Charlotte Observer

Maready Case Might Make Waves Across U.S.

This document is available courtesy of the Charlotte Observer.

Thursday, February 15, 1996
Section: BUSINESS
Page: 1D
TAYLOR BATTEN, Staff Writer

A final ruling that business recruitment incentives are unconstitutional would revolutionize the way businesses are recruited to North Carolina.

But the outcome of the Maready case, to be argued before the N.C. Supreme Court Friday, also could spark challenges to incentives throughout the country. Dozens of lawyers from outside North Carolina are expected to be in the Raleigh courtroom for the high court arguments.

“The implications are great for the entire country if the decision is in my favor. I think it would start an avalanche of similar decisions around the country,'' said Winston-Salem lawyer William Maready, who filed the suit. “I think it would add a lot of spirit to people around the country that have been talking to me about similar actions. I think there would be a grass-roots eruption.”

Maready won a lower court ruling that the use of taxpayer dollars to attract business is an unconstitutional use of public money for private purposes.

Some experts believe the case could set a precedent even if Maready loses.

“It has the potential for being a landmark case either way,” said Arthur Rolnick, an executive at the Federal Reserve Bank in Minneapolis who has studied the issue extensively. “It could bring national attention to an issue Congress has to face.”

Indeed, the effort to bring some rationality to a practice that many economists believe has gotten out of hand has already begun—sparked in part, organizers say, by the Maready case.

* The Ford Foundation will team with Minnesota Public Radio to sponsor a forum in Washington, D.C., to discuss the use of incentives. Organizers expect to have 60 to 80 experts from all sides of the issue explore the costs and benefits of using incentives. The symposium is tentatively scheduled for late May, shortly after a decision in the Maready case is expected.

* Ohio state Sen. Charles Horn is working with the Corporation for Enterprise Development to sponsor a multistate legislative conference, at which legislators from several Great Lakes states would ponder ending the “bidding war” and discuss cooperative ways to boost the region.

* Harvard University's Kennedy School of Government is writing a case study exploring North Carolina's chances of landing a Volvo plant without widespread incentives.

Many economists argue that while incentives may benefit the state that wins an industrial prize, there is a corresponding loser, and a net loss to the nation.

Last fall, a month after the lower court ruled in the Maready case, 104 economists from nine states endorsed a resolution decrying the “economic war between the states” and urging an end to targeted incentives.

But the use of incentives has accelerated so quickly in the past several years that opponents have an entrenched lobby to overcome. N.C. officials say they've lost projects—including AMP Inc. to South Carolina and Motorola to Virginia—in recent years because other states offer so much more.

“The lawsuit is ironic when our neighboring states are escalating their use of incentives daily,” Gov. Jim Hunt said in Charlotte Wednesday. “North Carolina has lost more than 30 major companies to Virginia and South Carolina over the last three years. That has got to stop. We cannot be in a position of consistently losing these battles.”

That escalation makes Hunt and other state officials skeptical that other states would follow suit should North Carolina disarm.

“If we should lose the Maready case, other states will immediately jump on that,” Hunt said.

But experts say economic development officials across the country are watching the Maready decision closely, wary of spillover effects.

“It could be a good wake-up call to the economic development field and the need to structure much more cost-effective approaches,” said Bill Schweke, of the Corporation for Enterprise Development.

Sen. Horn of Ohio said his campaign to have legislators there reconsider the wisdom of the incentives game is slowly paying off.

“I'm banging my head against a brick wall,” Horn said. “My head's getting sore, but we're loosening some of the mortar.”

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