Cover Story Incentives Raise the Roof JDIG and the state's other  new recruitment tools produce  a banner year in economic development By Lawrence Bivins and Steve Tuttle

John Wagner and his associates at Merck & Company already were familiar with North Carolina when they embarked on a nationwide search for the site for the company’s new vaccine plant. Merck has operated a large plant in Wilson for years that consistently has been one of the company’s most productive facilities. Merck also knew about Research Triangle Park and the universities that surround it. “But in the beginning, we didn’t know a lot about Durham,” says Wagner, senior director of vaccine and sterile operations at Merck. These days, Wagner knows just about everything there is to know about the Bull City: its scientific workforce, educational programs, utility rates, infrastructure assets, environmental regulations and more. A careful analysis of those and other factors led the company to decide to invest $300 million there in a move that will create 200 jobs.

Learn more: Top 10 projects statewide last fiscal year Top five projects in each of the seven regions Grants made from the One NC Fund Rising along I-40 at Carolina Corporate Center east of Greensboro, CitiCards, new 175,000-square-foot office building is a visible example of renewed industrial development

It also could be said that Merck – and dozens of other large companies like it – now know a lot more about the state as a whole. They have learned that North Carolina will compete aggressively with other states for corporate expansion and relocation projects, a matter that until recently was openly questioned in the site selection community.

Bringing Merck to Durham’s Treyburn Corporate Park took more than a year’s worth of work by economic development professionals at the Durham Chamber of Commerce, the N.C. Department of Commerce and Research Triangle Regional Partnership. A host of other entities also were involved.

But the deal wasn’t sealed until the General Assembly convened for a special session last December to vote on a landmark incentives package that included land and cash benefits. By overwhelming margins, legislators passed a bill giving Merck some $24 million to buy a 256-acre site and grade the land for the plant that will manufacture vaccines for measles, mumps, rubella and chicken pox. The state also agreed to hand back to Merck sales taxes paid on construction materials, a provision said to be worth $4.7 million. Local tax incentives, as well as $4.1 million in state tax rebates under the state’s Job Development and Investment Grant (JDIG) program, furthered sweetened the pot.


Focused on Jobs, Jobs, Jobs

The Merck deal is indicative of North Carolina’s new strategy in economic development policy. Staggered by the loss of 160,000 manufacturing jobs over three years and stung by criticism from such influential groups as NCCBI over the state’s seemingly lethargic response to the crisis, state leaders were prodded into action. The General Assembly appointed a blue ribbon panel, the Joint Select Committee on Economic Growth and Development, to explore fresh policy approaches. The commission actively sought input from business leaders. Gov. Mike Easley, often criticized early in his term for neglecting business issues, increased his focus on economic development.

The state sought advice from the pros in the business. “We went around to the top site selection consultants and asked for their feedback,” Commerce Secretary Jim Fain recalled in an interview for this article. “What we got back was that North Carolina continued to be a well regarded state with a good business climate and workforce. We were regarded as a progressive state, particularly in education. But we were regarded as a state that was not aggressive in incentives.”

Armed with that advice and the solid recommendations of the legislature’s Joint Select Committee, state leaders began preaching a new mantra: Incentives isn’t about giving away tax dollars; it’s about investing in new jobs. Everywhere, the debate focused on jobs, jobs, job.

In 2002 the General Assembly passed the landmark JDIG legislation, which rebates to companies the majority of state income taxes paid by workers in jobs the companies create. This year JDIG was expanded. Last December’s special legislative session created the Site Infrastructure Development Assistance Fund, which doles out grants to buy industrial sites for “high impact” companies. The momentum carried through this year’s session of the legislature, which has been hailed by many observers as the best for economic development policy in a generation (see related story, page 20).

“The bottom line is, we have been able to really refine and enhance our portfolio, and in our regular gatherings with consultants they tell us they’re convinced that North Carolina means business again,” Fain says. “We have turned around the perception that we might not be willing to compete on incentives.”


No. 3 in Job Growth

With the state’s new policies in place, the announcements of new and expanding industries began filling the headlines. In the fiscal year that ended June 30, the state’s economic development apparatus oversaw the creation of 23,637 jobs and nearly $4.3 billion in new investment, according to official estimates. That comes on top of organic job growth and capital spending at small and medium-sized businesses pursuing plans unaided. That compares to $3 billion in investment and 22,395 new jobs in the previous year.

Much of the favorable news occurred in the first half of 2004, when North Carolina moved up a notch to No. 3 in job growth among all states, according to Gov. Easley. Currently, only Florida and Texas can boast larger employment gains for the calendar year. “It really started toward the end of 2003,” says Gov. Easley, who offered his perspective in an exclusive interview with North Carolina. “We feel fortunate, but we think there is a reason why this is occurring.”

The governor concedes that the state’s new willingness to offer cash incentives to attract major new employers has jump-started the search for new jobs. But he contends that the North Carolina’s commitment to education and workforce development are as important today as ever. He says he’s proud that funding for community college training programs remained strong in spite of lean economic and fiscal times. “Capital investment follows labor — always has, always will,” Easley says. “The higher the skill level our population has, the more successful we’re going to be.”

It is not a thesis that Merck’s Wagner refutes. Among the mass of data that his company and its consultants considered was the flow of science graduates from area universities. Merck also liked the basic biotech training available at the community college level. “If there was a single most important driver that led us to Raleigh-Durham, it was the workforce development work they’ve been doing,” says Wagner, who is based in West Point, Penn. “There was evidence that they not only have the right resources, but are committed to sustaining them.”

A formal groundbreaking at the plant is set for later this month at the property along Durham’s northern edge. By 2008, Merck’s 250,000-square-foot plant should be operational, Wagner says, though an exhaustive federal approval process means the site’s vaccines won’t roll out until a year later. By then its workforce should reach 200 at healthy average wages levels of $55,000 to $60,000 in today’s dollars.


Clusters Kicking In

Before arriving at its choice of Durham, Merck’s site search team, which included an array of consultants, considered about 100 locations across 16 states. The team’s initial survey of North Carolina took it to sites in Johnston, Lee and Chatham counties, as well as RTP. “A project of this magnitude doesn’t come around every day,” says Vivian Powell, the regional development representative for the N.C. Department of Commerce who escorted Merck’s search team through the region.

While touring sites, Powell also took the team to the N.C. Biotechnology Center and introduced them to human resources executives from life sciences firms already here. “Our industry leaders will jump through hoops to help us with clients,” Powell says. “They believe in our (biopharmaceutical) cluster. They understand the importance of it and consider it a privilege to be asked.”

In North Carolina as elsewhere, the clusters paradigm is now ubiquitous. The approach maintains that knowledge-based companies prefer locations in convenient proximity to suppliers, customers and competitors to ensure reliable access to qualified workers, training programs and university-based R&D support. “Clustering was one of our considerations,” says Wagner. “Along with the cluster comes the infrastructure needed to support this type of operation.”

The state estimates Merck’s Durham plant will add about $1.4 billion to North Carolina’s total economic output. But additional opportunities may come to the Treyburn campus as expansion-minded Merck’s facility needs evolve. “We think after the first phase of the project if the state and community perform as expected, we’ll see Merck grow at Treyburn,” says Ted Conner, vice president for economic development at the Greater Durham Chamber of Commerce. “If you take a look at Merck over the years, they traditionally stay with existing sites for growth.”


Ten Big Ones

The same General Assembly action that sealed the Merck deal also authorized a $19 million assistance package for Reynolds American, the new company created through R.J. Reynolds’ merger with Brown and Williamson. As part of the company’s consolidation, it is moving more than 800 cigarette-making jobs from Kentucky and Georgia to Winston-Salem. In all, Reynolds American is sinking $40 million into the placement of its global corporate headquarters there.

Reynolds American and Merck are two of the 10 largest economic development projects announced in North Carolina in the past fiscal year, according to data supplied by the Commerce Department. The chart accompanying this story ranks the 10 in terms of their investment and jobs created. Because the announced numbers for those projects are estimates at best, the chart lists them alphabetically and not in order of magnitude.

In terms of raw job creation, no project topped Verizon Communications’ selection in March of Wilmington for a new customer financial services center. The company’s plans call for a workforce there of more than 1,200. As of late August, about 800 already had been hired, according to Scott Satterfield, CEO of Wilmington Industrial Development (WID), which oversees business recruitment and expansion for the Port City and surrounding communities.

“At a time when many U.S. firms are outsourcing customer support operations to Asia and Latin America, Verizon’s arrival in Wilmington is evidence our community can still compete for labor-intensive operations,” Satterfield says. Verizon’s 150,000-square-foot service center, completed in less than six months, is part of a $29 million investment in Wilmington. The facility’s payroll there alone will exceed $94 million annually, according to an analysis by Professor Woody Hall of UNC Wilmington’s Cameron School of Business.

Workforce issues were at the heart of Verizon’s choice of Wilmington; the city’s livability should ease the challenge of attracting and retaining good workers. “Quality of life gives staying power to your workforce,” says Tony Garcia, a corporate real estate director at Verizon who led the company’s search. While strong public schools and the presence of a local four-year university also factored in as assets, the company was impressed with the welcome they received from WID and other local leaders.

“We were looking for three things: quality of workforce, quality of life and quality incentives from various levels of government,” Garcia explains. “You can find these things in a lot of places, but the key component that led us to Wilmington was a can-do attitude.”

General Electric is another global business making its way to Wilmington. Last fall, the company’s Nuclear Energy unit announced the relocation of its headquarters from San Jose, Calif., to Wilmington, where it has maintained a sizable presence, along with GE’s aircraft engine division, since 1967. The move, which brings $4 million in investment and 200 high-quality jobs with it, was facilitated by the company’s desire to be closer to its East Coast customer base, according to Andy White, president of GE Nuclear Energy. Speaking at WID’s recent annual meeting, White said lofty real estate prices in San Jose had begun to hamper the company’s employee recruitment efforts there.

Local and state incentives, including a JDIG grant valued at nearly $6 million over seven years, helped Wilmington win out over Atlanta. “We had a very competitive offer from North Carolina,” White says. He also credits the participation of Progress Energy, which tossed in its own $50,000 to help with the project’s costs. The two companies are customers of each other.

“It makes you feel good to be able to entice a company out of Silicon Valley,” Gov. Easley says.

A similar win occurred in early June when Harris Corp. announced it would relocate its microwave division from Redwood Shores, Calif., to Durham’s Keystone Business Park. The decision brings another million in investment to the city along with 258 jobs across a broad variety of disciplines. Harris based its choice on the positive experiences it has had in North Carolina in the two years since bringing a 60-person R&D operation to Keystone. “The company was inundated with quality resumes from their previous location here,” says the Durham chamber’s Ted Conner. “They were confident they could find world-class talent here that would help them remain an industry leader.”

Telecommunications and technology firms, still finding their sea legs after a massive industry shakeout and consolidation, accounted for several key projects in North Carolina over the past year. Time Warner’s cable division is growing 350 jobs in Charlotte, where it is investing $36 million in the expansion of its corporate presence at Crescent Ridge, near I-77.

A fast-changing national security landscape is yielding important benefits in the Charlotte region. Goodrich Corp., which relocated its corporate headquarters to the Queen City three years ago, is moving additional jobs to neighboring Union County as it responds to new opportunities in defense and the commercial airline industry. The company announced last fall it would relocate two operations from New Jersey and Ohio into a previously vacant 65,000-square-foot building it owns in Monroe. About 50 Goodrich employees are moving to the community, with the balance of the site’s 300-person workforce being recruited locally.

“When we started looking at this opportunity, we also talked with New Jersey, South Carolina and Alabama,” recalls Brian Durdle, director of state and local government relations at Goodrich. North Carolina officials, including Easley and Commerce Secretary Fain, “had a very clear message: they were willing to partner with us,” Durdle says. “That separated North Carolina from the other states we were working with.”

In addition to financial benefits from municipal and county governments, Goodrich’s relocation will receive $2.7 million in J-DIG funds over 10 years and as much as $1.1 million in infrastructure support from the state. The financial assistance demonstrated a shared-interest, shared-risk, shared-reward posture the state was willing to assume in cultivating an aerospace cluster in the region, adds Durdle. “Incentives really make a difference,” he says, especially amid a challenging economic climate.

The Goodrich news complemented announcements by two other defense industry leaders of their growth plans in the Charlotte region. Defense Technologies Inc., a maker of radar and communications gear for the U.S. military, will be relocating its headquarters to Gaston County fromVirginia in a move that brings 200 new jobs to a community stung by textile losses. General Dynamics, a defense industry icon, unveiled plans to move its armament and technical products unit to Mecklenburg County from its home in Vermont. It will invest $30 million in Charlotte, where its 405-person workforce will earn salaries averaging $70,000.

Superior passenger air service, a technology-savvy workforce and modest business costs are at the heart of Charlotte’s recent success in courting aerospace firms, according to Kenny McDonald, vice president of economic development at the Charlotte Regional Partnership. “One of General Dynamics’ primary criteria was to be near a major airport,” he says. Regional officials have also taken the time to ask defense and aerospace firms about their needs and expectations. “We’re meeting with the largest companies in the industry, not just to try to woo them, but to gain insight into this growing field,” McDonald says.

CitiCard’s selection of Guilford County for its new financial service center not only will create 1,000 new jobs but also means that the company’s 700 existing employees in the area will be staying put. The division of Citigroup is expected to cut the ribbon on its new 175,000-square-foot facility this month. “This project will bring additional prestige and credibility to Greensboro and Guilford County as well as enhance awareness and identify of this area,” says Greensboro Economic Development Partnership President Andy Burke.

When R.H. Donnelley Corp., the giant publisher of yellow pages, announced that it was relocating its corporate headquarters and 275 jobs from Purchase, N.Y., to Cary, CEO David C. Swanson said clearly that the state’s aggressive new posture on incentives swayed the decision. “The economic incentive grant from North Carolina’s JDIG program was pivotal to our decision to relocate to Raleigh-Durham,” he said.

Watts Carr, chair of both the NCCBI Economic Development Committee and chair of the Piedmont Triad Partnership, said he is especially impressed that five of the 10 largest projects involve a headquarters relocation. “It’s a good sign when corporate headquarters move here,” he says. “That is the strongest signal industry leaders can send regarding their satisfaction with our business climate.”

The trend seems to be continuing into the current fiscal year. In late July, Network Appliance Inc., a leading provider of electronic data storage systems, said it would invest $59 million and create 361 new jobs in the Triangle, and Weil-McLain, America’s largest manufacturer of cast iron boilers, said it was investing $6.9 million and creating 103 jobs in Eden. The month also saw two foreign companies pick North Carolina for their first American operations. Japan-based Livedo Corp. said it would locate its facility in Wilson, investing $35 million and create 75 jobs in the production of personal care products; Poppelmann, a leading German plastics processing company, said it would spent $12 million and creatye 50 new jobs in Claremont.

In August, Cree Inc. said it would expand its semiconductor production operations in the Triangle with a $300 million investment in additional manufacturing operations and 300 new jobs. Cree, a spinoff from technology developed at N.C. State, was the first company to produce blue and green light emitting diodes.


What’s Next?

Economic development leaders such as Carr are confident legislators will continue their strong support for the state’s economic development community. Next year, for example, the William S. Lee Act is scheduled to sunset. While JDIG and One North Carolina Fund have eclipsed the 1990s-era Lee Act as a business recruitment tool, Carr says Lee Act provisions offering tax credits for capital upgrades remain a priority for companies already in the state. He also hopes the General Assembly considers cuts to the state’s corporate and personal tax rates, a key issue for businesses organized as partnerships and sole proprietors.

Mac Williams, president of the North Carolina Economic Developers Association (NCEDA), says JDIG and One North Carolina have elevated the state’s economic development policy to a new level. He also senses a renewed commitment by local elected officials to policies that foster job creation.

“There has been an appetite for being more aggressive, we just didn’t know what the avenue would be,” says Williams, who is economic development director for the City of Asheville. Until recently, generous incentives offered by competing states and communities were offsetting North Carolina’s long-held infrastructure and workforce advantages. “The Lee Act was basically our only incentive tool,” Williams says. “That didn’t win the day, and there’s no prize for second place.”

Incentives such as JDIG and One North Carolina, Gov. Easley says, have improved North Carolina’s perception among business executives and site selection consultants outside the state. But just having such programs on the books is not enough. “We’ve shown the world we know how to apply these tools effectively,” says Easley. “It’s one thing to have them. It’s another to use them.”

Commerce’s Fain agrees. “I feel that we’ve effectively made the case that incentives in a well-thought portfolio are important to job creation. Going forward, we need to be attentive to our entire portfolio. A focus will be to continue our ongoing evaluation of the Lee Act and come up with a good set of recommendations of changes that will make it as effective as we have seen that the other parts of our portfolio can be.”

Charts



Regions




Top Projects
Northeast N. C. Region
Rick Watson, president
Jack Runion, board chairman
TAMSCO
$20 million investment, 200 jobs
July 2004: The U.S. Coast Guard contractor says it will expand operations in Elizabeth City with a 100,000-square-foot airport maintenance hangar. The jobs will pay salaries ranging from $37,000 to $100,000.
Blackwater USA
Investment not announced, 25 jobs
July 2004: The security concern announces it will move its aviation operations from Florida to the Currituck Regional Airport. The county gets a $630,000 federal grant to extend the airport runway.
Bertie Co. Detention Center 
$75 million investment, 415 jobs
May 2004: Bertie County completes construction a 1,000-bed state-owned detention facility.
International Paper
$17 million investment, no new jobs
October 2003: The paper and forest products company announces plans to retrofit its Roanoke Rapids plant to produce Kraft paper. The investment ensures that existing jobs at the plant will remain.
PCS Phosphate
$70 million investment, 36 jobs
July 2003: The company nears completion of its purified phosphoric acid capacity using wet technology at its plant in Aurora.



Top Projects
Piedmont Triad Region
Don Kirkman, president
Watts Carr, board chairman
  A.F.G. Wipes Inc.
$34 million investment, 200+ jobs
November 2003: The Israeli-based non-woven textile manufacturer selects a 32-acre site in the Reidsville Technology and Industrial Park where it will produce and package baby wet wipes and other skin care products.
CitiCards
$35 million investment, 1,000 new jobs, 700 retained jobs
March 2004: The nation’s leading credit cards company announces plans for a 175,000-square-foot facility at Carolina Corporate Center just off I-40 in eastern Greensboro. The new jobs pay average salaries of $31,400.
  Unilin Flooring NC LLC
$80 million investment, 330 jobs
March 2004: The manufacturer of glueless laminate flooring is building a 600,000-square-foot facility on a 63-acre tract in Thomasville. The company also is acquiring an adjacent 12-acre parcel for future expansion. The jobs will average $16 an hour.
  Bank of America
$2.5 million investment, 380 jobs
July 2003: BofA announces plans to expand its Triad Center in High Point to support its mortgage loan business and becomes the city’s second-largest employer.
  Lyndall
$5 million investment, 104 jobs
March 2004: The Connecticut-based maker of thermal accoustical products for cars will expand in Hamptonville, about doubling its Yadkin County workforce. Incentives include $100,000 from the county and another $100,000 from the One NC Fund.


Top Projects
Research Triangle Region
Charles Hayes, president
James O. Roberson, board chairman
  Progress Energy
$400 million expansion, 300 jobs
June 2003: The utility mounts a major retrofit of its Roxboro plant to install emissions-reducing technology.
  Merck
$300 million investment, 200 jobs
April 2004: The giant pharmaceutical concern announces it has chosen Durham as the site of its 272,000-square-foot vaccine manufacturing plant.
  BPB America
$100 million investment, 200 jobs
February 2004: The maker of wall and ceiling products picks Roxboro as the site for its new 750,000-square-foot gypsum wallboard plant.
  KBI BioPharma Inc.
$45 million investment, 150 jobs
April 2003: The contract biopharm manufacturer picks Durham for a major expansion into recombinant protein therapeutics and vaccines.
Pergo
$36 million expansion, 86 jobs
September 2003: The Swedish floor maker expands its Garner facility to produce laminate flooring.



Top Projects
Southeastern Region
Paul Butler, president
Jane W. Smith, board chairman
  Verizon Communications
$24 million investment, 1,000+ jobs
March 2004: The wireless phone company chooses Wilmington for its new 160,000-square-foot call center. Studies estimate the the center will have an overall economic impact of $388 million in the Southeast region.
  GE Nuclear
$4 million investment, 200 new jobs
October 2003: GE picks Wilmington over Atlanta and Greenville, S.C., for the new headquarters for its unit that developes advanced boiling water reactors and nuclear plant services. The unit is relocating from San Jose, Calif.
  Innovative Machine Technology
$2 million investment, 100 jobs
September 2003: The maker of water purification systems purchases a shuttered yarn mill in Clarkton, remodels it and quickly begins operation. Employment may soon reach 200.
  Total Solutions & Logistics
$1.1 million investment, 60 jobs
December 2003: The local company purchases a 25,000-square-foot building to expand its business repairing imported apparel items. Another expansion is in the works.
Vulcan Amps LLC
$750,000 investment, 26 jobs
August 2003: The maker of mobile generators relocates from Stewart, Fla., to a 30,750-square-foot building at the Elizabethtown Airport Industrial Park. It plans to expand to 80,000 square feet and employ 80.


Top Projects
AdvantageWest Region
Dale Carroll, president
Gordon Myers, chairman
  Jacob Holm Industries
$40 million investment, 70 jobs
July 2004: The European concern choses Asheville for the world’s most technologically advanced nonwovens manufacturing facility. The plant will be near the AB Tech biotech incubator facility in Enka.
  Consolidated Metco
$23 million investment, 155 jobs
January 2004: The plastics injection molding company is expanding existing facilities in Cashiers, Canton and Bryson City for the manufacture of interior components for the heavy truck industry. The move raises its total employment in Western North Carolina to 500.
  Visotec Automotive
$20 million investment, 140 jobs
May 2004: The Japanese manufacturer of automobile interior fabrics is expanding existing operations in Morganton. The company already occupies a 260,000-square-foot facility where it has invested more than $74 million.
  Mako Marine/Seacraft Boats
No investment announced, 300 jobs
May 2003: The boatmaker picks Forest City as the location of its new facility. It will renovate a 338,000-square-foot former textile plant to manufacture salt-water fishing boats.
Martin Marietta Composites
No investment announced, 40 jobs
December 2003: The company rolls out the first trailer manufactured at its Sparta facility, which is leading to an advanced materials cluster in the region.



Top Projects
Charlotte Region
Michael Almond, president
Mike Mayer, board chairman
  Goodrich Corp.
$11 million investment, 300 jobs
October 2003: The global aerospace and defense systems supplier says it will expand its existing facility in Monroe, in Union County, and move some of its New Jersey and Ohio operations there. The new customer service jobs will pay average salaries of $15-$18 an hour.
  Defense Technologies Inc.
$2.5 million investment, 200 jobs
January 2004: The military contractor, which builds replacement circuit boards for radar and other communications equipment, is moving is headquarters from Virginia to Gaston County. The company will occupy 10,000 square feet of the old Carolina Mills textile plant.
General Dynamics
$30 million investment, 405 jobs
July 2003: The producer of aerospace and defense products is relocating its headquarters and light-manufacturing operations from Vermont to Charlotte. Many of the positions will pay salaries of $70,000. Charlotte was among 10 cites considered for the expansion.
  ZF Lemforder Corp.
$28.8 million investment, 200 jobs
March 2004: The supplier of automotive driveline and chassis technology said it plans to build a 150,000-square-foot plant in Newton. The jobs will pay average salaries of $70,000.
  Triangle Brick
$35 million investment, 50 jobs
December 2003: The company announces an expansion that will more than double the capacity of its Wadesboro plant to 120 million bricks annually.



Top Projects
Eastern N.C. Region
Thompson Greenwood, exec. dir.
Edward Bright, board chairman
Superior Essex
$9 million investment, 130 jobs
June 2004: The wire and cable manufacturer is expanding its 300,000-square-foot facility in Tarboro, where it already employs 235 people. The new jobs will pay average wages of $28,800. The company is the first JDIG recipient to locate in a rural county.
  American Food Resources
$6 million investment, 125 jobs
April 2004: The cheese processing and redistribution company chooses an existing shell building in Nashville Business Center for its new headquarters and warehousing operation. The jobs pay average salaries of $33,000.
  Kidde Aerospace
No announced investment, 65 jobs
July 2004: The maker of fire detection and suppression equipment for the aerospace industry is relocating 65 positions to its headquarters in Wilson and adding 30,000 square feet of space to accommodate additional production lines.
  Albritton Company
$780,000 investment, 97 jobs
August 2004: The Greene County company expands with a new plant in Hookerton to make home window treatments, floor coverings and interior accessories.
  SePRO Corp.
$7 million investment, 21 jobs
August 2004: The aquatics and ornamental horticulture company chooses Whitakers in Nash County for a 410-acre research campus. The jobs pay average wages of $50,000.


Rewriting the Laws on Economic Development
This year’s session of the General Assembly was one of the most productive in economic development policy in many years. Unlike the pitched battles that often have occurred on Jones Street over incentives and tax breaks, the legislature this year was united and mostly nonpartisan over economic development. Major accomplishment included the following:

Filling up the One NC Fund: The General Assembly made its largest appropriation ever for economic development when it committed $20 million for this deal-closing fund. It was the first infusion of money into the fund since 2001 and it was running dry. The legislation also included $4.1 million for the New and Expanding Industry Training program administered by the Community College System and $20 million for the N.C. Rural Center.

Expanding JDIG: The number of projects that may receive Job Development Investment Grant program funds was increased from 15 to 25 annually while the dollar cap (the total amount that may be awarded to all projects in one year) rose from $10 million to $15 million. The JDIG program’s sunset was extended an additional year.

Rewriting the R&D tax credit. The existing tax credit written into the Bill Lee Act, which focused mostly on manufacturers, was broadened to apply to all industries that perform R&D. The new credit rewards companies that perform R&D within the state and provides a special rate for small businesses and those in more economically distressed counties. It also offers a credit for R&D conducted at private and public universities within North Carolina to help strengthen ties between the universities and the business community.

Expanding the sales tax refund: Manufacturers of aircraft, automotive, semiconductor and computer products may now qualify for a refund of sales taxes paid on construction materials if they spend $50 million on land, construction and/or equipment in Tier 1, 2 or 3 counties and $100 million on the same in Tier 4 or 5 counties.

Expanding sales tax exemptions: North Carolina aircraft repair industries will be more competitive in efforts to secure contracts in the state by removing the cost of sales tax on parts, which most other states do not impose. It also makes the state more attractive to repair facilities of major airlines.

Increasing the Qualified Business Investment Tax Credit: Designed to encourage entrepreneurial investments in cutting-edge small businesses, this tax credit was increased from a total of $6 million annually to $7 million and the sunset was extended to Jan. 1, 2008.

Removing the wage test for IRBs: As one of the recommendations of the Joint Select Committee on Economic Growth and Development, legislation was passed that eliminates the wage test for manufacturers that want to use industrial revenue bonds. IRBs have federal guidelines, and North Carolina was one of only a handful of states that added any state regulations to the requirements. Eliminating this will allow more businesses to take advantage of these lower-rate loans.

In addition to those major legislative initiatives, the General Assembly also:

Changed the way the state ranks counties under the Bill Lee Act. Instead of using three-year averages for population growth, per capita income and unemployment, the tiers will now be calculated annually based on the past year’s numbers of the same three criteria.

Enacted a renewal fuels tax credit. Legislation was passed that offers tax credits to companies processing or distributing renewable fuels, including biodiesel and ethanol.

Expanded the Business ServiCenter. Ten positions were added to the Department of Commerce to expand the program statewide

Supported Internet initiatives: The budget gave Commerce $375,000 in non-recurring funds to begin the development of this comprehensive Internet-based system that will house databases associated with economic development and recruitment.

Increased tourism marketing: The Division of Tourism, Film and Sports Development got $850,000 in non-recurring dollars to be used for additional marketing efforts for tourism.

More money for regional marketing: The seven regional economic development partnerships will split $1.75 million in non-recurring funds to support vision and strategic planning and $200,000 for the proposed Advanced Vehicle Research Center in the Northeast.

More money for biotech. The NC Biotechnology Center received $3.2 million in recurring and $1.8 million in non-recurring funds to support the state’s new biotechnology strategic plan.

Improved ports facilities: The State Ports Authority received $2 million to replace the crane rail in Wilmington and $2 million for development and improvements to Radio Island in Carteret County.

NC Motorsports Testing and Research Complex: $4 million in non-recurring funds for planning and design of this complex to be operated in conjunction with UNC-Charlotte.

Global TransPark: $1.6 million in non-recurring funds to maintain current services while a business plan to provide private support is started.

Commercializing Commerce: A special provision in the state budget allows the department to acquire land options for mega-sites and to hire consultants to assist with proposals and other work associated with large industrial projects. — Steve Tuttle

Grants