RJR seeks a big gain from net loss of jobs.

When Gov. Mike Easley signed the Job Development Investment Grant Program into law last year, his office issued a press release saying the legislation enables the state to compete for "industrial recruitment projects that otherwise would not consider North Carolina." It appears he also sees the program as a way to give incentives to a company that is laying off about twice as many people as it's adding new jobs.

On Sept. 17, Winston-Salem-based R.J. Reynolds Tobacco Holdings Inc. announced that it would lay off about 1,600 here by the end of 2004. Less than six weeks later, RJR announced that it would merge with Louisville, Ky.-based Brown & Williamson Tobacco Corp., consolidate operations in Winston-Salem in 2004--which would likely bring at least 800 jobs--and change its name to Reynolds American Inc.

About half an hour before the second announcement, an RJR executive called Easley and told him that the company needed financial help to make the deal work, says Dan Gerlach, the governor's senior policy adviser for fiscal affairs. Two days later, Easley declared that he would use all the state's industry-recruitment tools, including the Job Development Investment Grant Program, to bring the Reynolds American jobs to North Carolina.

The grant allows companies to get up to 75% of employee withholding taxes from new jobs for up to 12 years. It's awarded by a special committee, which must be satisfied that without the grant there would be no new jobs and that the jobs mean a net increase in the company's North Carolina employment.

Because of the merger, the new name and plans to shift the incorporation from Delaware to North Carolina, the governor's office views Reynolds American as a new company, Gerlach says, even though RJR shareholders would own 58% of it. While RJR never said there would be no new jobs without incentives, the governor's team inferred that from the phone call, Gerlach says.

But if incentives really were the determining factor, RJR would have acted like it, says Rep. Paul Luebke, a Democrat (like Easley) and cochairman of the House Finance Committee. The company, he says, would have gotten the committee's approval before saying the new jobs were coming.

As for the disparity between the governor's stated intent for the grant program last year and the RJR case, Gerlach suggests the press release didn't say exactly what the governor meant. "Maybe our press guys got carried away," he says. Or maybe they didn't, but their boss did.