Dell’s decision to shut down its $190 million computer plant near Winston-Salem only four years after startup will provide fodder for arguments on both sides of the incentives issue.
Opponents can rightly point out the futility ó perhaps even foolishness ó of the state or any other government picking out particular businesses they think offer the kind of economic prospects that are worth tax breaks and other sweeteners. In Dell’s case, those sweeteners potentially added up to more than $300 million, making it the richest incentives package in North Carolina history. “You just don’t want to see this happen,” said former N.C. Supreme Court Justice Bob Orr, executive director of the N.C. Institute for Constitutional Law, which spearheaded a 2005 lawsuit opposing the incentives. “But this shows the stark and painful folly of the incentives game that state and local governments are playing.”
Advocates of incentives can rightly point out that Dell isn’t walking away from the “game” with either a win or a windfall. Whether the product is computers or car tires, it never bodes well for a corporation to sink this kind of investment into a facility and then abruptly walk away from it. The incentives package was structured so that Dell would only receive the tax breaks and other incentives if it met certain measures over a period of time. To date, about $8 million in state money has been disbursed, and Dell may have to give back some of that, although those details aren’t immediately clear. And as Gov. Bev Perdue emphatically stated in the wake of the Dell bombshell, the state will continue vigorously pursuing other corporate citizens to relocate to North Carolina, and incentives will be a part of the recruitment strategy.
If nothing else, the Dell pullout underscores the need for public officials to adopt two somewhat contradictory stances when it comes to the recruitment of businesses. While state and local governments want to be viewed as “business friendly,” they also need to dig deep and ask tough questions about a company’s longterm plans and economic prospects. Dell didn’t deliberately deceive anyone here, but it did seriously miscalculate the vigor of the market for the desk-top computers being manufactured in North Carolina.
If Dell’s crystal ball was that cloudy, you can reasonably ask how public officials can expect to foresee ó and benefit from ó the economic future of particular businesses. Obviously, they can’t. What they can do, however, is make sure that any incentives are linked to threshholds of longevity and job creation. While Dell’s departure is gloomy news for its workers and the state’s overall economy, it would be even worse if citizens were left footing a hefty bill for vanishing jobs and nonexistent tax revenue.