South Carolina made it tough for other states to compete to land Volvo’s first U.S. car plant, offering more than $200 million in incentives to entice the Swedish automaker.
Those incentives helped land Volvo, which has promised up to 4,000 jobs and a $500 million investment in the Lowcountry’s Berkeley County.
“Folks argue (the state) shouldn’t be trying to lure these companies with incentives, but the bottom line is: If we don’t, then those manufacturers will not locate here,” state Sen. Larry Grooms, R-Berkeley, said Monday.
South Carolina competed with five other states for the Volvo plant, including North Carolina and the other finalist, Georgia, state Commerce Secretary Bobby Hitt said.
Hitt said some of the incentive money will be used to build a new interchange on Interstate 26 and construct roadways on the property, which currently has no infrastructure.
A large chunk of the incentives – about $120 million – will be financed by borrowing, using economic development bonds, Hitt said. Those bonds must be approved by the 10-person legislative Joint Bond Review Committee and the state Budget and Control Board.
That figure is close to the state’s maximum borrowing capacity for economic development bonds. The S.C. Treasurer’s Office said previously the state could borrow up to about $120 million “under ... aggressive assumptions” for an economic development project.
Hitt said the Volvo project will create an industrial town along Interstate 26, populated by about 4,000 workers. He added Volvo will take up about a third of the 6,800-acre Camp Hall site. Other parts of the Berkeley County site will be developed for other industrial projects.
Roughly $30 million for the incentives will come from pots of money that Commerce has access to, including its deal-closing fund. That fund receives money through the state budget.
The state-owned Santee Cooper utility also will spend roughly $54 million on the project – $29 million toward the purchase of the entire Camp Hall site, and $25 million to offer loans and grants to Berkeley County to support job-training efforts, spokeswoman Mollie Gore said.
The utility will recover that cost through extra electricity sales and selling the rest of the Camp Hall site, Gore said. Consumer rates will not rise because of the incentives, she said.
Santee Cooper and Berkeley County will buy the site and provide it with water and sewer service, Hitt said.
Berkeley County Council was set to consider another incentive Monday night – lowering the property taxes that Volvo would have to pay – typically offered in many major economic deals. “However, the amount of that deal will likely not be disclosed until the council gives it final approval at a third reading,” said county spokesman Michael Mule.
The county also contributed $5 million to buy part of the land, he said.
Volvo also will be eligible for tax credits from the state based on the number of jobs that it creates. That credit rebates to an employer a portion of the state withholding tax paid by newly employed workers. The size of the rebate is based on the wages paid, said Commerce spokeswoman Allison Skipper.
A Mercedes Benz van-manufacturing facility, about 20 miles from the Volvo site, receives annual tax credits ranging from $798 for a worker making $14 an hour to a maximum of $5,000 for a worker making $52 an hour, according to Commerce.
If Volvo, owned by Chinese-based Geely Holding Group, received the exact same deal as the Mercedes plant, it would get from $1.6 million to $10.4 million a year for the first 2,000 jobs it created.
The tax credits reimburse a company for its capital expenditures — for land, buildings, site development, pollution control equipment or infrastructure — for projects that create new full-time jobs that also provide health-care benefits for S.C. citizens, Skipper said.
Another perk that Volvo will get is access to state-run job-training programs. The customized programs are designed to meet a company's hiring needs, Skipper said. She added similar ReadySC programs are being used in companies across the state, including BMW, Boeing and tire manufacturers.
Berkeley’s Grooms said the state also hopes to benefit from the spinoff jobs created to service a new manufacturing facility.
For example, suppliers created thousands of new auto-related jobs after BMW located in the state in the 1990s. That deal, too, depended heavily on economic-development incentives, which critics say amount to the government picking winners and losers in the private sector.
However, Grooms defended the incentives Monday.
“If you’re not in the economic-development game, you’re not going to have the investment in the state.”
South Carolina offered more than $200 million in incentives to win over the automaker
$120 million to be borrowed through economic development bonds
$30 million through pots of money that the state Commerce Department has access to, including its deal-closing fund
$54 million that the state-owned Santee Cooper utility is spending to buy the Berkeley County site, and to make loans and grants
$5 million that Berkeley County will contribute to the land purchase
Multi-millions that Volvo will receive in tax credits, based on the number of jobs that it creates and the amount those jobs pay
Multi-millions that Volvo will save on its property taxes via a fee-in-lieu agreement with Berkeley County