Red Clay Citizen

More Corporate Welfare on the Horizon?

There will be another vote today on SB 2075 - a bill that will boost the amount of money the Commerce Department can award to companies via the Job Development Investment Grant (JDIG) program. If passed, the bill would expand this corporate welfare scheme by an additional $120 million over the next twelve years.

The General Assembly must have very short memories. Don't they remember the public outcry after last year's Goodyear/Firestone boondoggle? The public has had enough of corporate handouts. Civitas polling data shows that an overwhelming 80% of North Carolina voters said they want NC lawmakers to end the "practice of giving big corporations cash payments taken from the taxes paid by small businesses and average taxpayers." Nevermind the fact that such handouts have received heavy scorn from policy groups on both ends of the political spectrum.

Making matters worse is the fact that almost all of the JDIG grant money is awarded to counties deemed as the "most prosperous" in the state (labeled Tier 3 counties). A look at the Commerce Dep't's 2007 JDIG Annual Review reveals that 91% of JDIG grant money awarded to recipient companies was directed to wealthy Tier 3 counties. Why do we need to bribe companies to locate or expand in counties that are already economically vibrant? The JDIG program essentially equates to taxpayers from economically distressed parts of the state subsidizing further business development in the wealthiest parts of the state.

Concerned citizens fed up with corporate welfare should keep a close eye on how their local represenatatives vote on this bill.

UPDATE: SB 2075 was approved in the House late Wednesday by a vote of 94-19. See how your representative voted here.  The bill moves to the Senate for a vote today.

Speculation on Airlines on Speculation

Flying customers have been getting emails from airlines about "speculators" and the evils of trading in futures markets. They're sending around this nice little piece of astroturf: www.StopOilSpeculationNow.com.

Here's economist Russ Roberts' take:

Three thoughts. First, blaming speculators for high prices has always seemed to me like blaming the thermometer for how hot it is. Second, airlines speculate all the time on oil prices. I assume they hedge against future price increases. Notice that in this plea, they distinguish between paper speculators and "real" speculators as if that matters. Third, is it not strange that of all the policies that the airlines could advocate to bring down gas prices (more drilling, a change in environmental regulations, etc,) they choose this one?

The cynic in me says that the airlines must think it's good PR to look like they're fighting for lower prices and attacking speculators is about as riskless an approach you could choose.

This tack reflects real desperation on the part of the airlines. When one industry starts picking on another, that means they're preparing the way for government bailouts or some sort of favoritism. Maybe, like Russ says, they're awkwardly trying apologize to customers for prices by scapegoating traders. It sure seems weird to me. I don't think any intelligent person in the airline industry honestly believes futures traders are working some sort of Hogwarts wizardry on the fundamentals of the market. Of course, the activity of speculators means gas prices are less volatile than they would otherwise be, and that there will be jet fuel in two-three-or-five years. 

I wonder if there is some other motivation for such an aggressive and overtly political campaign to interfere in oil futures. Could there be something more going on?   
-Max Borders

Ethanol Fantasy Costing NC Jobs

TBJ reports that due to rising corn prices due to 1/3rd of the crop being used for ethanol, Sanderson Farms is putting on hold its plan to build a $126.5 million, 1,600 job poultry processing plant in Kinston.

So, let me get this straight... government by unfairly propping up the ethanol industry has cost Kinston 1,600 jobs so then we have to turn around and bribe a company with $150+ million in incentives to come here and hopefully create 1,000 different jobs.  Is that some kind of wacky government-interventionist version of creative destruction?

No Such Thing as Good Corporate Welfare

Brian's letter in the N&R:

"Kudos to the News & Record editorial staff for supporting greater transparency in how the state’s Commerce Department hands out corporate incentives (“Open incentives deals,” June 11). The editorial disappoints, however, when it claims that such transparency will prevent the Commerce Department from being “suckered into bidding too much to land a new company.”

That’s suggesting that there somehow is a “right” price taxpayers must pay to help government planners play favorites. One penny of tax dollars (or targeted tax breaks) is too much.
If a company needs specialized treatment from government, it indicates that: a) taxes in North Carolina are too high and should be lowered across the board on all businesses, or b) the company cannot operate profitably without government assistance.

Showering specific companies with handouts or tax breaks encourages a dangerously cozy relationship between business executives and politicians, while propping up otherwise unprofitable businesses diverts scarce resources and jobs away from entrepreneurs who could create real, sustainable economic growth. Greater transparency in government is always a good thing. In this case, however, it isn’t enough. State lawmakers need to put an end to the unfair practice of corporate welfare."

Privatizing Government

What does the Democratic-led US Senate do when its government run restaurants are operating at deficits each year and the food and service is "substandard"?

It agrees to privatize them.  Sen. Diane Feinstein comments:

"Candidly, I don't think the taxpayers should be subsidizing something that doesn't need to be. There are parts of government that can be run like a business and should be run like businesses."

In a letter to colleagues, Feinstein said that the Government Accountability Office found that "financially breaking even has not been the objective of the current management due to an expectation that the restaurants will operate at a deficit annually." (emphasis mine).

How many other government operations lack profit motive that would be better served through private enterprise?  I would bet quite a few if we started making a list.

Subsidizing Renewables and SB 3

Remember SB 3 from last year?  The bill that the power companies wrote that mandates NC generate 15% of its electricity from renewable resources in the next 10-12 years?

Well, now they are getting corporate welfare to meet the regulations.

Fibrowatt, an energy company that generates electricity using poultry droppings, picked Surry County as a site for a second planned power plant in North Carolina.

The Pennsylvania-based company is received $5.3 million in state and county incentives to build the plant at the site.

Hmm... so the power companies write a bill with mandates they know they can't meet, now turn around and get the taxpayers to subsidize the cost of producing the power.  And guess who is going to be paying higher rates for the power they generate?  Yep, you guessed it... all of us.

Why does the State Give This Company $3 mil/year?

Higher earnings boost Nucor stock.

Nucor Corp. has raised its earnings estimate for the current quarter by 20 cents per share to a range of $1.75 to $1.80 per share, sending the company's stock up sharply Thursday.

We taxpayers subsidize their profits to the tune of about $3 million a year... all in the name of "economic development."
Looks like they are developing just fine to me.  Can we have our money back now?

Green Corporate Welfare

Here's a bill by our dear economically challenged Janet Cowell (D-Wake) - yes, she's running for state treasurer [yikes] - to bribe companies/developers to be more energy efficient. With the rising costs of energy, isn’t there already an incentive for companies to do that? My colleague Brian Balfour asks: "Can the government reimburse me for a new air conditioner (an energy efficient one, of course)?"
-Max Borders

We Will NOT be Silenced!

During the successful bribing announcement today by Governor Easley that they FINALLY have a major non-state agency tenant at the Global TransPark, Easley said the Spirit agreement “silenced” critics of the TransPark.

Silenced?  HA!

We're just getting started, my friend.

You've only had to spend $80 million over the past 17 years and now $125 million in cash to bribe a company to locate there.  Congratulations.

Silenced? Hell, you've just given us more fodder and a louder megaphone to bash this ridiculous game of incentives.  And all you've done is point out what a failure the GTP has been.  Unfortunately it's cost us taxpayers over $100 million already.

Corny Joke from the Onion

Greedy African children.
-Max Borders

IBM: Pocketing Your Money

Gotta love the timing of the Triangle Business News when it hit my Google Reader today.

First message:  IBM wins NC incentive to add 600 Charlotte jobs.
Very next message:  IBM to boost dividend 25%. (and do a $12 billion stock repurchase).

So why exactly do they need $10 million of our tax dollars to add jobs they were already going to add in the first place?

Skybus & Corporate Welfare

Chris Hayes's and my Skybus article is now on the Web.
-Max Borders

Cone's Local Economy, Our Tax Dollars

Ed Cone writes of our piece in the N&R this weekend, criticizing the Triad's Skybus fiasco:

Thanks for the advice, fellas, your one-size-fits-all ideology is just so interesting and relevant to people in the Triad who are trying to cope with the realities of our own local economy.

If it's your "local economy," why was the N.C. Dept. of Commerce involved? And why, pray tell, does your local economy require my tax dollars?

There's nothing ideological at all about criticizing the PTI's, the counties, and the State's corporate whack-a-mole failure in practical terms. What's more, it is pretty petty and snarky to refer to us as a "propaganda mill." Yes, we have opinions. That's why the piece was on the editorial page.

(Maybe he should check out this on other towns who've failed at corporate welfare.)
-Max Borders

Skybus: What the...?

Piedmont Publius is, perhaps, as confused as we are at the rationale behind central planners like Henry Isaacson o'er there in the Triad. Here's Isaacson - quoted by the PP - opining about the market dynamics:

I want people in the Triad to understand that Allegiant is an altogether different airline than Skybus,” Isaacson said. “They’ve been around for awhile; they’ve been making money; they’re established. I think the only reason they were leaving us is that Skybus was sort of permeating the low-fare territory. They don’t compete at the point of origin with another low-fare carrier.”

Is this 20/20 hindsight or something Isaacson could have sussed beforehand? Seriously, a company that hasn't been around for awhile, isn't making money and isn't established in an industry plagued by multiple factors like unstable inputs (jet fuel)... Why are these bureaucrats throwing our cash at such poor investments? This attempt to pick winners and losers is just wacky. Isaacson, et al, couldn't possibly have had the prescience to predict what Allegiant called the "destablizing" factor of Skybus -- never mind that these subsidies contributed to the destabilization. Nor does 20/20 hindsight help matters once everything goes haywire.

Excuse me, Mr. Isaacson, I think I'd like to invest my own resources. I'm pretty sure Vanguard or I could do a heckuva lot better than you.
-Max Borders

Economic Incentives: Told Ya

Time to give up corporate welfare. Chris Hayes, I'm sure, hates to say he told ya so, but...
-Max Borders

RIP Skybus

Skybus announced Friday night that it was ending operations.

Loved this quote:  "Their business plan had no chance of survival," said Michael Boyd, the president of The Boyd Group Inc., an aviation-consulting company in Evergreen, Colo. "If oil prices were half where they were, it would have just prolonged the inevitable."

Oh, great.  Good thing us taxpayers only sank a few million dollars into a business model that had "no chance of survival."

We need to use the Skybus incentives debacle to change the secretive system of handing out taxpayer money:
1. More transparency on what deals are in the works so the public can have input
2. Have someone other than bureaucrats determine if a business has a viable business model and is worthy of investment by taxpayer dollars
3. Increased clawback provisions so government can get a seat at the table in bankruptcy court to get back the money we used to subsidize them.
4. Elect a governor (any of the 8 running) who will actively recruit business and not just show up for the ribbon cutting

or, my preference:

5. End the use of corporate welfare

Unfair Competition?

Can you imagine if you were an existing business in North Carolina and the State used your tax dollars to recruit and subsidize your direct competitor to steal customers from you, forcing you to cease operations in the State?  Well, that is exactly what has happened to Allegiant Air.

Many of you have followed the story of Skybus, a startup low-cost airline that was successfully recruited to expand its service and create a hub at the Piedmont Triad Airport (PTI) last year thanks to millions of dollars in handouts from the State, Guilford County and the PTI Airport Authority.

Well, while the state is pouring money into Skybus, word comes last week that existing discount airliner Allegiant Air, which was already operating out of PTI, will be ending all service from Greensboro on May 31.  Government, through its recruitment and subsidies of Skybus, gave it a distinct competitive advantage over an existing business.

So, the state in its infinite wisdom in distorting the market decided that Skybus is the "winner" and any competitor operating under normal market dynamics is the "loser."

But ultimately, the consumer is harmed.  Through government intervention consumers now have less competition and less choices of discount airlines to fly.  At a time when jet fuel prices are sending airfares through the roof, more competition, not less, is needed.

I feel bad for Allegiant Air, they were already trying to exist in a difficult market, but having government stack the deck against them and in favor of their direct competitor made continuing operation impossible.

It's time to end all incentives.  The choice is clear -- tax all businesses the same or not at all.

Skybus Cutting Flights

Skybus, the low-cost, no-frills airline that is set to receive nearly $10 million in state and local incentives, announced it is reducing its number of flights due to high oil prices.

You mean the $10 million we're giving you doesn't subsidize the cost of jet fuel enough?  Well, just plead poverty to the General Assembly and they'll be sure to write you a bigger check.  Who cares if your business model is fundamentally flawed.

So, Ethanol Creates Jobs, Huh?

Looks like the unintended consequences of governments - state and federal - trying to design the economy with ethanol mandates are finally biting us in the arse.

Pittsburg, Texas — The nation's largest chicken-processing company is closing its plant in Siler City and laying off more than 800 employees.

Pilgrim's Pride Corp. said Wednesday the closure of the Chatham County facility is a result of soaring feed-ingredient costs resulting from corn-based ethanol production.

Can we get these energy-independence-global-warming-alarmist regulators jobs mopping floors and frying fries at BK? (HT: Chris Hayes)
-Max Borders

NetJets - Hate to Say It, But...

NetJets staying in Columbus.

Let's rewind to January, when a very wise man wrote:

Well, that's all it seems North Carolina is in this equation.  We're the bargaining chip to make the steady boyfriend jealous.  NetJets knows that NC is good state to use -- given our proclivity to throw cash around (Dell, Google, Goodyear, etc.) and they know we're throwing mad cash at the aerospace industry (SkyBus, HondaJet, etc) so we're a good foil in this scenario.

NC just got played.  Hard.

Expect to see this more often.  Companies know we're suckers for ponying up big money, so they come and play footsie with us just to get some other state to up the ante.

Let's stop the state from being a party in legalized extortion and get out of the incentive game.

Economic Incentives: WWMS (What Would Mises Say?)

Mitch Kokai cites a great passage from Mises on economic incentives by government.
-Max Borders

Shall we Laugh or Cry?

Sigh.
-Max Borders

Corporate Welfare for Cary

Apparently, the Triangle is struggling for jobs.  Or is at least struggling more than the more rural parts of the state.  Why else would the state be giving $5.6 million to lure 300 jobs to poor, desolate, struggling Cary.  It seems that any town that can afford to give a company $500,000 of taxpayer money in corporate welfare isn't really hurting for jobs all that much, are they?

So why exactly are we subsidizing jobs, when according to the N&O:

The expansion underscores the strength of the health-care sector, even amid a slumping economy, and its growing role in this state and region. The aging population has increased demand for medical services and technology, benefiting companies in that sector.

More of those businesses have come to North Carolina in search of the talent necessary to develop equipment and drugs. The state is the nation's third-largest hub for biotechnology, as measured by the number of companies. Much of that activity is centered in the Triangle.

Let's see... rapid growth in health care sector, aging population, high need for the services and many similar businesses already located in the area.

Seems like the market is showing there is already a need for these jobs, so why exactly are we paying Siemens to do something they were going to do already?

The company's own growth is fueled by acquisitions and rising demand for medical imaging, scanners and other technology it makes. That, in turn, has increased the need for hospitals and its own employees to improve their skills on the equipment.

"They're expecting a lot more people going through there for training," said Tom Schaffner, a spokesman for Siemens Medical Solutions in Malvern, Pa.

Oh, there's increased market demand for these products and Siemens is expanding to fill that role. Hmm... growth in the market, more opportunity to make money, need to expand already there to keep up with growth.  So, why exactly are we subsidizing them?

Tire Maker Moves Out of NC

Continental Tire announced today that it is moving its headquarters from Charlotte across the state line to Lancaster County, SC.

But wait, you ask, didn't we just spend $60 million of taxpayer dollars on tire companies to keep workers here in NC?

Yep, we did, but that money is going to companies located in key constituencies in Eastern NC (Tony Rand and Jim Hunt's hometowns), not a corporate headquarters in Charlotte.

Apparently, jobs in Charlotte (or anywhere else in NC as we pointed out here) aren't as important as jobs in the hometowns of Democratic Party leaders.

This is just one more example of why the corporate welfare game is inherently unfair.  The state now chooses which jobs are more important than others and subsidizes the "winners", and when the ability for that happens, the ability for the appearance that politics and/or corruption is distorting the picture enters as well.  End it all, treat every business the same and get the foul stench of favoritism out of the corporate handouts.

Ethanol: We're Waiting...

Ethanol? The debate is over. Now that a number of scientists have shown conclusively what we already knew, (knew, knew), when are we going to get some mea culpas from Congress, from the Greens, and from the General Assembly right here in North Carolina?

(Janet Cowell and Charles Albertson were particularly egregious in their rush to judgment, followed by their rush to purloin taxpayers of ethanol special interest dollars they were warned repeatedly would never work to slow global warming.)

It is, and always has been, an example of the wish fathering the lie -- the desire by the left to control the energy sector a la Stalin (the "Commanding Heights). We are waiting for those mea culpas. We are waiting for you to give us the tax dollars you extorted from us in an effort to garner political support from special interests--all so you could play energy gods in the name of global warming.
-Max Borders

Corporate Welfare, Economic Development - Collapse

Here's what happens when government tries to plan the economy.
-Max Borders

NC and NetJets -- A High School Love Story?

As we continue to follow the story of the bidding for tax handouts for NetJets, WRAL runs this story (originally printed in Columbus, OH) trying to understand the psyche behind the NetJets need for incentives.

Apparently, they just want some attention.  “They want to be embraced,” said Milbourne, whose organization, the Columbus Partnership, is composed of the city’s most powerful business and civic leaders. “For whatever reason, NetJets hasn’t really felt like Columbus has embraced them, loved them, as a major employer in the community.”

Ah, unrequited love.  Flashback to high school...
The popular girl in school has been dating her steady boyfriend for a few years.  He's good looking, clean cut, but pretty much an average working guy.  Over time, she begins to feel that he doesn't appreciate her or pay as much attention to her as he used to.

Then one day this new kid shows up at school -- driving a fancy sports car, looking all sharp and cool and sexy.  Thinking this is her opportunity to make her boyfriend notice her more, the girlfriend runs off after school and gets the cool guy to drive her home, knowing that her boyfriend will notice and it will make him jealous.

Well, that's all it seems North Carolina is in this equation.  We're the bargaining chip to make the steady boyfriend jealous.  NetJets knows that NC is good state to use -- given our proclivity to throw cash around (Dell, Google, Goodyear, etc.) and they know we're throwing mad cash at the aerospace industry (SkyBus, HondaJet, etc) so we're a good foil in this scenario.

NetJets just wants a little lovin'.  Whether they get it from their steady boyfriend or the flashy new stud on the block, they're going to get it somewhere.

What happens 10 years from now when NC is that old steady boyfriend and the next flavor of the month comes along?  Will we be the ones being blackmailed for more cash just like Ohio is now?

Get Out Your Checkbooks!

I wonder how high bidding will go on this?  "VW Considering NC for Auto Plant"

We'll start the bidding at $200 million, but as desperate as NC is to land an auto manufacturer goes, I would expect to see numbers in the $300-$400 million range bandied about.  And talk of $500 million wouldn't surprise me one bit.

Remember this when lawmakers tell you there isn't enough money for "education" or "transportation" and they want to raise your taxes.

Priorities matter.

More on Raleigh Spending Priorities

WRAL has a story that talks about the high turnover of Raleigh police officers and mentions the fact that there are 58 vacancies on the police force.

So why then, is Raleigh spending $1 million to spruce up a restaurant downtown while police officers quit over low pay?  Apparently, the Mayor of Raleigh places a higher priority on having a fancy place to eat in his beloved downtown than ensuring the safety of his city's residents.

How many police officers could have been hired for $1 million?  Or retained from resigning by a new pay structure?

Maybe if the Mayor got out of his Ivory Tower, he'd notice that there has been 3 homicides in Raleigh already this year.  Hmm... wonder if filling those 58 police vacancies might do something about the crime rate.

Rome may be burning, but Meeker will sit idly by and fiddle at his lovely new amphitheater next to his lovely new convention center, down the newly reopened Fayetteville Street from his lovely new white table cloth fancy restaurant.

Priorities matter.  It's time to hold Raleigh's leaders accountable for theirs.

Corporate Welfare - Subsidizing Competitors

As reaction continues to flow in response to Raleigh's spending $1 million to assist a white tablecloth, fine dining establishment, open in Downtown, I asked some people rhetorically, if you were the owner of an already existing restaurant in Raleigh, wouldn't you be a little bit peeved that the City was using your tax dollars to subsidize your competition.  Where was the City Council when Nana's Chophouse closed or when Fins relocated from North Raleigh to downtown?

Well, a loyal RCC reader sent a long this article from the N&O from just about two years ago, and yep, the other restaurant owners were pretty upset, as well they should be.  "I'm funding someone else's restaurant," said Kevin Jennings, who owns Frazier's and Porter's on Hillsborough Street. "I'm funding my competition."
And later in the article:  Business owners downtown noted that they took the same gamble. "I was surprised to learn that the city is funding my competition," said Parker Kennedy, who owns Caffe Luna.

But part of the conditions for receiving the funding was that the restaurant has to be open for lunch and make take-out available.  Geez, thanks.  I'm sure most people working downtown can afford the $11 Iceberg Wedge and the $30 Seared Scallops (pdf) on a lunch break.  How will Chic-Fil-A and Subway ever compete?

But so is the folly of government subsidies and distortions to the market.  What's going to happen one year from now when the owners of The Mint come back to the City Council and threaten to shutter their doors due to lack of customers?  The City does know the failure rate of new restaurants, right?  Will the Mayor and his cronies (well, except Isley) pony up some more cash to keep them afloat?  Once you start the pigs eating at the trough its hard to ween them off.

(HT: JES III)

How Should Cities Pay for Roads?

That is the question this WRAL article asks as Mayor's from around the state gathered yesterday to discuss local funding of transportation projects.

Interestingly, Mayor Meeker says property taxes in Raleigh went up recently to pay for roads.

That's funny, what was that article yesterday that said you just spent $1 million renovating a restaurant's lobby for them?

Maybe the Mayor needs an economics lesson in opportunity cost.  Using money on something (downtown corporate welfare -- restaurants, convention center, hotel, renovate Fayetteville Street, an amphitheater, etc.) means that money can't be used somewhere else (roads, police, fire).

So, Mayor Meeker, it's a bit hypocritical of you to say that Raleigh doesn't have enough money for roads, when you sure seem eager enough to give it away on your pet projects downtown.

And this isn't just confined to Raleigh, it's going on in every city and town.  Wilmington's convention center, every dollar spent on "economic development", Charlotte's downtown arenas.  I could go on and on and on.

But it's time for all these politicians to stop whining about not having enough money and wanting to raise our taxes when they would rather spend it on their pet projects and not meet the needs of all citizens.

Just a Good Landlord

Another chapter of "Your Taxdollars Hard at Work."

WRAL has a story on how the City of Raleigh spent $1 million fixin' up one of its downtown buildings so that a high end, white tablecloth restaurant could move in.

Sure seems like a lot of money for the City to be spending.  What else could that money been spent on?
How about 166,667 "low flow" shower heads at $6 each -- enough for one for every household in Raleigh.

Priorities matter, and the priorities of the Raleigh Mayor and City Council seem to be to spend as much money downtown as possible, the rest of the city be damned.

Another question that needs to be asked is why is the City owning property downtown that could be in the hands of private enterprise?  According to Wake County tax records, the City bought the One Exchange Plaza building four years ago for $7.885 million dollars.  Is current tax assessment is $14.28 million.
No doubt the asking price would be for more than the tax value, so why not sell the building and practically make a 100% return on investment.  (Then return that money to us, the taxpayers, who paid for the building to begin with.)

Since the property is owned by the City, no property tax revenues are collected on it either.  Selling it off to private investors would generate an additional $69,000 per year in City property taxes and almost $97,000 in County property taxes (at current tax rates).

Public entities doing what private enterprises can do is bad for taxpayers.  Not only did we spend $1 million in corporate welfare for a fancy restaurant, the City could make an additional $8 million selling the property and generate an additional $150,000 in combined property taxes per year.

So just remember this when they start complaining about not having enough money to spend to fulfill their big plans... There's an opportunity cost to everything government does, money can be spent wiser and more effectively for all citizens.  Subsidizing restaurants and keeping property off the tax rolls is not one of them.

Why Goodyear but not Gold Toe Moretz?

When the General Assembly passed special legislation giving $20 million to Goodyear (and $40 million to others) to upgrade its plant in Fayetteville we were told it was necessary in order to keep the jobs and avoid layoffs.

So when Gold Toe Moretz announced today that it was laying off 430 workers in Alamance County, why was there no legislative effort to save those jobs?

What makes jobs in Cumberland County apparently more important and more valuable to the taxpayers of North Carolina than jobs in Alamance County?  If a legislative leader was from Alamance County or if the plant was unionized (like in the case of Goodyear in the district of Sen. Tony Rand (D-Cumberland) and workers were represented by the United Steelworkers) would the General Assembly have stepped in then?

If you take the words of Rep. Pryor Gibson (D-Anson) who recently declared, "I'm positive it's in our best interest to keep XYZ company with 1,000 jobs, even if they're making buggy whips" then shouldn't the state have stepped in with a big check to keep the manufacturing plant open regardless of whether it was in its best interest to close or not?

How can legislators and the Governor look those laid off workers in the eye and tell them that they weren't as important as people in Fayetteville?   

This is the problem with having government pick winners and losers.  There are actually winners and losers.  The people of Alamance County lost today.  Not only did many lose their jobs, but the lawmakers of this state just told them that they aren't as important as the people and jobs of Cumberland County.  And that is wrong.  Dead wrong.

Government's right and legitimate role is to make an even playing field for all companies to succeed.  Giving $20 million to Goodyear puts them at a competitive advantage and elevates that one firm to a position of prominence at the expense of all other companies in North Carolina.  Stop the incentives, lower the corporate tax rate and get government out of the jobs market.

Corporate Welfare & BetaMax

Brian Balfour exposes the folly of NC corporate welfare programs for Chapel Hill readers. Here's a money passage:

A classic example of the mindset that government should be in the business of "saving jobs" through targeted incentives is N.C. Rep. Pryor Gibson (D-Anson). Gibson recently declared, "I'm positive it's in our best interest to keep XYZ company with 1,000 jobs, even if they're making buggy whips." Buggy whips? What Gibson really means is "It's in my best interest to keep XYZ company with 1,000 jobs so they can vote for me come election time."

Propping up businesses that no longer produce a product or service that society values is the perfect recipe to halt innovation and economic growth. I suppose Gibson's home is full of 8-track tape players and Beta Max recorders because of his desire to "save" those jobs.

The economy is a huge, dynamic entity often shaped by unforeseeable events, changing values and shifting priorities. A small group of lawmakers can never predict the flux and flow of changing consumer desires in an economy better than the millions of individual actors that comprise the market. Shouldn't consumers decide which businesses succeed or fail?

Subsidizing Billionaires, Again

As if the Bruton Smith cash giveaway wasn't enough, the State, local governments and the RDU Airport Authority is about to throw more cash at an even bigger billionaire -- Warren Buffett.

We here at RCC first warned of the impending handout back in November.  WRAL has a follow-up story today.

Not to get all John Edwards-style class warfare raging here (hypocritically on his part), but give me a break.  A man worth $50 billion needs my tax money as an incentive to make a business decision?  Please.

This is about the overzealousness of state and local officials to throw mine, yours and all other individuals and small businesses' confiscated taxes at any sniff of a new job in the name of "economic development."  Berkshire Hathaway doesn't need our money, but they'll sure as hell take it if it's offered.

The sheer thought of giving incentives to Berkshire Hathaway just shows how utterly stupid the incentive game is.  This is a company with a nearly $216 billion market capitalization!

I keep hoping that these economic developers will get so arrogant and try to make such a horrendous giveaway that the public will finally wakeup and yell, "Stop it now!"  Maybe they're trying for the famous death of a thousand cuts.  First Google, then Bruton Smith, now Warren Buffett.  Maybe, just maybe, this will be the one that sends people over the edge.

Where are my friends Rob and Chris on the left jumping in with the reverse Robin Hood argument?  Where are the environmentalists screaming about subsidizing a greenhouse-gas emitting, ozone destroying inefficient industry like personal corporate aircraft travel?  All hands on deck for this fight.

I've got nothing against Warren Buffett or his $50 billion fortune.  Congratulations to him for his success.  Just treat every business and individual the same under the tax code.  No special favors, no incentives to do this or that.  Is that too much to ask?

I Smell a Bailout Brewing!

According to an audit released today, the biggest economic development boondoggle in the State's history (No, not the Parton Theater, although it's gaining quickly), the Global TransPark in Kinston is at risk of going bankrupt, leaving the taxpayers holding the bag for somewhere in the neighborhood of $32.1 million.

And, if it went belly up, we would owe another $18.1 million to the FAA to pay them back for the money they invested.

If this does happen, the State should pay the money back from the balance of the One North Carolina Fund and other money already set aside for economic development.   We shouldn't have to pay again for failed economic development programs.

If it does go under, can I get the $20 back I had to pay for that stupid GTP license plate?

Your Tax Dollars (Soon To Be) Hard at Work

Sorry for just now catching up with my reading from around the state over the holiday, but two stories caught my attention.

Back in October, the Dept. of Commerce and Gov. Easley announced an incentive package to bring no-frills discount airline Skybus to Greensboro's PTI airport.  (I wrote about the deal here.)

One of my main criticisms of the deal was that the State should not be investing our tax dollars in risky start-up airline ventures with high failure rates.  The potential for Skybus to fail and North Carolina to get left holding the bag is tremendous.

Well, Skybus has had a couple of bad weeks of late. 

First, the company reported a quarterly loss of $16 million on revenues of only $22 million.  Some airline industry analysts were less than impressed, calling their revenue numbers "appalling." (Read more here.)

Second, the company had an old fashioned PR nightmare -- canceled flights on Christmas.  Mechanical problems grounded about one-forth of their scheduled flights on Dec. 25 and 26.  And since they are a low cost carrier, Skybus doesn't have agreements with other airlines to help passengers make other arrangements and doesn't have a customer service telephone number to help passengers.

These are all known risks and growing pains of an upstart airline.  But should government be gambling our tax dollars on it?
Company officials expect to lose money this year and turn a profit sometime next year.   But what happens two years from now when the company still hasn't made money despite taking incentive money from the state and decides to pull the plug.  What do the taxpayers get out of it?  Do we get a chance to get in line with the creditors in bankruptcy court to get our money back?

Better yet, what happens two years from now when Skybus comes back to the State, county and municipal governments and says that they will go under without more "assistance"?  Where does the slippery slope end?

What other high risk speculative markets should the state get involved in.  Hey, maybe I'll start a hedge fund and promise to hire some fund managers in exchange for a few million from government.  I've got as good as a chance as a startup airline.

Bottom line is, if the state is going to be handing out money to companies in the name of economic development (they shouldn't be but...), there needs to be some sort of criteria placed on the viability of the project to succeed.  Maybe if we had a little public input on these deals before they were announced it would help.

Hero of the Week

Not to make this a weekly awards thing, but special recognition goes out this week to High Point City Councilman Mike Pugh, who fought valiantly against giving away more than $3 million in city money (and another $6.57 million in state money) for a corporate welfare project.

In reference to the awarding of welfare to TransTech Pharma of High Point, Councilman Pugh is quoted:

“I know it’s vital to get new industries started and to have them in your city, but I don’t believe in extortion,” Pugh said. “When multimillion dollar companies come to us while small businesses are suffering and say, 'Give us money or we’ll leave or we won’t come at all,’ well, I think sometimes you just have to call their bluff.”

So, cheers to Councilman Pugh for standing up for economic integrity.  I raise my glass of holiday beverage to you! May there be more like him coming to understand that corporate welfare penalizes all other businesses for the benefit of one.

Small Victories

As we fight the larger battle to end the practice of state and local governments giving away our taxpayer money to corporations or to "promote" economic development, we sometimes gloss over the small victories that occur along the way.

Take this announcement out of Raleigh that the City, Wake County and the operators of the RBC Center will not extend a new package to recruit the MEAC basketball tournament to Raleigh.  Previously, the city and county gave away $550,000 of your money each year to bring the tournament to the RBC Center.

Taxpayers in Wake County saved a little money today, let's just remain vigilant that the elected officials don't just turn around and give it away to someone else.

Bootleggers & Baptists Redux : Gobble Gobble

If you're wondering what is going on with all these bio-fuel boondoggles dotted around North Carolina, it's because the Bootleggers and Baptists (pdf) are at it again!

A short paragraph inside North Carolina's landmark renewable energy bill could mean millions for one obscure company.

The provision requires major utilities to sell electricity produced from poultry waste -- a potential boon for Fibrowatt LLC, which spent $85,000 this year lobbying the General Assembly about the company and its product.

The legislation, passed earlier this year, requires major utilities to produce at least 12.5 percent of electricity by 2021 from renewable sources, including solar, wind and poultry excrement, among others.

Who pays? You do. And if you believe the hype about jobs and the environment, you'd better think again (and again and again and again).
-Max Borders

Right Hand, Left Hand

What is a state to do when it tries to serve two masters?

One one hand, those in charge are trying to "do something" about global warming and limit the use of coal-fired power plants.

On the other hand, others in charge are trying to "do something" about economic development and use corporate welfare to create jobs.

Thus, we get this situation where the Division of Air Quality must decide whether to allow the expansion of Duke Power's Cliffside power plant near Charlotte.

The problem is, the company who will do the construction of the expansion, Shaw Power Group, just received incentives from the state to expand their operations.  So how do they add jobs if the power plant isn't allowed to expand?

Who will win the battle between environmentalism and corporate welfare?  I don't know, but it's going to be fun to watch the Dept. of Commerce and the Division of Air Quality squirm their way through this.

More Bruton Smith Fallout

You knew tax increases were coming as part of the handouts to Bruton Smith's empty threats to move Lowe's Motor Speedway.

The latest:  Cabarrus County is trying to push through a 1 percent increase in the hotel/occupancy tax to pay for "promoting tourism" in the county.  Geez, I thought having two signature NASCAR races a year was promotion enough...

Demagogonomics

"I'm positive it's in our best interest to keep XYZ company with 1,000 jobs, even if they're making buggy whips." says Rep. Prior Gibson (D-Anson), quoted in the News & Observer. How about...?

I'm positive it's in our best interest to keep XYZ company with 1,000 jobs, even if they're building pyramids... or

I'm positive it's in our best interest to keep XYZ company with 1,000 jobs, even if they're paying teenagers to break windows and paying workers to replace them... or

I'm positive it's in our best interest to keep XYZ company with 1,000 jobs, even if they're building a Temple to Randy Parton... or

I've got it. Here's how it should read: I'm positive it's in my best interest to keep XYZ company with 1,000 jobs, especially if they're paying me back in votes.
-Max Borders

$1.3 Billion

That's how much the state gave away in corporate welfare last year according to a draft report produced by the General Assembly's Fiscal Research Division. (Report isn't available online yet, but I hope to scan it in and post it for you sometime today.  Meanwhile, here's the AP article that says so.)

$1.3 billion.  Yep, that's billion with a "b."  And that doesn't include any Federal or local money that was spent either.  Such as the One North Carolina Fund that requires a local match of cash payment.

And just for reference sake, the state collected $1.2 billion in corporate income tax revenue in 2005-2006. (Overview of Fiscal and Budget Actions - NC Fiscal Research Division, p. 305).

So... cutting the corporate income tax rate to 0% and eliminating corporate welfare incentives would actually save the state $100 million.

Rest assured, we'll have much, much more on this exciting new development in the coming days/weeks/months.  (Thought we had a lot to say on incentives before?  Now we've got hard evidence!) 

One-Stop Shopping for Corporate Welfare!

Hayes, I hope you're sitting down for this one...

Commerce Clearing House, Inc. (CCH), a company that "provides leading tax and business law information and software solutions," has announced its new handy on-line navigator  for businesses seeking state tax handouts.

"Users simply select an industry, an incentive category (such as investment, jobs creation, research and development) and geographic considerations (such as statewide or location-based incentives). Then they choose one or more jurisdictions. The results are instantly provided and include a description of the incentive, the application procedures and filing requirements plus contact information and links to more detailed information for deeper understanding."

A perfect example of how society responds to the rules our government puts in place. It seems the practice of politicians picking winners and losers has spawned its own cottage industry. This should come as no surprise to anyone reading this. When government announces loud and clear that their ATM is open and dishing out the cash, people will line up. Whether its business incentives, welfare, health care, day care, food stamps, affordable housing - it doesn't matter. When people see they can get something for "free," the demand will be limitless.

It reminds me of all the times that I've read progressives screaming that we need to meet the "demand" for more government services. There will always be more demand. Let's see if Fitzsimon insists we meet the business community's "demand" for more corporate welfare by increasing the cash handouts. After all, it is he and his ilk that justify their calls for more government spending because people "demand" it.

Another "Told Ya"

Chris Hayes was right about Bruton Smith back in October.
-Max Borders
(Update: Here's my take.)

So Much for Going Green

Well, green environmentalism that is...

The State of NC has awarded $12.7 million over the next 10 years to the Shaw Power Group to add 556 jobs in Charlotte.

What exactly does the Shaw Power Group do you might ask?

Well, they are a company that builds and constructs those nasty greenhouse gas emitting, global warming causing (allegedly) coal-fired power plants.  And is the principal contractor for the $1.8 billion Duke Energy's Cliffside coal power plant that environmentalists have been fighting for years and years to try and stop.

So let me get this straight... the General Assembly passes legislation mandating production of renewable energy yet the Department of Commerce gives money away to a company that builds coal-fired power plants?

One more thing... Aren't "incentives" supposed to be used to recruit or entice businesses to parts of the state that are struggling economically and that can't recruit business otherwise?  Last I checked, Charlotte wasn't really hurting for economic growth.

Just chalk it up to one more ridiculous incentive giveaway.  When will it stop?

Cheshire Fat Cat

Once this story disappears, the grin will still be there.

-Max Borders

(Update: A couple of people wrote to ask what the heck this is. It's Bruton Smith, the guy who just got $80 million not to leave Concord and take his race track with him.)

Nascar Nausea

A story that goes basically like this:

Nascar Mogul (Bruton Smith): "I want to build a dragway"
City Council (Concord, NC): "Nope"
Nascar Mogul: "Well, hell, I'll leave and take Concord Speedway with me."
CIty Council: "Ok, ok. Wait. Sorry, we--"
Nascar Mogul: "Well?"
City Council: "How does $80 million sound?"
Nascar Mogul: "Peachy."

We've just bribed a billionaire. Now we can all safely watch cars turn left.
-Max Borders

Testing Progressive 'Principles'

I recall an old Ali G episode where Ali asks an animal rights activist/moral philosopher if he would eat a chicken to save the life of a chicken. If there is any such animal as a progressive principle, such will be tested in the coming months and years with commitments to environmentalism.

In this post, I highlighted a rare overlap between progressives and free-marketeers (MFs) -- that is, neither of us likes corporate welfare. But what happens when progressive hostility towards corporate welfare runs smack into Green fetishism? In other words, will progressives be silent on incentives if they go to support companies that recycle? Quite the conundrum.

(My guess is that recycling has become such a religion for progressives that they'll escort the pigs to the trough without a peep of protest.)
-Max Borders

A $70 Million Bluff

In a political power play that would make even the toughest poker superstar envious, Bruton Smith played his hand and the taxpayers are the ones who will be paying.

Feeling disrespected by the Concord City Council in rejecting his plans to build a drag strip next to the Lowe's Motor Speedway, Smith threatened to close down the speedway and build a new one somewhere else in the greater Charlotte area.  Many, including yours truly, said that we should call his bluff and not give in and throw taxpayer money at him to not move (or maintain the status quo).

Well, guess what?  Smith backed down on his threat to move and cashed in on the City, County and State's offer of $70 million to stay where he is.

He gets $70 million in taxpayer money to do nothing!

Once again, the threat of moving (but not actually doing so) has cost taxpayers tens of millions of dollars.  It was warned that the Goodyear deal set a very bad precedent and the slippery slope from it was dangerous to the state.  Now we are seeing the results.

The sooner we can put an end to this practice the better.