In December 2005, home shopping network giant QVC announced it would build a $75 million distribution center in Florence, bringing at least 400 full-time jobs to an area with historically some of the state’s highest unemployment rates.
The day after the 1.4-million-square-foot center opened in July 2007, QVC President and CEO Michael George was quoted publicly as saying the facility would have 700 employees by the end of 2008 and 900 by the end of 2009.
The company, however, apparently hasn't quite hit its last-announced target of 900 workers.
Contacted last week, Joe King, the Florence County Economic Development Partnership director, told The Nerve that QVC today has “in excess of 600 (employees),” at least 400 of whom are full-time, though he couldn't provide exact numbers.
Still, King said, "Their business is doing real well ... They have far exceeded what was called for."
At one time, QVC shared something in common with the Amazon retail distribution center under construction in Lexington County: an exemption from collecting state sales tax on purchases made by S.C. residents.
Seattle-based Amazon recently received the sales tax break after upping its job-creation target from 1,249 to 2,000 workers and threatening to leave the Palmetto State if it didn't receive the exemption.
The state of South Carolina didn't set the job-creation bar relatively high for Pennsylvania-based QVC, which posted corporate-wide consolidated revenues of $1.8 billion for the first quarter of this year, to receive millions in taxpayer-supported incentives, The Nerve found in a review of state incentives agreements for the project.
In fact, under one agreement, QVC could create as few as 200 full-time jobs to receive various incentives.
Neither of the two agreements, which were obtained under the S.C. Freedom of Information Act, calls for the creation of 700 or 900 jobs that QVC's CEO announced four years ago.
Cost-benefit analyses included with the agreements project the public costs of the project over a 10-year period from a low of about $4.4 million to more than $13 million, depending upon the number of jobs created and the level of capital investment.
The analyses estimated the average annual salary for the warehouse workers from about $19,500 to $23,000. That's at least $10,000 less per year than the per-capita income in South Carolina in 2010, according to the U.S. Bureau of Economic Analysis.
In a Dec. 22, 2010, letter to QVC officials in West Chester, Pa., Alan Young, executive director of the S.C. Coordinating Council for Economic Development, said his office had received documentation from the company “certifying that QVC, Inc. has created the minimum jobs required and completed the minimum capital investment required at the Florence County facility.”
“We further understand that the Company is ready to begin claiming Job Development Credits (JDCs),” Young said in the letter, a copy of which was included in the incentives documents provided to The Nerve.
Young didn’t specify the minimum job-creation and investment levels in the letter, though it refers to one of the two incentives agreements calling for at least 400 full-time jobs and a minimum capital investment of $49.8 million.
The other agreement sets the minimum thresholds at 200 full-time jobs and a $24.5 million investment.
Neither S.C. Commerce Secretary Bobby Hitt nor the agency’s chief lawyer, Karen Manning, responded to written questions last week from The Nerve about why there were two agreements. Commerce is a member of and provides staff support for the Coordinating Council, made up of the heads of 11 state agencies involved in economic development.
King told The Nerve he didn’t know why there were two incentives agreements.
The Nerve also posed other questions to Commerce about the project, though no response was given. Those areas concerned:
- The actual number of employees at the Florence center as of the Dec. 22 letter;
- The types of documentation QVC provided to the state on its minimum employment and investment levels; and
- How Commerce verifies information provided by the company.
QVC representatives in Florence and West Chester, Pa., where the company is based, did not respond to phone messages left for them last week by The Nerve.
Besides Florence, QVC also has distribution centers in Rocky Mount, N.C.; Lancaster, Pa.; and Suffolk, Va.
The public costs of the Florence center include various job tax and job development credits, specialized training for QVC workers, increased state and local education costs, infrastructure costs and unspecified “other” costs, according to the cost-benefit analyses, which were done by Commerce on behalf of the Coordinating Council.
Two initial analyses done in November 2005 pegged the total taxpayer costs over a 10-year period at $5.2 million, based on the creation of 200 jobs and a capital investment of $24.5 million; or $11.4 million for 400 jobs and a $49.8 million investment.
A third analysis done in December 2005 listed the total public costs at about $13.2 million over the period, assuming the creation of 400 jobs and an investment of about $88.2 million.
Yet two more analyses done in May 2009 projected the 10-year taxpayer costs at about $4.4 million with the creation of 200 jobs and an investment of $24.5 million; or $9 million for a 400-job, $49.8-million-investment project.
As with the separate incentives agreements, it was not clear why it was necessary to produce five cost-benefit analyses.
What wasn’t included in any of the calculations was the loss of local property taxes under a 20-year, fee-in-lieu-of-taxes (FILOT) agreement that, according to an application for a state grant, QVC would receive in addition to other incentives. In addition, a 1-cent county sales tax, part of which was used to build a road for QVC, is still in effect, King said.
Also not mentioned in the state incentives agreements or taken into consideration in the cost-benefit analyses was the potential loss of state sales tax dollars with an exemption QVC was eligible to receive under a state law that became effective in June 2005.
The law exempted QVC from collecting sales taxes from purchases made by S.C. residents for five years. It’s the same exemption that Internet retail giant Amazon received last month after a state bill became law.
In the incentives agreement with Amazon, Commerce said it would seek legislation to renew the exemption, which expired last year. (King earlier said QVC did not seek to renew the exemption for itself, though he didn't know why.)
After heated debate, state lawmakers this session approved the exemption for Amazon; and Gov. Nikki Haley let it become law without her signature on June 8, contending that though she opposed it in principle, the previous administration had “promised” the tax break.
Legislative and other critics contend that the exemption is unfair to bricks-and-mortar businesses that have to collect state sales taxes from S.C. residents.
But there was no such public battle over the exemption in the QVC deal. In fact, local and state leaders, including former Republican Gov. Mark Sanford, at least publicly appeared to be unanimous in their excitement when the project was first announced in December 2005.
“A lot of the state’s unemployment is based in the Pee Dee, so any economic development in the area is sorely needed, will be welcomed with open arms and is greatly appreciated,” then-state Rep. Jim McGee,R-Florence, was quoted as saying in a local news article. “It’s great news. What a Christmas gift for the Pee Dee.”
The Pee Dee, however, still has some of the state’s worst unemployment rates. As of June, for example, Marion County, which borders Florence County, led the state with an unemployment rate of 20.1 percent, up from 19 percent the previous month, according to the latest S.C. Department of Employment and Workforce figures released last week.
The state’ unemployment rate in June was 10.5 percent, up from 10 percent in May. Besides Marion, other counties surrounding Florence County also had unemployment rates well above the state rate, including:
- Marlboro County – 18.4 percent;
- Clarendon County – 15.8 percent;
- Dillon County – 15.7 percent;
- Lee County – 14.9 percent; and
- Williamsburg County – 14.6 percent
As for Florence County, even while home to major companies such as QVC, Honda and Heinz, the county of about 137,000 had an unemployment rate of 11.9 percent in June – 1.4 percentage points higher than the state rate.
Reach Brundrett at (803) 254-4411 or email@example.com.