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BY ROB BENCINI

Over the last six weeks, we have read about Guilford County commissioners Vice Chairman Steve Arnold’s new incentive policy, which purportedly will offer assistance to small businesses by rebating their taxes on new and expanded facilities. It has been hailed as novel and potentially trendsetting. Having been Guilford County’s first and only economic development director; having handled more than 20 incentive projects since 2002; having written the policy that is currently in place; and being one of only 60 Certified Economic Developers in North Carolina, I am in a unique position to provide input on this proposal.

First, incentives may be granted to companies by local cities and counties only under the authorization the state gives to these jurisdictions under N.C. General Statute 158-7.1. The statute specifies for what purpose and the methodology by which incentive grants may be approved.

This law has been challenged twice in court and has passed judicial muster. It is the legal baseline for cities and counties to grant incentives. All incentive consideration must undergo a public hearing with at least 10 days advertised notice.

Arnold’s proposal does not pass this test of legality. More alarmingly, the proposal violates the basic tenet of taxation in North Carolina: Except under very precise limitations (like returning tax overpayments), rebating taxes in North Carolina is illegal.  Specifically, N.C. General Statute 105380 calls for “No taxes to be released, refunded, or compromised.”

It adds: “The governing body of a taxing unit is prohibited from releasing, refunding, or compromising all or any portion of the taxes levied against any property within its jurisdiction. …”

But there is a remedy. The law says: “Tax that has been released, refunded, or compromised in violation of this section may be recovered from any member or members of the governing body who voted for the release, refund, or compromise by civil action instituted by any resident of the taxing unit.”

So the commissioners who vote to rebate or refund these taxes may get the chance to pay the county back for their largesse.

Jonathan Morgan of the UNC School of Government and former N.C. Supreme Court Justice Robert Orr concur that the proposal raises serious legal questions.

Novel policy? Trying something that hasn’t been tried before?

Sure, no one has tried this methodology — because it’s simply illegal. One or 11 Guilford County commissioners supporting the proposed policy just doesn’t matter and makes it no more legal. Yet, Arnold persists in this quixotic quest to arbitrarily reduce taxes for developers.

Developers, you might ask? Yes, precisely.

Before I go on, please understand that the development community did not put this proposal forward; it is a creature of the creative mind of Steve Arnold. Arnold has been a developer for years, so he knows exactly who will benefit from his proposal.

This proposed policy has been promoted as a life-giving benefit to mom-and-pop stores and other small businesses to help them start or expand their businesses. This absurd depiction of what would happen if this illegal policy is put in place is way out of touch with reality.

The fact is, this policy would allow huge tax breaks to developers — including those from outside the region and out-of-state developers and builders — for the next Walmart, or CVS drugstore, or the next strip center hosting a tanning salon, nail painting and another Subway restaurant.

The sad truth is that this will almost certainly not help the small business itself. It will provide assistance to the owner/developer/builder (i.e., “taxpayer”) of the property, not the operator, except in that rare circumstance they are one in the same.

Local “gentlemen’s club” expanding?  Sure. Help the property owner and upfitter of the Alexander Devereaux property on High Point Road? Absolutely.

These are the people who would get the bulk of the money from the policy: landowner, developer and builder — not the mom-and-pop storefront printer, florist or day care operator whom the proposal purports to assist.  First illegal, now poorly developed and misguided.

Arnold knows that rebating taxes is illegal. Guilford County staff told him that repeatedly. The previous staff kept the commissioners out of this type of trouble, created the most aggressive local high-wage economic development policy in North Carolina — adopted in 2008 by the commissioners, and saving county taxpayers $1 million in incentive grant payments from the three projects approved in 2008 alone.

 Now there is no one minding the store from the staff perspective. This is but one outcome of all the staff cuts in the name of “efficiency.”

Not six months from eliminating the economic development staff, the commissioners are dabbling in illegal and poorly thought-through economic development activity.

This proposed policy needs to be quickly and thoroughly dismissed.

Rob Bencini, the former county economic developer, is a consultant in economic development policy. His job was eliminated this year in a round of county budget cuts.