unc economic incentives analysis · 8.05.2008 · l incentives elevate local wages l gaps in...
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UNC EconomicIncentives Analysis
May 8, 2008
Brent Lane, Director, UNC Center for CompetitiveEconomies (C3E)
Donald Schronce, C3E Senior Research Associate
Dr. Roby Sawyer, NCSU College of Management
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UNC Incentives AnalysisTasks
Definition of Relevant Incentives
Definition of Economic Incentives Goals
l Identification of Economic Incentives Recipients
l Economic Incentives Utilization Process
l Corporate Tax Rate Reduction AlternativeAssessment
l Identification of Economic Incentives Outcomes
l Economic Incentives Competitive Analysis
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Definition of RelevantIncentives
William S. Lee Creating Jobs Machinery and Equipment Research & Development Worker Training Central Office/Aircraft Facilities
JDIGOne NC FundCompany specific incentives
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Definition of IncentivesPerformance Measures
Return on Incentive (ROI) criteria
l Job creation: initial and long-term
l Distressed areas benefit: jobs, impact, andreemployment
l Quality of employment: wages, benefits,sustainability
l Competitiveness: diversification, valueadded and global
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Describe IncentivesRecipients
“What Companies Have Received EconomicIncentives, How Much, And How Much More?”
l Geographic distribution of recipients and amounts
l Industry distribution of incentives
l Size of firms in incentive programs
l Changes in distribution of incentives over time
l Cost of incentives granted to date and future forecast
The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise
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Describe IncentivesRecipients/Outcomes
l database of companies that receivedincentives between 1996 and 2006
l Approx. 4,000 companies from NC Revenueand Commerce
l “Mirror” database of NON-incented firms
l Compare performance based on EmploymentSecurity Commission jobs and wage data
l Calculate relative returns of differenteconomic incentives and recipients
The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise
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Have Historic TrendsContinued?
l A few big companies claim large share ofincentives
l Most incentives are not tied directly to job creation
l Most incentives go to firms in less distressed tiers
l Most incentives to expansion of existing firms
l Incentives elevate local wages
l Gaps in required information reporting
The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise
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Preliminary Analysis:Most Trends Continue
l Incentives continue to be mostly for investment,not job creation or worker training
l A few companies still receive large share ofincentives
l More firms are perennial recipients
l Incentive distribution has continues to favor lessdistressed areas
l Gaps persisted in required reporting
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Most Incentives Are NotDirectly For Job Creation
Prior analysis found:
l Most incentives are for investment –Machinery & Equipment and Research &Development
l Incentives for Job Creation and WorkerTraining lag far behind
l These trends continued in more recent years
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Lee Credits1996-06 = $2.1 Billion
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Incentives Favor LessDistressed Areas
Prior analysis found:
l Incentives allocation reflects existing industrydistribution
l Majority of incentive go to companies in theleast distressed (Tier 5) counties
l This trend has persisted, as incentives appearto follow, rather than drive, economic activity
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All Lee Credits - 2002-06$875 Million
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Ongoing Incentive PortfolioAnalysis
l Complete database of incented companies(Lee, JDIG, OneNC)
l Track performance of incented firms over time
l Compare to similar non-incented firms toassess significance
l Use committee return priorities to assessrelative performance of different incentives
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Incentives Use Process
“How is the Economic Incentives GamePlayed?”
l Develop case studies of incentive deals todescribe process and player roles
l Identify local incentive contributions
l Describe consultants’ role and compensation
l Describe NC’s competitive position vs. rivals
The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise
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Incentives Use Process
Donald Schronce, Senior Research Associate
l Accredited economic developmentprofessional
l Local economic developer, Mitchell andTransylvania counties; Laurens, SC; CapeBreton, Nova Scotia
l Senior Developer, NC Dept. of Commerce
l Economic development research consultant
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Case studies of 20 companies incentedbetween 2002 and 2005
l Regional partnerships
l Industry sector
l Incentive types
l Expansion/New location
Incentives Use Process
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Preliminary Case StudyCandidates
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Case Study Data
Initial round of case studies completed identifiedabundant data sources
l NC Dept Revenue, Commerce and Emp.Security reports
l Local public records
l Interviews of company executives, countymanager, local officials, site consultants, etc.
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Case Study Issues
l Confidentiality required to assure candor ofsources
l Access to records from competing states
l Cooperation of site location consultants
l Final selection of case study candidates
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Corporate Tax Reduction
“How would the economic impact of cuttingcorporate taxes compare to incentives”
l Analyze the scale and distribution of economicimpact and compare to incentives impact
l Dr. Roby Sawyer, NCSU Department ofAccounting, College of Management
The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise