Commerce Secretary John Skvarla said Monday that North Carolina lost its bid for a Volvo manufacturing plant in part because the legislature hasn’t approved more jobs incentive funding.
Skvarla’s comments came hours after Volvo announced it will build a new $500 million plant near Charleston and employ up to 4,000 people. South Carolina beat North Carolina and three other states courting the automaker after offering about $150 million in state incentives.
The Volvo announcement marks the third time in the past two years that North Carolina has been a finalist for an automotive company and fallen short to another state.
Skvarla said his department couldn’t make a competitive offer because its main incentives fund, known as the Job Development Investment Grants, is out of money. Both the House and Senate have economic development bills that raise the incentives cap, but neither proposal has made it to Gov. Pat McCrory’s desk.
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“I’m not sure we were ever in the game with Volvo because of that,” Skvarla said. “We need the cap lifted, and we need longevity in the program.”
McCrory said in January that he needed incentives funds “in a matter of weeks.” On Monday, he noted that the legislation was introduced months ago. “We’re in the third month,” he said. “It’s time to move.”
An “N.C. Competes” bill, backed by the McCrory administration, passed the House in March and is under review in the Senate Finance Committee.
That panel’s chairman, Republican Sen. Bob Rucho of Mecklenburg County, said the Senate has already addressed the short-term incentive need by passing a bill that would add $5 million to the fund.
“The governor is saying no to the $5 million,” Rucho said. “It was designed to provide some immediate relief. The House would pass it if they were told to.”
Skvarla said he’d support the Senate’s stopgap bill if it extended the JDIG program’s expiration date beyond the end of this year. Without that extension, he argues that the extra money won’t satisfy employers.
The House incentives bill would double the JDIG cap, adding $22.5 million to the program. The Senate bill provides a similar infusion but adds restrictions on how much money can go to urban counties.
Skvarla said the legislature should eliminate the cap entirely to compete with South Carolina, which has a similar incentives program with unlimited funding. He says the awards to companies don’t really cost the state because they represent a percentage of the new tax revenue the employer creates – and companies don’t get anything until they deliver the promised jobs.
The cap, he said, makes the state “discriminate between and among who does and does not receive these awards. And that’s really not an appropriate way to go about this, because it generates net dollars to the treasury every time we make one of these awards. We should want to do 100 of these a day.”
Rucho, however, said the Commerce Department must be selective about its use of incentives.
“What does he want, a blank check?” Rucho said. “He needs to be willing to show us how successful it’s been. How many (jobs) came from incentives?”
His committee is considering adding more performance requirements to JDIG. He said he has “no timeline” for introducing a bill.
“We should do a real good soul searching and see if Commerce is doing the most efficient and effective job,” he said.
The Senate is also considering moving to a corporate income taxing method known as single sales factor apportionment, which would effectively favor companies with extensive property and payroll taxes. The taxing formula is attractive to automakers, and South Carolina already uses it.
But Rep. Charles Jeter, a Huntersville Republican and co-sponsor of the House economic development bill, said he’s growing impatient with the Senate’s slow process. “We’re arguing theory and policy when South Carolina is doing what’s necessary to make sure their people have jobs,” he said. “To say it’s frustrating is an understatement.”
While North Carolina’s economic development debate centers around incentives, South Carolina leaders downplayed the role of grants in Volvo’s decision.
Gov. Nikki Haley cited the state’s workforce. “This is a state where they build planes, and we now have three car companies. That’s something you can’t just find anywhere.”
Haley also pointed to her state’s “readySC” program, which provides workforce training at community colleges targeted to the needs of specific companies.
Mercedes-Benz is building a $500 million van plant about 20 miles away from the Volvo site, while Boeing operates a 7,600-employee jet-making plant about 30 miles away. North Carolina has no auto manufacturing plants yet.
Meanwhile, Skvarla said the three “megasites” North Carolina is marketing to large manufacturers are in better shape. “All of our sites are very far along, and I suspect all of our sites could be made ready prior to South Carolina getting theirs ready,” he said.
One of the sites is in Edgecombe County, located between a U.S. 64 interchange and a rail line near Rocky Mount. Last week, House Speaker Tim Moore told Edgecombe leaders that “you guys are the most site-ready right now” and said he’d recently discussed the location with visitors from China.
And while the hunt for an automaker has garnered the most attention, Skvarla says many of the sites also would fit other large manufacturers. Commerce is looking to recruit companies in the aerospace, food packaging and food processing industries, he said.
“I don’t want to put all our eggs in one basket,” Skvarla said. “There are a lot of major manufacturers out there that aren’t automobile.” Staff writer John Murawski and Charlotte Observer staff writer Jim Morrill contributed to this report.