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S.C. Lawmakers Rush Through Huge Tax Break for Tire Manufacturers

When the clock struck 5 last Thursday afternoon – the official end of the regular S.C. legislative session – hundreds of bills introduced over the past two years last year died as time ran out.

But when it came to handing out a huge tax break to the state’s big three tire manufacturers – Bridgestone, Continental and Michelin – lawmakers moved with uncustomary blazing speed.

In a span of just over three hours Thursday afternoon, lawmaker gutted a bill that had been stalled for months and rammed a revised version through to passage, extending a tax credit worth tens of millions of dollars or more to the three tire manufacturers.

“I would say it was fast, but I wouldn’t say it was casual,” retiring Sen. Phil Leventis, D-Sumter and one of the architects of the amended bill, told The Nerve on Friday.

Continental, which is building a new tire manufacturing plant in Sumter County, is projected to save $118 million over 10 years with the tax break, Leventis said.

The credit, if approved by the governor, would be in addition to tens of millions in incentives already offered by the state and local municipalities to the tire manufacturers over the past year.

It’s not the first time that lawmakers have rushed through legislation benefiting particular companies.

In a rare, special session in October 2009, legislators unanimously approved, without any prior public debate, an incentives bill for the Boeing Co. to build an aircraft assembly plant in North Charleston. The Nerve has estimated that state and local incentives for the project will cost taxpayers at least $500 million.

In pushing the reworked version of H. 3506 on the Senate floor Thursday, Leventis said it was his “understanding that our state leaders in recruiting Bridgestone-Firestone for Aiken and Continental for Sumter said that they would provide the same tax incentives, if the thresholds of investment and job creations were met, that we had accorded to Michelin.”

“Michelin did not object to that,” Leventis added.

Leventis told The Nerve that he was not directly involved with the incentives-bill negotiations with the tire manufacturers, but that “members of the legislative branch and members of the executive branch were involved with the negotiations.”

“A commitment was made, and I think it was reasonable,” he said. “If a manufacturer is coming into this state for a long period of time, you wouldn’t want to be treated as a second-class citizen.”

On the Senate floor, Leventis said he didn’t know if Gov. Nikki Haley “made the sole commitment” to the incentives legislation, though he added, “I’m sure she was involved.”

Haley spokesman Rob Godfrey did not respond to written questions Friday from The Nerve seeking specifics on the negotiations, including Haley’s level of involvement.

The Nerve also sent written questions to S.C. Commerce Secretary Bobby Hitt but did not receive a response.  Since last year, The Nerve has submitted several requests under the S.C. Freedom of Information Act for the state incentives agreements for the Continental and Michelin plant projects but was informed each time that the agreements would not be released until they were finalized.

Haley in April announced that Michelin North America, which has its U.S. headquarters in Greenville, would invest $750 million and create 500 new jobs in expanding its production in Lexington and Anderson counties. 

In September last year, Bridgestone Americas announced a $1.2 billion expansion project in Aiken County that the company said would bring more than 850 jobs. The following month, Continental Tire the Americas, headquartered in Lancaster County, announced it would construct a $500 million plant in Sumter County, bringing approximately 1,600 jobs.

The Nerve reported in January that based on a review of a state incentives agreement, the offered state incentives to Bridgestone would total at least $57 million over 10 years. A cost-benefit analysis prepared by Commerce and included with the agreement, however, didn’t list the tax break contained in the incentives bill approved last week.

‘Not the Free Market’

Sen. Tom Davis, R-Beaufort, blasted the last-minute incentives legislation after it was introduced Thursday afternoon on the Senate floor. He compared it to the legislatively approved deal last year that exempted Amazon from collecting state sales taxes from purchases made by South Carolina residents in exchange for the online retail giant’s promise to build a distribution facility in Lexington County that would employ 2,000 workers.

Haley, a Lexington County Republican, said she didn't like the tax-collection break but let it become law without her signature, contending that the incentive was promised to Amazon under the administration of former Gov. Mark Sanford.

“We’re doing again what we (lawmakers) promised we wouldn’t do, which is to go ahead and grant an incentive to a company that already came here," said Davis, Sanford’s former chief of staff, though he was not working for Sanford when the Amazon deal was cut, during Thursday’s Senate session.

“We’re told that we have to do that (grant the tax credit to the tire manufacturers) because the executive branch and some representatives made the promise,” Davis continued. “We went through the whole debate last year with Amazon, and we said, ‘No, this is a unique situation, and we gotta do it.’ But we’re doing it again.”

Davis said the incentives bill for the tire manufacturers was being pushed through “without any real debate, with no analysis,” pointing out that lawmakers had failed to advance legislation introduced by him that would have required more transparency in government-sponsored economic incentives deals.

The Nerve has reported extensively on Davis’ transparency bills and other similar proposals.

“This is government steering the economy,” Davis said Thursday on the Senate floor about taxpayer-backed incentives in general.  “It is socialism. It is not the free market.”

Bill Switcheroo

Under the revised version of H. 3506 approved Thursday, Bridgestone, Continental and Michelin would be offered corporate income tax credits based on the dollar amount and accounting classification of “qualified manufacturing and productive equipment,” whether purchased or leased, that is “placed in service” at their South Carolina plants.

To receive the tax credits for the new projects, each company must commit to employing 1,200 workers in the state by Jan. 1, 2022; and making a capital investment of $400 million between Sept. 1, 2011, and Jan. 1, 2022. Michelin and Bridgestone each already have well more than 1,200 workers in South Carolina, according to information from the companies and state officials.

How exactly the state would verify the capital-investment and job-creation requirements for the tax credits is not specified in the bill.

None of the bill’s language is contained in a version of the legislation that had been stalled in a six-member conference committee since the end of February.  No mention of the proposed tax break for the tire manufacturers was made during a May 3 conference committee hearing on the bill, which The Nerve covered.

Instead, the discussion at that meeting focused on whether typically small businesses that use “professional employer organizations” should be eligible for job development credits, which are refunds of a portion of a company’s state employee withholding taxes. No agreement was reached then on that issue.

H. 3506, which initially passed the House in April 2011, was sponsored by Rep. Dwight Loftis, R-Greenville and a member of the conference committee. Besides Loftis and Leventis, other conference committee members included Sens. Billy O’Dell, R-Abbeville, and Phil Shoopman, R-Greenville; and Reps. Jim Battle, D-Marion, and Brian White, R-Anderson and the House Ways and Means Committee chairman.

Leventis told The Nerve on Friday that the tax-credit language for tire manufacturers was contained in another incentives bill, S. 1409, which he noted was “vetted” earlier at the subcommittee and committee levels. 

But there was no discussion about the new language when an amendment containing the language and other unrelated issues was approved during a May 23 Ways and Means Committee meeting, which The Nerve attended.  The full House passed S. 1409, which was introduced on April 10 by Sen. Thomas Alexander, R-Oconee, on May 31.

The conference committee on H. 3506 decided to strike the earlier provisions of H. 3506 and insert the tax-credit language of S. 1409 after it became apparent on Thursday that S. 1409 was not going to pass the Senate, Leventis said. He noted that S. 1409 was being held up “substantially by other people trying to add other issues to it.”

Special Treatment?

With the regular legislative session set to expire at 5 p.m. Thursday, the conference committee had to move quickly, Leventis said. It took just over three hours to wrap things up, records show.

The committee originally was scheduled to meet at 11:45 a.m. Thursday but postponed the meeting until 1 p.m. that day, according to Senate emails sent to The Nerve at 11:34 a.m. and 12:55 p.m. that day.

Under House and Senate rules, a conference committee cannot add or edit any language to a bill unless it is granted “free conference” powers by their respective chambers.  At 1:53 p.m., less than an hour after the conference committee on H. 3506 met, the House voted 97-0 to grant that authority to the House members of committee, according to the House Journal.

The House recorded the same unanimous vote at 1:56 p.m. to approve the free-conference bill containing the tax-credit language for the tire manufacturers.

At 3:23 p.m., the Senate voted 33-9 to grant free-conference powers to the senators on the conference committee; at 4:10 p.m., the vote was 34-9 to approve the free-conference bill, according to the Senate Journal.  Lt. Gov. Glenn McConnell, who is the Senate president and presides over the chamber while in session, let the bill move ahead of other bills under Senate rules.

The nine senators voting against the bill were Davis; Lee Bright, R-Spartanburg; Kevin Bryant, R-Anderson; Chip Campsen, R-Charleston; Ray Cleary, R-Georgetown; Mike Fair, R-Greenville; Larry Grooms, R-Berkeley; Mike Rose, R-Dorchester; and Shoopman.

The bill now is before Haley, who has to decide whether to approve or veto it. Lawmakers are scheduled to return to Columbia later this month to take up any vetoes.

Asked whether the tire manufacturers received any special treatment, Leventis, who joined the Senate in 1981 and announced his retirement earlier this year, told The Nerve: “Special treatment? Not so much. We were trying to figure out how to get this done.”

Davis had a differing opinion about the bill.

“It says to a small company or says to an individual, ‘Don’t even try,’” Davis said on the Senate floor Thursday. “Because if you’re a big company, and you can go to Columbia, and you can get a meeting with either somebody from the executive branch or maybe somebody with a committee, and get a special break – that’s what you do.”

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

 

 

General Assembly Incentives Legislation Transparency Corporate Welfare

Sen. Billy O'Dell Rep. Dwight Loftis Sen. Tom Davis Rep. Jim Battle Lt. Gov. Glenn McConnell Sen. Phil Leventis Rep. Brian White Sen. Phil Shoopman