By Leslee Kulba-By way of the consent agenda, the Buncombe County Commissioners were supposed to approve the issuance of $4 million in Industrial Development Revenue Bonds for Plasticard-Locktech. But, due to delayed air travel, Assistant County Manager Jon Creighton did not make the prerequisite meeting, which failed quorum. Creighton assured the award was not dead in the water, but it would reappear on a future agenda.
Joe Coletti from the state’s budget office described IRB’s as a tool that allows businesses to take out a loan at a low, fixed interest rate, essentially using a local government body as a cosigner. Interest typically runs somewhere around 7.5 to 8 percent of prime. An added bonus from a short-sighted recipient’s view is the bonds are tax-free.
The funny thing about this loan was the lender was going to be GE Government Finance, Inc. Another branch of the same multinational megacorporation, GE Aviation received $15.7 million in real estate investment and $2.68 million from Buncombe County, along with $1.5 million from the City of Asheville last year.
Receiving cash benefits from government is now a widely unpopular practice. To avoid accusations of corporate welfare, local governments like to offer totally free money, where state or local government is shelling out the cash, or the cash is only a waiver of fees and taxes. Those forms of bestowing privilege on favored industries have also been exposed as wealth transfers with opportunity costs like bureaucratic overhead, shifting tax burdens, and crowded-out business. By comparison, cosigning a loan for a highly successful corporation appears an even freer way for government to show favor.
Since IRB’s are generally not availed to small or unstable companies, they are low-risk. True, conventional lenders are shorted business, and the tax base will suffer somewhat from the bonds being tax-free. One may only ask how Buncombe County’s way of doing business is better for the economy than, say, GE giving itself $4 million for the former Project X.
To qualify for an IRB, 75 percent of a company’s operations must pass as manufacturing. IRB’s are available for new or existing companies, but they may only be used to pay for land, construction, or hard assets. In addition, the company must save or create one job for every $250,000 financed. The state recommends that companies interested in pursuing IRB’s retain skilled attorneys early on. Estimated fees for procuring the bonds run between $45,000 and 80,000. As further evidence that the program helps the rich get richer, the state’s web site recommends, “Generally an issue should be at least $1.5 million to be cost-effective.”
The commissioners pulled another item from the consent agenda, but that was to subject it to a divided vote. In question was an economic development incentive grant in the amount of $90,000 for Moogfest. The City of Asheville approved an award of an equal amount, but it included in-kind services. When council heard the matter, only Gwen Wisler voted against it, considering it a questionable role of government. The commissioners approved the grant, but this time, three board members voted against it.
Moog’s president Mike Adams returned, reporting ticket sales were looking good in the days approaching the event, which will run the last week in April. Adams said it looked like the festival will draw a number of people aged 30-54 with annual incomes over $100,000 for 34,000 room nights. At an estimated average of $175 per night, Adams said room taxes alone would more than cover the county’s investment.
Adams stressed the remaking/remodeling of the event into an educational techno extravaganza. In addition to attracting professional innovaters from around the world, he is making strides to get students as well as businesses roped into the concept of what plays in Asheville stays in Asheville. On top of the traditional showcasing of live performances running from the Gold to the bizarro, organizers have recruited university professors to talk about sound in outer “space,” cybernetic sound, and the future of music and technology. Other presentations will entertain more esoteric, futuristic, and artsy flights of fancy. A few music documentaries will screen, and, of course, those who pay for a $1000 package will get to build and take home their own synthesizer, freight not included.
The commissioners’ opinions fell along party lines. Holly Jones said she was excited about the demographic that would be coming to town. Chair David Gantt said the festival would promote everything the commissioners want: technology, innovation, and entrepreneurship. Brownie Newman foresaw opportunities to create a uniquely-Asheville signature event. He was happy for all the corporate sponsorships, but he thought the county would be making a worthwhile investment if it helped out.
Joe Belcher said he liked the idea of a tech conference, but he thought the private sector, or even the Buncombe County Tourism Development Authority would be a more appropriate source for funding. Mike Fryar was grimmer. He reminded everybody the county had just raised taxes 8 cents. He told Adams he wished he had submitted his request before the county had finalized its annual budget. He was hard pressed to know where the county would come up with the funding. More than that, people out in the county were hurting. Businesses were laying people off and making other sacrifices to pay their taxes. “ I don’t know how the people will react to us giving out $90,000,” Republicans Fryar, Belcher, and David King voted against the grant.