What return has Gaston County received on your $8.4 million investment

In the late 1990s, a nationwide courtship began for Buckeye Technologies, which planned to invest more than $100 million in the world’s largest manufacturing plant for nonwoven air-laid absorbent materials.

The company’s trade may have sounded complex to the average Joe. But the financial implications of landing the project were clear to local economic development leaders. Gaston County became an eager suitor, offering Buckeye a decade’s worth of tax incentives based on the huge expenditure the company promised.

When all was said and done, Gaston County had won the dance. The company built the plant between Stanley and Mount Holly, and since 2000 has received almost $2.6 million in tax rebates from the county. It’s the largest sum of tax breaks Gaston County has given to any one industry since launching its Investment Grant Program more than 10 years ago.

In all, the county has paid out more than $8.4 million in tax incentives to more than 40 companies in the last decade. Critics question why so many states and local governments feel obligated to grease the monetary wheel to attract economic development. But those who deal with industrial recruitment every day say it’s a necessary evil, and that the ultimate tax benefit to Gaston County will far outweigh the surrendered revenue.

“To assume Buckeye would have come here without getting that tax incentive is terribly fallacious,” said Donny Hicks, executive director of the Gaston County Economic Development Corp., who helped to recruit the company. “There’s no way they’re coming without incentives.”

Job creation is a residual benefit

The state of North Carolina offers tax incentives to new or expanding industries through its Article 3J Tax Credit initiative. The program largely sets credit benchmarks based on how many full-time jobs are created.

In contrast, Gaston County does not use job creation as a component of its Investment Grant Program. It bases reimbursements directly on a company’s expenditures on taxable real property, such as land, buildings and machinery.

Companies are not obligated to provide up-to-date employment figures for the county, though many do when asked, Hicks said. But with high-dollar investments, job creation is often a natural, secondary benefit of landing a large economic development project.

“You wonder what you’re getting for the dollar amount (in tax rebates) that you’re giving,” Gaston County Manager Jan Winters said this month. “One of those things is employment. We now have about 13,850 people unemployed here. If we didn’t offer those incentives, that figure would be higher.”

The more invested, the bigger the break

The county has four investment tiers of $1 million, $15 million, $30 million and $50 million. The more a company spends on taxable real property, the higher the percentage of tax breaks it receives over a longer period of time.

Every city and town in Gaston County has agreed to mimic the county’s tax incentive for projects that fall in their jurisdiction, Winters said.

A $1 million investment brings a tax rebate of 90 percent the first year, followed by rebates of 80, 70, 60 and 50 percent in the following years. A $15 million investment starts at the same level, but extends over 10 years on a downward sliding scale.

A $50 million investment earns a company an 85 percent tax rebate for the first five years, and a 70 percent break the last five years.

The investment is reviewed each year and weighed against the depreciation of the real property. If the disposal of grant assets decreases the investment value below a certain level, the grant is terminated.

“We audit all these companies every year,” said county tax assessor Jay Heavner. “Every year stands on its own. Typically a company wants the value of machinery to depreciate faster, so they can write it off faster.

“But in terms of the investment grant, the faster it depreciates, the worse (for the company).”

Playing the game

When the subject of incentives came up during a recent Gaston County commissioners meeting, most on the board said it’s a perk they feel compelled to provide, even if they don’t want to.

“Do I like incentives? No. Every time I’ve voted for them, it’s left me with a bad taste in my mouth,” said Commissioner Tom Keigher. “But this is nothing new. It’s the nature of business today.”

In 2009, Gaston County was a finalist for three to four major industrial projects that each involved investments of more than $100 million, Winters said. When a company narrows the field to a handful of sites, “it’s about who gives the best deal,” he said.

That Gaston County landed none of those projects last year suggests its incentive program is not too rich, Winters said.

“We’d love if the federal government would say you cannot offer incentives,” he said. “Seeing that’s not the rule of the land, if we want to get involved in bringing growth here, we have to offer something.”

Four years ago, Pharr Yarns invested $40 million in a high-tech plant to extrude polyester and nylon for its carpet yarn making operations. It qualified for the county’s incentive program, and last year received its first tax rebate of about $65,000.

The company’s chief reason for putting the plant in McAdenville was to build the town’s tax base and strengthen its roots there, said Pharr Yarns president Bill Carstarphen. In the grand scheme of things, the tax incentive wasn’t going to make or break the decision, he said.

“The incentive we got from the county is greatly appreciated,” said Carstarphen. “The bottom line is it helps us to be more competitive and sustain the business. Every little bit makes a big difference.”

However, had the company not mainly been trying to sustain its manufacturing assets here, incentives might have played a bigger role, he said.

“When you’re looking at several different sites and they’re all sort of equal, it can all come down to incentives,” he said. “I think it’s important for the county to be as creative as it can to bring in investment and jobs.”

You can reach Michael Barrett at 704-869-1826.

Top 10 beneficiaries of Gaston County’s incentive grant program, since 1999

Buckeye Technologies $2,583,763

Freightliner $1,154,125

DSM Desotech $477,152

Parkdale Mills/Parkdale America $472,901

Pass & Seymour/Legrand $446,762

Sunterrace Casual Furniture $320,860

Firestone Fibers $317,347

Industrial Fabricators $314,004

CWW Gerko Acoustics (now Aksys Systems) $300,296

WIX Filtration Products $282,694

Total $8,453,763

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