The Transylvania Times -

Incentives Are Not A Panacea


January 18, 2018

In the past several years, numerous states, including North Carolina, have offered incentives ranging from hundreds of millions of dollars to billions of dollars in order to lure large corporations. While free market purists denounce incentives as government intrusion into the free market, most states have embraced incentives in order to remain competitive with other states.

North Carolina has continually refined its incentives policy so that it can provide magnanimous packages to large corporations while making those incentives contingent upon the actual employment of thousands of people. Thus, when it was announced that Toyota and Mazda, in a joint venture, were looking for a location to build a new manufacturing plant, North Carolina jumped in. Apparently 11 states were competing for the plant, but the competition was culled to two states, North Carolina and Alabama.

Last week it was announced that Toyota and Mazda decided to build the plant in Alabama.

It’s not that North Carolina officials did not offer a good incentive package. North Carolina offered $1.5 billion in incentives, a remarkably high figure considering that the new plant itself has a projected value of $1.6 billion. By comparison, the state of Alabama offered a reported $380 million in incentives. It is not known what other benefits may have been offered by the city of Huntsville, Ala., but they certainly would not have been more than the state of Alabama itself and not nearly enough to compensate for the $1.2 billion more that North Carolina offered.

And it’s not that the state did not have a prepared site. North Carolina has developed four sites large enough for auto manufacturing plants and the one proposed to the Toyota and Mazda representatives is a 1,900-acre site on the border of Randolph and Guilford counties not far from I-85, which has become an industrial corridor.

So why did Toyota and Mazda select Alabama? One reason is that many auto suppliers are located near Huntsville. The new plant will lie approximately miles from another plant where Toyota builds 70,000 engines annually.

“One of the things that we were continually bumping up against was the Toyota supply chain,” said N.C. Commerce Secretary Tony Copeland.

Another quite arguable reason is the preparedness of North Carolina’s workforce. Copeland told the Raleigh News & Observer that the Japanese firms were convinced that this state has a good supply of people who could be trained to work at the plant. But Joel Leonard, an industrial labor expert from Randolph County, where the plant would have been built in North Carolina, told the Greensboro News & Record that losing the plant should serve as a “wake-up call.”

“In my opinion, it’s the best thing that could happen because we’re not ready for it,” said Leonard. “We’re putting in the infrastructure, but we don’t have the community structure.”

When people think of a state with a well-educated populace, Alabama does not spring to mind.

But most states have areas that run counter to overall impressions and Huntsville, Ala. is one of those. Huntsville is home to NASA’s Marshall Space Flight Center, the U.S. Army Aviation and Missile Command at Redstone Arsenal and Cummings Research Park, which contains such businesses as IBM, Northrop and Lockheed. Huntsville is to Alabama as the Research Triangle Park is to North Carolina.

Alabama evidently has a trained workforce ready and able to produce vehicles. It has a history of luring automobile manufacturers to the state. That experience also probably played a role. As John Boyd, a site selection expert told the Raleigh newspaper, “I think ultimately Toyota did not want to be pioneers. They did not want to be the first auto assembler in North Carolina, despite all the positive things it has going for it.”

If the goal is to lure businesses to this state or this community, we need to make sure we have all of those positives: a good workforce, ready-to-build sites or available buildings, access to good transportation, a reasonable tax structure and a high quality of life. These are just as important as incentives. The Toyota-Mazda decision should teach us that.


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