Incentive country: Behind an ongoing controversy

With rumors flying about local governments’ closed sessions on economic development (a New Belgium brewery?), government incentives for private business are once again in the news. Whether they’re spat on as “corporate welfare” or lauded as “job creation,” they remain controversial as ever.

At their respective Sept. 13 meetings, both the Buncombe County Board of Commissioners and Asheville City Council went into closed sessions to discuss an unspecified economic development proposal. Combined with rumors, swirling for weeks, that the New Belgium brewing company is looking at Asheville for a new brewery.

So far, it’s just rumor. New Belgium won’t confirm which six locations it’s considering for its East Coast expansion, and local officials are staying similarly mum.

The most recent economic incentives package was the high-profile deal with Canadian auto-parts manufacturer Linamar, which saw the state, Asheville and Buncombe all dish out incentives to get the company into the old Volvo plant. In that case, Asheville’s incentives took the form of just over $2 million in tax breaks over the next two years.

Ironically, the previous occupant of the plant, Volvo, was set to receive incentives from Asheville and Buncombe too, before laying off employees and shutting its doors.

While direct cash as part of an economic deal isn’t unheard of (the Grove Arcade is a famous example), economic incentives rarely take the form of direct funds from city/county coffers to the businesses involved. Instead, after a given governmental body signs off on the incentives, staff assess the company’s expansion to make sure it meets the criteria. If the company does, it gets a reimbursement from its property taxes.

In the Volvo case, notably, this had an impact. While it looked somewhat embarrassing for the company to fold its Asheville operations just a few years after county commissioners posed smiling at a groundbreaking, Volvo never received any of its last round of incentives, because it didn’t meet the criteria in the incentive deal.

Many cities and counties crafted economic development incentive policies in the late ‘90s after a series of court battles and decisions cleared the way for their use. Asheville and Buncombe were no exception. And a look back at the history of the initial deals shows no less controversy then.

For their defenders, incentives are a way to target job growth in needed sectors and, if done correctly, provide big economic payoffs for relatively little pain (after the incentives expire, the company pays property taxes at a normal rate). Even among many progressives generally averse to government helping big business, they represent an occasionally necessary evil.

However, they have plenty of opponents, especially those who point out that they often go to larger companies. Asheville City Council member Cecil Bothwell was ardently against the Linamar deal, and even devoted the invocation at the Aug. 9 Council meeting to decrying corporations. Council candidates Chris Pelly and TJ Thomasson have also decried the practice.

Of course, not all incentives are created equal. Asheville’s not exactly teeming with mom-and-pop auto parts manufacturers, so the Linamar deal was a relatively easy sell, especially as it was occupying a disused space. A New Belgium brewery, as a potential competitor to Asheville’s already-famed beer industry (which hasn’t received such tax breaks), might be a whole different matter, and a much more contentious battle.


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5 thoughts on “Incentive country: Behind an ongoing controversy

  1. Jake

    Please. The notion of incentives for New Belgium Brewing is too ludicrous to consider.

  2. CORRECTION: Council candidates Tim Peck, Chris Pelly and TJ Thomasson have also decried the practice.

  3. Viking

    A lot of the issue is fairness. First, it seems like every business starting in Asheville should get a $25,000 per job tax break or a package equaling 25K per job. 25K per job, including the small business owner, seems like the going average for these incentive deals.

    Next, the fact that it’s Starwood Hotels behind 51 Biltmore, a multibillion-dollar MNC, is the parent of Aloft Hotels (the developer is just the franchisee), is a fact that never made it in local media. Add this to the idea of our government adding on duties similar to a private equity firm, it gets strange. Wanda Greene’s pride in having to hold back information from the public one the Linamar deal is only one weird deformity.

    We can do a lot of things with what’s left of our government. And some kind of economic development angle seems prudent. But is the way things are done now (business as usual) the way to go on forever?

  4. sharpleycladd

    The secrecy gets on my nerves. I understand that you don’t want to get into a public bidding war with other cities, raising the incentives ante, etc., but keeping the New Belgium deal from local businesses that would be directly affected seems unfair.

  5. PisgahWorks

    I think they need to offer the deal to the locals too, at the very least. From a distribution perspective, Asheville doesn’t make sense. From a market perspective, Asheville’s market is tiny compared to metropolis areas. So why Asheville New Belgium? We met with the VP of NB in 2008 and he said, “At what point is enough enough? How big do you really need to get? We won’t grow beyond this place.” We were at their new facility in Fort Collins. Free market, they can come here, pay up. Just like the locals. I vote no. However, what’s in it for the City? What’s in it for the residence? If this deal can be structured to benefit the city with New Belgium, can we use it to invest in a more local entity or our local beer entities? Jobs are great. Our local small businesses need the help more than New Belgium. What about a canning facility that cans everyone’s beer? Job’s, licensing deals, fun advertisements…we can get a few jobs or we can get a whole bunch of jobs in this city. Business creates business. Who wants some business? Live limitless.

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