Economic incentives to again test urban-rural divide

Published March 2, 2015

by Gary Robertson, Associated Press, published in News and Observer, March 1, 2015.

Division between urban and rural interests isn't new to the General Assembly. But the fissure is getting a new look from Republicans now in charge of state government as North Carolina's economic recovery continues.

The Charlotte and Raleigh-Durham areas are outpacing the rest of the state in landing big companies and jobs. They've also become more powerful in the Legislature with each round of redistricting. Wake and Mecklenburg counties now comprise one-fifth of North Carolina's population.

But arriving with the Republican majorities in 2011 are more GOP legislators from rural and "exurban" counties who question why small-town North Carolina isn't getting more help. While the state unemployment rate has fallen sharply to 5.5 percent, nearly 20 small or rural counties still are at or above 7 percent.

"There's not a rural-urban split. There's a Raleigh-Charlotte versus anybody else split," said Sen. Andy Wells, R-Catawba, pointing to employment growth trends since 1990. "You've got some communities that have done really well, but others have just been real flat."

This disparity is likely to shape debate starting this week over an economic incentives package filed in the House and sought by GOP Gov. Pat McCrory.

The awards cap on Job Development Investment Grant awards, the state's primary economic incentives tool begun in 2003, rises in the measure. That's something McCrory says he needs to compete with other states in recruiting big business.

But non-urban lawmakers surely will notice 86 percent of the monetary value of JDIG awards has gone to companies building in Mecklenburg, Wake and Durham counties in the past two years, according to legislative staff.

The bill does sweeten incentives for computer data centers, which have come to Rutherford, Catawba and Caldwell counties, and it provides $20 million for an infrastructure fund. But that amount compares to $1.5 billion in announced JDIG awards since the program's inception. Only 9 percent of JDIG dollars through 2013 went to companies building in rural counties, a North Carolina Justice Center report says, and a disproportionate number of rural projects failed.

The measure also appears to end the potential tax advantage for a manufacturer to build a huge plant in non-urban counties by offering the break statewide.

Right now, said center analyst Allan Freyer, the measure "just doesn't fit the bill and it will almost certainly continue to leave our rural counties behind."

McCrory has suggested he wants more for rural areas. In his State of the State address, the former Charlotte mayor said his effort "recognizes the importance of economic strength in all regions, but emphasizes support to areas of high unemployment."

House Speaker Tim Moore said many companies inherently want to go to metropolitan markets.

"The question is what do you do for the rural areas," said Moore, from small-town Kings Mountain.

Sen. Bob Rucho, R-Mecklenburg, the Senate Finance Committee co-chairman, said his goal on economic development changes is to help all 100 counties become prosperous.

Republican agreement on incentives is difficult. Some believe cash incentives are ineffective and money would be better used to reduce income tax rates, as the GOP did in 2013.

"Republican legislators who represent these rural and outer suburban districts find themselves being asked to vote for a package of incentives that are largely going somewhere else, but the governor wants it because he's a statewide elected official," said Ferrel Guillory, the Program on Public Life director at the University of North Carolina at Chapel Hill.

The North Carolina Metropolitan Mayors Coalition, comprised of the largest cities, is pushing a regional economic development approach. It will decrease perception that urban and rural areas are adversaries, said Huntersville Mayor Jill Swain, the coalition chair.

Democrats grappled about rural areas when they controlled government. They helped create the N.C. Rural Center and the Golden LEAF Foundation. Republicans have turned off the cash spigot to both.

A potential Republican split could give more power to Democrats over proposed legislation. Public education, broadband access and job training need to be part of any discussion, said Rep. George Graham, D-Lenoir.

"Economic development as an issue is a statewide issue," Graham said. "We can't have two North Carolinas."