Editorial: A jobs package that doesn’t pay itself

by Keith Barber

The issue of economic incentive packages has been a topic of significant controversy in recent years. Local opponents of government-subsidized economic incentives had the perfect “I told you so” moment in 2009 when Dell announced that it was closing its Winston- Salem desktop computer manufacturing facility. Dell did repay the $26.5 million in economic incentives, but since that time, the city has dipped into those funds to attract new businesses. The city council has generally agreed that economic incentive packages are a good use of taxpayer dollars to create new jobs and spur the local economy.

That is, until the council’s Dec. 20 meeting. Dan Besse, who represents the city’s Southwest Ward, and James Taylor, the representative of the Southeast Ward, voted against a $250,000 incentive package for Wake Forest University to help the school relocate tenants in its Reynolda Business Center to make space for Pepsi’s planned expansion. The measure passed 6-2. This latest gift to Pepsi by the city council represents Round 2 of what Taylor characterized as “economic blackmail” by the soft drink giant.

Besse said he voted against the proposal because it doesn’t pay for itself. In November, the city council approved a $250,000 economic incentive package for Pepsi after the company said it planned to invest $7.5 million in its Winston-Salem sales and call center operations and create 195 new jobs in the process. Last week’s proposal creates no new jobs and no new investments.

“That’s going to quite reasonably strike people as a bait and switch,” Besse added.

Over the course of a single city council meeting, those in attendance witnessed the city council make one wise decision and one unwise decision on economic incentive packages. The city council unanimously approved $29,250 in economic stimulus funds for US Airways to create up to 200 new jobs with an average wage of $20,200. The city’s funds will be combined with a matching grant of $29,250 from Forsyth County and $58,000 from the NC One Fund. The funds for Wake Forest and US Airways came from the same place — the city’s economic development direct assistance program.

In tough economic times, large companies like Dell, Pepsi and US Airways could easily use the leverage of job creation to extract big chunks of economic development money from communities like Winston-Salem, and quite often, they do just that.

Elected officials are under tremendous pressure to spur economic growth in their communities. This sometimes causes them to take leave of their senses. Council members should have taken a step back and looked at the big picture before granting another quarter million dollars of taxpayer money to a company whose 2009 earnings exceeded $43 billion.

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