Bill Seeks Disclosure of Amazon-Like “Promises”

May 31, 2011

Investigative Reports

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The NerveA group of Midlands legislators is pushing a new bill designed to spare the General Assembly from facing another Amazon-like saga.

The proposed law would apply to state and local officials who try to incentivize a company to expand or locate in South Carolina. Scores of government workers in the state ply their wares toward that end, from Department of Commerce administrators on down to municipal economic development directors.

But going forward, if in their efforts to woo a firm “any suggestion or promise to seek a change in state law is offered,” the bill seeks to require the officials to notify the legislative delegation of an area where a project might occur that such an offer was made.

The notification would have to be provided before any economic development agreement including a pledge to that effect is inked. Then, after it is, the officials who negotiated the deal would have to reveal that provision of it in writing to all legislators who previously had not been told about it.

Rep. Rick Quinn, R-Lexington, is chief sponsor of the measure, H. 4187.

“The bottom line is we have to get more public disclosure and more buy-in from the communities involved,” Quinn says of economic development incentives.

Including Quinn, seven Republican Lexington County representatives, who constitute virtually the entire Lexington County House delegation, and one GOP representative from Richland County have signed onto the bill.

It is no coincidence that all of those lawmakers represent ground zero in the Amazon imbroglio.

The bill was introduced on May 5, in the eye of the Amazon storm, and sent to the House Labor, Commerce and Industry Committee.

The proposal faces essentially no chance of passing this year because the scheduled end of the regular 2011 legislative session is Thursday.

Lawmakers typically reconvene shortly after the regular session concludes. But their business then usually is limited to taking up any budget vetoes and a few other specific issues, not routine process matters such as committee hearings.

Still, the bill could move in next year’s session, and it’s a good bet that the catalyst for it will not be far from legislators’ memories.

Indeed, Quinn’s would-be law stems from a grueling experience this session in which lawmakers and many South Carolina merchants and residents learned some things about the gamesmanship of economic development incentives.

In this episode, that chess match saw a multinational online retailing giant bend the Legislature to its will with the promise of jobs in a shaky, uncertain economy.

Elsewhere, meanwhile, other states have seen this movie before.

Late Thursday night, the S.C. Senate approved a sales tax collection exemption for Amazon.com. The exemption would run for five years and apply solely to purchases by residents of this state.

Amazon is demanding a pass on collecting state sales tax as other businesses do before the e-commerce company will resume construction and staffing of a giant shipping warehouse in Cayce. Amazon halted the project in late April right after the House initially rejected the sales tax collection waiver.

But, amid intense pressure and much hand wringing about the state “breaking its promise” to Amazon, the House reversed course earlier this month and approved the exemption.

The Senate modified the specifics of what the House passed; adding, among other things, a requirement that Amazon’s receipts to the company’s Palmetto State customers include a statement that they are responsible for paying sales tax on their purchases.

The Senate’s changes mean the two chambers’ versions of the measure will have to be reconciled for it to become law. But that seems likely given developments thus far, and Gov. Nikki Haley has indicated that she will not veto it.

For Amazon, the sales tax collection exemption would be the proverbial cherry on top of a state incentives deal for the Cayce plant. The Nerve reported earlier that the agreement will total nearly $40 million in public costs over 10 years. Amazon also is receiving a break on its local property taxes.

In a transparent sign of how companies play the incentives game, Amazon upped its job creation and capital investment ante in the project – from 1,249 to 2,000 and $90 million to $125 million, respectively – as the House was preparing to re-vote on the exemption.

The chamber’s turnabout followed widespread lamentations that the state had broken faith with Amazon when the House first shot down the special favor.

Former Gov. Mark Sanford’s administration, the line went, had promised it to Amazon in brokering the agreement for the Cayce shipping center. But now the state wasn’t living up to its word, so how could it be counted on to do so in the future?

The state’s written deal with Amazon, however, contains no such promise. Rather, it says only that the Department of Commerce “agrees to use its good faith, best efforts to obtain legislation” granting the company a sales tax collection waiver.

Quinn acknowledges that fact. “It wasn’t in and of itself a promise,” he says.

Nevertheless, the lawmaker contends, “There was the implication that they could get this thing done.”

Hence Quinn’s bill. He says it is aimed at ensuring that legislators are in the loop on the front end of any incentives agreement that involves a potential change in state law. “Under this scenario there’ll be 170 people (all members of the Legislature) who have it.”

Quinn says he did not learn the details of the Amazon deal until late February.

To those who follow the company’s dealings in other states, though, its brinksmanship with South Carolina should come as no surprise.

A few days before the House’s 180, the Austin American-Statesman newspaper published an article detailing a bill the Texas Legislature had just passed in effort to prevent online retailers from getting around collecting sales tax in the Lone Star State.

“Amazon has consistently opposed collecting tax on its online sales, which has angered state governments and traditional retailers,” the article says.

It tells how Amazon announced that it would close a distribution facility in Irving, Texas, after the state’s comptroller general sent the company a $269 million bill for uncollected sales tax on purchases by Texas residents.

Sound vaguely familiar, anyone?

Reach Ward at (803) 254-4411 or  eric@thenerve.org.