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The Bad Business Of Incentives – MetLife Version

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And this is why government shouldn’t be giving preferntial tax treatment to companies.

A story in the Charlotte Observer raises questions about whether Mecklenburg County government officials really needed to throw millions of dollars at MetLife in order to lure the insurance giant to North Carolina.

On Saturday, less than 24 hours after a press conference announcing the deal at the Charlotte Chamber of Commerce’s headquarters, emails began flying between commissioners. They said evidence suggested that MetLife knew it was coming to Charlotte before commissioners on Tuesday gave preliminary approval for the incentives.

Commissioners Chairwoman Pat Cotham said questions about the timing of the incentives vote started to enter her mind when news broke that the company had picked North Carolina and media events were arranged – only two days after the commissioners voted. Later, she learned that some MetLife executives had already been picking out schools and colleges for their children.

“In my opinion, the deal was done when we first learned of it and voted for incentives,” Cotham, a Democrat, wrote in her first email to commissioners on Saturday.

Replied Republican Commissioner Bill James: “I think you are correct and have been thinking the same thing. One of the rules for a grant (for incentives) is that we must conclude that ‘If we don’t give them the money they won’t come.’

“I don’t think we were told the whole truth. They were already planning on coming.”

 

Well, I am shocked – just shocked!

Who would’ve thought that the largest U.S life insurer and Fortune 500 company would be making a decision to relocate regardless of a $2 million local government incentive?

What’s even more amazing is how genuinely perplexed these local officials seem to be. They really appear confused that a company with billions in revenues last year might not have been breathlessly awaiting the vote on that $2 million bribe… er… I mean benefit.

But this is exactly why folks (like me) say governments should not be playing this game at all.  Not only do you go into the negotiations at a disadvantage (due to ignorance of the company’s finances and a compelling desire to tell the public that you “brought jobs to town”), but most local elected politicians are not really qualified nor experienced enough to sit down with some of the corporate suits.

 

What did McCrory do for MetLife?

Meanwhile, another wrinkle in the story is Gov. Pat McCrory’s role in luring MetLife. Before taking office, McCrory worked for a Charlotte law firm that does lobbying work. One of the firm’s clients is MetLife. Did McCrory do work for the insurance giant before taking the oath of office?  If so, what kind of work?  Did he offer any assurances about an incentives package?

For now, the Governor isn’t talking.

“Gov. Pat McCrory avoided questions Friday about the state offering MetLife Inc. $94 million in tax breaks and other incentives to move thousands of jobs to North Carolina and using his former employer to help broker the deal.”

 

Picking winners and losers

I’ve laid out my opposition to these incentives repeatedly over the years, including during debates with McCrory when he was Mayor in Charlotte. After City Council meetings we’d tangle over the philosophy of whether government should be in the business of bestowing benefits to certain companies, to the detriment of others.

After all, a business that receives property tax rebates for moving to town has a decided leg up on its competitors who did not get the same incentives package.  If you don’t think the money makes a difference, then you cannot argue it’s needed to lure the business.  If you believe the incentive is critical to luring the company, you cannot argue it doesn’t put the company at an advantage over existing competition.

My frustration is compounded by the utter failure of both political parties to walk away from this ever-more-expensive racket.

Democrats claim to be the party of the people – watching out for “the least among us” and guarding against corporate abuses.  However, they approve these corporate-friendly deals all the time.

Republicans, on the other hand, explicitly to oppose these types of deals – but approve them all the time.  The NC GOP even spells out their opposition to incentives in its party platform.

I guess we know what that’s worth.

 

Pete Kaliner hosts the 3-6 p.m. drive-time slot on Asheville’s WWNC Radio. Visit his blog and listen live.

 

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