deserve an updated figure, pronto, plus a firm stance by state officials in negotiations over Dell's exit. There is no reason whatsoever to cut this company the least amount of slack.
Those matters, however, are details, albeit important ones. The big issue is whether the computer-plant crash should spell an end to incentives.
Yes, say longstanding and principled critics such as Robert Orr of the N.C. Institute for Constitutional Law, which sued -- unsuccessfully -- to have the Dell package judged out-of-bounds. And it's true that in retrospect, saying no to Dell would have saved much grief. Yet it's devilishly hard for elected officials not to compete with other states for a big new employer, especially when what government is giving away is a share of future tax revenue that otherwise wouldn't arrive at all.
The most sensible strategy is to keep North Carolina business-friendly, taking care not to place unnecessary obstacles in the way of home-grown successes. ("Business-friendly," however, should not mean a level of taxation incapable of supporting key investments of benefit to business, such as those that underlie a strong education system.) And if in a few cases incentives can't be avoided, never, ever give away the store.
