RALEIGH — North Carolina’s largest cities dealt with nearly 240 economic development contracts and promised $65 million in incentives from 2009 to 2014, according to a new John Locke Foundation Spotlight report. Actual incentives payments topped $20 million during the same five-year period.
Winston-Salem awarded $20 million in incentives, the most among the 13 North Carolina cities with populations of at least 70,000 people. Charlotte awarded more than $16.8 million in incentives, ranking No. 2, and Durham ranked No. 3 with $10 million. On the other end of the list, Wilmington awarded no incentives during the five-year study period.
Raleigh approved $1 million. Greensboro approved $3.3 million.
On a per-person basis, Winston-Salem once again ranked No. 1 with $83.86 in incentives. Asheville ranked No. 2 with $80.40 in incentives per person. Durham awarded $39.92 in incentives per person, and High Point awarded $35.46 per person.
All 13 cities made incentives payments during the study period. Winston-Salem made the largest payments, nearly $4.9 million. Fayetteville paid $3.1 million, and Charlotte paid $3 million. On a per-person basis, the largest payments came from Concord ($28.86 per person), Winston-Salem ($20.45), and Fayetteville ($15.31).
“Raleigh and Wilmington handled just two incentives contracts during the five-year study period, with Wilmington offering no new incentives, while Durham had 80 active incentives contracts during the same years,” said the report’s lead author, Sarah Curry, JLF Director of Fiscal Policy Studies. “There was no correlation between the number of contracts and the amount of money approved or paid by the cities.”
This report follows up JLF’s release this summer of a first-of-its-kind analysis of county government incentives issued across the state. That report showed that county governments awarded $284 million in incentives and made payments of $144 million from 2009 to 2014.
As with the county incentives report, Curry and her co-author, JLF Research Intern Austin Pruitt, found that city incentives data were “much more difficult to collect and interpret than was anticipated.”
“Currently there is no single data source that tracks the expenditure of tax revenue on economic development activities at the local level,” Curry said. “There is no state reporting requirement, so cities are free to maintain unique ways of documenting their economic incentive activities. Those differences make it extremely difficult to capture comparable data across jurisdictions.”
The new report recommends that state legislators mandate a standardized reporting requirement for all municipal economic development activities.
“In addition, legislators should require that all economic incentive data be collected by the Local Government Commission and published in a way that gives taxpayers access to aggregate and city-specific economic development expenditures and readable documents,” Curry said.
A provision of the newly approved state budget plan creates a new state budget transparency website. The provision calls for the state chief information officer to “coordinate with” local governments to ensure posting of budget and spending data on local government websites and to provide the data to the Local Government Commission in a standardized format for publication on the new state website.
In addition to data about the 13 largest cities, Curry and Pruitt detail cities’ legal authority to offer local incentives. The authors note that North Carolina’s appellate courts have addressed incentives issues in 1996 and 2010, but “no court has directly addressed” whether one form of incentive used in Raleigh and some counties represents an unconstitutional form of tax abatement.
From a regional perspective, Charlotte-area cities on the list (including Concord and Gastonia) approved $17.4 million in incentives over the five-year study period. The Triangle’s three largest communities approved $12 million, while Triad cities approved $27 million.
Larger incentives deals affected the numbers for several cities, Curry said. “Concord approved $5.26 in incentives per person during the study period but paid $28.86 per person, largely because of a one-time payment of $1.5 million to Great Wolf Lodge,” she said. “High Point and Winston-Salem each approved one exceptionally large agreement that skewed their totals as well.”
“Of the $3.85 million in incentives approved in High Point, $2.4 million was earmarked for the Ralph Lauren Corporation,” Curry explained. “Winston-Salem’s total of $20 million in incentives agreements included more than $13 million for Caterpillar Inc. alone.”
Before the John Locke Foundation issued its county and large-city incentives reports, no government agency, trade organization, special-interest group, or nonprofit organization collected or published economic development data for N.C. municipalities and counties.
A standardized reporting requirement would give local and state officials a helpful tool to evaluate incentives, Curry said.
“Elected officials should use this information to evaluate whether the costs of incentives outweigh the benefits,” she said. “We suspect that, in most cases, there are much better uses of tax revenue and much more efficient ways to spur economic growth, such as lower tax rates and reduced regulation.”
Sarah Curry and Austin Pruitt’s Spotlight, “City Incentives in North Carolina: How Large Cities Are Using Taxpayer Dollars,” is available at the JLF website. For more information, please contact Curry at (919) 828-3876 or [email protected]. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].