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What Entrepreneurs Want

Pour I think you are wrong on the taxes. The .10 is on top of county tax. *153A-317.**Research and production service district taxesTaxesauthorized; rate limitation.

(a)********Tax Authorized. -*A county, upon recommendation of the advisory committee established pursuant to G.S.*153A-313, may levy property taxes within a research and production service district in addition to those levied throughout the county, in order to finance, provide, or maintain for the district services provided therein in addition to or to a greater extent than those financed, provided, or maintained for the entire county. In addition, a county may allocate to a*service*district any other revenues whose use is not otherwise restricted by law. The proceeds of taxes only within a*service*district may be expended only for services provided for the district.



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So that 0.10 per $100 is not property tax as has been talked about for years, but is the service part. Durham assesses a service tax between 0.05 and 0.25 per $100..that's fire, police, etc. That's the part the law limits. So when I've heard Durham gets 0 taxes, that's the city of Durham, not the county. That makes more sense.

But....the service fee was only added to allowable in the mid 1980s, so prior to that there was no service fee allowable. That means the first 25 years there was a set small tax incentive. There are also infrastructure incentives in RTP, a lot from the state. And talking about the tax structure of RTP 50+ years after it started is meaningless to the original tax incentives, which were plentiful at the beginning to attract business...the same type of incentives given to an auto plant. That's the issue, not how it evolved. Centennial Campus for example is attracting business because of tax incentives. Apparently it is one reason Lucent chose Centennial over RTP.

So again, was it a mistake to invest in RTP......and now in Centennial Campus...using tax incentives????? That's the real salient point. One could easily argue that RTP is a great example of how tax incentives work. You still haven't made a single argument about how it's different than the auto plant you hate.
 
Well, first we had to get to a basic agreement on how RTP works, which I think we now have, before we could meaningfully discuss differences between RTP and an auto plant.

Second, I don't hate auto plants. I just think that state and local government should invest taxpayer dollars wisely and in a way that maximizes taxpayer ROI.

So, let's compare RTP to the Triad megasite unicorn.

RTP: State and private universities establish an area, funded largely by private benefactors, and build some infrastructure. Infrastructure is held by a foundation controlled by the elected representatives of the state of NC. Land within the park is sold to private companies (let's assume at something close to FMV, although there clearly could have been some discounting, I don't know. The point being, the land was not and is not given away to private companies). Private companies in the park pay property taxes to Durham County just like everyone else, plus additional assessments for services and assessments to the foundation to help fund the common infrastructure. Common infrastructure (including laboratory space I believe) is available for use by multiple companies and serves as a kind of subsidy because companies don't have to build their own similar facilities. Companies benefit from proximity to prominent university (Duke), university benefits by proximity to prominent companies, so there are continuing benefits in social capital and training of North Carolina residents. These companies spin off local entrepreneurs who take their high-tech training and create new business (without taxpayer subsidies). City of Durham benefits from having high-income employees live and shop in Durham and pay property and sales tax there. Durham is prevented from annexing the park land and imposing city taxes, which I don't view as any kind of tax subsidy since as far as I know, that city is not providing services to the park and there would be no justification for annexation anyway. It is certainly possible that some of the companies in the park received some tax incentives from the state or county to relocate there, but that has not been established for certain. Buildings are primarily office and research space and can easily be used by new companies if the original purchasers leave or fail. Low environmental impact.

Triad megasite unicorn: Government will buy land at fair market value. Every politician I have talked to about this assumes the land will be given away to the auto manufacturer. Government will build out infrastructure to the site at no cost to the auto manufacturer. This will amount to tens of millions of dollars, all invested up front before we can even get an auto manufacturer interested, so there is significant risk to the taxpayer here - the plant may never materialize, or the taxpayer may have to carry that investment for many years at no return until the manufacturer does show up. Auto manufacturer will build a giant plant that is good for nothing but manufacturing autos and will not be shared with any other company or the public. Auto manufacturer will get tax incentives from the state and county eliminating state income taxes for some period of years and offsetting county property taxes for some period of years. Surrounding cities (which are much farther from the megasite than RTP is from Raleigh and Durham get some benefit from having low-income manufacturing workers live and shop there. Potential for vendors who sell to the auto plant to create more spin-off jobs and pay property taxes (assuming they don't also demand incentives). Workers will be low to medium skill, so the investment will not likely produce local entrepreneurship. Buildings are not useful for anything other than an auto plant, so if original plant fails or relocates, the county must find a new auto manufacturer or have a big white elephant paying taxes (or not) at a much reduced rate. Potentially significant environmental impact.

I don't think I ever said that RTP was free of taxpayer subsidy, it just took us a while to understand the nature and scope of the subsidy. Personally, to me RTP looks like a smarter investment of taxpayer dollars over the long haul. I think the ROI on the RTP investment, or subsidy, has proven to be very large. The ROI on the unicorn megasite may be negative - severely negative if the auto plant doesn't materialize, or takes 10 years to materialize, because of the time value of all that taxpayer money tied up in it.
 
You continue to describe how RTP operates >50 years into its existence (and 50 years ago where the situation was different) and are trying to compare it to starting a new project. It's apples and oranges. Of course RTP has been a better benefit because (1) it's proven 50 years later; and (2) because of the universities. That was the entire point of it. What do you do with areas without universities with skilled workers but no jobs?

Look at the BMW plant in Spartanburg. The total incentives were $130m back in 1992-1994. BMW has since invested $6b producing 8,000 direct jobs, and thousands of other jobs via suppliers (a USC study suggested ~20,000 total). The plant is worth $2.2b. Back in 2002, a report says the state was netting $27.6m in annual income because of the plant (that's above the incentives). It's presence lured other companies to the state too. That's what an auto plant can do for an economy.

Look at the Toyota plant in Kentucky. That investment turned Kentucky into #3 in auto employment in the US. >400 auto related businesses are now there and 68,000 jobs. It's been so successful, that Kentucky didn't even blink to offer Toyota incentives to expand the plant.

http://industrytoday.com/article_view.asp?ArticleID=f388

I also don't think you understand the type of job that these plants create. Auto jobs aren't the low paying jobs you think they are. Auto plants don't even have the limitations you think either. It's not like they are single purpose facilities...like a steel mill. These places are continually retooled and improved, something Detroit was not allowed to do.
 
pour, I'm just getting back to this after 2 days in CLE without wifi and the weekend.

Let me repeat for at least the third time, I am not anti-auto-plant. Nor am I against taxpayer spending on economic development. what I am against is tax dollars being spent stupidly.

I am not really sure how this thread turned into RTP vs. an auto plant. I am also not sure that either of us really understands the details of how RTP got started, because I can't find much detailed info on the web, and you have not provided any links to back up your statements about it. Nonetheless, I agree with you that starting RTP in the 50s and attracting an auto plant in 2014 are vastly different exercises, so I see no point in continuing that particular argument.

I would appreciate it if you would provide a link backing up your statements above about the ROI on the BMW plant. I am interested in these things and would like to review the information myself.

Now, to get back to where we started. As far as I know, there is no auto manufacturer who has proposed building a plant in NC. Rather, a group of politicos (who are connected to some big contributors who have some land under contract) want to spend tens of millions of taxpayer dollars getting a "megasite" ready just in a case a manufacturer does come calling. "If you build it, they will come."

Now I submit to you that this is far different from the bidding war when BMW was looking for a place to build, or the recent bidding war over Boeing. In those situations, you are bidding on a known quantity, and you know if you spend the money, you will get a return. I don't like incentives, but states have no choice but to play the game. That is not the same as spending taxpayer money with no idea if it will ever pay off. NC is not the only state trying to attract an auto plant. The Triad "megasite" is not the only place to build. And if an auto maker ever does express interest in the megasite, there is no guarantee that NC will put up a big enough bribe to get them.

If someone asked me to invest a lot of money in a highly speculative land development project like the "megasite", I would demand a very high return on my money if the project was successful. I am not sure whether even the Spartanburg plant has met or is likely to meet that bar. To determine if it has, you have to take into account the money that was spent vs. the money returned, adjust for inflation, and adjust for the time (lost opportunity) cost of the initial investment. Further, as you have pointed out with regard to RTP, it is not really fair to compare a project that has succeeded against a project that may never happen - past performance does not indicate future performance, and all that. Therefore, "Spartanburg paid off" is not necessarily a strong argument for "we should make this speculative investment on the X% chance we'll get another Spartanburg" unless X is a decently high number. Again, I wish you would provide a link to the information you have mentioned above.

So finally, when someone asks me whether I think Greensboro should spend money on the megasite (which is actually nowhere close to Greensboro) I think about the "lost opportunity" cost of that money, and how it could be spent on improving our local infrastructure, increasing spending on education, and supporting our local small business incubators. That investment is a lot more likely to pay off, and is guaranteed to stay local. It may not pay off in multiples as large as the speculative auto plant might - but to me, that's like the difference between investing in blue chip bonds vs. small cap tech stocks. I am not comfortable with politicians betting my money on small cap tech stocks, because I have little confidence that they know what they are doing.
 
Pour, I think this is the 2002 study you mentioned.

http://mooreschool.sc.edu/UserFiles/moore/Documents/Presentations%20&%20Studies/2002%20BMW.pdf

Here's an article that gives a more mixed view on the impacts. http://bigstory.ap.org/article/bmw-20-plant-exceeds-hopes-tax-debate-ongoing

Some discussion of the initial package: $130,000,000 in 1993 dollars. http://savannahnow.com/stories/100902/LOCGREENVILLE.shtml There were also substantial infrastructure improvements to roads and airports to serve the plant - unclear if that cost is included in the $130,000,000, but from the way the article discusses them, I don't think so.

No question that approximately $32,000,000 in net tax collections as of 2002 is a good thing. However, the report does not have an analysis of whether SC has even broken even on its initial investment when inflation is taken into account. That's the kind of thing politicians should look at when making these decisions.
 
I wonder how many Chambers of Commerce offer courses on entrepreneurship, particularly to the unemployed. Random thought based on 923's post on opportunity costs.
 
PhDeac said:
I wonder how many Chambers of Commerce offer courses on entrepreneurship, particularly to the unemployed. Random thought based on 923's post on opportunity costs.
Click to expand...

Greensboro has a number of entrepreneur-support programs. They generally get small amounts of public funding through grants and so forth. The one I am most familiar with is the Nussbaum Center. http://www.nussbaumcfe.com/index.php/2012-05-18-16-29-49 According to their website, in 2005 the businesses they support were providing $4,000,000 in additional tax revenue and supporting 1200 jobs. That's a pretty good return for a very, very modest amount of public funding. As an example, a private company recently donated a new building to the Nussbaum Center. They needed money to renovate it and move. The city grudgingly loaned them $1.2M. This is an entity that is actually creating good tax-paying jobs and businesses with profits that stay in Greensboro, and all they can get is a loan to move into a second hand building. The "megasite" is a unicorn that may never produce one job, but the politicos in Greensboro are panting to drop millions on it.
 
More evidence that "small business" and "middle class" are just used to get votes. The real focus is on helping big business and the rich.
 
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