State Incentives Offered on Scaled-Back Projects

October 24, 2012

Investigative Reports

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FreebiesWhen electric bus maker Proterra announced in March that it was slashing the scope of its manufacturing project in Greenville by 900 jobs, or nearly 70 percent, what wasn’t publicly revealed then was that the small company would receive a $1.5 million taxpayer-supported state grant for site improvements.

The S.C. Coordinating Council for Economic Development (CCED), made up of the state Department of Commerce secretary and the heads of 10 other state agencies involved in economic development, at its March 7 meeting approved the grant and extended it for two years, council minutes show.

As it turns out, Proterra isn’t the only company in South Carolina to be offered state incentives even after lowering its initially announced job-creation targets, state records show.

A review by The Nerve of minutes from meetings this year and last of the Coordinating Council and a CCED subcommittee known as the Enterprise Program Committee found that the panels approved preliminary or revised incentives deals with at least nine companies, including Proterra, that lowered their minimum job-creation targets.

Excluding Proterra, the reductions in job-creation targets ranged from about 18 percent to 60 percent. The identities of seven of the nine companies were kept secret; no reasons were cited in the meeting minutes for the target reductions.

The Nerve earlier this month first reported that tens of millions of dollars in taxpayer-backed incentives are approved annually in largely secret meetings of the Coordinating Council and Enterprise Program Committee. Both panels are administered by the Department of Commerce; by law, the Commerce secretary chairs the Coordinating Council.

A Commerce lawyer earlier told The Nerve that the identities of some companies are not revealed in meeting minutes because in those cases, the firms often have “not yet decided to locate or expand” in the state; and that the state’s offers of incentives are “part of the inducement process.”

Typically, the Coordinating Council and Enterprise Program Committee reduced the amount of grants or the length of time eligible companies could claim job-development credits, or refunds of a portion of a company’s employee state income-tax withholdings, for those firms that lowered their job-creation targets, according to meeting minutes reviewed by The Nerve.

But the reductions in taxpayer-backed goodies weren’t always in proportion to the drop in job-creation targets.Take Proterra, for example. The initial $3 million in state grants for the project was cut in half, though the company’s job-creation target was reduced by about 70 percent.

In another case, AmbioPharm Inc., a pharmaceutical manufacturer headquartered in North Augusta, lowered its minimum job-creation target from 50 to 20 workers, a drop of 60 percent, though the length of time it could claim job development credits was cut by 30 percent, to seven years from 10 years, according to minutes of a Sept. 6 CCED meeting.

It was not known if other state or local incentives were reduced for those companies that lowered their job-creation targets. The Nerve reported last year, citing a review of state and local incentives agreements, that Proterra could receive at least $40 million in incentives over 10 years based on its initial job-creation and capital-investment targets.

Offering taxpayer-supported incentives is no guarantee that a company will locate in South Carolina. For example, the CCED in 2008 offered grants of $4 million and $12 million to Laurens and Greenville counties, respectively, to help Chicago-based American Titanium Works locate facilities in those counties, according to the September 2011 minutes of the CCED.

But the project was delayed a number of times, and the Coordinating Council set a final extension deadline of Dec. 31, 2011, according to the minutes. In July, the company announced it was reviving its plans to create 350 jobs in the Upstate, according to a story in the Spartanburg Herald-Journal, though it’s not known if the state renewed its incentives offer for the project.

In reviewing meeting minutes of the CCED and Enterprise Program Committee, The Nerve also found that taxpayer-supported incentives were approved for projects not directly related to companies locating or expanding in South Carolina.

For example, the Coordinating Council in 2010 approved a $71,000 Rural Infrastructure Fund grant to the cities of Laurens and Walterboro to start a “Teen After School Center Plus Program,” which according to CCED minutes, is “aimed at improving community safety, aiding at-risk youth and strengthening conditions to encourage economic development.”

The Coordinating Council approved an additional $70,000 last March to continue the program at both locations, according to the council’s June 14 meeting minutes.

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