A plan by the McCrory Administration to privatize the state’s economic development efforts is barreling through the General Assembly despite no compelling case for the drastic change, big unanswered questions about how the private entity will operate, and new concerns that have come to light about the man Commerce officials have picked to run it.
Gov. Pat McCrory and his top Commerce leaders announced the outline of his privatization scheme in April 2013 with the usual rhetoric about private enterprise always being more efficient and nimble than government.
That claim often rings hollow and this case is no exception. The state has been at or near the top of state economic development rankings for years under the current system.
More than a year later administration officials and state lawmakers are still ironing out the final details of the plan that would transfer roughly $90 million of public money over the next five years to a private nonprofit that will have to raise $6 million of its own.
The nonprofit — that will be overseen by a board of political appointees — will lead the state’s efforts to recruit new companies, convince existing firms to stay or expand and direct the state’s overall marketing efforts.
It is a troubling idea, but not a new one. Other states have tried it with mixed results.
A report two years ago from the national group Good Jobs First found that several states that have privatized economic development have seen problems, including misuse of taxpayer money, excessive executive bonuses, and questionable subsidy deals.
Commerce officials promise that the legislation for North Carolina’s approach includes safeguards against those sorts of abuses, but the bills in the House and Senate remove an earlier provision that would have put the nonprofit’s board and key staff members under the state ethics law that requires financial disclosure and prohibits gifts, etc.
The bill also includes some exemptions from the state’s open records laws even though the vast majority of the nonprofit’s funding will come from taxpayer money. The group must raise $6 million from private sources in the next five years to go with the $90 million in public money.
Some lawmakers have raised questions about the transparency of the operation and potential pay to play problems with corporate donors, but they have been brushed aside by the bill’s sponsors.
There also new questions about the man Commerce Secretary Sharon Decker hired to run the new private group, Richard Lindenmuth, a Raleigh businessman with no economic development experience.
An investigative report by Sarah Ovaska with NC Policy Watch uncovered some troubling episodes in Lindenmuth’s recent work history.
His Raleigh consulting firm entered bankruptcy in 2010 and a federal bankruptcy judge sharply criticized Lindenmuth’s behavior in a separate case when he was consulting for a another firm in bankruptcy proceedings, saying he improperly overcharged for his expenses to the point that his actions were potentially criminal.
Lindenmuth denies any wrongdoing and Decker doesn’t seem troubled by his past. McCrory promised a thorough nationwide search for the nonprofit’s CEO. They settle for a man with a questionable work background.
None of the questions seem to matter though. The point is to reform and privatize. Never mind the potential conflicts or lack of transparency. Never mind that former Gov.r Jim Martin, McCrory’s mentor and also a Republican, called a similar proposal in the late 1980s an “incredibly dumb and dangerous idea.”
McCrory ran on changing all of state government and is determined to — whether it’s working well or not, so the unwise privatization plan moves ever closer to reality regardless of how much public money and accountability it puts at risk.
Chris Fitzsimon is executive director of N.C. Policy Watch.