- The Washington Times - Monday, April 3, 2017

It turns out that the economic devastation to North Carolina wrought by the much-publicized boycott over House Bill 2 wasn’t all that devastating — and it wasn’t all about HB2.

Overlooked in the uproar leading up to last week’s repeal of the disputed transgender bathroom bill was its negligible impact on the state’s economy: The loss of business, concerts and sporting events represented just 6/100ths of 1 percent of the state’s nearly $500 billion annual economy.

That is small enough to be considered a “rounding error,” said John Connaughton, professor of financial economics at the University of North Carolina-Charlotte.

“If you back out and take a look at this on an annual basis relative to the state economy, you get less than a tenth of 1 percent. You get 6/100ths of a percent,” said Mr. Connaughton, who based the figure on an analysis released March 27 by The Associated Press. “Honest to God, that’s a rounding error.”

Even that “rounding error” may be a stretch. The Associated Press report placed the economic hit to the state at $3.76 billion over the next 12 years, but it’s not entirely clear that HB2 was the sole factor driving some of those companies out of North Carolina.

Citing the “great economic harm to many of our communities,” Gov. Roy Cooper, a Democrat, on Thursday signed a compromise bill that repealed HB2 but also placed a moratorium on local ordinances regulating public accommodations until Dec. 1, 2020.

That delay angered gay rights groups. The Human Rights Campaign, which spearheaded the boycott over HB2, blasted the measure as “shameful HB2.0” and urged the NCAA to keep its ban on holding championship games in North Carolina.

One of the five companies credited with pulling out over HB2, Deutsche Bank, declared in April 2016 that it would “freeze” plans to expand its 900-employee operation in Cary.

“We take our commitment to building inclusive work environments seriously,” John Cryan, co-CEO of Deutsche Bank AG, said in an April 12, 2016, press release. “We’re proud of our operations and employees in Cary and regret that as a result of this legislation we are unwilling to include North Carolina in our U.S. expansion plans for now.”

But former Lt. Gov. Dan Forest testified last month that the German financial giant’s expansion plan was a “dead deal” before Gov. Pat McCrory, a Republican, signed the legislation in March 2016.

“The one thing I would suggest is false is that Deutsche Bank was really never coming,” Mr. Forest, a Republican, testified March 7 before a Texas legislative committee. “That deal was a dead deal. It was a nice, handy excuse for them not to have to do their expansion plans in North Carolina, but I happen to know intimately about that deal from behind the scenes, and it was dead.”

Former state Commerce Secretary John Skvarla pointed out that Deutsche Bank was struggling at the time amid speculation about a bailout.

“Take a look at the timing of the holding-off of the 250 employees,” Mr. Skvarla said. “That happened to coincide almost exactly with articles reporting Deutsche Bank was going to go under, and they were asking for assistance from the German government to keep them propped up.”

In other words, he said, there may have been more to the bank’s termination than HB2, which banned opposite-sex use of public restrooms, showers and locker rooms.

Deutsche Bank declined a request for comment.

‘Was there really an expansion’

“Maybe it was a convenient excuse to say, ‘We’re not putting 250 jobs here because, oh, by the way, our bank is about to fail,’” said Mr. Skvarla, who served under Mr. McCrory.

Where did Deutsche Bank relocate the facility? “I’m not sure they ever put the 250 jobs anywhere else,” Mr. Skvarla said.

The same question hangs over PayPal, which pointed to HB2 as the reason for its decision to nix a 400-job global operations center in Charlotte, resulting in a loss of $2.66 billion to the state over 12 years, according to the AP analysis, citing state Commerce Department figures.

A year later, PayPal has yet to disclose where it plans to locate the global operations center. The company did not respond to a request for comment.

Chad Adams, a North Carolina conservative radio talk show host, said PayPal “said they didn’t expand in North Carolina because of HB2, [and] they ended up expanding nowhere.”

“Was there really an expansion, or was it just politically convenient to attack a policy they clearly didn’t understand?” Mr. Adams said.

Like Deutsche Bank, PayPal cited HB2 as the reason for its decision. PayPal’s move represented a whopping 71 percent of the total estimated hit to the state’s economy, with Deutsche Bank second at 14 percent.

Those familiar with the PayPal deal said North Carolina didn’t exactly lose out on becoming the next Silicon Valley.

“Let’s not get carried away with what that PayPal center was,” said Mr. Connaughton, the professor who prepares a quarterly economic forecast for the state. “It wasn’t part of their banking operation or anything like that. It was a call center for customer complaints. That had a really big number on it, and I don’t know why it had a really big number.”

Another firm, real estate analytics company CoStar Group, opted in October to locate a facility in Richmond, Virginia, instead of Charlotte. Last year, The Charlotte Observer cited emails showing economic development officials blaming HB2 for the lost deal.

The CoStar facility would have brought 732 jobs and $250 million in economic impact over the first half-dozen years, according to the AP analysis.

But CoStar Group spokeswoman Lauren Novo refused to attribute the decision to the bathroom law, saying the company “cannot confirm HB2 played a role in choosing Richmond over Charlotte as CoStar’s research HQ.”

She credited the selection of Richmond to the proximity of Virginia educational institutions such as Virginia Commonwealth University’s business school track in commercial real estate as well as the company’s headquarters in Washington.

Virginia also offered $10.6 million in incentives versus $10.2 million from North Carolina, The Observer reported.

Concerts and conventions

In the case of Voxpro, an Ireland-based tech support and customer service company, CEO Dan Kiely said HB2 was the reason the company refused to build a Raleigh office that would have employed 500 by 2020, bringing the state an estimated $52 million.

“The law runs completely contrary to our core values,” Mr. Kiely told the Irish Examiner in an interview last week.

At the same time, the Voxpro deal was hardly set in stone. Mr. Kiely described North Carolina as one of three destinations under consideration and said the company had yet to visit Raleigh when the decision was made.

Voxpro spokesman Dave McCadden confirmed that Raleigh was a finalist for the office, which ended up in Athens, Georgia.

What is made clear by the AP analysis is how little concerts, conventions and sports bring to the economic table. Only about $196 million of the $3.76 billion was attributed to canceled shows, conferences and sporting events.

Mr. Connaughton pointed out that out-of-state entertainers and teams also take most of the ticket sales with them when they head home.

“Let’s suppose you buy some tickets, and you pay $100 per ticket,” said Mr. Connaughton. “Well, $80, $90 of that ticket gets on the bus and leaves with the performer the next day. Or later that night.”

In fact, such events could be viewed as net losses to the state. “Honestly, entertainment events like this are actually leakages to the local economy in the sense that a lot of money leaves,” he said.

In addition, when an arena goes vacant as a result of a boycott, another entertainer often fills the void.

“If Bruce Springsteen pulls out and doesn’t perform at a concert, then that opens up concert space, and there’s somebody else who’s going to be willing to go there,” said Jay Richards, Catholic University assistant research professor of business and economics.

He said the problem with adding up the cost of the departures is that it accounts for only “one side of the ledger.”

“Let’s say Bruce Springsteen pulls out of a concert and nothing else happens, then you can add up the ticket prices and say that’s how much the state lost,” Mr. Richards said. “But that’s not how markets ever work. It’s just like a boycott against a product: It doesn’t mean nobody buys the product. It means some people don’t, and it might drop the price a bit because there’s lower demand.”

Thirteen states are considering bills similar to HB2 after bills in three states failed to pass, according to the National Conference of State Legislatures.

• Bradford Richardson can be reached at brichardson@washingtontimes.com.

• Valerie Richardson can be reached at vrichardson@washingtontimes.com.

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