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Wed.: "Dude, you're gettin' ..."
posted at 2009-10-07 21:15 | Last modified 2009-10-07 21:15
Today was a rough day for our friends in Winston-Salem. Dell Computer announced it’s closing its manufacturing facility, putting about 905 people out of work – 600 next month, and the remainder when the plant is shuttered in January.
It was 5 years ago that lawmakers reconvened for a special session to approve the largest tax incentive package in state history - $242 million dollars to lure Dell’s new desktop plant to NC, plus another $37M or so from local sources. Dell would receive the money in tax credits over 20 years if the company invested $100M in the new facility and maintained a workforce of 1500.
When the plant opened its doors in the fall of 2005, then-Governor Mike Easley presented Michael Dell with a ceremonial plate, joking it was all the state had left to give. Humor, sure, but it was close to true. The size of the deal made national headlines at the time, and resulted in a lawsuit against the state by the NC Institute of Constitutional Law. Director Bob Orr (who went on to run for Gov in 2008) argued the state had no constitutional right to give taxpayer dollars to a private company.
Orr lost his case in appeals court, but you could argue he won it today. Here’s his response to today’s announcement.
"While strongly opposing the Dell incentives deal since it was announced, all of us regret the loss of the Dell plant here in NC and the impact that loss will have on the Winston-Salem community and the Dell employees and local suppliers. The closing, however, provides a stark and painful example of the folly of the incentives game engaged in by our state and local governments. No matter how big the incentive package, operational decisions by businesses headquartered out-of-state will be driven by corporate financial considerations and not by any sense of loyalty to the community being left behind. To the extent North Carolina state government and local governments feel compelled to invest in businesses through the use of incentives, those investments should be in smaller, local businesses and not in multi-billion dollar interstate and international businesses."
When I reached Dell spokesman David Frink about the announcement, he said closing the Winston-Salem plant was a difficult decision, but necessary in light of the changing consumer market.
"This is a desktop computer manufacturing facility, and the demand for desktop computers has slipped well behind the demand for notebook PCs."
The argument seems a bit disingenuous – factories of all sorts retool all the time to meet changing demands. But it makes more sense in the big picture of Dell’s waning fortunes. The company’s been cutting costs, including payroll, since the beginning of the year, shedding more than 200 jobs in Forsyth County since February. The Greensboro News-Reocrd has an excellent timeline here.
So what’s the upshot for future NC incentive deals? That depends on how much the state paid out – a figure even the state revenue office isn’t sure about as of tonight. Dell more than met its property investment requirements, and nearly met its payroll goal as well; but what it earned over the first four years isn’t likely to come close to $279M. Frink says Dell will work out the details of its incentive obligations with state and local officials over the coming weeks.
Otherwise:
The nation’s second-largest credit card company, North Carolina-based Bank of America, says it will stop raising interest rates on credit card customers in good standing.
Starting next year, the new federal credit reform act (the CARD Act) will limit banks' power to raise interest rates on existing credit card debt. When CARD was under debate in Congress this spring, both Bank of America and top rival Morgan Chase reacted with preemptive, sometimes exorbitant, interest rate hikes on millions of cardholders whose accounts were otherwise in good standing. The rate rush prompted some in Congress to push for an earlier effective date for CARD – this December, rather than February of 2010.
BOA told Congressmen Barney Frank and Chris Dodd this week it will stop raising rates. BOA spokeswoman Betty Riess denies the move is in response to the push for an earlier enactment of CARD, or to the recent public backlash against credit card companies.
"Well, we take that into account, but I'd say that the concerns expressed to us by our customers are paramount. We're responding to what we're hearing from our customers."
Riess says the policy change will not help cardholders whose interest rates were already raised earlier this year. And she says BOA cardholders who pay late will still be subject to higher rates.
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