Mercedes Drove NC to Incentives

Once upon a time, North Carolina didn’t believe in big incentive deals to entice big companies here.

Then came Mercedes-Benz. Or, actually, didn’t come.

It was 1993. Mercedes was looking to put a $300 million, 1,500-jobs SUV manufacturing plant in the U.S. Thirty states put in bids. It came down to three finalists – North Carolina, South Carolina and Alabama.

Governor Jim Hunt had just begun his third term. He had been a champion industry-hunter in his first terms, 1977-1985. When he ran again in 1992, he promised to put the state on top of the game again. He put on a full-court press for Mercedes.

The Governor thought North Carolina had an edge in workforce training and education. He convinced the legislature to enact limited incentives, like tax credits and local economic-development financing.

But he said in April, “We’re not going to give away the store. I’ve considered, and rejected, more sweeping measures that other states routinely offer, such as tax abatements and free land. I just don’t believe such measures are necessary at this point.”

He was optimistic. He flew to Detroit to meet Mercedes’s chairman. Hunt said the executive “didn’t want to talk about the cost of labor, free land, infrastructure or tax abatement. He wanted to talk about the quality of North Carolina’s workforce.”

Then, in September, Mercedes made its pick: Alabama.

Mercedes plant in Vance, Alabama

Alabama had offered a financial-incentive deal three to five times bigger than North Carolina’s $109 million. Mercedes got a 25-year corporate tax holiday and a tax break to help pay for the plant’s construction. And that was just part of the deal.

Some 28 years later, the auto industry is a major part of Alabama’s industrial base.  The state is a national industry leader, poised to play a key role in the expansion of electric-powered vehicle production.

After the 1993 decision, Governor Hunt put out a statement that began, “Well, you win some and you lose some.” He said, “we did not feel that North Carolina should offer those kind of tax abatements.”

He was more pointed privately: “Mercedes told us it wasn’t about the money. But, in fact, it was about the money.”

Legend has it that one of the state’s economic recruiters took a hammer and smashed a toy Mercedes car.

After Mercedes, Governor Hunt decided that North Carolina needed to be more aggressive with incentives if we wanted to out-recruit other states.

We got more aggressive, as the Apple announcement last month showed. Apple got the state’s biggest incentive deal ever, almost a billion dollars over 40 years.

Today, as in 1993, offering incentives is controversial. It’s one of those rare issues that unites critics on the right and left – and provides common ground for pragmatists.

I’ve always thought that critics of incentives should be prepared to say precisely which companies and which jobs they don’t want North Carolinians to have.

It’s easy to criticize incentives in theory. It’s hard to turn away good jobs that pay well and that offer families and communities a better future.


More on Apple: “Apple incentives are the largest in NC history. Here’s how the deal breaks down”:

More on the Alabama plant:

“Electric vehicles are important to Alabama’s auto industry.”

“Big Incentives Won Alabama A Piece of the Auto Industry.” Excerpt: “In 1993, Alabama persuaded Mercedes-Benz to build its first U.S. auto plant here by offering the luxury-car maker $253 million worth of incentives — $169,000 for every job Mercedes promised the state. Taxpayers considered the deal such a boondoggle that they voted Gov. Jim Folsom out of office long before the first Mercedes sport-utility vehicle rolled off the new assembly line in 1997. Today, the deal looks a little more like a bargain — suggesting that the controversial practice of spending millions of taxpayer dollars to lure big employers can sometimes have a big payoff.”







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