Saturday, May 25, 2024

Tale of the spreadsheet: Looking for NC trends in economic development

North Carolina is an economic development hot spot. It seems like every week, some company is announcing it is coming here or announcing a big expansion to facilities already in the state.

Last week, Google announced it will open a cloud engineering hub in Durham that may grow to more than 1,000 jobs. The same day, Fujifilm Diosynth Biotechnologies said it will build a manufacturing facility in the Wake County town of Holly Springs, with 725 jobs.

I have been here 25 years. I constantly run across companies that have been here a while, and I think “When did they get here?” I’ll be somewhere and see a sign for XYZ Corp. in front of a big building, and have no idea what XYZ does here.

This is not a bad problem to have, because it is the result of a lot of jobs and investment coming to the state. But it did make me want to determine if I could see some of the larger patterns. I started, as I always do, by creating a spreadsheet.

I went back five years, using the job announcements made by the governor’s office or NC Commerce Department: new companies coming to North Carolina, or existing companies expanding that are eligible for the major state incentives – Job Development Investment Grant and One North Carolina Program.  The Commerce Department web site has all these announcements going back more than a dozen years, to the Easley administration.

These aren’t all the corporate relocations or expansions that have happened, because a lot of companies don’t get incentives or state press releases. And there are other programs, like the rural infrastructure grants, that also support job creation. But the JDIG and One North Carolina are two that are associated with the bigger projects, and provide insights into the kinds of companies and industries that are growing here, and where they are going.

There have been more than 250 of these announcements by the governor’s office over the past five years, according to my review of the Commerce releases. More than two-thirds of N.C. counties have gotten at least one project.  The big draws are workforce and location.  Companies want an adequate pool of skilled workers and, in many cases, access to interstates so they can ship quickly to customers. One of our great advantages is our proximity to major markets in the eastern half of the country.

Over the past five years, around 60% of the nearly 58,000 new jobs announced in these press releases went to Tier 3 counties. These are the 20 economically most well-off counties, as ranked by Commerce.  Nearly 24% went to Tier 2 counties, which are (in years without ties) the 40 next well-off counties, and around 15% went to Tier 1 counties, which are the state’s least economically well-to-do 40 counties.

The jobs that went to the Tier 3 counties, like Mecklenburg, Wake and Durham, were higher paying, looking at the five-year span, averaging more than $71,000, with eight companies saying they would pay $100,000 or more.  Jobs in Tier 1 counties averaged around $43,500 and Tier 2 jobs averaged nearly $49,000.

Many jobs that are created in the Tier 1 counties are manufacturing, assembly and packaging jobs. They require a trained, dependable workforce. And the jobs are scattered in a wide variety of industries. One of North Carolina’s chief goals, going back to the 1950’s in economic development, was to get away from being so dependent on furniture, tobacco and textiles.  We have gotten there. Enter a plant in rural North Carolina and you are liable to see auto parts, fiber optics, advanced materials, pet food, rail equipment and elevators.

But the best jobs have gone to the Tier 3 counties in the metropolitan areas.  They aren’t steered there by the state. For companies relocating or expanding, their decision process typically starts with the availability and quality of the workforce.  Companies in life sciences, information technology, and financial services want highly skilled, highly educated employees and access to the universities that train them.

That is why, in the past five years, you have seen big announcements like Credit Suisse (1,200 employees),  Infosys (2,000), and Bandwidth (1,165) in Wake.  That is also why you have seen Allstate (2,250), AvidXchange (1,229), Lowe’s (1,600) and Centene (3,237) in Mecklenburg.

But there have also been significant wins for rural counties. Cleveland County is a Tier 1 county west of Charlotte that companies like a lot.  It had nine projects on my spreadsheet over the past five years, totaling more than 1,300 jobs. Rowan County, between the Triad and Charlotte, landed the online pet food retailer, Chewy, a 1,200-job announcement in 2019.

Again, the announcements on the Commerce site aren’t an all-inclusive list of every new corporate arrival or expansion.  The Economic Development Partnership of North Carolina, which is the lead business recruiter and marketer for the state, said in its annual report last week there were 147 new corporate location and expansion deals in 2020, expected to create 20,026 jobs and $6.3 billion in investment. The 2020 investment figure is the highest in the past decade.

I used the Commerce releases for my spreadsheet, with nearly 60 announcements and nearly 14,000 jobs in 2020. I think it is significant when governors and commerce secretaries announce projects, including specific numbers of jobs, timeframes, salary ranges, and potential incentive money.

For example, the Google announcement last week was not announced by Gov. Roy Cooper. Google announced the Durham project along with other projects around the country.  There was no state press release. A Google spokesperson said the company would not be seeking incentives. Cooper sent out a tweet, and recorded a video welcoming the project.

The Fujifilm project, by contrast, got an official state press release, with discussion of the incentives and other details, as have five other projects so far this year.

Around 30% of the past five years’ announcements involved foreign companies, or companies with foreign parents.  One of the focuses of EDPNC is working with foreign businesses to locate new facilities or expand existing ones. The U.S. is a great market and there are many advantages to being here and close to customers.

A couple postscripts: There is frequently a lot of focus in coverage of announcements on the dollar amount of incentives. Fujifilm said it intends to spend $2 billion and hire 725 workers. The headline incentive number was a $19.7 million potential reimbursement to Fujifilm in JDIG money.  But that depends on Fujifilm coming through with the jobs, over 12 years, and at least a $1.5 billion investment. Essentially, the money reimbursed to Fujifilm is a portion of the increased state tax revenue paid by new future employees. Over those 12 years, new state tax revenue of $160 million is expected to be generated by those jobs, according to Commerce estimates.

Each year, state officials, including from Commerce and the Revenue Department, will look at tax receipts flowing from those jobs to determine how well the company has met its obligations. The incentive deal is essentially a contract between the company and the state.

Another part of the incentive process that usually ends up at the bottom of press releases and doesn’t get much attention is how projects in Tier 3 counties can spin off cash for rural counties. When a company enters into a JDIG agreement in a Tier 3 county, some of the new tax revenue will go into something called the “Industrial Development Fund – Utility Account.” Communities in economically challenged areas of the state can get grants from the account for infrastructure projects to help them land new companies. In the case of the Fujifilm project, that could put $6.5 million into the account.

Which is a good idea. We are one state. Fujifilm wants to be in the Triangle, a life science cluster with three world-class research universities. But its expansion will help build capacity in places that can use the money.





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