What Happens If They Don't Deliver? The Safeguards Behind Local Incentives (pt.2)

Picture this: a company agrees to locate or expand, negotiates a local incentive, breaks ground, hires a few hundred people... and then, three years in, quietly locks the doors and leaves town. Did we just hand out free money on a handshake, with no plan for what happens when things go sideways?

That's the question this second half of the incentives conversation exists to answer, and it might be the one people worry about most.

Quick recap, since this one builds directly on Part 1 (missed it? Read here): a company has to invest and perform before any money moves, the county tax office assesses that new investment at full value, and only a slice of the new taxes it generates — never the existing tax base, never anyone else's tax dollars - ever gets reimbursed. If you missed that post, it's worth a few minutes; everything below picks up right where it left off.

Now, the other half: what keeps that promise honest year after year, and what actually happens when a company doesn't hold up its end.

Step 4: Prove It, Every Single Year

Companies don't just get to say they hit their numbers — they have to provide proof, annually, before a single reimbursement dollar goes out. Every company under an active agreement files a certification each year (due March 5th) documenting investment, headcount, and wages. Our EDC team reviews this certification first, and we're not shy about asking follow-up questions until we're satisfied the company's figures hold up - we're the ones who actually calculate the reimbursement dollar figure, not the company. The verified paperwork and request from our office then is sent to the respective City and County for that project.

This step is the real checks-and-balances of the whole process, and it also gives us an honest, year-by-year read on how a company's actually doing. Over the past few years - particularly during the post-COVID hiring surge - we've seen more companies than usual fall behind their projected hiring or investment schedules.  When that happens, we have a direct conversation: is this temporary (construction ran long, say), or is this not going to happen? Sometimes the honest answer is "we're not going to get there," and both sides can terminate the agreement. If nothing's been paid yet, which is usually the case this early, we simply close it out. If something has been paid, those funds are repaid back to the respective local governments.

Step 5: It's All in the Contract

Every expectation on both sides - job counts, wage levels, investment amounts, payment timelines, deadlines - gets written into a signed contract before any of this starts. We even include language encouraging companies to use local vendors and hotels, so some of that benefit stays close to home too.

Here's the part that tends to surprise people: the commitment doesn't end when the payments do. In Catawba County, we require a company to maintain its jobs and investment for up to three years after the final incentive payment. So a company that signs up for a 5-year reimbursement is really looking at 2-3 years of ramp-up before payments even start, 5 years of payments, and then another 3 years of holding steady or risking a penalty anyway. Add those years up, and taking a local incentive means signing on for something close to a decade-long relationship with a city/county government - which, frankly, isn't something most companies rush into. Who really wants a 10-year commitment with a couple of local governments?  Not many - really only the companies where it genuinely tips the decision and is worth it for both sides.

Step 6: Penalties, or "Clawbacks" if You Want the Fancier Word

So what actually happens if a company falls short - misses its job numbers, under-invests, or shuts down entirely? Every agreement spells out, in detail, exactly what counts as a default and exactly what happens next. Hand-in-hand with attorneys, we spend a lot of time thinking through these scenarios up front, precisely so we're not figuring it out for the first time in the middle of an unexpected, bad situation.

The remedies vary a bit by circumstance, but they usually land in one of a few places: full repayment of everything reimbursed, plus interest - the agreement even specifies the interest rate and how it's calculated; repayment of the discount if publicly owned land was involved; or a prorated repayment if a company hit some targets and missed others. Whatever form it takes, there's always a repayment, and once a contract breaks this way, that's typically the end of it.

Why this matters for you

Put steps 4 through 6 together - the annual proof, the [possible] decade-long tail, and the contractual penalties — and the picture that emerges isn't "we hand out money and hope for the best." Incentives follow a long-term, closely monitored agreement where a company only ever keeps what it's actually earned, and where taxpayers have real legal recourse if things don't work out. That's the part of this process built specifically to protect taxpayers, and honestly, it's the part I most want people to walk away understanding.

In my time here, we've put together a good number of these agreements, and the honest track record is this: the large majority live up to what they promised. For the ones that don't quite get there, we usually see it coming well before it becomes a real problem - the annual certifications flag it early enough that we can start easing off before anyone actually owes money back.

Here's a detail worth sitting with, too: no company wants to owe a local government money. That fear alone tends to keep things honest - a company that's falling short would rather walk away from the incentive funding, or agree to cancel the deal outright, than end up owing us. And when that happens, it's worth remembering that some real growth usually already took place along the way - jobs got added, investment got made. The local governments and taxpayers keep all of that upside, and never paid out a dime in incentives to get it.

Or take this thought all the way back to fundamentals - back to Part 1, even. If our community had chosen not to participate in incentives at all, our community wouldn't have gotten some smaller share of those jobs and that investment instead. We'd have gotten zero. Zero jobs, zero investment, zero new tax base. That's the number incentives get measured against, and it's the number that makes the rest of this math worth doing. That's really the whole point of building the incentive process this way to both benefit AND protect the community jointly.

What's next

That closes out the incentives conversation for now — six steps, two posts, and still admittedly just the surface of a subject people write whole books about. Next up, we're tackling something almost everyone eventually asks about: why projects show up under code names, and why we can't talk about them until they're ready to be announced.

Got a question about anything in this post, or something from Part 1 that still doesn't sit right? Send it to me at nhuret@catawbacountync.gov — that's what this series is for.