Legislative leaders say they don’t cater incentives for one particular employer
After an announcement in the early hours of Thursday, North Carolina officials were left scrambling to explain why the state had lost out on another big economic expansion.
This time it was Apple.
The tech giant announced Thursday morning that it would invest $1 billion to create another campus in Austin, Texas, where it already employs 6,000 people.
The company also said it would establish new sites in Seattle, the head base of Amazon; San Diego, home to many micro chip developers; and Culver City, Calif., near the entertainment capital of Los Angeles.
Pittsburgh, New York and Boulder, Colo., were also identified as places Apple would add more employees over the next three years.
No mention was made of Raleigh or Research Triangle Park, which at one time had been considered a strong contender for the campus.
On Thursday morning, Gov. Roy Cooper told reporters that representatives from his office were trying to get in touch with Apple’s representatives “to figure out what exactly this means for North Carolina. We look forward to the end of those discussions and then I will be able to give you a comment. ... I do want to know exactly where North Carolina fits into this equation.”
Apple’s news release did say there was the “potential for additional expansion elsewhere in the US over time.”
Later in the day, Cooper, state Senate leader Phil Berger and state House speaker Tim Moore put together a rare joint statement on Apple’s choice not to expand in North Carolina.
“North Carolina is a great place for business and we have amazing success bringing quality jobs to our state, from corporate headquarters for Charlotte and Raleigh to advanced manufacturing jobs for places like Halifax and Scotland counties,” the statement said. “We’re on pace to add thousands of good-paying jobs this year with more expected next year. There’s no better place to find a top-tier IT workforce and legislative leaders have worked closely with the administration to attract large employers and technology companies like Apple. We’ll keep doing everything we can to bring more good jobs to North Carolina.”
The state’s Commerce Department said Secretary Tony Copeland was unavailable for comment, and Christopher Chung, head of the Economic Development Partnership of North Carolina, said he was not in a position to comment about Apple when asked for an interview.
The California company, which has been in Austin since the 1990s, announced in January that it was looking to expand.
The News & Observer reported in mid-May that Apple’s CEO Tim Cook had met with Gov. Roy Cooper that month, to discuss the possibility of a campus on the Wake County side of Research Triangle Park. Legislative leaders rolled new incentives into the state budget, saying at the time that they were intended to help land a “major jobs announcement” in the coming months. They refused to identify the company the incentives were targeting, but said a company would have to invest at least $1 billion and create at least 3,000 jobs to qualify.
Incentives not everything
Apple said on Thursday that the new campus in Austin initially will have 5,000 employees but could grow to 15,000. The Austin-American Statesman reported on Thursday that the company wouldn’t receive incentives from the city but could receive “as much as $25 million in taxpayer-funded grants” from the Texas Enterprise Fund. The paper also reported that a potential property tax abatement from the county that will be home to the new campus “could be worth tens of millions of dollars over the life of the deal.”
N.C. State University economist Michael Walden said that while incentives play a key role in economic development projects, they often aren’t as important as many think.
“I think incentives are always part of the conversation, but I don’t think they are always the major driver,” Walden said in an interview. “Typically, the research that has been done on this shows that companies typically narrow their search to maybe two or three locations. ... That is when incentives can maybe tip the balance. So it will be interesting to see what our package was compared to Austin’s.”
North Carolina leaders have not said how much the state was offering Apple in incentives, but the legislative changes to incentives removed the limit on what could be offered per job and allowed companies to get credit for future expansions of their workforce.
What went wrong
This is the third time in six months that the state lost out on a significant economic development project. In July, the Army selected Austin as the home of its Futures Command Center, which would’ve brought with it around 500 jobs.
And in November, Amazon chose to split its HQ2 between New York and Virginia after choosing Raleigh as one of the 20 finalist cities. The company’s interest in the region cooled after visiting in March.
Both Amazon and Apple received backlash from gay-rights advocates for considering North Carolina for expansion. The opposition stemmed from the legacy of the HB2 “bathroom” law that became a national flashpoint for anti-discrimination efforts — though that law was later partially repealed.
Tom Stringer, who leads national site selection and business incentives for the consulting firm BDO, didn’t mention HB2 but noted that the state had a history of “uncertain politics.” He also said Apple’s decision isn’t surprising.
“I know it has to sting in North Carolina, because I think you probably competed pretty well for it,” Stringer said in a phone interview from New York. “Given the scope of Apple’s existing presence in Austin that has clearly been successful, and this is affirmation of that. Those other (expansions) are in areas where Apple has business units already, so it’s kind of organic growth.”
Stringer said that Raleigh and the state as a whole’s biggest weakness is a lack of identity.
“You’ve got a lot of strengths,” Stringer said. “You’ve got incredible universities down there, generally lower cost of living ... You have some cool cities but they don’t have the feel of Austin, Nashville, Brooklyn or Boston. They don’t have a hip feel or they don’t have the feel of big coastal cities.
“Your region suffers from a lack of cool factor. That is a hard thing to describe, but you feel and it and know it when you see it.”
On Thursday, Cooper, who was speaking at an event at N.C. State University, said that North Carolina was still “a top destination for IT firms,” and pointed to recent announcements that Honeywell was moving its headquarters to Charlotte and Advanced Auto moving its to Raleigh.”
“We know that we are a place for high tech and we are excited about the fact that already this year we are headed to 18,000 jobs being announced,” Cooper said. “We feel good about where we are. We have got a lot of jobs in the pipeline, we have announced a lot of jobs, just last year was a record number of jobs and we are heading toward a significant number — close to that same number this year.”
Local developer Gregg Sandreuter of HM Partners said that while Apple would have been positive for the Triangle, losing on Apple isn’t a complete negative. He added that in 10 years, Raleigh could feel more like an Austin.
“Austin was a logical choice for them,” Sandreuter said in an interview. “Apple already has a huge presence there, it’s a short hop to California, and Austin has a cool vibe. If Apple had not originally said they were looking for an East Coast campus, people wouldn’t be scratching their heads now.
“Apple would have been terrific for the Triangle,” he added. “It would have attracted many other companies and spurred lots of new venture capital. But it’s no harm in not getting Apple — so many other companies are still coming to the Triangle because we are a premier innovation center.”
Stringer agreed that Raleigh’s time will come.
“North Carolina is going to have its day,” he said. “For states that have good assets, these losses, if they are used properly, you can make a pretty sharp spear point with it. I am a big believer in some of the changes being made in North Carolina.”
And there is one area where Apple is expanding its presence in North Carolina: data centers.
The company said it plans to invest $10 billion in data centers over the next five years, including $4.5 billion this year and next. The company, in its release, specifically mentioned that its data centers in North Carolina, Arizona and Nevada are all currently being expanded. Apple’s North Carolina data center is in Catawba County outside of Hickory.