Governor and Republicans Fail to Block Bill

Job Maintenance and Capital Development Fund

September 15, 2007

CUMBERLAND COUNTY NC NEWS -- Unfortunately, Governor Mike Easley and Republican members of the general assembly failed to block a bill that will allow the Goodyear Tire and Rubber Company to receive as much as $40 million in payments from the new North Carolina economic development incentive. The future grantee company, Goodyear, will be required to invest a minimum of $200 million in their Fayetteville plant in Cumberland County to receive the grant funds.

The Governor reconvened an extra session of the North Carolina General Assembly to reconsider legislation that he vetoed August 30, 2007, House bill 1761: "An act to create the job maintenance and capital development fund." The purpose of the bill was to encourage economic development and promote the maintenance of high quality jobs in existing major business and industry in distressed tier 1 counties. The extra session was scheduled for legislators to vote on whether or not to override the Governor's veto. Instead, Democrats spent Monday behind closed doors negotiating a resolve within their leadership to avoid the embarrassment of having either the veto sustained or the veto overridden.

Meanwhile, Governor Easley convened a separate special session for the purpose of considering a new incentive bill. Democrats introduced that bill, SL 2007-552 Extra Session House Bill 4, also titled the "Job Maintenance and Capital Development Fund," Tuesday morning. The new bill will give up to $60 million in tax dollars to certain large manufacturers, but does not resolve problems with the original bill addressed by Governor Easley in his veto message. House Bill 4, rather than being more restrictive with grants of tax dollars, the bill actually expands grant eligibility and spends more tax dollars. In addition, Extra Session House Bill 4, does not address the governor's issues of accountability to counties and state. To his credit, the Governor did manage to have a wage standard clause added to Extra Session House Bill 4, which requires businesses to pay wages 140% of the county average wage:

"Wage Standard.  A business is eligible for consideration for a grant under this section only if the business satisfies a wage standard at the project that is the subject of the agreement. A business satisfies the wage standard if it pays an average weekly wage that is at least equal to one hundred forty percent (140%) of the average wage for all insured private employers in the county. The Department of Commerce shall annually publish the wage standard for each county. In making the wage calculation, the business shall include any jobs that were filled for at least 1,600 hours during the calendar year, regardless of whether the jobs are full-time positions or equivalent full-time contract positions. Each year that a grant agreement is in effect, the business shall provide the Department a certification that the business continues to satisfy the wage standard. If a business fails to satisfy the wage standard for a year, the business is not eligible for a grant payment for that year."

However, the new bill does not address accountability to counties and state, as stated in the governor's veto message:

"House Bill 1761 would set a dangerous precedent for North Carolina's economic development policy and is not fair to her taxpayers. It calls for the state to give up to $40 million in cash to an existing company in one county with little or no regard for how much the company actually pays in state and local taxes, what wages it pays now or in the future, or whether it lays off nearly 25% of its workforce. Never in the history of the state has anyone given a company up to $40 million and allowed them to lay off hundreds of workers. We are proud of the employer and its hard working employees that House bill 1761 was designed to help. But this bill does not protect those employees or the state of North Carolina. Therefore, I veto the bill."

SL 2007-552 Extra Session House Bill 4 passed in the Senate along party lines, with Republicans opposed and Democrats in favor. Senate Republicans cited the hurried nature of the specially called session as a poor forum for a reasoned discussion of such an important policy issue and the expanded nature of the incentives being approved as reasons for voting against the bill. Republicans also contended that lowering taxes, providing adequate transportation and other infrastructure, improving schools, and creating an overall favorable business climate should be the focus of economic development efforts rather than expansion of expensive tax incentive and corporate grant programs.

Republicans offered as a substitute for House Bill 4 an amendment to reduce tax rates for all North Carolina corporations. North Carolina currently has the highest corporate tax rate in the Southeast. Democrat Lieutenant Governor Beverly Perdue ruled that an amendment for such overall tax reductions was "not germane" to a bill relating to job maintenance and capital development and no vote was allowed on the proposal.

Senate Republican Leader Phil Berger (Rep) of Rockingham County made the following statement:

"This new bill is not really much different from the vetoed bill except that now we are looking at spending $60 million rather than $40 million and now there are two intended beneficiaries in Goodyear and Bridgestone. One of the amazing things about this is that Bridgestone asked for this deal several years ago and was turned down; now they will be eligible for grants of tax dollars for expenditures they made over a year ago and were planning to make anyway. Draw your own conclusions, but this sure looks like a case of a large corporation being able to make state leaders open tax coffers and receive payment because another large corporation received such a payment. If that is the case, where will it end? You can be assured that there will be others in line with similar accounts of a need to modernize equipment or facilities, similar suggestions that job cuts will occur if help is not forthcoming and similar pleas from community leaders about the negative impact on their area if the corporation were to leave. How can the state continue down this path without discriminating against most employers or without going broke? It can't, and we should not have taken this step. There is a better way; that better way involves lowering taxes, improving our schools, treating all North Carolina businesses fairly, and providing for adequate transportation and other infrastructure.

"Being here for the last two days, it is difficult to understand the Democrats' priorities. Our transportation and other infrastructures are deteriorating and in desperate need of attention. Yet Democrats have done nothing to address that problem which affects all North Carolinians. In calling this special session for corporate incentives and passing this bill, Democrats continue to disregard urgent transportation and infrastructure needs and have chose instead to give away $60 million. The people of North Carolina deserve better than this."

The Governor, choosing the high road, released the following statement not even worth mentioning:

''This tool is a fantastic statement by the General Assembly that North Carolina is focused on the future and determined that our citizens will compete and win in the new world economy. This legislation will create cutting edge economic competitiveness in North Carolina, unlike any state in America. It requires huge investments -- each more than $200 million -- by companies that accept the challenge to build world-class facilities here that are the most technologically advanced on the globe. The bill ensures workers' job security, wages, benefits and advanced training as part of the incentives. It is performance based with clear criteria for earning any incentive.''

In conclusion, Senator Fred Smith, of Johnston and Wayne counties, made the statement, which best describes the overall end of this legislative battle over North Carolina economic development incentives:

"These incentives have gotten out of hand. Every business owner in North Carolina is entitled to compete on a level playing field."