Amazon’s plan to build a second headquarters somewhere in the United States, setting up a ferocious nationwide competition, is just the kind of project the North Carolina legislature had in mind when it established special financial incentives this year.
A provision in the state budget in June provides enhanced incentives for companies that invest at least $4 billion and create at least 5,000 jobs. In return, these “transformative projects” could receive full refunds on their tax bills and the state can chip in money to help develop the sites.
Earlier this month, Amazon announced it will spend $5 billion in construction and hire up to 50,000 high-paying jobs for a headquarters, in addition to its current one in Seattle.
“You know you’re talking about projects on the highest end,” Rep. Nelson Dollar, a Republican from Cary and key budget-writer, said in a recent interview. “We wanted to make sure we could put ourselves in the running.”
The money will be awarded through the state’s main incentives program, known as the Job Development Investment Grant. Funding won’t be limited by the $35 million statewide cap on JDIG projects, so that one big project doesn’t take up all the money. Companies have to meet investment and job commitments to qualify.
Amping up incentives
Companies that qualify as transformative are reimbursed for up to 100 percent of the withholding taxes from the new jobs they create, instead of the 75 percent that is typical with a JDIG. In addition, those taxes are reimbursed for up to 25 years rather than the usual 12 years.
Commerce officials say JDIG projects result in a net gain in taxes going to the state, even with the tax reimbursement.
Transformative projects also can receive up to $50 million for a project’s infrastructure such as water, sewer and rail access, with the money coming from a reserve account in the state’s general fund. There is $80 million in the reserve fund so more than one large project could be awarded.
In addition, the One North Carolina Fund can award up to $5,000 per year, per job, for up to five years.
Gov. Roy Cooper’s administration has the authority to decide which projects are worthy of receiving that money. His budgeting office and the Department of Commerce make that call.
That shows Democrat Cooper and Republican legislative leaders working together, administration officials say. Commerce Secretary Tony Copeland says part of his job is to improve relations with the General Assembly by making the administration’s actions on development more predictable.
What passing that legislation is indicative of is showing that as a state now the legislature and the executive are all in synch on pursuing these large transformational projects.
Commerce Secretary Tony Copeland
“What passing that legislation is indicative of is showing that, as a state, now the legislature and the executive are all in sync on pursuing these large transformational projects,” Copeland said in an interview Monday. “I think people of good will on both sides of the aisle are working together and will come together on large projects even outside the scope of that legislation.”
Incentives are ‘critical’
When Amazon made its headquarters announcement, it provided a list of factors that would influence its decision. It was clear about incentives, calling them “critical.”
“A stable and business-friendly environment and tax structure will be high-priority considerations for the Project,” the company says, which includes incentives to offset initial capital outlay and ongoing costs.
Instantly, cities across the country announced they were in the game. Amazon has given competitors until Oct. 19 to submit proposals. It anticipates choosing a location next year.
It’s a tremendous tool for the Department of Commerce to have if you have the opportunity to land a major project of that size.
Rep. Nelson Dollar
At the time the budget was being written, North Carolina was still in the running to land a major project by Foxconn Technology Group, a Taiwanese firm searching for a site to build a display panel plant employing up to 13,000 workers. In July, the company announced it had chosen Wisconsin. Gov. Scott Walker on Monday signed into law a $3 billion incentives package.
Dollar said North Carolina is still looking for a major manufacturing concern to locate here, and considers itself a strong candidate for the Amazon project, because of the transformative fund and previous actions.
“It’s a tremendous tool for the Department of Commerce to have if you have the opportunity to land a major project of that size,” he said.
House Speaker Tim Moore said the legislature’s efforts to attract companies is paying off.
“The North Carolina House enacted a transformative project incentive and sweeping pro-growth economic reforms to put North Carolina in top-tier competition for tech-job investments like the Amazon HQ2 project,” Moore said in an emailed statement. “North Carolina citizens are the greatest beneficiaries of these statewide policy changes that created a world-class business climate and a powerful investment tool to attract the best jobs and most competitive companies like Amazon.”