$22 Million-Plus Taxpayer Tab for Ross Stores’ Distribution Center

March 18, 2013

Investigative Reports

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RossLast year’s announcement by national discount clothes and household retailer Ross Stores Inc. to bring a $150 million distribution center to Rock Hill is probably the “largest single business investment” in the city’s history, so says Stephen Turner, executive director of the Rock Hill Economic Development Corporation.

It also might turn out to be the single-largest, taxpayer-funded corporate giveaway in Rock Hill’s history.

The total public cost of the project over a 15-year period is estimated at more than $22 million, including nearly $4.8 million in the first year, according to state incentives documents obtained last week by The Nerve under the S.C. Freedom of Information Act.

Based on those figures, the total projected public cost works out to nearly $37,000 on average over the 15-year-period for each of the 597 promised jobs.

The average annual salary with the project, dubbed “Project Daisy,” was listed in a cost-benefit analysis at $30,618 – $2,770 less than South Carolina’s 2011 per-capita personal income as determined by the U.S. Bureau of Economic Analysis.

The projected taxpayer cost as listed in the cost-benefit analysis doesn’t include the millions that Ross Stores likely will save in property taxes with a fee-in-lieu-of-taxes (FILOT) agreement with York County. The specific terms of that deal weren’t available by publication of this story, but according to a state grant application by the city of Rock Hill, the county agreement would be for 30 years.

The Nerve first asked the S.C. Department of Commerce for the state incentives agreement with Ross Stores Inc., which operates under the name of Ross Dress for Less, last April 11 – the same day state and local officials publicly announced the Rock Hill project. At the time, Commerce denied The Nerve’srequest, contending it didn’t have to release anything under the Freedom of Information Act until after the incentives agreement was finalized.

The effective date of the state agreement was listed as Sept. 10, though Ross applied for certain incentives as early as June 2011, records show. The Nerve resubmitted its FOIA request on Jan. 23 this year; Commerce typically has required The Nerve to resubmit FOIA requests if initial ones were denied.

As also has been its practice with The Nerve, Commerce blacked out parts of the state incentives agreement and related documents for the Rock Hill project, including:

  • Specifics on the projected value of land, buildings, machinery and equipment;
  • The number of jobs and average wages in listed job categories – management, administrative, production and contract employees; and
  • The names and contact information for company officials involved with the project.

The projected $22,065,066 in public costs over the 15-year period includes, according to the cost-benefit analysis:

  • $6.84 million in jobs tax credits, which are based on the number of jobs created;
  • $5.61 million in job development credits, which are refunds of a portion of employee state tax withholdings;
  • $2.48 million in tax credits based on the center being located in a designated “multi-county industrial park”;
  • A $2 million state grant to the city of Rock Hill to assist the city with site work and “off-site infrastructure”;
  • $1.86 million in increased state education costs;
  • $1.79 million in “special schools,” presumably the S.C. Technical College System’s “readySC” program, which provides training geared to a particular company; and
  • $1.46 million in increased local educations costs.

“Perhaps the greatest strengths of Rock Hill USA are the many incentives available to entrepreneurs and organizations that greatly reduce the cost of doing business in today’s marketplace,” the nonprofit Rock Hill Economic Development Corporation brags on its website.

The Nerve on Friday sent written questions about the Rock Hill project to Amy Love, Commerce’s chief spokeswoman, but did not receive a response by publication of this story. Efforts to reach York County economic development officials also were unsuccessful.

Ross Stores has two other distribution centers in York County totaling about 1.9 million square feet. With 1,419 employees, the company is the county’s second-largest industry behind Wells Fargo Home Mortgage, according to the county’s website.

The 1.2-million-square foot distribution center in Rock Hill is expected to open later this year, said Turner, the Rock Hill Economic Development Corporation’s executive director, when contacted Friday by The Nerve.

“This is 30 acres under one roof,” Turner said.

A smaller data center at the Antrim Business Park site already has been completed, he said.

Asked why it was necessary to offer various incentives to Ross Stores given the company’s existing presence in the county, Turner replied, “This is a completely new facility that they could have chosen to locate anywhere, and they were looking at other sites, including North Carolina.”

The Nerve last week first reported about a state Senate bill (S. 491) that would allow state general-obligation bonds, which would be paid back with interest by taxpayers, to be sold to attract distribution centers of at least 1 million square feet that employ 200 or more workers.

The planned Rock Hill distribution center would meet those criteria, though Turner said he didn’t think that Ross Stores could take advantage of the incentive offered under the Senate bill.

“Ross made incentives agreements with the state and local governments a couple years back,” he said. “Their deal is done. I don’t think there’s anything else on the table for them.”

Efforts Friday to reach officials at Ross Stores’ headquarters in Pleasanton, Calif., were unsuccessful. The company on its website describes itself as the “largest off-price apparel and home fashion chain in the United States,” with 1,091 locations in 33 states, the District of Columbia and Guam.

Ross Stores recorded sales of $8.6 billion and net earnings of $657 million in fiscal 2011, according to its annual financial report filed with the U.S. Securities and Exchange Commission. The company’s website listed fiscal 2012 revenues of $9.7 billion; its fiscal 2012 earnings are expected to be released Thursday.

As a comparison, Ross’ 2012 revenues were at least $3.8 billion more than South Carolina’s general-fund revenues last fiscal year.

Reach Brundrett at (803) 254-4411 or rick@thenerve.org. Follow him on Twitter @thenerve_rick. Follow The Nerve on Facebook and on Twitter @thenervesc.