Implementación de la solución

3.1 Overview of North Carolina’s Incentives Programs

In the 20 years since North Carolina began using these incentives in hopes of promoting economic development, the state has consistently been recognized for following some of the best practices for ensuring that incentive programs deliver on their goals (Pew, 2012). In particular, North Carolina’s strong accountability and performance measures—the rules that require companies receiving taxpayer-funded incentives to actually live up to their promises of job creation or have their incentive grants taken away—are credited with ensuring more cost- effective returns on investment than many other states. At the heart of the state’s accountability framework are two core statutory requirements—first, that all prospective incentive deals must meet a certain minimum threshold of return according to a cost-benefit analysis run by staff in the N.C. Department of Commerce; and second, that all incentive deals must involve a written

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contract with the recipient firm that specifies job creation and investment targets that the firm must meet, or lose the incentive grant offered by the state. The amount of time recipient firms have to hit these job creation benchmarks depends on the specific incentive program, but if they fail to meet these benchmarks, the deal is cancelled, future allotments under the grant are terminated and previous allotments are recovered (a clawback policy). Lastly, statute limits the total cost of each incentive deal by creating an overall cap on the total new fiscal liability the state can assume for all incentive projects each year (Freyer, 2014). Taken together, these accountability measures have ensured that the state’s incentive programs have demonstrated positive effects on employment growth often absent in other states (Lester et al, 2014; Jolley, Lane, 2008).

Despite these progressive accountability requirements, however, recent policy analysis has found that the economic impact modeling requirements and investment totals required by statute have paradoxically contributed to less equitable geographic distribution of the state’s incentive dollars (Freyer, 2014). Since 2007, North Carolina’s least distressed and largely urban counties have received more than three out of every four incentive dollars awarded by these programs and more than half of the total number of jobs promised from them. In effect, the state’s incentive programs have bypassed much of the state’s rural and most distressed regions, despite deliberate efforts to steer dollars to more distressed counties.

In terms of program specifics, a state constitutional prohibition on income and property tax abatements—the traditional way of providing incentives throughout much of the United States—has led to the creation of three discretionary grant programs that offer cash incentives to recipient companies. These programs include:

1 _{(1) Jobs Maintenance and Capital Fund (JMAC), created in 2007 to encourage retention of at} least 2,000 high-paying, high-quality jobs and large-scale capital investment in Tier 1 counties; (2) Job Development Investment Grant (JDIG), created in 2002 to provide grants to capital- intensive new and expanding businesses for periods up to 12 year, including a three-to-five-year

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“base period” during which the company may fail to hit job creation targets without

cancellation; and (3) the One North Carolina Fund, created in 1993 to provide a matching grant to county governments over a usually-three-year grant period. The goal of the matching

program is to help level the incentive playing field for distressed counties by providing local governments with more resources than they would otherwise have for economic development projects. If companies fail to hit their job creation benchmarks during the grant period, the state withholds the funds and cancels the grant.

3.2 Targeting, Mediation, and Other Policy Supports in North Carolina

Previous research has described the industry targeting efforts in North Carolina (Lester et al, 2014; Goldstein et al, 2008). In the early 2000s, the General Assembly mandated that each of the state’s seven economic development regions—the multi-county planning organizations designated by statute to help coordinate economic development activities across different regions of the state—conduct cluster identification and strategic targeting planning process to develop a core set of industry targets appropriate for recruiting, retaining, and supporting in that region. Although the regional partnerships rarely played a serious role in recruitment and retention over the next decade (much to future legislature’s dismay), the targets identified by their strategic plans were incorporated into the Department of Commerce’s approach to firm prospect selection and incentive awarding process, as revealed in JDIG annual reports and interviews.

Beyond targeting, the state provides a range of common pool policy supports for firms, which represent long-term institutional commitments by state government. Lowe (2014) and Lester et al (2014) identified two of these mediated industries—Biotechnology and Textiles, while Freyer (2016) included Aerospace, Automotive, and various industries comprising the state’s military and defense complex in this category. Taken together, these supports often include strategic planning, research and development, workforce training, and technical assistance on business operations. While the state certainly provides some of these supports to

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individual firms on an individual or a la carte basis—especially through the dozens of specialized research centers at the state’s university system—the special characteristic of the mediated approach is that it bundles together these policy supports specifically to strategically advance an entire industry or sector.2 _{An important aspect of these common pool supports involves the} customized workforce development and job training services provided to firms through the Customized Job Training Program (CTP). Administered by the N.C. Community College system, the program provides customized workforce training services, including specialized curricula, employee screening, and on-the-job training through local community college campuses to firms given CTP awards. For example, the aviation firm TIMCO (now HAECO) received a customized training award that allowed Guilford Technical Community College to develop a specialized curriculum for the company around airframe and power plant repair and precision

manufacturing. This customized training effort proved so successful that it served as the basis for five full credential programs in the aerospace industry.