Was the NC’s deal with Apple ‘a really big win?’ Or the worst of the year?

Business

RALEIGH, N.C. (WNCN) — The agreement to bring an Apple hub to the Triangle has been called everything from “a really big win” — to now, the worst economic development deal in all of 2021.

The Michigan-based Center for Economic Accountability recently gave North Carolina that dubious end-of-the-year honor for the $846 million in tax incentives the state is giving the tech giant over 39 years to bring a headquarters to central North Carolina.

And a key reason hinges on one question: Did the state need to offer so many incentives for Apple to pick North Carolina over Ohio in the first place?

The think tank’s president says it didn’t.

A North Carolina State University professor — whose research found the state could recoup that big investment in as little as four years because of the tax collections it could spur — disagrees.

“To say that Ohio was just simply uncompetitive with North Carolina … is somewhat short-sighted,” said Nathan Goldman, an assistant professor of accounting at N.C. State’s Poole College of Management.

The move is expected to create 3,000 new jobs that pay an average salary of about $187,000.

John Mozena, the center’s president, says the state and the Triangle have so much going for them already — from the work force and the business environment to the tax and regulatory structure — that it was effectively a mismatch between North Carolina and Ohio.

“The problem is that because you have all those things, companies are going to locate there anyway,” he said.

Goldman says negotiators couldn’t take that for granted.

“That does not automatically mean that Apple was going to come here,” he said. “If you come in too low with some of these tax subsidies, you will risk losing it all.”

Mozena said the move to the Triangle isn’t necessarily about job creation in either state because the highly skilled workers Apple attracts are likely already working for another company.

“There are not roving bands of unemployed AI researchers wandering around Ohio, just waiting for a company to show up to employ them,” he said.

The report also criticizes the total price tag, calling it “giant,” and called the projected economic impact “ridiculous.”

But Goldman says the area is already receiving an economic boost from it, and not just because some of those Apple employees have already made their way to the Triangle.

“There’s also been many other of Apple’s business partners that have started forming businesses here,” he said. “And I’m going to expect that to increase steadily up until the point, and even after, the new Apple headquarters is opened up in a few years here. So I think we’ve already seen some of these benefits.”

The study by Goldman and Poole lecturer Erynn Stainback found six scenarios that, taken together, could help North Carolina recoup its investment in this those tax breaks in 4-7 years.

“These people will be buying homes, spending money and, yes, paying their own taxes here in the state of North Carolina,” he said, “and there will be 3,000 of them.”

But what would a good deal look like to Mozena and the center?

“Really, the question is whether there needs to be these kinds of deals at all,” he said. 

Mozena said only about a quarter of subsidy actually changing the decision a company would ordinarily make.

“The things that actually change companies’ decisions for big things like this are things like workforce, regulatory climate, energy costs,” he said. “It’s like, Tim Cook, the CEO of Apple, is not going to buy a Ford because it’s got a better rebate on it than the Mercedes that he wanted,” he added. “They’re going to go where it makes the most business sense. So if you have to do subsidies, for some reason, do them where it’s actually going to change your business decision. But this is not the kind of thing that will.”

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