In the global competition to recruit jobs and capital investment, North Carolina local governments routinely offer economic development incentives to private companies in exchange for promises to construct job-creating facilities locally. The North Carolina Supreme Court sanctioned such business recruitment incentives in this competitive context in the landmark 1996 case, Maready v. City of Winston-Salem. Today, however, local governments field a broad array of incentive requests, ranging from the traditional incentive for business recruitment addressed in Maready, to requests that fall outside of the competitive context or involve businesses that are unable or unwilling to promise job creation. This Article closely examines existing statutory authority and case law in order to develop a framework for analyzing incentive requests wherever they fall along the spectrum.
The Article’s proposed framework suggests that subsidies (or incentives) provided to private companies in pursuit of economic development should be bounded in two important ways. First, the consideration obtained by local governments in exchange for incentives must be meaningful, primarily in terms of job creation and increasing the tax base. Second, the approval of incentives should comply with procedural requirements set forth in the North Carolina General Statutes and further described by the Supreme Court of North Carolina in Maready.
The Article concludes by testing the proposed framework on two types of incentive requests frequently submitted to North Carolina local governments: one that fits the traditional profile of incentives described in Maready, and one “tax-base-alone” request that does not fit the Maready mold.The Article illuminates how the tax-base-alone request may be problematic under Maready, and offers possible alternative sources of legal authority for local government incentives in such a scenario.