Due to COVID-19, NC gives businesses that received grants an extra year to meet goals
In response to the sharp economic downturn caused by the coronavirus pandemic, the North Carolina Department of Commerce is revising the requirements of its Job Development Investment Grant program, a tool the state has used hundreds of times in recent years to attract companies and jobs.
To earn the valuable tax breaks that the JDIG program provides companies must meet certain annual hiring and investment targets.
But with the coronavirus pandemic causing uncertainty, Depression-era levels of unemployment and slashed revenue for government and businesses alike, the state feared many companies might fall short of their hiring requirements and default on their agreements.
Now the state will allow companies to take their 2020 obligations and “carry them forward” one year to 2021. Essentially if a company had agreed to hire 100 employees per year between 2020 and 2025, that company can now push those hiring targets to the period of 2021 to 2026.
The hiring and capital investment requirements will not be eliminated as part of the relief, but companies will now have more time to meet them.
“Grantees receiving such relief shall not be considered to be in default for 2020 grant year with respect to their Job Creation, Retention, Investment and Wage obligations under their respective Community Economic Development Agreement,” the order states.
In a letter to JDIG recipients obtained by The News & Observer, the state said grantees have until Jan. 31, 2021 to take the compliance relief. The companies will still have to file an annual report with the Commerce Department for 2020 and pay the annual filing fee. For grant awards made prior to Aug. 1, 2013, the fee is $1,500. For grant awards made since then, the fee is the greater of $2,500 or .03% of the grant amount going to the company.
“Basically, if you’re going to default or think you’re going to default then this gives you a pass,” N.C. Secretary of Commerce Anthony Copeland said in a phone interview. “It is needed because of the unprecedented circumstances.”
Copeland said he doesn’t know how many of the scores of companies that were expected to meet hiring requirements this year would have defaulted without the relief.
“I will say that everyone is being especially cautious,” he said. “These incentives were not developed for situations of economic distress. Most [companies] were not entering these agreements in anticipation of this type of economic event. We don’t want any company to default.”
The changes were approved by the state’s Economic Investment Committee on May 26, and the state sent letters to JDIG recipients the following day announcing the change.
Copeland, who was appointed by Gov. Roy Cooper in 2017, said he had been in conversations about taking the step for months.
Some JDIG recipients have said they will continue to hire despite the COVID-19 downturn.
Technology startups Pendo and Policygenius, which both have received incentives in recent years, said they expected to continue hiring. Advance Auto Parts, which received a $12 million state and local incentive package to move its headquarters to Raleigh, said it wasn’t sure how the downturn would affect its plans.
“At this time, it is premature to predict the full effect the COVID-19 pandemic will have on our business,” Advance Auto Parts spokesman Darryl Carr said in an email to The News & Observer earlier this month. “As a result, it’s too early to know how COVID-19 might impact Advance’s JDIG commitments this year, if at all. We remain committed to our long-term plans, including the expansion of jobs here in [North Carolina], and continue to look forward to our new headquarters office opening later this year in North Hills. ”
More than one million North Carolinians have filed for unemployment benefits since the coronavirus led the state to issue a strict stay-at-home order. The pandemic has been especially harsh on the retail and food sectors, but even industires where much of the work can be done remotely have suffered.
The number of technology job openings in North Carolina dropped by 25% in April, the first full month in which the state was under a stay-at-home order because of the coronavirus pandemic, The N&O recently reported.
Copeland said he thinks drafting the order was about being fair to companies and understanding that the pandemic was out of their control.
“We have to remain flexible while still remaining vigilant in holding companies to their requirements,” Copeland said. “The companies are making good faith efforts and we need to react to them likewise.”
He added that the efforts show North Carolina is “business friendly” while also retaining a “duty to the taxpayer that everyone honors their commitments.”
Despite the pandemic, Copeland said North Carolina is continuing to hear from companies looking at opportunities in the state.
This week, Commerce helped attract more than 400 manufacturing jobs to Rockingham County with a JDIG worth more than $3 million over a 12-year period.
And in April, the state awarded a JDIG valued north of $30 million to the tech company Bandwidth to hire more than 1,000 employees in Raleigh.
This story was produced with financial support from a coalition of partners led by Innovate Raleigh as part of an independent journalism fellowship program. The N&O maintains full editorial control of the work. Learn more; go to bit.ly/newsinnovate
This story was originally published May 28, 2020 at 1:14 PM.