June 12, 2024

The Nerve Archive

Where Government Gets Exposed

Incentive-Laden AQT Solar Project Moving Slowly

The NerveIn its 2010 year-end report, the S.C. Department of Commerce ranked the proposed AQT Solar plant in Richland County as the second-highest announced capital investment in the state last year, and the third-highest announced job-creation project.

But three months after the Silicon Valley-based company announced that it would create 1,000 jobs at the Richland County site, an already completed 184,000-square-foot building that it is supposed to go into stands empty.

In fact, there’s not even a sign announcing the project at the Blythewood-area site.

Although Richland County Council in December approved a resolution to offer property tax breaks to AQT, no agreement had been reached as of last week, an assistant county attorney told The Nerve, though she declined to answer further questions.

And, according to a redacted state incentives agreement provided to The Nerve, AQT would have to hire 500 employees – not 1,000 as announced by Commerce and the company – to receive a $2 million state taxpayer-funded grant.

Commerce, which provided the incentives agreement to The Nerve more than two months after it was requested under the S.C. Freedom of Information Act, blacked out information in the agreement about the required minimum capital investment for the project.

But a review by The Nerve of a cost-benefit analysis included with the agreement found that it would be at least $100 million less than the $450 million or $460 million total projected investment cited by Commerce and Richland County officials.

Given the fact that, according to incentives agreement, AQT plans to lease an already existing building, it raises questions about how a small, relatively young company will be able to invest hundreds of millions of dollars in a second manufacturing plant.

In a written response Sunday to The Nerve, AQT spokeswoman Liz Patrick said the company is “actively engaged in the planning and design phase of its volume manufacturing facility, expected to be developed over a four-year time frame.”

“To minimize cost overruns and construction delays, our facilities team expects to optimize the full-site layout prior to initiating construction of the first phase of the project, anticipated to be Q4 2011,” Patrick said. “Hiring for the initial phase of the project will also likely commence Q4 2011, with a pilot group of employees identified for training at our Sunnyvale (Calif.) facility.”

Patrick disputed there is any delay in obtaining a county incentives agreement, noting, “Implementation of that commitment will be entered into in due course no later than the year in which the project is placed in service.”

Patrick said the state incentives agreement requires the creation of 1,019 in two phases for AQT to receive a $2 million state grant. But she did not respond to The Nerve’s specific questions about the lower job-creation threshold cited in the copy of the agreement provided by Commerce to The Nerve; or provide legal documentation, as requested by The Nerve, backing up her statements.

AQT was founded in 2007 and has about 40 employees, according to other media reports. According to a Jan. 6 press release posted on the S.C. Department of Commerce’s website (http:// sccommerce.com), AQT opened its first manufacturing facility in Sunnyvale, Calif., last August.

The Richland County site would “expand AQT’s current production capacity and help to fill current order backlog,” the release said.

The Richland County project would cost taxpayers about $5.2 million in the first year and nearly $25 million over a 10-year period, according to the cost-benefit analysis, which was done through the S.C. Council for Economic Development, made up of the heads of state economic development agencies. Commerce, which is a member of the council, provides staff support for it.

If AQT doesn’t start the project within three months of the date of the award of the $2 million grant, which was Dec. 21, 2010, the council could rescind the grant and require AQT to repay any grant funds, according to the state agreement.

The deadline under the agreement would have been March 21, though it’s unclear based on the contract language if AQT missed the deadline.

To have begun the project, AQT must have “incurred material obligations in connection with the project satisfactory to the council to indicate that the project will be timely completed,” according to the agreement.

In its Jan. 6 announcement posted on Commerce’s website, AQT said it “plans to create 1,000 jobs at the existing 184,000-square- foot LEED Silver Certified facility over the next four years.” The press release also said the building would be “upfitted beginning in the first half of this year.”

A state lawmaker and attorney involved with the project told The Nerve on Friday that the project is “still on.”

“They’re completing their work,” said Rep. James Smith, D-Richland. “It’s right on schedule.”

Smith declined to answer questions about the state incentives agreement, saying he didn’t work on it. He referred The Nerve’s written questions to Patrick.

Mum’s the Word

The Nerve twice last week visited the Richland County site, located in the Carolina Pines Industrial Park off Interstate 77 near Blythewood, during normal business hours. In each visit, there were no private cars parked at the site, and no apparent activity inside the large building, which has 26 loading bays.

The only observable item in the building that wasn’t a permanent fixture was a small display table in the main lobby for the site developer, Michigan-based Kirco.

The Nerve last week sent written questions to Commerce Secretary Bobby Hitt; Karen Manning, the agency’s chief attorney; and department spokeswoman Kara Borie about the apparent absence of any activity at the site location, and the various discrepancies between information listed in the incentives agreement provided to The Nerve and Commerce’s year-end report.

None of the three responded.

The Nerve last week also sent written questions about the project to Richland County Assistant Attorney Elizabeth McLean and county spokeswoman Stephany Snowden. McLean in a written response declined comment, noting that the state Freedom of Information Act “does not require a public body to respond to questions.”

The Nerve, however, did not pose those questions as a Freedom of Information Act request. The Nerve last month asked the county under the Freedom of Information Act for any finalized county incentives agreement, but McLean in her written response last week replied, “We do not have an agreement or ordinance at this time.”

Snowden did not respond to The Nerve’s written questions.

The county provided The Nerve with a copy of a Dec. 14, 2010, County Council resolution offering AQT, code-named “Project P 2010,” a fee-in-lieu-of-taxes (FILOT) deal that would assess its property at the occupied homeowner rate of 4 percent instead of the state manufacturing rate of 10.5 percent.

The resolution also would offer AQT a “special source revenue credit incentive” equal to 30 percent of the FILOT payments – essentially a rebate to the company.

The resolution describes the project as an “investment of approximately $450 million and approximately 900 new jobs.”

Chuck Salley, an industrial real estate agent with Colliers International of Columbia, which is the listing agent for the Carolina Pines site, told The Nerve last week that AQT is the intended occupant of the 184,000-square-foot building.

But Salley declined to say when AQT plans to move to the site, or whether the company intends to buy or lease the building. Salley said the site was bought by Kirco, a real estate company with offices in Troy, Mich., near Detroit; New Albany, Ohio; and Charlotte.

The state incentives agreement said AQT will “lease a 184,000-square-foot facility to be located in Richland County,” though it doesn’t give a specific location.

Representatives of Kirco did not respond to a phone message last week seeking comment.

In her written response Sunday to The Nerve, Patrick said AQT officials “remain in active negotiation with Kirco, the site and building owner, regarding leasing their Carolina Pines facility.” But she declined to comment on the lease terms.

AQT’S CEO, Michael Bartholomeusz, did not respond to written or phone messages left last week by The Nerve at the firm’s headquarters in Sunnyvale, Calif.

The firm on its website (www.aqtsolar.com) describes itself as “the leader in capital-efficient thin-film solar cell manufacturing technology.” It manufactures small solar cells for various products, including solar panels used to generate electricity, according to other media reports.

“Our team has a strong track record of making high-tech commodity products with minimum investment capital,” Bartholomeusz says in a video posted on the website. “AQT Solar is an industry leader that has commercialized in record time with very little capital required.”

Taxpayer Costs

A company project information sheet included with the state incentives agreement listed the following taxpayer-funded subsidies to be offered to AQT:

  • $2 million grant through the governor’s “closing fund”;
  • A $500,000 grant through the S.C. Budget and Control Board’s Office of Local Government;
  • State job tax credits;
  • State job development credits;
  • Taxpayer-funded job training through the S.C. Technical College System’s “readySC” program’; and
  • A county fee-in-lieu-of-taxes agreement and special source revenue bond credits.

The sources of funding for the project also include a $10 million U.S. Department of Agriculture loan, according to the company project information sheet.The number of new jobs to be created at the Richland County site, according to the project sheet, is 500, not 1,000 as Commerce and AQT has stated publicly.

The cost-benefit analysis estimates that the project would result in 1,211 “indirect” jobs, for a total “employment impact” of 1,711 jobs. The average wage for the 500 workers would be $29.28 per hour or $58,552 annually, according to the analysis.

The analysis projects an overall “net” benefit of nearly $1 billion over the 10-year period, or a benefit-to-cost ratio of 39 to 1. But much of that is derived from the estimated payroll of the projected 1,200 “indirect” jobs, which isn’t defined; and the analysis doesn’t provide any methodology used to calculate its benefit “multipliers.”

The projected 10-year taxpayer cost, which totals $24.8 million, would include, according to the analysis:

  • Job development credits (refunds of a portion of employee state income tax withholdings in exchange for minimum employment and investment levels) – $11,249,071;
  • Job tax credits (generally good for five years; tied to the number of new jobs created and the per-capita and unemployment rates in the county where the company is located) – $7,292,109 (includes additional credits for being in a designated multi-county industrial park);
  • Economic development state grant – $2 million;
  • Increased state education costs – $1,559,278;
  • “Special Schools”(presumably the “readySC” program) – $1.5 million;
  • Increased local education costs – $1,226,769.

Patrick in her written response to The Nerve said all discretionary incentives are “subject to performance measures and clawback provisions.” But other than the repayment provision connected with the $2 million grant, there are no specific “clawback” or penalty provisions with most of the listed incentives in documents provided by Commerce to The Nerve.Incentive Secrecy

The projected investment value of the land, building, machinery and equipment; and expected local property tax revenue from the site were blacked out in the “income benefits” section of the cost-benefit analysis provided by Commerce to The Nerve.

But after subtracting other listed benefit categories from the total figures, the cumulative projected value of the blacked-out categories would be about $241.3 million in the first year and approximately $273.1 million over the 10-year period.

That would be about $209 million to $219 million less in the first year and about $177 million to $187 million less over the 10-year period compared to the total projected investment figures cited by Richland County and Commerce officials.

Patrick in her response to The Nerve said the $460 million investment and 1,017 job-creation figures cited by Commerce in its year-end report “accurately reflect the scope of our investment in the project.” But she declined to give a breakdown of the $460 million investment, noting that is “confidential and proprietary information.”

The Nerve protested the redactions made in its copy of the state incentives agreement, but Manning, the Commerce attorney, in written responses said the redactions were allowed under the “confidential proprietary” exemption of the Freedom of Information Act.

Besides required minimum investment figures, Commerce staff also blacked out other information in documents provided to The Nerve – over The Nerve’s written objections.

Included, for example, in the incentives agreement are two mostly blank pages with handwritten notes citing the “confidential proprietary” exemption for “wage and employment position information,” and “business proposed information.”

Under the Freedom of Information Act, public agencies are allowed to withhold “confidential proprietary information provided to a public body for economic development or contract negotiation purposes,” though they are not required to do so.

The law does not spell out what is considered proprietary information, leaving that discretion to public agencies and the companies involved in the deals.

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

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