BMW’s Taxpayer Tab Totals Millions with Expansion Project

October 25, 2013

Investigative Reports

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BMWAfter four open-records requests over 18 months, the S.C. Department of Commerce this month finally released incentives documents to The Nerve for an announced $900 million expansion project at the BMW plant in Spartanburg County.

The agency contended in initial written responses that it couldn’t release any records under state law until an incentives agreement was finalized. No explanation was given, however, about why that process took about 1 ½ years.

What the records provided under the state Freedom of Information Act reveal doesn’t exactly match what was released during the pomp and circumstance of the Jan. 12, 2012, announcement that 300 jobs would be added at the Greer plant.

For starters, Commerce in a press release said that with the addition of the 300 jobs, the plant would employ “nearly 7,500 people at its more than 4-million-square-foot facility” by the end of 2012.

But in a Dec. 2, 2011, application to the state for incentives, BMW said it had 3,822 permanent, full-time jobs in the entire state as of Jan. 1, 2011, – slightly more than half of the number that was cited in the press release.

The exact amount of taxpayer-backed incentives that BMW has received over its approximately 20-year history in the Palmetto State is unknown, though The Nerve in 2010 reported, citing Commerce documents, that the German-based automotive manufacturer had gotten more incentives over the years than any other South Carolina company, including aerospace giant Boeing.

The records provided to The Nerve for BMW’s latest expansion project show that the company will receive millions, and possibly tens of millions, in incentives over time.

For example, a cost-benefit analysis included with the documents projects that BMW will receive more than $2.8 million in job development credits with the 300 new employees over a 15-year period. To begin receiving the credits, which are rebates to a company of employee wage withholdings, BMW must invest at least $485.5 million, or less than 55 percent, of the announced $900 million investment, within five years.

The total public costs for the 15-year period are estimated at nearly $8.9 million, including more than $3.4 million in corporate job tax credits and $900,000 for “special schools” – typically the readySC worker training program through the S.C. Technical College System, the analysis shows. And the total figure doesn’t include the likely millions that  BMW will save over the years in county property tax abatements, listed as one of the incentives in its application to the state Coordinating Council for Economic Development.

The Coordinating Council, made up the heads or board chairs of 11 state agencies involved with economic development, doles out tens of millions in job development credits and other incentives annually – often in secret meetings held at Commerce’s headquarters across from the State House, as The Nerve has previously reported.

Commerce Secretary Bobby Hitt, a former BMW spokesman, is the council chairman.

What’s different about the BMW deal compared to other incentives agreements reviewed by The Nerve is that BMW has two state incentives agreements for its expansion project  – one that calls for the creation of at least 300 jobs and a minimum investment of $485.5 million, and the other requiring the creation of at least 700 jobs and a minimum investment of $433.1 million.

Under the agreement for the 700 jobs, the total projected taxpayer cost over 15 years jumps to at least $21.1 million, according to a cost-benefit analysis included with the documents.

Contacted this week by The Nerve, Commerce spokeswoman Allison Skipper said in written responses that both agreements “are in effect,” and that for “investment figures, the two agreements combined equal $900 million.”

Skipper, though, didn’t want to discuss job-creation figures, so it’s unclear whether BMW plans to create 300, 700 or possibly 1,000 jobs with the expansion project.

“On all employment figures, I’ll defer to the company,” she said. “You probably know, however, that BMW’s workforce includes full-time employees of a contract company. BMW cannot claim job development credits on full-time workers who are not BMW employees.”

BMW spokeswoman Sky Foster did not respond to written questions this week from The Nerve.

Asked how BMW’s job-creation and investment amounts will be verified by the state, Skipper said the company “must submit payroll records to verify job creation and property taxes and/or invoices to verify investment.”

“Once certified, the company submits quarterly reports to the Coordinating Council that provide the number of jobs at the company for the quarter, and the company is audited by the Department of Revenue every three years,” she said.

But the quarterly reports and amounts of tax credits claimed are “confidential taxpayer information,” she said when asked by The Nerve for a copy of the reports.

In its January 2012 press release, Commerce touted that the $900 million expansion project would be the single-largest investment at its South Carolina plant and would bring its total investment in the state to “nearly $6 billion.” Since 1994, the plant has undergone four major expansions, according to the release.

“BMW’s impact on South Carolina’s economy and overall competitiveness is always worth celebrating,” Hitt, the former BMW spokesman, said in the release. “This new economic investment and commitment of jobs is a testament to South Carolina’s strong automotive manufacturing industry.”

But BMW’s impact in Spartanburg County isn’t impressive by some measures. For example, the county’s unemployment rate in August was 8.2 percent, virtually the same as the state’s rate, according to the S.C. Department of Employment and Workforce. And the county’s personal per-capita income in 2011 – the latest available figures listed on the South Carolina Association of Counties’ website – was $31,670 – $1,718 less than the state’s per-capita income for that year.

The incentives agreements for BMW’s latest expansion project allow job development credits if the average wage for the new employees is at least $15.12 per hour, which, based on a 40-hour work week, is slightly less than the 2011 per-capita income for the county.

Hourly rates that would be paid to the new BMW employees were blacked out in documents provided toThe Nerve.

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