What Boeing wants, Boeing gets.
On Tuesday, what Boeing got was effectively a rubber stamp from the S.C. Budget and Control Board (BCB) to the tune of $120 million in taxpayer-funded state bonds that will allow the Fortune 500 company to finance its latest expansion project when the bonds are sold by the state Treasurer’s Office.
The rub with the bonds is that Boeing wants the money now. Like, right now.
So Boeing will get it.
As part of the deal approved unanimously by the five-member BCB, chaired by Gov. Nikki Haley, the state agreed to a $120 million “bridge” loan pending the sale of general obligation bonds that will allow Boeing to draw upon the sum immediately in order to meet “anticipated expenditures of approximately $50.3 million from July 2013 through December 2013; about $32.5 million from January 2014 through June 2014; and approximately $27.2 million from June 2014 through December 2014,” according to documents provided for the meeting.
Under the loan terms, the BCB can “in its discretion and subject to certain conditions, borrow from any department of the state government … and any surplus which may be on deposit with the state treasurer.”
The Nerve first reported about the bridge loan last week, though S.C. Department of Commerce Secretary Bobby Hitt and other agency staff did not respond then to requests for specifics about the financing.
Some of the money, approximately $12.5 million, is intended to purchase about 320 acres of Charleston International Airport property owned by the Charleston County Aviation Authority, while the rest will be allocated to infrastructure, “site remediation” and construction at that site and the existing Boeing site leased from a Commerce division, though specifics on those projects and costs were not released Tuesday.
The Nerve reported in May, citing Sen. Paul Campbell, R-Berkeley, who said he was involved with some of the early negotiations for the $120 million bond bill, that the state will own the newly purchased airport land until the bonds are paid off.
As part of the rushed bond bill (S.578) – signed by Haley into law in April just two weeks after it was introduced by Senate Finance Committee Chairman Hugh Leatherman, R-Florence and a BCB member – Boeing would have to commit to invest $1.1 billion and create 2,000 jobs to receive the $120 million in bonds, which will cost S.C. taxpayers millions more with interest.
For Hitt, Boeing’s additional investment in South Carolina, which he characterized Tuesday as “historic,” was the state’s best-case scenario, and Tuesday’s unanimous vote by the BCB amounted to a victory lap for Hitt, who was in great spirits and eager to talk to the press after the meeting.
“Boeing has essentially, after five years in South Carolina, said that we’ve met all our promises and their expectations and are doubling down,” Hitt told The Nerve after the meeting adjourned. “So the most important thing is not the $120 million but the $1.1 billion (that Boeing intends to invest).
“We’re meeting with an awful lot of Boeing suppliers right now. We have the strong support of Boeing, and Boeing has decided that South Carolina is a great place to build airplanes. They’re earnest about expanding their current plants and have ambitions for even more in the future. ”
Specifically, Hitt said the “bridge” loan and bond issuance achieves the goal of getting Boeing moving forward on those expansion plans now.
“(Boeing needs) some cash flow in the near-term,” he said. “So, this (bridge loan and bond issuance) allows us to help them acquire certain properties that have been made public already, and to help them prepare for an even larger production environment here, long-term, while balancing the state’s interest.”
Hitt, however, did not reveal specifics to reporters of how most of the $120 million will be spent by the Chicago-based aerospace giant.
The Nerve previously has detailed Boeing’s wealth, noting that the company reported net income of $3.9 billion in 2012 and $1.1 billion for the first quarter of this year. Its total annual revenues of $81.7 billion last year were nearly 3.5 times more than the entire ratified state budget ($23.6 billion) for this fiscal year, which ends June 30.
As previously reported by The Nerve, the BCB in January 2010 approved a $102.5 million “bridge” loan to Boeing pending the sale of a $270 million taxpayer-funded bond package (which will cost S.C. taxpayers at least $360 million over 15 years with interest) for the company’s main 787 Dreamliner assembly plant near Charleston International Airport. The state Treasurer’s Office later said the actual amount of the loan was $4.75 million and was repaid by Boeing with bond proceeds.
In addition to the latest $120 million bond issuance and “bridge” loan, the BCB on Tuesday also approved the state’s acquisition of the 320-acre airport property at Boeing’s request to lease it for future expansion, with an option to buy it after 15 years.
Aspects of that process are still under legal review, as the BCB went into executive session to hear arguments about issues surrounding some 240 acres where Boeing’s main assembly plant is located and which is owned by the Charleston County Aviation Authority; leased to S.C. Public Railways, a division of the Department of Commerce; and subleased to Boeing. The Nerve reported in May about the lease agreements, and that Boeing has first-refusal rights on an additional 488 acres of nearby land.
Leatherman was an integral part of crafting the initial incentives deal – estimated by The Nerve to be at least a half-billion dollars and first revealed in part during a rare, special legislative session in October 2009 – to bring Boeing to South Carolina. As part of that agreement, Boeing promised to create at least 3,800 jobs and invest $750 million by Dec. 31, 2016.
At Tuesday’s meeting, Leatherman called the company’s latest moves and subsequent growth a “game-changer.” He was especially excited at news coming out of the Paris Air Show, where Boeing launched its new 787-10 Dreamliner model, a longer version of the 787 that already is generating substantial buzz in the aviation industry and which, according to a story in Sunday’s Seattle Times, will be made exclusively at Boeing’s North Charleston site.
“We don’t know, as we sit here today, what that means to this state long-term,” Leatherman said.
Besides Leatherman and Haley, other members of the BCB include state Comptroller General Richard Eckstrom, Treasurer Curtis Loftis and Rep. Brian White, R-Anderson and the House Ways and Means Committee chairman.
Referencing the Times’ report after the meeting, Hitt was equally excited about the story.
“That’s a pretty interesting report,” Hitt said, smiling. “We’ll have to see how it comes out.”
“I think it’s reverberated around the world, and that’s why we’re getting attention (at the Paris Air Show),” Hitt continued. “The delegations from Alabama and Washington State are chasing us. Alabama sent 90. Washington State sent 50. We have 16 there, and three are interns.”
In other action Tuesday, the BCB approved a July 1 deadline for a final draft of a request for proposal (RFP) for identity-theft protection and resolution services for South Carolina citizens, subject to an appropriation in the fiscal 2014 state budget for the services, which became necessary following the massive 2012 cyber theft of millions of Social Security numbers and other sensitive financial information at the S.C. Department of Revenue.
The July 1 deadline for an RFP would ensure that it could be issued by mid-July at the latest, and a contract could in place by Oct. 25 to prevent the current Experian contract from lapsing. The Oct. 25 date marks a year from the first day a citizen could have signed up for the free protection.
“We want to make sure there’s no lapse period,” Haley said.
Reach Ron at (803) 200-8809 or at ron@thenerve.org. Follow Ron on Twitter @RonAiken. Follow The Nerve on Facebook and Twitter @thenervesc.