Grant well intended but shortsighted

Published 12:07 am Sunday, January 29, 2012

To the Editor:

The Economic Development Commission has announced a matching One N.C. grant of $180,000 that will be given to a foreign firm that intends to reduce employment at its recently acquired Washington, N.C. plant. Although some jobs will be kept at the firm, the EDC has mentioned that a number of employees will lose their jobs. Prior to this grant, public funding has only been given to businesses that planned to create new jobs in the community. This new grant carries serious unintended consequences.  It is well intended but shortsighted.

Taxpayers are being introduced to a surrealistic situation in which more help is actually worse. If our leadership were to negotiate more of these grants, we would be confronted by an accelerating loss of employment and a corresponding budget deficit as jobs vanished and matching grants necessitated further tax increases. In particular, the grant in question will cost local taxpayers $180,000 and will witness the loss of approximately 25 jobs. Hypothetically, just six of these grants would see the county job census fall by nearly 150 jobs, while taxes would rise by over $1 million. How long can this process continue? At some point tax increases will kill off enough real economic activity to leave us with a glut of failing firms and no new entrepreneurs willing to build our future.

This new style of grant would weaken rewards to taxpayers while at the same time offering employers a perverse incentive to downsize operations.

Traditionally, incentive grants establish baseline employment levels and reward firms for jobs created above the baseline.  Grant administrators are required to use payroll reports submitted to the N.C. Employment Security Commission to document that the job creation goals were met. However, under the new “reduced jobs” model discussed here compliance baselines and job goals are irrelevant.  There is no job-creation goal. Firms offer no improvement in employment levels; they merely offer not to close operations entirely. Is there any employer who would not appreciate the advantages in being paid to reduce payroll? Can we be sure that managers won’t be attracted to strategies of replacing men with machines or encouraging early retirement of workers when they realize that their reorganized companies might earn subsidies for the effort?

There is no longer any criteria or threshold for grant qualification. If the only performance requirement for earning a subsidy is to continue at some level of reduced employment, then any firm can qualify for assistance. How can commissioners say “no” to the next applicant without establishing that only favored firms need apply?

Elected officials and the Economic Development Commission seem to have completely surrendered their defined task of developing new jobs and opportunities within Beaufort County and have started out on the slippery slope of rewarding job reductions with taxpayer assistance.

This puts the proposed sales tax increase in a different light.