View Mobile Site

Economic Development (2 of 3)

‘The sales people of the county’

Posted: March 22, 2018 6:10 p.m.
Updated: March 23, 2018 1:00 a.m.
C-I file photo/

Kershaw County Administrator Vic Carpenter

View More »

If there is one part of Kershaw County government most responsible for bringing new industry to the county, or having existing companies grow, it is the Kershaw County Economic Development Office. Unlike most other county departments, which are housed inside the County Government Building on Walnut Street in Camden, the economic development office is situated inside the new Central Carolina Technical College (CCTC) building near I-20 Exit 98 off U.S. 521. It recently moved into that space from an older CCTC building next door.

The move was so recent on a Tuesday morning in late February that the phones in the office weren’t working. County Economic Development Director Peggy McLean and Marketing Manager Lauren Reeder had to do business via email, text or cell phone.

McLean, who commutes from her home in Florence, and Reeder now work in a space that is larger than they previously shared, with a third position open for an “Existing Industry and Workforce Development Manager.” It is a department that has, for all intents and purposes, doubled its budget since McLean took over in October 2011.

According to information provided by the county, in Fiscal Year (FY) 2011, the economic development office’s total budget stood at just a fraction above $369,000. That included full-time salaries of $115,260 for the county’s former director, Nelson Lindsay, and an administrative assistant. The remainder of the budget included items such as insurance, retirement and workers compensation benefits, a vehicle allowance, office supplies, postage, dues and publications, a copier lease, industrial grounds, site development, travel, elective training, long distance and cellular phone service, (industrial) park utilities, contracted services and maintenance, and program supplies.

Now, in FY 2018, the total budget for the economic development office stands at $750,000, including $230,305 in full-time salaries, which appears to include not only McLean and Reeder’s salaries, but salaries for the vacant workforce development manager and a fourth position, “land manager,” that is not currently on the list of vacancies the county is looking to fill. The remaining nearly one-half million dollars is spread out among some of the same categories as in FY 2011, with inflation accounting for some of the increase. However, it also includes items the FY 2011 budget did not: $30,000 for advertising/marketing; $28,870 in legal professional services; a $147,677 transfer to the airport/general fund; and nearly $40,000 in capital projects.

Yet, according to other data provided both by McLean herself and Kershaw County Auditor Robin Watkins, the office focuses on a segment of business that only provides about 10 percent of the county’s revenue.

Some people -- including members of Kershaw County Council -- have criticized the decision to focus additional money and effort on something that, to them, has provided little in return.

Kershaw County Administrator Vic Carpenter had this to say in response to such criticism:

“When I got here as administrator, we were just coming out of the recession and Kershaw County had not had a great 10 years prior to that. We had a few announcements, (but) we had lost the big one,” Carpenter said, referring to the half-billion dollar decision Continental Tire made to locate in Sumter rather than Kershaw County in October 2011. “Gene Wise had been elected as chairman. (He) had a very strong focus on industrial growth and development. He’s the reason why council got behind having this complex (CCTC/ATEC) here built. I hadn’t been here six weeks, when Nelson came and said, ‘I hate to do this to you, but I’m leaving; I’m going to Columbia.’”

At that point, Carpenter explained, he and council made the decision to make a concerted effort in changing the way it handled economic development.

“Our product was poor. We had a collection of industrial sites that we had mostly marketing agreements for, but we didn’t own. The one we owned didn’t have any infrastructure in it and it was the most remote. We had no buildings. So, a decision was made that the county would begin investing in itself,” he said.

Part of that decision was to conduct a statewide search for Lindsay’s replacement that, ultimately, resulted in McLean’s hiring.

“Peggy was, by far, the one who had the most experience and knowledge,” Carpenter said. “She came from commerce, she came from working in the power and electrical industry. She knows economic development like few do in the state. If you ever go to (the Department of) Commerce, everyone in Commerce knows Peggy and it’s a good knowledge.”

Next, Carpenter said, was the money the county needed to invest in itself.

“Well, this is six years later, and we’re only now walls up,” he said, referring to the completed CCTC. “It does take time to do that. We had to re-do our entire marketing concept. We brought in Lauren, whose focus is marketing, who knows that stuff and is good at it. So, we upgraded our skills there. We have made a committed effort to invest in the people who represent us. We hadn’t always done that in the past, which is one reason why Nelson went on elsewhere.”

Taxes and FILOTs

Carpenter pointed out that the economic development office’s approximately $750,000 budget is being paid for by the very industries recruited to or expanding in Kershaw County.

“When we started this, economic development was paid significantly out of the general fund of the county,”

Carpenter explained. “So, your average person was paying for economic development whether they directly saw a benefit from it or not. What we did is we shifted to paying for it out of industry only -- fee in lieu. So all the money we spend on economic development comes from the fee in lieu stream. No property taxes, it’s all from industry. So, industry pays for economic development … they’re the ones who get the benefit from it … so the average taxpayer’s not picking up the cost off their shoulders.”

According to the S.C. Department of Commerce’s (SCDOC) website, a FILOT (pronounced by county officials as “fee-low”) -- a fee in lieu of tax agreement -- is the only tax-related incentive the state allows individual counties to offer potential companies to set up shop in their communities. FILOTs can be offered to companies for investing as little as $2.5 million. They are usually 20-year incentives lowering the assessment property tax liability from the S.C. manufacturer tax rate of 10.5 percent to as low as 6 percent.

McLean said a consultant once told her that that a company investment of $1 million will be taxed six times higher in South Carolina than it would in North Carolina, making FILOTs attractive to prospective companies looking to save on taxes.

“South Carolina’s (property) tax rate is abnormally high compared to the rest of the country,” Carpenter said, and indicated FILOTs were the only way to deal with that.

According to McLean, FILOTs only cover property being taxed under a new investment, locking the millage rate on that investment and are granted in five-year windows. So, if an existing company is paying full manufacturer property taxes and then decides to expand, the FILOT will only cover property -- additional land, facilities and equipment -- related to that expansion. It will continue to pay property taxes at the full manufacturer’s rate on its pre-existing property. If the company decides to expand again after the fifth year, they must request another FILOT.

This way, Carpenter said, entities such as the Kershaw County School District still obtain tax revenues from the full value of existing industrial property.

Watkins said after the economic development office portion of FILOT collections is disbursed, the rest is divvied up among services provided in the districts where the company locates -- fire, law enforcement, water, etc.

“And don’t forget about multi-county parks,” Watkins said.

If a business is already in or locates in one of those parks, other counties in the partnership could receive anywhere from 1 to 5 percent of the FILOT collections.

According to data provided by Watkins, between fiscal years 2011 and 2017, the county has collected approximately $413.68 million in overall tax revenue. Of that, approximately $23.476 million came from FILOT-related agreements, or about 5.6 percent of tax revenue.

During that same time, Kershaw County Council approved approximately a dozen FILOT agreements. Of those, only a single one was for a new company coming to the county: Diversified Information Technologies (DIT) in September 2012. In return for promising a $5.8 million investment during its first five years in Kershaw County, creating approximately 25 jobs, the county agreed to waiving property taxes in favor of annual payments equal to an 8 percent assessment for 10 years, which would drop to 6 percent if DIT hit the $10 million investment mark.

DIT, headquartered in Scranton, Pa., is a document management solutions company. When it moved into the former SPX Filtran Building off U.S. 601 in Lugoff, it was one of four new facilities the company was purchasing. According to a press release at the time, DIT said it was working to bring the new facilities, including Lugoff’s, in line with National Archives and Records Administration standards to protect “classified and highly confidential federal information.”

All of the remaining FILOTs county council has approved during the last seven years have been for expansions. Two companies received two FILOTs each for expansions in separate years. McLean provided the following list of FILOTs -- which she described as “a performance-based incentive” -- the dollars invested and the jobs created:

2010 -- Canfor/New South -- $5 million invested for 40 jobs

2011 -- Accuride -- $8.7 million invested for 25 jobs

2011 -- Oak Mitsui -- $25 million invested; no jobs listed

2011 -- INVISTA -- $20 million invested for 50 jobs

2013 -- Weylchem -- $10.8 million invested for 49 jobs

2014 -- Hengst (extension of 2005 FILOT) -- $8 million for 20 jobs

2015 -- Haier -- $72.1 million for 410 jobs

2015 -- INVISTA -- $45 million for 20 jobs

2015 -- Suominen -- $55 million for 29 jobs

2016 -- Protective Packaging -- $2.5 million; no jobs listed

2017 -- Roy’s Wood Products -- $2.5 million; no jobs listed

2017 -- Weylchem (a separate announcement under the 2013 FILOT) -- $13 million; no jobs listed

County council just approved a new FILOT for Canfor for a minimum investment of $35 million over five years with an assessment ratio of 6 percent and a fixed millage rate of 324.4 mills over 30 years.

Note that the FILOT for DIT is not listed. McLean said that is because DIT never filed the paperwork necessary to take advantage of the FILOT, which means that to this day, the company is paying full taxes on its investment.

In a memorandum to the C-I in response to a FOIA request in connection with this project, Carpenter said the county “has announced (more than) $300 (million) in expansions to existing industries since 2015” and that “2018 is on track to another successful year. These announcements didn’t happen by chance.”

McLean’s list totals $267.6 million in FILOT-related investments to date since 2010 for a total of 643 jobs. Carpenter said the $300 million figure includes approximately $33 million remaining in committed FILOT-related investments.

There have also been some missed chances.

In Dec. 2011, when council approved the first INVISTA FILOT, they also passed third and final reading of an ordinance authorizing a FILOT for Southeast Renewable Energy (SRE). SRE planned on building a new biomass plant, bringing a $45 million investment creating 25 to 50 new jobs. However, SRE never used the FILOT. In July 2012, the company announced it would not be coming to Kershaw County after all, deciding to concentrate on two plants it had already started building in Allendale and Dorchester counties.

“That shows you that the fee agreement is only a portion of their decision process; it’s not the be-all end-all,” McLean said.

Carpenter added, “People who would make that point are trying to justify their own belief, and their belief is that fee in lieu is bad, it’s negative and it’s hurting us.”

“It’s simply one component of their business,” McLean said, likening the decision-making process to considering taxes on a house along with how a prospective owner perceives its entire livability.

Carpenter acknowledged that there was local opposition to SRE’s plant being located in Kershaw County because of a fatal malfunction at a similar biomass plant in Columbia -- a plant SRE neither owned nor operated.

“I’m not saying that was their only reason, but it happened just as we were hitting the third reading time frame. There was a lot of opposition in Kershaw County to this and that does have an impact as well,” he said.

Four years later, in September 2015, council was ready to vote on first reading of an ordinance authorizing a FILOT for “Project Stagecoach.” It reportedly would have brought an $88 million investment. However, council was asked to put the vote on hold as the prospective company was continuing negotiations with a potential client. Project Stagecoach never came back up for a vote.

The good news is Stagecoach isn’t really gone.

“I still have it as an active project,” McLean said and, therefore, could not get into specifics. “They can go on for years. If (a company) came here in 2008 and if they had a positive experience, (then) in 2018 -- if their business model has changed; if all of a sudden they need to look somewhere -- we have an advantage. They’ve seen us; they know who we are and they had a good experience. That’s why we try to give them a positive experience whether we land them or not.”

When taking all of this into account, along with the fact that companies’ property, including equipment, depreciate over time, McLean said it is exciting to see expansions.

“These companies are investing in themselves. They’re putting machinery and equipment in the plant, which means it’s going on the tax rolls,” McLean said. “(It’s) not nearly as sexy as a new location, and we love those, too. However, it really is an indicator of the business environment in Kershaw County. It proves we’re a good place to do business.”

Carpenter and McLean said expansions cost the county less, financially, because most of what the expanding company needs is already in place. Carpenter also said McLean is trying to raise the average hourly wage in the county, which currently stands at $17.85/hour.

FILOTs and assessments

However, attracting new businesses is important to any county because they can affect the assessed value of the entire county. Watkins said the assessed value of Kershaw County has being going up slowly. While property is reassessed every five years, gains and losses in the residential, commercial and industrial markets have effects every year. She said the county’s assessment was “pretty stable” from 2016 to 2017.

“It was a little weak in 2016 but improved in 2017,” Watkins said.

Property was assessed in 2012 and again in 2017 for the 2013 and 2018 tax years, respectively. Watkins said the county’s assessed value in 2012 was approximately $202 million and went up to $240 million in 2017.

Watkins said she has heard from the assessor’s office that property values in downtown Camden have been picking up along with commercial property along U.S. routes 1 and 601 in Lugoff.

However, “the lake took a dive,” she said, “(while) vehicles have grown tremendously.”

Watkins said FILOT collections have increased thanks to a $7 million increase in the assessed values of the companies who use them. FILOT-related assessments stood around $10 million in 2012 and increased to $17 million in 2017, she said.

Carpenter said FILOTs “make us competitive with other states, apples to apples,” while improving the county’s quality of life, which, he said, “is the motive of recruiting new industry.”

“(It’s) to give people a reason to live in this county -- to live, work and play, to use that term,” he said.

Carpenter went on to say that the county has a lot of discussion with the school district about growth, including industrial growth. He said the district benefits from industrial growth to a point, but may not necessarily equate it with the residential growth that feeds student enrollment.

“But they get revenue from industry that they don’t get from residential, so they see that as very important to them, and that’s between them and the state of South Carolina,” Carpenter said. “All growth is growth and it’s all going to have an impact on us. Existing industry growing has the least impact, which is why it’s very attractive. It’s not that it’s low-hanging fruit; you have to fight for it. But, if you have to pick between taking a green field and turning it into an industry versus just a modest amount of effort for an existing industry, you go with the easier effort with the same or better impact.”

And McLean said it is a “fight” to get existing industry to expand.

“I think it’s assumed, ‘Oh, it would happen anyway,’” she said.

“You’re competing with China,” Carpenter added. “You’re competing with $2 a day versus $12 an hour. You’re competing with no environmental restrictions versus our environmental restrictions. You’re competing with communities that don’t have the ability to speak out with communities that do get to speak out. So, anyone who would say that … I’ve been in enough meetings where they say, ‘It’s between you and Mexico.’”

Carpenter said that because of that situation, the county has to know what its strengths and weaknesses are and overcome the weaknesses.

“You know, Suominen (in Bethune) has 10 plants around the world. They did not pick Bethune, South Carolina, (to expand) just because they were in Bethune, South Carolina. That was probably one of their least attractive locations, if you want to compare Finland and France,” he said.

McLean added Suominen plants in Wisconsin and Connecticut and said all those locations wanted to expand just as badly as Bethune did.

“That’s why I think it was important that I was in Europe, and I went to Finland and called on the corporate headquarters. I met with the CEO. I had met her here, but I went and told her, ‘Thank you for doing business in Kershaw County,’” McLean said.

As to whether the county’s investment in economic development -- especially where FILOTs are concerned -- is “worth it,” Carpenter points out that, in FY 2011, when the county hired McLean, the county collected $3.6 million through fee in lieu agreements.

“This year, we’ve collected $5.3 million in fee in lieu (money),” he said; a 50 percent increase despite company property depreciating by 11 percent annually. “Prior to that, we had decreased. We had decreased from ’08 to ’09 to ’10, so it was going down every year prior to bringing Peggy on board and making a commitment. That’s the best proof I can show you that it was a decision that made sense.”

Carpenter added that, with one exception, all the companies current paying FILOT-related fees are actually paying in more than their FILOTs originally projected, in some cases, significantly so.

Kershaw County’s ‘products’

In 2015, Kershaw County Council voted to authorize a $17 million bond issue to improve the county’s industrial parks. The idea is to make them as ready as possible for new companies to begin constructing their plants and get up and running. The economic development office’s website lists 11 industrial sites, three of which -- one at 604 Mt. Olivet Road near Camden, and Emmanuel Site parcels 1 and 2/3 in Lugoff -- are listed as being available for general development. The other eight are available for industrial development.

In addition, the county has two buildings available for use.

As word about DIT’s arrival to Kershaw County began to spread in spring 2012, S.C. Yutaka Technologies -- an ATV and motorcycle parts manufacturer -- announced it would be leaving, taking 150 jobs with it. According to McLean, the 168,000-square-foot building next to the Target Distribution Center in Lugoff has been leased as a warehouse and is being maintained, ready for the next major tenant to take over.

A little further up, off U.S. 601, the county lists an 89,366-square-foot building at 185 West Jones Lane as available for general development. It can be purchased for $2.1 million or leased for $2.50 per square foot.

Shell or spec buildings -- facilities built to a point where a prospective company can move in and complete construction to its specifications -- are a type product. Carpenter said having such facilities allow prospective companies to “get up and running quickly,” cutting months off the time needed to do so.

McLean said one of the biggest investments the county is making is in workforce support through the new CCTC/ATEC campus.

“I am so excited about that training space in there,” McLean said. “If I’ve got a company coming in, in a year and half, I’ll be able to say, ‘If you look right across the street, you look over here, that’s your future workforce. That’s who will go to work for you.’ And the number one issue in manufacturing today -- new, existing, prospective, whatever -- is workforce. So, the ability to show them that we can provide that is vital.”

“At the end of the day,” Carpenter said, “what these industries are looking for is they want to get up and running quickly. The longer it takes for them to be producing, the longer it takes them to make money. They want to be able to produce things efficiently. Their only goal to come here is to make money.”

Carpenter said anything the county can do to support companies in that goal is vital.

“That’s why that spec building is going to be important because, we feel, that spec building is going to cut off eight months of the process getting someone up and running,” he said.

The spec building is located near U.S. 601 and I-20 at Heritage Point Industrial Park.

McLean said many companies use databases or create spreadsheets of hundreds of communities with dozens of facts, plugging in “yes” or “no” for whether or not communities have what they need. A community with eight out of 10 things as “yes” will continue to be looked at; a community with only six will likely be struck off the list. McLean said that process takes place long before representatives ever talk to her.

“It’s very disappointing when you don’t get the decision,” McLean said. “Most often, and I’m going to say 95 percent of the time, it’s because of a decision the company has made that really has nothing to reflect badly on the location that’s not chosen. They have their own, internal decision process.”

She said that is why the county is now focusing on improving its industrial products.

“Our industrial sites, industrial parks and industrial buildings -- we’re making that better so we’ll have more attractive products for them to look at and consider,” McLean said.

‘What … needs to be done’

“We’re the sales people for the county,” McLean said of her office. “We are promoting Kershaw County to the players in the economic development field, and that would be the Department of Commerce … (and) site location consultants. That’s why we work with our existing industries, because existing industries are competing for expansion projects. That’s a competitive process. Most all of our industries, right now, are what we call branch plants. They’re one of many owned by the parent company or headquarters.”

She went back to Suominen and added INVISTA as examples of plants competing with other locations in the same company to expand.

“So, our job is to promote the county,” McLean said, with three focuses: recruit new industry, help existing ones grow and, thirdly, develop the aforementioned industrial products.

She said her office’s website is very important, being kept as updated as possible in order to offer prospective new companies the information they need to make decisions. McLean also tries to be out of the county as reasonably as possible in order to give industrial decision-makers a “face to the name of Kershaw County.” She also attends marketing and other conferences.

“Economic development truly is a relationship-type business. People want to do business with people they feel comfortable with and feel confident in. So, the more people I can go out and meet, whether it is consultants … if they know me, if they’ve met me somewhere, it gives me kind of a leg up over some place that they’re not as knowledgeable about or not have a relationship with,” McLean said.

If the county’s economic development department is a sales office, then one of its clients has to be the Central SC Alliance (CSCA). In addition to Kershaw County, CSCA members include Calhoun, Clarendon, Fairfield, Lexington, Newberry, Orangeburg and Richland counties, plus the city of Columbia.

What this means is that, in many cases, a company looking to come to South Carolina for the first time will contact SCDOC, which, in turn, will then contact the eight alliances, including CSCA. CSCA will then, in turn, inform Kershaw and the other counties in the alliance that someone may wish to locate in the area.

McLean said the alliance’s role is to help promote the county.

“They do full-time marketing. So, they are constantly on the road. They are advertising. They are meeting people. I have the opportunity to travel on some of their trips, but they are a marketing entity,” she said.

She also explained that the CSCA helps the county with research.

“We have to provide a lot of data in response to questions from prospective companies and consultants, everything from topography to major employers to quality of life, soil, historic -- all kinds of information -- nearest fire service, nearest hospital, nearest airport, nearest port. So, they help us a great deal when it comes time to answer those extensive questionnaires,” McLean said.

As of late February, McLean was unsure how many leads the CSCA has provided Kershaw County, nor if any of those leads had turned into actual jobs created in the county.

“I get several a month, so it’s very productive,” McLean said. “They have told me, because it happened before I came, that they were involved in Hengst locating in the county.”

Carpenter said looking at economic development in that way is “nebulous,” like looking at a Venn diagram with four overlapping circles -- SCDOC, CSCA, Kershaw County and, finally, McLean’s office.

“Who is responsible for something getting here?” Carpenter said. “Well, really, everybody is.”

He said the county sees the relationship as beneficial and part of what it takes to bring industry to the county, even if it takes years to happen.

Many of the officials interviewed for this project said Continental Tire’s Sumter County decision was one of the most disappointing milestones in Kershaw County’s modern history. Continental’s decision meant 1,620 jobs did not come here along with its $500 million investment.

Since then, South Carolina has seen more than $10.2 billion in new industry announcements accounting for more than 48,000 new jobs. In comparison, during that same seven years, only one new industry has come to Kershaw County: DIT.

McLean and Carpenter point back to their assertion that during not just the last seven years, but even before that, Kershaw County had no products to show off, that it was not investing in itself as it has been since council approved the $17 million bond in 2015.

Carpenter said the county turned to everyone, including the CSCA, when Continental chose Sumter, asking “What can we do differently? Why don’t we see buildings going up?” He said it has been interesting over the years to see how many companies want to be able to move into an existing building, or that want to be close to a seaport, airport or railroad line.
McLean said one of the first things she did, as far back as 2011, was perform an analysis to answer the question, “Why not Kershaw County?”

“And the only thing we could come up with at that point was we needed to make our product better. We needed to be more attractive to industries,” she said. “We had an industrial park -- Governor’s Hill -- and all it was was trees. That’s when we decided we had to make our products better and more attractive.”

Carpenter said SCDOC, CSCA and other outside consultants assisted with that analysis.

Carpenter also wondered how many of the 300-plus announcements making up the $10.2 billion figure of new industry actually came to fruition.

“How many of them went into an existing building? How many were port-driven? How many of them were (international) airport-driven? How many of them were rail-driven?” Carpenter asked, adding that announcements made in Charleston, Greenville or near Charlotte are driven by factors to which Kershaw County cannot and should not be compared.

McLean said she believes Kershaw County’s lack of attracting new industry is precisely because the county hadn’t begun making itself more competitive and attractive until now.

“We have to be realistic about who we are,” Carpenter added. “I would say to anyone who does ask ‘We never got any of this, why haven’t there have been any?’ that it was a direct result of the policies we were following for so many years of doing nothing, and Nelson will tell you that. He was given very little to work with and he did his best to make (it work).”
He said the county can control buildings, streets, signage and the rest to attract companies, but can’t control what other factors may convince a company to come to Kershaw County. He called it “working on the fundamentals.”

“We’re doing what we think needs to be done to make us competitive,” McLean said.

Just as much to that point, Carpenter said when he asks what the county is not doing, or, rather, if it’s doing anything wrong, the answer is “nothing.”

“There isn’t anything we’re not doing to get (companies). No one has got any idea why, they just don’t like losing. Neither do we, and we’re not getting the new industry, and that hurts all of us,” Carpenter said.

McLean added that instead of getting feedback about what the county might be doing wrong, she instead receives compliments on the teamwork and what the county presents to prospective industry.

Comments

Commenting not available.
Commenting is not available.


Contents of this site are © Copyright 2018 Chronicle Independent All rights reserved. Privacy policy and Terms of service

Powered by
Morris Technology
Please wait ...