Under the Dome

SUNDAY DOME: Volvo outcome draws a focus on incentives

S.C. Gov. Nikki Haley, center, raises her arms upon hearing that a $500 million Volvo auto plant will go near Charleston.
S.C. Gov. Nikki Haley, center, raises her arms upon hearing that a $500 million Volvo auto plant will go near Charleston. S.C. Governor’s Office

Two years ago, Gov. Pat McCrory’s first commerce secretary stood in the tight quarters of a dim ballroom at the Pinecrest Country Club on the outskirts of Lumberton.

The governor’s administration was beginning to retool and rework its approach on jobs. Officials were talking with small-town leaders, like those gathered in Lumberton that day, but also with influential lawmakers in the state House and Senate who control the state’s purse.

Then-Commerce Secretary Sharon Decker told the country club crowd that day she had been discussing with lawmakers the need to chase “big fish” and to let the administration have more freedom in the decisions.

Landing big projects costs states lots of money – millions in incentives in exchange for the promise of steady jobs, she acknowledged.

“The question I’m asking, before we have one of those fish on the hook, is this: Do we have the stomach for that?” Decker said then. “Is it worth the investment?”

An alternative, Decker said, would be to emphasize more work with “existing industry, with midsize industry that is here, to figure out a way to capitalize on their initial investment already to multiply their efforts.”

Decker said she believes pursuing large jobs projects must be part of the approach, extending the metaphor to say the state’s strategy should include “big-game hunting” with McCrory having more leeway to make large incentives offers. McCrory, Decker and Decker’s recent replacement, John Skvarla, have only reinforced that viewpoint since.

And so there was plenty of fingerpointing in North Carolina over the past week as the fingers of the governor in South Carolina shot into the air in celebration that Volvo would build a $500 million manufacturing plant near Charleston. The plan is for at least 2,000 jobs, with another 2,000 possible in an expansion.

An auto manufacturing plant qualifies in the jobs-recruiting business as a whale (“big fish”) or a lion (“big game”) these days, eclipsed only by a large aircraft plant – like the one Boeing recently built in South Carolina, also near Charleston.

South Carolina’s incentives deal for Volvo is estimated at $200 million to $300 million when all the tax rebates, infrastructure work and training costs are added up.

It prompted the speaker of the House, Tim Moore, to offer an assessment that North Carolina just wouldn’t offer that kind of deal – though it did in 2004, with significant bipartisan support, for a Dell computer plant (now shuttered) near Winston-Salem.

Skvarla was pointed in his comments after the Volvo announcement that lawmakers need to act, a position the administration has been pushing all year as the governor’s efforts on incentives stalled, especially in the Senate.

The summary of impatience was captured by Rep. Charles Jeter, a Huntersville Republican and co-sponsor of the main McCrory-backed economic development bill that has passed the House.

“We’re arguing theory and policy when South Carolina is doing what’s necessary to make sure their people have jobs,” he said. “To say it’s frustrating is an understatement.”

Even so, influential senators have worried about giving the executive branch, in the words of Sen. Bob Rucho, a “blank check.” Senators have led an effort to rid the state of special tax breaks and loopholes. They led in ending a tax incentive program for the film industry, for example, and for historic preservation projects.

‘Aggressive and bold’

There has always been a split on incentives in North Carolina, with legislators on the left and the right holding philosophical views that the state shouldn’t get in that game. That hasn’t often been the case elsewhere in the South.

At midweek, McCrory spoke to a pro-business N.C. Chamber crowd. He told them he wants to be “aggressive and bold” on jobs deals but acknowledged he needs lawmakers to act. He said he is up against other state governors – mostly Republicans, he pointed out – who compete with North Carolina just “as Carolina and Duke compete against each other in basketball.”

Which brings us back to Decker. She left her job as commerce secretary on Dec. 31 to return to the private sector. She told Dome in an interview that she was in the discussions with Volvo before her departure and has no doubt “we were in the ballgame for that opportunity.”

Decker said a major hang-up was incentives uncertainty.

“I believe very strongly that we had a shot at Volvo,” Decker said. “I know that as we talked with them ... our conversation always had a caveat of ‘legislative approval,’” she said. “I can tell you that other states, and South Carolina, didn’t have to say that ... I can tell you with certainty – when I would have to say, ‘This is what North Carolina can offer ‘with legislative approval,’ it was not a positive conversation.”

She argued that unless lawmakers pass changes, landing big fish with incentives will be difficult. In the Senate, that might be the point.

In the coming weeks, lawmakers are expected to take up a renewed, serious effort to adopt a plan on jobs, taxes and incentives. One question it will answer is how much stomach North Carolina will have.

“I hope that this slowness to action is not saying that we are not going to compete,” Decker said. “I hope that is not the case. I hope that, still, in this session, that we’ll make some firm decisions. It’s so important. So important.”

J. Andrew Curliss

Big deals – elsewhere

North Carolina commerce department officials have been tracking major automotive and aviation projects in which significant incentives helped lure a manufacturing plant. A glance at the state’s file, which does not yet include the Volvo deal announced last week:

2012: Airbus, Mobile, Ala.

Jobs promised: 1,000

Investment: $600 million

Incentives: $158.5 million

Funding sources: Bonds, capital improvement trust fund, state incentives authority.

2011: Continental Tire, Sumter, S.C.

Jobs promised: 1,700

Investment: $500 million

Incentives: $237 million

Funding sources: Corporate income tax credits, job credits (refund of withholding), property tax rate reduction.

2009: Boeing, Charleston, S.C.

Jobs promised: 3,800

Investment: $750 million

Incentives: $450 million initially (estimate now $750 million to $900 million)

Funding sources: Bonds, property tax breaks, corporate income tax break, training, other tax credits.

2008: Volkswagen, Chattanooga, Tenn.

Jobs promised: 2,000

Investment: $1 billion

Incentives: $577.4 million

Funding sources: Job-related tax credits, property tax breaks, property and infrastructure construction and purchases.

2007: Toyota, Blue Springs, Miss.

Jobs promised: 2,000

Investment: $800 million

Incentives: $383.9 million

Funding sources: Site preparation, water and sewer; job tax credits; infrastructure and land.

2006: Kia, West Point, Ga.

Jobs promised: 2,893

Investment: $1.2 billion

Incentives: $410 million

Funding sources: Property tax breaks, job tax credits, training, property and infrastructure construction and purchases.