While over at the Biz Journal site, I read with interest the story making the case that “Controversy aside, incentives usually deliver as promised.”
The story focuses on clawback provisions, which certainly will be included in any deal offered up to Caterpillar. While the article makes it sound like the clawbacks from the Dell deal means the system work, the article unfortunately didn’t address the fact that Winston-Salem, in a tough budget year where city council members claimed they “looked under every rock” to fund core services, is taking Dell’s money and offering it to another company. I just don’t understand that, and I’m waiting for a rational explanation.
Remember also that contracts can be rewritten, as they did down in Davidson County. Note the last sentence —maybe I’m missing something here. I realize Unilin’s business is suffering, but waiting until the unemployment rate is below 10 percent to reinstate job thresholds appears to undermine the argument that incentives help reduce the unemployment rate, doesn’t it?
On some occasions, incentives are adjusted when companies don’t perform, rather than clawed back. Last year in Davidson County, flooring maker Unilin requested and received a modification of the job-creation requirement in its incentive contract because it would not add as many employees as expected in 2010 due to the recession.
Steve Googe, director of the Davidson County Economic Development Commission, said under the original deal, Unilin would have had to create at least 65 percent of the expected jobs to receive a pro-rated share of that year’s annual incentive payment. The change removed that minimum threshold to allow for a partial payment even though the target wasn’t quite met.
“The contract called for $80 million in total investment and they’ve already made $120 million, so it’s not like they’re trying to shirk their responsibility,” Googe said.
Googe said the contract modification will reinstate the 65 percent threshold once the unemployment rate in Davidson County dips back below 10 percent.
