NC SPIN Online

The former in the Dell
Yesterday`s announcement that Dell Computers would shutter its Winston-Salem plant was shocking. At one time this plant had as many as 1,300 people on payroll, but it has been reduced to the current level around 900. All will lose their jobs, almost guaranteeing that North Carolina`s unemployment rate will reach the 11 to 11.5 percent levels predicted by many economists.

State officials are trying to put as pretty a face on this as they can, but the truth is that it is prima facie evidence of the evils of throwing large dollars in economic incentives to lure big companies to the state. They can come, but they will just as easily leave when they determine it is in their best interest. The fact that the incentives are not enough to keep them here should probably say they weren`t that significant in attracting them here.

This is a sucker`s game we are playing. Politicians have drunk the Kool Aid in believing our state won`t attract big new industries without throwing money at them. Indeed, knowing there are free dollars available, most of those looking to relocate are eager to get the green, even telling us they will go elsewhere if they don`t get dollars from us. But politicians like the publicity of being in on the relocation announcement, cutting the ribbon, talking about how they played an important role in creating new jobs. It isn`t as sexy when the local car dealer or construction company or retailer hires five new people.

We go backward when a company like Dell, a company we have fawned over with our tax dollars, pulls out. Not only do we lose the jobs, but our governments (and many families) have built their budgets based on revenues which have vanished. A labor force that might previously have been employed by other firms has not been available and now floods the marketplace, ensuring that those who find new jobs will likely do so at lower wages than they previously earned. A major facility will sit empty, for sale, likely having a downward effect on the prices of other commercial real estate. We will spend time and money trying to claw back tax dollars already given. Few believe this will be a zero sum game. But the biggest loss is that of morale. This community, this state, suffers another blow to our already shaky confidence.

Many eyes will be watching how much of the money state and local governments have given Dell is actually repaid. Public agencies spent millions in site preparation, road widening, and community college training for workers. Most of that and other public money won`t be returned.

It doesn`t have to be this way. Our state withheld the pressures of incentives for many years, rightly believing that our state was attractive enough without having to buy jobs. We got our share of new plants without these giveaways. We don`t have to be a follower. We can once again lead.

Here are several solutions we can adopt that will take us out of this high-stakes showdown poker game and get us back on the right track for economic development.
1. Let us recognize that it is small business that creates most of the jobs in this state. Some say as many as 7 out of 10 new jobs come from enterprises smaller than 200 people. Pick up any newspaper and see where a company is adding ten new jobs. This is nowhere near as exciting as hearing Dell Computer promises 1500 new jobs over the next ten years, but it is a lot more certain to last. It is the age-old case of the tortoise and the hare.
2. Many of these small companies are what are known as Subchapter S corporations, meaning the profits accrue to ownership and are not paid by the corporation. We could easily make the first $150,000 of those earnings tax free.
3. Let`s give more incentive for small companies to create new jobs, putting them on equal or better footing with larger firms.
4. We can and must do more to expedite permitting, simplify and consolidate regulations, and ensure the role of government is as free of complications as possible while ensuring the safety and rights of others.
5. The revision of the state tax codes could go a long way toward making us more business friendly. If we expand the base of taxation to include services, eliminate some of the exemptions and preferences we could easily reduce the corporate tax rate significantly.

To add insult to injury Guilford County just passed a resolution to make $1.3 million in tax dollars available to small businesses that spend more than $10,000 in capital improvements. The firms would have to apply for grants. We talked with the person in Guilford who has just been tasked with the administration of this program. There are few details available. We were told the grants could be different amounts to different firms. Somehow the amount of property taxes the firm paid would factor into how much, if any, they were granted. Of course $1.3 million won`t go far, so there will be competition for the grants. Who will decide who gets the grants? That is being finalized, but we understand the County Manager and perhaps the Commissioners will be involved in the final decisions. Forgive our skepticism, but this program, well intentioned though it may be, appears to have disaster written all over it. We understand the motivation was to do something to help small companies but this could become a nightmare.

You can be sure that Forsyth (especially now) is looking at the Guilford program, as are other counties. No county wants a neighbor or any other county to have a leg up on them in economic development. This could set off another round of county vs. county. We already have enough of that. At the least can`t our legislature pass a law prohibiting local governments from giving incentives?

This game of musical tax incentive chairs has to stop somewhere with someone. Just recently the Governor of Virginia stated that his state was prepared to do whatever necessary to match the incentives of North Carolina. Michigan`s Governor also chimed in about incentives.

If nobody likes giving incentives, as all our politicians claim, and everyone wants something done about it, how about forming a coalition of states who pledge not to give anymore? What have we got to lose by trying?

We have lots to lose if we keep doing what we`re doing now. Just ask all the folks in Winston-Salem.

For more discussion, including the discussion about the million dollar gift to Johnson and Wales and the Guilford County initiative, be sure to catch this week`s NC SPIN.

Wake`s school revolution
Like it or not voters in Wake County sent a resounding message to the Wake School Board and administrators Tuesday. Forced busing and diversity balancing will end, if those elected hold true to their campaign promises. Even in one undecided district that will see a runoff the two top vote getters say diversity is over.

The sad part of the election was that it revolved around diversity. But Wake school leaders did little to reframe the debate. While parents have been protesting and complaining over the past several years their response was perceived as arrogance.

The handwriting was on the wall. Private polls have shown for months that the revolution was coming, explaining why three incumbent school board members chose not to stand for re-election. The fourth incumbent came in third in his district.

Now comes governing. When the new board takes office in December it will be interesting to see what happens. How soon will diversity be replaced by neighborhood schools. The chair of the board says things look a lot different on the other side of the desk. Let`s see.

Our question is whether this election is an isolated instance of rebuke or the beginning of a voter revolution in our state. Read our column

Perdue hard at work
You have to hand it to Governor Perdue. Not since a young and energetic Jim Hunt became Governor have we had a chief executive working harder and getting out among the people. Her press office turns out more releases than Associated Press, a PR machine that must run day and night.

We`re told the Governor is very aware of the poll data showing her lack of popularity among voters but has decided not to let that get her down. She has told staffers that they are to ignore the polls and stay about the job of working for North Carolina.

Cunningham expected to announce soon
We are told former State Senator Cal Cunningham is in Washington meeting with consultants. Expect him to come back and announce his campaign for the U.S. Senate soon. We were also informed that he has been buoyed by reports that Secretary of State Elaine Marshall is having some difficulty in securing commitments to her campaign. That is reinforced by a survey taken last week by Public Policy Polling. It showed incumbent Richard Burr leading Marshall by a 44-32 percent margin. Cunningham, who has never run a statewide campaign, was only slightly less competitive, at 46-27 against Burr.

Burr can be beat. His numbers aren`t that great. But no Democrat has traction against him yet.

BofA rumors
Last week we reported that Ken Lewis, embattled CEO of Bank of America had resigned. You could see this coming after half the board resigned amid shareholder complaints and fed rebukes over the Merrill Lynch and other deals. There is speculation these resignations were prompted by officials in the federal government and that at least some of the new directors have close ties to the old Fleet Boston bank.

There is some buzz as to whether all these orchestrations might result in the demise of another corporate banking headquarters in North Carolina. Wachovia`s loss was huge. If Bank of America was to move, it would devastate Charlotte.

The Charlotte Observer recently reported that the Queen City was reeling from the loss of some 600 high paying bank jobs over the past year. A headquarters move would put even more on the streets.

The best way to put an end to the rumors is for Bank of America to say so. Now!