Guv’s Office, Commerce Can’t Produce Job-Creation Records

January 24, 2012

Investigative Reports

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Nikki HaleyIn an interview on Dec. 15, Gov. Nikki Haley told a reporter with The State newspaper, “I sleep, eat and breathe jobs every day.”

On Wednesday, she told lawmakers in her state-of-the-state address that South Carolina was “surging,” pointing to the recruitment of approximately 20,000 new jobs during her first year as governor.

But if you ask Haley’s office exactly how many jobs have been actually created in the Palmetto State since she took office on Jan. 12 last year, you likely won’t even get an educated guess.

The lack of verification allows politicians to trumpet job-creation numbers without backing up their claims.

The Nerve on Dec. 19 submitted a request to Haley’s office under the S.C. Freedom of Information Act seeking all records showing the number of “actual jobs created to date.” The request sought records specifying the name and location of the company, and the number of employees by company “receiving paychecks as of the date of this letter.”

In a Jan. 13 written response, Swati Patel, Haley’s chief attorney, said: “Please be advised that this office does not have any records responsive to your request. Information that you are seeking may be available from the South Carolina Department of Commerce.”

The Department of Commerce – the state’s premier job-recruiting agency – wasn’t helpful, either.

In a Dec. 22 written response – three days after receiving a similar FOIA request from The Nerve – Karen Manning, Commerce’s chief attorney, said, “With regard to the jobs announced during 2011, Commerce has no public records regarding whether any of the announced jobs have been created to date.”

“The companies creating the jobs are the best source for that information,” Manning added.

If the state’s past practice is any predictor, the vast majority of those companies will receive taxpayer-backed state or local incentives. The Nerve earlier this month, for example, reported that Bridgestone Americas Inc., which announced in September that it would create 850 jobs with a $1.2 billion manufacturing project at its Aiken County site, was eligible to receive at least $57 million in incentives over a 10-year period.

Commerce has yet to publicly release any specifics on incentive performance agreements for the Bridgestone project, described by Haley as the single-largest announced initial capital investment project in state history. Those agreements typically tie incentives to job-creation and investment targets.

The subsidies for the international tire maker include taxpayer-funded employee training sessions in Japan, where the company is headquartered.

No Verification, Study Finds

The lack of specifics from the Governor’s Office and Commerce about the number of actual jobs created to date during Haley’s tenure comes as no surprise to Philip Mattera, research director at Good Jobs First, a Washington, D.C.-based nonprofit organization that advocates corporate and government accountability in economic development.

In a nationwide study released last week, the organization found that many states fail to verify that companies receiving taxpayer-funded incentives meet job-creation targets and other requirements, while “many more” states have “weak penalty policies for addressing non-compliance,” according to a press release accompanying the report.

“Remarkably, both the District of Columbia and South Carolina have no performance verification in any of their five major (incentives) programs in our sample,” Mattera and other researchers said in an executive summary of the study.

The study gave South Carolina an overall grade of “C-,” tying the state for 38th place nationally in the strength of enforcement of performance standards for companies that receive taxpayer-funded subsidies.

“If you have no verification, you really have no guarantee that taxpayers are getting what they paid for,” Mattera told The Nerve last week. “It just seems to be a matter of good government.”

After the Good Jobs First study was released, Commerce spokeswoman Amy Love disputed the findings in an interview with The State newspaper, noting that companies receiving job development credits are audited every three years by the state.

Love said those companies also must file quarterly and annual reports with the state Coordinating Council for Economic Development, made up of the heads of 11 state agencies involved in economic development, including Commerce, to verify job-creation and investment requirements.

“That’s not what they told us when we researched it,” Mattera told The Nerve when asked about Love’s comments.

Love did not respond to written questions submitted last week by The Nerve.

In a January 2010 story on a projected half-billion-dollar-plus incentives package for the Boeing Co.,another Commerce spokeswoman told The Nerve that companies cannot receive certain “discretionary” incentives, such as job development credits or infrastructure grants, until they submit payroll and property tax records to the Coordinating Council to “verify that the minimum investment and job numbers have been met.”

After a company begins claiming those incentives, the state Department of Revenue conducts audits to confirm the business is in compliance with the incentives agreement, the Commerce spokeswoman said then.

A DOR spokeswoman told The Nerve for a later story that those audits are done every three years, though she declined to release any audits and couldn’t cite a specific law giving the agency the authority to prohibit the release of that information.

Most taxpayer-backed incentives that companies are eligible to receive typically have no “clawbacks,” or penalties, if the firms fail to maintain minimum job-creation levels, The Nerve has found over the past two years in reviewing various state and local incentives agreements.

Take the Money and Run

A number of companies that received millions of dollars in incentives later closed or moved out of state,as first chronicled by The Nerve two years ago. Mack Trucks, for example, which operated an assembly plant in Fairfield County from 1987 to 2002, received at least $17 million in state and local incentives, according to published reports when the project was announced.

More recently, several big announced projects that were backed with incentives offers have yet to materialize, including, as reported in September by The Nerve, a $460 million AQT Solar manufacturing plant project in Richland County, which would bring a purported 1,000 jobs over four years.

The total taxpayer cost of the Richland County project, which was announced in 2010, is projected to be at least $24 million over 10 years, according to a cost-benefit analysis included with the state incentives agreement.

Last month, Amy’s Kitchen, which announced in May that it would build a $63 million manufacturing plant in Greenville County, creating 700 jobs over six years, surprised economic development officials when it reversed course, saying it was delaying construction indefinitely to “reconfigure existing operations to meet their immediate needs,” according to a story in the Anderson Independent Mailnewspaper.

Greenville County offered the frozen-food manufacturer a fee-in-lieu-of-taxes (FILOT) agreement that would significantly reduce the company’s property tax bill if it ever locates in the county, according to a copy of the agreement provided by the county last year to The Nerve under the Freedom of Information Act.

In addition, the state Coordinating Council for Economic Development approved job development credits for Amy’s Kitchen but had not finalized any state incentives agreement as of June, according to a response then by Commerce to an FOIA request from The Nerve.

Fuzzy Numbers

Whether the remainder of the approximate 20,000 new jobs announced during the first year of Haley’s tenure will materialize remains to be seen. The Nerve’s review of 94 Commerce press releases announcing those jobs found that no timetables were specified in the vast majority of cases.

In 29 projects, the specified time period for creating the announced positions typically is five years, which would result in less of an impact on unemployment in any given year, The Nerve’s review found.

Continental Tire, for example, announced in October that it would create 1,700 jobs with a $500 million manufacturing plant in Sumter County, making it the biggest-announced manufacturing project in terms of job creation so far during Haley’s tenure.

Among other incentives, the state has approved $35 million in state and federal grants to Sumter County to help finance the project, according to an October response from Commerce to an FOIA request fromThe Nerve.

But the 1,700 jobs would be created over a 10-year period, according to a Commerce press release, which averages out to be 170 jobs per year. That likely won’t create much of a dent in the state’s 9.9 percent unemployment rate.

(After this story was published, the S.C. Department of Employment and Workforce announced this morning that the state’s unemployment rate had dropped to 9.5 percent in December.)

Of the approximate 20,000 new jobs announced so far under Haley’s watch, about 4,000, or 20 percent, would be created over a five-year period with the addition of an unspecified number of Wal-Mart stores statewide. As The Nerve reported in September, most of those jobs likely will be relatively low-paying retail sales associate jobs.

Based on a top hourly rate of $11.52, as cited by PayScale Inc., a compensation-data collection company, a Wal-Mart associate working a 40-hour week would earn $9,202 less yearly than the 2010 state per-capita annual income of $33,163, a review by The Nerve found.

Columbia city officials, who are considering whether to approve locating a Wal-Mart store at the site of a baseball stadium, have said the company is not seeking any subsidies, though the small Upstate town of Easley approved $1.7 million in bonds for roadway and other infrastructure improvements for a Wal-Mart store there, The Nerve reported last month.

“You shouldn’t be using taxpayer dollars to subsidize the creation of those types of jobs,” said Mattera of Good Jobs First.  “You should use that money to create good-paying jobs. That will have the most impact.”

Reach Brundrett at (803) 254-4411 or rick@thenerve.org.