Key details in Volvo cost-benefit analyses kept secret by S.C. Commerce

July 12, 2019

Investigative Reports

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By RICK BRUNDRETT

More than four years after officials announced that Volvo would locate in South Carolina, the state Department of Commerce won’t reveal the estimated amounts of certain public costs and benefits identified in analyses of the $1.1 billion project.

The Nerve reported last month, based on Commerce records obtained under the state open-records law, that more than $250 million in incentives had been spent or offered by state and local government agencies to locate the Swedish car maker’s first U.S. plant off Interstate 26 in Berkeley County.

That amount was at least $50 million more than what public officials initially said would be the estimated public costs of the project. The incentives included everything from multimillion-dollar state grants and bonds, sponsorship of a professional women’s tennis tournament, and an offer of free display space at Charleston International Airport.

To better determine projected total public costs of the project, The Nerve at the time asked Commerce for any cost-benefit analyses, but was told to submit a formal request for those records under the S.C. Freedom of Information Act.

On Tuesday, the agency released three analyses used by a state panel chaired by Commerce director Bobby Hitt – two done around the time when the project was first announced in May 2015, and the third dated about a month after an announced expansion in September 2017.

Yet Commerce blacked out estimated dollar amounts in a dozen listed categories in the records, including the value of land, new buildings, machinery and equipment at the plant site – much of which already has been or will be paid for by taxpayers – plus average pay for the approximately 4,000 promised jobs.

In contrast, a Commerce cost-benefit analysis publicly released in April in connection to the Carolina Panthers’ proposed move to South Carolina had no redactions.

Asked about the redactions in the Volvo analyses, agency spokeswoman Alex Clark in an email Thursday told The Nerve that those amounts are “considered confidential proprietary information” under the state open-records law.

Clark said Commerce’s chief lawyer “consults with the company affected (in this case Volvo) before making redactions and disclosing public records,” adding, “Typically, companies consider as confidential proprietary and competitive any information concerning payroll, average or individual employee wages, or how and where a company invests in its facilities.”

Although the Freedom of Information Act allows pubic agencies to redact “confidential proprietary information” for “economic development or contract negotiations purposes,” they are not required to do so.

Combined, Commerce estimates the total public costs for the Volvo project at $331.2 million over 15 years to 20 years. That works out to be an average of $84,716 per worker over the period for the promised 3,910 workers.

The agency, however, blacked out the estimated public cost of a job development credits, which are refunds of a portion of quarterly state withholding taxes – a favorite incentive routinely doled out by the state Coordinating Council for Economic Development (CCED), chaired by Hitt.

The council typically has met behind closed doors in Commerce’s headquarters in an office high-rise across from the State House to discuss various taxpayer-backed incentives for companies, as The Nerve has previously reported.

The Nerve was able to determine the total projected amount of job development credits for Volvo – $58.2 million – by subtracting other category amounts in the analyses from the total estimated public costs. Commerce on its website says the CCED typically caps the annual credit at $3,250 per worker, though agency records show that the credit can be up to $10,000 per year for some Volvo plant workers, and up to $40,000 yearly for certain office employees.

Job development credits typically are tied to a company hitting job-creation and investment targets. Asked how the state Department of Revenue, which issues the refunds, verifies a company’s compliance with the requirements, agency spokeswoman Bonnie Swingle in an email Thursday to The Nerve said the CCED has “procedures to monitor a business’ compliance status,” adding the CCED notifies the revenue department about “which businesses qualify for the credit.”

Commerce also redacted all dollar amounts under the annual payroll, average salary and average hourly-wage categories in the Volvo analyses. As of December 2017, the per-capita income in Berkeley County and the state was $35,667 and $39,517, respectively, revenue department records show.

In addition, Commerce blacked out dollar amounts in several categories under the “Income Benefits” heading, including the category of “Property Taxes from Project.” Under its incentives agreement with the state and Berkeley County, Volvo will receive substantial property tax breaks through “fee-in-lieu-of-taxes” (FILOT) payments.

The Nerve this week contacted the Berkeley County Treasurer’s Office for details about Volvo’s FILOT payments but was told to submit a formal open-records request for that information.

Overall, the Volvo project will result in a “net benefit” of more than $5.4 billion over 15 years to 20 years, according to the cost-benefit analyses. But as The Nerve reported last week, the public costs likely will keep growing; the state Technical College System, for example, revealed that its total cost of training 1,538 Volvo workers to date through its “readySC” program was at least $12.3 million, based on an average cost of $8,000 to $10,000 per employee.

In contrast, the cost-benefit analyses list the total estimated cost of training 3,910 workers through “special schools” over 15 years to 20 years at about $11.4 million, or an average of $2,909 per worker.

Clark, the Commerce spokeswoman, told The Nerve that the analyses were based on a “model created and provided to the Coordinating Council (for Economic Development) by the S.C. Revenue and Fiscal Affairs Office,” adding that the cost-benefit “formulas are embedded with the model.”

Some calculations, however, were different between the first two analyses on April 26, 2015, and May 14, 2015, for the initial project. For example, the total number of “direct” Volvo workers used in those projections dropped from 2,350 to 2,000.

This story was based on adding listed figures from the May 14, 2015, analysis for the initial project and the Nov. 1, 2017, analysis for the expansion. Clark said the listed numbers were “specific” to the separate analyses.

Bryce Fiedler, a policy analyst with the South Carolina Policy Council, 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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