With Dell done, what does N.C. get back?

RALEIGH

The state of North Carolina is eligible to recover only a portion of the $8.5 million in financial incentives it has given to Dell Inc. over the past four years.

It's unclear exactly how much money the state can recoup now that Dell has announced that it will close its computer-assembly plant in Forsyth County. But so far, state officials say they believe that just $1.5 million will return to the state.

That figure is at odds with Gov. Bev Perdue's pledge this week to fight for a full reimbursement from Dell. It also illustrates a difference between the incentives provided by the state and the ones provided by Winston-Salem and Forsyth County, where officials say they are confident that they will recoup all of their costs.

Perdue said she spoke with Dell officials on Wednesday afternoon, shortly after the company said it would be shuttering the plant and laying off more than 900 workers.

"We made it very clear to them -- and they already understood it, quite frankly -- that every red cent of incentive money had to come back to the people of North Carolina," Perdue said.

That may be an impossible task.

For instance, the state paid about $3.6 million in grants that were used to train workers at Dell's new plant. The company is not required to pay back that money, according to the N.C. Department of Commerce.

Commerce officials said that the money should not be considered a waste, because it was used to help North Carolinians develop new and useful job skills. Even though the workers are now losing their jobs at Dell, they still have those skills.

The state also provided Dell with about $3.3 million worth of tax credits and other benefits. Those tax credits took the form of discounted tax bills for Dell based on the company meeting yearly conditions.

"There is still some question as to how much of that tax break, if any, would be possible to get back," said Chrissy Pearson, Perdue's press secretary.

Dell said it would comply with the terms of all of its incentives agreements.

There is at least one type of state incentive that Dell is legally required to repay, state officials said yesterday. That's a set of grants totaling $1.5 million that the state gave the company in 2006 and 2007 based on the company meeting employment targets at its plant.

Under the terms of Dell's contract with the state, Dell must repay those grants because it is closing the plant before the contractual time period is up.

The company qualified for an additional job-creation payment of $1 million in 2008, but the company will not receive that money.

Overall, the $8.5 million total package that the state provided to Dell during the four-year history of the plant was much smaller than almost everyone anticipated it would be when the state first lured the company here.

Under the various incentives it was eligible for, the company could have received well over $200 million from the state. That's on top of incentives from the city and county. But as the market for desktop computers dwindled, the state's high hopes for the plan never came to fruition.

One striking example of the huge expectations was a special tax credit that the General Assembly approved in 2004. It was nominally for computer manufacturers, but in reality it was for a single company: Dell.

But in the end, the company received a tax break of just $106,000 under that tax credit.

On Thursday, one day after Dell's announcement, Perdue visited the Durham factory of Cree Inc., which makes LED light bulbs. The company was announcing a major expansion that is expected to create 575 new jobs by the end of 2012.

Cree has benefited from government subsidies in the past, but no economic incentives were part of its current expansion.

Still, Perdue told reporters that incentives -- although she may not like them -- are essential and are here to stay. She was asked if the Dell experience indicates that the state must rethink its incentives programs, and she gave no specific areas she wants to change.

"This may happen again," Perdue said. "There may be another company that has outlived its capacity to compete in the 21st century in North Carolina. But I'll tell you what I can tell you: After nine months as governor, I have yet to talk to a company that doesn't ask me sometime during the initial conversation what I'm going to do, as the governor of a state, to meet the incentive package they have been offered" by other states.

jromoser@wsjournal.com | 919-210-6794

Journal Graphic by Nicholas Weir - Click to enlarge