Damn the Consequences: North Carolina and Florida Lawmakers Take Aim

I’ve longed believed that the best friends and worst enemies that economic developers can have are elected officials.

For the uninitiated, economic developers are those people charged with the herculean task of improving a business climate in a particular locale in order to foster job growth, capital investment, and wealth creation. I was once one.

But economic developers are not czars with unlimited power, and they are certainly not elected in their own right. So they have to, whether they like it or not, work in close concert with elected officials.

Some elected officials want to learn from professional economic developers in order to craft public policy, while others have peculiar if not preconceived ideas of what economic development is or should be. And then there are those who believe economic development is nothing more than an intrusion into the private market for the benefit of a chosen few.

It’s What They Do

No matter their political affiliation, elected officials come into office on promises. They vow to reform, protect, cut, enlarge, shake up, shut down, clean house, boost, shrink and on and on. It’s what they do.

Not so long ago, I wrote a blog called “Economic Development Under Assault,” in which I postulated that a there was a growing wave of ideologues coming into office that view economic development with great suspicion.

Many but not all are of the Tea Party persuasion, who see big government and big business in cahoots and needing to be knocked down a peg or two.

They see no justification for government rewarding a large corporation with financial incentives, for expanding in a particular place that it would have done otherwise. This notion of incentives as “corporate welfare” is generally subscribed to by the press and is where the hard left and the hard right meet.

Economic developers from across this country face this mindset every day.

For many of the ideologues who have come into office, economic developers are not the solution but part of the problem. They are shills for big business and their counsel should be viewed as such.

North Carolina and Florida Reload

In the last couple of weeks, it is apparent that the ideologues reign in both North Carolina and Florida.

While the stories are different, the common thread is that legislators have purposely acted in ways that will hamper and degrade economic development in both states.

In last week’s blog, I quoted Michael Hecht, president of Greater New Orleans Inc., about “the old Louisiana.” He said when the state “shot itself in the foot, it reloaded.” That is precisely what is happening in Florida and North Carolina today.

And I can tell you from personal interaction that some companies and industry consultants like myself are watching this shoot-in-foot scenario with great interest. It’s hard to ignore.

In the case of North Carolina, we are witnessing what The Washington Post so correctly termed as a “rush to bigotry.”

I have been watching North Carolina for some time now. What traditionally has been a stellar player in terms of industry recruitment, the Tar Heel state has been wallowing in the mud for some time now.

Strike Three

For me, strike one was when state lawmakers there enacted tough voting rights restrictions in the guise of  combating voter fraud, essentially designed (although they will deny it) to lessen the importance and impact of the black vote.

“It’s not a pretty time for democracy in North Carolina,” Bob Phillips, executive director of the nonpartisan government watchdog group Common Cause North Carolina, told The New York Times.

Lawsuits abound and this will certainly play out in the courts.

Strike two was the uncertainty over the state’s package of economic-development incentives during last year’s long legislative session. By the time state lawmakers approved new incentives programs in late September, North Carolina had lost sizable deals in the industrial arena, as well as regional headquarters.

Strike three – In a single day, the governor and legislature of North Carolina unveiled, deliberated, passed, and signed the nation's first state law limiting the bathroom options for transgender people.

For reasons that I cannot fully fathom, legislators returned to the state house in a special session to overrule a local ordinance in Charlotte banning discrimination against LGBT people. The new law prevents any local governments from passing their own non-discrimination ordinances.

Reevaluating Our Options

Some companies are already reconsidering doing business in the country's ninth-largest state.

New Jersey-based Braeburn Pharmaceuticals said it is "reevaluating our options based on the recent, unjust legislation" whether to build a $20 million manufacturing and research facility in Durham County. The 50 new jobs paying an average of nearly $76,000 a year were announced last month.

Lionsgate, a California-based entertainment company, has decided to shoot its pilot episode for a comedy series in Canada instead of North Carolina. The company had been lining up hotel and equipment rentals and planned to hire more than 100 local workers. Not now.

Charlotte convention officials and the organizers of one of the world's largest furniture markets say some customers have pulled out, also citing the new law.

A Duke University study in 2013 dubbed the furniture expo as North Carolina's single largest economic event, drawing about 600,000 visitors and generating more than $5 billion for the state's economy each year.

North Carolina Attorney General Roy Cooper said he won't defend the new law in court, calling it discriminatory and a "national embarrassment."

"We know that businesses here and all over the country have taken a strong stance in opposition to this law," Cooper said.

Bad For Our Employees and Bad For Business

Charlotte-based Bank of America, the largest corporate employer in the state, is joining 90 other national companies in seeking repeal of the law.

“Such laws are bad for our employees and bad for business,” the company said in a prepared statement.

Other companies denouncing the law include Apple, IBM, Biogen, PayPal, Dow Chemical, Disney, Facebook, Red Hat, Lowe’s, Wal-Mart, Wells Fargo, American Airlines, the NFL and the NBA.

Breaking News (an addendum inserted April 6): PayPal has become the first -- but likely won't be the last -- business to back out of a deal with North Carolina because of the new law.

Last week, Georgia Gov. Nathan Deal vetoed a bill that would have allowed businesses to cite religious beliefs to deny service to gay people. He listened to corporate concerns and did the right thing.

North Carolina Gov. Pat McCrory, well, he apparently doesn’t listen. You reap what you sow, governor.

And Then the Bottom Dropped Out

Unlike North Carolina, things were looking up in Florida. Enterprise Florida Inc., the state’s economic development organization, unveiled a promising $10 million branding campaign with the tagline: The Future is Here.

I was somewhat optimistic, and wrote a recent blog stating as much: “Florida: It’s not just for Fun Anymore.”

But I noted that state lawmakers had turned the governor down flat in his seeking to fund a $250 million, three-year trust to incentivize the most competitive business deals. When I say flat, I mean they gave him nothing.

Little did I know that the bottom would soon drop out. The refusal by the legislature to fund the Gov. Scott’s proposed enterprise fund would result in the resignation of Enterprise Florida’s CEO Bill Johnson.

Does Enterprise Florida Have a Future?

Gov. Scott then almost immediately announced plans for a major restructuring, leaving some to wonder whether Enterprise Florida even has a future.

"The Florida Legislature sent a clear signal this year that they do not want to fund competitive economic development incentive programs," Scott wrote. "Clearly, we have no choice but to refocus the efforts and mission of Enterprise Florida. … The agency will be forced to become smaller and more streamlined."

Scott told Enterprise Florida's board of directors to make $6 million in cuts to its staff and office space. The agency has 90 employees and a payroll of $9 million.

Even before lawmakers rejected the $250 million fund, Scott said Enterprise Florida was "bankrupt" and that 277 separate deals and 50,000 jobs were in jeopardy of being lost.

An Intrusion into the Private Market

Not surprisingly, some of the legislators opposing the governor’s enterprise fund latched onto the “corporate welfare” theme. Incoming Florida House Speaker Richard Corcoran told the Miami Herald, “The enemy of Enterprise Florida is not the Legislature; it is an adherence to the free market.”

While Corcoran didn’t say it directly, the implication is that the awarding of financial incentives is simply a wrong thing to do, an intrusion into the private business market.

State Sen. Jack Latvala, chairman of the Transportation, Tourism and Economic Development Subcommittee on Appropriations, said a “backroom deal” between House leadership resulted in the “gutting” of Enterprise Florida. 

“My fear is that we've got new legislators who are putting ideology first and their constituents second,” Latvala wrote for the Tampa Bay Times.

Well, what is done is done. Ideology has prevailed in both Florida and North Carolina and damn the consequences. But there will be consequences. Just you wait.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. He can be reached at [email protected] or at 972-890-3733.