Do the pieces still fit? In the '90s, the state split into seven regional partnerships to sell itself better. Now it needs to show that they count.

• Author: Martin, Edward
• Position: FEATURE

In some ways, Carolina Ingredients Inc. is a petunia in an onion patch, perched in an industrial park next door to a company that distributes nuts and bolts and across the street from a plant that makes rollers for assembly lines. On a sign out front, its logo, a tricornered burst of red, yellow and blue, is cheery, but what sets it apart are the smells--allspice, nutmeg, sage, chili peppers, ginger and scores of other scents. Customers can order 5 pounds or 500,000 pounds of seasonings. "We supply the Fortune 500 companies you see on grocery-store shelves," President Doug Meyer-Cuno says, "but also mom-and-pop operations."

In late 2009, the company moved and expanded, with about 60,000 square feet now under its roof. The $5 million upgrade includes a research-and-development lab with quartz countertops infused with antimicrobial agents. Employment increased from 24 to 34. Businesses such as this are the soul of a state's economy. Of the 380 that have received $83 million since 2001 from the One North Carolina industry recruiting and expansion fund, about 60% had fewer than 100 employees. Carolina Ingredients' business might be spices, but it's the kind that entices recruiters--progressive, prosperous, growing.

It's also in South Carolina. How it came to leave Charlotte shows one of the flaws in the Tar Heel State's front-line system for recruiting and retaining business -- the public-private North Carolina Partnership for Economic Development. Crafted on the principle that the state's cities and counties are too small to make much of a splash in a global market competing for business, it divvies them up into seven regional public-private partnerships. "We had 100 counties and about 500 municipalities competing against each other," says Dave Phillips, the High Point businessman who was North Carolina's secretary of commerce from 1993 to 1997 and is considered the father of regionalism in economic development. "We needed to get people to work together." Few question the premise, but two decades on, many question whether the partnerships are fulfilling the mission he and others envisioned for them.

Meyer-Cuno didn't want to leave North Carolina. He started his company in 1990 in Mecklenburg County and grudgingly accepted what he calls "the maze you have to go through" to do business in Charlotte. He expanded once but balked when he wanted to do it again and Mecklenburg economic developers turned him down for $33,000 in property-tax breaks. Mark Farris, economic developer in neighboring York County, was waiting in the wings. Among the offerings he dangled: abating property taxes for five years.

York and three other South Carolina counties are members of the 16-county Charlotte Regional Partnership, in which they supposedly work together to attract business and industry from elsewhere--not each other. In fiscal year 2008-09, the latest for which figures are available from the N.C. Department of Commerce, the Charlotte Regional Partnership got $638,775 of its $3 million budget from the N.C. General Assembly. The remainder came from member cities and counties--most of them in North Carolina--private businesses and grants. York County kicked in about $50,000. The state of South Carolina contributed nothing. Despite the loss of this company and others, including 500-employee Continental Tire North America in 2008, partnership officials say such defections are inconsequential, totaling less than 1% of Mecklenburg County's tax base. Farris' take: "If the phone rings, we answer it. We don't come up there and put up billboards."

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Even when there's no state line to contend with, companies routinely pit partnership members against each other. Take Round Rock, Texas-based Dell Inc., recruited to the Triad in 2004 with the promise of receiving more than $300 million of state and local incentives over 15 years. Greensboro offered $5.3 million, with Guilford County upping the ante to $7.1 million, then Davidson County raising it to $23.1 million before the duo of Winston-Salem, with $18.9 million, and Forsyth County, $14.8 million, prevailed. "Not only do executives play the game," Phillips says, "they hire firms that specialize in it." All this occurred despite warnings by industry analysts that U.S. computer manufacturing was an endangered species. Five years after the plant opened, Dell shut it down last year, leaving on the table most of the incentives it won. "Dell shows how hard it is to pick winners," says Donald Jud, professor emeritus at UNC Greensboro's Bryan School of Economics. "Government folks would probably be better advised to stick to their knitting and do things they know about."

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If partnerships can't prevent internal strife, what do they do? And...