Questions arise on NC public-private economic partnership

cjarvis@newsobserver.comApril 3, 2014 

— State legislators on Thursday took their first look at the makings of a bill that would create North Carolina’s first public-private economic development agency. Questions arose about ethics, transparency and salaries.

Plenty of questions remain, however, such as how transparent the new nonprofit corporation will be as it spends taxpayers’ money, what ethical rules will govern the agency and how much to pay its staff.

Members of the Joint Legislative Economic Development and Global Engagement Oversight Committee asked those questions before unanimously approving a draft version of the bill. But even state Commerce Department officials and the bill’s sponsor said they still had work to do before introducing it in the General Assembly in May.

“I think this is a good starting point,” said Sen. Harry Brown, a Republican from Jacksonville who is sponsoring the bill.

After the meeting, Brown and Commerce Secretary Sharon Decker separately agreed one major sticking point is the requirement that the corporation raise $10 million in private funds to pay for its operations before it even gets started.

“That would slow the process,” Decker said.

Brown acknowledged that could pose a significant obstacle.

The McCrory administration has touted the public-private partnership as a way to provide a more coordinated, more nimble approach to recruiting new businesses and aiding existing businesses that want to expand. Critics say the approach has had mixed results in other states, and the structure has led to abuses, including misuse of taxpayer money, conflicts of interest, excessive executive pay and little public accountability.

Several lawmakers asked about what ethical standards would be in place. The current proposal puts the corporation’s employees and board members under the State Ethics Act, which puts restrictions and reporting requirements on those who make $60,000 a year or more.

But Decker and Richard Lindenmuth, the interim chief executive officer, said that’s another area that requires more discussion. Decker said the corporation’s board members will need more flexibility than is currently allowed under state law, such as being able to pick up the tab for a dinner meeting.

“There will need to be disclosure,” Decker said. “The question becomes, what type and how often in a sales and marketing environment. Our intention is to operate in an ethical and transparent manner. I don’t want to do anything to skirt that.”

A recent provision added to the draft bill would require the corporation to disclose on its website within 30 days any gifts, contributions, items or services of value for which full-market value wasn’t paid. It would have to be disclosed whether the donor of the gift has a contract with the state and how much money it had been granted or loaned.

A policy could encourage the corporation to look for money from sources who are unlikely to seek incentives from it, but they wouldn’t be required to do that.

Other new aspects of the legislation include:

• Public and private money remain separate.

• The Office of State Budget Management would complete a performance audit,

• Employees of the corporation would not be state employees and could not use the State Health Plan. Health insurance might go out to competitive bidding.

• The corporation would have to report once a year to Commerce on specific issues, including how salaries are determined. Lindenmuth said salaries haven’t been determined yet. The state will contribute no more than $120,000 a year in individual salaries.

The Economic Development Partnership of North Carolina recently received approval from the Internal Revenue Service to operate as a tax-exempt organization under the 501(c)(3) federal code. The corporation could also contract with the Commerce Department to use public funds to recruit companies and to market the state as a business and tourist destination.

Legislation creating the partnership almost passed the General Assembly last year, but bogged down in the final days because a fracking provision was inserted into it at the last minute. Fracking is no longer part of this version of Senate Bill 127.

Decker told the committee her department has already been making organizational changes to prepare for the new partnership. She said once the General Assembly passes the bill, things will move quickly, and the corporation should be up and running by the end of the year.

Jarvis: 919-829-4576; Twitter: @CraigJ_NandO

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