spot_img
Sunday, November 10, 2024
Home Blog Page 487

Statewide: Charlotte region, May 2014

0

STATEWIDE Charlotte Region

""

Faster than Google’s search

 
Earlier this year, Mountain View, Calif.-based Google announced it was considering installing its high-speed Google Fiber network in Charlotte and seven Triangle cities. Not to be outdone, Shelby-based RST Global Communications announced it already had activated a 3,100-mile underground fiber-optic network that spans the state and can provide broadband Internet service to businesses at up to 100 gigabits per second. The speed limit on residential service: 1 gigabit per second. RST runs fiber-optic cable to cell towers and installs wireless transmitters. Anyone within 1½ miles can receive a 1 gigabit connection. Wireless routers in offices and homes connect, expanding the network like a web. RST plans to introduce the service before July in Charlotte, followed by Raleigh and Asheville. Later, it plans to add video and television capabilities to the network. The company, founded in 2010 by three Cleveland County natives, has about 200 current customers, including data centers, health-care organizations, schools and universities.
 
 

 
Briefs

CHARLOTTE — Bank of America will pay $9.5 billion to resolve four lawsuits that allege the bank and subsidiaries Countrywide Financial and Merrill Lynch sold substandard mortgage-backed securities to Fannie Mae and Freddie Mac between 2005 and 2007. In a separate case, BofA will pay $783 million in fines and refunds to credit-card customers misled by deceptive marketing of its credit-protection and identity-theft products. The bank also raised its common-stock dividend to 5 cents a share in the second quarter, its first increase since slashing the payout to a penny in 2008.

CHARLOTTE — The Central Intercollegiate Athletic Association has agreed to hold its annual basketball tournament here through 2020. The city, Mecklenburg County and the Charlotte Regional Visitors Authority will increase the annual financial incentive from $1 million to $1.4 million beginning 2015. Charlotte has hosted the tournament for the past nine years. The CIAA will also move its headquarters here from Virginia in 2016.

MATTHEWS — Family Dollar Stores cut 6% of the workforce — 135 jobs — at its headquarters here and will close 370 stores nationwide to reduce costs. The discount retailer employs more than 4,000 in North Carolina and about 61,000 nationwide.

CHARLOTTE — Thinkgate moved its headquarters here, relocating 70 employees from Atlanta and an operations center in Huntersville to a 21,000-square-foot office downtown. The education-software company will hire 75 to 120 workers over three years with annual salaries ranging from $50,000 to $200,000. It offers data-management software and customized tests for K-12 schools.

CHARLOTTE — The Daniels Company, a subsidiary of China-based Beijing Guohua Technology Group, will move its North American headquarters here from Bluefield, W.Va., and create 30 jobs in management, research and development. The company designs and builds coal-processing equipment and plans to open a manufacturing plant here.

CHARLOTTE — Park Sterling will buy Rock Hill, S.C.-based Provident Community Bancshares, holding company of Provident Community Bank, in a deal valued at $6.5 million. The combined company will have $2.3 billion in assets and 54 offices in the Carolinas, Georgia and Virginia. Pending stockholder and regulatory approval, the deal will close in the second quarter.

 

Closing credits

0

Closing credits

A state incentive made North Carolina a haven for Hollywood, but tax reform may end the show.

By Edward Martin

Above, under a full moon, mists shroud the forest’s gnarled oaks. Down here, where there’s neither night nor day, footsteps echo hollowly in a gloomy passageway. Serpentine roots reach out of gray rock walls. “These,” a young woman whispers to her companion, as if hesitant to breathe in the odor of decaying flesh, “are the catacombs.” Everybody whispers here, but the only smell is of freshly cut plywood. Signs warn: Hot Set — Do Not Enter. Fox Broadcasting Co., part of New York-based News Corp., films its Sleepy Hollow television series at EUE/Screen Gems Studios in Wilmington. At 50 acres, it’s the largest soundstage lot outside California.

Outside again, executive assistant Layne Woods laughs as the golf cart in which she’s ferrying a visitor from one cavernous metal building to another splashes through puddles in pelting rain. Later, her boss, Executive Vice President Bill Vassar, watches from his office window as a queue builds under a catering truck’s awning. “It’s a fairly normal day,” says the 30-year veteran of managing film lots. “We’ve got three productions underway, so there are about 300 to 400 workers on the property. Sometimes, when we really get going, there are a thousand.”

Since Italian movie producer Dino De Laurentiis arrived in 1984 to film Stephen King’s Firestarter, at least 350 film, television and commercial projects have been shot at the studio. While the region around the Port City was earning its “Hollywood East” and “Wilmywood” nicknames, filmmakers gradually spread across the state. The Last of the Mohicans, released in 1992, helped put the North Carolina mountains on the movie map. Principal filming for Iron Man 3, last year’s highest-grossing feature film, was at EUE/Screen Gems, but some scenes were shot at SAS Institute Inc. headquarters in Cary. For three seasons, Charlotte was home of Homeland, New York-based Showtime Networks Inc.’s Emmy-winning TV series. More than 30 counties hosted about 60 productions last year. “This is a serious industry,” says Sheila Brothers, a Wilmington radio and TV personality who blogs about the film business. It’s also an industry that could be in serious trouble in North Carolina.

Only six months after Gov. Pat McCrory reported that producers spent about $254 million in the state last year, creating 4,000 jobs and 25,000 part-time and temporary positions, the financial incentive that boosters insist keeps this industry in North Carolina faces a crucial test when the General Assembly reconvenes this month. Signed into law by Democratic Gov. Mike Easley in 2006, the tax credit returns 25% of a production’s cost. Unless renewed, it will expire at year-end.

The issue divides politicians of all stripes. In Wilmington, a GOP state representative who commissioned a study critical of the incentive was singled out by a Democratic opponent as threatening “local jobs and a strong industry.” Republicans, who gained control of both houses of the legislature in 2010 and won the governor’s office two years later, are split, too. Some fear ballot-box retribution for killing jobs, while others fret over having to explain their support to conservative constituents who consider the incentive corporate welfare for rich, liberal Hollywood interests.

Stung by some in his party for seeming to endorse film incentives last fall, McCrory is undecided on the issue, his press secretary says. A spokeswoman for House Speaker Thom Tillis, who is running for U.S. Senate, says he “decides incentives on a case-by-case basis,” though, she concedes, members of his caucus “obviously don’t all see it the same way.” Through his spokeswoman, Senate President Pro Tempore Phil Berger deferred to Bob Rucho, co-chairman of the Senate Finance Committee. “Those numbers are not credible,” he says, attacking the figures McCrory cited. In an interview, the Matthews state senator says the industry provided fewer than 200 jobs — later amending that to fewer than 1,000 — in 2013. “That 4,000 number includes people selling tickets and popcorn and everything else you can think of. The reality is, there are very few jobs, and they aren’t even permanent. Most of these people work six weeks or three months, then they’re off.”

Ambivalence is evident even within McCrory’s administration. The state Film Office is under the N.C. Department of Commerce, whose secretary, Sharon Decker, supports economic incentives to attract and retain business. Film Commissioner Aaron Syrett, who works for her, says unequivocally that losing the credits would kill the Tar Heel film industry. On the other hand, the John Locke Foundation, a Raleigh-based conservative think tank, derides them. It issued a report that says the industry employs only a few hundred people in the state and returns less than 20 cents on each dollar it receives, based on the theory that money paid in incentives is redirected, by way of taxes, from potentially more lucrative uses. The foundation’s co-founder and principal benefactor is Art Pope, the governor’s budget director. (Its chairman and president, John Hood, writes a monthly column for this magazine.)

Rick Parris’ family owns H&S Lumber & Glass Co. in Charlotte. In business since 1937, it rides the ups and downs of construction, including long, frightening slumps. “You don’t ever know,” he says. Film production reached here in force with a rash of made-for-TV movies, including 1993’s The Black Widow Murders, based on an Alamance County preacher’s daughter who poisoned her husband and several other men. It was filmed in Charlotte’s Plaza Midwood neighborhood. Big-budget theatrical releases followed, including The Rage: Carrie 2, released in 1999, and 2006’s Talladega Nights: The Ballad of Ricky Bobby. Filmmakers found H&S to be a quick, reliable source. Parris estimates a third of its annual revenue — “hundreds of thousands of dollars” — comes from films and TV productions.

In 2011, H&S trucks carried materials to locations in western North Carolina for the first The Hunger Games movie. “They had 300 carpenters working there at one time,” he says. “Some think these people fly in here and get their money and leave, but they live in North Carolina. The stage manager of Homeland lives a few blocks from where we are right now.” H&S supplies lumber, plaster molding and other material for the TV series. “They sure break a lot of glass.”

 

Under an elegant arched portico and up carpeted stairs, wooden floors creak. Roaring down from the cliffs of Hickory Nut Gorge, March winds rattle windows. The past is present at Lake Lure Inn, which is much as it was when built in 1927. But unlike Sleepy Hollow, its spirits are real. President Franklin Delano Roosevelt’s black-and-white photo, taken during a 1936 visit, hangs in the antique-filled lobby. Today, though, the stars of 1987’s Dirty Dancing, filmed partly at the inn, are more revered than novelist F. Scott Fitzgerald, who also was once a guest.

Photogenic landscapes and buildings made the state a movie star, but its early history in film is as easy to overlook as locations used in Robert Mitchum’s 1958 moonshine-running classic, Thunder Road, shot around Lake Lure. Compiling an exhibit called “Starring North Carolina” that will open in November at N.C. Museum of History in Raleigh, registrar Camille Hunt counted more than 3,000 films in which the state has made an appearance. Conquest of Canaan, about a small-town lawyer, was shot in Asheville in the 1920s. “We have evidence of an earlier one, but we don’t have concrete proof. We think a short one called The Heart of Esmeralda was filmed in Henderson County in 1912.”

Syrett isn’t surprised. “North Carolina has always been a great place for films,” says the former Utah film commissioner, who joined the N.C. Film Office in 2007. “We can be Anywhere USA, from beaches to mountains, large cities to small cities, rural to urban.” The state didn’t have a film office until 1980. Wilmington became its film capital by chance and, even after that, almost flickered out. Scouting locations for Firestarter, De Laurentiis stumbled upon historic Orton Plantation, across the Cape Fear River in Brunswick County. Impressed by the climate and diverse locations, he set up De Laurentiis Entertainment Group Film Studios in a former warehouse in Wilmington. Five years later, Carolco Pictures Inc. bought the property out of bankruptcy. It went under in 1996. New York-based EUE/Screen Gems Ltd. bought and began expanding the lot, including $2 million of upgrades in the last several years. Meanwhile, moviemaking spread to other parts of the state. In 1985, Steven Spielberg filmed The Color Purple, starring Oprah Winfrey and Whoopi Goldberg, in Anson County.

Farm fields stretch to the horizon in Duplin County, where more than 2 million hogs vastly outnumber the 60,000 people who live there. They raise chickens, too, which explains the presence of what is claimed to be the world’s largest frying pan, a 15-foot giant shelved in a gazebo in downtown Rose Hill. In February 2013, a man came to Salon Exclusive, Catherine Floyd’s brick-fronted beauty shop, a few blocks away on Church Street. Iron Man 3 producers wanted to turn her town into a Tennessee hamlet. “They said they’d just be using the front of my shop, and mostly at night, but they’d pay me $150 a night to stay here, or hire someone to, just to cut the lights on and off inside if they needed to.” She stayed. “I’m not about to give the keys to my shop to anybody else.” Other businesses got similar offers, including The Trading Co., which also sold hardware and building materials to the crew. Filming went on sporadically until August. “Some of the people from out of town were a little bigger than their britches, but the working people building the sets were from right here in North Carolina,” Floyd says. “They were incredibly nice, and it sure helped our economy, no doubt about it.” In Burgaw, the CBS series Under the Dome did something similar last year, with Dee’s Drugstore in the role of a pharmacy in the fictional town of Chester’s Mill and the Pender County Courthouse standing in for its town hall and police station.

Just how much money stays behind after the cameras leave is unclear, but it’s substantial, just counting taxes alone. Robert Handfield, an N.C. State University professor and supply-chain expert, says the film industry generated more than $170 million in state and local taxes — while getting $112 million in tax credits — from 2007 to 2012. “For every dollar of credits issued, the industry generates $1.52 in tax revenue back to the state.” During that span, he says, filmmakers spent just over $1 billion in North Carolina, returning $9.11 on each dollar of incentives. Film commissions in the western part of the state, Charlotte, Triad, Triangle and Wilmington, as well as the Washington, D.C.-based Motion Picture Association of America, sponsored the study.

Iron Man [3] came here and dropped $180 million,” says Vassar, adding that television series often spend more than big-screen films. Dawson’s Creek, shot in Wilmington from 1998 through 2003, cost about $1.8 million per episode, and One Tree Hill was a fixture from 2003 through early 2012. Such longevity feeds on itself. “A plus for North Carolina is the solid, talented crew base, more than 4,000-strong,” says Brothers, who writes The Wilmywood Daily blog about the industry. “When you have a crew bringing your show in on budget, master craftsmen and artists working on construction sets as well as all facets of production, it’s a win for the studios. You don’t get there on the backs of actors and producers alone. It takes a village.”

A secret lurks under the floor of Sleepy Hollow’s catacombs set. “It’s covered up now,” reveals Woods, Vassar’s assistant. “It’s the pool” — one of two massive tanks here, each holding a million gallons, for underwater special effects. Over and around it are tens of thousands of square feet of plywood sets and miles of wiring. Separate buildings hold electrical, carpentry and millwork shops. EUE/Screen Gems recently spent about $1 million upgrading computer systems to boost graphics capabilities. “If we hadn’t,” Vassar says, “Los Angeles would have been complaining we’re back here in Hooterville with crank phones.” Filmmaking is a massive, expensive and highly technical undertaking. Though De Laurentiis initially set up shop in a warehouse, this built-from-scratch complex cost hundreds of millions of dollars, and what grew up around it is the core of the state’s permanent workforce in film. Handfield counts 4,259 and says their annual pay averages about $24,000 more than the national norm for private industry. Most have sawdust rather than stardust in their eyes.

Many belong to Local 491 of the International Alliance of Theatrical Stage Employees, which has joined the lobbying for incentives, aligning itself with management and local government. In an anti-labor, right-to-work state, the union label might be a political handicap, but it fits the unconventional nature of film work. “Dino brought master carpenters, riggers, electricians — all the best from all over the world — and had them live here,” Vassar says. “A lot of the people on this lot are in their 20s today, and their parents grew up doing film. They sleep in their own beds at night and want to be in North Carolina.” More than 60% have worked in film 10 years or longer, Handfield says. For many — independent contractors, self-employed or working for small companies — their $240-a-year union dues gets them access to insurance and other benefits and helps them overlap jobs posted by the local. “You might be doing a commercial that works for three days or a TV series for nine months, but as long as those projects keep coming in, it creates full-time work for you,” says Johnny Griffin, director of Wilmington Regional Film Commission. “A lot of these people have been doing this for 20 or 30 years, and it’s their only source of income.”

Small businesses also stand to get hurt if the film incentive disappears — Handfield estimates $164 million in lost sales, based on 2012 data. H&S Lumber, Parris says, would be one. In addition to lost sales, “I’m wearing out tires and burning gas that I go down the street to the local dealer and buy. I had a truck I let them use in Hunger Games. It needed a back set of tires, and that set of tires was $2,200. They went out and bought them and didn’t blink an eye.”

“To me,” Brothers says, “film incentives are nonpartisan. Louisiana, South Carolina and Georgia are all led by Republicans who fully support incentives, as do Democratic leaders in New York and Hawaii.” In Georgia, legislators are watching North Carolina’s scuffle. That state has a slightly smaller EUE/Screen Gems studio outside Atlanta but bigger incentives. Vassar nods at carpenters, electricians, grips, gaffers and others working on the lot. “It’s not all Susan Sarandon and her friends making a lot of money. These are mostly highly skilled, blue-collar workers who’re well paid.” Handfield says trades workers and technicians earn an average of $66,000 a year. He projects that more than 3,400 would leave for other states — primarily Georgia and Louisiana, which have the nation’s richest incentives — if the industry collapses in North Carolina.

Vassar heads the North Carolina Production Alliance, formed in February to fight for the incentive. Last fall, Wilmington hired one of the state’s highest-profile lobbying firms, Charlotte-based McGuireWoods Consulting LLP, to twist legislators’ arms after a previous study it had commissioned Handfield to perform concluded that New Hanover County could lose out on $10 million a year in tax revenue if the incentive expires. Lobbying efforts also are underway in the Triad, Raleigh, Asheville and elsewhere, including Charlotte, where the local film commission is staging celebrity events to drum up support for keeping the credit. Richard Petty has been enlisted. A member of the Screen Actors Guild, the legendary racer calls the incentive “critical to having this industry in North Carolina.” EUE/Screen Gems resumed tours of the lot in late April.

Critics such as Rucho dismiss those arguments and statistics. “They’re exaggerating all this stuff,” he says. “If we’re going to be passing out money — and that’s what we’re doing — we ought to have a measure, and that measure is long-term, permanent jobs.” Rucho repeatedly quotes Locke Foundation reports that dispute what supporters claim. After the latest Handfield study came out in early April, another, commissioned by Wilmington Republican Rep. Rick Catlin and several other House members, ripped into the report, saying it was “based on a series of misunderstandings of the state’s tax laws, invalid or overstated assumptions and errors in accounting.” Done by the legislature’s Fiscal Research Division and focused on 2012, it concluded the state lost more than $33 million on the $84.2 million of credits that year. Critics attack on other fronts, too. Jon Sanders, the Locke Foundation’s director of regulatory studies, cites widely varying claims of returns, from $1.50 per $1 spent in New Mexico, to as much as $20.50 in Florida. “Findings with such enormously high multipliers are simply not believable,” he says. What’s clear, though, is that a nationwide arms race is underway.

North Carolina’s package makes it formidable but not invincible. Georgia offers up to a 30% tax credit with no caps — including a 10% bonus if a filmmaker gets the state’s peach logo into a scene. And it has begun pointedly telling location scouts that there’s no sunset clause. Louisiana goes even further, offering, among other things, 30% tax credits that can be sold back to the state at 85% of face value.

Film incentives aren’t just a Tar Heel issue. Forty-four states offer them, and many are equally torn. In Alaska, lawmakers are debating a bill to repeal them, arguing, as Rucho does, that they cost more than they’re worth. In March, the Oklahoma House refused to extend that state’s, as much for bipartisan condemnation of immoral Hollywood as their lack of economic benefit. On the other hand, California — its $17 billion-a-year movie industry being bled by North Carolina, Louisiana, New York, Georgia and other states — is debating increasing its
offerings, as are Florida and Pennsylvania. In Virginia, a bill would bump the credit from 15% to 20%, though that’s still less than North Carolina’s. A tea party conservative from the rural southwest section of the Old Dominion State sponsored the measure. Nationwide, a small industry has grown up evaluating film-incentive packages and advising moviemakers of the best deals. New Orleans-based Film Production Capital LLC rates states. Places with no incentive get no stars. Georgia and Louisiana earn five. North Carolina rates four, in a second tier with Massachusetts, Pennsylvania and several others.

Now, within weeks, politics rather than production values could determine North Carolina’s film career. For the moment, though, on a side street in the mercantile section of downtown Wilmington that dates to before the Civil War, policy matters are but ideological flotsam in a flow of green beer. It’s not yet noon, but inside the dim pub, the wait staff plies libations to a dozen patrons. It’s St. Patrick’s Day at Hell’s Kitchen, and sitting at a back table, Eric Laut pores over figures on his laptop. A former business-development manager, he moved from Chicago, enticed partly by the film economy, and bought the pub on Princess Street in February. “I like the dichotomy,” he says. “We’re actually a family place, but people think of Hell’s Angels when they hear the name.” There’s something else about the premises that isn’t as it seems.

“This wasn’t a bar to start with. It was just a historic old place they remade into a bar as a set for Dawson’s Creek. A local guy bought it when they finished and turned it into the real thing.” Illusion becomes reality in an enterprise built partly on fantasy. Critics insist that its economic impact is an illusion, too. Defenders say detractors can’t understand an industry that, instead of fabric or furniture, manufactures make-believe.

Sovereign states

0

Free & Clear: May 2014

Sovereign states
These 14 (and D.C.) rule when it comes to higher-than-average growth in both GDP and per capita income since 2000. North Carolina is not among them.

By John Hood

Does Oregon have a sizzling economy? By one measure — gross domestic product — the Beaver State has built an impressive record since the start of the 21st century. Its real, inflation-adjusted GDP growth has averaged 3.7% a year since 2000. That’s second-highest among the 50 states and District of Columbia and far above the national average of 1.5%. 

That’s not the only way to measure economic performance. GDP is an abstraction — a tally of goods and services produced and traded in dollars. As individuals, we care less about the abstract than personal experiences such as employment or income gains. According to another measure — per capita income growth — Oregon ranks 45th since 2000.

Arguments on the merits of economic metrics are more than academic. They affect public perception and shape policy. Tar Heel officials are looking to other states and localities for ideas and inspiration as North Carolina continues its slow recovery from the Great Recession. That’s healthy. Benchmarking is a wise practice for any organization, but its success depends on choosing the right subjects for comparison.

For example, high rates of GDP growth can reflect not only real gains in workplace productivity but also in-migration of retirees, college students or illegal immigrants. On the flip side, high rates of income growth may signify the out-migration of groups with low incomes. Instead of choosing a single indicator of economic growth, we would be better off comparing our state against those that perform well in a range of measures.

Using the latest data from the U.S. Bureau of Economic Analysis, I found 15 places that have enjoyed higher-than-average growth in GDP and per capita income in the 21st century: Alaska, Arkansas, D.C., Hawaii, Iowa, Kansas, Maryland, Montana, Nebraska, North Dakota, Oklahoma, South Dakota, Texas, Virginia and Wyoming. North Carolina wasn’t even close. While our GDP growth since 2000 ranked 19th, our growth in per capita income was an abysmal 47th. North Carolina exceeded the national average in both measures during the last three decades of the 20th century.

There is no common denominator across all 15 pacesetters, though there are interesting patterns. Nine have Republican-majority legislatures, three have Democratic ones, two are split, and one — Nebraska — is officially nonpartisan. Ten form a continuous belt stretching from Texas to Montana, Alaska and Hawaii touch the Pacific, and Virginia, Maryland and D.C. form a clump on the Mid-Atlantic.

What about the role of state services such as education and infrastructure? These 15 pacesetters have somewhat higher proportions of workers with high-school diplomas and college degrees than the rest of the country but differ little from the rest of the states in high-school graduation rates or reading and math scores. The link between education and economic growth consists of arrows pointing in both directions. Good schools are a plus. But fast-growing economies tend to attract skilled workers who were educated elsewhere.

The case for quality infrastructure as an explanation is a bit stronger. On average, pacesetters were significantly higher than nonpacesetters on an annual ranking of the quality and cost-effectiveness of state highway systems by the California-based Reason Foundation. Pace-setters fared better on two rankings related to economic freedom, from Fraser Institute in Canada and the Mercatus Center at George Mason University in Virginia. The 15 fastest-growing places had, on average, smaller government budgets, lower and flatter tax burdens, and a lighter regulatory burden than other states.

Perhaps the most revealing differences emerge when you examine industry mix. The natural resources and mining sectors — including agriculture, forestry, mining and especially oil and gas production — play a higher-than-average role in 11 pacesetter economies. In the other four, something else is going on. The post-9/11 growth in federal spending essentially has redistributed resources from the rest of the country to the region around the nation’s gluttonous capital (D.C., Virginia and Maryland) and to the country’s key Pacific outpost (Hawaii).

The latter is not a model that can be replicated elsewhere in the country, though Tar Heel leaders ought to make a spirited case for the continuing value of military bases such as Camp Lejeune and Fort Bragg. But when it comes to the safe, efficient transformation of natural resources into valuable exports, North Carolina may have the ingredients for success. State policymakers are setting up the regulatory process to permit exploration for oil and natural-gas reserves. And a combination of technological progress, managerial innovation and a new round of free-trade agreements could play to North Carolina’s strengths in swine, poultry and other agricultural products.

Naturally, state leaders should craft broad policies that make North Carolina a better place to do whatever business individuals might want to do here. But fascination with the “creative class” and other economic-development fads shouldn’t blind us to an important truth about the 21st century economy: It still runs on food, fiber and fuel. If you want rapid growth in both output and incomes, don’t ignore the economic potential of farming and fracking.

John Hood is chairman and president of the John Locke Foundation. You can reach him at jhood@johnlocke.org.

 

NCtrend: It’s cheaper in Charlotte

0

It’s cheaper in Charlotte

Feds claim they bought the mayor’s influence for only $48,500.

By Spencer Campbell

On March 26, the FBI arrested Charlotte Mayor Patrick Cannon, charging him with accepting cash, airline tickets, a Las Vegas hotel room and access to a luxury apartment in exchange for his influence. Though the affidavit is an entertaining read, with dialogue you might expect in a script for American Hustle 2, it leaves plenty of questions unanswered. 

 Cannon, who resigned following his arrest, became the focus of the probe in 2011 after an undercover agent “interacting with certain businessmen in a related investigation” learned of potentially corrupt dealings by the then councilman and mayor pro tem. Does that mean other locals — in the public or private sectors — are suspected of corruption? The Charlotte Observer reported that in 2011 a man claiming to be a Cannon associate told owners of cab companies that $10,000 in cash would get them lucrative contracts at Charlotte Douglas International Airport. Does business sometimes have to pay to play in the Queen City? And if so, what kind of wannabe world-class city has a mayor who can be bought for a measly $48,500?

 One thing seems certain: Cannon’s once-promising political career is over. After growing up in public housing, Cannon, 47, graduated from N.C. A&T University in Greensboro and became, at 26, the youngest person elected to Charlotte City Council and its longest-serving member when he was elected mayor last year. He also is CEO of Charlotte-based EZ-Parking Inc., which has management contracts with Charlotte Regional Visitors Authority, Charlotte Mecklenburg Library system and the Carolina Panthers.

 

 

 

 

 

 

 

 

Getting out of rehab

0

Getting out of rehab

Tax breaks for renovating historic buildings breathed life into dying downtowns. Now the credits are expiring.

By Greg Lacour

On a chilly, drizzly February morning, Nathan Kirby crouches in a downtown Gastonia alleyway, screwdriver in hand. He couldn’t find his drill. He labors to remove the sheet of plywood he had fixed to a doorway of a century-old neo-
classical building that once was — and, Kirby believes, will be again — a limestone-and-brick jewel. The screwdriver slips from his grip. “Damn it,” he mutters, then picks it up.

He pulls away the wood. The inside of the Lawyers Building is as it has been for three decades: vacant and dusty. Assorted bric-a-brac — sheets of drywall, stacked doors, an old cash register — clutter the dim interior. But sunlight reveals beauty beneath the dust. Half-moon windows, heart-pine floors, buttressed ceiling. Stone-faced elevators and brass fixtures in the lobby. You realize what Kirby — a developer who specializes in renovating historic structures — sees in it and why city officials believe its $4 million renovation will spur downtown’s rebirth.

“This ground floor was basically limestone. It was made with concrete and reinforced with steel, so the building is as tough as they come.” Kirby, 32, is boyish and unkempt. His thinning light-brown hair is unruly. His shirt is untucked. Even in the dank cold, he eschews a jacket. “They had a nuclear-fallout shelter in the basement.” It’s one of the oldest and most visible buildings in downtown. “If you listen to the cries of the community, the old-timers who have been here all their lives, all you hear is, ‘Nothing’s going to happen downtown until the Lawyers Building gets renovated.’”

It’s a familiar argument. Historic preservation is touted as a catalyst for downtowns, especially in small places struggling to survive population loss to big cities. To help pay for such rehabbing, the federal government enacted a historic-preservation income-tax credit in 1976, and North Carolina added one in 1998. Developers say they are necessary because of the cost and complications of restoring decades-old buildings. City and county officials, who often layer public funding on top of the credits, say incentives encourage development in downtowns that would otherwise stay dormant. “It really took off due to the tax credit,” says Janet Gapen, director of community planning services for Salisbury. “They really have fueled the revitalization of downtown.”

Statistics support her claim. Credits helped finance 1,324 projects for residential or commercial use between 1976 and 2007, generating an estimated $1.4 billion in economic output, according to The Historic Preservation Society of North Carolina Inc., a Raleigh-based nonprofit that buys endangered properties and sells them to people who will restore them. From 1998 to 2013, developers completed 716 income-producing ventures, totaling $1.2 billion of investment, the N.C. State Historic Preservation Office says. 

But the state credits are scheduled to expire at the end of the year, leaving potential development in limbo. In mid-April, Gapen and the Salisbury city manager met with a developer who wants to convert a downtown commercial building into 12 to 14 residential units. The estimated $1.2 million project would help fill the streets with residents primed to spend money at restaurants and other retailers, Gapen says. The city may offer the developer an incentive package, but that might not be enough. “He’s very concerned about tax credits. He actually said that could be a deal breaker.” 

Since 1976, 71 Rowan County projects have received historic-preservation tax credits worth $27.4 million, according to the state preservation office. During roughly the same period, developers renovated 288 buildings — not all of them historic — in Salisbury, the county seat, investing more than $117 million. “The impact of these projects is so far-reaching, from the renovation, redesign, construction, purchase of the building, their employees, people shopping at it,” says Paula Bohland, interim director of Downtown Salisbury Inc., which promotes the center city. According to the city’s 2013 fiscal report, more than 90% of downtown’s first-floor business and retail space is occupied.

“It’s a cumulative thing,” says Myrick Howard, who became president of Preservation North Carolina in 1978, two years after the birth of the federal credit. In theory, the renovator of a historic building for commercial use claims 40% of qualifying expenses — 20% from the federal credit and 20% from the state — as a credit on income taxes in years following the project’s completion. (Rehabs for residential use get 30% from North Carolina, which added an incentive for improving mill buildings in 2006.) The benefit dwindles to about 26% after navigating tax law, Kirby says. The credits, for instance, have to be counted as added income.

Still, they’ve been especially popular in small and midsize towns. Hickory, with about 40,000 residents, suffers from the collapse of its once-bustling textile and furniture factories. Its unemployment rate of 7% in February exceeded the state’s 6.4%. But shells of factories throughout the city are ideal candidates for renovation. From 2009 through 2011, the city issued $230,000 in development grants, the seed money for $1.3 million in private investment, Community Development Manager Dave Leonetti says.

Hickory’s biggest completed historic-preservation project is the $6 million renovation of Hollar Hosiery Mill. The 10,000-square-foot building, which opened last spring, contains event space, a 720-square-foot stage for musical acts, meeting rooms, a restaurant and catering service. “What it’s done is halt the decline as much as anything,” Leonetti says. “There’s definitely some momentum that’s been created.” It also enticed the owner of a larger former hosiery plant — the 85-year-old, 83,000-square-foot Moretz Mill — to begin a $9 million renovation that will accommodate a restaurant, gym, offices, apartments and retail space when it opens in late summer or early fall.

The private investment for Hollar Mill came mostly from three local families, who got about $100,000 in city grants. Cutting the red tape entangling the tax credits, however, proved troublesome. A Charlotte contact mentioned to the families that a young guy who had completed preservation projects in Gastonia and Monroe could help. Kirby didn’t put any of his own money into Hollar Mill but became a co-developer by helping structure the financing. “The thicker that stack can be, the more varied — from private but also public through grants, tax credits — the more sources, the more comfortable everyone is,” he says. “If you have a $10 million project, no one wants to get caught holding the entire bag.”  

Kirby grew up in Clinton, a town of 8,600 about 20 miles east of Fayetteville. Its tiny downtown stayed vibrant through the 1970s and 1980s, when other center cities lost business to Kmarts, Wal-Marts and other retailers that opened on the outskirts. Kirby recalls both of his grandfathers taking him downtown for hot dogs and ice cream. “To me, small-town downtown was the place to be. It seemed like every small town I went to, I was missing what I loved about home.”

Kirby never earned a college degree. He followed his parents into the insurance business but detested the work. He tried brokering real-estate deals on the side but found that fulfilling only when it involved an old industrial building someone wanted to save or rehab. He consulted Preservation North Carolina in 2005 about where he might make the biggest impact. He wanted a place with a wealth of older industrial buildings and little movement to restore them. Gastonia, he was told. His wife is a native, so he closed his insurance office and told her they were moving to her hometown. “I can be pretty impulsive,” he says.

His first project was the Groves Cotton Co. building, one of downtown Gastonia’s most dilapidated structures. Through a limited-liability corporation, he bought the two-story yellow brick structure from the city for $10,000. A mix of loans, private investments and tax credits covered the $1.5 million renovation. The building was divided into four apartments and an Italian restaurant that opened in 2008. In 2010, his company, Gastonia-based Downtown Pioneers LLC, completed redevelopment of the 51,000-square-foot Monroe Hardware warehouse, built in 1926. It includes 26 apartments and ground-floor retail space. The $6 million project qualified for federal and state preservation credits, and Monroe provided a $1.3 million, 10-year loan. The building’s tax value jumped from $200,000 to $4.7 million, according to a UNC Chapel Hill School of Government analysis of the project.

All along, Kirby eyed the Lawyers Building, which had housed a bank before evolving into law offices after the Great Depression. By the late 1980s, the final tenant had departed. In 2007, Kirby and Gastonia doctor and friend Charles Hutchins pitched a plan to convert the building into apartments and retail space. The economic collapse a year later scuttled that idea. He bought out Hutchins for $350,000 in 2012 and lined up federal and state tax credits. The city pledged 10 annual grant payments of nearly $60,000 plus a decade of property-tax exemption for turning the building into a 31-room upscale hotel rather than an apartment building. Downtown needs hotel rooms more than apartments, officials say. Three years ago, the city opened the $10 million Gastonia Conference Center. It has failed to meet expectations — losing $290,000 its first year, $35,000 more than projected — and city officials believe the lack of adjacent lodging was a factor. So Kirby plans what he describes as the 62nd iteration of his idea — a hotel with a bar, restaurant and “speakeasy” in a vault in the basement.

To the city, the property-tax break is worth the risk because a successful project eventually would generate significant property-tax revenue. “That’s money we would never get if the building were not rehabbed,” says Todd Pierceall, who chairs the City Council committee that guides downtown development. It’s unclear, though, if credits expand property-tax bases. Between 2000 and 2013, the assessed value of Rowan County real estate increased 65%. That of property in downtown Salisbury, hailed for its use of tax credits for revitalization, rose only 35%. In Gaston County, property values also increased at double the pace of that in downtown Gastonia, where little historic-preservation renovation occurred.

But few could say credits don’t encourage development. A mile west of the Lawyers Building sits Loray Mill, site of the bloody 1929 strike that culminated in the deaths of Gastonia’s police chief and a prominent union leader. It was once the world’s largest textile mill. The 111-year-old structure rises six stories and contains more than 600,000 square feet. Last year, Preservation North Carolina reached a deal with Palos Verdes Estates, Calif.-based JBS Ventures LLC and Atlanta-based Camden Management Partners Inc. for a $39 million renovation of the mill into 190 loft apartments plus office and retail space. Camden is financing the project with the help of a federal-housing loan and the promise of state and federal tax credits. It expects to complete the first phase this year.

“It took eight years [to get financing], and we could have walked away at any time. But we felt it would have such an impact on the city and community,” says Billy Hughes, a principal at JBS. “I’ve been at this for more than 20 years, and what we see happening — and you don’t learn this in Real Estate 101 — when you start renovating an old building in the center of town, all of a sudden people start to take notice.”

After a decade and a half, though, the credits may be on their way out. The program is scheduled to expire at the end of the year, a casualty of an overhaul the General Assembly passed in 2013 to simplify the tax code by eliminating exemptions and closing loopholes. All three state historic-rehabilitation tax credits — for commercial, residential and mill buildings — would be eliminated.

The legislature can revisit tax reform during its short session this month, but there is no plan to do so, says Rep. Julia Howard of Mocksville, the Republican senior chairwoman of the House Finance Committee. She and other legislators say they’re not opposed to the program per se; its elimination is just part of their larger push to simplify the tax code. Some lawmakers, though, think the credits are worth re-examining. “I know it’s a very important development tool,” says Rep. Mitchell Setzer, a Republican from Catawba County and Finance Committee co-chair. “What the General Assembly will do when it goes back in, I can’t tell you, but I’m hoping we can look at this again.”

Howard, president of Preservation North Carolina, admits the program could be simplified. He teaches a class on preservation at UNC Chapel Hill. “At the end of the semester, people still look at me like, ‘Huh?’” The credits benefit from a scheduled sunset of Jan. 1, 2015, rather than the year before, when Republicans, who had finally gained control of state government for the first time since Reconstruction, were intent on revamping tax policy. “We thought it would be better to wait to make our push until the General Assembly settled down a bit. 2014 is closer to elections, so people will move closer to the middle,” Howard says. Plus, the credits are popular. “No one wants to shut down a billion-dollar economic-development tool.” He believes the General Assembly would support them at a reduced rate, 15% instead of 20%. Mills or projects in economically distressed counties would get an extra 5%. 

If the program ends, Kirby says he will live in North Carolina but mostly work in other Southeastern states — Georgia, Alabama or Louisiana, which offers 25% state tax credits for commercial and residential renovations and an additional 25% credit if a residential project revives a blighted building. The threat of the North Carolina tax credit’s demise also imposes a hard deadline for the Lawyers Building project, which Kirby has to finish by year-end or risk losing the credit. He’ll probably work 20-hour days till then, but promises it will get done. It has to be. “I’ve had that conversation with my wife. She knows what’s coming.”

 

 

 

Welcome back

0

UpFront: May 2014

Welcome back

For the magazine’s new editor, it’s déjà vu all over again.

Not long after I hired Dave Mildenberg the first time, I got fired. That was 29 years ago at Fortune Media Inc., which has been out of business nearly that long but back then published Charlotte magazine and a couple of business periodicals. His coming — he had been a business reporter for The Charlotte Observer — had nothing to do with my going. The publisher and I butted heads over what I considered an ethical issue, so I quit, was persuaded to return, then canned.

Five years later, I hired Dave again. By then, I was editor and publisher of this magazine and he the business editor of the Greensboro News & Record. After four years as BNC’s managing editor and then executive editor, he realized he missed the adrenaline rush of daily newspapers and returned to the Observer as its assistant business editor. That was 20 years ago.

After the Observer, he spent nine years, broken by a year teaching math to seventh-graders in Charlotte-Mecklenburg Schools, with American City Business Journals. He was a reporter for its Charlotte weekly, editor of the Raleigh one and on the corporate staff back in the Queen City developing a Web strategy for ACBJ’s 40-plus papers nationwide. Dave then worked seven years for New York-based Bloomberg News, one in Atlanta covering transportation, three in Charlotte reporting on finance and three in Austin on the news service’s municipalities/states team. Now he has returned from Texas to be our new editor.

“No other place felt like home,” he says, “not surprising given my previous tenure in North Carolina. I missed friends and relationships I made working in our state’s three major metro areas. And I wanted to work for Business North Carolina again because it offers an opportunity to produce insightful journalism about key people, institutions and trends. BNC has staked out a niche as an irreverent, valued publication with a passion for explaining what makes the state tick. It highlights the best and worst of our state without bias or pretense.

“I feel lucky to be part of a three-decade-old institution that has employed a string of talented people and published work by some of this state’s best writers. Glossy magazines that do not pander are increasingly rare in the digital age. I hope I can use my experience, here and out of state, to help make this one even more distinctive and valuable to our readers and advertisers.”

Like many modern Tar Heels, Dave, 54, was not born here, though he’s quick to point out that his wife, Janet, grew up in Charlotte. A native of Minnesota, he earned a bachelor’s in journalism from Northwestern University in suburban Chicago and has an MBA from UNC Charlotte — which he finished during his last gig at BNC. “My goal,” he says, “is to help a great staff make this magazine thrive because the state deserves diverse and independent editorial voices. And a locally owned, private business is about as independent as one gets with the media increasingly dominated by large companies based outside North Carolina.” 

kinney@businessnc.com

Seed money

0

Seed money

Is it too late in the season for venture capital to nurture the growth of biotechs?

By Spencer Campbell

If money follows innovation, North Carolina companies have been pretty prosaic the last few years. The amount of venture capital flowing into the state in recent years can best be described as a trickle. One industry, however, might be turning things around. According to The MoneyTree Report, a summary of U.S. venture capital compiled from Thomson Reuters data by PricewaterhouseCoopers and the National Venture Capital Association, Tar Heel businesses received $110 million in the fourth quarter of 2013, the state’s largest quarterly total in three years. Biotechnology companies got more than $70 million.

But even biotech backers are skeptical of the boost. “I wouldn’t read too much into a quarterly spike,” says Peter Ginsberg, vice president of business and technology development of North Carolina Biotechnology Center, a Research Triangle Park-based nonprofit, adding that investment was low in the previous quarter. “But the IPO activity is a real plus. We really haven’t seen that in a long time. It brings a lot of attention to the North Carolina industry.” In the 12 months that ended April 1, 11 Tar Heel companies went public. Five are biotechs.

Venture capitalists invest in risky companies in hopes of rich returns, and life science has provided plenty of plunder lately. The iShares Nasdaq Biotechnology Index grew 60% in 2013, compared with the S&P 500’s increase of 26%. “When the public markets are clearly supporting risk takers, it begins to prime the pump down the line for more venture-capital investment,” says Michael Easley Jr., the ex-governor’s son and a lawyer in Raleigh-based McGuireWoods LLP’s life-sciences group. And North Carolina has plenty of biotech companies in the pipeline.

Large companies — such as GlaxoSmithKline PLC, Monsanto Corp. and Biogen Idec — anchor the sector as tenants of Research Triangle Park. The three nearby research universities turn out a talented workforce and research rich with commercial possibilities. And contract-research organizations such as Raleigh-based Quintiles Inc. and Wilmington-based Pharmaceutical Product Development LLC guide products through complicated clinical trials. Between 2000 and 2010, the number of biotech companies grew 41%, increasing to 2,509. They employed 62,386, up 43% during the same decade.

While the state’s infrastructure supports biotech, early stage funding has been scarce. Only three firms in the state — Intersouth Partners, Hatteras Venture Partners and Pappas Ventures, all Durham based — invest primarily in life science. “There’s not enough funding from local groups,” says Ginsberg, who has guided hunts to San Francisco and Boston, where the financial side of the industry resides. 

The biotech bandwagon might hit a roadblock before it really gets rolling. The Affordable Care Act and demands to cut health-care spending threaten to impose price constraints on pharmaceuticals and medical devices. That would stymie innovation, according to the Massachusetts Biotechnology Council, which suggests venture-capital firms are already throttling life-science investments. The market might already be responding to the risk. The biotech index was down 5% in 2014 through mid-April. “We’re seeing a market correction from 2013,” Easley says.

 

 

 

 

Click here for the list of Top Technology Employers in North Carolina.

 

 

NCtrend: Gender studies

0


Gender studies

Women get paid less than men virtually everywhere, but the gap is smaller in North Carolina. Full-time female workers here make an average of $34,421 a year, $7,438 less than men. That disparity — 82 cents for every dollar earned by a man — is 11th slimmest in the U.S., according to Census data compiled by the National Partnership for Women & Families. “Any gap is too big a gap,” says Vicki Shabo, vice president of the Washington, D.C.-based nonprofit. “But North Carolina is better than other places.”

 The state’s women also are more entrepreneurial than the national average, with the number of female-owned businesses increasing 91% to 267,800 since 1997, the third-highest rate among states, according to a March report by New York-based American Express Co. Those businesses only ranked 41st in revenue growth and employ 268,300 — about one worker per company — reflecting how startups typically begin with low sales and few employees, says Julie Weeks, president and CEO of the Michigan research company that produced the report. North Carolina was 17th in total performance — an average of business, revenue and employee growth — of women-owned businesses from 1997 to 2014.  

 North Carolina has a higher share of women in white-collar jobs, where pay scales are typically more in line with men than in other occupations, Shabo says. Still, American women have a long climb ahead of them. In 1963, they made 59 cents on the dollar, compared with men. That’s risen to 77 cents, but research indicates they won’t pull even until 2058.

 

 

Women-owned companies in North Carolina

 

 

 

 

 

 

 

 

 

 

 

 

Down and dirty

0

Capital Goods: May 2014

Down and dirty
The threat from coal ash is not new, but fate dealt the governor a bad hand when his former employer spilled massive amounts in a river on his watch.

By Scott Mooneyham

When a big story or scandal breaks, political observers look beyond the news and ask the most important question: “Has it got legs?” They want to know if it will have lasting ramifications. If so, to what extent? Operating in an environment where even the fairly trivial (anyone remember the Thom Tillis college-credentials flap?) warrants a day or two of coverage, it’s easy to get caught up in the moment. Politicians and their handlers may view a bump in their road as Mount Mitchell.

But there are peaks that cannot be scaled without puncturing  political dreams. A mountainous upheaval occurred when coal ash started pouring into the Dan River in early February (cover story, April). Fair or not, the political career most imperiled by the spill was that of Pat McCrory. Imagine a screenwriter pitching a script to a Hollywood producer. It’s the story of a governor facing an environmental catastrophe. With his critics nipping at his heels, the feds launch a criminal investigation. “Here’s the kicker,” the writer would reveal. “The governor worked most of his life for the company that caused the disaster.” He’d probably be laughed out of the office, the producer deeming the 
plot too contrived.

Sometimes real life feels that way. McCrory worked nearly 30 years for Charlotte-based Duke Energy Corp., which operated the coal-fired Dan River Steam Plant in Rockingham County. The company shut it down in favor of a gas-turbine one a few years ago. But coal ash, in a 27-acre reservoir next to the river, remained. When a pipe under the pond ruptured, at least 35 million gallons of gray sludge laced with toxic metals leaked into the river.

It’s not obvious that McCrory, at that point, could have done anything different than he did to improve the situation. His environmental chief, John Skvarla, made public assurances and answered questions. Four days after the spill was made public, McCrory was at the site. He formed a task force to study how to deal with other coal-ash ponds around the state, almost all of them on Duke property. After some initial cautiousness, he berated his old employer. In a letter to CEO Lynn Good, the governor wrote “as a state we will not stand by while coal-ash ponds remain a danger due to their proximity to where so many North Carolinians get their drinking water.” On April 16, he proposed legislation to close the lagoons or convert them to landfills.

Of course, he cannot undo the past. The leak had barely been stopped before criticism rained down on a McCrory administration decision to intervene in a lawsuit brought against Duke by environmental groups over coal-ash pollution. The state reached a settlement with the utility that did not require cleaning up the ponds. A federal prosecutor opened a criminal investigation — subpoenaing records and convening a grand jury — into potential coziness between regulators and Duke. Meanwhile, environmentalists and the governor’s political adversaries reminded voters that McCrory and fellow Republicans had embraced legislation to scale back regulation. However, the most damaging past relationship, which McCrory cannot undo, is his own Duke tenure.

This problem isn’t going away. Even if he or his administration isn’t implicated, the probe could drag on for years. If the feds disappear, the coal ash will remain. Besides its threat to rivers, ash in storage lagoons had been leaching toxic metals into the soil and, potentially, into groundwater. Cleaning it up will take years, even after everyone agrees on how to do it.

In his expected campaign for re-election in 2016, McCrory can point out that his Democratic predecessors as governor ignored the environmental danger for decades. His Democratic opponent most likely will be Attorney General 
Roy Cooper, whose deputies represented state regulators in some of the litigation related to coal ash that is being criticized. Even so, McCrory’s response to the Dan River disaster will require the kind of political skill he didn’t demonstrate during his first year in office. He ran and won as a moderate Republican in 2012 — and North Carolina remains a purple state — but has let a conservative legislature paint him into a corner.

Even his call last month for tighter regulation drew fire from critics, who noted it would not require Duke to remove ash from all its sites — which the utility says 
it doesn’t need to do. In a preview of what we’re likely to see in 2016, the New York-based National Resources Defense Council ran television advertising in March that tried to blame the spill on the governor. The ad concludes, “Pat McCrory has coal ash on his hands.” It will take a while to wash it off.

Scott Mooneyham is editor of The Insider, www.insider.com. Email him at smooneyh@ncinsider.com.

 

Data mine

0

Data mine

Google’s search engine superiority is powered in part by a billion-dollar data center in Lenoir.

By Edward Martin

Google Inc. doesn’t relinquish many of its data centers’ secrets, but it has revealed some. Others have leaked out. The tech giant’s big-data dozen handle more than 3 billion “googles” a day, their servers responding 200,000 times faster than a home Internet connection. “Capital of North C … ,” someone types, “ … Raleigh,” they answer. A desktop computer stores about a terabyte of data. There are 1,024 terabytes in a petabyte. A petabyte of songs would play for more than 2,000 years on an MP3 player. The combined memory of Google’s data centers is measured in petaflops, one of which equals 1 quadrillion calculations per second. That’s 15 zeros.

In 2007, Mountain View, Calif.-based Google built a $600 million data center in Lenoir — for which it could get more than $260 million in tax incentives over 30 years — and doubled its investment at the 215-acre property last year. It was not one of the city’s top 20 employers last fiscal year, according to Lenoir’s annual report, but it has about 150 workers who mend and care for about 50,000 servers. They aren’t the most advanced — the Tianhe-2 supercomputer in China can handle 33.9 petaflops — but their muscle comes via teamwork. They are strung together, a tactic called commodity computing, to increase power exponentially while managing costs incrementally.

So much thinking makes even servers burn. That’s why much of the investment in the Lenoir data center isn’t in computers. Miles of pipes connecting valves, water tanks, cooling towers and condensers work together to keep the servers comfortably cool. The company won’t reveal how much electricity the center consumes, but a federal study estimates similar ones use as much power as a city of 20,000. Lenoir has about 19,000 residents.

Google tries to assuage environmentalists by stretching every kilowatt. “We’re proud that we’ve got some of the most-efficient data centers in the world,” says Michael Terrell, head of Google’s energy-policy division. “They’re 50% more efficient than the typical industry data center.” Efficiency is measured by power-usage effectiveness, a ratio between power entering a data center and power used in computing. The perfect score is 1.0, which Google would achieve if every electron answered queries and handled messages for its 425 million gmail users rather than a portion of it powering the cooling and distribution equipment. A January 2013 survey of large North American companies by San Francisco-based Digital Realty Trust Inc. — which owns, develops and operates data centers — reported an average PUE of 2.9. The average for all of Google’s data centers was 1.1 during the fourth quarter of 2013. The company is working with Charlotte-based Duke Energy Corp. to buy only renewable energy, even though it may be more expensive.

Moore’s law holds that the world’s computing capacity doubles every two years. How many petaflops will be needed in 24 months? Google is already working on ways for the Lenoir data center to help cover the added zeros.