Mon July 15, 2013
'Pay-To-Play' System For N.C. Business Incentives?
Governor Pat McCrory's plan to privatize part of the state Commerce Department could result in a pay-to-play system where some businesses get special treatment. That's the finding of a report the N.C. Budget and Tax Center released Monday.
Governor McCrory wants to revamp the way North Carolina recruits new businesses and keeps current ones.
The proposal he rolled out a few months ago is called the Partnership for Prosperity. It would set up a nonprofit to identify businesses that should get incentives. The nonprofit would run off taxpayer dollars and donations from private businesses.
Allan Freyer of the N.C. Budget and Tax Center said there's a problem with that.
"Companies could well end up making donations to the public-private partnership in the hope of receiving a recommendation for public incentive dollars," he said.
In his report on the partnership, Freyer said that's like a pay-to-play system: if you want a sweet incentives deal, you better give money to the nonprofit in charge of recommending incentives.
But Commerce Department spokesman Josh Ellis said that is not how it works.
"What someone has given in private contributions has absolutely nothing to do with the formulas that we use to figure out the appropriate incentive to recruit a project," he said.
Ellis said the nonprofit in the Partnership will be under strict ethics rules, and all the donations it gets will be public record. That way you can see if there's a connection between businesses giving money and getting incentives.
The idea behind taking private donations is that it would make economic development cheaper for taxpayers. Ellis said what businesses would get out of the donations is the ripple effect of a stronger economy as the partnership helps create more jobs – you know, that argument that a rising tide lifts all boats.
But Freyer of the Budget and Tax Center said there could still be a conflict of interest. He said he hopes lawmakers tweak the proposal to prevent businesses who donate from getting incentives. The proposal is currently in the Senate.