STATE NEWS

Corporate Welfare Blowout:

Gov. Cooper Pledged $1.3 Billion to Just 58 Corporations in 2021

Jon Sanders Jon Sanders
  • In 2021, Gov. Cooper blew past his previous years’ corporate welfare numbers in pledging $1.3 billion in incentives giveaways to just 58 corporations
  • His 39-year, $846-million award to Apple, a company with more money than the State of North Carolina, was named the "Worst Economic Development Deal of the Year" by the Center for Economic Accountability
  • The General Assembly then enabled another potentially 39-year deal worth up to $315 million to Toyota by creating yet another new kind of Job Development Investment Grant

In 2019, Gov. Roy Cooper pledged $146.0 million in corporate welfare to 66 corporations. In 2020, amid shutting down and crippling small businesses with extreme executive orders, Cooper pledged $519.3 million in corporate giveaways to just 48 corporations.

In 2021, Cooper made those crony boondoggles seem almost stingy by comparison. He pledged over $1.3 billion in corporate welfare to just 58 corporations. A full list is at the end of this brief.

Pledging such huge amounts to so few corporations has always made for dramatic contrast with the governor’s habitual professions of anger at "corporate tax breaks." Supposedly those giveaways are what creates jobs, as the governor’s press office would have you believe. The tallies of announced jobs that would be "created" include 11,779 starting in 2019 (at $12,392 per job); 11,600 in 2020 ($44,764 per job); and 15,670 in 2021 ($82,962 per job).

The jaw-dropping giveaways are through the state’s corporate incentives programs, the Jobs Development Investment Grant (JDIG) and One North Carolina (OneNC) grant programs, which are creatures of legislation, meaning that the General Assembly is in on the game. OneNC grants are smaller awards given in 25% increments as recipient companies add promised new jobs, while JDIG grants are spread out across 12 years with clawback provisions if recipient cronies don’t create the promised new jobs or make the promised amount of investment. Investigative reporting from WRAL had found that these programs resulted in "just over half the expected jobs" — and "[a]bout 37 percent of incentivized companies failed to create even a single job."

There are, however, no clawbacks to glowing headlines and ribbon-cutting ceremonies. Media and politicians bask in the "but-for" fallacy: the pretense that, but for the state giveaways, the projects and jobs would never take place. But as Alan Peters and Peter Fisher point out in their 2004 Journal of the American Planning Association article, "The Failure of Economic Development Incentives," the "most fundamental problem" with incentives is that "many public officials appear to believe that they can influence the course of their state or local economies through incentives and subsidies to a degree far beyond anything supported by even the most optimistic evidence."

Economic research into incentives finds that presumption highly dubious in most instances. It’s not "economic development" to rob Peter to pay Paul. Having consumers and businesses support giveaway programs for favored crony corporations diminishes job-creation opportunities all across the state as it "creates" jobs in one area. It makes for photo ops but poor public policy.

Furthermore, economic decisions are made on the margins, and they involve many more factors than incentive offers, which tend to be far down the list of deciding factors. In 2015, Economic Development Quarterly published research specifically concerning incentives in North Carolina. Among other things, it found that business executives in North Carolina listed 14 factors that were more important to the state’s climate for business than offering economic incentives (click here for the list).

A more credible "but-for" theory is this: but for the ability to involve state grant programs in impending corporate moves and expansions, opportunistic politicians could not claim they have "created jobs" and "driven investment" into where their voters live.

The game has gotten worse in recent years with the General Assembly’s creation of "Transformational JDIG" awards — which spread out massive wealth transfers and tax abatements across decades. One such award this year received an "award" of its own:

North Carolina’s 39-year, $846+ million subsidy to Apple for a new corporate campus in the Research Triangle Park has been selected as the "Worst Economic Development Deal of the Year" for 2021 by the Center for Economic Accountability. …

Apple’s deal in North Carolina stands out for the way in which a state’s elected officials claimed that this massive public subsidy was necessary to attract the project to the state, despite the Research Triangle’s clear competitive advantages in business-critical site selection factors.

"As with all truly bad subsidies, North Carolina’s elected officials gave a big company a giant pile of money to do what that company was already going to do anyway," said John Mozena, president of the Center for Economic Accountability (CEA).

The Center for Economic Accountability also pointed out that "Apple has more money than North Carolina does," with total sales ($365.8 billion) almost seven times greater than the entire state budget ($56 billion), adding "In fact, Apple could have funded North Carolina’s entire state budget out of its $94.7 billion in net profits for the year and still had more than $38 billion left over to distribute to its shareholders."

Not done, legislators and the governor agreed to another kind of expanded JDIG award, this one termed a "Transitional" JDIG (see Section 11.19, "Economic Development Project Appropriation," starting on page 293 of the state budget), which essentially created a two-phased JDIG specifically for a site in Randolph County. The governor’s announcement shortly afterward of the “Transitional” JDIG awarded to Toyota gives an idea of how profligate this brand-new incentive scheme is (emphasis added):

Using a formula that takes into account the new tax revenues generated by the 1,750 new jobs required in the grant’s first phase, the JDIG agreement authorizes the potential reimbursement to the company of up to $79.1 million. This potential payment would be spread over 20 years.

Should Toyota increase the number of jobs and capital investment committed to the project to 3,875 jobs and $3 billion of investment within 36 months of today’s award, the company will trigger phase 2 of the Transitional JDIG and could then receive up to an estimated $315 million over the life of the grant, which could expand to run for as many as 39 years.

Speaking of "but-fors": One wonders, but for Cooper et al. having already given Apple so, so much, whether this Toyota agreement would have been the nation’s "Worst Economic Development Deal of the Year" instead.

Here’s the final tally of Cooper’s corporate welfare in 2021:

  • Jan. 7: $3,000,000 to Adverum Biotechnologies, Inc. (JDIG)
  • Jan. 26: $1,914,750 to PennyMac Financial Services, Inc. (JDIG)
  • Feb. 9: $9,997,500 to Gilead Sciences, Inc. (JDIG)
  • Feb. 18: $400,000 to Crown Equipment Corporation (OneNC)
  • Mar. 18: $21,724,250 to FUJIFILM Diosynth Biotechnologies U.S.A. Inc. (JDIG and OneNC)
  • March 30: $3,006,000 to Robinhood Markets, Inc. (JDIG)
  • April 6: $175,000 to American Racing Headers & Exhaust, Inc. (OneNC)
  • April 7: $125,000 to AP Emissions Technologies (OneNC)
  • April 8: $125,000 to Pipeline Plastics Holdings, LLC (OneNC)
  • April 12: $300,000 to Gusmer Enterprises, Inc. (OneNC)
  • April 13: $6,940,800 to Abzena Holdings (US) LLC (JDIG)
  • April 14: $50,000 to Polykemi AB (OneNC)
  • April 20: $6,767,250 to Invitae Corporation (JDIG)
  • April 26: $845,820,750 to Apple Inc. (“Transformative” JDIG)
  • May 4: $2,206,500 to JELD-WEN Holding, Inc. (JDIG)
  • May 5: $400,000 to Carolina Coops (OneNC)
  • May 18: $120,000 to eGourmet Solutions Inc. (OneNC)
  • May 20: $1,616,250 to CARsgen Therapeutics Corporation (JDIG)
  • May 20: $5,441,400 to White River Marine Group, LLC (JDIG)
  • May 21: $250,000 to Ardagh Group (OneNC)
  • May 25: $20,306,250 to Credit Karma (JDIG)
  • May 28: $75,000 to Aeronautical Systems Incorporated (ASI) (OneNC)
  • June 15: $75,000 to KNOLL America Inc. (OneNC)
  • June 17: $180,000 to Lotus Bakeries (OneNC)
  • June 29: $1,779,000 to Precision Swiss Products, Inc. (JDIG)
  • June 30: $50,000 to Elkay Manufacturing (OneNC)
  • July 1: $2,088,000 to Roseburg Forest Products (JDIG)
  • July 13: $1,008,000 to Red Bull (JDIG)
  • July 13: $3,057,000 to Rauch (JDIG)
  • July 14: $100,000 to Metal Specialist LLC (OneNC)
  • July 21: $1,000,000 to Glen Raven, Inc. (OneNC)
  • July 27: $3,008,700 to POLYWOOD (JDIG)
  • July 27: $2,821,500 to Smart Wires Inc. (JDIG)
  • Aug. 3: $1,421,000 to Steffes, LLC (JDIG)
  • Aug. 3: $11,612,250 to Amgen, Inc. (JDIG)
  • Aug. 10: $1,954,800 to Nature’s Value Inc. (JDIG)
  • Aug. 17: $1,644,000 to Crump Group Inc. (JDIG)
  • Aug. 18: $75,000 to Harger, Inc. (OneNC)
  • Aug. 25: $918,000 to Grupporeco (JDIG)
  • Sept. 14: $4,528,800 to Thermo Fisher Scientific Inc. (JDIG)
  • Sept.28: $2,041,200 to Corning Incorporated (JDIG)
  • Sept. 28: $1,418,000 to Vantaca (JDIG)
  • Sept. 29: $175,000 to Mohawk Industries, Inc. (OneNC)
  • Oct. 1: $200,000 to Cambrex Corporation (OneNC)
  • Oct. 15: $200,000 to Pöppelmann Plastics USA LLC (OneNC)
  • Oct.18: $200,000 to Hubbell Power Systems, Inc. (OneNC)
  • Oct. 20: $100,000 to Custom Alloy Corporation (CAC) (OneNC)
  • Oct. 21: $125,000 to WestRock Company (OneNC)
  • Oct. 26: $2,355,000 to Jaguar Gene Therapy, LLC (JDIG)
  • Nov. 15: $50,000 to Meel Corp. (OneNC)
  • Nov. 16: $150,000 to Precision Graphics, Inc. (OneNC)
  • Nov. 17: $50,000 to Hosokawa Custom Processing Services LLC (OneNC)
  • Nov. 23: $3,878,000 to MasterBrand Cabinets (JDIG)
  • Dec. 3: $150,000 to Sherrill Furniture (OneNC)
  • Dec. 6: $315,000,000 to Toyota Motor North America, Inc. (“Transitional” JDIG)
  • Dec. 8: $2,300,000 to The Kroger Co. (JDIG)
  • Dec. 16: $200,000 to LT Apparel Group (OneNC)
  • Dec. 21: $3,336,750 to Science 37, Inc. (JDIG)