NC economic grants aimed at helping rural communities often go to already booming areas: I-Team

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BySamantha Kummerer WTVD logo
Friday, August 4, 2023
NC economic grants designed for rural areas end up in biggest metros
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ABC11 I-Team uncovers data showing money designed to help rural communities attract businesses is often going to already booming communities.

RALEIGH, N.C. (WTVD) -- The need for expansion quickly became apparent for Raleigh-based company, SinnovaTek.

The company develops food processing equipment and was looking for a larger space for its co-packing operation: FirstWave Innovations.

During the search, leaders explored options in Virginia, South Carolina, as well as in multiple North Carolina counties.

Ultimately, last year the company chose a spot 30 minutes outside of Raleigh in Nash County.

"I think a big part of it is we want to be closer to the fields, to the farms, to the sauces. A lot of these ingredients that we're using in here for baby food are growing right here in Nash County," explained SinnovaTek's vice president of manufacturing, Tyler Brown.

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The construction timeline and site also factored into the company's decision, but so did added financial incentives from the local and state governments.

SinnovaTek received a $400,000 state grant for repurposing an empty building.

"It definitely played in quite a bit," said SinnovaTek CEO Michael Druga. "We were able to reinvest that money immediately back into additional equipment, additional production lines versus some of the other states we looked at or more of an overtime or at the end of a three or five year period."

SinnovaTek's expansion aims to bring investment of $11 million to the area over the next five years along with 75 new jobs they hope to fill from workers in the county.

It's an impact like this that North Carolina aims to create through its various incentive programs.

Former UNC Economics professor Brent Lane said many of these grants started as ways to attract companies to more rural areas of the state. But looking closer at the data that doesn't appear to still be the case.

The ABC11 I-Team analyzed data for a number of Economic Development grants from 2009 to 2022. Over the 13 years, the state awarded $418 million from four different state grants (JDIG, OneNC, Utility Account, JMAC).

The I-Team's analysis found 16% of the money awarded through these grants has gone to counties most economically distressed, labeled as 'Tier 1' counties by the state. Additionally, only 14% of the jobs created from these grants have been in these same counties. These 40 counties have the lowest unemployment rates, average incomes and slowest population growth in the state. These 'Tier 1' counties have received the highest number of grants compared to Tier 2 and Tier 3 counties, but they have not benefited the most.

Whereas the counties that are the least economically distressed have received 49% of the funds and are home to half of the jobs that have been created through these incentives.

"The economy is already booming in those areas. And the industries are already very interested in those areas. They are more needed in areas where that's not true," Lane explained.

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Lane is the former director of UNC's Center for Competitive Economies and has studied the state's incentive program in the past.

It does take a few years for companies to create jobs and earn the awards associated with these grants, so these percentages will change as some of the more recent projects mature.

Zooming in further, Mecklenburg and Wake County have received 44% of all money distributed so far and 39% of the jobs created under the four grant programs.

"There's a valid argument that the distribution of incentives basically follows where the industry needs to go or wants to go, but we need to use our incentives proactively to find those companies that can go to the rural and non-metro areas of the state where the need is greater," Lane said.

The One North Carolina Fund (OneNC) aims to specifically "encourage economic activity in the less prosperous areas of the state." However, the I-Team analysis still found the most distressed counties in the state have received nearly half the amount of funding and new jobs than other areas of the state.

"Our public policy obligation is to make sure our incentives address those areas of the state as well," Lane said speaking to the rural areas of the state.

Lane said it's important for the state to consider where these grants go because some of the biggest impacts could be made in areas that need a boost to the economy the most.

"Some of the more rural areas of the state where a few hundred jobs move the needle tremendously, whereas, in the Triangle, even a few thousand jobs can have a fairly limited impact," Lane said.

The North Carolina Department of Commerce which oversees these incentive programs did not agree to an interview.

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The Carolinas Gateway Partnership works to attract businesses to Eastern North Carolina. Their CEO, Norris Tolson, said while it can be harder for 'Tier 1' counties to compete for businesses, he believes success anywhere in the state can help.

"We look at every project that walks through our door as somebody that's taken another hard look at North Carolina and whether they wind up in Mecklenburg County or Duplin County or you name it, it doesn't matter to us because that the more exposure here we get to the international marketplace, the more opportunities all of us have," Tolson said.

Beyond the grants the I-Team analyzed, the state and local municipalities have a number of other financial offerings that businesses can win based on their project and location.

Tolson said he remains optimistic that eastern North Carolina's economy will continue to attract expanding businesses and that incentives will help make that happen.

"We will be very well positioned in the eastern part of North Carolina to take advantage of all these opportunities that are going to come our way through these companies and the thing that's going to help us seal the deals are going to be the things you've talked about, the state incentive packages, the state's interest in helping the rural part of the state grow," he said.