Transcript Local Incentives in North Carolina Presentation to the NC Joint Select Committee on Economic Development Incentives December 16, 2008 By Bill Schweke and.

Local Incentives in North Carolina
Presentation to the NC Joint Select Committee on Economic Development Incentives
December 16, 2008
By Bill Schweke and Brian Taylor, CFED
Large Local Incentives
2004 - Forsyth County and Winston-Salem
State: $240 million
Local: $37 million
Rationale: Bidding war with Virginia, then intra-state bidding war
Surprise: Virginia offered only $30 million; Dell now considering closing plant
2006 - Caldwell County and Lenoir
State: $100 million
Local:$165 million
Rationale: Outbidding SC
Surprise: Google later puts a server farm in SC; Google now giving incentives back
Questions
• When a company locates or expands in NC,
how large are the local incentive packages
that they receive on top of state incentives?
• How much do local governments pay per job
in incentives?
• How costly ($/job) are local incentives relative
to state incentives?
Outline
•
•
•
•
Methodology
Findings
Large local incentives
Recommendations
Methodology: Data Issues
• No aggregate data on local incentives in NC
– Local governments not required to report
incentives to state
• Media reports and surveys give us an estimate
Methodology: Local Incentives
• 338 local incentive
deals (2001-08)
• 208 based on actual
figures
• Data sources:
– 148 based on C3E media
study (2001-08)
– 60 based on NCICL
survey of NC counties
(2004-06)
– 130 based on One NC
Fund match requirement
(2001-08)
Sources for Local Incentive Figures
350
300
250
200
150
100
50
0
Media Study
NCICL Study
1 NC Fund minimum
Methodology: Local Incentives
• Incentive values represent:
– total offers of county and or city
– multiple different types of incentives:
•
•
•
•
•
Cash grants
Refunded property taxes
Cheap facilities or land
Extension of sewer & water lines
Waiver of fees
Methodology: State Incentives
• 282 One NC Fund grants (2001-08)
• 60 Job Development Investment Grants (2003-08)
• Data source: NC Commerce
State Incentive
300
250
200
150
100
50
0
1 NC Fund
JDIG
Size of Incentives in NC (2001-2008)
120
100
Frequency
80
60
Local
JDIG
One NC Fund
40
20
0
< $100K
< $200K
< $300K
< $400K
< $500K
< $600K
< $700K
< $800K
Incentive Amount (dollars)
< $900K
< $1 mil
> $1 mil
Size of Incentives in NC over $1 million (2001-2008)
30
25
Frequency
20
Local
15
JDIG
One NC Fund
10
5
0
< $2
< $3
< $4
< $5
< $6
< $7
< $8
Incentive Amount (millions of dollars)
< $9
< $10
> $10
Incentives per Job (2001-2008)
120
100
Frequency
80
60
Local
JDIG
One NC Fund
40
20
0
< $1K/job < $2K/job < $3K/job < $4K/job < $5K/job < $6K/job < $7K/job < $8K/job < $9K/job < $10K/job > $10K/job
Incentives per job (dollar per job)
Incentives over $10,000 per Job (2001-2008)
35
30
Frequency
25
20
Local
JDIG
15
One NC Fund
10
5
0
< $20K/job
< $30K/job
< $40K/job
< $50K/jpb
< $60K/job
< $70K/job
< $80K/job
< $90K/job < $100K/job > $100K/job
Incentives per Job (dollar per job)
One NC Fund and Corresponding Local Incentives per Job
$70
Local (Thousands of dollars per job)
$60
$50
$40
$30
$20
$10
$0
$0
$10
$20
$30
$40
$50
One NC Fund (Thousands of dollars per job)
$60
$70
JDIG and Corresponding Local Incentives per Job
Local (Thousands of dollars per job)
$60
$50
$40
$30
$20
$10
$0
$0
$10
$20
$30
$40
JDIG (Thousands of dollars per job)
$50
$60
NC Discretionary Incentives & Corresponding Local Incentives
$250,000,000
$200,000,000
$150,000,000
1 NC Fund
JDIG
$100,000,000
Local
$50,000,000
$0
2001
2002
2003
2004
2005
2006
2007
Jun-08
INCENTIVE
TOTAL AMOUNT COMMITTED
One NC Fund
$59.4 million
JDIG
$472 million
Local Incentives
$484.1 million
Key Findings
State incentives often come with large local incentives
• 1/3 of companies receiving discretionary incentives from the state also
received local incentive packages worth over $1 million
Local incentives have cost the most per job, not JDIG
• 20 local incentive packages over $30,000 per job
Large state incentives often come with even larger local incentives
• 17 out of 60 JDIG grants were accompanied by even larger local incentives
JDIG and One NC Fund recipients were also offered at least $484 million in local
incentives
• State discretionary incentives have a maximum value of $530 million
What is wrong with large local
incentives?
• Marginal influence of incentives as a site
selection factor
• Lack of coordination with state and other
communities
• Lack of cost-benefit analysis
 Local governments overbid for business
 Lack of funding for essential public services
Site Selection Factors
Area Development 2008 Corporate Survey
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Highway Access
Labor Costs
Energy Costs/Availability
Skilled Labor
Rent/Construction Costs
Available Land
Corporate Tax Rate
State and Local Incentives
Environmental Regulation
Tax Exemptions
Intra-State Competition
• $6 million in local incentive from 2004 to 2006
• Forsyth vs. Guilford County - Dell
– $37 million
• Vance  Granville - Dill Air Controls
– $300,000
• Rocky Mount  Raleigh - RBC Centura
– $750,000
Economic & Fiscal Impact Analysis
• Large local incentive deals can have net social
costs if:
- High in-migrant ratio
- Low unemployment
- Inadequate infrastructure
• EIA & FIA prevent overbidding
• Few localities in NC use impact analyses
An Unbalanced Portfolio
7
ED
net
6
Incentives
benefit
5
4
3
2
1
-1
-2
-3
net
-4
cost
-5
-6
-7
K-12
Infrastructure
Entrepreneurship
Education Small Biz Dev't
Industrial
Training
Recommendations
• Better Cooperation
– Coordinate state and local incentive negotiations more closely
– Promote cooperation at the metropolitan level
• Offer fewer, but larger One NC Fund grants to be matched by regions
• Promote project sharing between neighboring jurisdictions
• Better Information
– Require local governments to disclose details of incentive deals
– Conduct local economic/fiscal impact analysis for local governments or
labor markets
• Better Local Incentives
– Encourage more In-Kind incentives: Access Roads, Customized training
– Support First Source Hiring Programs linked to customized training
References
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“The Incentives Game”. 2007. North Carolina Institute for Constitutional Law
Bartik, Timothy J. "Jobs, productivity, and local economic development: what implications
does economic research have for the role of government?." National Tax Journal 47.n4 (Dec
1994): 847-861.
“2007 Corporate Survey”. Area Development . Accessed 12/8/08
http://www.areadevelopment.com/corpSurveySeries/feb08/taxesAndIncentives.shtml