Politics & Government

NC’s economic development partnership is falling short, report says

Economic developers push expansion of job grants

A file video shows members of the N.C. Economic Developers Association gathered at the Legislature in Raleigh to encourage lawmakers to expand the state's Job Development Investment Grants program, which is used to recruit employers.
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A file video shows members of the N.C. Economic Developers Association gathered at the Legislature in Raleigh to encourage lawmakers to expand the state's Job Development Investment Grants program, which is used to recruit employers.

The state’s economic development public-private partnership is failing to communicate and coordinate its work with the N.C. Department of Commerce, and it’s falling short in raising money, according to a scathing legislative report presented Tuesday.

The legislature’s nonpartisan Program Evaluation Division was charged with a detailed review of the Economic Development Partnership of North Carolina, which was created in 2014 under a contract with the state that expires this October.

Some economic development work remained under the Commerce umbrella while other programs migrated to the partnership.

One economic developer interviewed in the report said that “the relationship between Commerce and the EDPNC does appear to be somewhat antagonistic and not always functional.”

The report’s authors wrote that the lack of coordination is “problematic in practice and detracts from the State’s economic development reputation.”

They found that the problems include a “bureaucratic and slow” process for obtaining job creation incentives. And they found a lack of policies and procedures to determine which agency does which tasks, resulting in separate research teams that sometimes duplicate each other’s efforts.

In response, EDPNC leaders wrote that “we agree with the need for and welcome stronger communication and coordination measures with Commerce,” but they added that “both groups have already undertaken many steps towards this end over the past several years.”

The report also called for the legislature to increase the amount of private funding that the EDPNC is required to raise. In fiscal year 2017-2018, private contributions made up $1.2 million, or 5 percent of the group’s $24.5 million budget, with 89 percent coming from the state budget.

That’s roughly the minimum required by the state, and it’s less private money than similar organizations raise in other states.

The requirements, report author Sara Nienow told lawmakers, “don’t encourage the organization to keep raising money once the amount has been raised.”

The report found “significant” fees charged by the private contractor in charge of fundraising, causing the group to spend “approximately 17 cents to raise one unrestricted dollar,” when that figure should be closer to 10 cents.

Draft legislation included with the report would require EDPNC to increase fundraising to $2 million per year, with excess contributions counting toward the next year. But EDPNC executive director Chris Chung criticized that proposal, arguing that more aggressive fundraising could harm fundraising efforts by local economic development organizations.

“We’ll be forced to compete more with our local partners who are approaching the same private investors,” he said. “The last thing we want is a much higher requirement to drive a bigger wedge between us and our local partners.”

The report also identified problems in how the EDPNC and Department of Commerce divide up tourism duties. The EDPNC handles most tourism marketing, but the state’s Welcome Centers and tourist information call center are still run by Commerce.

The report suggests appointing a commission to determine whether tourism should remain under EDPNC, shift back to Commerce or shift to a new, separate 501(c)3 organization.

The report questions whether tourism is a good fit for the EDPNC’s overall mission, something the organization disputes.

“PED seems to believe that promoting the state to potential visitors and promoting the state to prospective businesses are mutually exclusive activities, with little overlap and few opportunities for coordination,” EDP leaders wrote in their response. “We disagree and have furnished to PED numerous examples where joint business-marketing and tourism-marketing efforts have delivered advantages that an ‘either/or’ approach would not. ... The state’s tourism marketing efforts are performing far more effectively since becoming part of the EDPNC, especially with six fewer employees than when these functions were housed at Commerce.”

Chung defended his organization’s record of creating jobs, noting that the EDPNC has helped the state land 67,000 new jobs and $14 billion in proposed new investment. He pointed to the report’s survey of economic development professionals, the vast majority of whom said the public-private partnership has made the state more competitive.

“I imagine that any of you would kill for an 85 percent approval rating, and that’s what we have,” he told legislators Tuesday.

Commerce Secretary Tony Copeland — who the report recommended should get a seat on the EDPNC’s board — offered a much briefer written response to the findings.

“To my knowledge, there has been no other evaluation to this level of detail performed to date and many of the findings certainly deserve further discussion,” Copeland wrote.

The legislature’s Program Evaluation Oversight Committee won’t vote on the proposed draft legislation in the report until its next meeting, and committee chairman Rep. Craig Horn, R-Union, encouraged legislators to give the issue careful consideration.

“This is one of those reports that you need to take home and read through,” he said. “Avail yourself of the people who don’t agree with the conclusions as well as those who do.”

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