03/29/05 — Incentives unfair, says Pate-Dawson chairman

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Incentives unfair, says Pate-Dawson chairman

By Turner Walston
Published in News on March 29, 2005 1:45 PM

State financial incentives that helped lure a competitor to Johnston County are an unfair intrusion of government into the marketplace, says the chairman of the Pate-Dawson Co. of Goldsboro.

Mike Pate said he has been disappointed by the state's decision to give more than $5 million in tax incentives to another food distribution company to build a plant in Selma. Pate-Dawson is a Wayne County-based food distribution company located in the county industrial park.

Sysco, which has offices in Concord and in Suffolk, Va., said it expects to create 600 jobs during the next seven years. In addition to the state money, Johnston County and Selma came up with another $5 million to convince Sysco officials to build there.

Pate made it clear that his company's beef is not with Sysco.

"They're a good competitor," Pate said. "They have a right to build wherever they want to build. Our complaint is with the state of North Carolina."

Pate said Sysco would have built a facility in eastern North Carolina, whether or not the state came up with financial incentives.

The argument against such financial bait has many supporters. Former state Supreme Court Justice Robert Orr, who is the executive director of the state Institute for Constitutional Law, said he plans to sue the state over laws that allow North Carolina to give tax credits in return for job creation. Many such incentives are unconstitutional, Orr maintains. The state, he said, does not have the right to give taxpayers' money to one company and not another. Such policies favor large corporations at the expense of other businesses, Orr said.

Pate said many of the new jobs Sysco claims to be creating will be filled by employees leaving other companies, including his own.

"There's no way to add 300 new jobs and have them be completely new jobs," he said. Some of the Sysco employees will come from Pate-Dawson, Nicholas, US FoodService and other distribution companies in the region, he added.

Pate said state law permits existing companies to claim tax credits for job creation. That benefit, he said, pales when compared to the perks offered to companies that are new to the state.

Pate called the situation "discouraging." His company, built from the ground up in Wayne County, received no such governmental help when it sought to expand, he said.

Pate-Dawson began as a small Wayne County business in 1885. In recent years, it has expanded rapidly, going from 75 employees a decade ago to 290 at present.

Pate said that the food service industry is growing at about 5 percent a year.

Orr has said he wants to challenge the $242 million incentives package the state Legislature approved in November to convince the Dell computer company to build an assembly plant in Winston-Salem.

The Dell case is "very interesting," Pate said. He added that he has discussed Pate-Dawson's legal options with several lawyers.

"We're a strong company," Pate said. "We've been here 120 years. We plan to be here 120 more. Hopefully, we won't lose any jobs."

Pate said he has a suggestion for state leaders who choose to give money to companies in hopes of creating create new jobs.

"Spend the money on better schools, better highway, rail and other infrastructure. Then, companies would want to come here, and we wouldn't have to bribe them."

State Rep. Louis Pate, R-Mount Olive, said incentives for industry have become a divisive issue in recent years.

"I can understand what they're saying." said Rep. Pate, who is no relation to Mike Pate. "Sysco sees the population growth in the area and wants to have a presence. On the other hand, we have existing businesses in our area."

Rep. Pate said established companies in the area are too often overlooked. "If we go out and entice with incentives and don't pay attention to the industries that are already there, then it seems like perhaps that is an unfair advantage.

"We gave Dell $240 million, and we have IBM right up the road that has employed North Carolinians for a long time. Where's their incentive?"

Although he is glad to have the new jobs for the state, Rep. Pate said he does not agree with the incentive offered to get Sysco to Johnston County.

"I'm glad they're coming, but I think it should be paid out of their pocket," he said.