Ports Only Part of Economic Calculation | Eastern North Carolina Now

   Publisher's note: The author, Becki Gray, is vice president of outreach for the John Locke Foundation. Becki Gray is the John Locke Foundation's Vice President for Outreach.

    RALEIGH     Caterpillar announced recently that it has chosen Athens, Ga., as the site for a new manufacturing plant. Several states were considered for the facilities, including a North Carolina site in Brunswick County.

    Advocates for bigger North Carolina ports say we have to beef up the Wilmington port and move forward with the new one at Southport in order to be in the running for expansions like Caterpillar's. But corporate expansion decisions are multilayered and often more complicated than they appear. So before we jump in over our heads and commit to hundreds of millions of dollars to improve the ports we have or build new ones, let's look at why the company said it chose Georgia.

    After the announcement, Caterpillar spokeswoman Mary Bell said that Athens was selected for several reasons: proximity to major ports, a regional base of suppliers, a proactive business climate, and workers with manufacturing experience.

    Could North Carolina have done anything quickly to land the new plant? Consider the factors that swayed Caterpillar.

    * Port location. The Brunswick County site is 20 miles from the port of Wilmington. Athens, Ga., is 207 miles from the Savannah port and 234 miles from the Charleston, S.C., port. Caterpillar already has manufacturing sites in North Carolina -- one in Sanford, 121 miles from the Wilmington port, and another in Winston-Salem, 205 miles from the Wilmington port. Advantage: North Carolina.

    * Access to deep-water ports. The Charleston port is 45 feet deep, Savannah's is 42 feet deep, and Wilmington's is 42 feet deep. All are considering dredging to make way for an anticipated increase in cargo traffic from larger megaships that will travel through the Panama Canal when it's expanded by 2014. Dredging will cost taxpayers plenty: Savannah's dredging to 48 feet would cost $551 million; Charleston's dredging to 50 feet would cost $300 million. Dredging and other improvements to Wilmington would cost between $3.2 billion and $3.5 billion. Construction of a new port at Southport would cost $6 billion. With environmental regulations, improvements would take eight years or longer. Advantage: unclear.

    * Government incentives. Caterpillar is eligible for $77.7 million in state and local incentives from Georgia. An initial incentive package offered by N.C. officials was between $70 million and $90 million. No advantage.

    * Business climate. According to the Tax Foundation's State Business Tax Climate Index for fiscal year 2012, Georgia was ranked 34th nationally, North Carolina 44th. The gas tax in North Carolina is 35.3 cents per gallon; in Georgia, it's 29.2 cents. North Carolina loses on both accounts.

    * Manufacturing workers. North Carolina has been the top manufacturing state in the Southeast for the last 10 years. It consistently ranks in the top 10 states for manufacturing output. Some 15.1 percent of North Carolina's work force is in the manufacturing sector, employing 500,000 people. About 9 percent of Georgia's workforce is in manufacturing, employing 344,800 people. Advantage: N.C.

    Has Caterpillar determined that North Carolina is not a good place to do business? The company has a division headquarters in Cary and more than 1,000 full-time employees in seven North Carolina counties. It opened an 850,000-square-foot plant in Winston-Salem in November 2011. On Feb. 1 it announced a $33 million expansion of the Clayton facility with plans to add 200 jobs.

    Apparently we're doing something right. So why did Caterpillar decide to build a new plant in Athens, Ga.? It's a question that doesn't have one answer. And our reaction should not be one-dimensional.

    Decisions regarding economic development policies should not be based on a reaction to one company's decision not to choose North Carolina for location or expansion. Hundreds of companies make decisions every day where to locate new facilities or expand their operations. Sometimes they consider North Carolina, and sometimes they don't. More often than not, they choose not to come to North Carolina. And that's OK.

    Our decisions on whether to expand ports, where to focus worker training programs, or what enticement packages to offer should not be determined by one or two rejections. A better plan to attract and grow businesses is to have sensible regulations, low taxes, a skilled work force, and reliable infrastructure.