City Council pulls the plug on funding the EDC operating budget | Eastern North Carolina Now

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

    The Washington City Council, in its regular monthly meeting Monday (7-23-12), set the stage for what might eventually lead to a reform of the city/county economic development program. They decided that they would not make their traditional annual contribution toward funding the Economic Development Commission's operating budget but would instead reserve the money it has budgeted for "economic development" to be used on an ad hoc, case by case basis as specific projects come up. What remains to be seen is whether they will continue to use taxpayer money to provide "incentive grants" to selected businesses under the guise of "creating/saving jobs."

    You can listen to the discussion in the video below but what you should know to interpret that discussion is that the county has yet--after more than a year of talk--to decide what its approach will be toward economic development. The county has been paying about 2/3 of the bill and the municipalities (mainly Washington) have paid the remainder of the EDC's budget. That budget, for the most part, covered the salary and benefits for the county's Director of Economic Development, who was one of the highest paid such officials in the state over the last several years. He has now resigned and the county is interviewing for a replacement.

    The EDC budget also funds two other positions, variously titled and described over recent years, and office expense. Those office expenses are some of the highest in the county.
City of Washington Municipal Building: Above.     photo by Stan Deatherage
    Now the City of Washington will not be directly underwriting those expenditures but will instead leave that to the county and other municipalities if they wish to continue doing so.

    Traditionally, whenever the EDC concocted an incentive deal it did so behind closed doors and then brought the proposed project to the City Council and County Commission for funding or agreement to underwrite seeking state grants to fund the deal. The City here is saying that it will continue to consider participating at that point on a project by project funding basis. That apparently means it does not intend to consider a fundamental change in the approach that has been taken to economic development.

    The problem that has come to light over the last several months is that the previous approach has proven to be a dismal failure. The city and county have poured over six million dollars into the strategy only to see less jobs created than the jobs lost as a result of the approach. Moreover, the City has done very little to deal with what has been identified as one of the greatest impediments to economic development the county suffers--high electric costs.

    Thus, much appears to remain to deal with finding an effective economic development strategy for the city and county. But what was decided was that the City will no longer pay a part of the salaries and office expenses of the EDC, and the Commission's membership will be revised somewhat.

    Essentially what the option selected for revising the EDC does is provide that the membership will be appointed by the County Commission but by doing it by townships it insures a geographical distribution across the county. But because of variances in township population, the Washington Township will be less represented than others on a population basis unless some or all of the "at-large" members are from Washington. Townships are pretty much irrelevant in modern times. They were originally designed to allow for different tax rates to be assess within the county but that has fallen by the wayside in recent times. There is no practical direct relationship between townships and economic development. So if the City does indeed fund economic development projects on a project by project basis, the problem discussed, of city residents paying a disproportionate share, will continue; depending on the numbers in each deal. Thus, the problem of city taxpayers paying more into the various projects will apparently continue. This funding of projects has been, by far, the largest expenditure for economic development, as opposed to the annual operating expenses.

    The issues of restructuring the EDC and the funding of its operating expenses are framed by Councilman Doug Mercer, who currently serves as the city's representative to the Economic Development Commission.



    The vote was 4-1. Ed Moultrie cast the dissenting vote. The mayor does not vote except in the event of a tie.

    Commentary

    The City Council's decision here is somewhat encouraging. It is at least dealing with the issue of how much the taxpayers should be forced to pay for high-flying salaries at the EDC. And maybe they've hit on a better way to structure the composition of the EDC.

    But it is very discouraging, at this point, that neither the Council nor the County Commission is dealing with the basic problem here. That is, what should the city/county's economic development strategy be? And more specifically, how are we going to measure what is achieved?

    There has been so much said over the last years that we suspect most people lose sight of the fundamental issue here. How are our leaders going to prevent another scandal that has been the economic development program in Beaufort County? They are not even talking about that.

    But here's the crux of it. The city and county leaders have confiscated more than six million dollars from the taxpayers, including every business in the county, and have given that money to a few select "friends" and most of what we have to show for it is fewer, not more jobs. The strategy of buying real estate and making grants to a few select businesses has been by any measure you want to use, a colossal failure. Except for a few favored, well-connected politicos.

    Listen to the discussion and you will hear not one word about whether the city is going to continue this cronyism with taxpayer money that it has been following. Nothing is said about whether whatever money they are going to spend could be spent better for other approaches, such as, for example, reducing electric rates and utility fees for businesses that are struggling to survive in these hard economic times. Not one word about whether the money would have been better spent on workforce development. And not one word about whether it would not have been wiser to cut taxes and let all businesses invest their money in growing existing businesses. Or meeting payroll. That is "creating/saving jobs." How many of these empty stores in the city might still be operating if they had not been hit by high taxes, fees and costs of regulations?

    Earlier in the meeting the Council did approve a $30,000 contract with an outside consulting firm to do a study for developing a "retail recruitment and retention effort" which can be reviewed beginning on Page 147 of the meeting agenda and backup materials by clicking here.

    But we would respectfully suggest that the money they're talking about stashed away in the budget might best be held until we know what kind of liabilities the current EDC and former Director have created for us.

    Maybe that will come later. We hope so.