S.C. House budgets millions for little-known Commerce fund

March 17, 2018

Investigative Reports

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By RICK BRUNDRETT

In December 2016, the S.C. Department of Commerce quietly announced it was relaunching an online tool to connect companies seeking to locate in the state with available industrial sites, buildings and office space.

But “LocateSC” is much more than a website – especially with a $10 million taxpayer price tag attached to it under the House version of the 2018-19 state budget that passed this week.

To put the $10 million in perspective, it’s more than the total proposed budgets for 33 state agencies or separately listed agency divisions in the $28.1 billion state budget for next fiscal year, which starts July 1.

LocateSC’s budget for this fiscal year is $17 million.

In an email Friday to The Nerve, Commerce spokeswoman Adrienne Fairwell said the LocateSC program “helps the state be proactive in developing land and existing properties into suitable inventory that we can show potential projects.”

Fairwell didn’t immediately respond to follow-up questions seeking specifics about the site development program. The Nerve has reported extensively about the secrecy surrounding taxpayer-backed incentive agreements between Commerce and companies.

Site development across the state is a priority for Commerce, as stated in the agency’s fiscal 2016-17 accountability report approved by Commerce Secretary Bobby Hitt.

“S.C. Commerce continues to allocate funding to assist counties in developing sites, speculative buildings and making improvements to industrial parks as part of its product development efforts,” the report said.

In his 2018-19 state budget, Gov. Henry McMaster proposed $4 million for LocateSC for “economic development site preparation efforts,” though he didn’t provide details. In a written budget summary, the Republican governor proposed nearly $12 million more in total for Commerce next fiscal year to “maintain and expand upon South Carolina’s strong economic development trajectory.”

Commerce’s total budget, which includes state, federal and “other” funds, for this fiscal year is about $203.7 million. Next year’s proposed budget under the House version is $236.2 million – a nearly 16 percent hike.

Commerce was financially fat at the start of this fiscal year: S.C. Department of Administration records show that Commerce carried over $43.2 million in general funds from last fiscal year, including nearly $10.8 million collectively in two accounts related to LocateSC. On top of that, the agency had nearly $109 million in total cash balances in federal and “other” funds as of June 30.

McMaster proposed drawing the $4 million for LocateSC in 2018-19 from the state’s Capital Reserve Fund, which is supposed to be used for financial emergencies but often is raided annually by lawmakers for pet projects, as The Nerve has previously reported.

Under the House version of next fiscal year’s state budget, LocateSC would get $6 million from the Capital Reserve Fund and another $4 million from a separate $20.6 million pot of one-time funds.

LocateSC isn’t the only economic development fund at Commerce’s disposal. The House version of next fiscal year’s budget calls for $5.2 million for the “deal closing fund,” which, according to Commerce’s website, are grants “generally awarded to assist with the costs of real property improvements or other road or infrastructure improvements.”

The Nerve previously has reported that lawmakers have budgeted tens of millions of dollars annually for that fund, also known as the “closing fund” or “governor’s closing fund.”

Fairwell said $36 million was carried over from the closing fund at the end of last fiscal year, all of which she noted was “committed to projects,” though she didn’t immediately provide details. Department of Administration records show that $9 million in general funds from that account was carried forward into this fiscal year; in addition, the account had a total cash balance of $26 million in federal and “other” funds as of June 30.

Money from the closing fund is doled out by the state Coordinating Council for Economic Development, an 11-member group made up of the directors or board chairpersons of state agencies involved in economic development. 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.

By law, the council is chaired by Hitt, whose annual salary as the head of Commerce is $175,980.

Brundrett is the news editor of The Nerve. 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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