## Facts

- The General Assembly enacted N.C. Gen. Stat. § 158-7.1 authorizing local governments to spend public funds for economic development incentives to induce private companies to locate, expand, or remain locally.
- The City of Winston-Salem and Forsyth County implemented at least 24 incentive projects committing over $13 million in tax-derived funds, paid as reimbursements or grants to private corporations.
- Local officials projected the projects would create more than 5,500 jobs and add over $238 million to the tax base, offsetting the incentives’ cost.
- William F. Maready, a resident taxpayer, challenged § 158-7.1 and the specific projects as unconstitutional uses of public funds for private benefit.
- The trial court held the statute unconstitutional under the “public purpose” limitation and enjoined the program.

## Issues

1. Whether economic development incentive grants to private corporations authorized by N.C. Gen. Stat. § 158-7.1 violate the North Carolina Constitution’s requirement that taxation be exercised “for public purposes only.”
2. What level of judicial deference is owed to the legislature’s determination that a spending program serves a public purpose.
3. Whether anticipated job creation and tax-base expansion can render expenditures to private recipients primarily public in character.

## Decision

- The North Carolina Supreme Court reversed the trial court in a 5–2 decision.
- The court held that § 158-7.1 and the challenged incentive projects served a constitutional public purpose and did not violate N.C. Const. art. V, § 2(1).
- The court upheld the statute and allowed the city and county incentive projects to proceed.

## Legal Principles

- Legislative enactments are presumed constitutional; a challenger bears the burden to show a clear constitutional violation.
- The legislature has primary responsibility for determining what constitutes a public purpose, and its determination is entitled to great weight.
- “Public purpose” is not fixed; it may expand with changing economic and social conditions.
- An expenditure satisfies the public purpose requirement if it primarily benefits the public as a whole, even if private parties receive incidental benefits.
- Economic development measures, including job creation and tax-base expansion, may qualify as public welfare objectives within the state’s police power when supported by credible evidence of substantial, direct public advantage.
- Direct payments to private entities are not unconstitutional per se; the constitutional inquiry turns on the expenditure’s primary objective and the anticipated public benefit, not the identity of the immediate recipient.

## Conclusion

The court upheld local economic development incentive grants authorized by statute, concluding that projected jobs and tax-base growth could reasonably be expected to benefit the public primarily, and it deferred heavily to the legislature’s judgment that the program served a public purpose under the state constitution.


Maready v. City of Winston-Salem, 342 N.C. 708, 467 S.E.2d 615 (N.C. 1996)