COLUMN: A Defense of Economic Incentive Grants | Govt. and politics
By Blake Kiger Cabarrus County Commissioner
Ely Lily. Kroger. Red bull. Recently, these familiar business names have been making headlines in local newspapers. Each received an economic development investment from the Cabarrus County Board of Commissioners. Many local businesses have them too, but these big names are the ones you’ve heard of.
Our county has announced more than $3.5 billion in capital projects since 2014. What’s important in 2014? This year, under another Board of Commissioners, the Charlotte Business Journal had a headline that read, “Cabarrus County is closed for business” and the year a newly elected Board of Commissioners began proactively promoting development economic. Since joining the Board of Trustees in 2017, I have happily supported grantmaking that encourages much-needed progress in our region.
All alone in ‘Droits-ville’
Theoretically, I don’t think it’s the local government’s job to provide such investments. This might surprise some readers. But in a purely capitalist market economy, I would expect every business to compete on the merits of its core business, delivering consumer products or services in the most efficient way, regardless of the price the market will bear. However, that is not how the world we live in works. States, counties and municipalities all compete for companies that offer job creation and expansion to help create a diverse employment base. This expansion contributes to increase the tax base of the county of Cabarrus.
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In fact, economic development incentive investments are a necessary part of how businesses grow and how a county council conducts business in the best interest of its constituents. These investments are neither illegal nor immoral. If you disagree, I respect that. It is obviously your right. But I encourage you to consider that there are many others in our community who support development incentives and understand the competitive nature of attracting well-paying jobs. If you don’t want to participate for any reason, and stand aside while everyone participates, you are “all alone in Rights-ville.” You may be right, theoretically. However, this does not make it the best approach for Cabarrus County.
To illustrate what I mean, let’s say college football is big business. And each university builds a football team made up of ninety players drawn from their student body. They will face other schools that have their own ninety players. So here’s the question: should your school offer scholarships to attract better football players to field a more competitive team? Other schools will, but you don’t have to. Your team, however, will play against these top athletes. Wouldn’t it be beneficial for your school and sports program to field a winning team?
Some schools don’t. The Ivy League does not offer athletic scholarships. And do you know the last time an Ivy League team won a football championship? Yale, in 1927 (NCAA.com). A hundred years ago, teams could compete without offering financial incentives to attract higher caliber players. Today, Yale couldn’t have touched the results of the University of Georgia’s 2021 national championship program. This reality is neither illegal nor immoral. That’s just the nature of modern college sports.
How do corporate incentive offers work? The Economic Development Corporation (EDC), overseen by the Board of Commissioners and municipalities, negotiates with companies that submit expansion plans. For obvious reasons, code names are used, so the BOC does not know the specific company being examined. During the grant negotiation phase, EDC is bound by non-disclosure agreements.
Negotiations take time and many back and forths: companies have many suitors; they ask EDC for things we are not willing to do; we’re offering what we think are our best terms and waiting to see if we have a deal. If we do, a public hearing is held before the Board can approve the project. During the term of each investment, the awarded company pays full annual property taxes, after which the county tax department conducts a thorough audit. If it is determined that the negotiated conditions have been met for the current year, then only the corresponding investment or a percentage of the property taxes paid will be returned to the business.
For example, in an 85% incentive agreement, 85% of the company’s taxes would be refunded. This means that during the incentive period, the county would receive 15% of these taxes annually, revenue that we would not otherwise have seen. Then, after the term of a typical three to five year agreement, Cabarrus would withdraw 100% of the company’s annual tax revenue, as long as he remained a taxpayer in the county. In the short term, some ground is ceded in order to secure a deal that earns the county a significant increase in tax revenue in the long run. Later is always longer.
Currently, the Board of Commissioners has four economic development-focused members whose primary goals are to provide incentives only to businesses whose average salary would be above the county’s current salary (±$43,000/year). In the case of Elly Lilly, the average salary is even higher than the county median income ($76,000/year versus $67,328/year). Where possible, we also favor deals with shorter incentive periods. We do NOT promote the provision of any type of upfront funding or partnership. We are not in the business of development. We were asked and we refused. We have also declined several distribution centers.
Would these incentivized companies still come to our county? We are regularly told during negotiations that without an incentive investment in economic development, the company will go elsewhere. Would you pay tuition to play football at a university when you could get a scholarship elsewhere?
I’ve also heard that voters are concerned about companies moving into our county, taking the money, and then leaving once the incentive period ends. I don’t understand how a company investing hundreds of millions of dollars in construction, real estate, and salaries, while receiving a short-term subsidy given only AFTER the annual audits are complete, could “take the money and s ‘escape”. These companies make long-term investments, just like our county.
We live in a large, prosperous region. Ultimately, economic development incentive investments are an exciting way to attract strong employers who will pay taxes and provide better paying jobs so Cabarrus County can continue to thrive beyond being a community of commuters to Charlotte. NOT competing for these expansion opportunities would be a costly gamble on our future and our quality of life. It’s not a bet I’m willing to take!
In conclusion, let me give you some details about just one of the grants awarded, Elly Lilly:
Total annual economic impact $850 million (does not include construction)
Construction impact $730 million per year (Estimated construction schedule of 5 years)
Total grant cost $45.5 million
Estimated useful life of the plant – 50 years
Blake Kiger is vice-chairman of the Cabarrus County Board of Commissioners and has been a member since 2017.