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Let’s Talk HB2 Beyond the Anecdotal Evidence

May 13, 2016 Katie Culp, MBA
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This article appeared in the May 13 issue of the Triangle Business Journal.

In the political arena there is an adage: When you are explaining, you are losing. North Carolina, which has consistently been named one of the top five business friendly states in the country, finds itself in the awkward position of explaining itself.

Businesses have traditionally been drawn to North Carolina because of the educated, talented workforce, the cost of doing business, and the energy around the state’s banking, life science and emerging tech scenes. Now, the “Bathroom Bill,” or HB2, has become an unfortunate part of the state’s narrative, and has caused North Carolina to explain itself instead of focusing on its many positive attributes.

I’ve recently worked with more than a dozen companies in North Carolina on economic development and location advising, including one of the largest privately held pharmaceutical companies in the U.S. and a Fortune 500 medical device company. I’ve also worked extensively in both rural and urban communities in North Carolina, and I can tell you this: HB2 has become an unfortunate part of the state’s compelling narrative.

Lionsgate, Pay Pal and Deutche Bank are just a few of the national names who have pulled projects in North Carolina in the past few months, specifically pointing to passage of HB2. Time Warner Cable News estimates a loss of more than 1,750 jobs and more than $77 million worth of investments and visitor spending because of it.

But do jobs really flee states when perceived discriminatory legislation is passed? Two examples in other states point to possible answers.

Years ago, Arizona was called a haven for intolerance because of the state’s failure to pass a law establishing a state holiday honoring slain civil rights leader Martin Luther King. After failing to pass in 1990, the measure succeeded two years later. In the meantime, the measure cost the state the 1993 Super Bowl, among other events, and cost the state more than $100 million in anticipated revenue.

More recently, in 2015, the Indiana State Legislature passed the Religious Freedom Restoration Act (RFRA). The Center for American Progress found that the measure cost or put at risk more than $250 million in revenue to the state. An amendment to the bill was put in place quickly, but a subsequent study in early 2016 from Visit Indy, the city’s tourism arm, still pegged the number at $60 million in hotel bookings and lost convention business.

Employers’ generally favorable impression of North Carolina has been replaced with a question mark, and other states are swooping in to take advantage. I’ve seen firsthand that neighboring states – and distant ones – are being aggressive in their recruiting efforts to companies that had been strongly considering North Carolina as a home, or a site to expand. Indiana faced a similar onslaught last year in response to RFRA; forceful efforts have been made, and will continue, to woo uncertain parties.

I’ve heard some officials defend HB2, explaining that the exact language is not actually so harmful. While that response could be the topic of its own article, my point here is that the perception issue transcends semantics. Most key decision makers will never read the bill, but the bill’s impression will leave a lasting legacy.

Further, cities – also crucial economic development engines – are directly impacted by state’s legislation. Even communities like Durham that have passed ordinances disavowing the statewide law will face consequences from the state’s actions.

And the fallout could continue. Just last week the NCAA announced that it would ban states and localities from hosting NCAA events if they don’t provide anti-discrimination protections based on sexual orientation and sexual identity. The NCAA Board of Commissioners didn’t point to North Carolina specifically, but declared that the action was directed at “recent actions of legislature in several states” to enact legislation that limits protections on the LGBT community.

Unfortunately, the legislation has tarnished what was once a sterling national reputation for economic development.  The track record of states injecting themselves in social issues generally results in strong consequences and unwanted national attention – with jobs and revenue the casualties.