Big Taxpayer-Funded Gift Offered to Distribution Centers under Senate Bill

March 12, 2013

Investigative Reports

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Charleston PortLarge distribution centers would be eligible for millions of dollars in taxpayer-funded bonds under a state Senate bill quietly introduced last week.

This incentive under S. 491 would be the same type of corporate giveaway that lawmakers approved in a rare, special session in 2009 for Boeing’s North Charleston plant. The Chicago-based aerospace giant received $270 million in state bonds; with interest, taxpayers are on the hook for at least $360 million, The Nerve reported earlier.

If the Senate bill becomes law, general-obligation bonds could be sold to help the Port of Charleston attract large distribution facilities to take advantage of super-size cargo ships that are expected to deliver goods through an expanded Panama Canal beginning next year. Lawmakers last year approved setting aside $300 million to deepen the Charleston port.

Sen. John Matthews, D-Orangeburg and sponsor of S. 491, says he wants to make South Carolina more competitive with the Port of Savannah in Georgia.

“It’s a port bill to help our port compete with Georgia,” Matthews told The Nerve when contacted Friday.

Asked if his legislation were needed to accommodate a specific project, Matthews said only, “I can’t comment on that.”

However, Gregg Robinson, executive director of the Orangeburg County Development Commission, toldThe Nerve Monday there are “several prospects” being considered that would fall under the criteria in S. 491, though he didn’t identify them. No agreements are in place with any company, he said, adding that officials are seeking ways to position the Port of Charleston ahead of Savannah and the port in Jacksonville, Fla.

Orangeburg County has been touted as the location of the Dubai-based Jafza facility near Interstate 95, planned by officials to be the center of the state’s distribution network of goods delivered from the Charleston port to destinations in the state and elsewhere. There has been relatively little activity at the site near Santee, though, after Jafza announced six years ago it planned to create 8,000 to 10,000 jobs by 2017 with an investment of $600 million to $800 million.

“We don’t have enough distribution centers,” said Sen. Paul Campbell, R-Berkeley and one of the two Republicans co-sponsors of S. 491, told The Nerve Monday.

The other GOP co-sponsor is Sen. Hugh Leatherman, R-Florence and a key player in the Boeing deal, who did not return a call to The Nerve. The bill, introduced Wednesday, also has four Democratic co-sponsors; it was referred to the Senate Finance Committee, chaired by Leatherman.

The bill would amend Section 11-41-30 under the S.C. Code of Laws to allow state general-obligation bonds to be sold for certain distribution centers located on land owned by the state or local governments. To be eligible, a center would have to be at least 1 million square feet and create at least 200 new jobs. The jobs-creation target and another requirement setting minimum annual cargo levels would have to be met within two years of completing construction, under the bill.

It is unknown if a distribution center currently in the state meets the stipulations in S. 491.

Matthews said lawmakers must amend the law because “nobody is using” it, adding that senators want to “enhance and grow our port.” The law generally requires a minimum investment of $400 million and the creation of at least 400 jobs.

The day after Matthews filed the bill, Gov. Nikki Haley spoke in Orlando, Fla., pitching South Carolina to suppliers of the Arkansas-based Wal-Mart Stores Inc., according to The State newspaper.

Matthews said each project that would qualify for state bonds must be approved by the S.C. Ports Authority board of directors, the authority’s Review and Oversight Commission, and the state Joint Bond Review Committee.

Campbell said the state bonds authorized in S. 491 doesn’t trouble him because the added sales, income and gas taxes that he contends would be generated with those projects “would more than make up for the tax incentives.”

South Carolina has fallen behind Georgia on port activity, according to an August 2012 analysis of North American ports by Seattle-based Colliers International, a worldwide real estate company. The Port of Savannah ranked only behind the ports in Los Angeles, Long Beach and New York/New Jersey; the Port of Charleston ranked 13th, according to the report.

The distribution center push also comes from New Carolina, a Columbia-based nonprofit group with backers from 25 nonprofit or public entities that include the University of South Carolina and Clemson University, the city of Charleston, and the S.C. Research Authority, a state-created technology and real estate company.

New Carolina has created a “TDL” Council, which stands for “transportation, distribution and logistics.” The group is spearheading the creation of a TDL strategic plan in partnership with the state departments of Commerce and Transportation, and the Ports Authority. The plan would “guide the execution of TDL activities, projects, and policies and serve as an economic development tool to spur job creation, business expansion, and education.”

But big public projects can bring bring big debt to taxpayers. The state Treasurer’s Office reported to The Nerve that the Palmetto State has $1.05 billion in outstanding general-obligation bond debt that requires $191.8 million in annual principal and interest payments.

Including an additional $400.2 million for highway bonds and $447.8 million for higher-education construction projects, the state’s cumulative debt is more than $1.8 billion, with total annual payments of $293.6 million.

Olson can be reached at (803) 254-4411 or curt@thenerve.org. Follow him on Twitter @thenerve_curt and @olson_curt. Follow The Nerve on Facebook and on Twitter @thenervesc.