The story has been corrected to reflect that North Carolina’s first JDIG award was issued in 2003, not 2013.
North Carolina has paid out millions of dollars to businesses over two decades for creating jobs in the state, and some lawmakers say the system too often rewards companies for moving to the state’s most affluent counties.
A proposal to redirect state financial incentives – to encourage companies to move to poorer counties – passed a state Senate committee Thursday. But some lawmakers and the N.C. secretary of commerce warned that the proposal, Senate Bill 660, would do little to help economically distressed counties and would instead undermine the ability of job-magnets like the Triangle and Charlotte to continue attracting high-paying jobs.
The legislation, called Economic Development Incentives Modifications, cleared the Senate Commerce Committee on Thursday and now heads to the Senate Finance Committee. The bill’s sponsor, Republican Sen. Harry Brown from Jacksonville, said using incentives to reward not only job creation but also geographical selection would restore the original intent of incentives: to help poor counties compete for jobs.
“We’ve created an atmosphere in the state that’s driving businesses to go to these counties,” Brown said of the state’s most affluent counties. “The intent of this bill is to change behavior.”
Brown said some of the state’s most economically distressed counties have never had a company that was awarded a state Job Development Investment Grant, or JDIG, for relocating or expanding there.
Tony Copeland, secretary of the N.C. Department of Commerce, told lawmakers he agrees with their general goal but said incentives won’t produce magical results. He said the primary considerations for job creation are the quality of the workforce and the quality of the infrastructure, such as access to airports, highways and natural gas lines.
“I’ve seen what companies look for, and without the talent they’re not going anywhere,” Copeland said.
After the vote Copeland said he looks forward to working with lawmakers to help poor counties attract business. He said that with the House Bill 2 controversy over, public officials shouldn’t be creating a new uncertainty over incentives.
“The first decision a company is going to make is whether they have a trainable workforce,” Copeland said. “Without the first two things – the talent and the infrastructure – you don’t get to incentives.”
Between January 2007 and June 2016, the Department of Commerce announced 734 incentive awards totaling more than $1.4 billion. The money came from four state programs. As of last October, 288 of the awards were still active as some companies had failed to meet job creation goals, which means that $628 million has yet to be disbursed.
Since the first JDIG award in 2003, the state has paid out almost $200 million for the creation of 37,852 new jobs and retention of 66,538 existing jobs, according to the Department of Commerce Economic Development Grant Report. Of the 56 grants awarded during that time period, 36 went to the wealthier Tier 3 counties.
Under the legislation, the state would stop paying bonuses to state job recruiters for jobs created in Tier 3 counties, which are the 20 wealthiest counties in the state and include Wake, Durham, Orange, Chatham, Johnston and Mecklenburg. The only exception in the wealthy counties would be for “high yield jobs,” which are defined as companies investing at least $500 million and creating at least 1,750 jobs. The recruiters affected by the legislation work for the Economic Development Partnership of North Carolina, a public-private partnership created in 2014.
The state’s $20 million JDIG budget would be restricted so that no more than half its funds could be awarded in Tier 3 counties.
Additionally, the incentive totals would be reduced in Tier 3 counties and increased in other counties. The JDIG amounts are based on the salaries of the new jobs, and the proposed formula would reduce the total incentives in the most affluent counties from 75 percent to 50 percent of income tax withholdings from the jobs created.
And companies would no longer qualify for financial incentives for creating technology and other jobs for foreign workers on temporary work visas.
Furthermore in the wealthiest counties, local governments would need to contribute more toward the incentives given to companies. Currently, the One NC Fund requires a local match equal to the state match. Under the proposal, the wealthiest counties would have to match $4 for every $1 from the state.
State’s wealthiest counties
According to the state of North Carolina, the following 20 counties are the wealthiest in the state, based on average unemployment rate, median household income, percentage growth in population and adjusted property tax base per capita.