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Tax Dollars Pitched for Legislators’ Nonprofits

Three nonprofit regional economic development organizations whose boards of directors list at least one state lawmaker could each receive up to $671,000 in state tax dollars next fiscal year under a Senate Finance Committee proposal, a review by The Nerve found.

The committee’s chairman, Sen. Hugh Leatherman, R-Florence, and another committee member, Sen.Yancey McGill, D-Williamsburg, are board members of one of the organizations, the North Eastern Strategic Alliance (NESA), according to NESA’s website (www.nesasc.org). McGill has been the longtime chairman of NESA’s executive committee.

Former state Rep. Doug Jennings, D-Marlboro, also is a NESA board member and served on it while he was a legislator, records show.

Another sitting state senator, Democrat Brad Hutto of Orangeburg County, serves on the SouthernCarolina Alliance’s board of directors, according to the organization’s website (www.southerncarolina.org).

And Rep. Bill Hixon, R-Aiken, is listed on the Economic Development Partnership's website as the organization's board vice chairman.

None of the lawmakers responded to written or phone messages left for them by The Nerve.

(After this story was published, Hixon, who was elected to the House for the first time in November, contacted The Nerve and said he had resigned his board position in December to avoid any conflict of interest. He also said that the Economic Development Partnership's website and his biographical information on the S.C. General Assembly's website would be edited to reflect his resignation.)

NESA, SouthernCarolina Alliance and the Economic Development Partnership are among seven regional economic development groups that could receive up to a total of $4.7 million next fiscal year under the Senate Finance Committee’s proposal.

NESA serves Chesterfield, Darlington, Dillon, Florence, Georgetown, Horry, Marion, Marlboro and Williamsburg counties. On its website, the organization says it will "coordinate with its county allies and the South Carolina Department of Commerce to develop competitive incentives packages, making locating in the NESA region one of the easiest and best business decisions you have ever made."

Leatherman was a key player in an incentives deal, estimated earlier by The Nerve to be at least $500 million in public costs, to bring a Boeing aircraft assembly plant to North Charleston.

Jeff McKay, NESA’s executive director, did not respond to written and phone messages left for him last week by The Nerve.

Contacted last week by The Nerve, Ronald Carter Jr., NESA’s business development coordinator, said Leatherman and McGill have been on the NESA board "from the beginning," though he referred further questions to McKay. NESA was formed in 2001, according to other media reports.

Last fiscal year, the organization took in $1.4 million in revenue, $429,333, or about 31 percent, of which was government grants, according to income tax records reviewed by The Nerve.

McKay’s base salary for that year was $161,832, though he earned an additional $47,000 in bonus and incentive compensation, and $46,178 in nontaxable benefits for a total compensation package of $255,010, records show.

On its website, the SouthernCarolina Alliance, which represents Allendale, Bamberg, Barnwell and Hampton counties, says it was formed to "aggressively market the Southern Carolina area for industrial locations." Hutto’s district includes all or parts of Allendale, Bamberg and Barnwell counties.

"Working with the South Carolina Department of Commerce, the Alliance prepares incentives packages that are the most competitive offered in the Southeastern United States," the website says.

Danny Black, the organization’s president, declined comment on the Senate Finance Committee’s funding proposal when contacted last week by The Nerve, saying only in a written response, "I have not seen the legislation, so I cannot comment on its intent."

Black did not respond to written follow-up questions from The Nerve about the role that Hutto plays on Southern Carolina’s board.

Contacted last week by The Nerve, Renee Daggerhart, spokeswoman for the S.C. Secretary of State’s Office, which maintains records on nonprofits in the state, said she could not locate income tax records for the Southern Carolina Alliance.

On its website (www.edpsc.org), the Economic Development Partnership bills itself as "unique among economic development organizations in that it receives funds from Aiken and Edgefield County governments as well as contributions from the private sector."

Last fiscal year, the organization took in $1.4 million in government grants, or 87 percent of its total revenue, income tax records show.
Hixon, Leatherman, McGill and Jennings are not compensated for their board duties, according to the most recently available tax records reviewed by The Nerve.

Still, even though there might be no direct financial conflict of interest for lawmakers to serve on the boards of nonprofits,  the situation raises questions of favoritism, said John Crangle, director of the government watchdog group Common Cause of South Carolina.

"It’s quite possible that the fact that they have legislators on their boards has a cause-and-effect that they (the nonprofit organizations) get more money than they otherwise would," Crangle told The Nerve last week. "If you’re a regional economic development board, and you’re putting a legislator on there to enhance your revenue, that’s clearly inappropriate."

Under a Senate Finance Committee amendment to a House bill (H. 3701) divvying up the state’s approximate $111 million capital reserve fund for next fiscal year, $5 million is earmarked for unspecified economic development organizations.

A separate proviso (40.18) in the committee’s version of the state budget bill (H. 3700), which is being debated by the full Senate, would require that $4.7 million of the $5 million be divided equally, or $671,428.57 per organization, among the seven regional economic development organizations.

Besides NESA, SouthernCarolina Alliance and the Economic Development Partnership, the other four groups that would receive state funding include:


  • Central SC Alliance, which describes itself on its website (www.centralsc.org) as a "not-for-profit public/private partnership which engages in the recruitment of capital investment and job creation in the central region of South Carolina."

  • Charleston Regional Development Alliance, which, according to its website (www.crda.org), is a "professional economic development organization representing Berkeley, Charleston and Dorchester counties in South Carolina."

  • Upstate South Carolina Alliance, which describes itself on its website (www.upstatescalliance.com) as a "public/private regional economic development organization designed to market the dynamic 10-county Upstate region to the world." S.C. Department of Commerce Secretary Bobby Hitt served as vice chairman of the alliance's executive committee. In addition, S.C. Rep. Mike Forrester, R-Spartanburg, was listed in 2009 income tax records as a board member of a related nonprofit organization known as the Upstate South Carolina Alliance Educational Foundation; and according to media reports, was past chairman of the alliance's executive committee.

  • Lowcountry Economic Network and Alliance, which describes itself on its website (www.lowcountrynet.org) as a "public-private partnership whose primary purpose is to provide comprehensive business development and recruitment services to organizations looking to relocate or expand their business in Beaufort and Jasper counties and deliver quality jobs in a quality lifestyle."


Total compensation for the current or former directors of several of the organizations were as follows, according to the groups' most recently available tax records reviewed by The Nerve:

  • Hal Johnson, president, Upstate South Carolina Alliance, $160,840 (calendar year 2009);

  • Fred Humes, immediate past executive director, Economic Development Partnership, $130,000 (fiscal year 2010); and

  • Kim Statler, executive director, Lowcountry Economic Network and Alliance, $96,800 (fiscal year 2009)


Under the Senate Finance Committee’s budget proviso, state funding for each of the seven organizations would have to be matched dollar-for-dollar with private funds. The state funds would be dispersed by the S.C. Department of Commerce.

The remaining $300,000 of the proposed $5 million total amount would go to Chester, Lancaster, Union and York counties, with the same matching requirements, though how the money would be used in and allocated among those counties is not specified.

Union County is part of the Upstate Alliance, according to the alliance’s website, though Chester, Lancaster and York counties are not listed as being represented by any of the seven organizations.

A similar proviso was included in the previous four state budgets, The Nerve’s review found. But the total amount to be dispersed over the four fiscal years was $3 million – $2 million less than the proposal for next fiscal year, which starts July 1 – and the Lowcountry Economic  Network and Alliance wasn't allocated as much as the other organizations in previous years.

In vetoing the $3 million appropriation in 2007, then-Gov. Mark Sanford said in a written message, "While these organizations are in many cases doing a fine job in complementing the efforts of the Department of Commerce, funding them equally at the state level cuts against the notion of having a coordinated, statewide approach to economic development because each alliance has a different mission that does not represent all areas of the state."

The General Assembly overrode Sanford’s veto, records show.

Reach Brundrett at (803) 254-4411 or rick@thenerve.org.

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