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N.C. To Privatize Efforts For Wooing Manufacturers

Thu, 01/02/2014 - 2:01pm
Emery P. Dalesio, AP Business Writer

RALEIGH, N.C. (AP) — Gov. Pat McCrory's administration is moving to privatize parts of the public agency that woos companies and jobs to North Carolina, hoping to make business recruitment more agile and effective.

The revamp would motivate business recruiters in the same way as other salesmen — by possibly paying them bonuses for success and making it easier to fire them when they fail, state Commerce Secretary Sharon Decker said in an interview.

She said the aim is to put the state's recruiting efforts more on par with that of the corporate world by using determined pros to drum up new business. But critics counter that the changes could make it harder to track public dollars used to entice executives and open new doors to cronyism.

A nonprofit incorporated in September is to become the new private entity that will handle economic recruiting. The Economic Development Partnership of North Carolina Inc. is scheduled to hire its first CEO soon.

In the first half of 2014 the Commerce Department will lay off state employees tasked with selling and marketing the state as a destination. The nonprofit will hire some of those same people who negotiate with companies over site selection, jobs and the tax breaks that can follow.

Running recruitment efforts outside of state government will free it from restrictions that require seeking multiple bids for purchase contracts and rules for use of state vehicles and other property, Decker said. Business recruiters could get bonuses for success and risking firing when they fail, Decker said.

"My experience in the private sector is that that really drives performance, particularly in the sales arena," she said. "The biggest advantages I think that this will give us is the speed of movement. My experience of a year in public life is that it is very difficult in that (government) setting to make fast decisions."

The plan calls for public money to be used to pay salespeople a base salary supplemented by bonuses using private money, much as university athletic coaches are compensated, Decker said.

A significant portion of the no-profit's funding would continue to come from taxpayers to avoid "disproportionate reliance on funds from large businesses," according to a planning document.

Private money could come from selling memberships to businesses based on their size, much the way local chambers of commerce operate, as well as business memberships in an existing nonprofit called Friends of North Carolina, the planning document said. Those remain possible sources of private funds, but decisions haven't been finalized, Decker said.

The Friends nonprofit, controlled by state Commerce Department officials, accepted more than $1.5 million in cash sponsorships since 2009 from some of the state's biggest businesses, including regulated utilities and firms that lobby the agency for corporate incentives. The money paid for cocktail parties in Hollywood and Manhattan, rounds of golf at Pinehurst, and expenses on overseas trips to Shanghai and Bangalore to help recruit new employers.

Decker, like McCrory a long-time Duke Energy executive, said her interviews with corporate officers who decided to locate in North Carolina and others who didn't persuaded her that the state needed to speed up decision-making. Many of those decisions involve tax breaks, road building, community college training, construction and other permits that involve multiple layers of governments.

Adoption of similar public-private partnerships in other states has led to a growing appearance of insider dealing and conflicts of interest, according to Good Jobs First, a Washington group that tracks development incentives.

Wisconsin's public-private jobs creation agency, which administers $520 million in incentive programs, repeatedly broke state law when making awards, failed to adequately track money it awarded for economic development projects and gave money to ineligible recipients, a state audit this year found.

Indiana's business recruitment agency held on to lofty job-creation figures though as many as 40 percent of the more than 100,000 jobs it promoted as being created between 2005 and 2010 never materialized, an Indianapolis TV station reported. The Arizona Commerce Authority's first chief executive received a three-year compensation package worth about $1 million and got a privately-funded $60,000 bonus when he resigned after a year.

Rob Schofield, policy director of the liberal NC Policy Watch in Raleigh, said he's more concerned about the dual role of a top McCrory confidante as member of the interim five-member board overseeing the recruiting partnership.

The partnership's board includes John Lassiter of Charlotte, who ran unsuccessfully in 2009 to succeed McCrory as the city's mayor and also had a top role in McCrory's transition team.

Lassiter now chairs the Renew North Carolina Foundation, a nonprofit political advocacy organization led by McCrory's political friends that has spent hundreds of thousands of dollars airing TV commercials advocating for the governor's positions. The foundation, which isn't required to disclose its donors, this year held two private retreats with big-dollar contributors attended by McCrory and some of his top officials.

"It is a pretty remarkably blatant bit of conflict-of-interest to have someone who is raising money from corporations in secret to fund activities for the governor, then going around handing out money to corporations," Schofield said.

Lassiter did not respond to Schofield's criticism in an email seeking comment. A foundation spokesman, Brian Nick, said Lassiter would leave the group's board sometime early in 2014.

Decker said the recruiting partnership will not have the power to approve corporate tax breaks under the state's largest incentive program. That will remain the decision of a separate board whose members are appointed by state political leaders, Decker said. A different tax break sometimes offered to attract company executives is left to the governor's decision.

North Carolina officials planning the privatized marketing effort have considered missteps by similar organizations in other states where there have been "challenges," Decker said.

"If you get into the details of some of the other models, they've mixed the public and private funds with not clear accountability of how each was used," she said. "We are from the get-go establishing our grants-making as a public function, as it is now, with strong accountability for it."

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