01/31/05 — Opinion: Level the field

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Opinion: Level the field

By Gene Price
Published in News on January 31, 2005 1:58 PM

"If you have to pay them to come, you don't want them."

Craig Kennedy said something like that many years ago. He was economic development director during one of Wayne County's early successful periods of industrial expansion.

But things have changed. The name of the game is incentives. And communities -- and states -- have to be competitive.

The most recent big-bucks example was North Carolina's offering Dell a $242.5 million incentive to locate in the Triad. Forsyth County and Winston-Salem promptly added another $37.2 million to have the plant come there.

But there could be a cloud on the horizon.

A U.S. Court of Appeals has held that Ohio and local governments violated the U.S. Constitution when they made a $300 million deal to a company to keep a Jeep manufacturing plant in Toledo. The case could be headed to the Supreme Court.

A former N.C. Supreme Court Justice, Bob Orr, agrees with the Appeals Court ruling in the Ohio case. With the encouragement of some small business operators, he is considering suing our state over the deal with Dell.

And already, it has been obvious that such deals are not always good business. In 2001, Mount Airy and Surry County cut a deal with Sweden-based Chatham-Borgstena to keep and expand a seat cover plant there. County Commissioners gave the operators $326,000 and Mount Airy tacked on another $275,000 incentive.

In turn, the company was to employ more than 200 people and add $14 million to the local tax base.

The plant's employment never exceeded 100 and last month the owners announced they were closing -- now! Surry County and Mount Airy want their money back. Fat chance.

An argument against incentives, which almost always come in the form of substantial tax breaks, is that they shift a greater burden of taxation to other businesses and citizens of a state and county. And these are businesses that have been providing jobs and under-girding the tax base for years.

Perhaps another factor should be considered. Do not incentives the more prosperous states, counties and cities can afford preclude the hopes of poorer areas to attract substantial and desirable industries? In essence, guaranteeing continuing poverty of those in greatest need.

Should the U.S. Supreme Court ultimately outlaw this business of paying industries to come, it might contribute to leveling the playing field.

It would at least negate the argument that "we have to pay them to come in order to be competitive because everyone else does it."