In the mid-1990s, North Carolina embraced a strategy of big spending, after decades of shying away from giving out large subsidy packages. Not all of those deals worked out well. In 2009, Dell Computer announced it would shut down an assembly plant for which the state had provided $280 million in assistance. The experience prompted North Carolina to improve its clawback and disclosure practices, which are now among the best in the South.
In 2018, the state expanded its flagship program Job Development Investment Grant (JDIG) by adding a “transformative project” designation. The expansion allowed the state to provide large awards, such as $450 million to Centene and $320 million to Apple.
There are a few unique aspects of North Carolina economic development practices.
- The state divides its counties into three tiers, from the richest counties where state subsidies are the smallest, to the poorest ones where subsidies may be the largest.
- A provision in the state constitution prohibits localities from providing traditional property tax abatements so instead, a company is given a cash refund, which can span decades.
- North Carolina is also one of a few states that limits the use of tax increment financing, allowing only up to 5% of a city and county’s combined land area to be put into a district. As of 2021, it had only three TIF districts.
The Economic Development Partnership of North Carolina, a privatized agency, recruits companies and works with them to design subsidy packages. The state Commerce Department approves and manages grants and rebates. The Department of Revenue (DOR) administers tax-based subsidies. On the local level, subsidies are approved by counties and major cities, often as a required match to the state OneNC program.
North Carolina recipient disclosure is mostly good. The Commerce Department posts annual or quarterly reports of OneNC, JDIG, and other major grants. Those posts include company obligations, outcomes, and subsidy payments. Recipients of major tax-based subsidies are disclosed in annual reports posted on the DOR website. However, data center tax exemption recipients are not disclosed, and training program grant reports are buried on a legislative website. Only a few localities post recipient data online but in most localities the data is available via freedom of information requests.
Program costs are available in the Commerce Department and DOR annual reports. The state tax expenditure reports include only limited information. Because North Carolina programs are structured as grants or as-of-right tax subsidies, GASB 77 disclosure is crude.
North Caroline does not regularly evaluate subsidy programs, but the state has done some subsidy audits on a one-time basis.