NC Tax Incentives - A Figment of Value

Dell Computers decided to leave our state after we gave them the ability to receive rebates of up to $287 million in incentives to come here. Dell thinks everything is fine.  They are paying back the earned incentives and Dell even gets a discount for being a prompt payer.  The problem is that Dell is not repaying the actual costs that are incurred for this sweetheart deal.  The people in our NC government that encouraged the deal think this is fine and we are getting back everything spent. 

Dell got a nice parcel of land with utilities, roads, etc. all set up with the potential of up to 8,000 people employed, when adding in the spin off jobs created. Now we have 1,400 people directly unemployed people at a time when jobs are scarce.  It is even worse when one considers that the jobs are not really "lost" at Dell.  They just moved the jobs to other locations, including Mexico.  So for our investment in Dell they used us until it wasn't convenient and moved the work to other places. 

I would love to see what the real costs to the state were for this wonderful opportunity.  The reimbursed fees do not cover the actual costs for items like roads and other improvement costs, including the full unemployment amounts for Dell personnel and their suppliers.  Forbes magazine says that

millions of dollars won't be returned. Public agencies paid to prepare the Dell site for construction, widen roads leading to the plant, and equip community colleges to train company workers before the plant opened.

The biggest part of Dell's incentives were targeted tax breaks specifically created to draw large computer manufacturers to the state. The company could keep tax savings for milestones that were met, but could not claim the rest.

The added money that Dell invested in plant and equipment is not lost because they will move it or sell it.  North Carolina, Winston Salem and sourrounding localities don't have that option to recover their investment which might have been better used by spreading the lost tax revenue by decreasing taxes for everyone instead of one employer.

I don't have a problem with limited incentives that involve training.  Trained employees can move from one job to another easier than unskilled employees.  But incentives that benefit only one employer at the expense of all other employers and people that pay the taxes in the state don't make economic sense without unconditional guarantees.  The 90 acres of land next to the abandoned site that Winston Salem receives doesn't solve the problems for the city.  They still lost money on their gamble and now have land that is worth less today than it was when purchased.

To quote one of the original proponents of the incentives by Tonya Vinas - Industry Week Magazine:

The next time someone complains about all the good U.S. manufacturing jobs moving overseas, be a contrarian and tell them about Dell Inc.'s new plant in Winston-Salem, N.C.

Now that the US manufacturing jobs are moving to Mexico, does he still feel exactly the same way?  Dell got the incentives and still moved away after less than 5 years.  Dell did exactly the same thing in Lebonon, TN where they did not insist on legal language for the incentives provided.  In the TN case, the incentives were tiny compared to NC's.

The comments made by others describe the feelings of many people. 

The state has argued for years that the incentives are actually grants for jobs created and new money spent, but if Dell is actually returning money, and they are. . .

The Department of Commerce said Tuesday that the company fully returned grant payments (of $1.5 million) from 2006 and 2007. Officials in Winston-Salem have said the company is also in the process of repaying $26 million in local incentives.

. . then we have to assume that money was given with NO benefits received for the state. It was simply gambled away to a favored company by a foolish legislature and all too eager Governor. The state was fooled, plain and simple and it doesn’t stop there. With Google, Apple and others in the periphery, is North Carolina getting what it gambled for

It is time for us to tell our politicians that they are supposed to be working for us and not for companies.  Yet it appears we did not do our own homework and offered incentives almost 8X greater than our competitor Virginia. We even calculated that the spin off jobs would be twice as high as our neighboring state. While helping companies grow has benefits for the state, having the state determine the winners and losers in the incentives game makes me feel that they feel fine gambling with my money.  If I want to gamble, I will go to Tunica or Vegas or on a cruise and feel that it is my decision on whether to double down or not. 

No matter how big the incentives are, the company will remain loyal to profit and stockholder value and not to their employees or any state.  I don't blame Dell for requesting incentives either.  It is our politicians that offered them in such abundance that made the deal too good for the moment for Dell to ignore them.  As they say in the song, "the thrill is gone" and now so is Dell.