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Bite of the Apple

SoVaNow.com / July 02, 2009
In the immortal words of NASCAR legend Ricky Bobby, “If you ain’t first, you’re last.”

OK, so it’s only a movie. And granted, the font of that piece of wisdom happened to be none other than actor Will Ferrell. Still, Monsieur Bobby’s words come stingingly to mind in response to the question: How close did Southside come to stealing Apple Computer away from North Carolina?

“Close” matters only in horseshoes and hand grenades, let’s not forget. (Close will matter if Apple chooses a nearby site for its $1 billion data server farm — say Oxford or Roxboro — instead of a location closer to Charlotte, as widely expected. The data farm itself is expected to create only about 50 jobs, but the state of North Carolina believes the spinoff jobs will number in the thousands). Moral victories can soothe feelings of inadequacy and deaden sense of loss, but they don’t put food on the table. Being in the running for a huge economic development project is one of those things that Southside can feel good about, but Susan Lucci probably felt the same way the first time she was nominated for a daytime Oscar and look at how that turned out.

Two thoughts spring to mind on this Apple deal: One, it would come as no surprise at all if the project turned out to be a bust for North Carolina. Wouldn’t be the first time such a thing has happened. Two, after seeing the extent to which the Tar Heel State bent to Apple’s extortionist demands, it’s hard to imagine many major companies letting the opportunity to wring public dollars for private gain pass by without demanding a similar raid on the treasury. The business of America, now more than ever, is big business.

So how close did Southside get to a bite of the Apple? I e-mailed the Virginia Development Economic Partnership this week, whose director, Liz Povar, indeed confirmed that Mecklenburg and Halifax counties were 1-2 on Apple’s list of potential Virginia sites. (Mecklenburg moved ahead of Halifax by virtue of having a large, site-ready park in Boydton; Halifax’s option, the county fairgrounds property, was deemed too small and not ready for prime time.) As the story is told, Virginia entered the bidding late for Apple, but once they were in the game Halifax and subsequently Mecklenburg rose greatly in the company’s estimation. If not for those dratted North Carolina legislators and their $46 million bag of tax breaks — which could grow to $300 million over 30 years — we could be the ones Thinking Differently at the Halifax County iFairgrounds.

It’s tempting to say Virginia’s bid was blown away by North Carolina’s largesse, which I think is mostly true, but things tend to look a lot clearer in hindsight than they do during the moment of agency. The Raleigh News & Observer published a story this week that would appear to confirm the statements of local and state officials that Apple did indeed come fairly close to choosing Mecklenburg for its data operation. The takeaway for Southside Virginia from the News & Observer’s piece, cheerily titled State conceals much about Apple is this:

Discussions intensified in March and conversations became more focused on Apple’s corporate income taxes. North Carolina has a formula to decide how a company’s total U.S. income is apportioned to the state. It takes into account a company’s property, its payroll and the value of its sales in North Carolina. Many states have similar formulas, but they give different weights to the factors that go into the calculation.

Virginia is one place that Apple found favorable. And the state emerged as a chief competitor to North Carolina, the records show.

“The company informed Peggy [Anderson] and me they are stepping things up with the State of Virginia and will revisit there on Monday and Tuesday,” Dale Carroll, chief operating officer at Commerce wrote in e-mail March 28 to nine others at Commerce, the Department of Revenue and Gov. Beverly Perdue’s office. He listed tasks for several Commerce employees to help woo Apple back.

Those “tasks” included having legislators draft a massive tax break bill specifically tailored for Apple. If you ever wondered how the actors in this drama truly felt about the violence they were visiting upon the public weal, the News & Observer provides the answer: What if other companies with data projects in the state learned about the special treatment for Apple and became upset?

The legislation, as approved, is intended to benefit only Apple, lawmakers agreed. And that’s some contrast to the approach earlier in the process.

Legislators in February drafted a bill to change eligibility requirements for tax breaks that benefit owners of computer data centers.

Six days later, an e-mail message went to those lawmakers urging them to hold off because Apple worried introduction of legislation “would appear self-serving and would stir up undue criticism.”

Who wrote that message and who received it is a mystery. Commerce removed that information.

All I gotta say is, folks are going to miss newspapers when no one else is around to ferret out these tidbits.

***

So, returning to the question: Where does Southside stand in Apple’s wake?

Episodes such as these give new life to an old argument: Do corporate giveaways represent a creeping takeover of whatever remains of government of, for and by the People (iPeople?) or are they simply a necessary evil, the palm grease that quickens the spin of economic development? Until the politics of the country fundamentally changes, I’d say the question has already been answered for us. Let’s go with door number two, Alex ….

The more relevant question is why Southside Virginia doesn’t play the palm greasing game very well. At the very least we don’t seem ready to compete for the really big projects, such as they are. It’s not for lack of interest. There’s not a politician in our poor downtrodden region who wouldn’t give up his annual whiskey allotment from their lobbyist friends in Richmond for the chance to say he brought 2,000 jobs to town. And to be honest, if I were in, let’s say, Frank Ruff’s shoes, I’d pretty much leap at doing whatever is necessary to not only play with but beat out the North Carolinas of the world. So why don’t these big economic development deals happen here?

One explanation, quite possibly the most plausible one in Apple’s case, is simply that Virginia was working under an uncharitable timeframe. North Carolina reportedly had been in talks for Apple for at least a year and a half; Virginia became involved about six months ago, according to officials. The North Carolina legislature buckled down in May and enacted its tax giveaway bill, while the part-time Virginia General Assembly was freshly adjourned and still enjoying its first box of spring lobbyist whiskey (just kidding — I think). Timing is a big deal in the business world, and it’s perfectly reasonable to think that North Carolina, by luck, history and happenstance, was simply better positioned than Virginia to move when the time was right.

But it’s also true that no one in a leadership position in our region has the political heft or skills to bring together the necessary players in Richmond to make a deal such as this one happen. The first step of course would be to get upstate legislators to pay attention to our situation. (It might help if Southside legislators paid some attention to theirs.) If we’re going to compete for the Googles and Apples of the world, we need a plan of action. And this action plan must account for the fact that Southside represents a hard case. Virginia is home to quite a few big data centers, primarily in northern Virginia. As evidenced by the News & Observer article, North Carolina officials were concerned about how established North Carolina companies would react to a special tax giveaway for Apple. Someone apparently even hid a Commerce Department e-mail presumably to keep embarrassing information from getting out. So: How do you think the gleaming tower crowd in Northern Virginia would react if the General Assembly and the governor, sight unseen and without laying a foundation for special intervention, all of a sudden decided to cut a break for a bigfoot competitor simply to bail out Southside Virginia?

This, of course, gets right at the heart of the problem with these lavish business incentives: Money for you and me, but not for that business rival behind the tree. One of my questions for the Virginia Economic Development Partnership was whether Virginia had considered a special legislative session to discuss incentives for Apple. The answer, provided by VEDP spokesperson Christie Miller, was that agency officials had “no direct knowledge” of such a request. Would direct knowledge be too hot to handle for the arm of Virginia government responsible for recruiting new businesses while keeping existing ones happy?

Leaving aside the wiggle room inherent in such a statement, it does seem to me that Virginia has forgotten the maxim that if you’re going to do something controversial, you might as well do it in a big way. One only look at the penny-ante results of the Tobacco Commission to realize that spending another couple of million on a sewer system somewhere ain’t gonna get Southside over what ails it. (When the Commission does line up behind a grand vision, such as alternative energy development, it’s usually so clueless about the potential downsides that one is left with renewed appreciation for the view that risk-taking is best left in the hands of the private sector). What the Apple saga tells us is that Southside has some important elements in place to be in the running for some nice projects, and the Good Lord willing we’ll maybe snag a few. But one thing still lacking is the political coordination and determination to make even the seemingly most impossible and ambitious projects a reality. Until that happens, for Apple and presumably for other game-changing prospects, it’ll be whistling Dixie and Carolina on their Minds and all that.

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