Incentives totaling nearly $280 million from the state of North Carolina and local governments in the Triad to lure a Dell computer production facility to the Piedmont faces new legal challenges.

Led by former state Supreme Court Justice Robert Orr, the North Carolina Institute for Constitutional Law filed suit in Wake County Superior Court on Wednesday, saying the incentives were unconstitutional, violated interstate commerce and were discriminatory.

“It is our belief that a judicial resolution must be reached to determine the constitutionality of the state’s policy of using tax revenue to grant various types of subsidies to selected large corporations to either move to N.C. or to keep them from relocating,” Orr said in announcing the suit.

Dell is already constructing a mammoth computer production facility in the Triad and training workers at other Dell facilities to work in North Carolina when the plant opens in September. The state has said the plant could create up to 6,000 jobs with 1,500 jobs coming through Dell.

Remembering Maready Case

Phil Kirk, president and chief executive officer of North Carolina Citizens for Business and Industry, and Scott Millar, president of the North Carolina Economic Developers Association, issued statements later in the day saying that the North Carolina Supreme Court has already upheld the use of incentives in a 1996 decision known as the Maready case.

“The State of North Carolina has taken a pragmatic approach on economic development incentives necessary to compete in today’s business recruitment climate,” Kirk said. “The North Carolina Supreme Court, in the Maready case, already affirmed
the constitutionality of economic development incentives. The General Assembly has had numerous opportunities to repeal its policies on incentives, but has chosen to continue using incentives on a targeted, strategic basis.”

Added Millar: “The North Carolina Supreme Court’s ruling in the Maready case confirmed the constitutionality of economic development incentives. Incentives are a reflection of the aggressive times that we live in and North Carolina must also compete or risk being left behind. The act of filing this lawsuit does not in any way change the validity of incentives.”

Kirk, noting that Dell had already become a member of the NCCGI, added that the company “has made a strong effort to become part of the Triad and North Carolina communities” and that the group is “looking forward to seeing Dell computers come off the assembly line in Winston-Salem later this year.”

Tech Entrepreneuer Among Plantiffs

The suit was filed on behalf of seven plaintiffs, one of whom is an entrepreneur in the Triangle’s technology community.

Kent Misegades, who lives in Cary, is president of Computational Engineering International, a software company focused on analyzing and visualization of computer-aided engineering data.

North Carolina’s General Assembly passed legislation granting Dell some $242 million in tax credits and incentives.

“The Dell legislation discriminates in favor of in-state economic activity and against interstate commerce thereby violating the Commerce Clause of the United States Constitution and otherwise violates the U.S. Constitution and various provisions of the North Carolina Constitution,” according to the suit.

The city of Winston-Salem and commissioners of Forsyth County added $37 million in local subsidies, the plaintiffs added. “The local government subsidies violate various provisions of the North Carolina Constitution,” the suit said.

“Our organization and these plaintiffs strongly support encouraging a robust business climate in N.C. that results in good jobs for its citizens,” Orr said. “However, the current practice neither conforms to established constitutional restraints nor does it meet the test of sound public policy. States and local governments are being played off one another resulting in loss of tax revenue which could be used for important government services like education or Medicaid or returned in part to all the taxpayers of this state.”

For a copy of the suit, see: ncicl.org/LITIGATION/complaint.html

For information about the plaintiffs, see: ncicl.org/LITIGATION/plainbios.html