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State Funds Slated for Economic Groups with Legislative Ties, Big Paychecks

Lawmakers are once again seeking to funnel nearly $5 million in taxpayer funds to seven private regional economic development organizations, two of which have at least one state senator on their governing board.

Sen. Brad Hutto, D-Orangeburg and a board member of the one of the nonprofit organizations, known as the SouthernCarolina Alliance, told The Nerve last week that he sees no conflict of interest in sitting on the alliance board and voting on the Senate version of the state budget, which contains the proposed appropriation for the alliance.

“I’m aware we’ve done it (appropriate state funds to regional economic development groups) in the past,” said Hutto, an attorney, adding, “It wasn’t debated this year.”

Hutto isn’t the only legislator serving on the governing board of an economic development organization slated to get more state money.

Sens. Hugh Leatherman, R-Florence and chairman of the budget-writing Senate Finance Committee, and Yancey McGill, D-Williamsburg, who also serves on Finance, are members of the executive committee of the North Eastern Strategic Alliance board, according to NESA’s website.

Neither Leatherman nor McGill responded to phone and written messages last week from The Nerve.

While it's unclear whether the seven groups actually are producing any significant tangible results, most of their directors are taking home hefty paychecks, according to The Nerve's review of the organizations' federal income tax returns.

Leatherman’s Senate Finance Committee last month added $5 million under the S.C. Department of Commerce’s budget for unspecified “local economic development alliances.” A separate budget proviso lists which organizations would receive the money and how the funds would be divvied up.

The new budget year starts July 1. A conference committee made up of House and Senate members likely will be appointed this week to resolve differences in the chambers’ versions of the fiscal 2013 budget.

Of the proposed $5 million for next fiscal year, $4.7 million would be divided evenly – $671,428 apiece – among the following organizations:

  • Central SC, which serves Calhoun, Clarendon, Fairfield, Kershaw, Lexington, McCormick, Newberry, Orangeburg and Richland counties;
  • Charleston Regional Development Alliance, which serves Berkeley, Charleston and Dorchester counties;
  • Economic Development Partnership, which serves Aiken and Edgefield counties;
  • Lowcountry Economic Alliance, which serves Beaufort County and had represented Jasper County until last month;
  • North Eastern Strategic Alliance, which serves Chesterfield, Darlington, Dillon, Florence, Georgetown, Horry, Marion, Marlboro and Williamsburg counties;
  • SouthernCarolina Alliance, which serves Allendale, Bamberg, Barnwell, Colleton, Hampton and Jasper counties; and
  • Upstate SC Alliance, which serves Abbeville, Anderson, Cherokee, Greenville, Greenwood, Laurens, Oconee, Pickens, Spartanburg and Union counties.

The remaining eligible $300,000 would be split among Chester, Lancaster, Union and York counties, though how the money would be used there is not specified. A budget proviso (40.17) requires that those counties and the seven economic development organizations provide a dollar-for-dollar match of private funds to receive any of the state funds to be dispersed by Commerce.

The proposed total $5 million would come from recurring general funds under the Senate’s version of the fiscal 2013 budget. For this fiscal year, the Legislature provided $5 million to the same counties and organizations, tapping the state’s capital reserve fund, which, as The Nerve has pointed out, lawmakers have raided in recent years for various projects.

Local Groups Needed?

Hutto said he believes that regional economic development groups, typically made up of local representatives of government, business and education, are necessary to attract new business to South Carolina; and that the organizations complement, rather than duplicate, Commerce programs.

“We can all meet them (prospective companies) out there, show them our prospective sites,” Hutto said. “It has greater buy-in with the community.”

Former Gov. Mark Sanford, however, didn’t think that the organizations should receive state funds.

In vetoing a proposed $3 million appropriation in 2007, he wrote, “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. Gov. Nikki Haley did not challenge the $5 million appropriation in this fiscal year’s budget.

Hutto said local economic development organizations were even more needed during Sanford’s tenure, contending that Commerce then was “just not doing its job,” and that “we really had to do it all on our own.”

If regional groups such as the SouthernCarolina Alliance didn’t exist, Commerce likely would have to add more employees to help with recruiting companies to the state, Hutto said.

Hutto, who noted he has been on the SouthernCarolina Alliance board for about a dozen years, said the alliance in recent years has helped attract big projects to the area, though he couldn’t name specific companies, referring The Nerve to the alliance’s website.

Claire Gibbons, marketing and communications director at the Charleston Regional Development Alliance, told The Nerve last week that receiving the state match has “definitely extended our reach.”

She said, for example, that state funds have allowed staff to attend national and international trade shows to recruit companies in the organization’s four targeted industries: aerospace, biomedical, security and information technology, and wind energy.

Gibbons said her organization did not work with any legislators in seeking state funding for next fiscal year, noting, “We were not even aware of it until two weeks ago; it was a surprise to us.”

For this fiscal year, the Charleston alliance has raised private matching funds to receive $310,000 of the eligible $621,478 in state funding, Gibbons said. That amount will be listed under a government-grants section of the organization’s federal income tax return, she said.

Big Paychecks

The state funding cannot be used to support the alliance’s general operations, Gibbons said.The Nerve’s review of federal income tax returns of the seven organizations found that all but one of the listed directors receive six-figure paychecks.

Jeff McKay, the executive director of the North Eastern Strategic Alliance – which Leatherman and McGill have listed ties to – received $312,067 in salary and bonuses last fiscal year. It was easily the highest compensation among the seven organizations, according to the groups' most recently available federal income tax returns.

In 2010, Danny Black, president and CEO of the SouthernCarolina Alliance, received $222,987 in salary and bonuses, and $9,157 in other compensation; while David Ginn, president and CEO of the Charleston Regional Development Alliance, received $208,000 in salary and bonuses, plus $10,153 in other compensation, last fiscal year.

The Nerve last week sent written messages to the heads of the seven organizations seeking comment on the proposed state appropriation for next fiscal year. None responded, though Gibbons replied on behalf of the Charleston organization.

Jessica Bridges, the business development director for the Lowcountry Economic Alliance, told The Nerve last week that she and Kim Statler, the alliance’s executive director, will no longer be with the organization after June 24. Bridges, who works in Statler’s consulting firm known as Lowcountry Consulting, said she and Statler were employed with the alliance under a month-to-month contract.

Bridges said the organization is not having financial difficulties, though there reportedly has been plenty of internal turmoil. According to an April story in the Hilton Head Island Packet, Statler announced her departure in an email to the board, noting, “As I have said before, this Alliance cannot lead with politics. … The events and conversations as of late tell us at this time we do not have a healthy regional relationship.”

Last month, the Jasper County Council voted to leave the alliance and join the SouthernCarolina Alliance, according to local media reports.

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

 

 

 

 

Legislative Power Trip

Upstate SC Alliance North Eastern Strategic Alliance Sen. Hugh Leatherman Sen. Yancey McGill SouthernCarolina Alliance Charleston Regional Development Alliance Lowcountry Economic Alliance Economic Development Partnership Central SC Economic Development Alliance Sen. Brad Hutto