Commentary: The case for incentives

Published 12:00 am Monday, October 19, 2009

Four years ago, North Carolina held out the welcome mat and the promise of $242 million in state incentives to Dell Computer for building a new plant in Winston-Salem. Now the company is leaving for good. A lot of people are using this case to urge a halt to incentives.
That won’t happen. Incentives have become an indispensable part of states’ business recruiting strategy, and they often pay off many times over. The Cape Fear region has had several successful ventures with incentives. A state that drops incentives takes itself out of the running for many new jobs. But what happened with Dell provides a solid argument for the Honorables in Raleigh to consider how incentives are doled out and whether the state should put more of that money into workforce training programs, roads, water and sewer infrastructure and other strong business lures.
Even the biggest backers of incentives acknowledge that they do not guarantee that company will stay. This was a business decision, and North Carolina doesn’t have anywhere near enough money to persuade Dell to keep the plant open. The company will pay back millions and will forfeit the rest. But the impending departure is a severe blow to the people who have lost their jobs, and the community that has lost another employer. And of course, the state and Forsyth County can’t recoup what they spent recruiting Dell and training its workers.
The thought of handing millions of dollars to a company that has no inherent loyalty to a community is hard for many taxpayers to swallow. The Dell incentives were even more controversial than most such deals because of their size and the considerable secrecy surrounding the combined local/state package of more than $300 million.
At one point the company was promising up to 2,000 jobs. About 900 people are working at the Forsyth County plant that will soon close. The state and local governments held secret talks with the computer giant, which apparently also was looking at neighboring Virginia, which offered considerably less than North Carolina.
Bob Orr, who as a state Supreme Court justice wrote the dissenting opinion after the court upheld financial incentives as constitutional, has made a second career trying to make a strong case against them. And he has some good points. Incentives are negotiated out of public earshot, have the distinct feel of a bribe, and companies have learned how to pit one community against another to squeeze out the most taxpayer dollars.
But as long as other states and other nations are willing to play, North Carolina must play to win. Most of the time, the state and community more than get back what is paid out in incentives. … And although Dell is leaving after a few short years, it has added to the economic bottom line while it has been in the state.
Incentives are a gamble, however. North Carolina and Forsyth County gambled that Dell would provide a long-term source of jobs and economic strength. It didn’t. One consolation: At least the company won’t leave town with the taxpayers’ money.
ó The Star-News of Wilmington