For Members Only is published monthly when the General Assembly is not in session

Voter interest, registrations surge
in election tilting toward incumbents

Voter interest in state and national races seems high with just days to go before the Nov. 2 general election. That’s particularly noticeable in the surge in registered voters from just over 5 million a year ago to nearly 5.5 million today. According to the State Board of Elections, we now have 2,560,121 registered Democrats, 1,889,664 registered Republicans, 12,406 registered Libertarians and 1,010,854 voters not affiliated with any party. Of note is the sharp rise in unaffiliated voters, who numbered 881,541 a year ago.

Most believe the elections will be kind to incumbents. NC FREE predicts George Bush will easily carry North Carolina, that all incumbents in the congressional delegation will go back to Washington. NC FREE also picks Mike Easley for a second term as governor, Beverly Perdue for four more years as lieutenant governor and additional terms for all members of Council of State (with one possible exception). In the chart on page 3 listing all candidates for federal and state races, the check marks indicate NC FREE’s expected winners.

NCCBI urges every member to go vote on Election Day – if you haven’t already through the early voting process. Of course, we don’t endorse candidates but we think you should support the pro-jobs, pro-growth candidates in each race regardless of party affiliation.

However, we do ask for your vote in support of Amendment One because we feel it’s so important for economic development and the creation of new jobs. North Carolina is one of only two states in the country without this powerful economic development tool, called self-financing bonds. With 185,000 jobs lost, North Carolina can no longer afford such a distinction. North Carolinians for Jobs and Progress, the NCCBI-led coalition advocating for passage of Amendment One, appreciates your support.

Most daily papers have editorially endorsed Amendment One, including the Charlotte Observer, the Durham Herald, the Fayetteville Observer, the Hendersonville Times-News, the Hickory Daily Record, the Monroe Enquirer-Journal, the Raleigh News & Observer, the Rocky Mount Telegram and the Winston-Salem Journal. More than 300 groups also are supporting Amendment One, including dozens of local chambers of commerce, local economic development organizations, statewide trade associations and many local governments.

It’s called Amendment One because it’s listed first among the three constitutional amendment questions that will be on the ballot. Here is the exact wording of the Amendment One question:


“I. Constitutional amendment to promote local economic and community development projects by (i) permitting the General Assembly to enact general laws giving counties, cities, and towns the power to finance public improvements associated with qualified private economic and community improvements within development districts, as long as the financing is secured by the additional tax revenues resulting from the enhanced property value within the development district and is not secured by a pledge of the local government's faith and credit or general taxing authority, which financing is not subject to a referendum; and (ii) permitting the owners of property in the development district to agree to a minimum tax value for their property, which is binding on future owners as long as the development district is in existence.”

The other constitutional amendments on the ballot concern changing the terms of magistrates from two to four years, and a provision clarifying that the General Assembly may appropriate the proceeds of civil penalties, civil forfeitures, and civil fines collected by a state agency in a fund to be used exclusively for maintaining the public schools.

NCCBI News
Good reasons why you should attend a Workplace Law seminar
In emails we’ve sent you recently, we’ve highlighted important reasons why you should attend one of the Workplace Law seminars being offered in six cities over the coming weeks. Let’s recap:

Changes in the federal Fair Labor Standards Act defining who is and who is not eligible for overtime pay went into effect Aug. 23, and many business leaders say they’re confused about how the new rules effect them. It once was simple to know the difference between white collar and blue-collar jobs: if you worked on the factory floor you got time-and-a-half after 40 hours. Everybody else in the company was white collar. That simple distinction no longer applies, experts say. Importantly, job titles no longer are of any relevance to exempt status, meaning, for example, that companies should examine whether administrative assistants and other office workers are due overtime pay.

You know it’s against the law to discriminate in hiring based on race, color, religion, sex or national origin, but did you know you also can get sued over how you word help-wanted ads  in the newspaper? Federal rules governing employment actually intrude much deeper into the workplace than most business people assume. You have to comply with Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Age Discrimination in Employment Act and other federal laws. Most employers want to comply but often get caught up in a lawsuit over an honest, but expensive, mistake. Examples are in allowing use of company facilities; in training and apprenticeship programs; in fringe benefits; pay, retirement plans and disability leave. Title VII also prohibits discrimination because of participation in schools or places of worship associated with a particular racial, ethnic or religious group. And did you know that employers are required to post notices advising employees of all these rights? By the way, these notices must be accessible, as needed, to persons with visual or other disabilities that affect reading.

How can you avoid getting sued because of these complex regulations?  For starters, you must stay abreast of all the federal and state laws that impact employers. But knowing the law is not always enough. You must also understand how these laws are applied to everyday decisions employers face. One of the best ways to learn how to wade through the labyrinth of employment laws is to learn from the practices, good and bad, of other employers.  

That’s what NCCBI is doing in the "Making Workplace Law Work For You" seminars. They are geared toward business owners, particularly human resource directors, as well as the attorneys and CPAs who advise companies.  Continuing education credits will be available.

Registration is $225 for NCCBI members, $250 for non-members.  The fee includes breakfast, lunch and extensive course materials.  For more information on the seminars, and to register online, click on: http://www.nccbi.org/ecommerce/.  To register by phone, call Marsha Lewandowski at NCCBI at 919-836-1400.

The N.C. Bar Association, the N.C. Association of CPAs and the national Society for Human Resource Management have placed their stamp of approval on the Workplace Law seminars, meaning that attorneys, CPAs and HR professionals who attend the seminars will receive continuing education credits toward renewing their accreditations.

The seminars will cover:  Wage and Hour Issues • HIPAA and COBRA • Business Insurance • Covenants Not to Compete • Avoiding Lawsuits • Negligent Hiring • Workplace Privacy • and Employment Relationships. This is the second year NCCBI has offered these seminars for business people. After last year's seminars, 97 percent of the attendees who completed evaluation forms said they were so impressed that they would come back again.
 
Luncheon speakers include N.C. Supreme Court Chief Justice I. Beverly Lake Jr.; U.S. District Court judges Frank W. Bullock Jr., James C. Fox, Graham C. Mullen and Richard L. Voorhees; and Magistrate Judge James C. Dever III.

The main presenters at the seminars will be Thomas A. Farr and Gretchen W. Ewalt, attorneys with Ogletree, Deakins, Nash, Smoak & Stewart and co-authors of the book “The Employment and Labor Law Resource Guide,” and other attorneys with the firm.

"I believe most business people want to comply with the new overtime rules but knowing how is another matter," said NCCBI President Phil Kirk. "I would hate to see any of our good North Carolina companies get sued for not complying with these new regulations that everybody agrees are terribly confusing."


Richmond Fed president to keynote Economic Forecast Forum
The new president of the Federal Reserve Bank of Richmond, Jeffrey M. Lacker (right), will be the keynote speaker at the third annual Economic Forecast Forum on Monday, Jan. 3. The event, co-sponsored by NCCBI and the N.C. Bankers Association, will again be held at the Sheraton Imperial Hotel in Research Triangle Park beginning at noon. Held on the first business day of each New Year, the forum provides insightful briefings to business leaders on key trends in finance, interest rates and credit availability.

Dr. Harry M. Davis, the noted professor of finance at Appalachian State University and chief economist at the Bankers Association, also will address the gathering and deliver several predictions on economic trends for the year ahead. Other speakers will be announced later.

Last year’s luncheon event drew roughly 700 people and an even larger crowd is expected this year. Prices for individual tickets are $50 or $500 for a reserved table. Sponsorship opportunities also are available. Watch your email for registration and ticket ordering information.

Lacker, 48, was promoted to president of the Richmond Fed on Aug. 1 upon the retirement of J. Alfred Broaddus Jr. after 34 years with the bank. Lacker has been with the bank since 1989, most recently as senior vice president and director of research. A native of Kentucky, he received a bachelor’s degree in economics in 1977 from Franklin and Marshall College. He then joined Wharton Econometrics in Philadelphia and went on to earn a Ph.D. in economics in 1984 from the University of Wisconsin. Lacker was an assistant professor of economics at Purdue University for five years before joining the Richmond Fed.
 
Lacker is only the seventh person to lead the Richmond Fed in its 90-year history. The Federal Reserve Bank of Richmond is one of 12 District Reserve Banks that together with the Board of Governors in Washington, D.C., make up the Federal Reserve System. The Richmond Fed serves the Fifth Federal Reserve District, which encompasses the District of Columbia, Maryland, North Carolina, South Carolina, Virginia and most of West Virginia. A nine-member board of directors governs the Richmond Fed. North Carolina has two members of the board, Ernest J. Sewell of Greensboro, president and CEO of FNB Southeast; and Theresa M. Stone of Greensboro, CFO of Jefferson-Pilot Corp. and president of Jefferson-Pilot Communications Co.


Busy month ahead for NCCBI groups
November will be a busy month at NCCBI, with no less than 16 different meetings and events on tap. Please glance at the calendar on page 18 and make a note of the events you should attend.

The month begins with the final area meeting of the year, in Asheville. The event was rescheduled from late September when two hurricanes caused major flooding in the area. Also, several of the NCCBI policy committees will meet this month as they wrap up their work of formulating recommendations to the Executive Committee on positions the association will take in the General Assembly next year.

One of the highlights of the NCCBI year will occur on the 10^th when four major figures in North Carolina business history will be inducted into the Business Hall of Fame. Jointly sponsored by NCCBI and Junior Achievement of the Carolinas, the Hall of Fame dinner will again be held at the Westin Hotel in Charlotte.

At the end of the month, NCCBI’s volunteer leaders will gather for important business meetings. The policy-setting Executive Committee, which meets quarterly, will meet on the 30^th at the Bank of America tower in Charlotte. That will be followed later in the day with the full board’s semi-annual business meeting. If you are a member of the full board or the Executive Committee, we urge you to make plans to attend.

The Executive Committee last met on Sept. 9 in Raleigh as part of the Triangle Area Meeting at the Angus Barn. Led by Chair Barry Eveland, the Executive Committee heard financial reports and was briefed on an initiative aimed at sharpening public perceptions of the association.

Eveland reported that Charlotte public relations and consulting company Loeffler, Ketchum and Mountjoy (LKM) had volunteered to develop a more effective marketing campaign for NCCBI. While the main focus of the project is to craft ways to recruit and retain more members, Eveland said the larger goal of the effort will be to examine all aspects of how NCCBI interacts with its members and the public. LKM President John Ketchum gave the Executive Committee a preliminary outline of the project. He said LKM will be guided by feedback received from members during three focus group meetings President Phil Kirk conducted earlier this year in the Triangle, Triad and Charlotte.

Also at the Sept. 9 meeting, NCCBI Second Vice Chair Graham Denton, the Bank of America executive who is in charge of this year’s membership campaign, reported that the campaign is gaining momentum and will reach its goal of $100,000 by the end of the year.

NCCBI's Small Business Advisory Board also met on Sept. 9 and heard a presentation on the new Small Business Ombudsman program that will be initiated soon in the Department of Commerce. Gene Byrd of the Department of Commerce told the group that the agency conducted meetings throughout the state last year to get suggestions for the program, which was approved by the General Assembly during the short session.  The person who will serve as small business ombudsman should be on the job by Dec. 1, Byrd said

The Small Business Advisory Board, under the direction of Chair Pickett Council of Council Tools, decided to hold three meetings each year rather than two.


Kirk touts Amendment One to Moore County group
A vote for Amendment One is a vote for jobs, NCCBI President Phil Kirk told more than 100 members of the Moore County Republican Men's Club on Oct. 14 at the Country Club of North Carolina in Southern Pines. "We are one of only two states which does not provide our economic developers with the ability to use self-financing bonds in order to recruit jobs to an area," Kirk said. He also discussed the top priorities of NCCBI---lowering the corporate and personal income taxes, more effective economic development, and efficiency in government.  He also urged the club to continue to support candidates who are pro-jobs and pro-education and to contribute time and money to their campaigns. Bill Scott introduced Kirk.

Kirk praises Visiting International Faculty program
NCCBI President Phil Kirk, speaking to the annual staff retreat of the Visiting International Faculty program in Chapel Hill, praised the program for a record year. "Congratulations for your biggest year yet in your 16-year history -- you recruited 1,865 teachers for classrooms across the country from 52 nations," Kirk said. More than 900 are teaching in North Carolina classrooms. "Schools across our state have outstanding VIF teachers who are not only good teachers, but they are also teaching students about the diversity and complexity of the world's nations and people," Kirk, who is a member of the VIF board, said every job in the organization is important and that teamwork and hard work are key ingredients for success in work and in life.

Local chamber executives briefed on issues
NCCBI’s Council of Local Chambers of Commerce met Oct. 5 to receive an update on association priorities, heard about the state’s economic development initiatives, was briefed on Amendment One activities and got political predictions prior to the November elections.

NCCBI President Phil Kirk told that group that the association’s leadership is continuing to focus on economic development, reduction in corporate and personal taxes and efficiency in government. Progress has been made in the area of economic development with the adoption of key legislation during the last session of the General Assembly. There was also some good news to report with government efficiency because of the adoption of information technology legislation that has the potential to change the way the state operates and save money. Kirk said that the tax reduction issues would be key in the 2005 legislation session and urged chamber executives to get involved and talk with their local legislative delegations prior to the session beginning in January. Don Hobart, legal counsel and legislative liaison for the NC Department of Commerce, reported on the successes of the last legislative session and thanked local chamber executives for the role they played in educating legislators on the importance of economic incentive legislation for the recruitment of businesses across North Carolina. He also outlined major initiatives for the 2005 session including continuing to work on issues like the One North Carolina Fund and the William S. Lee Act.

Amendment One campaign coordinator Margaret Webb encouraged local chambers to do all that they can until Election Day to get information out about Amendment One. She told the group that the grassroots efforts that local chambers and local economic development organizations have put in place will make a real difference in the outcome of the amendment. NCCBI Vice President of Governmental Affairs Leslie Bevacqua Coman noted that business leaders across the state have gotten actively involved in the campaign. NCFREE Executive Director John Davis gave predictions on the national and statewide campaigns and insights on what might happen in local legislative races.

NCCBI joins coalition opposed to DaimlerChrysler incentives ruling
NCCBI has joined with the Council On State Taxation (COST), a broad-based coalition of states and businesses, to respond to a challenge posed by the Cuno v. DaimlerChrysler case in Ohio.  In the case, which would shake the underpinnings of dormant Commerce Clause jurisprudence, the 6^th Circuit Court of Appeals ruled that Ohio’s investment tax credit violated the Commerce Clause because it discriminated against interstate commerce by “coercing” DaimlerChrysler to locate its facilities in Ohio to lower its tax burden. COST is asserting that the broad standard used by the court is unnecessary to reconcile the existing case law and inappropriate given the court’s mandate to uphold legislative choices if possible. COST has filed an amicus brief in support of DaimlerChrysler’s request for a rehearing/hearing en banc before the 6^th Circuit. This case could have an impact on legal and political challenges to state economic incentives. COST’s goal in forming this coalition is to build consensus between states and businesses regarding the appropriate remedy for Cuno and advocate that remedy before states and the federal government.

Please welcome these new members
Companies that joined or rejoined NCCBI in September, along with the name of the key executive at each company, include:

 

Tax Watch

National study ranks N.C. 30^th in ‘business friendly’ tax system
A new study by the Tax Foundation ranks North Carolina 30^th in the nation in terms of its business tax climate, a slight improvement from its 32^nd ranking last year (see chart, next page). The focus of the study is the role of business taxes in the shifting of economic activity. The study, “State Business Tax Climate Index,” ranks the 50 states on how “business friendly” their tax systems are, providing a roadmap for state lawmakers concerned with keeping their states tax-competitive.

Generally the index rewards tax codes that are neutral, have low and flat rates, are simple and transparent, avoid double taxation, and have statutory or constitutional restraints that keep tax burdens low over time. The worst state tax codes tend to have:

• complex, multi-rate corporate and individual income taxes with above-average tax rates;
• above-average sales tax rates that don’t exempt business-to-business purchases;
• complex, high-rate unemployment tax systems; and
• high overall state tax collections with few tax or expenditure controls.

The methodology of the State Business Tax Climate Index is centered on the idea of economic neutrality. If a state’s tax system maintains a “level playing field” for businesses, the index considers it neutral and ranks it highly. However, each state’s final score depends on a comparison with the other 49 states.

The overall index is composed of five specific indexes devoted to major features of a state’s tax system: the corporate income tax, the individual income tax, the sales or gross receipts tax, the unemployment insurance tax, and the state’s fiscal balance. These five indexes are themselves composed of several sub-indexes. Overall, the index consists of 5 specific indexes, 10 sub-indexes, 33 categories and 109 variables.

Each state’s laws and tax collections were assessed as of Jan. 1, 2004, and therefore reflect the business tax climate for the current year, but without consideration of 2004’s legislative action. While the index is comprehensive, it is not exhaustive. Future research into state taxation will lead to new variables and sub-indexes in future editions of the index.

A nonpartisan educational organization based in Washington, the Tax Foundation does not represent any particular economic sector's point of view. Through the years the organization has earned a reputation for independence, and credibility.

 

Economic Development

Credit Suisse picks the Triangle for $100 million investment
In what Gov. Mike Easley called a “landmark” deal, Credit Suisse First Boston said it would locate a Global Business Center in the Triangle, bringing 400 new jobs and more than $100 million investment to the area. The state offered the company a $3 million grant from the One North Carolina Fund and a Job Development Investment Grant (JDIG) worth $8.9 million over 10 years. “To have a key Wall Street firm locate in RTP is a real win for North Carolina,” Easley said. Officials estimated the deal would add $2.4 billion to the state’s cumulative gross product value.

CSFB’s Global Business Center will house global support staff, including operations and information technology positions with average salaries of nearly $72,000 a year. The company expects to hire a substantial majority of this workforce in North Carolina, providing entry level through senior positions in technology and securities operations. The Global Business Center will also be home to one of CSFB’s business continuity sites, which banks are required of to operate under new anti-terrorism laws so they have operating capacity outside large financial centers.

“What I find so attractive about North Carolina and the Triangle is the high-value that is placed on people, lifestyle and education,” said Eileen Murray, CSFB’s head of Global Technology, Operations and Product Control and member of CSFB Executive Board. “The blending of business and education is unparalleled, and we are looking forward to being part of one of the fastest growing and most vibrant parts of the country.”

Credit Suisse is expected to rent space from Cisco Systems while a 150,000-square-foot office building is being built on an 80-acre plot north of Cisco's campus.

Smithfield Packing Co. said it plans to build an $85 million ham manufacturing plant in Kinston and create 206 new jobs. The subsidiary of Smithfield Foods Inc. will build the new facility on 90 acres in the Highway 70 West Industrial Park. Construction on the 180,000-square-foot plant is expected to begin in the first quarter of 2005 and be completed in April 2006. It mainly will produce deli hams, sliced deli products and retail and foodservice hams. The company already employs 574 workers in the area. “Once again, North Carolina stepped up to be our partner as we were making decisions about important future investments,” said Smithfield Foods Chairman and CEO Joseph W. Luter III. The state did not extend any incentives to Smithfield Foods for the expansion.

Philip Morris USA said it plans to invest about $200 million over the next three years to modernize its manufacturing facility in Cabarrus County where it employs about 2,600 people. Philip Morris was awarded $1 million from the One North Carolina Fund to help with the project. The company also is receiving $100,000 from the Incumbent Workforce Program, which will enable Philip Morris to provide educational and skills training to its workers.  About $140 million of the investment includes installation of 12 high-speed cigarette manufacturing modules that will replace 18 lower-speed modules, giving the facility the potential to increase production. The company also is in the process of completing an Automated Storage and Retrieval System (ASRS), which will boost productivity. The company will use it to store its cigarette packaging materials. Currently, materials must be delivered from the warehouse to a staging location, then moved again to the manufacturing center floor. “Investments in the Cabarrus facility are a demonstration of Philip Morris USA’s already strong commitment to North Carolina,” said John R. Nelson, Philip Morris USA president of operations and technology. “We believe in North Carolina. We believe in the people here, and we believe that our future together is bright.”  The average wage at the Cabarrus facility is $917 a week. The company contributes about $268 million annually to the North Carolina economy through employee wages and taxes. Last year, Philip Morris USA purchased nearly half of all tobacco grown in the state.  

State officials gave the N.C. Department of Commerce an extra $500,000 to implement a marketing program to promote tourism for communities affected by recent storms. ''Fall is the traditional ‘peak season’ for travel in western North Carolina and is the second most important travel season for our state,” Gov. Easley said. “We do not want the unwelcome visitors, Ivan and Frances, to keep other visitors away. The special promotion will ensure visitors know North Carolina is open and ready for tourists.” The additional funds will be used to market tourism in North Carolina, focusing primarily on fall foliage, events and attractions. Commerce’s Division of Tourism, Film and Sports Development will purchase national and regional television commercials emphasizing the state’s beauty and hospitality. Radio advertisements highlighting North Carolina will also be aired in Atlanta and Washington, D.C. The division is also running full-page ads in newspapers across the state, as well as the Atlanta Journal-Constitution, promoting fall color and contact information for the three mountain host groups and the Blue Ridge Parkway.

PCB Piezotronics Inc. said it plans to locate a new manufacturing facility in Roanoke Rapids, bringing 250 new jobs and about $5 million in additional investment to the area. PCB, one of the world’s leaders in the design, development and manufacture of laboratory and industrial grade sensors, is the 17th recipient of the new state Job Development Investment Grant (JDIG) award. PCB Piezotronics, a subsidiary of PCB Group, is headquartered in Depew, New York and has more than 500 employees. The company will move into the 50,000-square-foot Halifax Industrial Center shell building in Roanoke Rapids and be fully operational by 2005. The new positions will primarily include manufacturing and assembly positions with an average annual compensation of $26,000. “The decision to expand into North Carolina instead of expanding in our existing New York State operations was a difficult decision, but was made easier by the smooth and flawless economic development process in North Carolina. The JDIG grant was extremely instrumental in our decision,'' said David Hore, co-president of PCB Group. Under the terms of the 10-year JDIG agreement state will provide a grant equal to 65 percent of the state personal income withholding taxes derived from the creation of new jobs. If the company creates the jobs called for under the agreement and sustains them for 10 years, the agreement could yield $1.6 million in maximum benefits to the company. The N.C. Department of Commerce estimates the project will generate a cumulative gross state product value of about $171 million and produce a positive cumulative net state revenue impact of $2.07 million.  

Coeur Inc., a manufacturer of injection-molded medical devices, said it plans to expand its current facility in Washington, creating a $2.5 million investment, 46 new jobs and job security for the current 60 employees. Coeur is a leading manufacturer of syringes used in medical technologies such as heart catheterization labs. The company was established in Washington, N.C. in 2000 and has one other facility in Sheboygan, Wis. The new jobs will be skilled manufacturing positions and will pay an average salary of $491 a week. The company will receive $200,000 from the One North Carolina Fund, as well as local incentives.



Names in the News

Kirk, Wyche elected to positions in national organizations
NCCBI President Phil Kirk and Vice President of Development Rosemary Wyche have been elected to leadership positions in national organizations. Kirk was elected to the executive committee of the Council of State Chambers, which includes the CEOs of state chambers across the country. He also was recently elected to the executive committee and as secretary-treasurer of the Conference of State Manufacturing Associations, which is composed of the heads of state manufacturing associations.
Wyche was recently elected secretary of the Association of Membership and Marketing Executives, which is composed of the persons holding the top position in the area of membership and marketing in state chambers across the nation. She has been on the executive committee for the national organization for two years.

 "This gives us the opportunity to learn what works and what does not work in state chambers across the nation," Kirk said.  "It also gives us the chance to share some of the things we are doing in North Carolina."

Kirk will host the manufacturing executives next August at Pinehurst Resorts. "Host may be the wrong word," Kirk chuckled. "They will pay their own way and hopefully stay a few extra days in North Carolina."

Julie Woodson, NCCBI’s director of governmental affairs for the past five years, has resigned to become director of public affairs for the N.C. Pork Council. Her responsibilities there include media and membership relations, lobbying and working with the Pork Council’s PAC. NCCBI President Phil Kirk commented that he was both pleased and sad about Woodson leaving, and said “she has done a fantastic job here.”

The N.C. Bankers Association has announced the next class of inductees into the North Carolina Banking Hall of Fame. The inductees are: James. M. Culberson Jr. of First National Bank & Trust of Asheboro, C.C. Hope of First Union Bank, John G. Medlin Jr. of Wachovia Bank, the late L. Vincent Lowe Jr. of Branch Bank & Trust, and Addison Reese of North Carolina National Bank. The induction banquet took place at the Pinehurst Resort on Oct. 24.


Philanthropy

Blue Cross gives $1 million to hurricane recovery fund
Blue Cross and Blue Shield of North Carolina is donating $1 million to the North Carolina Disaster Relief Fund to aid victims of recent storms. BCBSNC is the first major corporate contributor to the fund.  “Many of our residents across the state are in need of basic resources right now and need our help to return their lives to normal,” said Easley . “Blue Cross and Blue Shield has stepped up and offered a generous donation to help rebuild communities hard hit by the seven storms ensuring that our citizens will be back on their feet quickly.”  The relief fund will supplement state and federal government aid to storm victims, including providing food, medicine and other relief supplies.  “Blue Cross and Blue Shield of North Carolina has been a good neighbor to the people in this state for more than 70 years, and good neighbors help out when their friends face difficult times,” said Bob Greczyn, BCBSNC president and CEO. BCBSNC made donations of $1 million for hurricane relief following Hurricane Floyd in 1999 and Hurricane Isabel in 2003.  Gov. Easley also urged people to continue to donate items, time and money to the victims of the recent storms. People wishing to make monetary donations may make a donation on-line at www.ncdisasterrelief.org or make a check payable to the N.C. Disaster Relief Fund and mail it to:  North Carolina Disaster Relief Fund, Office of the Governor, 20312 Mail Service Center, Raleigh NC 27699-0312.

North Carolina will grant tax relief to affected individuals and businesses in 15 mountain counties unable to file tax returns and make timely payments due to the destruction caused by Tropical Depression Frances. The waiver includes both late filing and payment penalties for a tax return due to be filed or paid between Sept. 7 and Nov. 9, provided the return is filed or the tax is paid before Nov. 10. The 15 counties, which have been declared federal disaster areas, are: Avery, Buncombe, Burke, Caldwell, Haywood, Henderson, Jackson, Madison, McDowell, Mitchell, Polk, Rutherford, Transylvania, Watauga and Yancey. A taxpayer eligible for relief should complete Form NC-5500, Request to Waive or Reduce Penalties, write “Tropical Storm Frances” on the top right of the form and check the block for natural disaster. The form is available at all Department of Revenue offices and on the agency’s website at: http://www.dor.state.nc.us/downloads/penalty.html.


Duke Power to give community colleges $3 million annually
Duke Power said it will fund grants totaling up to $3 million annually through 2009 to community colleges within its service area and others that do significant training for major industries served by Duke Power. The focus of the grant program is on training, retraining and other efforts to revitalize manufacturing and related businesses. "Duke Power's commitment to North Carolina's community colleges is truly historic. Certainly this new program represents one of the largest investments in our statewide system by a company, and the potential impact on our state's economy is tremendous," said Martin Lancaster, president of the N.C. Community College System. "Duke Power has always been a strong partner with community colleges and we are excited about the expansion of our community college grant program in North Carolina," said Tony Almeida, Duke Power's vice president of economic development. "Community colleges are the workhorses for North Carolina's industrial training efforts and our plans to provide an additional $3 million annually to help take these training programs to the next level in our service area will directly benefit our state's struggling manufacturing sector and drive economic growth."

State Government
State beats budget in first month of new year
The state slightly exceeded budget in tax and non-tax revenues for the first month of its fiscal year, with total July income coming in about $5 million over target, according to data obtained from the State Controller’s office.

Individual income tax collections of $545.9 million for the month were nearly $3 million over budget. Still, that’s well below the $576.1 million in individual income taxes collected by the state in the same month one year ago.

In fact, total tax revenues of $1.044 billion for the month are $73 million less than the state collected the previous July.

When compared to the prior year through July 31, actual tax

and non-tax revenues decreased by $186.9 million, or 14.9 percent, mainly due to a transfer of $108.8 million from reserves to generate additional funds for the 2004 fiscal year. The decrease in sales and use tax is due to a larger distribution to local governments.

State to use $1 million grant to improve biotech training
North Carolina will receive a $1 million incentive grant from the U.S. Department of Labor for exceeding federal performance levels in three separate workforce programs. The N. C. Community College System, N.C. Department of Public Instruction and N.C. Department of Commerce’s Division of Employment and Training each exceeded performance goals while administering federal workforce programs during fiscal 2002-2003. The grant money will be used to train workers in biotechnology, one of the state’s fastest growing high-tech industries. The biotechnology project funded by the grant award will link the activities of the Community College System, the Department of Public Instruction and the Department of Commerce’s Division of Employment and Training to provide awareness, education and training in the biotechnology field to high school students, youth dropouts, dislocated workers and other adults. 

DOT awards contract to widen section of Charlotte Outer Loop
At its October meeting, the N.C. Board of Transportation voted to spend $14.8 million to add two lanes to an existing four-lane section of the Charlotte Outer Loop (I-485) to form a six-lane highway from west of Interstate 77 to Brown Grier Road (S.R. 1143) in Mecklenburg County. The contract was awarded to the Asheville Division of APAC-Atlantic Inc. of Asheville. Work on the project is expected to begin on Nov. 1 with completion scheduled in June 2006.

The DOT board also awarded a $28.2 million contract to widen 12.1 miles of U.S. 421 from Plank Road at Gulf to the four-lane bypass of Siler City in Chatham County to four lanes. The contract was awarded to W.C. English Inc. of Lynchburg, Va. Work on the project is expected to begin on Nov. 1 with completion scheduled in December 2007.

Also, the board awarded a contract to build a 3.8-mile, four-lane bypass of Hope Mills from Bingham Road to Legion Road at Elk Road in Cumberland County. The contract was awarded to Barnhill Contracting Co. of Tarboro for $25 million. Work is expected to begin Nov. 1 with completion scheduled in October 2007.


A contract was approved to build a new bride over Michael Creek and West Center Street Extension on U.S. 29/64/70 and Interstate 85 Business in Lexington. The contract was awarded to DLB Inc. of Hillsville, Va., for $10.9 million. Work on the project is expected to begin Nov. 1 with completion scheduled in November 2007.

Unemployment rates decline in 93 counties
Unemployment rates fell in 93 of North Carolina’s 100 counties in August and — for the second time this year — in all 11 metropolitan statistical areas, according to ESC data. The rate was unchanged in three counties and rose in four. The unemployment rate was at 5 percent or below in more than half of the counties. For the sixth consecutive month, Vance County had the state’s highest unemployment rate at 11.8 percent in August. For the fifth consecutive month, Currituck County had the state’s lowest unemployment rate at 1.4 percent. Statewide, the seasonally adjusted unemployment rate in August was 5 percent — nearly a half percentage point lower than the U.S. rate. It was the sixth consecutive month that the state’s rate has been below the national average. Total non-farm industry employment increased by 46,300 over the year.


Unemployment rates in the MSAs in August compared with July were:
Asheville — 2.9 percent, down from 3.3 percent
Charlotte/Gastonia/Rock Hill — 5.4 percent, down from 6.0 percent
Fayetteville — 4.3 percent, down from 4.8 percent
Goldsboro — 4.2 percent, down from 6.3 percent
Greensboro/Winston-Salem/High Point — 4.8 percent, down from 5.3 percent
Greenville — 6.1 percent, down from 6.5 percent
Hickory/Morganton/Lenoir — 6.9 percent, down from 7.6 percent
Jacksonville — 4.0 percent, down from 4.5 percent
Raleigh/Durham/Chapel Hill — 3.4 percent, down from 3.6 percent
Rocky Mount — 7.4 percent, down from 8.0 percent
Wilmington — 3.4 percent, down from 3.9

Plant explosion, airline crash cause rise in workplace fatalities
North Carolina work fatalities rose moderately in 2003 in large part because of a plant explosion in Kinston that killed six workers and a commuter airplane crash that claimed 21 lives in Charlotte, 12 of which were counted as workplace deaths. The U.S. Bureau of Labor Statistics show that workplace fatalities in North Carolina for 2003 rose to 182, up from the previous year's record low of 169.The total for 2003 ranks as the third lowest year since the federal government started keeping detailed data in 1992. Transportation-related incidents that include highway accidents accounted for 69 fatalities. The fatalities also included 12 of the victims who perished in the commuter plane crash in Charlotte on Jan. 8, 2003. The victims were counted as work fatalities because they were traveling on business or were members of the plane crew. Fatalities in construction, considered one of the most dangerous industries in the state, stayed steady at 44. Fatalities among Hispanic workers dropped from 25 in 2002 to 21 in 2003. Manufacturing had 26 deaths. Homicides in the workplace accounted for 23 fatalities. Labor Commissioner Cherie Berry said injury and illness data from the U.S. Bureau of Labor Statistics illustrates that North Carolina has the third-lowest injury rate in the country. The following counties had three or more fatalities: Mecklenburg – 24; Guilford – 11; Durham – 10; Lenoir, Wake – 6; Forsyth, Richmond, Wilkes and Wilson – 5 each; Gaston – 4; Alamance, Bertie, Carteret, Catawba, Cumberland, Edgecombe, Harnett, Henderson, Hertford, Orange, Randolph, Robeson, Rockingham and Rowan – 3 each. No other county had three or more fatalities.

DMV offices have begun using face recognition technology to strengthen the state's driver license and identification card application procedures. The new technology, which went into service on Oct. 1, compares facial features of an applicant with digital images in DMV's database to verify the identity of each applicant. As an extra security measure, the new tool will also match these images against those on federal terrorist watch lists. 


Washington Watch

Tobacco quota buyout will send $3.9 billion to North Carolina
The tobacco quota buyout will give $3.9 billion to North Carolina growers and quota holders over the next decade. With about 76,000 tobacco farmers and allotment holders, North Carolina should receive the largest portion of the buyout. About $500 million of the money will be used to buy all tobacco left in reserve from the quota system. 
 
The government will pay $10 for each pound of quota. In cases where quota holders rent their allotments to other people to farm, $7 will go to the person who holds the quota and $3 to the farmer who rents it. Payments, to be made over 10 years and funded by a fee on tobacco manufacturers, will be based on 2002 production levels. Those who quit farming before 2002 will receive nothing.
 
All tobacco companies large and small will pay for the buyout, with payments based on market share. This is a contrast with the 1998 tobacco settlement agreement with the states, which did not include most smaller manufacturers. Industry analysts estimate that major tobacco companies will have to raise prices by only a penny a pack to fund their portion of the buyout, while deep-discounters will have to hike prices 5 cents.

According to Blake Brown, a professor at N.C. State University, the key provisions of the buyout are:

$7 for each pound of quota owned based on the 2002 level of basic quota. The quota owner as of the date of enactment of the legislation will receive the payments. Payment will be over 10 years in 10 equal annual payments; i.e. $0.70 per pound per year.

$3 in contract payments per pound of quota grown paid to growers who grew tobacco in 2002, 2003, or 2004. The amount of payment will be based on the 2002 effective marketing quota. Producers of a quota in all three years, 2002, 2003, and 2004, are eligible for payment of the full $3 based on the 2002 effective quota level for a particular quota. If a grower grew a quota for 2 out of the 3 years, then the grower is eligible for 2/3 of the payment. If a grower grew a quota for 1 out of the 3 years then the grower is eligible for 1/3 of the payment. The payments will be spread over 10 years in equal annual payments.

Growers and quota owners are allowed to assign their payments to a financial institution. The significance of this provision is that some financial institutions have indicated an interest in providing growers and quota owners an up-front lump-sum payment in exchange for the stream of buyout payments. Growers and quota owners will need to carefully weigh the cost of this option since the financial institutions will retain a portion of the stream of payments in return for making a lump-sum payment.

The legislation eliminates the federal tobacco program. Beginning in 2005 there will be no federal restrictions on the production of tobacco. It does not contain any geographical restrictions on where tobacco can be produced after the program ends. Price supports and quotas will no longer exist.

The buyout will be funded by quarterly assessments on tobacco product manufacturers and importers based on their product's share of the U.S. market.

Because tobacco product manufacturers will fund the buyout, Phase II payments will cease after enactment of the buyout. Assuming this year's Phase II payment is made, there would be a total of about $2.6 billion in the six remaining scheduled payments. Since these scheduled payments would be adjusted downward due to declining U.S. cigarette consumption, the actual payments would have been less than $2.6 billion. The projected total of the actual payments is around $2 billion.

Other important aspects of the tax legislation
The tobacco quota buyout was included in legislation known as the American Jobs Creation Act of 2004 (H.R. 4520). The original intent of that bill was to repeal the extraterritorial income (ETI) regime available to American businesses that had ruled illegal by the World Trade Organization. Repealing ETI would end punitive tariffs imposed by the European Union on more than 1,600 U.S. exports since March 2004. However, the bill was heavily amended to include some $137 billion of tax relief over 10 years, offset by repeal of the export tax provisions and a number of revenue raisers. 

For people in states without a state income tax, the biggest impact of the legislation is that it allows taxpayers to deduct their state and local sales tax (whichever is greater) in 2004 and 2005. This will benefit taxpayers in Alaska, Texas, Tennessee, Florida, Washington, South Dakota, Nevada and Wyoming. Other provisions of the legislation include:

Tax incentives: Provides $4 billion of relief from the Alternative Minimum Tax, including AMT relief for farmers. The 90 percent limitation on the use of AMT foreign tax credits is repealed; the tax break for manufacturers applies to AMT payers.

Tax deductions: Provides a tax deduction for a portion of income from domestic production activities, limited to 50 percent of wages; 9 percent deduction fully phased-in by 2010; applies to Subchapter C corporations, S corporations, sole proprietorships, partnerships, cooperatives, and estates and trusts.

Repeal of ETI: Current export tax provisions (ETI) are repealed; three-year transition period provided for current beneficiaries; binding contract rule applies to agreements in effect on 9/17/03.

Homeland investment: Generally effective on the date of enactment, a one year temporary reduction in the U.S. tax rate on foreign profits earned by U.S. multinationals that are reinvested in the United States.

International tax reforms: A package of provisions with varying effective dates help alleviate the double taxation of foreign source income earned by multinational corporations; specific provisions include modified interest expense allocation rules, a 10-year carry forward and one-year carryback of foreign tax credits, recharacterization of overall domestic loss, a reduction in foreign tax credit baskets and a study on earnings stripping provisions.

Investment incentive for small businesses: Extends through 2007 current provision allowing smaller companies to deduct up to $100,000 of capital expenses annually.

Reforms of rules for Subchapter S corps: Increases maximum number of eligible shareholders from 75 to 100 and family members can elect to be counted as one shareholder for determining number of shareholders in the corporation; other provisions address IRA shareholders, small business and qualified subchapter s trusts and other issues.

Stock options: Clarifies that employee stock purchase plan and incentive stock options are not subject to payroll taxes.

Restrictions on executive compensation: Amounts deferred under “nonqualified deferred compensation plans” are subject to immediate taxation unless certain requirements are met.

Study ranks N.C. 9^th in ‘insourced’ jobs
North Carolina ranks 9th in the nation in “insourced” jobs — jobs supported by the U.S. subsidiaries of foreign companies. Such companies employ 212,700 North Carolinians, according to the Organization for International Investment (OFII), a Washington, D.C., trade group that represents the U.S. subsidiaries of international companies.  An economics professor at the Tuck School of Business at Dartmouth conducted the study, which is based U.S. Bureau of Economic Analysis data from calendar year 2002. North Carolina “Insourcing” job facts listed in the study include:

• The 212,700 employed in North Carolina by U.S. subsidiaries of foreign firms represents about 7 percent of the state’s private sector workforce;

• North Carolina also ranks 5^th in the nation by the number of its insourced manufacturing jobs, with a total of 91,400; 

• North Carolina’s insourced jobs grew by 17,100 over five years, an increase of about 9 percent.

• Insourcing companies in North Carolina include: Akzo Nobel Inc.; BSH Home Appliances Corporation; Degussa Corp.; GKN Automotive; Freightliner; Honda; Infineon Technologies North America Corp.; Michelin North America Inc.; Saint-Gobain Corp.; Sodexho Inc.; Thomas Built Buses; Tomkins Industries; Unilever United States Inc.; and Volvo Group North America Inc.; and

• Nationally, average compensation at U.S. subsidiaries is $56,667 – approximately 31 percent more than all U.S. companies.

The top 20 states in terms of the number of insourced jobs – ranked in order – are California, New York, Texas, Illinois, Florida, Pennsylvania, New Jersey, Ohio, North Carolina, Michigan, Massachusetts, Georgia, Virginia, Indiana, Tennessee, South Carolina, Connecticut, Wisconsin, Maryland and Missouri. Nationally, U.S. subsidiaries of foreign companies employ over 5.4 million Americans.