State terminates incentive grants for two Triangle economic projects
On Tuesday, the North Carolina Economic Investment Committee unanimously voted to end its economic incentive agreements with three companies, including a pair that had announced major projects in Wake and Durham counties.
In terms of initial job goals, the largest terminated project was for the printing company Xerox to create 600 new positions in Cary. In 2019, the company had pledged to invest $18.4 million in a Cary facility called the North Carolina Center of Excellence. The state enticed Xerox with an incentive package worth $16.4 million, including $12.3 million in future tax breaks if the company met annual hiring and investment targets over a 12-year period. Local governments set aside an additional $211,000 for the project.
After the pandemic delayed construction, Xerox opened the Center in September 2020.
But on March 6, Xerox CEO John Bruno wrote a letter to the five-person N.C. Economic Investment Committee (EIC) requesting the state terminate its grant.
“Driven by changes in Xerox direction, corporate strategy and current business conditions, Xerox no longer envisions meeting the job creation and investment targets,” Bruno wrote.
As of Jan. 1, he said, the company had a net of 163 new employees “aligned to” the Cary facility and employed 122 others in North Carolina who are not connected to the Center of Excellence.
Bruno said “no changes” would be made to the center and that “limited hiring will continue in support of business needs.”
State records indicate neither North Carolina nor local governments have disbursed any public money to Xerox in connection to its Cary facility.
That the Xerox grant ended early isn’t unusual. Since North Carolina began awarding job development investment grants, or JDIGs, in 2003, early-terminated grants have outnumbered completed grants by more than 3-to-1. An N&O analysis found that the majority of awarded JDIGs ended prematurely in every year but one between 2003 and 2015.
Labcorp exits RTP agreement
Besides Xerox, the state ended two more JDIGs Tuesday, including a 2018 grant for Labcorp, the major clinical lab-services company based in Burlington, N.C., to open an operations center in Research Triangle Park. The state offered Labcorp $8.2 million in tax rebates over a 12-year period if the company created 422 jobs and invested $30 million in the Durham County location.
According to the Walden Model, the cost-benefit equation used by the state to calculate incentives, the Labcorp project was estimated to grow North Carolina’s economy by $880 million.
But on Feb. 22, a lawyer from the Raleigh law firm Parker Poe wrote to North Carolina Commerce Secretary Machelle Baker Sanders explaining why Labcorp sought to exit its agreement.
Attorney Bruce Thompson explained Labcorp planned to break off its clinical development division into a new business, and thus “the number of baseline employees required in the JDIG Agreement will be impacted by the planned spin-off.”
Thompson then noted the state has not distributed any public funds to the company in connection to its Durham agreement. State records do not list whether Labcorp has created any new jobs at the RTP facility.
Another company cites pandemic for ending grant
The third terminated grant on Tuesday was for the industrial company Dhollandia US to manufacture liftgates in Bessemer City, about 30 miles west of Charlotte. Awarded in 2017, the grant would’ve given the company up to $1.4 million if it created at least 135 jobs and met its investment goals over a 12-year period.
Public records show $160,000 in local funds were spent on the site but that no state funds have been disbursed. Dhollandia says it currently employs 10 people at the Bessemer City site and invested $22.5 million to purchase the land and construct its facility.
In a Feb. 25 letter to the EIC, Dhollandia CEO Georges Hoffmann said the North Carolina project was upended by “the substantial increase in transport costs and raw materials” that were seen after the start of the COVID-19 pandemic.
Dhollandia joins several other companies that cited the pandemic as cause for leaving their state economic agreements. The list includes the Cary communications firm Trilliant, which earlier this year said COVID-19 had slowed its hiring pace. And in November, the New Jersey-based IT management firm Conduent informed the state it wouldn’t meet its job creation targets in Morrisville due to “COVID and changing business conditions.”
This story was produced with financial support from a coalition of partners led by Innovate Raleigh as part of an independent journalism fellowship program. The N&O maintains full editorial control of the work.
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