Topics/Categories

Get The Nerve in your in-box every weekday morning!

New Carolina: Full of Sound and Fury, Signifying Nothing

For an organization that purports to favor such free market ideals as fostering competitiveness, enhancing commercial development and cultivating a strong economic community, New Carolina certainly doesn’t mind taking a taxpayer dollar or two.

Of the 100-plus organizations listed as contributors to New Carolina on the nonprofit organization’s website, more than 30 receive some or all of their funding from public sources.

In case the name New Carolina doesn’t ring a bell, perhaps you’re more familiar with the organization’s clunky more-formal title: South Carolina’s Council on Competitiveness.

Or perhaps New Carolina’s credo strikes a chord. Sounding more like the canon of a collection of Haight-Ashbury castoffs from the mid-1960s holed up in a remote stretch of wilderness, it begins: “We, the tenacious people of New Carolina, declare independence from mediocrity.”

It adds, “We will reach beyond past mistakes and build on historic successes toward a bright future that lifts our families, our schools, our businesses. From this day forward, we will demonstrate a new will and forge a new way.”

The “new way,” though is paved with contributions from a wide range of public and quasi-public entities.

New Carolina backers include the University of South Carolina and Clemson, and a variety of other concerns as well, including the city of Charleston, public-private partnership EngenuitySC and Advanced Technology Institute, an affiliate of the S.C. Research Authority, a state-created agency.

In addition, New Carolina has received contributions from the S.C. department of Commerce, Education, and Parks, Recreation and Tourism. It’s also gotten contributions from the N.C. Department of Commerce.

New Carolina received money from 11 publicly supported schools – nine South Carolina institutions along with North Carolina State University and UNC-Charlotte – and a nonprofit called the South Carolina Universities Research & Education Foundation.

And New Carolina has gotten funding from state-owned utility Santee Cooper; the Electric Cooperatives of South Carolina, the service and trade association for electric cooperatives in the state; and the Palmetto Economic Development Corporation, which is a combined effort of Santee Cooper and the Electric Cooperatives of South Carolina.

Executive director George Fletcher, speaking with The Nerve after his story was published, said New Carolina currently gets very little public money.

"Less than 10 percent of our budget last year came from public funds," he said.

The rest, he said, comes from private sources such as foundations.

New Carolina believes the key to South Carolina’s future prosperity rests with developing “clusters,” which, according to New Carolina’s definition, are groups of companies in a similar line of business that “collaborate to improve competitiveness.” The concept is pushed by Harvard University business professor Michael Porter, who recommended the formation of New Carolina.

"New Carolina provides staffing, technical support and in some cases financial support to cluster organizations," Fletcher said in a follow-up email to The Nerve. "We do not drive the agenda. It is the cluster companies themselves that decide what will make them more competitive.

"Many of the organizations that you identified were contributing to the privately driven cluster committee through New Carolina," he added. "New Carolina was merely the banker."

As such, New Carolina differs from publicly funded economic development agencies, Fletcher wrote.

However, it's difficult to measure what the citizens of South Carolina (and North Carolina, for that matter) have gotten in return.

New Carolina hasn’t put out an annual report since 2008, due to a lack of funding, Fletcher said. Determining any results since New Carolina was begun in 2004, is difficult.

In a 2010 report by The Nerve on New Carolina, Fletcher said his organization does not “make projections about job creation under the cluster concept.”

“Our overall goal, on a 20-year horizon,” he said, “is to raise per (capita) income in South Carolina faster than the (consumer price index) rises nationally.”

New Carolina does have an “Impact” page on its website, featuring “stories & successes.” The page features a variety of images linking to individuals or business clusters overlaid on an image of South Carolina. By mousing over the smaller images, information pops up, describing alleged victories.

These include such areas as the automotive, agribusiness, textiles and tourism “clusters,” but all were well in place long before New Carolina came along seven years ago.

Other clusters appear amorphous and difficult to pin down, such as one titled “creative.”

New Carolina’s definition of “creative” includes the areas of preservation and restoration, cultural heritage, architecture and urban design, performing arts, visual arts, culinary arts, literary and publishing and digital media and design.

This would appear to encompass not only skills involved in such areas as advertising and craftsmanship involved in restoration of unique Lowcountry structures, but more common construction labor, restaurant work and just about any job at a newspaper.

Perhaps not surprisingly, New Carolina says that Charleston, for example, has a large “creative” workforce, more than 28,000 individuals.

And some clusters, such as hydrogen fuel, raise serious questions. More than $40 million in state and local tax dollars has been allocated to hydrogen in the Midlands alone over the past few years, yet there’s little to show for it.

The state, for example, has just two hydrogen fueling stations, paid for with state tax dollars, to go with perhaps as many hydrogen-powered vehicles. That would seem to suggest anything but a success story, at least from the taxpayers’ viewpoint.

New Carolina did receive a $600,000 grant last year from the U.S. Small Business Administration, one of seven grants awarded nationwide by the agency for developing small business around existing regional innovation clusters.

New Carolina's partner in this endeavor was SCRA, to whom nearly all the money was passed, Fletcher said. New Carolina kept a small portion of the grant – about $25,000 – for management fees, he added.

New Carolina’s measuring devices appear nebulous, as evidenced by the organization’s “five stages of cluster activation”: mobilize, analyze, catalyze, realize and actualize. And while New Carolina’s most recent newsletter, dated April 11, was heavy on “analyze,” it didn’t report concrete results.

It begins by stating that, “With 15 cluster committees and task forces on Education and Workforce Development, Entrepreneurship and Distressed Areas, we have vigorously pursued a clustering strategy for economic development in South Carolina.”

The newsletter then goes on to tout the benefits of clustering, the concept that companies in the same industry can be more successful by coming together to solve common problems and taking advantage of common opportunities.

In fiscal year 2010, New Carolina brought in nearly $900,000 in contributions and grants, according information found on documents submitted by New Carolina to the Internal Revenue Service.

Between 2004 and mid-2010, New Carolina brought in nearly $5.1 million, IRS documents show. A good portion of that came from state tax dollars, according to earlier analysis by The Nerve.

In fiscal years 2006 through 2008 alone, the organization received a total of $905,000 in government funding, according to its federal tax returns for those years. State records show at least $800,000 of that money came from the state Department of Commerce in little-noticed budget provisos in fiscal years ’07 and ’08.

Of the $892,797 that New Carolina brought in during fiscal year 2010, $124,944 went to pay the salary of Fletcher, the executive director.

However, according to information filed with the IRS, a little more than $70,000 of that compensation was paid to Fletcher Engineering Services LLC, which is 100-percent owned by Fletcher. There was no explanation given on the IRS Form 990 filing of why a portion of Fletcher’s compensation was funneled through his company.

In all, New Carolina spent $169,840 on management costs during 2010, or about 19 percent of its total expenses.

Also in 2010, $136,945 went to the Columbia firm of Sagacious Partners LLC, for “economic development services.” Neil McLean is founder and managing partner for Sagacious Partners.

McLean is also listed as the executive director of EngenuitySC, one of the organizations which gave money to New Carolina. Sagacious received $115,055 from New Carolina during fiscal year 2009 and $91,140 the year before that, records show.

Sagacious was paid $326,990 by EngenuitySC during fiscal year 2010, according to information filed with the IRS.

Fletcher said he wasn't certain how much money EngenuitySC has given to New Carolina over the years, but believed it to be a small amount, perhaps $250.

McLean could not be reached for comment for this story.

Like New Carolina, EngenuitySC has positioned itself as a key player in South Carolina’s knowledge-based economy initiative. And, like New Carolina, it also has received public funding.

Since 2004, the organization has received more than $2.5 million in public funding. More than $1 million came from the U.S. Department of Housing and Urban Development, $870,408 from the city of Columbia and $200,000 from the S.C. General Assembly.

EngenuitySC has received money from Richland County, Midlands Technical College and the USC Research Foundation, as well.

EngenuitySC’s board is made up of some of the most visible members of the Midlands’ business and political communities. According to information on EngenuitySC’s website, board members include: Former Policy Management Systems Corp. Chief Executive Larry Wilson, Columbia Mayor Steven Benjamin, state Rep. Joan Brady, USC business school dean Hildy Teegan and Chernoff Newman CEO Lee Bussell.

New Carolina’s board is a full of Palmetto State movers and shakers, including financier Darla Moore, S.C. House Speaker Bobby Harrell, Clemson President Jim Barker, MUSC President Ray Greenberg, S.C. Education Lottery executive director Paula Harper Bethea, former BlueCross and BlueShield of S.C. CEO Ed Sellers, former South Financial CEO Mack Whittle, Sonoco CEO Harris E. De Loach Jr., former Liberty Corp. CEO Hayne Hipp and former USC business school dean Joel Smith.

In addition, four individuals sit on the boards of both EngenuitySC and New Carolina: USC President Harris Pastides, Innovista executive director Don Herriott, state Sen. Nikki G. Setzler and developer John Lumpkin Jr.

New Carolina’s credo ends with the following: “Each day we will reach for, and push each other, until one day the world will acknowledge us as ‘The New Land of Opportunity’. New energy. New ideas. New action. New Jobs.”

Today, though, with a 10.5 percent unemployment rate, South Carolina appears no closer to being acknowledged as the land of opportunity then it did when New Carolina was started seven years and more than $5 million ago.

Reach Dietrich at (803) 779-5022 ext. 110, or kevin@thenerve.org.

Accountability Transparency