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What has been the real impact of Golden LEAF on Beaufort County?
Publisher's Note: When I saw the resolution in question this week, I said, 'now that's an article.' My thanks to the Beaufort Observer for doing the work to bring this to us.
The redistribution of wealth scheme from the "Tobacco Settlement" has devestated small business in Beaufort County, much more than the EDC/Committee of 100 claims it has helped.
Beaufort County's Economic Development Commission and its non-profit affiliate, the Committee of 100, has come out in opposition to using unencumbered tobacco settlement funds to balance the state's budget. Even though the EDC did not send a press release to this media outlet, we have obtained a copy of a resolution recently adopted by the EDC and Committee of 100.
Parts of the resolution are misleading, at best. For example, it says that "...money that funds Golden LEAF grants does not come from tax payer (sic) funds but from a legal settlement with tobacco companies..." What it does not say is that those same funds could, by action of the legislature, be made available either to the state's general fund or to specific accounts that could be used to reduce the tax burden on North Carolina taxpayers. That's about like the guy who was about to have his house foreclosed on him taking a trip to Las Vegas because he got a big tax refund check.
What the resolution does not say is as misleading as the "no taxpayer money used" statement. It ignores many of the questions that have been raised in recent years about the activities of Golden LEAF.
But what is most misleading is that the resolution attempts to support a contention that Golden LEAF has benefitted Beaufort County. It lists a number of grants made to businesses and activities in Beaufort County over the last ten years that have totaled, according to the EDC $3,870,505. And when you look at the list some of the recipients, such as the Community College and Hospital, appear to be very worthy either from the standpoint of their purpose or from the perspective of relieving the tax burden on Beaufort County taxpayers, even though other recipients are questionable, either in terms of equity or effectiveness.
The resolution is also very misleading in implying that the budget balancing proposal in the legislature, which was vetoed by Governor Perdue, did not propose to cut any of the existing projects but rather proposed to use money that is essentially sitting in escrow. Some have observed that much of the money being eyed by the GOP leadership is not likely to be used as long as the economy is depressed as it is either because of the lack of business growth and development and/or the higher risks of failure of potential projects in the current economic environment.
We recently reported here that Golden LEAF made a $100 million loan/grant to the Global Transpark and now the State Auditor has said that there is a "...substantial doubt about the Authority's ability to continue as a going concern..." And of course, one has to remember that the Golden LEAF was heavily involved in the Randy Parton debacle in Halifax County as well as the ill-fated agri-ethanol project in Beaufort County which was vigorously supported by the EDC and Committee of 100. And then there was the "Sparta Tea Pot Museum" that got $380,000 from Golden LEAF. This link contains a whole list of questionable Golden LEAF projects.
The use of tobacco products, and the ability to tax those who still smoke is shrinking in the United States of America.
And if you want to see examples of some of the questionable dealings of Golden LEAF, click here, and here. And remember as you read these two articles (which are only 2 of more than 2 dozen the Carolina Journal has done), that this is the outfit our EDC and Committee of 100 are supporting.
When you look at the total picture what you find is that Beaufort County has not fared very well with Golden LEAF. The $3.8 million over ten years is but a pittance of what they have given out, leaving the Beaufort EDC in the unenviable position of have to defend the staggering loss of jobs suffered by Beaufort County over the last decade by contending that "it could have been worse," much like the defenders of the Obama Stimulus debacle had resorted to defend that "wealth re-distribution" scheme.
And that is indeed what these economic subsidies are...wealth redistribution. Take, for example, the EDC's contention that Golden LEAF is a good thing because it is funded by "tobacco settlement" funds. Here's the real story there.
The issue is who pays the tobacco settlement tax? The answer is simple: We The People and if you wish to be more specific, the hard-working people and many small businesses in Beaufort County.
The Federal Government sued tobacco manufacturers claiming that tobacco products increased health care costs and because of Medicare and Medicaid "the government" had higher expenses than if these nasty products were not sold. But rather than outlaw the cancer causing products they simply added a tax on tobacco products. Remember who pays that tax.
Then when the lawyers got done and the settlement the EDC brags about funding the Golden LEAF was signed, the tobacco companies simply passed along that cost to the...yep, you've got it: The People who buy tobacco products. Everyone understands that shell game. But what most people do not fully understand is the residual impact of these government imposed costs.
After the tobacco settlement and the new taxes trickled down to the consumers the costs of tobacco products skyrocketed. And just as sure as the Law of Supply and Demand is irrefutable, demand for tobacco products fell.
But that decrease in demand not only impacted tobacco farmers and those who worked in tobacco manufacturing it also impacted retailers of tobacco products.
A decade ago the market share of tobacco products in most convenience stores was the second highest product, behind only gasoline both in terms of sales and the number of customers purchasing those products. Retail sales plummeted. Click on the chart above to see a visual picture of the trend. The sales were already distressed and the "tobacco settlement" price increases only made things worse.
Ironically, in more recent years this "hit" from the decline in tobacco sales at convenience stores was exacerbated by the skyrocketing of gasoline prices. And while the total dollar value of both products (tobacco and gasoline) grew because of higher prices, the amount of profit made by retailers declined dramatically and still remains in depressed ranges to this day. That reduction in profit margins has resulted in most of these retailers having to cut expenses. Other than cost of goods sold and taxes (neither of which can be effectively reduced by a retailer) the largest expense item is "payroll." That is what the EDC calls "jobs." Retailers thus have cut payroll costs, often by using part-time people more so fulltime people because they do not have to pay full-time benefits.
So when you read the EDC resolution where it talks about how many "jobs have been created" by these economic subsidies to selected businesses and activities you should, if you really want to be honest, also consider the jobs lost by the residual impact of this redistribution of wealth scheme.
What we're talking about here is not insignificant. The numbers furnished by the N. C. Department of Revenue show that in 1976 (the highest year) the per capita consumption of cigarettes was 230 packs per year. That would have translated to approximately 9 million packs of cigarettes being sold in Beaufort County in 1976. But in 2008 (the latest available data from DOR) the per capita consumption had fallen to 73.7 packs per year. That translates roughly to 3.2 million packs per year consumed in Beaufort County. That is a substantial reduction in sales for small businesses that depended on cigarettes to carry the third heaviest load of their expenses.
If you assume a very conservative margin of profit on cigarettes what you find is that Beaufort County loses more every year from the tobacco settlement (decline in sales resulting from increased prices) than Golden LEAF has "redistributed" to Beaufort County since its creation. Put that in your pipe and smoke it while we wait for the EDC to explain how Beaufort County has really benefitted from this redistribution of wealth scheme that is the tobacco settlement and Golden LEAF.
If you want to send a copy of this article to our legislators and tell them how you feel about it, use the "email" button in the toolbar below and copy/paste these email addresses into each form:
Rep Bill Cook Bill.Cook@ncleg.net
Sen. Stan White -- stan.white@ncleg.net
Go Back
The redistribution of wealth scheme from the "Tobacco Settlement" has devestated small business in Beaufort County, much more than the EDC/Committee of 100 claims it has helped.
Beaufort County's Economic Development Commission and its non-profit affiliate, the Committee of 100, has come out in opposition to using unencumbered tobacco settlement funds to balance the state's budget. Even though the EDC did not send a press release to this media outlet, we have obtained a copy of a resolution recently adopted by the EDC and Committee of 100.
Parts of the resolution are misleading, at best. For example, it says that "...money that funds Golden LEAF grants does not come from tax payer (sic) funds but from a legal settlement with tobacco companies..." What it does not say is that those same funds could, by action of the legislature, be made available either to the state's general fund or to specific accounts that could be used to reduce the tax burden on North Carolina taxpayers. That's about like the guy who was about to have his house foreclosed on him taking a trip to Las Vegas because he got a big tax refund check.
What the resolution does not say is as misleading as the "no taxpayer money used" statement. It ignores many of the questions that have been raised in recent years about the activities of Golden LEAF.
But what is most misleading is that the resolution attempts to support a contention that Golden LEAF has benefitted Beaufort County. It lists a number of grants made to businesses and activities in Beaufort County over the last ten years that have totaled, according to the EDC $3,870,505. And when you look at the list some of the recipients, such as the Community College and Hospital, appear to be very worthy either from the standpoint of their purpose or from the perspective of relieving the tax burden on Beaufort County taxpayers, even though other recipients are questionable, either in terms of equity or effectiveness.
The resolution is also very misleading in implying that the budget balancing proposal in the legislature, which was vetoed by Governor Perdue, did not propose to cut any of the existing projects but rather proposed to use money that is essentially sitting in escrow. Some have observed that much of the money being eyed by the GOP leadership is not likely to be used as long as the economy is depressed as it is either because of the lack of business growth and development and/or the higher risks of failure of potential projects in the current economic environment.
We recently reported here that Golden LEAF made a $100 million loan/grant to the Global Transpark and now the State Auditor has said that there is a "...substantial doubt about the Authority's ability to continue as a going concern..." And of course, one has to remember that the Golden LEAF was heavily involved in the Randy Parton debacle in Halifax County as well as the ill-fated agri-ethanol project in Beaufort County which was vigorously supported by the EDC and Committee of 100. And then there was the "Sparta Tea Pot Museum" that got $380,000 from Golden LEAF. This link contains a whole list of questionable Golden LEAF projects.
And if you want to see examples of some of the questionable dealings of Golden LEAF, click here, and here. And remember as you read these two articles (which are only 2 of more than 2 dozen the Carolina Journal has done), that this is the outfit our EDC and Committee of 100 are supporting.
When you look at the total picture what you find is that Beaufort County has not fared very well with Golden LEAF. The $3.8 million over ten years is but a pittance of what they have given out, leaving the Beaufort EDC in the unenviable position of have to defend the staggering loss of jobs suffered by Beaufort County over the last decade by contending that "it could have been worse," much like the defenders of the Obama Stimulus debacle had resorted to defend that "wealth re-distribution" scheme.
And that is indeed what these economic subsidies are...wealth redistribution. Take, for example, the EDC's contention that Golden LEAF is a good thing because it is funded by "tobacco settlement" funds. Here's the real story there.
The issue is who pays the tobacco settlement tax? The answer is simple: We The People and if you wish to be more specific, the hard-working people and many small businesses in Beaufort County.
The Federal Government sued tobacco manufacturers claiming that tobacco products increased health care costs and because of Medicare and Medicaid "the government" had higher expenses than if these nasty products were not sold. But rather than outlaw the cancer causing products they simply added a tax on tobacco products. Remember who pays that tax.
Then when the lawyers got done and the settlement the EDC brags about funding the Golden LEAF was signed, the tobacco companies simply passed along that cost to the...yep, you've got it: The People who buy tobacco products. Everyone understands that shell game. But what most people do not fully understand is the residual impact of these government imposed costs.
After the tobacco settlement and the new taxes trickled down to the consumers the costs of tobacco products skyrocketed. And just as sure as the Law of Supply and Demand is irrefutable, demand for tobacco products fell.
But that decrease in demand not only impacted tobacco farmers and those who worked in tobacco manufacturing it also impacted retailers of tobacco products.
A decade ago the market share of tobacco products in most convenience stores was the second highest product, behind only gasoline both in terms of sales and the number of customers purchasing those products. Retail sales plummeted. Click on the chart above to see a visual picture of the trend. The sales were already distressed and the "tobacco settlement" price increases only made things worse.
Ironically, in more recent years this "hit" from the decline in tobacco sales at convenience stores was exacerbated by the skyrocketing of gasoline prices. And while the total dollar value of both products (tobacco and gasoline) grew because of higher prices, the amount of profit made by retailers declined dramatically and still remains in depressed ranges to this day. That reduction in profit margins has resulted in most of these retailers having to cut expenses. Other than cost of goods sold and taxes (neither of which can be effectively reduced by a retailer) the largest expense item is "payroll." That is what the EDC calls "jobs." Retailers thus have cut payroll costs, often by using part-time people more so fulltime people because they do not have to pay full-time benefits.
So when you read the EDC resolution where it talks about how many "jobs have been created" by these economic subsidies to selected businesses and activities you should, if you really want to be honest, also consider the jobs lost by the residual impact of this redistribution of wealth scheme.
What we're talking about here is not insignificant. The numbers furnished by the N. C. Department of Revenue show that in 1976 (the highest year) the per capita consumption of cigarettes was 230 packs per year. That would have translated to approximately 9 million packs of cigarettes being sold in Beaufort County in 1976. But in 2008 (the latest available data from DOR) the per capita consumption had fallen to 73.7 packs per year. That translates roughly to 3.2 million packs per year consumed in Beaufort County. That is a substantial reduction in sales for small businesses that depended on cigarettes to carry the third heaviest load of their expenses.
If you assume a very conservative margin of profit on cigarettes what you find is that Beaufort County loses more every year from the tobacco settlement (decline in sales resulting from increased prices) than Golden LEAF has "redistributed" to Beaufort County since its creation. Put that in your pipe and smoke it while we wait for the EDC to explain how Beaufort County has really benefitted from this redistribution of wealth scheme that is the tobacco settlement and Golden LEAF.
If you want to send a copy of this article to our legislators and tell them how you feel about it, use the "email" button in the toolbar below and copy/paste these email addresses into each form:
Rep Bill Cook Bill.Cook@ncleg.net
Sen. Stan White -- stan.white@ncleg.net
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