MEDIA RELEASE: New report proposes reforms to state’s incentive policies in wake of blown Continental Tire deal, stagnant economy

Lawmakers must develop new policies to ensure the creation of stable, quality jobs, report says

RALEIGH (Jan. 5, 2012) —The North Carolina General Assembly should reform the state’s economic development incentive policies to ensure the creation of stable, quality jobs for the state’s workers, according to a new report released this morning by the NC Budget & Tax Center. These reforms are especially critical given North Carolina’s high unemployment rate and the high-profile failure to recruit a Continental Tire facility to the state in September.

“Both the persistently high unemployment rate and the Continental Tire deal have created the opportunity for re-thinking the state’s approach to incentives,” said Allan Freyer, Policy Analyst with the N.C. Budget & Tax Center and author of the report. “In making the most of this opportunity, the state should reform its economic development incentives policies and refocus those policies towards creating more and better jobs for the state’s workers.”

The report recommends that lawmakers target taxpayer-funded incentives to recruit new firms and retain existing ones in industries that are stable, growing, and pay a decent wage. In an intensely competitive global economy, the report states, stable and growing businesses provide the best return on investment for incentive dollars. Growing businesses are most likely to increase investment and hire additional workers within the state, while declining industries are more likely to experience plant shutdowns, widespread outsourcing, mass layoffs, and wage cuts as they struggle to keep up with the global economy.

The report highlights the importance of holding incentivized firms accountable for their promises of job creation and investment in exchange for taxpayer subsidies. Under current law, all firms subsidized through the state’s Jobs Development Investment Grant (JDIG) and OneNC programs are required to meet certain job creation criteria or give back the taxpayer dollars they received, as penalties for noncompliance. However, these accountability measures do not apply to most incentive deals signed by local governments or special deals approved by the legislature – such as the proposed Continental Tire project – unless the General Assembly writes such provisions into the legislation authorizing the deal.

“The state needs to promote a more accountable job-creation process in exchange for the taxpayer dollars given to these firms,” said Freyer. “All firms receiving public dollars from the State and local governments should be held accountable for their promises. If any firm that is subsidized by state or local governments fails to live up to its promises, then those public dollars need to be taken back by those government agencies. The legislature should never grant special incentives to firms that have laid off workers in North Carolina since receiving a subsidy.”

Specific policy recommendations in the report include:

  • Target incentive programs to attract and retain high-growth industries
  • Target incentives toward industries with higher-wage occupations
  • Enforce existing performance criteria for incentive deals funded with JDIG and OneNC.
  • Extend existing performance criteria to all other incentive deals, including those offered by local communities and those approved by the legislature.
  • Improve monitoring and transparency of incentive contracts and firm performance.

FOR MORE INFORMATION CONTACT: Allan Freyer, Public Policy Analyst, NC Budget & Tax Center, allan@ncjustice.org, 919.856.2151; Julia Hawes, Communications Specialist, NC Justice Center, Julia@ncjustice.org, 919.863.2406.

The N.C. Budget and Tax Center—a project of the N.C. Justice Center—seeks to create economic opportunity and shared prosperity for all North Carolinians through non-partisan research, education and advocacy on budget, tax and economic issues.