Are State Treasurer Cowell and the Bowles too cuddly?
North Carolina’s $90 billion state pension is getting lots of attention this week, including a two-part series by Charlotte public radio station WFAE on why State Treasurer Janet Cowell is so fond of alternative investments and collecting campaign funds from New Yorkers with Wall Street ties. The series repeats previous criticisms of Cowell’s strategy, which has boosted state spending on hedge funds and investment groups that specialize in more complex strategies than traditional stock-and-bond investing.
Separately, the cozy relationship between Cowell and Charlotte business icons Erskine and Crandall Bowles was highlighted by International Business Times, a New York-based website affiliated with Newsweek magazine.
Charlotte-based Carousel Capital, which Erskine co-founded, got a contract in 2011 to manage money for the N.C. Innovation Fund, a $232 million state-sponsored investment fund overseen by the state treasurer, only weeks after a fundraiser for Cowell’s 2012 campaign was held at the Bowles’ Charlotte home. Such a fundraiser isn’t too surprising because the Bowles generally support Democrats such as Cowell. But Securities and Exchange Commission rules restrict campaign contributions from companies that manage public pension funds, including Carousel Capital and JPMorgan Chase, where Crandall is a director.
Erskine Bowles told the International Business Times he hasn’t had a role in raising funds for Carousel Capital since 2005 and hasn’t talked to North Carolina or anyone else about investing in the firm during that period. Crandall Bowles, former CEO of the Springs textile empire and the party’s host, didn’t comment. The money apparently helped Cowell, who won about 54% of the vote during her elections in 2008 and 2012, while Republicans gained control of North Carolina politics.
For a balanced perspective on all of this pension-fund talk, check out Andy Silton’s blog. He’s a former chief investment officer for North Carolina and offers an insider’s view of how public pensions work. One interesting point he makes: the State Employee Association of North Carolina slams Cowell for putting 22% of state pension fund into distressed debt, real estate and other alternative investments, up from less than 10% five years ago. Had she put the money in a U.S. stock index fund, instead of messing with all those costly Wall Street and Tryon Street sharpies, the fund would be billions richer, SEANC argues.
But SEANC doesn’t mention that over the past 15 years, including the recent bull market, stocks returned 5% annually vs. 6.9% for bonds. “If we’d followed SEANC’s prescription (even with index funds) over the past 15 years, the state’s pension plans would be in a very deep hole,” Silton notes. He doesn’t fault Cowell for trying something new.
Fayetteville's recovery from recession among fastest in U.S.
Fayetteville recovered faster from the Great Recession than all but two other U.S. cities, according to a survey by personal-finance website Wallethub.com. The city's economy is buoyed by Fort Bragg, the nation's largest Army installation and home to about 57,000 soldiers, according to the Associated Press.
Raleigh ranked No. 10 on the survey of 150 cities, while Durham was No. 22. Greensboro and Winston-Salem were Nos. 84 and 87. With much of its economy tied to the finance industry, which has taken longer to climb out of the recession, Charlotte ranked lowest among North Carolina cities included in the survey at No. 98.
The survey considered 18 metrics including unemployment rates, median household income growth, and increase in the number of college-educated workers moving to the area, to measure which cities experienced the most economic growth since the recession ended in June 2009.
Fayetteville also had the largest decline in the ratio of part-time to full-time jobs.
NC exports top $15 billion in first half of 2014
North Carolina exports topped $15 billion during the first half of 2014, an increase of 2.7% over the same period in 2013, according to a press release from Gov. Pat McCrory's office.
“Exports have not only increased for our traditional industries, such as textiles and food, but also for many of our newer industries as well,” said Sharon Decker, secretary of the N.C. Department of Commerce.
One of the new industries is wood pellets, benefiting after the European Union mandated that 20% of the region's energy come from renewable sources by 2020. Six wood-pellet production plants are now open or in development, including four owned by Bethesda, Md.-based Enviva LP, which is also constructing two storage domes at Port of Wilmington.
In our July issue, contributing writer Lee Weisbecker examines this growing industry, which environmentalists view as a threat to North Carolina woodlands.
Canton paper mill wins incentives from state
The billionaire owner of the Canton paper mill, a bulwark of western North Carolina’s economy for more than a century, got his state aid after lawmakers in Raleigh reversed course in less than 24 hours. Graeme Hart of New Zealand, who bought the mill in 2006 for $500 million and renamed it Evergreen Packaging, sought $12 million over six years to help pay for modernized boilers that burn more natural gas and reduce coal use to meet new federal rules on emissions. The plant provides more than 1,000 jobs with average annual compensation of more than $78,000. A bill enabling incentives was approved today, after another bill, which also included assistance for Evergreen, was defeated yesterday."It's a small insurance policy for a company that has a $100 million annual impact," says state Rep. Nathan Ramsey, a Fairview Republican who voted for the bill.
Champion Fibre and its successor entities ran the mill for decades until selling it for $200 million to an investor group, which included employees, in 1999. Upgrading boilers will cost up to $44 million, which would have no adverse impact on its finances, according to Evergreen’s 2013 annual report. “We’re afraid [Hart’s] going to say, ‘I’ve had enough of this,’ and just shut it down,” says Sen. Jim Davis, a Republican from Franklin who voted for the bill. Hart, who spent more than $16 billion assembling a packaging empire the past decade and is often called New Zealand’s richest man, may sell as much as $7.9 billion of assets, according to a July government filing. Talk around Canton is that Koch Industries’ Georgia Pacific might buy the plant, former Mayor Pat Smathers says. Evergreen officials didn’t return telephone calls. Georgia-Pacific had no comment.
Just appreciate, baby!
Complain all you want about its concussions, its tin-eared commissioner and its players who carry more guns than common sense — the NFL is doing just fine, thank you very much. Forbes released its annual ranking of most-valuable NFL franchises today, and 25 of the league’s 32 teams are worth more than a billion dollars. North Carolina has 36 public companies worth that much.
Last year’s Carolina Panthers, which posted a 12-4 record and won the NFC South, secured the franchise’s first playoff spot since 2008. That earned Carolina an 18% increase in value, from $1.05 billion to $1.25 billion. It improved one spot on the list, climbing to 17th. Also important to the pocketbook of Jerry Richardson — whose ownership group paid just $200 million for the expansion team in 1993 — is that though annual revenue grew only 4.4% to $283 million, operating income nearly doubled to $56 million.
But the Forbes list proves the business of the NFL is about more than winning, with all apologizes to late Oakland Raiders owner Al Davis. The Dallas Cowboys, which haven't been relevant since Troy Aikman was under center and were a middling 8-8 for the third-straight year in 2013, are evidently still America’s favorite team, worth a staggering $3.2 billion, 39% more than last year. Its operating income is only about $40 million less than the Panthers’ revenue.
Florida attracts BofA biggie
David Darnell’s move to Florida costs Charlotte its top-ranking Bank of America executive. But why don't more wealthy Tar Heels retire to the Sunshine State, where the temperature is high and the taxes low?
Darnell, 61, is a Charlotte native, Wake Forest University grad and ardent supporter of his hometown, having served as chairman of the Charlotte Chamber. He’s also regarded within the bank and community as a genuinely nice guy. BofA's North Carolina-based leadership team has dwindled since Brian Moynihan replaced Ken Lewis Lewis as CEO in 2010. Most of its key decision-makers now work in New York. However, Charlotte boosters could always point to Darnell, formerly co-COO, as evidence that Moynihan, who lives near Boston, hasn't turned his back on the bank's headquarters city.
That's a tough sell, now that Darnell will become a vice chairman based in Tampa and is no longer equal to COO Tom Montag, a former Goldman Sachs executive who oversees investment banking from New York. Darnell retains responsibility for business banking and wealth and investment management.
Darnell’s Merrill Lynch wealth advisers might recommend a move to Florida for tax-planning purposes. The Sunshine State doesn’t tax personal income, while North Carolina’s tax rate for the highest earners is 5.8% this year and 5.75% next year. His compensation has averaged about $9 million a year over the past three years, so living in North Carolina can cost income-earners at Darnell’s level a half-million dollars a year. Darnell owns a home near Bradenton, Fla., 45 miles south of Tampa, according to property records. "David’s decision was based on a desire to relocate with his family to Tampa and still provide strategic leadership to the company," bank spokesman Tony Allen says. "Nothing more than that."
The state has no way of tracking how many residents move to Florida for tax reasons, says Trevor Johnson, a spokesman for the N.C. Department of Revenue. It’s an impossible stat to gather because many motivations prompt moves, says Richard Borean, spokesman for the Washington-based Tax Foundation. But U.S. Census Bureau statistics rebut the idea of a surge of Tar Heels heading south. About 53,000 more Floridians moved to North Carolina between 1993 and 2010 than vice versa, according to the Tax Foundation.
Canadian manufacturer bringing 68 jobs to Scotland County
Cascades Tissue Group will invest $62 million and create 68 much-needed jobs over three years in a manufacturing plant in Scotland County, which had the highest unemployment rate in North Carolina in June at 12.1%. Based in Kingsley Falls, Quebec, Canada, the company makes recycled paper towels, tissues and napkins. Started in 1964, Cascades employs about 12,000 workers at more than 100 locations in North America and Europe, including 178 at plants in Kinston and Rockingham. Salaries will vary, but will average about $47,000 annually, 47% higher than Scotland County's average according to a press release from Gov. Pat McCrory's office. The company will receive up to $402,000 in grant money from the One North Carolina Fund if it meets job creation and investment targets.
Best-performing N.C. stocks
The best North Carolina-based stocks to own over the past five years were mostly companies in traditional, less-than-sexy industries, according to Business North Carolina’s annual ranking of the Top 75 public companies in the state.
Raleigh-based Salix Pharmaceuticals Ltd. (ticker: SLXP) topped the list, increasing more than tenfold since June 2009 on increased acceptance of its drugs, which treat gastrointestinal illnesses. Other big gainers included companies with popular brands such as Greensboro-based VF Corp. (VFC) and Hanesbrands Inc. (HBI) and Krispy Kreme Doughnuts Inc. (KKD), both based in Winston-Salem. Each rose more than fourfold. Old Dominion Freight Line (ODFL), based in Thomasville, jumped 327%, while manufacturers Enpro Industries Inc. (NPO) and Carlisle Cos. (CSL), both in Charlotte, gained 306% and 276%, respectively.
In comparison, Bank of America Corp. (BAC) increased 18% during the five-year period, while the S&P 500 Index more than doubled.
See the top performers here.
Dollar General weighs bid for Family Dollar
Dollar General Corp. is considering a bid for Matthews-based Family Dollar Stores Inc., according to a Bloomberg report.
Chesapeake, Va.-based Dollar Tree announced July 28 it would pay $8.5 billion − $74.50 a share − for the discount retailer. Family Dollar's stock has been trading at or above that price since the announcement.
Goodlettsville, Tenn.-based Dollar General is currently the No. 1 dollar-store chain by number of stores. A combined Family Dollar and Dollar Tree would overtake the top spot.
Investor Carl Icahn, who took a 9.4% stake in Family Dollar in June (Under Fire, July 2014), aggressively pushed for a sale of the company, then dumped more than half of his shares after the Dollar Tree deal was announced.