Editor: Please tell our readers how you came to develop your practice involving economic development, particularly international transactions.
Guarnieri: It goes back to my interest in international business prior to law school. During law school I interned with several law firms, one of which was Parker Poe. I liked the fact that the firm had a significant corporate practice, but also had a dedicated international practice.
In the early 80s Parker Poe had formed an international division and needed lawyers for that group. As a result I have had 20 years of experience on the international front, both inbound and outbound transactions. It not only has been a growing practice area but also a fun one in the sense of experiencing cultural and transactional differences.
Editor: What has been the catalyst for attracting both domestic and foreign investment to the Carolinas?
Guarnieri: Originally this commenced in the 80s when European companies saw a huge U.S. market, in which they needed to be present. We helped them through that process. A lot of machinery and engineering companies in Europe manufactured equipment that U.S. companies needed and wanted. Others needed to be present to supply their products to the marketplace. You can see continued growth and emphasis on the inbound investments. The industry mix has changed but has remained strong. Our U.S. clients likewise have become more international in focus so you see many transactions on the part of U.S. companies abroad.
Editor: Why are the Carolinas in advance of other parts of the U.S. in attracting investment?
Guarnieri: It's a reflection of having the right assets and leadership, as well as putting in place a number of tools that attract investment. Charlotte, in particular, has been blessed with good assets and offers the type of "product" that companies are looking for to meet the first set of investment criteria, i.e., access to labor, access to markets, an educated workforce. It has an excellent highway and air transportation system with international flights that can get a businessperson to almost any part of the world with one stop. You combine these assets with a good business atmosphere - such as lower taxes, reasonable business regulation, cost of doing business and all of the factors that companies need to take into consideration as they evaluate locations - and it makes it a very compelling argument for locating in this area.
Editor: Economic development has taken on added significance over the last few years. What is driving this trend?
Guarnieri: If you look at the 1990s, both Carolinas were very successful with their economic development but the downturn in the early 2000s and the dramatic changes in the traditional industries - textiles and furniture - forced a renewed effort. The local governments and state governments were compelled to generate new economic activity. North Carolina took steps to implement some new tools to help with that effort. For instance, the Job Development Investment Grant is a new tool that they could put into their kit to try to close deals and bring more economic development to the state. It was adopted in 2002 to provide grants to up to 25 companies a year in an amount ranging from 10% to 75% of the state personal income taxes derived from the creation of new jobs. To qualify, a company must demonstrate that its project will result in a significant net increase in employment in the State, the project is consistent with the economic development goals of the State and the area in which it will be located, and the project would not be undertaken in North Carolina without the grant.
Economic development in the 16 county Charlotte region and the Carolinas has gone extremely well. For example, North Carolina has an unemployment rate of about 5 percent, notwithstanding the job losses in a number of traditional industries, such as textiles and furniture.
On the international front both states have done well over the years and continue to do well. Foreign investment remains strong. The Charlotte region alone has over 630 foreign-owned companies employing thousands of workers. Exports have increased markedly.
Editor: Can you give us some examples of successful economic development. I know Charlotte has become a banking center and a hub for airlines.
Guarnieri: Charlotte is a banking center. That aspect of Charlotte is clearly part of the economic development success of the city and the region. The banks not only are an economic development success story, but they also attract new investment and business opportunity as well as support economic development efforts. When you look at the banks or Duke Energy, they want this region to prosper.
I also think it is interesting to look at economic development in a slightly broader sense. For instance, in the Charlotte area there is the recently announced NASCAR Hall of Fame and a new whitewater park is under construction. These are economic development success stories. Other successes include Lowe's Companies, which relocated its corporate headquarters to the Charlotte area. A final example would be the recently announced North Carolina biotechnology center, which will be built on the former site of the Pillowtex factory where one of the largest mass layoffs in North Carolina occurred a few years ago. It shows the dynamic economic activity in Charlotte, the Charlotte region and the Carolinas.
Editor: What do you think are the main challenges facing economic development in the Charlotte Region?
Guarnieri: One challenge that is fairly unique to Greater Charlotte is that the metropolitan area is in both North and South Carolina. When I think of the Charlotte region, I think of the counties in both states. Obviously, each state has different incentive tools, slightly different assets and other differences. The ability of a company to relocate across state lines, but stay in the region is an issue affecting both states.
Editor: Is that because one state has more favorable tax abatements than the other?
Guarnieri: It depends on how you look at it. There are a few things, such as the state corporate income tax in South Carolina is lower than in North Carolina. Some of the economic assistance incentives are slightly different and sometimes can be favorable to one state or the other. One of the things that is not unique to Charlotte, but is worth noting, is that the competition isn't really one county or state over another. More and more projects are looking at not only four or five states, but also maybe three or four different parts of the world. That is a changing trend that needs to be kept in mind, because the competition is not just within the U.S. anymore; it can be sites all over the world.
Editor: As legal counsel assisting companies through the legal aspects of their projects, what suggestions can you give companies about the investment process?
Guarnieri: We have done quite a bit of that. Most importantly, the company needs to understand the legal aspects involved in their investment and in doing business in a particular state or location. Companies will evaluate a marketplace to determine if there is adequate demand for their product. They need to go through the same process as to the legal aspects. We work with our clients to help them through that process. It applies no matter the size of the company. The difference may be, for instance, with a foreign-owned company, if they are new to the U.S., they may need more help in just understanding the legal landscape, whereas, if it's a U.S. multi-national setting up in a different state it may not have as much of a learning curve. On the foreign side we actually develop materials written for foreign-owned companies on the legal aspects of investing and doing business in North and South Carolina. Editor: I understand that your firm has specialists in the areas of immigration, visas, and export and import regulations.
Guarnieri: On the international front, those areas are important. The visa and immigration side is one piece of helping foreign companies with their investment needs here and it's an area of importance to us. It distinguishes us. It allows us to provide not only the corporate business services but to bring that international understanding to the forefront.
Editor: What suggestions do you have on the process relating to incentives?
Guarnieri: We work with clients on a wide range of points in connection with incentives - the confidentiality aspects of the project, evaluating what incentives are available, and what requirements must be met to qualify for incentives. At the local level there may be various financing options available, and employee training. There are a variety of incentive steps, depending on the project, that need to be taken.
Editor: Where is economic development going in the next one to five years?
Guarnieri: As some people may know, there is currently before the U.S. Supreme Court a challenge to some economic incentives, particularly tax credits, that were issued in Ohio. In Cuno v. DaimlerChrysler , 386 F.3d 738 (6th Cir. 2004), the 6th Circuit struck down certain tax credits that were granted to Daimler Chrysler. The U.S. Supreme Court granted cert and oral argument was heard earlier this year. That decision could impact how incentives function in the future.
What will also occur over the next number of years is that no matter what happens to incentives, competition will continue and increase along the lines of continued globalization. There will be different options and different locations available for companies and they will continue to evaluate those as they always have done.
For the Charlotte area, there is opportunity over the next five years as the area's product continues to develop and improve. With such a proven workforce and high quality of life, I expect Charlotte to increase the number of corporate headquarters located in the region (there are now eight Fortune 500 companies headquartered locally), and for the city to become even more of a U.S. and global headquarters location than it is today.
Editor: What about Carolina-based companies expanding elsewhere in the U.S. and abroad.
Guarnieri : It happens, of course, and is a reflection of the globalization of business. There continues to be significant investments coming in the Carolinas - both foreign and domestic - and that will continue nicely. With continued leadership, a good location for business and with an educated workforce, the Charlotte region and the Carolinas will remain competitive and will prosper.