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Excerpt from Oral History Interview with S. Davis (Dave) Phillips, January 27, 1999. Interview I-0084. Southern Oral History Program Collection (#4007) See Entire Interview >>

Making North Carolina attractive to businesses

Here, Phillips describes North Carolina as "an easy sell" to businesses. Research Triangle Park, a research and development center, the state's universities, airports, and other infrastructure—as well as the natural environment—make the state attractive. But North Carolina failed to lure BMW, and despite offering fat incentives, also lost Mercedes when Alabama offered the company even more. Nevertheless, Phillips believes that he has stewarded the successful development of a set of incentives that will benefit the state.

Citing this Excerpt

Oral History Interview with S. Davis (Dave) Phillips, January 27, 1999. Interview I-0084. Southern Oral History Program Collection (#4007) in the Southern Oral History Program Collection, Southern Historical Collection, Wilson Library, University of North Carolina at Chapel Hill.

Full Text of the Excerpt

JM: Was it hard to sell businesses considering North Carolina for the first time on North Carolina did you find? Or maybe a better question is what was the pattern of response to your solicitation that they consider North Carolina as a place to locate? DP: We've got a great product in North Carolina. So it's an easy sell compared to most states. It goes back to the Research Triangle Park and the universities and the airports and all that infrastructure that has evolved over the last forty years. It's just a quality state. You've got a little bit of everything here. You've got basic manufacturing; you've got high tech; you've got things that appeal to the lifestyle of executives. We've learned that that's important whether they like to fish or snow ski or play golf. If you think about, most states just don't have that. I mean, if you think about the Southeast, there are no other states that have mountains except North Carolina. They all come into North Carolina, the mountains or our coast, which is fabulous. We have an edge. They've either been here to participate in something from a lifestyle standpoint. They like that. But there's no reason to turn us down. We're competitive in our infrastructure, our utilities costs, our water and our housing, great education. So we don't have any big blemishes. Most states have big blemishes. So yes, it's an easy sell. JM: What would you say were the principal challenges to the model of development that you had in mind. Were there any great hurdles that had to be overcome? Were there any losers along the way you had to try to accommodate and bring along and the success story as well? DP: This whole battle of incentives. A major situation that is still going on. We had never competed, and there was a lot of built up frustration when I first got into office as to why the state lost BMW. We lost to South Carolina. We had been in office ninety days and here came Mercedes. We felt compelled to really go after them and did and put an incentive package worth about one hundred million dollars together for them. Something of that magnitude had never taken place in this state before. It boiled down to three states, Alabama, South Carolina, and North Carolina. South Carolina had gotten BMW because of enormous incentives and basically bought it and were very creative in the way they bought it through their state ports and the way they financed it and things of that nature. So that was the beginning of quote the incentive wars. Mercedes became the worst of all of them. There's never been anything as bad since. Mercedes played it beautifully. They played us all off against each other. Alabama gave them the most by far. JM: Let me interrupt right here. I just need to turn this tape over. DP: Okay. END OF TAPE 1, SIDE A START OF TAPE 1, SIDE B JM: Okay. All going. DP: Alabama ended up giving them total elimination of any state income taxes for up to twenty years or the investment they put into it would be really five hundred million dollars. The newspapers claim it was worth 350 million dollars compared to our 100 million dollars. Frankly it's worth a lot more than that because there are a lot of other deals that any expansion or any additions during that twenty years, a billion or two billion they invest, they get it all back. They were hoping for putting Alabama on the map, which they did. The world was just astonished. So we understand what the state was trying to accomplish. JM: Not an economic play for Alabama or not in the narrow sense. DP: Correct. It was profiled what they were hoping for to pay it off was all the supplier companies coming there and paying full taxes. Get the mother ship, and let all the other ships pay for the freight. A lot of companies have gone there, and they've hired a lot of people, and they've done a great job training them. But it's still going to cost Alabama a lot of money. You can debate is that PR; is that advertising--what are the intangibles. Well North Carolina just wasn't desperate. We're still not desperate. We've been so good for so long that we didn't have to play that game. However we've played it to the degree that we felt compelled to do it. We thought we would be pretty darned competitive. We were just doing a pretty good job and that South Carolina was still more aggressive than we were because they felt compelled after they won BMW they wanted Mercedes too. They've got a great location near Charleston where all the cars will be shipped out and products will be shipped in. Our ports weren't as strong as Charleston. So they were terrific in what they were doing. Alabama just was desperate. Since that time all the people that have had anything to do with it have all been fired. The Governor's been fired. Big controversy. But anyway it was fascinating for us, but that's just an example of incentives. There are times that you need to be competitive or more competitive than you are just on your own for different reasons. One is helping other regions of the state that just don't have the resources. If you can absolutely bait some company to come in there and say for these dollars I'll employ a lot of people and invest a lot to where your property taxes will have some added dimension to it. Therefore, we have created an incentive program on a tier basis for the more distressed counties in North Carolina. We're trying to re-engineer the state to where instead of giving fewer grants of money, companies earn less taxes or have to pay less taxes, earn the tax credits. It's working. We had a meeting last week in Raleigh where we talked about an analysis over the last few years of how all these things have evolved. That's probably one of the most gratifying things I've done because when I was Secretary of Commerce during all that, it's the thing that I worked hardest on to get implemented. It's implemented and it's really paying off.