Taxpayers pay 20% more for Volvo deal than announced

When S.C. officials announced in 2015 that Volvo would locate its first U.S. plant in rural Berkeley County, the total incentives offered to the Swedish car maker were pegged at about $200 million.

An investigation by The Nerve, however, found more than $250 million in incentives spent or offered so far by state and local government agencies for the Volvo project – everything from multimillion-dollar grants to an offer by a state senator of free display space at Charleston International Airport.

The incentives amount doesn’t include at least $39 million in related spending by state-owned utility Santee Cooper, which, as The Nerve revealed last year, had a debt load then of more than $15 billion, stemming in part from the failed V.C. Summer nuclear project. And it doesn’t count state and local tax breaks for Volvo, the specific amounts of which are unknown.

The public bill for the Volvo project likely will keep growing. The S.C. Technical College System, for example, this week revealed to The Nerve that its total cost of training more than 1,500 Volvo workers to date was at least $12.3 million. In 2017 while its plant was still under construction, Volvo announced expansion plans to increase its workforce to 3,900, which likely means millions more spent for training.

The plant, located off Interstate 26 north of Charleston near Ridgeville, produced its first cars last year.

The gap between what politicians say are the public costs of bringing a company to the Palmetto State and the actual taxpayer bills often is very large – and citizens typically have no clue of what government officials are offering to prospects behind closed doors.

The Nerve this week asked the S.C. Department of Commerce for all cost-benefit analyses of the Volvo project but was directed to submit a state Freedom of Information Act request for that information.

The incentives issue is again timely with the Charlotte-based Carolina Panthers’ planned move of its headquarters and practice facilities to South Carolina. In announcing the proposal in March, Gov. Henry McMaster compared the state’s efforts to lure the NFL team to earlier taxpayer-backed deals for BMW, Boeing and Volvo.

Besides tens of millions of dollars in state economic development grants and bonds, government agencies and other organizations offered a variety of other taxpayer-backed gifts to Volvo, The Nerve found in its review of Commerce records.

The S.C. Department of Parks, Recreation and Tourism (PRT), for example, allowed Volvo to take over as the main annual sponsor of the former Family Circle Cup women’s professional tennis tournament on Charleston’s Daniel Island – at no cost to the company from 2016 through last year, according to a May 8, 2015, letter from PRT director Duane Parrish to Volvo.

“We look forward to the next generation of the tournament, The Volvo Cup,” Parrish ended his letter.

PRT spokeswoman Dawn Dawson-House told The Nerve on Thursday that Commerce covered the $2.55 million in total sponsorship costs.

In a May 7, 2015, letter to Commerce, state Sen. Paul Campbell, who is the CEO and executive director of the Charleston County Aviation Authority, offered a 12-month, no-cost display for Volvo – identified in the letter as “Project Soter” – at Charleston International Airport.

“If Project Soter were to join our community, we would be proud to feature a prominent company display in our airport,” said Campbell, R-Berkeley. He signed the letter as “Senator Paul G. Campbell, Jr. Director of Airports.”

The Nerve this week requested more details about the proposed display but was directed by an authority spokeswoman to submit a formal open-records request for that information.

In a March 26, 2015, letter to Commerce, Helen Hill, executive director of the Charleston Area Convention & Visitors Bureau, offered to “secure the best available site” on King Street, which she described as “historic Charleston’s main shopping thoroughfare,” for a “retail presence” for Volvo, under the Project Soter code name – plus cover lease costs for the first six months, up to a maximum of $40,000.

In an email to The Nerve, Doug Warner, spokesman for the tourism organization, said the lease “did not become a reality,” and that “no funds public or private were used for a lease.”

As with other incentives agreements in recent years, the state Department of Commerce, headed by Bobby Hitt, a former longtime chief spokesman for BMW, took the lead role in shepherding the Volvo deal, records show, though much of it was done behind closed doors.

Hitt, for example, is chairman of the S.C. Coordinating Council for Economic Development (CCED), an 11-member panel made up of the heads or board chairpersons of state agencies involved with economic development. From June 2015 to June 2017, the CCED quietly approved four separate grants totaling $81 million to Berkeley County for the Volvo project, records show.

The CCED typically has met in Commerce’s headquarters in a high-rise across the street from the State House, and, as The Nerve has previously reported, has a long history of discussing taxpayer-backed incentives in secret.

In a letter last year to The Nerve, a Commerce spokeswoman said the CCED grants for the Volvo project were increased “collectively by $65 million after the October 2015 flood because of adverse effects to the project site and higher than anticipated costs associated with fulfilling commitments.”

Other public money pots
Following is a breakdown of the largest-known revenue sources of incentives for the Volvo project, according to state records reviewed by The Nerve:

$81 million: Coordinating Council for Economic Development grants to Berkeley County for site development at the 1,600-acre manufacturing site, building costs and lease payments for temporary office space. The original grant amount in 2015 was $16 million; the CCED approved separate grants of $20 million in 2015 and 2016, and another $25 million in 2017.
$70 million: State surplus funds appropriated by the Legislature to Commerce at the end of the 2015 legislative session. Commerce awarded the money as a grant to Berkeley County.
$53 million: State general-obligation economic development bond proceeds made available to Commerce. The former state Budget and Control Board in 2015 approved a total of $123 million in bonds for the Volvo project, though $70 million of that amount was not needed with the 2015 supplemental appropriation by the Legislature, according to Karen Owens, spokeswoman for the state Treasurer’s Office.
$45.5 million: Excess state debt service funds authorized, according to Owens, to be used by Commerce in place of approved state bonds for Volvo’s office campus and plant expansion. Under a September 2017 “confidential memorandum of agreement” between Volvo, the state and Berkeley County, a collective $8 million out of the approved state bonds was designated for the construction of a rail spur and road improvements at the plant site.
Major expenses for the Volvo project include the construction of an interchange on I-26 at an estimated cost of $44 million. When finished, the interchange will include at-grade and flyover ramps, according to the S.C. Department of Transportation’s website.

In addition, the S.C. Technical College System to date has covered, through its “readySC” program, a total of at least $12.3 million in training costs for 1,538 Volvo workers, based on an average training cost of $8,000 to $10,000 per worker, according to college system spokesperson Leah Andrews. A May 2015 state incentives agreement directed Berkeley County to build a training center at a maximum cost of $4 million, excluding equipment. Andrews said the county owns the center, located at the project site.

Berkeley County also approved $5 million toward the purchase of the 1,600-acre manufacturing site, and was authorized to spend up to $2.5 million for related off-site water infrastructure improvements, records show.

As for Santee Cooper’s role in the Volvo project, the utility spent a total of approximately $34 million to purchase about 6,800 acres at the project site at $5,000 per acre, which included land for the manufacturing site, an office campus and plant expansion, according to information provided Thursday to The Nerve by utility spokeswoman Mollie Gore.

Berkeley County bought the approximately 1,600-acre portion for the manufacturing site from Santee Cooper at the same $8 million total cost, using a $3 million grant from the “South Carolina Power Team/Santee Cooper site readiness grant program to supplement its $5 million contribution,” Gore said.

Santee Cooper also spent $5.9 million to develop about 103 acres at the project site for the office campus, Gore said. She noted Volvo entered into a 20-year “capital ground” lease so that Santee Cooper could recoup its expenses for that project, plus bought an additional 256 acres from the utility.

Under the May 2015 state incentives agreement, Santee Cooper is required to own and develop the remainder of the approximately 6,800 total acreage, described as the “Camp Hall Property,” as an industrial park.

Santee Cooper maintains it has to spend money on economic development projects under state law. But, as The Nerve reported earlier this month, as the utility was accumulating billions in debt for the now-abandoned V.C. Summer project – which likely will affect ratepayers’ future bills – it was doling out millions that benefited major corporations, local governments and economic development groups.

 

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.