Corporate Welfare Weekly - February 22, 2010 – Issue 38

Recent Announcements…

$350,000 in incentives has been granted to Northeast Foods Inc. from the One North Carolina Fund. The Maryland-based company has been a key supplier of hamburger buns to McDonald’s since 1965. The company will open the new operation in Clayton.

                ~ WRAL, February 22, 2010

It is rumored that Microsoft Corporation is seeking an East Coast location for its new data center. The rumors are that the computer giant will be choosing between North Carolina and Virginia for the new center.

                ~Sarah Newell Williamson, Hickory Daily Record, February 5, 2010

State and local governments have not announced any incentive offers as of yet, but stay tuned, they may be on the horizon.

If taxpayers cannot legally question their government’s spending decisions, then to whom is government accountable?

NCICL was handed two defeats in one day in the legal war against incentives. In two separate court decisions on Tuesday, February 16, both the Wake County Superior Court and the NC Court of Appeals ruled against the taxpayer.

The Charlotte Observer reported in a February 18 article written by Mark Johnson and Benjamin Niolet that:

“A Wake County Superior Court judge Tuesday dismissed a lawsuit by a conservative legal group to halt $10 million in state subsidies for Johnson & Wales University in Charlotte.

The decision marked another installment in the controversy that has lingered since legislative leaders cut a deal to start parceling out money to the culinary school in 2003.

It was the second loss in the same day for the N.C. Institute for Constitutional Law and its efforts to reshape state law governing multi-million dollar incentives used to lure businesses to the state. While the Institute’s director, former Supreme Court Justice Bob Orr, was arguing the Johnson & Wales case, he was literally handed defeat in another. A colleague passed him a copy of a state Court of Appeals ruling that the Institute’s suit over $250 million in tax breaks and other perks for Google could not proceed.

In the Johnson & Wales case, the judge ruled that the subsidies served a legitimate public purpose for education and economic development and that the Charlotte and Lincolnton residents represented by the Institute did not have a basis to sue.

"If an act will promote the welfare of the state and its citizens," Superior Court Judge Michael Morgan read from the bench, "it is a public purpose."

The Institute’s lawyers claimed that giving money to the culinary school is unconstitutional, nothing more than a political promise made by then-House Speaker Jim Black and bankrolled by taxpayers.

Since 2003, $6.5 million of the pledged funds have been given in installments. The Institute lawyers wanted the state to force a refund and halt future payments. Unlike other economic incentives, the Johnson & Wales money was a gift to a single organization with no requirements for producing jobs or other measurable gains for the state, said Jeanette Doran, a staff lawyer with the Institute, during arguments.”

Quotes of the Week…

“The bottom line is Ford Motor Co. is under a full-out assault from other states with incentives. We can’t wear white gloves and pretend that we’re above the competition that goes on between the other states. If you want to be above that, your state will be in decline as other states use incentives to cannibalize your existing businesses.”

~ Missouri Representative Tim Flook, chairman of Missouri’s House Job Creation and Economic Development committee, as quoted by the Associated Press. Rep. Flook was commenting on the state’s HB1675, which provides tax breaks to manufacturers for making factory improvements. Ford Motor Company was the main target of the bill. Ford employs nearly 3,700 people at its Missouri plant.

Rep. Flook’s comparison of incentives to cannibalism creates quite a mental picture of the effects of incentives. It appears Missouri passed this bill as a line of defense, not necessarily as an enticement.

Governor Perdue offers “favor” to local companies

According to a February 17 press release from the Office of the Governor’s website, Governor Bev Perdue signed an Executive Order giving North Carolina businesses a contracting advantage over out-of-state companies when bidding on state contracts. In an effort to “create” or “save” North Carolina jobs, Governor Perdue has unfortunately instituted a very questionable policy.

“Gov. Bev Perdue today signed Executive Order No. 50 that will give North Carolina-based businesses a price-matching opportunity when bidding on state contracts for the purchase of goods.  The Governor’s order will help North Carolina businesses protect and grow jobs.

Under the Governor’s order, if a North Carolina-based business is not the low bidder on a state contract, but submits a bid within a specified range of the low bid from an out-of-state company, the North Carolina business will receive the opportunity to match the out-of-state bidder’s price and secure the contract.  Gov. Perdue believes leveraging the buying power of the State of North Carolina can provide an immediate economic benefit to our citizens and companies during these difficult times.

‘This order can help save and grow jobs right here in North Carolina,’ said Gov. Perdue.  ‘At a time when North Carolina companies are looking hard for customers, this change will give them a better chance to compete for business, stay in business, and grow their business.’

Executive Order No. 50 directs the Secretary of Administration to develop price-matching procedures for North Carolina resident bidders on state contracts for the purchase of goods.  Such a preference would provide a qualified North Carolina company whose bid price is within 5% or $10,000 of the lowest bid, whichever is less, an opportunity to match the price of an out-of-state low bidder and be awarded contracts with the State of North Carolina.”

How will the governor define “out-of-state?” What about companies that are based in another state, but employ North Carolina workers? As Joe Coletti, fiscal policy analyst at the John Locke Foundation, points out in his recent blog post, Fidelity Investments is based in Boston, but employs thousands of workers in North Carolina. Could this be just another underhanded way to favor one company over another? And then there is that little problem called the U.S. Constitution. Under the Commerce Clause of the Federal Constitution, efforts by states to “balkanize” commerce by protecting home state commercial efforts have consistently been declared unconstitutional.

We want our money back please!

Maybe New Hanover County officials should have done their homework before offering $4.2 million in incentives to cement giant, Titan Cement. County residents are becoming increasingly upset about the incentives deal offered to the company two years ago. Wilmington’s Star News reported in a February 11 article written by Joel Bourne that New Hanover County residents want their money back!

“It’s been nearly two years since our county commissioners offered Titan Cement $4.2 million of our tax dollars to build the fourth largest cement plant in the U.S. on the banks of the Northeast Cape Fear River.

Since then, as the protest at the New Hanover County Courthouse last week showed, public opposition to this heavily polluting industry has grown dramatically. It now includes nearly 6,000 petitioners, 250 local doctors, the North Carolina Pediatrics Society, and scores of local businesses, business leaders, citizens groups, academics, and several governmental agencies concerned about Titan’s impacts on our coastal environment and our community.

In two years we’ve also learned a lot more about Titan Cement: that its draft air permit is “significantly less stringent” than proposed EPA standards for new cement plants; that the company has declined to include existing pollution control technology to make its plant cleaner; that while company officials were telling our commissioners what great environmental stewards they were, their mining permit was being revoked by a Florida judge for suspected impacts on the Everglades and Miami’s drinking water supply; that they’ve done everything in their power to avoid a State Environmental Policy Act Review (SEPA).

Most recently we’ve learned that while Titan was lobbying state officials to remove SEPA, a local Titan officer paid twice the appraised price for an office building owned by two big-time fundraisers for former Gov. Mike Easley – men with reputations for helping grease the skids for environmental permits. The State Bureau of Investigation is now investigating the Titan permit process.

But there are a few things the current county commissioners can do to rectify their mistake and help lift the cloud of controversy that now permeates the Titan project.

At a minimum, pass a resolution asking Gov. Beverly Perdue to freeze all permits for Titan Cement until the SBI investigation is complete. Better still, request that Perdue require the Titan project be subject to the State Environmental Policy Act, which would hold all state permits until a comprehensive review of all the plant’s impacts is complete. And rescind the $4.2 million in incentives promised to Titan Cement. Some of the commissioners have expressed concern that rescinding the incentive would bring a lawsuit from Titan.

… So gentleman, if you please, we’d like our money back.”

Reminder…

The Corporate Welfare Weekly recently launched an effort to identify ANY company doing businesses in North Carolina who plans to expand, relocate within the state, or simply create new jobs – but ISN’T getting any incentive from the state or local government.

Email Shelley Gonzales at gonzales@ncicl.org