As North Carolina lawmakers and Gov. Beverly Perdue (D) struggled to cut spending and raise taxes to cover a $4.6 billion budget deficit, they gave Apple Computer a multimillion-dollar package of tax incentives to build a data center with 50 employees.
The abatements will save Apple about $3 million per year and could go as high as $12.5 million.
The company expects to create 50 jobs for the state, with possibly another 250 contractors getting work related to the so-called “server farm,” a warehouse filled with computers to host and support Apple services and downloads.
“It’s not something we want to do,” state Sen. David Hoyle (D-Gastonia), who sponsored the bill, told Raleigh NBC affiliate WNCN-TV regarding the June 1 deal. “It’s something that is a necessity. We have got to rebuild this state’s economy.”
North Carolina’s unemployment rate stood at 10.8 percent in April, its third consecutive month in double digits and among the five states with the highest jobless rates.
Opponents of the incentives—mostly Republicans—said the state should make its tax structure more friendly to all businesses by lowering disincentives such as the state’s corporate tax rate, which at 6.9 percent is highest in the Southeast and ninth-highest in the nation.
‘Argument Almost Ludicrous’
“This particular deal is being advertised for jobs,” said state House Minority Leader Paul Stam (R-Apex), “and yet there are so few jobs involved, it makes the argument for it almost ludicrous.”
The Apple deal is not North Carolina’s first foray into targeted incentives for high-profile technology companies.
In 2004, state and local governments offered Dell Inc. $280 million in various breaks to build a computer assembly plant in Winston-Salem. In 2007, economic development officials convinced Google to build a data center—larger than Apple’s—in little Lenoir, North Carolina, at an estimated cost of more than $200 million in city and county tax breaks.
Disappointing Job Creation
In December, however, Google announced it would forgo its right to apply for a $4.7 million grant from the state attached to job creation. Instead of creating 210 jobs and spending $600 million in the state per the incentives agreement, Google had slowed construction of its facility and employed only 50 people by that time, the Triangle Business Journal reported.
As North Carolina moved to close its deal with Apple, another company it had rewarded with incentives declared bankruptcy. R.H. Donnelley Inc., a publisher of Yellow Pages directories in 28 states, announced on May 29 it would reorganize under Chapter 11 protection of the bankruptcy code. The company employs about 570 people in the Raleigh area but cut 20 percent of its workforce in 2008.
The state gave Donnelley $4.3 million in incentives in 2003 to relocate its headquarters to the Raleigh area.
Paul Chesser ([email protected]) is a special correspondent for The Heartland Institute.