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The Voice of
Business, Industry & the Professions Since 1942 |
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Frank Clifton Jr. was concerned. It was February 1996 and he'd just arrived as Cabarrus County manager. Even in the winter he saw growth that was astounding as he drove through endless new neighborhoods like Copperfield and Sunset Park. He learned that the boom placed Cabarrus in the same dilemma as other Tar Heel counties that border metro areas. Each day, 12,000 residents left Cabarrus to work elsewhere, and demand for schools and other services created by homes, except those valued at $250,000 and up, cost the county about $150 a year each more than their taxes covered. To correct that, Clifton set about creating an economic incentive plan that has now been copied by 25 other towns and counties. “I might be the Lone Ranger,” says Maurice Ewing, president of the Cabarrus Economic Development Corp. and chief industry hunter, “but Frank Clifton gets credit for creating the silver bullet. His plan is constitutional, gives existing businesses as clean a shot as newcomers, and everybody pays their taxes.” Successes? Helping land a $300 million Corning Inc. plant that was also considering eastern Tennessee, and recently, the $240 million Concord Mills mall that was considering several other interstate sites in the Charlotte area, including South Carolina. Clifton explains the plan. “We structured it to provide grants, not rebates, which the state doesn't allow,” he says. “We also tied it to investment rather than job creation. Too often, business conditions change or companies simply don't follow through on jobs. Also, we have no control over where people live. We could create 500 jobs only to find half live in Mecklenburg County.” First, says Clifton, “We made sure we never lose on the existing tax base.” If a $25 million venture will be built on a $1 million tract of land, only $24 million is eligible for incentives. Then, incentives are spread over five years, at different rates: A company that invests $5 million is eligible for grants equaling 75 percent of its tax base; at $20 million, the grant rises to 80 percent; at $100 million, it reaches the ceiling of 85 percent. “When a plant is up and running, we agree on the assessed valuation with the company, and it pays its taxes when normally due,” explains Clifton. “Then, each year, we give them a grant of up to 85 percent of those taxes, until the end of the fifth year, when the grants end.” In the case of a $300 million plant, the company pays full tax value on the site itself, plus, in effect, 15 percent of its normal tax bill each year. “That would be the same as getting a $45 million plant on the books without incentives,” says Clifton. “Then in the sixth year, we get 100 percent.” The county is still looking for balance, he adds, noting that a disproportionate 60 percent of its tax base remains residential. But in 1998, for the first time, nonresidential construction exceeded homebuilding. Now, says Ewing, the county's recruiting focuses on “relatively small, technology- and engineering-driven companies,” that bring in high-priced equipment and heavy investment, like Corning, more so than simply large numbers of jobs. The view from the outside? Union County is one of 25 that have adopted the plan. “Our success ratio has increased dramatically,” says Lee Correll, director of the Union County Economic Development Commission. — Ed Martin
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