Big Taxpayer-Funded Gifts behind Big Job Announcements

June 17, 2014

Investigative Reports

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Money GiftIn a press release Monday, Gov. Nikki Haley touted her announcements of three separate Upstate economic development projects, which officials say will eventually bring a collective 7,100 jobs, as the “Biggest Single Day Jobs Announcement in South Carolina State History.”

What Haley barely mentioned in her official press statements, however, was the multimillion-dollar taxpayer tab for the projects.

In fact, she left out the single-biggest taxpayer gift among the three announced projects: a $37.8 million state grant to Singapore-based Giti Tire to locate a plant in Chester County.

The Nerve in March reported that the House Ways and Means Committee approved giving the S.C. Department of Commerce $37.3 million for its “deal closing fund,” though Commerce Secretary Bobby Hitt or other state officials were tight-lipped then on how it would be used.

The “deal closing fund,” or “governor’s closing fund,” or “closing fund” for short, is used by Commerce to get companies to locate or expand in the state. The fund is authorized annually through obscure state budget provisos. A Commerce spokeswoman on Monday revealed the closing fund grant awarded to Giti Tire when asked by The Nerve.

To put the $37.8 million closing-fund grant to Giti Tire in perspective, it is larger than the total ratified budgets this fiscal year of 59 state agencies or divisions, a review by The Nerve found, including, for example:

  • Commission on Indigent Defense ($33.4 million);
  • Forestry Commission ($29.9 million);
  • University of South Carolina – Beaufort campus ($26.8 million);
  • School for the Deaf and Blind ($25.8 million);
  • Department of Agriculture ($23.6 million); and
  • S.C. Attorney General’s Office ($23.4 million).

The $37.3 million earmarked for the “deal closing fund” for next fiscal year, which starts July 1, was not among Haley’s budget vetoes issued last week. It would come from surplus state revenues left over from this fiscal year and last – which Haley has dubbed the “money tree” – and the state’s Capital Reserve Fund, which is supposed to be a “rain-day” fund, though lawmakers in recent years have raided it. Legislators return today to Columbia to take up Haley’s vetoes and other matters.

Asked Monday about the current balance in the deal closing fund, Commerce spokeswoman Allison Skipper told The Nerve, “The status of any funds would be considered pretty fluid,” noting that “we have committed funds toward projects as well.”

As of Monday, the balance of Commerce’s closing fund was $25.3 million, according to information provided by the S.C. Comptroller General’s Office to The Nerve.

The $37.8 million grant to Giti Tire was approved by the state Coordinating Council for Economic Development (CCED), Skipper said. The 11-member council is made up the directors or board chairpersons of state agencies involved with economic development, and by law chaired by Hitt.

The council, which is administered at Commerce’s headquarters located in a high-rise office building across from the State House, often meets in secret to decide what companies will receive taxpayer-backed incentives, as The Nerve has previously reported.

Skipper said the $37.8 million grant, which was awarded to Chester County, would be used primarily for “land acquisition and site preparation.” Giti Tire, described by state officials as the 10th-largest tire company in the world, plans to construct a 1.8-million-square foot, $560 million manufacturing and distribution facility on the Carolinas I-77 Mega Site in the Richburg area in Chester County, according to a press release from Haley’s office.

The project would create 1,700 jobs “over the next decade,” according to the release, which works out to an average of 170 new jobs per year.

“The company’s decision to locate in South Carolina was driven by a number of factors, including the area’s workforce and training opportunities through the technical college system, proximity to major transportation infrastructure and deep-water port facilities in Charleston, market access to the growing Southeast region and the state’s business-friendly environment,” the release said.

But other than mentioning the “recruiting and training of its initial workforce” through the S.C. Technical College System’s “readySC” program, the release gave no information on taxpayer-backed incentives offered to Giti Tire.

Besides the deal closing grant, the CCED also approved job development credits for Giti Tire, which are rebates of a portion of employee wage withholdings, Skipper said. Factors affecting the amount of those credits that eligible companies can claim include the number of jobs created, the level of wages paid and the location of the company. The tax break can total in the millions over time.

In addition, another state agency, the Rural Infrastructure Authority, awarded a $2 million grant to Chester County for water and sewer lines at the project site, while Chester County has offered a “fee-in-lieu-of-taxes” (FILOT) agreement to the tire manufacturer, Skipper said. FILOT agreements typically save companies millions in property taxes over a period of years.

Taxpayers likely won’t get a better idea of the total public costs of the Giti Tire project until the state incentives agreement is released, which, given past practices by Commerce, probably won’t happen for months at the earliest and only upon request through the S.C. Freedom of Information Act.

The Nerve revealed in June 2012, for example, that the projected state and local costs of incentives deals for a Continental tire manufacturing plant in Sumter County was at least $237 million over 10 years, according to records obtained under the FOIA. In January 2012, The Nerve reported that state incentives for a Bridgestone tire manufacturing project in Aiken County would total at least $57 million over 10 years.

That same year, lawmakers rushed through at the end of the legislative session a huge tax break for the state’s big three tire manufacturers – Continental, Bridgestone and Michelin. Continental was projected to save $118 million over 10 years with the incentive, then-Sen. Phil Leventis, D-Sumter, told The Nerve at the time.

In addition to Giti Tire, Haley on Monday announced two other projects in the Fort Mill area in York County:

  • A $90 million national headquarters for the Lash Group Inc., a healthcare consulting firm and subsidiary of AmerisourceBergen Corp., a Pennsylvania-based pharmaceutical distribution company.The Lash Group plans to initially employ 1,200 in the first phase of its project, with plans to double the workforce “over the next several years based on current growth projections,” according to a release from Haley’s office. The firm plans to move its headquarters in south Charlotte to a 250,000-square-foot building in Fort Mill’s Kingsley North business park, according to media reports.
  • LPL Financial LLC, which provides training, research and other services to more than 13,700 financial advisors and 720 financial institutions nationwide, plans to locate a regional headquarters in the Kingsley North business park, investing at least $150 million through 2022 and creating 3,000 jobs. The company, which has offices in San Diego and Boston, plans to consolidate three Charlotte offices with the move, according to media reports.

Skipper told The Nerve that the CCED approved a $2 million “set-aside” grant and job development credits for the Lash Group project, and job development credits for LPL Financial. The Lash Group project also likely will be eligible for a FILOT agreement with York County, she said.

In total, the $41.8 million in cited incentives  – and that’s on the low end – for the three projects announced Monday works out to an average of $5,887 in taxpayer costs for each of the collective 7,100 jobs that officials say will be eventually created.

(Update: After this story was published, Skipper clarified her earlier statements to The Nerve, pointing out that a total of $37.8 million in grants, including a $35.8 million closing-fund grant and a $2 million Rural Infrastructure Authority grant, was awarded for the Giti Tire project.)

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