John Locke Update / Research Brief

North Carolina’s Failing Approach To Economic Development

posted on in City & County Government, Economic Growth & Development, Local Government
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This week I read something that struck me as odd.  The Department of Commerce announced that U-Play, a Chinese company, had decided to build a plant in Wayne County.  Commerce made an announcement because, evidently, we’d been competing with South Carolina for this.  And John Skvarla, Secretary of the department, said, “The arrival of U-Play Corporation is further evidence that the world is bullish on North Carolina.”

Really?  Are you sure it’s evidence of that?  Because I have an alternate theory.

Skvarla went on to say:

Our state has ready infrastructure and excellent multi-modal transportation along with well-trained workers and a world-class business climate. Nothing compares to North Carolina as a destination for foreign direct investment.

But that strikes me as disingenuous.  Why?  Because later in that press release, there’s another important nugget:

U-Play Corporation’s arrival in North Carolina was facilitated in part by a performance-based grant of up to $200,000 from the One North Carolina Fund. … All One NC grants are contingent upon a local government match.

And then there’s this from the NCEast Alliance website:

The Wayne County Board of Commissioners approved an incentive grant of $56,730 to be paid over five years based on the Phase I investment of $3,750,000 and 30 new jobs.  Phase II has an estimated investment of $15,000,000 and will require a separate incentive grant at that time.  U-Play will also receive a One NC Grant from the State of North Carolina and will be applying for a Building Re-Use Grant both requiring a match from the local government.

The announcement of U-Play came to fruition through a collaborative effort between U-Play, Wayne County Development Alliance, Economic Development Partnership of North Carolina, NC Department of Commerce and the Stump Corporation.

So we lured them with several hundred thousand dollars in grants, but it was the infrastructure, transportation, workers, and business climate that attracted them.  Really?  Then why the cash?

Perhaps the world is actually bullish on free money.

Don’t get me wrong.  I think it’s fantastic that there are going to be 88 new jobs in Wayne County.  That’s what they’re saying – 88 jobs over four years with a total payroll of $2.75 million, which is an average of just over $31,000.  I’m all for new business, foreign direct investment, job creation, and employment.  But if we’re only able to attract those things by essentially bribing companies to come here, isn’t that a sign of weakness, not strength?

This company is planning to invest $21.3 million in the site over four years, which means that the grants they’re getting from state and local taxpayers amount to less than 2 percent of their spending.  Two percent is nice, but I find it a little difficult to believe that the company couldn’t come up with that 2 percent through private investment, or by trimming a bit of expense, or something.  It’s a nice little sweetener for the company, but it seems doubtful that it’s actually a make-or-break for U-Play.

And yet, state and local governments continue to make these grants, so they’ve come to be expected.  They’re handed out routinely.  And over time, it adds up to real money – money that could have been left in the pockets of taxpayers to invest in their own businesses, or to provide for their own families, or to access some more training or education to equip them for a better career.

There’s no way to know how that money would have been spent, but it would have gone to things that taxpayers valued most.  And now none of those things will happen because, instead, the government took it and gave it to U-Play.

It’s time to rethink this approach to “economic development.”

Julie Tisdale is City and County Policy Analyst at the John Locke Foundation. Before coming to the Locke Foundation, she worked at the Centre for Civil Society in New Delhi, India, where she wrote about various economic and public policy… ...

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