Each year bribery takes place in North Carolina’s government. Under the guise of ‘economic development’, taxpayer financed bribes are offered by state and local governments to persuade businesses to relocate here. Most times, the bribes aren’t large enough and businesses go to the highest bidder. Occasionally, North Carolina will win the bidding war and land a new investment. This is not just a contest against other states but also against the shrewd negotiators used by the relocating businesses. These negotiators know how desperate North Carolina is for jobs and jack up the price even further. Even when the N.C. Department of Commerce wins, taxpayers still lose.
Despite North Carolina’s participation in this rigged game, there are better alternatives. Bringing sanity back to economic development is a retired manufacturer who wants to stop using public money and replace it with private dollars. Senator Jim Jacumin (R-Burke) spent a career in the textile industry making and selling the very machines that made North Carolina the textile leader in the world. After touring a textile plant in China, Jacumin realized what lay in store for his industry. He convinced his employees that owned part of the company with him, to sell out before the manufacturing exodus hit North Carolina. “China didn’t target a company or a plant, they came after a whole industry,” he said.
What is Jacumin’s silver bullet to help bring back manufacturers to North Carolina? Would you believe private money, of all things? After being elected in 2004, Jacumin sought a solution to help the manufacturing industry survive. What he discovered was a new type of corporate entity, used in other states, to help achieve charitable goals: the low profit limited liability company (L3C). L3Cs make it less risky for foundations to make specific investments in business and to take on the highest level of risk, improving the outlook for other investors and attracting more investment. Jacumin had the idea to use the L3C model to help the struggling manufacturing industry.
Jacumin realized that foundations in the U.S. have assets in excess of $500 billion but are required by the IRS to contribute 5% to charitable purposes annually. He also saw that foundations would be willing to help keep jobs in their area, if tax regulations allowed them to invest in expensive types of overhead, such as facilities and equipment. The new structure makes it easier for foundations to make non-grant investments such as loans, loan guarantees or other investments that further a charitable foundation’s philanthropic mission.
Jacumin introduced a bill with bipartisan support entitled “The Endangered Manufacturing and Jobs Act” to authorize low profit limited liability companies in North Carolina in 2007. After passing the Senate, the bill was sent to committee in the House but was never given a hearing. Despite a difficult start in North Carolina, several other states, coping with the loss of manufacturing jobs, passed the bill into law. Currently, the L3C concept is law in Michigan, North Dakota, Utah, Vermont and Wyoming and is being considered in six other states.
During this session of the Legislature, the current version of the bill, SB 308 has again passed the Senate and is up for hearings in the House. Time will tell if lawmakers in North Carolina will open the door for private dollars to incentivize job creation or keep throwing away tax dollars to bribe businesses. Even though he has been invited to the bill signing ceremonies of his legislation in other states, Jacumin has declined to attend them. “I want to see the bill designed to protect North Carolina’s manufacturing jobs signed here,” he said.