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Senate bill could steer more jobs this way. S.B. 493 tackles state's uneven economic growth by offering new incentives to companies that move both their headquarters and production to N.C.

Senate bill could steer more jobs this way. S.B. 493 tackles state's uneven economic growth by offering new incentives to companies that move both their headquarters and production to N.C.

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Corporations considering a headquarters move to Charlotte or the Triangle would be offered an additional incentive — potentially worth millions of dollars — to spread the economic benefits to less vibrant areas of the state under a bill that cleared the N.C. Senate last week.

Republican-sponsored Senate Bill 493 modifies the state’s Job Development Investment Grant program — the primary economic-recruitment tool for corporations being recruited by other states.

The co-primary sponsors include Sens. David Craven Jr. of Randolph County and Vickie Sawyer of Yadkin County. The Senate voted 49-0 for the bill.

An economic reality for much of this century — oftentimes to the frustration of Triad civic and elected officials — has been that most corporations contemplating a headquarters move into North Carolina look only at the state’s two primary economic engines in Wake and Mecklenburg counties.

With that in mind, bill sponsors are offering up to an annual 20% bonus in JDIG funding as an enticement for those corporations to also bring production, manufacturing and supply-chain operations to the state — but place them in lower-growth counties, including Forsyth and Guilford.

Businesses controlled or under common control by the corporation qualify for the non-corporate operations.

State law requires N.C. Commerce Department officials to annually rank the economic health of all 100 counties: the 20 most prosperous counties are Tier 3; the next 40 counties are Tier 2; and the 40 most distressed counties are Tier 1.

In the 14-county region of the Triad and Northwest North Carolina, only Watauga County was ranked in the most prosperous category for 2021.

Forsyth and Guilford counties are both Tier 2, as are Alamance, Alleghany, Ashe, Davidson, Davie, Stokes, Surry and Yadkin. Randolph, Rockingham and Wilkes are ranked Tier 1.

This is the fourth time Forsyth has not been a Tier 3 county since the rankings began in 2007. Guilford is a Tier 2 county for the fifth consecutive year.

For Tier 1 counties, the state currently provides $3 for every $1 in local economic financing. Tier 2 counties get $2 for every $1 provided locally, and Tier 3 counties continue to get a $1 for $1 match.

Companies adding jobs in a Tier 2 county are eligible for a tax credit of $5,000 for each job, while in Tier 3 counties companies are eligible for just a $750 tax credit for each job.

To qualify for incentives under S.B. 493, corporations would be required to place at least 66% of the overall jobs established by their re-location project into a Tier 1 or Tier 2 county.

“North Carolina’s regional assets and ease of transportation make it an ideal state for multi-location projects, if that is what a company is seeking,” said Mark Owens, president and chief executive of Greater Winston-Salem Inc.

“Connecting projects in multiple markets also increases job opportunities across the state.

“The more we can work together to be competitive, the better,” Owens said.

Tier system

Tier designations also serve to determine eligibility for Commerce grant programs that include building reuse, water and sewer infrastructure, and the downtown revitalization Main Street program.

Tier rankings are based primarily on an assessment of each county’s unemployment rate, median household income, population growth and assessed property valuation per capita. The Republican-controlled legislature eliminated in 2018 considering any additional “adjustment factors” for tier rankings.

The adjusted valuation per capita on vacation properties is a major reason why some coastal and mountain counties have a higher ranking than their neighbors.

“The Tier 2 designation is generally reflective of the entire Triad region, which has been under-performing relative to the other major population centers of the Research Triangle and Charlotte,” said Zagros Madjd-Sadjadi, an economics professor at Winston-Salem State University.

Michael Walden, an economics professor at N.C. State University, said research shows the tier designations are important.

“But they are trumped by such basic factors as education and training of the workforce, the transportation network, land and construction costs, and the location of supportive cluster firms,” Walden said.

Potential example

A recently announced project affecting Charlotte and Clemmons could have qualified for the JDIG incentive bonus.

Hayward Pool Products, the largest private employer in Clemmons, said March 29 that it will shift some corporate operational jobs to the village as part of a relocation initiative by its parent company.

Hayward Holdings Inc., a publicly traded company since March 12, said March 29 it is moving its corporate headquarters to Charlotte from Berkeley Heights, N.J. The company has 90 corporate jobs altogether.

The company is a global designer, manufacturer and marketer of pool equipment and associated automation systems. The plan is to begin the relocation initiative this summer and to be completed within 12 to 15 months.

The Clemmons operations will gain supply-chain, quality-assurance and customer-service corporate jobs, according to Monty Hagler, who spoke on behalf of Hayward. The company did not disclose the number of jobs involved.

Meanwhile, Charlotte will gain the parent company’s senior leadership team, corporate human resources, U.S. sales leadership, corporate finance and other strategic functions.

Hayward Pool Products already has 921 employees — 747 full time and 174 part time — in its Clemmons production facility at One Hayward Industrial Drive, according to Greater Winston-Salem Inc. That’s up about 170 over the past year and up 370 over the past 11 years.

It ranks 13th among Forsyth County’s largest private employers.

The company’s sprawling research-and-development, manufacturing, distribution and warehouse operations in Clemmons occupy 700,000 square feet. Nearly all of its pool products are made at the plant.

The company said it “evaluated multiple relocation sites before determining North Carolina best fit the interests of the company.”

“This is an important strategic next step for Hayward to create greater synergies and cross-functional collaboration to improve decision-making, cycle time and customer service,” chief executive Kevin Holleran said in a statement.

“It will also result in long-term cost savings that will be redeployed back into the business, put us closer to our largest production facility, and create easier access to connect with our customers, distributors and channel partners.”

Analyst response

S.B. 493 has drawn mixed responses from economists and economic development recruiters.

Some question whether the up-to-20% incentive bonus is overkill.

Others say it could be make a difference for a corporation wanting the benefits of a Charlotte or Raleigh address while keeping its other operations nearby.

“The bill, focused on multi-location projects, is a great example of lawmakers being in sync with current and emerging corporate site-selection trends,” said John H. Boyd, a national site-selection expert with The Boyd Co. of New Jersey.

“Legislation rarely can reverse prevailing corporate location and investment trends, but they can work with them and speed up the process,” Boyd said.

Boyd said a company’s first entrance into a market often is with a distribution center or a manufacturing facility. He said Georgia and South Carolina have had success attracting corporate headquarters with that initial recruitment tactic.

“Landing a regional office or even a headquarters becomes much more likely after the company has a positive experience and relationships in a region,” Boyd said.

“Since more and more projects are being done in-house today, the ability for a company to be presented with grants for multiple locations can more quickly facilitate the migration of other parts of the company.”

Madjd-Sadjadi said he is not a fan of the N.C. Commerce Department and legislature using large-scale incentive packages to recruit corporations from other states.

“The gains to one state are typically a loss to the other state, and the payments come from taxpayers including competing firms that were in the state already,” Madjd-Sadjadi said.

Bad policy?

Mitch Kokai, senior policy analyst with libertarian think tank John Locke Foundation, also frowns on the use of millions of dollars in incentives to lure corporate projects.

“It’s possible that this legislation has been fashioned to deal with a particular corporate recruitment project,” Kokai said.

“But it’s just as likely that the corporate recruiters who drive this type of legislation have told lawmakers that these changes would help them generally.

“If they can convince a state’s recruiters that another state is likely to give them a better deal, the recruiters will seek new ways to ‘win’ these high-profile projects,” Kokai said.

Kokai believes that “targeted tax incentives embodied in JDIG represent bad public policy.”

“Lawmakers are much better off pursuing across-the-board tax rate cuts ... or they could cut the corporate income tax rate again.”

“That action would help more businesses now operating in North Carolina — along with those considering moving here — and not just the companies favored by elected officials and government bureaucrats.”

Tony Plath, a retired finance professor at UNC-Charlotte, said targeted financial incentives, tied to measurable business performance objectives, can be a successful economic-recruitment tactic.

“Especially when the type of growth we’re able to attract has the potential to be transformative for the North Carolina economy,” Plath said.

Plath said he is leery of using the incentive bonus “just to buy a few new jobs that would likely move here anyway.”

Plath also said the incentive bonus bill may not be necessary “when our current state economy exhibits a surplus of open positions that are going unfilled because they are too few qualified workers who are willing and able to fill these jobs.”

Plath said North Carolina’s overall favorable economic climate should be attractive enough for most companies considering a headquarters relocation.

He cited “the favorable relative state tax rates, educational infrastructure, government quality and physical infrastructure that North Carolinians currently enjoy.”

“I frequently see corporate relocations moving from New York and New Jersey to North Carolina,” Plath said.

“But, I rarely hear of any local North Carolina-domiciled corporations picking up stakes and heading for those states.”

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@rcraverWSJ

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