Dear Commissioners, May 14, 2012 | Eastern North Carolina Now

    Publisher's note: Below is solid citizen, Warren Smith's ongoing, and well stated, "Letter to the Commissioner." We agree: At some point, Beaufort County needs to remedy its Economic Development mess, then North Carolina needs to tend to its mess as well.

Beaufort County Commissioners
121. W. Third Street
Washington, NC 27889

Dear Commissioners:

    During the last few months the City of Washington has sponsored and applied for several grants, none of which will require any funding to be provided by local taxpayers. All matches are to be the responsibility of the grant recipients. This is in stark contrast to the common practice surrounding grants proposed by the Economic Development Commission. In spite of the espoused belief that Tier 1 status allows Beaufort County access to state grant funding without providing matching funds, grants arranged for the EDC’s commercial clients are commonly accompanied by contributions from local taxpayers. I know of none where the recipient provided the match.

    In particular, the Beaufort County and the City of Washington will shortly be asked to finalize twin grants of $90,000 as a match for a $180,000 state grant to be given to Spinrite Services LLC (‘Spinrite”) in connection with their purchase of Caron International (“Caron”).

    In its own right this grant is inconsistent and difficult to understand. It purportedly involves the transfer of ownership of Caron’s real estate, capital equipment, patents and product lines to Spinrite with the immediate assumption of active management of the property by the existing Caron management team. For all intents and purposes it appears to be a sale with lease back accompanied by a downsizing of the workforce, which targets older employees. Both parties to the arrangement have commented that the community will see little difference between the before and the after.

    It is difficult to understand why Spinrite would have purchased a business that is admittedly unable to run at a rate of return high enough to support its existing capital structure. Generally, businesses are bought on the basis of a price that can be justified by the present value of cash flow from operations as it is projected into the future. If there is a problem with the business being able to generate enough revenue to support a particular valuation, then the seller is required to reduce his asking price or improve the value of the business in some other way. Both Spinrite and Caron are well-informed, profit driven organizations. Determination of a proper free market price for this transaction should have been well within their capabilities. Taxpayers need never have been involved.

    Why are the taxpayers being asked to provide added value for this sale? Will grants allowing workforce reductions now be seen as the norm? Will all county businesses be eligible for this treatment going forward? Have this county’s taxpayers ever before been asked to ransom a firm’s workforce on behalf of the private investors of the corporation?

    Understanding that Beaufort County taxpayers remit millions of dollars to Raleigh as income and sales taxes, it seems prudent to help local businesses and community organizations to repatriate these funds by means of grants from Raleigh. They are our taxes. Why shouldn’t we use them? If Raleigh had not taken our money in the first place, then local businesses might well have a healthy enough local economy to solve their own problems. However, asking local residents to then match these grants for the further benefit of private, profit-seeking corporations seems overdone.

    Is there a reason taxpayers would not require these investors to provide their own matching funding?

    Regards,

    Warren Smith
      Beaufort County, NC