City Council approves Spinrite grant | Eastern North Carolina Now

    Publisher's Note: This article originally appeared in the Beaufort Observer.

    The Washington City Council on Monday night (5-14-12) approved the Spinrite grant of $90,000 from the City taxpayers. This $90K will match an equal amount from Beaufort County and those two local matches are anticipated to draw a $180,000 grant from the state, making a total of $360,000.

    You can read the details of the proposal beginning on Page 57 of the agenda and backup material.

    A significant issue, as reported in an earlier article, is that this grant does not propose to "create" any new jobs. Rather, the deal is to "save" existing jobs, and then not all the jobs that have been there. So the city and county are each kicking in $90K dollars of taxpayer money to potentially "keep" fewer jobs than have been at the business.

    One other significant issue you will want to pick up in the video of the discussion by the Council is Councilman Doug Mercer's comments about not being sure the jobs would have been lost without the grant. Our investigation to this point indicates this is a very material issue. There is no evidence that Spinrite would not have maintained the jobs even without the grant.

    What it appears to us is going on, absent any refuting documentation, is that National Spinning simply used the $360,000 to get more in the deal, or perhaps cover the lower amount Spinrite was willing to pay. In other words, there is probable cause to believe that there is as much of a chance that the taxpayers simply made it a "sweeter" deal for both National Spinning and Spinrite. Of course we can't prove that, based on the disclosures that have been made. And it is interesting that neither the City Council or County Commission required full disclosure of the terms and conditions of the National Spinning/Spinrite deal. We'll leave it to you to decide whether they should have done so or not.

    Here's the discussion and action:



    Commentary

    We commend Doug Mercer for a wise position on this matter. What we sense is going on here is that National Spinning simply sold its Caron operations and picked up $360,000 to make it a better deal. We wonder how many other businesses in Washington, particularly downtown, would like such a deal. In almost every transaction of this nature the normal process is for the buyer and seller to agree on the value of a deal. Deals that don't happen are usually the result of the difference between what the seller wants and what the buyer is willing to pay. In this deal, apparently, the city and the county simply filled the gap between buyer and seller.

    And the rationale was "jobs." Listen to the video and you see that William Pitt obviously fell for the ploy. We say ploy simply for this reason: This deal will not add a single job. In fact it allows a reduction in the work force and pays taxpayer dollars to Spinrite to eliminate those jobs.

    Now Spinrite, National Spinning and the Economic Director claim the jobs would have been lost had the bailout not been offered by the taxpayers. But interestingly, only Hood Richardson, Stan Deatherage and Doug Mercer questioned this. And to our knowledge there has been no disclosure required of National Spinning or Spinrite to document this claim. Here is the simple truth as we know it today: These politicians who voted for this deal have NO concrete evidence that our $360,000 will be invested in this enterprise, in either facilities or equipment. These politicians have no idea whether or not the $360K will simply be pocketed by people involved in the deal. In other words, there is no evidence, in the documentation, that proves that the $360K saved even one job.

    Consider this. Suppose a struggling downtown business puts its assets on the market for one million dollars. And suppose the highest offer they get is $640,000. Are these same politicians going to pitch in another $360K to allow the seller to get what he wants, and/or the buyer to get a subsidized deal? Is that the way we are going to "maintain" businesses (jobs) in Washington and Beaufort County? Is that the business model we are going to use?

    Then if you hear them say "well, this is a unique situation..." ask them "what is unique about it?" Is it the players involved? Is it that they have any evidence that the $360,000 will be invested in the local economy, as opposed to leaving the county and even the country?

    Obviously National Spinning is in serious trouble. They are a mere shadow of what they were a few years ago. Why are they selling out? If the current management could not make it a viable enterprise why should we believe Spinrite will be able to do any better? Hopefully they will. But if they can make it a going enterprise, why could not National Spinning? The fundamental question here is: What is the rationale for the taxpayers subsidizing a troubled enterprise? Think about that question. Why are we doing this?

    No, Mr. Pitt it is not to save jobs. If Spinrite is going to make a go of it, they will have to have employees. Any jobs "saved" will be as a result of the market and sound management, not this taxpayer subsidy. If the business cannot make a go of it without the taxpayers subsidizing it then it will eventually fold. But many other businesses in Beaufort County face the same problem. Just look at all the empty property around town and ask yourself if the answer to that problem is for politicians to decide that in some "unique" cases they will confiscate money from taxpayers (other businesses themselves struggling to survive also) and give it to a group of managers who could not make it without a subsidy.

    We would suggest that not one of the commissioners or council people who voted for this deal is prepared to say they will vote for any similar deal presented to them from any other local business. And they obviously cannot say they will do it for all the businesses that ask for equal treatment. Not one of them will tell you they will now treat every other local business equally. And in that simple truth you see why this deal has a stench all the way to its core.

    If indeed the National Spinning/Spinrite deal is the business model our elected officials are going to follow then it is the City of Washington and the County of Beaufort that will be going broke. And how many jobs will that "save"?

    Thus, the bottom line is this. If you want to know whether this was a sound decision or not, simply consider this fact: This deal cannot be replicated very many times without bankrupting the City of Washington and Beaufort County.

    This same group of officials will soon be making decisions about how much in taxes and fees they are going to extract next year from the consumers and struggling businesses in the city and county. They really need to understand that taxes and fees (particularly electrical fees) are a very real cost of doing business. As they adopt a budget, they need to remember that their action takes more money away from these businesses and that costs jobs. We trust Mr. Ptt will be equally concerned about those jobs.

    These people need to remember that. When they extract money from private producers and give it to moochers or put it in unproductive uses they are destroying jobs.

    We recently interviewed a small businessman who runs a convenience store. His tax bill last year was $6500. He showed us a letter threatening to foreclose on his property if he did not pay the $6500 immediately. But he also showed us the last invoice for a load of gas he recently received. It was for $21,322. He must pay that invoice before the oil company will deliver another load. He had $19,000 in his bank account the day we interviewed him. He had a payroll due that Friday. If he pays his taxes he can't pay his oil bill and they will not deliver gas before he runs out. If he runs out of gasoline he makes nothing and eleven people (some part-time, all of whom work two or more jobs) will be out of a job. He simply cannot stay in business if he pays his taxes. The same number of jobs will be lost (not saved) at National Spinning under this $360,000 deal.

    You get the picture.

    Taxes are a real, actual cost of doing business. When asked, "what would you do if someone gave you $360,000?" His answer was: "I could keep trucking for at least another two years, maybe until things turn around."