Ultimate economic impact of HB2 uncertain as opposition grows

Since North Carolina adopted House Bill 2 three weeks ago, hardly a day has gone by without an announcement that a big employer is re-evaluating or freezing expansion plans, that an entertainer is refusing to perform in the state, or that another business leader has issued a statement saying they publicly oppose the legislation.

Economic development officials say this steady drip of announcements hints at a much larger phenomenon. They say they know about, or are hearing about, many more companies, some representing hundreds of jobs, that are privately reconsidering expansions in North Carolina as they face pressure from their employees. They also worry about the companies they are not hearing from, the ones that may have taken North Carolina off their short list of possible relocation sites because of the law.

“Certain companies are very sensitive to this kind of attitude,” said Dennis Donovan, a partner at Wadley Donovan Gutshaw Consulting, a corporate location advisory firm based in Bridgewater, N.J. “This kind of regressive social legislation will cost the state – in my opinion, unless it is repealed – thousands of jobs, well-paying jobs, over the next several years.”

One of the first major groups in the state to warn of the economic danger posed by the HB2 was High Point Market, the home furnishings trade show held here in 180 pavilions and buildings twice a year.

Less than a week after Gov. Pat McCrory signed HB2 into law, market officials said “dozens” of its customers were opting out of this year’s event because of the controversial law, which critics say undermines the rights of the transgender community and gays and lesbians.

On Friday, as the show was set to open, the law was a hot topic among exhibitors. One of the most talked-about cancellations was the soirée thrown by Architectural Digest magazine, considered the most exclusive of the dozens of late-night parties that turn High Point into Miami Beach every spring and fall.

High Point Market is often compared to New York’s fashion week, attracting the who’s who of interior design and a retinue of big spenders. Some in the industry have been among the most outspoken critics of HB2.

Chris Bruning, president of Groovystuff, a Dallas, Texas, designer specializing in refurbished materials, could barely contain his rage when discussing the law. He said the law requires him and his two-person staff to operate in a hostile work environment, one that could lead to someone being escorted out of a bathroom based on unfounded suspicions, or some other unpleasant incident.

“That makes me liable, if I know about it and put my people in that situation,” Bruning said. “Somebody could get hurt, insulted.”

Some exhibitors are predicting that attendance at the market, which runs through Wednesday, will be down as much as 20 percent from buyers, many of whom have multimillion-dollar purchasing budgets. The furniture market is the largest economic event in the state each year with an annual economic impact of $5 billion and some 75,000 people attending twice a year.

Corporate opposition

Not everyone shares such concerns. The Keep N.C. Safe Coalition says it has gathered signatures from 393 business leaders who support the law, but it has only released the names of 68 – most of them small firms. Even some exhibitors at High Point Market predict HB2 fatigue – that the storm will blow over and all will be forgotten.

“There are a lot of companies that are just not concerned about it,” said Ernest Pearson of Nexsen Pruet law firm in Raleigh, who is president of the board of directors of the N.C. Economic Developers Association. “For every one that is affected, there will be many many companies that won’t be affected.”

He said LGBT issues affect only a fraction of industries, and within those industries only some companies will be swayed against expanding here.

But Tom Stringer, managing director for the site selection firm BDO which has offices in Charlotte and around the world, said one of his clients will not consider North Carolina now, and others are examining the issue closely.

“They need to take into account not only who their work force is but who their customer base is,” he said. “Things like this linger. Having this now as part of the baggage of the state is never a good thing. Because it makes people think, ‘Is this going to come back? Is this the way most people think?’ These things have lasting impacts in peoples’ memory banks as they look at sites.”

Last week, the governor attempted to soften the impact of HB2 with an executive order in which he extended anti-discrimination protections to LGBT state employees. He also said he would ask legislators to repeal a section that took away workers’ rights to sue over discrimination in state court. But he reaffirmed other provisions in the law, including the contentious bathroom issue that bars transgender people from using the public bathroom of their gender identity and prevents local governments from extending LGBT anti-discrimination protections to anyone except their employees.

The move seemed to do little to appease those who have called for the law’s repeal. Corporate opposition to the law has been particularly strong in industries such as financial services and technology, sectors that are among the Triangle’s largest employers. More than 160 CEOs, including executives at Wells Fargo, Facebook, Google and Apple, have signed a letter urging a repeal of the law. A growing list of entertainers have said they will no longer perform in the state, including baby boomer icons Bruce Springsteen and Ringo Starr and the performance troupe Cirque du Soleil, all of whom canceled concerts for which tickets had already been sold.

A boycott is ultimately an economic strike against one’s own business, industry and, in the case of entertainers, fans. Such reactions to controversial legislation or policies are not wholly new. In 1990, the NFL relocated the planned 1993 Super Bowl from Arizona after the state refused to make Martin Luther King Day an official state holiday. When Arizona reversed its MLK stance, it was rewarded with the Super Bowl in 1996.

Last year’s fight over Indiana’s religious liberty bill cost the state an estimated $60 million and a dozen conventions, according to its state tourism bureau.

In North Carolina to date, only PayPal and Deutsche Bank have publicly announced they are freezing expansion plans in North Carolina, moves that will collectively cost the state 650 jobs. But five companies have canceled or postponed efforts to bring jobs to Wake County, according to the county’s economic development director, Adrienne Cole.

And in Durham, Braeburn Pharmaceuticals officials have said they are re-evaluating the company’s plans to invest $20 million and hire 52 people in Durham in light of the law.

“We’ve had companies that have already moved here but are reconsidering other investment here,” said Ted Conner, vice president of economic development and community sustainability for the Greater Durham Chamber of Commerce. “One thing we’ll never know is how many companies took us off the list before we saw them.”

Other cancellations are directed at annual or one-time events, such as concerts, conferences, conventions and the High Point Market. Wake County, for example, has so far lost more than $700,000 in tourism because of cancellations and $24 million more is on the line as groups, including an undisclosed sports tournament, reconsider holding events in Raleigh. An update is expected Monday from the Raleigh visitors bureau.

Charlotte has seen a similar impact with at least 20 conventions and events no longer coming to the city because of concerns with the law.

‘Skipping the market’

High Point Market regulars who are also oppose HB2 say they are deeply conflicted over boycotting an event that has become a highlight on their annual calendar. Many designers at the High Point Market urged against it, some say it’s a must, and others are squeezed in the middle.

Among those not attending because of HB2 is HW Home of Denver, which has been coming for 18 years. The company is not bringing its five-person team of shoppers in a show of protest.

“Boycott – that’s a harsh word,” said Ronald Werner, co-founder and co-owner of the business. “We said we were ‘skipping’ the market.”

The cost to the area for his company’s no show? About $5,000 in rental cars and restaurants, and about $1 million on products, the majority of which are made by North Carolina companies, Werner said.

Some who support those boycotting the show say they are not in an economic position to take that moral stand.

Bill Indursky, creative director for the Design Network, said his clients and designers make most of their livelihood from the sales and contacts they make at High Point Market. Design Network is an online publication that covers the industry.

“From a purely economic standpoint, it’s ridiculous,” he said of not attending. “We need the money.”

Even those who denounce the law warn that a boycott will inflict economic wounds on arguably one of the industries most welcoming of gay and transgender people.

“Any ill will toward the High Point Market is misdirected and misguided,” said Robert Maricich, CEO of International Market Centers, the Las Vegas company that owns about two-thirds of the showroom space in High Point Market. “It’s a visceral, passionate reaction.”

John Murawski: 919-829-8932

What about tourism?

While urban areas have already seen significant losses in tourism dollars from canceled conventions and other events, communities that count on vacationing families are waiting to see what, if any, effect HB2 will have on their seasons.

Tourism is a major industry for the state, with some $20 billion spent here in 2014, according to VisitNC. The VisitNC Facebook page has comments in support of the state’s position, but many more from people who say they will not be taking an annual trip to the state’s beaches or mountains until HB2 is repealed.

Areas such as Durham that have events geared toward LGBT tourism including a gay and lesbian film festival could be vulnerable if the law makes the LGBT community feel uncomfortable coming to the state, officials there have said. The Durham Convention and Visitors Bureau issued a statement opposing HB2.

A sampling of the reaction

The Keep N.C. Safe Coalition says it has gathered signatures from 393 business leaders who support the law, but it has only released the names of 68 – most of them small firms.

Calling for the law to be repealed:

▪ 170 entrepreneurs – representing small firms that employ a total of 2,461 people.

▪ A group called Scholars for North Carolina’s Future that included the names of 500 faculty members, staff and graduate students from public and private universities across North Carolina.

▪ 32 independent bookstore owners from Corolla to Sylva, including the Triangle’s Quail Ridge Books, Regulator Bookshop, Flyleaf Books and McIntyre’s Fine Books and publishers Algonquin Books and Eno Publishers.

▪ 160 corporations including Red Hat, Bank of America, PNC, Wells Fargo, LabCorp, American Airlines, Time Warner Cable, Campbell Soup and United Airlines.

▪ Musicians such as Bruce Springsteen and Ringo Starr, who canceled their shows, to Cyndi Lauper, who will use her June show in Raleigh as an anti-HB2 fundraiser.