Tar Heel Tattler - October 2006

Holly Springs get stuck by incentives
By Frank Maley

Maybe Holly Springs should hold a really big bake sale. But the town would have to sell a lot of cookies, brownies and cakes to make up the $11.8 million gap between what it has promised to spend on Swiss drug maker Novartis to land a vaccine plant and what it has on hand.

Town officials said in July that Novartis would invest at least $267 million to build a vaccine factory, which will create 350 jobs paying an average of nearly $50,000 a year. They also said in a statement that they had promised the company $8.3 million in incentives. What they didn’t mention was they also had committed to road and other improvements that brought the cost to $21.9 million.

Only about $10.1 million had been earmarked for the project by the town, state or other entities such as The Golden LEAF, the Rocky Mount nonprofit that disburses proceeds from half the state’s $4.6 billion share of the national tobacco settlement. It pitched in $800,000. “The town of Holly Springs is overextended and has significant gaps in meeting the demands of Novartis,” Town Manager Carl Dean admitted in a letter seeking $6 million from Golden LEAF, which anted up an additional $1.25 million. The town is asking for more state and federal funds.

Officials insist that the town of about 15,000 will keep its word, even if it has to borrow what it needs. “You’ve got us in a position where we have to say we need the money but also, at the same time, to say that we’re responsible and we’re not an 18-year-old out there with a brand new credit card,” Town Attorney John Schifano says.

Maybe not, but a town’s willingness to take such risks shows a flaw in economic-development policy, says Robert Orr, a former state Supreme Court justice and executive director of the Raleigh-based North Carolina Institute for Constitutional Law, which has sued the state to block incentives. “It certainly would appear to be a situation where a small municipality, in an effort to lure a large company to that particular location, was willing to get itself overcommitted without any real, adequate public oversight until the deal is done.”

Golden LEAF President Valeria Lee recalls one other town asking for help keeping promises it had made, but she wouldn’t identify it. “I don’t know anybody who would want to do it this way.”