Advance Auto Parts is one of the latest companies to back out of an incentives package that North Carolina has offered to companies to relocate to the state. Some say that while incentives may initially entice some companies to relocate and bring some, if not all, of their workforce with them, the majority of companies looking to relocate to a thriving area would do so anyway, making such offers redundant and expensive.
Earlier this month, Advance Auto ended its Community Economic Development Agreement with the state, which involved having the company relocate its corporate headquarters from Roanoke, VA, to Raleigh in 2018 and created over 700 full-time jobs.
Reports say that company officials told the state that they are unable to add the hundreds of jobs agreed upon as part of the agreement. They cite competition for talent and being more flexible with workers, like allowing for remote work due to changes that occurred with the pandemic.
Company officials have stressed that while the agreement has ended, they have no plans to relocate their headquarters or workers that are already here.
The initial project was slated to grow North Carolina’s economy reportedly by $1 billion.
Advance Auto is the latest company to pull out of an incentive agreement with the state.
In March, Microsoft pulled the plug on two state economic incentive grants approved in 2019 that would have been worth $20 million in economic incentives. The company said they were not comfortable sharing the amount of employee data that was needed to complete the validation of job creation specified in the previously approved Job Development Investment Grants.
The company planned multi-million-dollar expansions of its operations based in Charlotte and Morrisville in 2019 with the creation of hundreds of jobs at both locations. Approved incentives packages were tied to plans for both locations, including an additional million-dollar incentives deal from Wake County in 2020 on the condition that Microsoft would bring hundreds of jobs with the deal.
Sonic Automotive sent a letter in February to the state’s Economic Investment Committee terminating their economic incentive agreement of almost $7 million. They said they wouldn’t be able to create the hundreds of jobs needed to fulfill the agreement due to the pandemic.
Despite the allure and enticement of incentive packages from the state, some economists say they aren’t always what they are cracked up to be.
“This latest instance should come as no surprise,” said Brian Balfour, Senior vice president of research, John Locke Foundation. “Economic incentive deals have a terrible track record in living up to the promised results. There is no justification for politicians and bureaucrats to be handing out taxpayer dollars or targeted political advantages to select corporations.”
Still, others argue that incentive packages still carry their weight in North Carolina, despite the changing employment landscape due to the pandemic.
“Companies choose a business location for different reasons, depending on their individual circumstances, but first and foremost, a business location must have the fundamentals in place,” said David Rhoades, Communications Director, N.C. Department of Commerce. “Factors such as the availability of a skilled workforce, education, and training systems to develop that workforce, transportation and infrastructure networks, and the overall business climate play key roles in company decision making. But, in situations where we’re competing with a location offering similar fundamentals, there’s no question that incentives can be the deciding factor.”
Rhoades said the incentive programs the state currently has do not need to be changed or strengthened and are still working well to keep the state competitive. He said the programs are flexible enough to account for changing conditions, like companies that adopt more hybrid work situations, and new remote positions can qualify for job creation requirements, provided those workers are located in the state and pay North Carolina taxes.
“A better approach would be lowering tax rates across the board for all businesses,” said Balfour.