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Constitutional – Taxation – Corporate Incentive – Public Purpose – Standing

Haugh v. County of Durham. (Lawyers Weekly No. 10-07-1157, 24 pp.) (Barbara Jackson, J.) Appealed from Durham County Superior Court. (Howard E. Manning Jr., J.) N.C. App. Click here for the full text of the opinion.

Holding: Even though Nitronex Corp. accepted tax incentives from Durham County when it relocated there from Wake County, since Nitronex was leaving Wake County regardless of where it went (which it had narrowed down to Durham County or Silicon Valley), Nitronex did not pit one N.C. county against another. This case is controlled by Maready v. City of Winston-Salem, 342 N.C. 708, 467 S.E.2d 615 (1996), and the incentives were constitutional.

Although we reverse the trial court’s holding that plaintiff Haugh lacked standing, we affirm the trial court’s grant of summary judgment for Durham County.

Even though the county showed that plaintiff Haugh did not pay Durham County property taxes for the year 2007, Haugh alleged that he paid sales and other taxes in Durham County. Since the county failed to make a showing to rebut Haugh’s allegations, the trial court erred in determining that Haugh lacked standing to challenge the incentives grant.

However, plaintiff Capps did not allege that he has paid taxes of any kind to Durham County. Capps argues that he, a Wake County resident, has been injured by Durham County’s incentives to Nitronex because the incentives illegally induced Nitronex’s move to Durham County, which diminished the tax base in Wake County.

To the contrary, Nitronex’s CEO testified in his deposition that “relatively early on we concluded that Wake County … would not have the facilities that we were looking for. ….” This uncontroverted deposition testimony demonstrates that Nitronex was prepared to leave Wake County, and its corporate officers were deciding whether to move to Durham or California. Therefore, Capps’s argument that he had been injuriously affected by the diminution of Nitronex’s contribution toward Wake County’s tax base as a result of Durham County’s incentives fails, and summary judgment against Capps was correct.

The trial court also correctly concluded that the propriety of tax incentives similar to those at issue already has been judicially established and that any further review of the relative wisdom of Durham County as to whether to offer the incentives or the amount thereof would be barred by the political question doctrine.

Plaintiffs appear to attempt to distinguish the case sub judice from our holdings in Peacock v. Shinn, 139 N.C. App. 487, 533 S.E.2d 842 (2000), and Blinson v. State, 186 N.C. App. 328, 651 S.E.2d 268 (2007), and our Supreme Court’s holding in Maready by framing this as a novel case of intrastate competition between adjacent counties and characterizing Durham County’s action as a reward for consummating a plan Nitronex already had conceived and to which it already had committed.

We are not persuaded, and we hold that the Nitronex CEO’s undisputed deposition testimony contradicts plaintiff’s position and places the remaining issues squarely within the purview of holdings that we are not at liberty to revisit.

The Nitronex CEO’s deposition unequivocally demonstrates that, although Nitronex initially had considered remaining in Wake County, the company quickly eliminated the county from discussion due to its lack of necessary clean-room facilities. Although Nitronex had leased property in Durham since 2002, the facility was only partially developed, and “still required another two and a half or $3,000,000 worth of investment to finalize the clean room space and the other facilities, so that people could move into it.” The CEO further explained that “over and above that two and a half to $3,000,000 was an additional three to $4,000,000 of capital equipment, and that would be required … to support the company’s growth.”

Although that additional equipment also would have to be purchased if Nitronex moved to California, relocation to Silicon Valley provided the economic benefits of facilities with existing clean rooms and of “a very vibrant secondhand equipment market. …” We note these economic considerations and estimated investment amounts not to engage in a discussion of the propriety of Durham County’s incentives or to pass on whether the public ever will benefit from the incentives offered – for that is not the province of this court – but to illustrate that the case sub judice is not solely one of intrastate competition between Wake and Durham counties.

Furthermore, notwithstanding the existence of a lease on a partially complete building in Durham, Nitronex’s remaining in North Carolina was not a foregone conclusion. Rather, Nitronex’s consideration was relocating to and outfitting a partially completed facility in Durham or moving to readily available facilities with readily available equipment in California. The CEO noted that, although “the incentives and the overall support from the County of Durham [were] a very important factor in that decision,” “it would be fair to say there was no single factor that made the decision one way or the other. There were a whole series of different criteria that went into the final decision.”

This case is materially indistinguishable from our holdings in Peacock and Blinson and our Supreme Court’s holding in Maready.

We affirm the trial court’s granting of summary judgment in defendants’ favor with respect to purported violations of the Public Purpose Clauses of the N.C. Constitution. Incentives parallel to those at issue already have been held to comport to the Public Purpose Clauses of our state constitution, and we are bound by that precedent.

Affirmed in part, reversed in part.

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