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Audit finds lack of verification in JDIG grants

The state Department of Commerce issued $20 million in job-creation grants in 2010 without performing audits or onsite visits to confirm that the companies met the requirements of the grants, according to a state audit released Monday.

The department instead relied on withholding records from the Department of Revenue to confirm the accuracy of the wage and tax information being reported by companies, while also requiring companies to submit and certify annual reports.

“Relying on a company that is receiving grant payments to confirm that the company is in compliance with the grant requirements does not meet the definition of an objective and independent process,” the auditor’s report concluded.

North Carolina spent $1.3 billion last year on economic development

North Carolina spent more than $1.3 billion on economic development last year, according to a recently released annual report from the General Assembly's Fiscal Research Division.

The vast majority of that spending -- more than 92 percent -- came in the form of tax expenditures, including tax exemptions for goods, services and equipment.

Sales tax exemptions accounted for nearly $700 million, with the bulk of those exemptions going to sales to farmers ($244 million), purchases of mill machinery ($178 million) and packaging costs for manufacturers and retailers ($120 million).

Economic development grants accounted for $37 million, with the state's Commerce Department allocating $31.4 million of that.

Perdue veto watch

We won't hear what Gov. Bev Perdue will do with a budget-cutting bill she doesn't like until next week, her office says.

A bill that would give Perdue extra powers to cut at least $400 million from agency budgets and take about $140 million from other state accounts to pay next year's expenses has made it to the governor's office.

Perdue has said she doesn't like the parts that take unspeat money from economic development accounts, including JDIG and One North Carolina.  But she won't take any action on the bill until next week at the earliest, said her spokeswoman Christine Mackey.

The plan is to handle budget presentations first, Mackey said.

Perdue presents her proposed budget tomorrow morning and will be traveling the state Friday to talk about it.

Dems rake GOP savings bill

The controversy over saving unspent economic development funds is headed for a showdown.

A few hours before the House debates a GOP budget -savings bill, state Democrats held a news conference to oppose a plan to take Golden LEAF Foundation, One North Carolina, and JDIG money and put it into savings for next year.

The Republicans have a bill that would sweep about $140 million in unspent money from about 20 state accounts, including economic development accounts. The GOP is aiming to capture unspent money to help fill next year's projected $3.7 billion budget hole.

The Perdue administration opposes taking these funds, saying they are essential to attracting business to the state. Republicans maintain the money to be put into savings is a fraction of the amount available in those accounts.

Democrats joined to back Perdue's position, saying the bill will kill job creation.

The bill is "throwing up this road block by raiding some of the very funds set up to increase jobs and grow the economy in this great state," said Rep. Edith Warren of Farmville.

On incentives and lobbying

Helping a company get incentives?

You don't necessarily have to register as a lobbyist.

A spokeswoman for the N.C. Department of Commerce said that under their reading of state laws, lobbying does not include assisting companies applying for financial incentives with the One North Carolina or JDIG programs.

"'Lobbying' is the attempt to influence legislative or executive action," Kathy Neal wrote in an e-mail to Dome. "'Executive action' specifically does not include a person (or the person's consultant) communicating with a public servant with respect to applying for a determination of eligibility (such as for incentives), or making an inquiry about or asserting a benefit, claim, right, entitlement, payment, etc."

The N.C. Secretary of State's office, which is the arbiter for lobbying registration, said that it would depend on the consultant's role. In some cases, the registration would not become public until after the incentives are approved.

That interpretation did not sit well with Bob Orr, a former state Supreme Court justice who is fighting the state's incentives system through the N.C. Institute for Constitutional Law.

"If they don't have to register as a lobbyist, they ought to," he said. "It would seem to me if you're negotiating to get taxpayer money from a government agency, then that's lobbying."

Orr: End incentives

Bob Orr proposes ending corporate incentives.

In a press conference this morning, the former Supreme Court justice said he would undo most of the state's economic development incentives programs if elected governor.

As part of his reform plan, he would:

* Create a task force to work on federal legislation limiting the use of incentives to lure companies from one state to another.

* Eliminate the One North Carolina program, the Job Development Investment Grant program and certain targeted tax credits.

* Require companies disclose offers from other companies and lobbyists involved; create a 45-day waiting period on any deals.

* Start an initiative focused on workforce development that would give companies up to $2,500 per worker for training.

Orr said the reforms would end the "incentives game," in which corporate lobbyists have argued that companies won't come to North Carolina without grants.

"We don't have to pay them cash grants to come here," he said. "This is a great place to do business and a great place to live."



Document(s):
orr-incentives.pdf

What is the JDIG program?

Answer: 

The Job Development Investment Grant program gives annual cash grants to businesses that relocate or expand in North Carolina.

The program was signed into law by Gov. Mike Easley on Oct. 31, 2002, and became effective Jan. 1, 2003. It has been amended in 2003 and 2006.

Between 2004 and 2007, the committee promised more than $200 million in grants to companies such as Google, GlaxoSmithKline and Dell Computer, in exchange for pledges of more than 20,000 jobs.

The grants are paid over as many as a dozen years. Companies must meet specific hiring and other criteria each year before the grant is given. By law, a business can create as few as 10 new jobs to qualify, but typically it's at least 100. 

The grants are approved by Economic Investment Committee, a five-member panel.

The governor appoints three people on committee: The secretaries of the state departments of Commerce and Revenue and the director of the Office of State Budget and Management. The other two are appointed by the Speaker of the House and the president pro tem of the Senate.

The committee decides on grants in closed-door sessions, though the final approval is done in an open meeting and the public can weigh in before each payment is made.

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