Exposing NC Rural Center for the money pit it is
I am not always Mr. Negative (as some folks like to claim). I’ll hand out kudos to folks who do good things. In this case — surprise, surprise — I am handing out kudos to a resident of the McClatchy-Raleigh newsroom. It appears Andy Curliss has broken from his crayonista colleagues to do some real, bona fide, honest injun’ journalism:
The N.C. Rural Economic Development Center portrays itself as working to heal North Carolina’s struggling rural counties. Its brochures and website feature tractors, farm animals and brick buildings lining small-town streets. Leaders highlight work on the “long-range future” of rural counties.
But the private nonprofit organization also has used millions in taxpayer money to help build fast-food restaurants, golf resorts, discount stores and big-box retail outlets that include a Kohl’s in Southern Pines and a dozen Walmarts, records and interviews show. […]
The state Senate recently passed a budget that zeroed out the Rural Center. The state House’s version of the budget kept the Rural Center fully-funded. Curliss digs a little deeper into this agency to show us what a vote-buying money pit it really is:
It spent $85,000 to help an electronic sweepstakes software company outfit a building in Greenville after lawmakers tried to shut the sweepstakes industry down.
It granted $350,000 for water wells in La Grange, about an hour southeast of Raleigh, saying the infrastructure would generate 35 full-time jobs at a new restaurant. The restaurant was a Bojangles’ that had already hired workers and opened its doors the next week; the wells were drilled six years later to solve a major water-capacity problem in the town.
Numerous Rural Center grants have led to claims of jobs being created – but where no or far fewer jobs exist, The News & Observer found after reviewing a sampling of dozens of projects.
And with millions each year from taxpayers, the Rural Center has built up a sizable cash balance: More than $69 million is unspent and still in the bank for its main “job generating” programs, largely because of projects delayed, not yet started or from busted deals, records show.
Bob Luddy, a Raleigh businessman appointed to the center’s board of directors two years ago by Republican Senate leader Phil Berger, said he has grown concerned and thinks the organization should be stopped from handling taxpayer money.
“This is state money and should be administered by some state organization or state agency that the government or governor takes responsibility for and the General Assembly provides oversight of,” Luddy said. “Here’s what they do in a board meeting. They spend an hour and 15 minutes praising each other for the amazing work they’re doing. And they spend 10 minutes to just ram these grant resolutions through, maybe five minutes. There’s no discussion.”
The center is led by Billy Ray Hall, 65, a veteran in state government circles who has headed the agency since it opened in 1987.
Hall’s message is straightforward: He says the center used state money to create 19,911 jobs in the past five years. Hall’s claim includes the center’s share of incentives deals that were led by the state Commerce Department.
In February, he told lawmakers that every job the center claims can be proven through employment payroll records. That’s not the case. The N&O found more than 950 jobs included in his count on projects that haven’t yet begun.
In grant applications, mayors, commissioners and town officials write of an “economic tornado” and the importance of obtaining Rural Center money to help them get new jobs of just about any sort, from a Dollar General in Mount Airy to a small Sears store in Edenton. In all cases, the money is routed through the local governments; it generally pays for improving a building or for water and sewer lines to serve a particular project.
The applications state how many jobs will be created; if the projects don’t produce, businesses or governments are supposed to repay the money. The grants pay as much as $12,000 per job, usually with a maximum grant of $500,000.
The center’s jobs claim to the legislature included projects that have already fallen apart, such as 20 jobs at Hallelujah Acres in Shelby, west of Charlotte, which got a $150,000 grant for a sewer line so it could move across the street. It has now moved to Gastonia.
In Rocky Mount, a Subway was supposed to create five jobs after a $96,000 grant to spark it and a neighboring business. The restaurant has closed.
The Rural Center told lawmakers it had created 50 jobs with a watermelon distribution facility in Carteret County. It was never built. A total of $300,000 in state money was earmarked for the project from early 2008 until May 22, when the center says it defunded the project. That came days after the state suspended the melon association’s charter for failing to pay taxes.[…]
The center has allowed failed projects to find substitutes, something its officials said is common in grant-making circles.
For example, the Rural Center gave $450,000 for water and sewer to serve a theater in Roanoke Rapids featuring Dolly Parton’s brother, Randy. It failed, and the city and Parton parted ways in 2007. The center allowed a Hilton Garden Inn built nearby to fulfill the theater’s jobs promise of at least 50 full-time workers, releasing Parton’s Moonlight Bandit Productions from a contract to create theater jobs.
A manicured Moore County golf course development, the Dormie Club, failed to meet its jobs promise after the Rural Center provided $428,000 to run water to serve the club. The 3-mile water line extension was supposed to create at least 50 jobs by 2010, records show.
That didn’t happen; in a letter, the club blamed construction delays, the recession and bad weather. The Rural Center has now given the golf club until January 2014 to meet its pledge. But it already claims those jobs as having been created.
The newspaper’s review also shows that the Rural Center:
• Does not ensure its grants are necessary for a company to open or expand. One city official who has handled several Rural Center grants, Vanessa McCleary of Rocky Mount, said she advises potential recipients to treat it as “gravy money” not essential to business plans.
• Breaks its own rules, or adjusts them, to keep money flowing. […]
• Requires companies it subsidizes to pay only the minimum wage, which is what dozens of grantees agree to do. Many beneficiaries do not offer paid benefits, and some are retail and service operations that researchers and economists say do not generate much economic impact.
• Awarded grants to benefit 49 restaurants, including Krispy Kreme, Wendy’s and a range of locally owned eateries. It made at least 100 grants to retail and service outlets. The total: $22 million since 2004.
Wal-Mart Stores is one of the world’s most successful companies. North Carolina taxpayers, through the Rural Center, kicked in about $6 million from 2004 to 2009 to help develop its stores in the state.
There was a catch in the deals: Wal-Mart refused to play by the Rural Center’s rules, declining to sign commitments to create jobs.
Of course, that *low-budget shoe-string operation* from Arkansas got the state money, anyway.
Jonathan Q. Morgan, an associate professor of public administration and government at UNC’s School of Government, has studied infrastructure incentives and said they represent “an interesting dilemma” when made for retail, restaurants and other service jobs. The government money is not usually decisive, he said.
Morgan said his research on North Carolina governments shows about half have provided infrastructure to entice companies to locate in their communities, but only 7 percent do it for retail projects. He has encouraged local governments to be cautious and study the full impacts, but he said many do not have resources for that.
“Retail tends to go where the customer base is,” he said. “Chains put a store in based on customer count and demand and some of those other types of things.”
Neither government NOR politicians “create jobs.” Government can help establish an environment conducive to either economic growth or economic contraction / stagnation. Jobs get created when government cuts taxes, rolls back regulation and GETS OUT OF THE WAY.