Notice of hearing for cash economic development incentives

Tyler Mulligan is a School of Government faculty member. In a previous post, I discussed an “unwritten rule” in the Local Development Act for local governments to provide notice and a hearing prior to approving a cash economic development incentive. One obvious difficulty with this “unwritten rule" is the lack of any statutory guidance. If notice and a hearing are required, and there is no other specific guidance, then how do public officials know what contents to include in the notice of hearing? Is it sufficient for a governing board to post notice of the hearing, merely “stating its purpose” as required generally for notice of meetings under G.S. 143-318.12? Or is more required?

Unfortunately, we don’t know for certain. North Carolina courts simply have not addressed the matter, but we know enough to propose some guidelines. To start the analysis, it is helpful to revisit my previous post’s discussion of Maready v. City of Winston-Salem, 342 N.C. 708 (1996), in which the North Carolina Supreme Court established that economic development incentives serve a public purpose. Maready appears to establish a presumption of public benefit for an incentive so long as the “strict procedural requirements” of G.S. 158-7.1 are followed. Some of those “strict procedural requirements” include specific notice requirements for enumerated incentives such as conveyance of property, extension of utility lines, and site preparations, to name a few. But you won’t find cash grants listed among those enumerated incentives, so in the absence of statutory guidance, it is difficult to determine what information to include in a notice of hearing for a cash incentive. It is helpful at this point to recall the purpose of the notice. Complying with the “unwritten” notice and hearing requirement is meant not only to inform the public, but also to earn a presumption of public benefit for the cash incentive in the event it is challenged in court. If the presumption is earned only through compliance with “strict procedural requirements” found in G.S. 158-7.1, then local governments may wish to demonstrate fidelity to those existing statutory requirements, even for incentives like cash grants which are not specifically listed. How is that accomplished? We know that the N.C. Supreme Court wrote approvingly of the procedures mandated in G.S. 158-7.1 for a variety of incentives. A reasonable approach, then, would be to model our “unwritten” notice requirement for cash grants after the notice requirements already described in G.S. 158-7.1 for other incentives. Using that as the standard, we can deduce the following notice requirements for cash grants: 1. A description of the incentives to be granted and their value. Derived from:

• G.S. 158-7.1(c): notice shall describe “interest to be acquired” and “the proposed acquisition cost”; “improvements to be made” and the “proposed cost of making the improvements”

               and

• G.S. 158-7.1(d): notice shall describe “interest to be conveyed or leased” and “value of the interest”

2. The public benefit to be derived from granting the incentives. Derived from:

• G.S. 158-7.1(c): notice shall describe “public benefit to be derived from making the improvements”

               and

• G.S. 158-7.1(d): notice shall describe “proposed consideration for the conveyance or lease”

3. Such other information needed to reasonably describe the incentives. Derived from:

• G.S. 158-7.1(c): notice shall describe “such other information needed to reasonably describe the acquisition” and “any other information needed to reasonably describe the improvements and their purpose”

Nothing in the statutes requires local governments to supply the level of detail described above for cash grants, but getting hung up on that fact misses the point. Following the proposed notice requirements above is advised in order to buttress a local government’s claim that its cash grant to a private company serves a public purpose. By overtly striving to provide notice modeled after the “strict procedural requirements” favored by the N.C. Supreme Court in Maready, a local government stands a better chance of earning a presumption of public benefit—and therefore overcoming a legal challenge—related to its cash incentive.