RALEIGH -- Johnson & Wales University in Charlotte can continue to collect its million-dollar checks from the state of North Carolina, thanks to a judge in Raleigh.
Wake County Superior Court Judge Michael Morgan dismissed a lawsuit Tuesday by a conservative legal group to halt $10 million in subsidies to the culinary school.
The decision marked another installment in the controversy that has lingered since legislative leaders cut a deal to start parceling out the money to Johnson & Wales in 2003.
It was the second loss in the same day for the N.C. Institute for Constitutional Law and its efforts to reshape state law governing multimillion-dollar incentives that are passed out to lure businesses to the state. While the institute's director, former Supreme Court Justice Bob Orr, was arguing the case, he was handed defeat in another. A colleague passed him a copy of a state Court of Appeals ruling that the institute's suit over $250 million in tax breaks and other perks for Google could not proceed.
In the Johnson & Wales case, the judge ruled that the subsidies served a legitimate public purpose for education and economic development.
"If an act will promote the welfare of the state and its citizens," Morgan read from the bench, "it is a public purpose."
The institute's lawyers claimed that giving money to the culinary school is unconstitutional, nothing more than a political promise made by then-House Speaker Jim Black and bankrolled by taxpayers.
Since 2003, $6.5 million of the pledged funds has been given in installments. The institute lawyers wanted the state to force a refund and halt future payments. Unlike other economic incentives, the Johnson & Wales money was a gift to a single organization with no requirements for producing jobs or other measurable gains for the state, Jeanette Doran, a staff lawyer with the institute, said during arguments.
"Johnson and Wales is required to do nothing," Doran said. "They can spend it however they want."
The judge agreed with lawyers for the state and the culinary school who argued that the institute and its plaintiffs, a salesman from Charlotte and a consultant from Lincolnton, have no basis to sue.
On taxpayers' behalf
Orr asked that if the taxpayers can't sue when their money was used to pay Johnson & Wales, then who can?
He offered a similar and also unsuccessful argument in the Google case.
The N.C. Court of Appeals ruled Tuesday that three state residents who sued to halt the incentives to Google had no right to sue because they were not being put at a disadvantage by the incentives. Orr said he thinks the court's ruling would incorrectly prohibit any legal challenges to the incentives. He said he wants to be able to put on evidence and argue about whether the public actually gets a benefit from the incentives.
Orr has filed similar suits over incentives to Dell and Durham County's $100,000 incentive to get communications manufacturer Nitronex to move from Wake County. Orr's suit contends that Nitronex, which already had a contract for its site in Durham, would have moved without the incentives.
"It's a legitimate constitutional issue that we've been fighting now for a number of years: whether subsidizing Google or Dell or Johnson & Wales, whether that really constitutes a public purpose," Orr said. "It's very frustrating, and I've been fighting these battles for a long time."
