Archive for August, 2022

8-13-2022 – You Decide: Should We Use Incentives to Attract Firms?

Posted on: August 15th, 2022 by admin No Comments


August 13 2022



By Mike Walden

Aug 12, 2022


North Carolina recently received some outstanding economic news. Our state was named “America’s Top State for Business” by a major national media organization. This is, indeed, a high honor. It recognizes the attractiveness of North Carolina to both national and international firms. Experts say the state’s labor supply, educational systems — especially universities and community colleges — competitive cost-of-living, and attractive weather and natural amenities are some of the reasons for our high business ranking.


Yet there may be another factor at work — incentives. Incentives are a type of financial rebate to businesses that locate in North Carolina. Usually they take the form of a reduction in taxes paid by the company over several years. The company still pays state taxes, but just less. The incentive packages can be big — even over a billion dollars — if the tax reductions last several decades. Local governments in North Carolina can also offer incentives, but they’re usually much smaller in dollar amount compared to the state’s programs.


Recently I talked to a local citizens group about incentives. Several questions were raised, including why incentives are used, whether incentives should be banned and if North Carolina loses money with incentives — money that could be used for crucial state programs. Let me provide the same answers in this column as I gave to the group.


Incentives are used because they work. Business incentives were first offered by a few states in the 1930s, but they have significantly expanded in the last 30 years. In particular, large, well-known companies bringing thousands of jobs and billions of dollars in economic activity will rarely consider locating in a state without incentives.


Does this mean only incentives are important? Not at all. A business will have specific requirements for labor, skills, access to suppliers, access to buyers, transportation and other factors. Research shows a business looking for a site will examine numerous locations across the country — and possibly even the globe — and then decide on a handful of sites that meet their requirements. The business will consider each of these two, three, four or five locations as equal. It’s then the size of the offered incentives package that will create the winner.


Some may say states are being used by companies to provide them with more financial benefits. If so, then why don’t states just agree not to use incentives? There have been efforts to do this, but thus far they have failed. Why? Because even though incentives can be costly to states in terms of foregone tax revenues, they can still generate net benefits.


Consider this example. Suppose the “Big Deal Company” is offered incentives worth $250 million over 20 years to come to North Carolina, and they accept. Is the North Carolina treasury in the hole for $250 million for the next twenty years?


Not necessarily. If the new economic activity generated by the Big Deal Company creates $350 million of new state revenue potential during the next 20 years, then even including the incentives, North Carolina’s public revenue would be ahead by $100 million.


The gain could even be bigger if North Carolina is able to reduce spending on unemployment compensation and other economic support programs as a result of employment rising and unemployment falling.


But how do we know if the Big Deal Company will be prosperous enough to pay $350 million to the state over 20 years? Based on the company’s hiring and production plans, we could estimate their revenues, payroll and other key factors to generate forecasts of what they would pay the state, before incentives. Then we could compare those forecasts to the costs of incentives. If the forecasts of new revenues and spending savings are greater than the incentives, then using the incentives could bring a net gain to the state.


Indeed, this is exactly what North Carolina does before offering incentives. For the past 20 years, the state has been using an economic model that predicts the benefits and costs of incentive packages.


But some of you may be thinking — what if the model is wrong? What if, after receiving the incentives, the company doesn’t hire as many workers, produce as much output and pay as much tax revenue to the state?


Fortunately, North Carolina has thought of this possibility and includes “clawback” provisions in the incentives contract. If the company doesn’t meet the hiring number they claimed they would, the size of the incentives is reduced —“clawed-back” — in proportion to the number of missed jobs. North Carolina has used this clawback provision several times.


Of course, there’s always the possibility a company would have come to North Carolina without incentives. However, experience suggests this possibility may be slim. For example, recent records revealed that North Carolina was about to lose a large multi-hundred-million-dollar firm to another state because North Carolina’s incentives package was too small. The state increased the amount and the firm announced they were coming to North Carolina.


There’s much to dislike about incentives, and most people wish they wouldn’t be used. However, as North Carolina’s economy has been transformed in recent decades, with traditional industries like tobacco, textiles and furniture downsizing and new sectors such as technology and pharmaceuticals rising, the state has strived to attract new companies so that good-paying jobs can be offered to our workforce. Is it worthwhile to use incentives to accomplish this goal? You decide.


Walden is a William Neal Reynolds Distinguished Professor Emeritus at North Carolina State University.

8-11-2022 – EDC presented proposal to purchase 30-acres

Posted on: August 11th, 2022 by admin No Comments


August 11 2022





Deborah Murray, executive director of the Economic Development Commission (EDC), presented a proposal to purchase the 30-acre Hollowfield McDowell property on Helton Road in Sawmills for the purpose of industrial development.


“The development there would be a tremendous investment in Sawmills,” Murray said.


The property has the potential to add value, jobs, and investment in the community. The EDC has also partnered with an engineering consultant to maximize the value of the property.


“We’ve decided that naming it Evergreene Industrial Park gives a nod to the recently deceased mayor of Sawmills,” Murray said. “It gives it something that is important to us, being green and sustainable and standing for 21st century types of things, but also a nod to the history and legacy of something important to the town of Sawmills.”


Potter asked Murray if there were any concerns about the property becoming a Brownfield site, which is a site that may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminate. Murray answered that she was not aware of anything of that nature planned for this property.


After Murray’s presentation, commissioners voted unanimously to approve this land acquisition.

8-4-2022 – County’s unemployment rate ticks upward

Posted on: August 4th, 2022 by admin No Comments


August 4, 2022




Aug 3, 2022


RALEIGH — At 4.1%, Caldwell County’s unemployment rate increased in June from May’s rate of 3.6%.


Unemployment rates (not seasonally adjusted) increased in 98 of North Carolina’s counties in June and decreased in two. Edgecombe County had the highest unemployment rate at 8.0% while Orange and Buncombe Counties each had the lowest at 3.3%. All 15 of the state’s metro areas experienced rate increases. Among the metro areas, Rocky Mount had the highest rate at 6.5% while Asheville and Durham-Chapel Hill each had the lowest at 3.4%. The June not seasonally adjusted statewide rate was 4.1%, the same as Caldwell.


In Caldwell, 1,477 out of a workforce of 36,274 are listed as unemployed. The county ranks in the middle of the state’s 100 counties, or 49th, with its current joblessness rate.


When compared to the same month last year, not seasonally adjusted unemployment rates decreased in all 100 counties. All 15 of the state’s metro areas experienced rate decreases over the year.


Last year, Caldwell County recorded an unemployment rate of 5.8% for the month of June. Of course, the state was still climbing out of the depths of the COVID-19 pandemic that resulted in economic peril.


The number of workers employed statewide (not seasonally adjusted) decreased in June by 13,268 to 4,935,844, while those unemployed increased by 22,766 to 209,855. Since June 2021, the number of workers employed statewide increased 220,290, while those unemployed decreased 63,454.


It is important to note that employment estimates are subject to large seasonal patterns; therefore, it is advisable to focus on over-the-year changes in the not seasonally adjusted estimates.


The next unemployment update is scheduled for Friday, Aug. 19 when the state unemployment rate for July 2022 will be released.

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