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RALEIGH — Shortly after the November 2004 elections, the word went out to lawmakers that they were needed back in Raleigh. North Carolina was competing to land a Dell manufacturer and all shoulders were needed in the wheel of state government.

Like FedEx before it and Google after, lawmakers were about to create a special tax break designed to land the kind of company experts say would spur job creation and growth for decades.

So nearly five years later, does the implosion of this high-profile deal make state leaders any more gun-shy about using specially crafted incentives to land one company?

“I have yet to talk to a company...that doesn’t ask me sometime during the initial conversation what I’m going to do as the governor of the state to meet the incentive package they’ve been offered (elsewhere),” said Gov. Bev Perdue. With other states willing to offer up incentives deals, North Carolina can’t “unilaterally disarm,” she said.

“So if we want to lower the unemployment rate and continue to grow North Carolina’s 21st-century economy, we’re going to continue to invest in incentives.”

Perdue pointed to other Triad companies such as HondaJet that were lured to the state with incentives deals and are thriving. It’s unfair, she said, to tar all incentives deals with failure just because Dell is closing.

That said, Perdue added, the state needs to broaden its economic development efforts.

“We’ve got to do a whole lot more than we’ve traditionally done to keep the jobs that we have here,” Perdue said. “And so we then also need to dig down and look at small business development and small business nurturing. I don’t believe that’s part of the incentives equation, but I do know ... there are many things the state as a whole can do in terms of tax policy and worker enhancements to help them compete effectively.”

Even lawmakers who criticize the Dell deal and say there should be changes in incentives policies don’t advocate abandoning the recruitment game entirely.

“I don’t know that there’s a blanket answer that you should forgo any kind of government interest and involvement in economic development,” said Sen. Phil Berger, an Eden Republican who voted for the Dell package but has been critical of many incentives deals. “I do think there are some questions about whether this whole structure of economic development ... is worth the expenditure of tax dollars that it costs.”

The state, Berger said, would be better served by doing things that helped all businesses, such as lowering taxes or streamlining regulations.

And Berger said lawmakers may want to rethink passing laws at the behest of one particular company or another.

“The fact that somebody’s big enough to be able to hire a team of lobbyists to get a bill pushed through the General Assembly so they can have a special deal that other folks can’t get, that ought to be of real concern,” Berger said.
Others said lawmakers should be more careful in the deals they make.

“The Dell case indicates the need for higher standards set by the General Assembly,” said Rep. Paul Luebke. Like the governor and House and Senate leaders he is a Democrat, but he has frequently voted against incentives deals, including the Dell package.

“For example, Dell was not required to meet a wage standard while it received multimillion-dollar incentives,” Luebke said.
Companies, Luebke said, should be required to pay salaries at a minimum level — such as the prevailing industrial wage in an area — if they receive government subsidies. Any deal should be structured, he said, so that a company can’t avoid paying corporate income tax entirely.

As for Dell, Luebke said, “a strict interpretation of the clawbacks is called for.”

“Clawbacks” allow the government to get money back from a company if they don’t live up to their incentives agreement.

“We made it very clear to them, and they already understood it quite frankly, that every red cent of incentives money had to come back to North Carolina,” Perdue said of Dell.

That might not be possible.

The lion’s share of the $242 million state incentives package for Dell was in the form of tax credits. Only $106,479 of those credits were claimed. That money should come back to the state, Perdue and other officials said.

The state paid out another $8.4 million. About $1.5 million of that was in payments from the state’s Job Development and Investment Grant program and will be recouped, said a Commerce Department official.

Another $3.6 million in work force training funds from the Community College System and Commerce Department’s Workforce Division won’t come back to the state.

Those funds, a spokeswoman said, have “gone toward strengthening worker skills and abilities — an investment that will continue to benefit individuals and employers.”

Dell has been “very good in a bad situation,” said Commerce Secretary Keith Crisco.

Like the governor, he said the state needed to do more to grow and retain businesses. However, that doesn’t mean North Carolina will turn its back on major companies like Dell that might want to relocate here.

“We’re trying to do all of the above,” he said. “If there’s a company that’s going to relocate ... and it’s an opportunity, we should be there talking to them. If they’re going to move and bring jobs, they might as well come to North Carolina and employ people here.”

Contact Mark Binker at (919) 832-5549 or mark.binker@news-record.com