Incentives Deals More Trick than Treat for Taxpayers

November 1, 2013

Investigative Reports

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Trick or TreatHalloween is officially over, but plenty of companies locating or expanding in the Palmetto State will continue to get big, taxpayer-funded goodie bags.

The Nerve recently received state incentives records for five projects under the S.C. Freedom of Information Act. The state Department of Commerce took more than 18 months to provide the requested documents for one of the projects and more than six months for three other projects – and only after multiple FOIA requests.

Commerce billed The Nerve more than $125 for 157 pages of records, which included $45-per-hour search fees.

Cost-benefit reports included with incentives records show that the total projected public costs of the five projects over a 10- or 15-year period range from about $4.5 million to $23.5 million. Following is a list of the projects, with their estimated 10- or 15-year public costs:

  • Recleim recycling plant, Aiken County, announced Feb. 20, 2013: $4.47 million (over 15 years);
  • Michelin tire expansion project, Anderson County, announced Jan. 24, 2013: $5.14 million (over 15 years);
  • Amazon.com distribution center, Spartanburg County, announced Jan. 23, 2012:  $12.16 million (over 10 years);
  • Spirit Pharmaceuticals plant, Clarendon County, announced March 6, 2013:  $18 million (over 15 years); and
  • ZF Transmissions plant expansion, Laurens County, announced July 26, 2013: $23.51 million (over 10 years).

The projected public costs don’t include county fee-in-lieu-of-taxes (FILOT) agreements that typically give huge property tax breaks over at least 20 years.

The number of promised new jobs with the projects ranges from 100 (Michelin) to 450 (ZF Transmissions), though  in most cases, the companies can take up to five years to create the jobs, according to the incentives agreements. The total announced investment per project ranges from $12.2 million (Spirit Pharmaceuticals) to $200 million (Michelin).

The cost-benefit reports or other documents provided to The Nerve indicate that in all five projects, new employees will receive taxpayer-funded training – to the tune of at least hundreds of thousands of dollars for each project – through the S.C. Technical College System’s readySC program.

Also, in all five projects, the state Coordinating Council for Economic Development, made up of the heads or board chairs of 11 state agencies involved with economic development, approved grants ranging from $675,000 to $2.2 million. In three of the projects, the Coordinating Council approved job development credits, which are rebates of employee wage withholdings, projected over 15 years to range from $2.3 million to $6.7 million, according to cost-benefit reports.

The Nerve previously has reported that the council, which is chaired by Commerce Secretary Bobby Hitt and meets in Commerce’s headquarters across the street from the State House, has doled out tens of millions of dollars annually in recent years – often in secret meetings.

Commerce maintains that secrecy even in finalized incentives agreements, often blacking out basic information such as the value of land, buildings and equipment; a breakdown of the number of jobs to be created by employment category; and average hourly pay rates for new employees.

Records with the Amazon.com agreement, for example, include one completely redacted page with only this handwritten note on it: “Section 8.3 b Benefit Information Redacted.” Another completely redacted page included with the Spirit Pharmaceuticals agreement reads only, “Detailed Project Cost Breakdown Redacted.”

Commerce frequently cites an exemption in the FOIA allowing “confidential propriety information,” which isn’t defined in the law, to be withheld. Incentive agreements between companies and the Coordinating Council for Economic Development, such as the one awarding a $2.2 million grant to ZF Transmissions, often specify that the council “agrees to redact any information in this Agreement or any documents incidental thereto that is clearly marked by the Company as confidential and proprietary and has been provided to the Council for economic development or contract negotiation purposes.”

In all five projects, even the names of company officials who signed incentives agreements were blacked out.

But company officials typically aren’t bashful when announcing their projects.

“The state of South Carolina and Aiken County have been extremely proactive in offering incentives for us to grow our business,” said Ben Hirokawa, Recleim’s CEO, during a Feb. 20 press conference at the State House, as reported then by The Nerve. “We are confident as we move forward that this strong relationship will continue for our mutual benefit.”

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

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