Bosch’s planned layoffs raise questions about repayment of incentives

January 28, 2020

Investigative Reports

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By RICK BRUNDRETT

In December 2010, then-Gov. Mark Sanford, along with other state and local officials, announced a $125 million expansion of the Robert Bosch automotive parts plant in Dorchester County, with promises that the project would create 285 jobs.

The Nerve revealed several months later that the estimated public costs of the project over 10 years totaled about $11.8 million, citing S.C. Department of Commerce records obtained under the state’s open-records law.

Earlier this month, Bosch formally notified the state unemployment agency that it planned to cut 430 jobs, or nearly 24% of its Lowcountry workforce of approximately 1,800 employees, in stages through July 31, 2021.

But the company likely will have to repay few, if any, of its taxpayer-backed gifts, given state laws and incentives agreements that typically are generous with public money on the front end but often require relatively little or no repayment when companies later lay off workers or close.

And the laws and incentives agreements have plenty of secrecy provisions that prevent citizens from knowing exactly the amount of public benefits that the companies received and how the money was spent.

Companies are eligible to receive certain corporate tax breaks under state law if they meet specific requirements. Other taxpayer-backed benefits, such as various state grants, are awarded at the discretion of the S.C. Coordinating Council for Economic Development, an 11-member panel made up the heads or board chairpersons of state agencies involved with economic development.

By law, the council is chaired by the Commerce secretary, who is appointed by the governor. The Nerve has previously reported that the panel has typically met behind closed doors in Commerce’s headquarters across from the State House to discuss incentives for companies, which often are not publicly identified.

The Nerve in 2018 revealed that a total of nearly $13 million in state grants was awarded between 2009 and 2014 to 11 counties and one town to help 14 companies that decided to locate or expand in those counties. But the companies collectively repaid just a little over half of the total amount after failing to hit job-creation or investment targets, Commerce records showed, under what commonly are known as “clawback” provisions in incentives agreements.

Of the 14 companies, four closed plants in counties that received the grants, and another project never materialized.

Under its incentives agreement for the expansion project, Bosch would have received a $1 million state grant if it invested $125 million or more and created at least 285 full-time jobs by Dec. 2, 2014, as The Nerve previously reported.

Asked Monday if Bosch would have to repay any of its grant given the planned job cuts, Commerce spokeswoman Alex Clark in an email response said the company “met all performance agreements for the 2010 grant in 2014, and, accordingly, the grant file has been closed.”

Bosch also was projected to receive more than $8.3 million in job tax and job development credits over a 10-year period, according to a cost-benefit analysis provided in 2011 by Commerce to The Nerve under the S.C. Freedom of Information Act.

In her response Monday to questions about how much state tax breaks Bosch has received to date, Clark cited a state tax law banning the release of that information, adding such incentives are “performance-based, meaning that if a company does not meet and maintain investment and job targets, the company may not claim (or continue claiming) credits.”

The additional 285 workers under the expansion project could receive a projected collective $855,000 in taxpayer-funded job training, according to the cost-benefit analysis, though Kelly Steinhilper, spokeswoman for the S.C. Technical College System, which runs the “readySC” training program, in an email response Tuesday said the program to date has trained “64 individuals at a total cost of approximately $3,600.”

“We do not intend to ask them to repay,” she added.

‘Super’ county incentives

Besides state incentives, Bosch was offered a 30-year, 4%-assessment-fee-in-lieu-of-taxes (FILOT) agreement that would rebate 40% of property fees on the expansion project over 15 years, according to a company project information sheet included with the state incentives agreement.

FILOT agreements typically offer significant breaks on local property taxes that normally would be paid based on a 10.5% assessment rate on manufacturing property. Over the 15-year period, Bosch was projected to pay $7.7 million in property fees, according to an analysis by the state Board of Economic Advisors.

In an email response Tuesday, John Truluck, the Dorchester County Economic Development director, said Bosch has “active” FILOT agreements from 2001 and 2017, though he didn’t know the total amount of payments to date made by Bosch.

Under the 2017 “Super FILOT” agreement with Bosch, the property fees would be based on a 4% assessment ratio if the company invested at least $150 million and created 125 new jobs over 10 years, Truluck said. He said Bosch has “almost reached” the investment target, though its planned job cuts will “likely cause them to miss the job requirement” for now.

If Bosch doesn’t hit the investment and job-creation targets by the 10-year deadline, its “Super FILOT” agreement would revert to a “Simplified FILOT,” requiring the company to “repay the difference between the 4% and 6% assessments that they may have received on the FILOT payments made during that ten years,” Truluck said.

Truluck also said reports that Bosch intends to lay off 430 workers are “not exactly accurate,” noting the company plans to use “early retirement and voluntary severance packages as well as allowing employees to move to other Bosch facilities” before enacting any layoffs.

The cost-benefit analysis that The Nerve obtained in 2011 estimated an overall “net benefit” with the expansion project of $387 million over a 10-year period, though that number included a projected total payroll of 522 “indirect” jobs, which weren’t’ defined.

As has been Commerce’s practice with incentives agreements provided to The Nerve, certain information in the Bosch documents was blacked out, including, for example, the estimated annual average salary and average hourly wage for the promised 285 additional jobs.

Hannah Hill, senior policy analyst with the South Carolina Policy Council, the parent organization of The Nerve, contributed to this story. Brundrett is the news editor of The Nerve (www.thenerve.org). Contact him at 803-254-4411 or rick@thenerve.org. Follow him on Twitter @RickBrundrett. Follow The Nerve on Facebook and Twitter @thenervesc.

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