Bath­room bill boy­cott costs vir­tu­ally noth­ing

Loss amounts to ‘round­ing er­ror’


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 AP 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 op­po­site­sex 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 Ire­land­based 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.


PayPal cited HB2 as the rea­son for its de­ci­sion not to lo­cate it global op­er­a­tions cen­ter in North Carolina, but the professor who pre­pares a quar­terly eco­nomic fore­cast for the state is puz­zled why it rep­re­sented a whopping 71 per­cent of the to­tal es­ti­mated hit.

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