The Jobs Recovery Coalition, comprised of representatives from PENC, ACEC, AIA, NC Surveyors, NC Association of General Contractors and the NC Association of Landscape Architects has been meeting with legislators to discuss ways to get support for creating and retaining jobs in our industries. Most recently, we have heard from Senator Basnight’s office that bonds, COPS (Certificates of Participation), and other debt financing options are being talked about this year but probably not General obligation bonds which would require voter approval. Senator Stevens, in his remarks at the E-PAC luncheon also reiterated that there is Senate support (obviously bipartisan as well) for bonds that could be included as part of the current year budget.
I have my reservations. Even Senator Basnight’s power and influence may not be enough to overcome the resistance of the state treasurer to take on additional debt. Several legislative oversight and appropriations committees have recently heard from the Debt Affordability Advisory Committee that NC is in danger of bumping up against the 4% guideline of debt service as a percentage of revenues. Actually if both general fund and transportation fund debt is combined, the result is projected to be above the guideline – at 4.3% in 2012, leaving no room for borrowing. The state treasurer maintains that our state is being “watched” to see if we make any financial decisions that could threaten the state’s Triple A bond rating. Only 7 states maintain a triple A bond rating which saves the state money when it borrows (somewhere between 5 and 20 points depending on interest rates at the time).
However, the ceiling of debt service, as established by the Advisory Committee, as a percentage of revenues is actually 4.75% leaving at least a quarter of a point available in debt capacity before reaching the ceiling. This quarter of a percent translates into another $200 million in availability each year – enough for a $2 billion bond program. A $2 billion bond program could be used to fund higher education, transportation and other state construction projects which could generate jobs in the construction and design industries, in turn, producing more tax revenue for the state.
Our Jobs Recovery Coalition has plans to meet with noted economists such as Mike Walden at NC State and the Treasurer’s office to gather additional information before refining a legislative agenda that will focus on infrastructure investment that will lead to jobs growth. In addition, we will continue to compile compelling statistics to demonstrate the number of jobs that can be retained or created with additional investment, the unemployment data for each of our industries, and the tax revenue that is produced from our respective industries.
An interesting presentation made this week, related to the argument for increased investment in infrastructure, was the result of a study of NC’s economic development incentives programs. This study found that economic development incentives, particularly statutory tax credits, are limited in their effectiveness in job creation. In fact, if these tax credits were eliminated, the savings could be used over a phased in time period, to reduce the corporate income tax, the highest in the southeast, from 6.9% down to 6.5%.
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“Such corporate tax rate reduction would bring North Carolina in line with our competitor states. At 6.9%, North Carolina’s corporate tax rate is 0.4% higher than Alabama and Tennessee (6.5%). A reduction to 6.5% would still leave the North Carolina rate substantially higher than South Carolina’s rate of 5.0%, but it would at least neutralize the corporate tax rate as a regional competitive disadvantage.”
(An Evaluation of NC’s Economic Incentive Programs, UNC Center for Competitive Economies)
The study also found the primary reasons most companies choose to relocate are based on the strength of the workforce and existing infrastructure (to include schools) – not tax incentives.
What are your thoughts?