Haywood prosperity limits economic development opportunities

By Vicki Hyatt | Dec 10, 2012

If there is one area that prosperity relative to other areas in North Carolina is a disadvantage, it in the world of economic development.

Earlier this month, Haywood County moved from the middle tier when it came to the incentives available to new or expanding industries to the most prosperous tier. It’s a move that Mark Clasby, the county’s economic development director, viewed with mixed feelings.

“It’s great that we’re doing better than the rest of the state, but we won’t be getting big projects.”

In Haywood County, a “big” project was one like the expansion of Sonoco in Waynesville where the company is set to receive $315,000 in tax incentives for its expansion that will create 35 new jobs.

In this case, the economic incentives that could be offered were significant in landing the deal.

“I was competing against Missouri and South Carolina for this project,” Clasby said. “It was all about the bottom line. In Buncombe, Wake or Mecklenburg counties it might not be as critical, but for a rural county, it makes a big difference.”

 

How incentives work

In North Carolina, the 40 lowest-performing counties are classified under state law as  “tier 1,” a ranking that provides businesses creating at least five new jobs with a $12,500 tax credit per new job and a 7 percent tax credit for  business property expenditures.

Tier 2 counties, the 40 middle-performing counties in the state, can offer businesses that create at least 10 jobs a $5,000 tax credit per new job and a 5 percent tax credit for eligible business property expenditures of more than $1 million. This is the tier where Haywood County was ranked in 2012.

Tier 3 counties, the 20 counties with the most robust economic indicators, can only offer tax credits to businesses creating at least 15 new jobs. The amount drops to $750 per new job and there is only a 3.5 percent tax credit for eligible business property expenditures of more than $2 million.

The formula is set forth by statute and is adjusted annually based upon various economic performance indicators, including unemployment rate, population growth and the property tax rate.

In Haywood, the unemployment rate is the 15th lowest in the state, Clasby said, and in population growth, the county moved from 59th to 38th, moving upward 21 places. Haywood’s property tax ranking is lower than 75 percent of the counties in the state.

 

What’s at stake

While the tier rankings are calculated annually by the N.C. Department of Commerce, they apply to more than just state tax incentives, Clasby said. For instance, The Rural Center, which provided funding over a two-year period to renovations at the Imperial Hotel in Canton, also uses the commerce department tier rankings in determining which projects to support.

“A lot of us don’t like tier system because we think it penalizes rural counties,” Clasby said. “Incentives are another tool in our toolbox and sometimes it is the incentives that will make or break a deal. I would rather be a tier 2.”

The very first consideration when companies are looking to relocate is the all-familiar “location, location, location,” Clasby said. Work force, quality of life and tax issues are important, too, but once communities have made the cut on those factors, the tax incentives that become available are the equalizer.

“It’s all about the bottom line,” he said.

The new tier calculations might not be as much of a reflection of prosperity in Haywood County as they are the conditions in other parts of the state which aren’t faring as well.

“This basically says we’re doing better than 80 percent of the counties in North Carolina,” he said. “We just need to see what we can do to improve competitiveness.”

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