John Locke Update / Research Brief

A Bad Deal for Kannapolis’s Taxpayers

posted on in City & County Government, Economic Growth & Development, Local Government
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This week, the City of Kannapolis approved an incentive package.  This sort of thing has become commonplace in recent years, and there’s nothing particularly unique about the Kannapolis deal.  But it does offer a good reminder of the types of deals that are being done and why they’re bad for taxpayers.

Kannapolis has agreed to grant tax incentives of $1.34 million over five years to a large real estate investment and development company for infrastructure improvements.  These improvements are part of a larger project, a 1 million square foot warehouse providing at least 600 jobs with an average annual salary of $31,000.

Certainly, the addition of 600 jobs with an average salary of $31,000 is no small thing for the community.  According to the U.S. Census Bureau, Kannapolis lags behind the statewide average on several basic economic indicators, so hundreds of good jobs paying decent salaries are, of course, attractive to local elected officials.

 KannapolisNorth Carolina
Per Capita Income$22,000 $25,920
Median Household Incom$43,000 $46,868
Population in Poverty 17.6 %16.4 %

But Kannapolis also has one of the higher city property tax rates in the state at 63 cents per $100 assessed value.  High property taxes don’t help to boost economies, and they certainly don’t help people who are unemployed or in low-paying jobs.  While Kannapolis does need more jobs, taking money from taxpayers and giving it to a large company is not the best way to create those jobs or help those city residents.

Some would argue that the incentive game, both in North Carolina and across the country, has gotten completely out of control.  TPA, the developer receiving the grant, “is planning to invest $50 million in the new facility, in addition to $4 million for on-site infrastructure improvements,” according to the city council’s agenda documents.  So does anyone believe that they have to have $1.34 million from the city to make the project viable?

The answer, of course, is no.  In fact, the Mayor of Kannapolis, Darrell Hinnant, admitted as much.  According to the Salisbury Post,

“If somebody looks at this number and says, ‘My gosh, giving away that much money is offensive,’ I would say, ‘Would you rather be offended and have the jobs or rather have somebody else look at the jobs and wave at you as they go by?’” he said.

Hinnant said he would prefer no one gave tax incentives to companies but they are common across America.

“If we don’t want to do this, let’s just pass it along to somebody else who will be standing in line to do it,” he said.

So, it’s not that the numbers only work with that injection of cash from the local taxpayers.  Rather, it’s that “everybody’s doing it.”  Be offended, swallow your pride, let yourself be held hostage by the developer because if you don’t someone else will get the jobs.

I think it’s time that local governments started standing up to bullying from big corporations demanding taxpayer dollars for their projects.  Rather than offering tax breaks, they should offer low rates to all businesses who choose to set up shop locally – whether it’s a big, out of state developer or a local mom and pop.  Reduce regulations and zoning codes that get in the way of developers who want to build a warehouse or open a barber shop.  But don’t tax all property owners (and renters) to give a tax break to the chosen few.

Julie Tisdale is City and County Policy Analyst at the John Locke Foundation. She studies the effectiveness of local spending and tax policy. Before coming to the Locke Foundation, she worked at the Centre for Civil Society in New Delhi,… ...

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