Follow the Money: Issue 88


Mar 11th, 2011
by Elizabeth Lincicome

 

Incentives Failures: Four local companies forced to terminate grants

Four area companies lured by state incentives have said they can’t meet their hiring goals and therefore must shut down their incentive grants. The terminations are just one more example of how economic development incentives end up hurting the very people they’re intended to help. 

Sysco Food Services in Selma, INC Research in Raleigh, DRS Technical Services in Elizabeth City, and Tessera Technologies in Charlotte were eligible to receive nearly $24 million in incentives money. All four companies fell embarrassingly short of its hiring goals.  INC for example, predicted it would add 1,093 jobs by this year but has only added 270 since its grant was rewarded in 2007.  

A spokeswoman for the company defended the shortfall saying, “We continue to create jobs in North Carolina; however, growth in headcount has been spread across our worldwide locations that did not exist within INC Research at the time of the award.”

 

Lydall gets $600,000 in incentives, will hire up to 50 miles away

Lydall Inc., which manufactures automotive heat shields, has been rewarded $600,000 in incentives money to expand its operation in Yadkin County. The company will receive $180,000 from the county, $120,000 from the city, and a matching grant of $300,000 from (that’s right, you guessed it) the One NC Fund. 

The recent incentives announcement is especially egregious for two reasons. First, according to Lydall’s HR manager, the company will recruit from a 50-mile radius. Anyone familiar with Yadkin County, knows that if you head 50 miles out, you’re reaching into parts of Virginia or Greensboro. Second, the average annual wage for the new jobs will be almost $3,000 less than Yadkin’s current average. 

The head of the county’s Chamber of Commerce even admitted Lydall probably would have chosen Yadkin regardless of the incentives. “My guess is a major reason why Lydall chose Yadkin County for the expansion is the success it already has achieved here," he said.

 

Electrolux’s incentives agreement with Tennessee hits a “snag” 

Remember the story about appliance maker Electrolux? Just before the holidays, Selma, NC. learned that it had lost out to Memphis, TN., which apparently offered the company around $150 million in state and local incentives to build a monster new plant there. The news was a huge disappointment for the town of Selma, which could have used the hiring boost. Now we learn that the Memphis deal may not happen. 

Through a public records request, a local newspaper in Memphis uncovered the fact that legislative budget approval is required for officials to get to a big chunk of their incentive money and that process is taking time. 

Electrolux has threatened Tennessee officials saying if the budget approval isn't complete by May 1st and the money isn't delivered by June 1st, the company may terminate the deal taking its 1,250 promised jobs with them. This is a firsthand example of how greedy companies can turn on and use economic development officials desperate to recruit new business. 

 

United Furniture’s incentives include money, land, and a new road

United Furniture, which currently employs 400 in Randolph County and hundreds more in Davidson County, will receive a multi-tiered incentives package to expand operations at its Lexington plant. In addition to receiving a $125,000 grant from the One NC Fund, the city and county have purchased 17 acres next to the plant to give United a place to park its tractor trailers. 

In what officials refer to as the “second phase” of the incentives deal, leaders of the General Assembly and the N.C. DOT will provide $600,000 toward the $1.1 million cost of building an industrial access road that United says is necessary in order for its large delivery trucks to navigate congested traffic areas.

 

KCST sets a good example

Kudos to Keihin Carolina System Technology for its recent announcement that it will create additional jobs and continue to invest in North Carolina without getting state incentives to do so. KCST produces parts for Honda and Acura cars. The company currently employs 370 people in its Tarboro plant, which it has already expanded once before in 2003, and is investing more than $13 million to expand there once again.

 

Quote of the week: 

“We continue to create jobs in North Carolina; however, growth in headcount has been spread across our worldwide locations that did not exist within INC Research at the time of the award." said 

 -Trisha Vonder Reith, an INC spokeswoman