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Deals drive jobs to area

Posted on 06/03/2008 @ 04:25 PM

Tags: Ideas in Development, Business Incentives, North Carolina

By Clay Barbour

In exchange for 219 new jobs and millions of dollars in private investment, the city of Charlotte and Mecklenburg County agreed in April to give two companies a total of $1.7 million in tax breaks.

The government contributions to Speed Channel and Tessera Technologies, which makes industrial optical parts, are contingent on the companies' performance. The incentives are designed to keep those businesses in the region.

Through the business investment grant program, the city and the county together have approved more than $11 million in incentives since 2004. The city portion must be approved by the City Council and the county part by the county commissioners.

Though not every vote is unanimous, no city-county project has been turned down since the program began in 1998, said Brad Richardson, who runs the city side of the program.

That money is earmarked for companies that do everything from build solar panels to provide cable TV. It's given to the companies as a rebate on property taxes. To city and county officials, the most important thing such companies do is invest in the region.

Business incentives have become common across the country. Typically, unless the money goes toward something like a major sports stadium, such incentives never make headlines.

Critics say incentives subsidize shareholders, foster unfair competition and divert leaders from focusing on other, more important issues.

But advocates say that incentives are the cost of doing business these days and that if done right, they offer big returns for a relatively small investment.

“Almost all of the cities we compete with use incentives,” Richardson said. “It's a useful tool.”

For its money, Charlotte-Mecklenburg's business investment program should garner more than $300 million in private investments and more than 3,500 new jobs.

The two most recent grants were $1.03 million for the solar panel manufacturer Sencera and $107,000 for the German manufacturer Mias. Both have been approved by city leaders but are awaiting county approval.

Bill Schweke, a vice president with the Washington-based economic think tank Corporation for Enterprise Development, said local leaders have to be careful with incentives.

“They can easily end up overbidding for something they would have gotten anyway,” he said. “Not to mention, it can be considered an unfair advantage to other businesses in the area.”

Representatives from Speed Channel and Tessera could not be reached for comment.

Recent estimates place the price tag for state-driven incentives nationally at about $16billion a year. Some believe local incentives are equally high. The cost has been going up, too.

For example, in 1980, Tennessee offered Nissan $11,000 per job created. Thirteen years later, Alabama offered between $150,000 and $200,000 per job for a new Mercedes-Benz plant.

Richardson agreed that cities and counties must be careful when choosing to invest public money to help land a company.

For this reason, the program has some strict standards. For one, Charlotte and Mecklenburg do not poach businesses from nearby counties. Critics have said this approach rarely helps an area and often hurts it.

Also, the city-county program requires a minimum investment of $3 million from companies, along with the creation of at least 20 new jobs that pay at least the average wage in the region.

A company can create fewer than 20 jobs but must add at least 10 new jobs and invest at least $6 million.

Companies that are approved have to meet all the requirements before public money is made available to them.

For example, Charlotte and Mecklenburg approved a $140,000 grant for restaurant supplier Sygma in 2005. The company was supposed to invest $4.9 million into its Charlotte operation and add 80 new jobs.

Richardson said the company made the investment but failed to add enough jobs, so it received nothing.

“Incentives have to be performance-based,” Richardson said.