Why Doesn't a Company Just Get a Check? A Look Inside Local Incentives (Part 1)

Somewhere out there right now, someone is reading a headline about a new project coming to Catawba County, and there's a flicker of worry that this company's success — and its choice to land here — means a dollar is coming out of their own wallet or purse to make it happen.  

I get it. I'd think the same thing if I didn't do this for a living. It's probably the single most misunderstood piece of what we do, so let's take it head-on. 

First, a definition, because "incentive" gets thrown around loosely: in our world, a local incentive is a partial, time-limited reimbursement of the new property taxes a company generates by building or expanding here — nothing more, nothing less. Not an upfront grant. Not a blank check. Not money pulled from you or yours. We'll get to why that distinction matters in a minute. 

One more grounding note before we go further: none of this is something our office invented on our own. The whole process runs on North Carolina's Local Development Act (NC General Statute(s) 158-7.1) — state law, not local preference — and other states structure theirs quite differently. So what follows is specific to how Catawba County, and North Carolina, actually do this. 

Why we do this at all 

If Catawba County existed on an island, none of us would offer a dime. If we could keep 100% of the tax base benefit of every new company or expansion starting on day one, we would — no debate needed. But we don't operate on an island. Every company we recruit, and plenty of the ones already here, are comparing us against other counties, other states, sometimes other countries. Incentives are part of how that competition plays out almost everywhere, and if we opted out entirely while everyone else stayed in, we wouldn't be taking some principled stand — we'd just be losing.  0% of a project that goes somewhere else is what we would get.

If that sounds uncomfortably close to everyday life, it should. You've probably waited for a Presidents Day sale on a dishwasher, taken the 0% APR deal at the dealership to finance that truck, or timed a shoe purchase to BOGO a second pair for 50% off. None of that talked you into buying something you didn't want. But if you were shopping for the same truck from Hickory to Barstow, California, the incentive might genuinely tip which dealer got your business when all else is equal. That's roughly the position we're in — except the "dealer" is a whole county, and the stakes are jobs and tax base instead of a car payment. 

We say "no" more than people think 

Here's the part that might surprise you: incentives aren't handed out just because a company asks. We turn down a lot of opportunities (I’d venture to say a very healthy majority) — companies whose wages don't clear our wage threshold (updated annually by the NC Department of Commerce, and for new companies we hold a higher bar, 110% of the county average), companies whose investment is too thin to broadly benefit the rest of us taxpayers, and sometimes companies whose operations just don't sit right with the community they'd be joining — think noxious fumes, heavy water and sewer draw, companies that create undesirable waste byproducts, or even a building nobody would be proud to drive past. Our office has recently taken on an unofficial motto: chase good companies, aspire higher, do it now. The reality is we do live in a great community with a lot of tremendous assets, and that puts us in a position to be selective. But companies are equally selective, so we can't get by on just our good looks (I tried that once — didn't get far). That's another reason incentives are a component of getting an opportunity across the finish line.

How the money actually moves 

This is the misconception I most want to clear up: nobody gets paid upfront. A company has to build first, hire first, invest first (Step #1) — and prove it, with documentation sent straight to the Catawba County Tax Office and our EDC office — before a single incentive dollar is returned to the company. Because of this requirement (aka the company performs first), it is usually two to three years before any type of incentive reimbursement from the local government even starts.  

Once the company's investment is on the books, the county tax office assesses it at full market value, the same way your house gets assessed every January 1st. The company then pays 100% of the resulting property tax bill, at the normal rate, like anyone else (Step #2). Only after that does a portion of that new tax revenue — typically 50 to 75 percent — get returned to the company (Step #3), for an agreed-upon number of years spelled out in a contract before any of this starts. 

Break it down to simple numbers: the company pays us a dollar in new taxes, and we return fifty cents of it. We keep the other fifty cents. No other taxpayer's dollar is involved — the company is, in effect, funding its own incentive out of taxes that didn't exist in our county before they showed up. And it's worth being precise here: this only ever applies to the new taxes tied to the new investment. If a company already had a facility here, they always pay 100% on their existing machinery and buildings — no incentive we offer ever touches what was already on the books before this deal. The incentive only ever applies to whatever's new. 

Why this matters for your tax bill 

That "fifty cents we keep" isn't an abstraction — it's police coverage, fire and EMS response times, ensuring clean water flows out of your tap, the trail at the park we mentioned last time. And when the incentive term ends, which every one of them eventually does (typically after 3-5 years), 100% of that new tax revenue starts flowing to the county and cities for good. That's the diversified tax base we talked about in our first post — now you can see the mechanics behind it. 

What's still ahead 

We're only three steps into this explainer which may be a six-step process, and I'll be honest with you: there are entire books — real, published, footnoted books — written on the legal structure of local government incentives. Two shorts posts here aren't going to do the subject full justice, and I don't want to pretend otherwise. But we have to start somewhere, and plain language beats no explanation at all. 

Next time, we'll cover the other half of the six steps: the legally-binding contracts, the annual monitoring, and what happens — including real financial penalties — when a company doesn't hold up its end. That's the safeguard piece and important safety net each of us have as citizens and taxpayers. 

If there's a piece of this you want us to slow down on, or a question this raised that we didn't answer, send it my way at nhuret@catawbacountync.gov. This series only works if it's answering what you're actually curious about.