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NC fund spurs rural transition from tobacco

By: olga

After nearly a decade of turning money from chastened cigarette makers into grants that pumped life into tobacco communities, a state-created foundation has increasingly dangled big bait for corporate prizes.
The Golden LEAF Foundation still spends on feasibility studies to expand rural broadband service or to encourage sweet potato markets. But this year, it opened its vault by committing $100 million to build an aircraft parts plant in Kinston.
"I think we're diversifying our strategies," said Dan Gerlach, who took over as the foundation's second president in October. "Diversification is important. I think we'll continue to do investments in agriculture to diversify the agriculture sector. We'll continue to do more high-quality manufacturing. We're going to do more on health care."
Rocky Mount-based Golden LEAF is both a reminder that the money comes from North Carolina's tobacco-growing heritage and an acronym for Long-term Economic Advancement Foundation. It was created in 1999, months after a landmark 1998 settlement to a lawsuit in which U.S. states sought compensation from cigarette makers for the cost of treating sick smokers.
The foundation was designated by the state to collect half of North Carolina's share of the master settlement to boost the economies of tobacco-dependent communities.
The Golden LEAF option was an uncommon choice for the settlement money. Of the $56 billion states collected between 2000 and 2005, $1.5 billion, or 2.7 percent, went to economic development efforts for tobacco regions, a Government Accountability Office report said.
Golden LEAF is expected to collect more than $2.25 billion from cigarette companies by the time the deal expires in 2025. The foundation has received at least $707 million so far. It has awarded more than 733 grants totaling more than $366 million since its inception.
In its first year of awards, Golden LEAF allocated $10,200 to help poor people in Richmond County learn to use computers, $100,000 to beef up community credit unions, and $235,000 to teach truck driving in Bladen County. Money has also gone to beekeepers and winemaking co-ops.
Over time, the foundation has increasingly provided incentives to companies promising to add jobs in North Carolina. In 2006, $400,000 went to renovate a Martin County building that would be leased to Quintiles Transnational Corp., a Durham-based international pharmaceutical services firm. In 2005, $2.76 million went to training workers for a Dell computer plant in Winston-Salem.
In May, Kansas-based aircraft parts supplier Spirit AeroSystems agreed to hire 1,000 workers at the state-owned Global TransPark in Kinston. The workers will build composite fuselages for the Airbus A350 passenger jet. Golden LEAF committed to spending $100 million to build their first factory space and lease it back to Spirit.
"I would say that this was an opportunity that could not be missed," Gerlach said.
Including the Spirit plant, the nonprofit awarded $141 million in grants in the 2008 fiscal year, compared to $34.2 million in 2007.
The boldness came at a time the foundation saw its assets grow to $732 million in the year ending in June, up from $720 million the previous year and $598 million in 2005-2006.
The foundation has its critics. Though it is run by a professional staff, the foundation is overseen by a 15-person board of political appointees, said state Rep. Paul Stam, R-Wake.
"They're deciding one business is better than another business; we'll give money to this industry and not that industry," Stam said. "I think it's unsound economics."
Stam thinks the money should have been used for its original purpose and repaid the state for its health care costs. Boosting state funding for the Medicaid program would have attracted a hefty federal money match and created demand for more health care workers, he said.
While big targets like Spirit may again come along, about 60 percent or more of the foundation's grants are given to elevate the economies of poorer communities, Gerlach said. After noticing some of the state's distressed areas have gotten no grants from Golden LEAF, the nonprofit is setting aside about $2 million for each of the 41 poorest counties over the next two years, he said.
"A lot more of our spending is building the base of the community," he said. "How should we spend this money to move the needle in this county?

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