CORPORATE WELFARE WEEKLY --October 18-23, 2010

Corporate Welfare Weekly October 18-23

This newsletter is compiled by Elizabeth Lincicome, Director of Communications and Development for NCICL. She may be contacted at lincicome@ncicl.org.


Durham Offers Incentives to Lure Smartphone Maker…

On Monday, Durham City Council members locked in their half of an incentives package they believe could persuade Taiwanese smartphone manufacturer HTC Corp. to open a new R&D office in Durham’s American Tobacco complex.

The city’s offer of $150,000 in economic incentives won unanimous approval from the council and more corporate welfare is just over the horizon. Recruiters are waiting on the N.C. Department of Commerce to match Durham’s offer with money from the One North Carolina Fund.

But according to HTC’s chief strategy officer, Ron Louks, targeted incentives are not what attract the smartphone maker to Durham, but rather the area’s brain capital. Seems the incentives are just a nice extra cash bonus!

Louks told council members, "Part of HTC deciding to, looking into coming to North Carolina, was ... the fact that when Sony Ericsson and Ericsson and other companies left, there was just way too much good talent in this area.”

Louks also said HTC would work very closely with Duke University, UNC Chapel Hill, NCSU, NCCU, and Shaw University.

Taxpayers Angry Over Film Incentive Handouts…

It’s bad enough that the governor raised the bar on how much N.C. hands out in film incentives, but it also seems the types of movies coming to this area keep getting worse and worse.

This past week Gov. Perdue announced that New Line Cinema would spend five months in Wilmington filming a new movie titled, “Journey 2: The Mysterious Island.” The movie is about a teen who sets out with his mom’s boyfriend in search of his grandfather who is thought to be missing on a mythical island. The movie will qualify for a film incentives package that offers a 25% tax credit for companies that spend at least $250,000 in production costs.

The debate over the expansion of film incentives in N.C. prompted the Civitas Institute to investigate the kinds of movies being produced here. Civitas’s Chris Hayes writes:

Roughly $700,000 taxpayer dollars went to subsidize the production of a raunchy R-rated film entitled, “A Good Old Fashioned Orgy” in 2008. According to Internet previews of the film, the plot centers around a group of 30-somethings still living at home who decide to throw an end of summer party that turns into an orgy. The film’s parent company, GOF Productions, applied for and received film incentive credits from the North Carolina Department of Revenue totaling $713,104.

This film has still not yet been released in theaters. Hayes continues:

Recently, the film incentive program was expanded. On July 22, 2010, Democratic Gov. Bev Perdue signed into law HB 1973, which would expand North Carolina’s film incentive program, upping the amount that can be rebated to 25 percent of total costs. If HB 1973 had been law in 2008, “A Good Old Fashioned Orgy” would have received an additional $400,000 of taxpayer dollars. According to analysis by the General Assembly’s Fiscal Research Division, HB 1973 will cost taxpayers more than $188 million in lost revenue over the next four years, even as the state faces massive budget shortfalls.

Save-A-Lot Lands Incentives for New Distribution Center…

Both the Triangle Business Journal and the Winston-Salem Journal reported that the state has awarded discount grocery chain Save-A-Lot Ltd. $125,000 in incentives money from its One North Carolina Fund. The company is also eligible for an $875,000 incentives package from both Davidson County and the city of Lexington. The company has promised to create 43 jobs in its new distribution center in Davidson County.

SAERTEX Scores State and Local Incentives to Stay in NC…

Local economic developers have apparently convinced German manufacturer SAERTEX USA LLC to stay in Huntersville, NC. by offering them $240,000 in economic incentives.

The company was considering opening a new site in either Brazil or Colorado, but instead decided to merely expand its already existing site in Huntersville.

In exchange for its pledge to expand, Saertex will get $110,000 from the One North Carolina Fund, incentives of $45,000 from Huntersville, and $80,000 from Mecklenburg County – both payable as rebates on taxes the company pays.

Quote of the Week:

“Incentives are corporate welfare. In North Carolina, 80 percent of the new jobs are created by small businesses. The way the incentives program is set up in Forsyth County, small businesses do not qualify because they do not create a big enough bump in the tax office to qualify, and they can’t offer enough new jobs.”  -Bill Whiteheart; Candidate for Forsyth County Board of Commissioners

NCICL Supports Sensible Economic Development Under the Constitution

The Center for Economic Development Reform (CEDR) is a center of the North Carolina Institute for Constitutional Law.

Please visit the North Carolina Institute for Constitutional Law website at www.ncicl.org for more information.