South Carolina and Greenville County taxpayers won’t be getting any magic carpet rides with the construction of the Proterra electric- and hybrid-powered bus assembly plant in Greenville.
The Nerve’s analysis of the state and county incentives agreements for the project, code-named “Project Magic Carpet,” found that the small Colorado-based company could receive as much as $40 million in corporate income tax credits, job development credits, grants, low-interest bonds and forgivable loans within 10 years. Throw in millions in expected county property tax breaks, and the total state and county incentives package would more than pay for the projected cost of the plant.
The huge incentives goodie bag isn’t reflected in the state’s official cost-benefit analysis, which paints a rosy economic picture of the project.
The Nerve’s review of the incentives agreements, obtained under the S.C. Freedom of Information Act, found that:
- More than $19 million in grants, low-interest bonds and forgivable loans have been committed to Proterra, which announced in February that it planned to invest $68 million and create at least 1,300 jobs over seven years at a 240,000-square-foot plant to be located at Clemson University’s International Center for Automotive Research. Assuming it creates 1,300 full-time jobs, Proterra could receive as much as $16 million in state corporate income tax credits. On top of that, the company could receive at least $4 million in job development credits, or refunds of a portion of employee state income tax, according to an S.C. Department of Commerce cost-benefit analysis provided to The Nerve.
- The state will provide worker training through the S.C. Technical College System’s readySC program. The training is valued at $3.9 million based on 1,300 workers.
- Proterra won’t have to pay any property taxes based on the normal 10.5-percent assessment rate for manufacturers. Instead, under a 20-year deal with the county, the property will be assessed at a lower commercial rate of 6 percent and taxed at a fixed millage rate, saving the company millions of dollars over the life of the agreement. And, in the first 10 years of the agreement, Proterra would receive annual rebates – likely worth hundreds of thousands of dollars yearly – of its fee-in-lieu-of-taxes (FILOT) payments.
- Under the county agreement, the company would have to invest at least $42 million within five years and $68 million within seven years to be eligible for the full amount of the breaks. It also has to create “”approximately” 1,300 jobs within five years, though that number isn’t defined precisely and there is no language about verifying company-provided figures.
- Proterra would have to create 800 jobs –not 1,300 as announced – and invest $30 million – less than half of the announced $68 million – to receive $3 million in grants from the S.C. Coordinating Council for Economic Development, made up of the heads of 10 state agencies, including the Department of Commerce.
- The city of Greenville will rent temporary manufacturing space for one year to Proterra for a total of $12. Proterra will lease land – 25 acres, according to a Clemson University press release – for its permanent plant on the university’s International Center for Automotive Research campus. Contacted this week, university spokeswoman Sandra Woodward said the lease would be done through Clemson’s Real Estate Foundation, though she declined to provide specifics, noting that the lease “has not yet been negotiated.”
- Neither the state nor county agreement provides any specifics on “clawbacks,” or requirements that company repay taxpayer money should it fail to uphold its end of the deal. In a March 4 letter to The Nerve, Department of Commerce spokeswoman Kara Borie said the Coordinating Council and Proterra had not yet entered into a “final revitalization” agreement.
Besides the incentives listed in the agreements, Greenville County Administrator Joseph Kernell told The Nerve last week that the county also plans to issue $4,979,000 in economic development bonds authorized under the federal stimulus law.
“It’s a strong (incentives) package,” Kernell said.
Kernell said offering incentives was necessary to lure Proterra to South Carolina. “If you don’t do the investment, you wouldn’t get the return, ” he said. “The competition is from other states; we’ve got to be competitive.”
In a Department of Commerce press release on Feb. 4 announcing the project, Proterra CEO Jeff Granato said his company selected Greenville after a nationwide search involving about 30 states. He said Greenville was chosen “as a result of the state’s numerous benefits in terms of workforce capabilities and research and development support.”
Granato didn’t specifically cite the incentives offered to his company. The Commerce press release didn’t provide any incentives numbers other than mentioning two Commerce grants to the county totaling $3 million.
But the incentives cost likely was known long before then. For example, the S.C. Technical College System and the Greenville Area Development Corp., a private-public partnership including Greenville County, formally offered incentives in September 2009, according to commitment letters obtained by The Nerve under the Freedom of Information Act.
The Enterprise Program Committee of the S.C. Coordinating Council for Economic Development approved job development credits for Proterra on Dec. 3, records show. The FILOT agreement with Greenville County was dated Jan. 19.
It’s not the first time state and county officials have been mum on details of incentives agreements. The deal to bring a Boeing aircraft assembly plant to North Charleston, for example, will cost taxpayers at least a half-billion dollars, an investigation earlier this year by The Nerve found, though state and county officials for months refused The Nerve’s written requests for details.
As for details on the Proterra deal, Kernell said the company, not the county, will be responsible for repaying the nearly $5 million in “recovery zone economic development” bonds not listed in the incentives agreements provided to The Nerve, and another approximate $7.5 million in “recovery zone facility” bonds specified in the agreements.
Both types of bonds are authorized under the federal stimulus act, he said, adding, “It’s a tool by the federal government for communities to use for economic development.”
The state incentives agreement also includes about $7.5 million in federal stimulus-authorized “qualified energy conservation” bonds for Proterra, though the agreement noted that state law would have be changed for the S.C. Energy Office, a division of the state Budget and Control Board, to issue $3 million of those bonds.
An economic development bill introduced Jan. 28 by S.C. House Speaker Bobby Harrell, R-Charleston, would accomplish that. The bill (H. 4478), which also would expand other taxpayer-supported incentives and eliminate the state corporate income tax, passed the House last monh and is now in the Senate Finance Committee.
Besides incentives offered by the state and Greenville County, other groups are providing incentives to Proterra, according to documents provided to The Nerve under the Freedom of Information Act. The S.C. Research Authority, a state-created agency, is offering at least $775,000 in grants and forgivable loans, while the Greenville Area Development Corp. plans to kick in $250,000. Duke Energy awarded Proterra $50,000.
All of it is worth it, if you ask Kernell. He contends that Proterra will bring higher-paying jobs to the county and will generate far more tax revenue for the county and state over the long haul than the cost of the incentives package.
“The potential is tremendous, not only for the company, but for other industries,” he said. “You could see a lot of ancillary businesses springing up.”
The Department of Commerce cost-benefit analysis projects nearly 1,900 “indirect” jobs with the project. According to the analysis, the average hourly wage at the Proterra plant will be $17.54; the average annual salary is listed at $35,080, nearly $10,000 higher than the state average.
That projected average annual salary, though, was nearly Greenville County’s per-capita income last year, according to the state Board of Economic Advisors.
The Commerce analysis projects a benefit-to-cost ratio of 40:1. But it appears to lowball the cost of certain incentives, such as job tax credits, and doesn’t take into account the cost of other incentives, such as county FILOT payments.
On its Web site, Proterra, based in Golden, Colo., at the Coors Technology Center, bills its electric, hydrogen-hybrid and diesel-hybrid buses as “cost-effective solutions for clean transportation,” contending its vehicles “eliminate the most harmful emissions.”
In its February press release, the Department of Commerce said the company’s “revolutionary BE-35 fast-charge battery” electric bus runs on a diesel-equivalent of between 17 and 21 miles per gallon, an approximate “500-percent improvement over conventional diesel buses.”
Founded in 2004, the company, which employs about 40 people in Colorado, is expected to deliver about 20 buses this year and more than 500 in several years, according to a February article in The Greenville News.
Reach Brundrett at (803) 779-5022, ext. 106, or rick@scpolicycouncil.com