from Bloomberg Businessweek

The Associated Press June 10, 2010, 8:19AM ET
NC House panel clears wide incentives bill

By GARY D. ROBERTSON
Story Tools

RALEIGH, N.C.

Boosters of an economic development package that cleared a House committee Wednesday said it will help bring good jobs to the state and perk up the ailing tax base -- even though a university study argues a portion of the tax breaks that woud be extended are no longer effective.

Part of the bill is similar to a measure designed to encourage computer data centers, an energy turbine manufacturer and a paper plant to expand in the state. Those expanded enterprises alone could generate at least 1,200 jobs and more than $2 billion in capital investment, deputy state commerce secretary Dale Carroll said.

The bill, if approved, could create $93 million in tax breaks annually by 2015, according to an analysis performed by legislative staff. But the measure should generate more tax revenues than it gives out to qualifying companies because the new jobs will generate income taxes and sales taxes from the items the workers purchase, said Rep. Bill Owens, one of the bill's primary sponsors.

"It's all about jobs," said Owens, D-Pasquotank, adding that tax revenues won't rebound in the slow recovery "unless we have people paying into the system." Companies won't receive tax credits, cash payments or sales tax refunds unless they create jobs or make investments, Owens added.

But the measure also would extend through 2013 some business tax credits first approved in the 1990s that give breaks to companies for each job they created in a handful of industries, and if they buy machinery.

The North Carolina Center for Competitive Economies, an organization linked to the UNC-Chapel Hill business school, presented a report to lawmakers in early 2009 arguing that incentives previously under the state's William S. Lee Act should be allowed to expire. The center found the credits worked well in the 1990s by giving firms a slightly higher employment growth rate than those that didn't get them. But the gap narrowed over time. The incentives were modified in 2006.

Rep. Pryor Gibson, D-Anson, another primary bill sponsor, said these per-job and machinery credits are still a key bargaining chip in trying to recruit companies deciding where to build.

"If we don't at least compete with the states that are attracting these industries, then we're not going to attract them," Gibson said. "Are they effective? (Companies) certainly take the money when they say, 'what are you going to do to attract us?'"

The measure, which now goes to the House Finance Committee, would also:

-- expand tax breaks for film productions that shoot in North Carolina and extend credits for renewable fuel facilities and the sales tax refund for certain fuel purchases by airlines and stock car racing teams.

-- create a new production tax credit of up to $7.5 million for companies that develop in North Carolina computer simulation programs for military training, education and entertainment.

-- give preferential tax treatment to companies that build inside an "Eco-Industrial Park," a business park whose tenants don't pollute, with state grants and tax breaks designed to promote green businesses in North Carolina.