Apple incentives are the largest in NC history. Here’s how the deal breaks down.
The announcement Monday that Apple Inc. would locate its new high-tech campus in Research Triangle Park was heralded as a coup for the state, which has pursued the company and the promise of its high-paying jobs for at least three years.
But that victory comes at a cost.
State and local incentives for the deal could be worth nearly $1 billion to the company over the next four decades. That award, by far the largest in the state’s history, will mostly come from new Apple employees’ state income tax payments — the vast majority of which will flow right back to Apple.
State leaders say what North Carolina gets in return will more than offset those costs. Apple is promising $1 billion in investment across the state, as well as 3,000 new jobs with an average annual salary of $187,000. All told, the state estimates more than $1 billion in economic benefits annually from the project.
The company will also have to hit job and investment targets to get paid.
Regardless, a lot of money is set to change hands over the next 40 years. State and local governments will release more information in the coming days, but here’s a look at the numbers we know so far.
From state grant, Apple to collect nearly $1B
The largest portion of Apple’s incentive package comes from the Job Development Investment Grant, a discretionary program operated by the N.C. Department of Commerce and the governor.
The JDIG award approved by the state’s Economic Investment Committee Monday morning would mean $845.8 million in payments to Apple through 2061 — provided the company meets its hiring, worker-retention and investment targets.
These payments are recouped from the income taxes Apple’s new employees would normally pay to the state. Starting in 2023, the state will start issuing payments to Apple worth a little more than half of those employees’ annual tax payments. In 2032, if all goes as planned, that percentage increases to 90%.
During that first phase, about 20% of those new employees’ taxes will go toward a utility fund maintained by the state for rural infrastructure projects designed to attract employers. That percentage drops to about 10% starting in 2032, adding up to a projected total of about $112 million by 2061.
The size of Apple’s hiring spree qualifies it as a “transformative project,” which removes the normal caps on how much companies can receive in incentives.
But the $845.8 million JDIG award is the largest in the grant’s history — more than twice the value of the incentive for the last transformative project, a $388 million deal with Centene Corp. announced in July 2020.
On its own, the value of the grant to Apple is worth more than every JDIG awarded to companies since 2019 combined, projects that together promised more than 21,000 jobs.
State lawmakers lowered the threshold for transformative projects back in 2018, when North Carolina officials were widely rumored to be in hot pursuit of Apple. The company’s hiring and investment projections announced Monday match those reduced thresholds exactly.
But at a press conference Monday morning, state House Speaker Tim Moore said changes to the law were prompted by the chase for another — unnamed — corporate prize.
“When the transformative project legislation was introduced, we had one project in mind. But isn’t it great when it’s a different project that comes around?” Moore said. “I think the governor, before we came out, said it well: When a window closed, we had a big door open all of a sudden. And this is an absolutely huge opportunity, not just for our state but frankly for so many generations yet to come.”
From Wake County, $20M on offer
Typically under such economic development projects, counties and cities will sweeten the state’s offer with their own smaller incentive packages.
Wake County, according to county spokesperson Dara Demi, has offered the company half of its new tax growth if it hits its hiring and investment targets.
A summary document on the deal from the state commerce department puts the value of those county incentives at $20 million.
Demi said that would be paid out over 30 years.
“That mirrors the state’s transformational JDIG period,” Demi said in an email.
Catawba County
Catawba County — at least, to date — hasn’t offered Apple any incentives for its own piece of the project in Maiden, where the company plans to expand an existing data center.
“At this point Apple has not enumerated their local expansion plans to us, but we look forward to continuing our successful partnership with them for many years to come,” county spokesperson Amy McCauley said in an email Monday.
Maiden Town Manager Todd Herms said his municipality isn’t planning to offer any additional incentives to the company, apart from the existing deal struck more than a decade ago when Apple first came to town.
The company has been “an excellent thing” for residents and businesses in the area, Herms said. The company’s investment helped the area weather the recession, and town leaders actually lowered taxes twice since Apple arrived, he said.
“I’m glad they chose North Carolina. I’m glad they chose the Triangle area,” Herms said. “It further cements that North Carolina is a good place to do business, whether it’s in the Piedmont or the foothills.”
From Apple, millions to economy, schools
Aside from the $112 million flowing from employee tax withholdings to the utility fund, Apple has also pledged $100 million “to support schools and community initiatives in the greater Raleigh-Durham area and across the state.”
Neither the company nor local officials have offered additional details on that program or what it will mean for state residents.
One of the main benefits of the Apple deal touted by state leaders is the downstream impact on the economy.
A release from Apple, citing UNC Charlotte economist John Connaughton, put that impact at $1.5 billion a year by 2029. Wake County cited the same figure in its own press release Monday.
“That $1.5 billion is pretty conservative,” Connaughton said in an interview Monday. “I suspect it will be more than that.”
His estimate, based on Apple’s hiring and investment targets, largely squares with the state commerce department’s projections for the overall impact on the state economy, calculated based on the change in gross domestic product. After ramping up through the late part of this decade, those projections put the total GDP impact at $79.8 billion through 2061.
But these are projections only.
To get those estimates, the state commerce department uses a formula called the Walden Model — named for N.C. State University economist Mike Walden.
The model also projects that, minus incentive payouts, the state should expect to see a total of $1.97 billion in extra revenue from the Apple project through 2061.
Apple’s $1 billion capital investment will be split across its new RTP headquarters and its existing Catawba County data center.
Out of that projected investment, about $558 million will go to property construction, improvements and equipment in Wake County, with the other $448 million headed to Catawba County.
Given the high salaries and the cutting-edge nature of the jobs, Connaughton called the announcement “a real coup” for the state.
“This is really something very special for North Carolina,” he said.
This story was originally published April 26, 2021 at 4:36 PM.