McCrory, Dalton clash on economic incentives

Differences stem from their experience recruiting businesses to this state

jfrank@newsobserver.comOctober 13, 2012 

  • More information On the campaign trail, the two candidates for governor talk constantly about the state’s economy, given the 9.7 percent jobless rate. Here’s how they compare on economic issues: Jobs plans Dalton: Issued a detailed 15-page plan with a mix of short-term tax credits and programs aimed at putting unemployed workers into jobs, and larger initiatives culled from other states in which government money is used to spur private industry. McCrory: Proposed cutting the personal income and corporate income tax rates but didn’t offer specifics about how much or how he would pay for it. Favors opening the state to oil and gas drilling, cutting government regulations and developing a long-term infrastructure plan. Incentive packages Dalton: Argues that taxpayer-funded incentives are necessary to compete for jobs against rival states with more generous offers. McCrory: Acknowledges that he would use incentives to lure companies, as he did as Charlotte mayor, though he opposes them in some cases. Film incentives Dalton: Embraces film incentives but refuses to say whether he would renew the current 25 percent break for film productions. McCrory: Supports film incentives but wants to re-evaluate the tax credits the state offers. Unemployment debt Dalton: Supports issuing taxpayer-backed bonds to pay the $2.8 billion debt to the federal government for unemployment benefits. Declined to offer specifics on how to pay the bond interest. McCrory: Offers no specific plan for dealing with the debt but has indicated he is open to issuing state bonds and would consider tweaking the unemployment benefits the state offers.

Last of a series

Republican Pat McCrory recalls giving top company executives tours of Charlotte in his Honda Accord. “I would show them the good, the bad and the ugly,” he said. It often worked.

Democrat Walter Dalton remembers sitting next to an airline executive at a recruitment dinner who asked what made North Carolina better than his other options. “If you come here, your business will grow as North Carolina grows,” Dalton told him. The line scored.

The candidates for governor cite these experiences often this year as they talk about the economy in a state with the fifth-highest unemployment rate in the nation. The anecdotes add weight to their respective “jobs plans,” which promise to remedy the state’s flagging economy, even though neither can say how many jobs their plans would create.

Dalton’s platform includes an assortment of tax credits and programs to stimulate the economy in the short term, such as a tax break for companies that hire long-term unemployed workers.

McCrory’s proposal is more broad but preaches Republican economic orthodoxy with tax cuts and less regulation, a build-it-and-jobs-will-come approach.

“Neither of them show the proper level of urgency about the poor health of the North Carolina economy,” said Brent Lane, the director of the Carolina Center for Competitive Economies at UNC-Chapel Hill. “If you forced these guys to put numbers on these various proposals and add them up, I’m going to guess they won’t fill the hole.”

Similarity in goals

The discussion on the campaign trail focuses on how the state can lure more jobs. And here the two candidates are more alike than the rhetoric may indicate.

Both think that the state needs to re-evaluate its incentives programs to remain competitive, and both favor industry-specific strategies to target job opportunities.

But their approaches differ on the use of taxpayer-funded incentives. A prime example is the 1,300-job Continental Tire project that the state lost last year to South Carolina.

The Republican-led legislature refused to endorse offering $100 million in grants and tax breaks to attract the $500 million project to southeastern North Carolina. Dalton supported the deal; McCrory opposed it.

On incentives, Dalton takes what he calls a pragmatic approach: No one likes them, but they are necessary to compete against more generous rival states. He compares it to shopping for a new car and looking for the best financing offer.

“If you don’t have an incentive package, then not only will you not be able to recruit jobs from outside, you’ll start losing your companies to states that are offering incentives,” he said.

McCrory gives the impression on the campaign trail that he opposes incentives. But he reluctantly acknowledged in an interview that he would use them, as he did often as Charlotte mayor.

“I’ll be offering incentives based on our return-on-investment formula for all industries, including films,” he said after being asked several questions.

It works in the movies

Even though many people find incentives unsavory, a recent study from researchers at UNC-Chapel Hill found companies that received North Carolina incentives added more jobs than those that didn’t get the boost.

In the past two years, North Carolina awarded up to $190 million to companies on the condition they create a specific number of jobs or make a certain investment. More than 60 percent of the state incentive money went to existing companies that are expanding, rather than new companies that relocated to the state, Commerce Department officials said.

“Relatively speaking, I think we are more on the conservative side of the incentive game,” said Stewart Dickinson, a top state Commerce Department official. Unlike some states, North Carolina doesn’t offer upfront cash incentives to companies without legislative approval, and the state requires companies to meet jobs promises.

One industry benefiting from incentives is film. Companies that produce movies and TV shows in the state get a 25 percent tax break, lower than in rival states, on certain spending. It is expected to lure about $350 million in production spending this year, said Aaron Syrett, the N.C. Film Office director.

The tax break expires in 2015, and the new governor will help decide whether to extend it. Without it, Syrett said, “those jobs will go away to Georgia, Louisiana, elsewhere.”

Dalton embraces the film incentives. “The beauty of the film (production) is it creates an immediate economy ... but then you get the reverberating impact,” Dalton said. As an example, he cited “Dirty Dancing,” the 1987 film shot in Western North Carolina. “We’ve got people this week who will come to Lake Lure and want to know where Johnny jumped off the stage or where he lifted Jennifer Gray in the water.”

McCrory, who initially avoided taking a stance on film tax breaks, said he would look at restructuring them but supports the concept.

What companies look for

As Charlotte mayor, McCrory used taxpayer-funded incentives extensively to lure new businesses, sometimes drawing the ire of conservatives and existing businesses that felt left out. McCrory also supported projects in which Charlotte sold city-owned land to Johnson & Wales University at a reduced rate and gave the Charlotte Bobcats control of a city-owned building as part of its franchise deal.

The city didn’t develop a coherent model for when to grant incentives until his fifth term, but McCrory said that as governor, he would create a strategic approach. He also said he would “spend as much time getting your existing companies to grow as you do getting new companies to come.”

Dalton calls McCrory’s reluctance about state incentives “unrealistic, narrow-minded, ideological.”

McCrory said Dalton’s attitude means “you’ve already lost your negotiating leverage.”

The conversation about how to bring jobs to North Carolina is real for Jim Bradshaw, economic development director for Brunswick County. At a recent candidate forum, he heard McCrory say lower taxes would lure companies. “I thought, ‘Well, that’s nice. But that’s not what these industries are looking for,’ ” he said.

Smaller projects don’t necessarily need incentives. But to land the big fish, such as Bradshaw’s near-miss with the $500 million Continental Tire project, the state must offer incentives, and most companies want money at the start, he said.

“It’s no longer quality of life (that attracts) these larger corporations,” he said.

Aiming at unemployment

To implement their jobs plans, both candidates said they can draw on their experience.

Dalton said he is quite familiar with company negotiations, dating to his work as the attorney for Rutherford County, when he helped craft agreements with companies that received local incentives. Later, as the state Senate’s budget chairman and now as lieutenant governor, he served on the state’s economic development board and has helped pitch to prospective companies.

In the past couple of years, Dalton led task forces that looked at how to better link education with workforce demands and analyzed what transportation and infrastructure improvements would help recruit companies.

Dalton said his 15-page economic plan is designed to put “a ton” of people “back to work immediately.” One proposal would allow workers to train with employers while receiving unemployment benefits, giving the company free training time and the worker a potential step toward a job. Another would ask companies to avoid layoffs by instead reducing hours for employees, who could then get partial unemployment benefits.

The programs “would dramatically reduce the unemployment rolls,” Dalton said.

‘Always selling Charlotte’

McCrory is more elusive about the effects of his plan, content to talk more broadly about improving the state’s brand and business climate.

His main proposal would overhaul the tax code by making North Carolina’s personal and corporate income tax rates competitive with neighboring states – a move he said will make the state more attractive to existing businesses and those looking to relocate.

McCrory refuses to give details, but his plan could cost between $2 billion and $11 billion. He won’t say how he will pay for it.

He also wants the state to open its land and water to drilling for oil and natural gas but acknowledged it could take years to see those jobs manifest.

McCrory said he wants to act as the state’s chief salesman, as he did in Charlotte as mayor. He cites former Democratic Gov. Jim Hunt as a model.

“A governor is one of your top salespeople, and we haven’t had that,” McCrory said in a recent interview. “And I don’t think Dalton fills the shoes either, with all due respect, of someone who can sell any region of the state.”

McCrory focused intensely on this role as the part-time mayor, playing double duty at times as a business recruiter for Duke Energy.

Bob Morgan, the president of the Charlotte Chamber, said McCrory played a key role in recruiting companies.

“Whenever we needed him, he was there,” said Morgan, a longtime friend of McCrory. “He was always selling Charlotte.”

In 2008, McCrory took credit for creating thousands of jobs in the city, but after being criticized, he acknowledged he could only share in the spotlight. The expectations for his plan as governor in this campaign are more nuanced.

“I think it creates a better job creation environment in North Carolina, but as I said in the debate the other night, the governor doesn’t create jobs,” McCrory said.

Frank: 919-829-4698

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