Tax breaks for companies in trying times
Tue June 23, 2009
Tax breaks for companies in trying times
Mecklenburg County has cut its budget by $70 million, reducing social services at a time when they're in high demand. The City of Charlotte has frozen salaries and laid off 50 Charlotte Area Transit employees. Despite the cutbacks, the city and county are giving tax breaks to companies at a record rate.
At a recent meeting, Mecklenburg County Commissioners were asked to approve $1.5 million in tax breaks to two companies: nuclear power plant designer Toshiba America Nuclear Energy and Siemens Energy, a company that builds power plants and manufactures wind turbines.
It sparked a 35 minute debate. Commissioner George Dunlap suggested the board should be more cautious in approving incentives when tax collections are so tight.
"We have granted $4.5 million thus far. That would have saved- y'all are talking about creating jobs- that would've saved some CMS jobs, it would've saved some county employee jobs. Let's keep things in perspective. That's all I'm asking," said Dunlap.
Still commissioners approved the Toshiba tax credits 5-to-4 and the Siemens 7-to-2. Dunlap voted with the majority both times. Commissioner Harold Cogdell said the county should be proud that it helped encourage those companies to create 350 jobs here, especially now.
"I mean we're talking about a time, an economic climate that every job matters," said Cogdell.
So far this year, the city and county have approved $5.7 million in tax breaks to companies for the fiscal year that ends June 30th. This is actually an increase from last year when $2.2 million was approved.
Generally, here's how it works: Companies that invest at least $3 million and create at least 20 jobs can get a 90-percent break on their property taxes for three years. Businesses that invest at least $30 million or create a minimum of 150 jobs get a 50 percent break for five years. If it's a company already here and is expanding, the tax credit only applies to the new investment. Most of the tax breaks approved this year won't go into effect for at least another year.
"It's not time to be choosey about creating jobs," says City Councilman John Lassiter who chairs the economic development committee. "Finding ways to get that private investment, create those jobs is job one for the city and county who want to be participants in using our resources to put the city back to work."
Lassiter wants to make it easier for companies who may not create as many jobs and invest as much money in capital to receive assistance. Toshiba, the company the county commission narrowly approved for a tax credit, did not receive one from the city. But at the request of Lassiter, the city is looking at whether it can provide translation and transportation services to dozens of the company's employees moving here from Japan.
"We want Toshiba to know that we really want them here," says Lassiter. "Part of that's messaging. And part of it is there maybe some other things we can do that will help stimulate their thought about other ideas, about bringing more talent here, bringing more operations here, expanding their investment in their marketplace."
Toshiba does plan to hire about 130 jobs locally over the next five years. Richard DiSalvo, who helped research incentives for Toshiba, says assisting the company's employees with translation and transportation seems like a natural fit for the city.
"This is a constituent outreach program," says DiSalvo. "Although many of the Japanese language people will remain citizens of Japan, they'll be residents of Charlotte and will be taxpayers of Charlotte. And government is considering what it can do to make life better for them."
And, well, ease the burden on Toshiba. That's what county commissioners decided to do through tax credits even though the company's investment-level failed to meet the county's own standard. Lassiter wants city council to relax its guidelines and judge companies like Toshiba on a case-by-case basis like the county has been doing.
The Center for Competitive Economies at UNC Chapel Hill recently surveyed 50 North Carolina counties. Eighty percent of counties reported they're reviewing their tax credit and incentive programs in light of the recession. That doesn't necessarily mean they're handing out more or fewer incentives, but simply re-evaluating what works.