The fight over a $280m-plus incentive package to lure Dell into North Carolina has entered the state's second-highest court.
Attorneys have asked the N.C. Court of Appeals to reinstate a lawsuit over the legality of a massive golden handshake proffered by the state to the computer manufacturer.
Under the state constitution, tax money must be used to serve a public purpose. The inducement to Dell to build a plant in Winston-Salem is illegal because it fails the public purpose test, according to the North Carolina Institute for Constitutional Law (NCICL),a Conservative non-profit.
Dell decided to build a plant in Forsyth County after the state agreed to provide the company with about $280m worth of tax breaks, roads to the factory and Dell repair classes in local colleges. The company agreed to reciprocate by investing $100m in the factory and creating 1,200 jobs within five years.
In 2005, the NCICL filed a lawsuit on behalf of seven individuals calling on the court to decide if using tax revenue to fund grants is constitutional. The group says such pay-outs create a hostile environment for local businesses that do not receive similar perks.
The suit was thrown out in Wake County Superior Court in May 2006 when judge found that the NCICL failed to show how the deal directly hurt North Carolina residents' interests.
The NCICL's attorney, Bob Orr, made the argument for the plaintiffs before a three-judge panel of the Court of Appeals yesterday.
"At a minimum, we have a right to go back to trial and present evidence to show who primarily benefits from the $300 million," said Orr, a former N.C. Supreme Court Justice.
An attorney representing Dell, Burley Mitchell (who is also a former N.C. Supreme Court Justice), told the judges the incentives package is legal and a matter of public policy for the General Assembly to determine. He said the dismissal upheld previous court decisions determining the constitutionality of taxpayer-funded incentives to attract industries.
"Creating jobs and developing the economy is a public purpose," Mitchell said.
The NCICL also plans to butt heads with Google, which received a $90m incentive package to build a data center in the state. Google was awarded a 100 per cent personal property tax break and an 80 per cent cut on real estate taxes for the next three decades. ®