Published: Sep 12, 2005

Cities willing to pay for jobs

Towns use incentives to lure businesses, but the long-term effects are unknown

By Ryan Teague Beckwith, Staff Writer

They are as different as two towns can be in Wake County.

Apex is a booming bedroom community southwest of Raleigh, not far from Research Triangle Park. Zebulon is a small town, heavy with industry, on the county's rural eastern edge.

That may be why they have taken two radically different approaches to recruiting business.

Like a growing number of towns in North Carolina, Zebulon will give cash grants to major new employers and expansions. Elected officials in Apex say they will not.

The debate is a microcosm of arguments about state economic incentives like

 those given to computer maker Dell, which is building a $100 million plant in the Triad.

For Zebulon, the grants mean jobs for neighbors and friends, with a trade-off of hundreds of thousands of dollars of future tax revenue. For Apex, they're a giveaway of residents' money with a questionable record of results.

Zebulon Mayor Bob Matheny said the grants have become a necessary part of the business recruitment game.

"When the Dell deal went through, all of these people stood up and took notice," he said. "Companies began to say, 'Hey look, we're of value to your community. What's it worth to have us here?' "

But Apex Mayor Keith Weatherly isn't sure it's a game that towns can win.

"You get into a bidding war, and it's a net loss," he said. "I'm not convinced that there would ever be a case that I can envision where it would be a worthy expenditure of our money."

Apex is increasingly alone on the issue among Wake municipalities. Cary and Morrisville have already offered grants, and Knightdale and Raleigh are considering them. Holly Springs has a written policy on grants.

Despite the talk of jobs, the issue for towns is their own bottom lines.

The business of municipal government -- police, fire, water among other things -- is mostly paid for by local property taxes. New homes demand more services but often don't bring in the extra tax money to offset the increased costs.

As a result, towns pursue big businesses, which pay high tax bills and don't ask for much in the way of services.

In years past, that meant setting aside land for relocating companies, extending roads and water lines to new factories at reduced rates or providing training at the local community college for employees.

Simply giving the companies cash is a relatively new idea in Wake County.

It began in 2003 when Morrisville offered $605,000 to a Florida drug maker in a deal that later fell through. The next year, the town of Cary kicked in $25,000 to keep a phone book publisher from crossing into Durham County.

By far the leader is Zebulon. This year, the town has offered two grants: $1 million to British drug company GlaxoSmithKline and $150,000 to synthetic wine-cork maker Nomacorc.

In both cases, the grants were given because of the state's One North Carolina fund, which requires a local match. But the town has also written a policy that could give grants even if the state is not involved.

Under the policy, any industrial company that is spending $10 million and creating at least 50 well-paying jobs can qualify for a grant that would be paid after it has made the improvements.

Not everyone in town is happy with the policy.

Kenny Stancil, vice president of Future Graphics, a Zebulon commercial printer with 40 employees, said the grants should be given to medium and smaller-sized companies instead of major corporations.

He argues that a big company is less tied to the community and causes more disruption to the local economy when it leaves. Giving out smaller grants would spread the risk around, he said.

In Apex, the debate over grants is largely hypothetical.

Unlike Zebulon, the town has a much smaller industrial base and more expensive homes that pay more in property taxes. Its residents are more white collar and less likely to work in town.

When other Wake towns began giving grants, Apex staff asked elected officials for their positions.

At a planning retreat earlier this year, the board of commissioners and mayor decided against writing a policy on incentives, saying they do not think that they are worthwhile.

Commissioner Bryan Gossage said giving private companies taxpayer money is irresponsible.

"If that company is not paying the taxes for their roads or their infrastructure, then that money has got to come from somewhere," he said. "In all likelihood, that is our citizens."

Ken Atkins, economic development director for the Greater Raleigh Chamber of Commerce, said that towns that don't offer grants can miss out on business opportunities down the road.

"If your community is on record as not doing incentives, it's very unlikely that you're going to be looked at for future projects," he said.

So far, the town has not had any serious inquiries about incentives, although a few smaller companies have hinted at the subject, said Weatherly, the mayor.

Still, even he would not rule out grants entirely, saying the right project could change his mind.

"It would have to be a really unique circumstance," he said.

Staff writer Ryan Teague Beckwith can be reached at 836-4944 or rbeckwit@newsobserver.com.