A Lesson from the AvCraft Experience

March 1, 2015 8:00 AMViews: 1670

By Paul Gable

The final curtain is coming down on AvCraft Technical Services in a couple of weeks leaving behind an important political lesson that will soon be forgotten.

That lesson? Never, never, never believe a politician’s (or their associates’) claims about economic development and/or job creation.

AvCraft was first introduced to Horry County in 2003 by, then, Horry County Council candidate Joe DeFeo.

AvCraft had just forfeited economic development incentive payments for failing to reach job creation promises at its location in Tyler, Texas and was looking for fresh government dollars. DeFeo was looking for an issue that could help him win election to Horry County Council District Three.

Partners Economic Development Corporation (a forerunner of today’s Myrtle Beach Regional Economic Development Corporation) combined with Horry County officials and the Myrtle Beach Air Force Base Redevelopment Authority to craft a four-year economic development incentive package for AvCraft.

The AvCraft move to Horry County was announced, amid much hoopla, in early January 2004 with DeFeo and Gov. Mark Sanford standing together to announce the creation of hundreds of high paying jobs in Horry County.

(I still have a copy of a DeFeo campaign mailout from the 2004 election contest for District Three with DeFeo pictured with Sanford and the claim of AvCraft’s promised creation of 400-600 high paying jobs for Horry County.)

Maintenance and completion of newly built Dornier 328 aircraft (from the German production facility AvCraft had purchased out of bankruptcy with the help of the German government) were supposed to be the mainstay of AvCraft’s Horry County business.

Incumbent District Three council member (and DeFeo opponent) Marion Foxworth coined the phrase “Pimp my ride for airplanes” to describe the AvCraft business plan at the time.

Foxworth was right, DeFeo was wrong. Without going into the bloody details, AvCraft never made good on its promises. The company brought 53 employees with it when it relocated to Horry County and never got much above that number of employees in its entire Horry County history.

But, AvCraft still managed to bank nearly $750,000 of public money, as well as pay years of reduced rent on the hangars it occupied at Myrtle Beach International Airport, thanks to the economic development agreement approved by Horry County Council.

By the end of 2005, AvCraft was back in bankruptcy. Maple Financial, the primary creditor for AvCraft’s U.S. operations, foreclosed on the U.S. business and subsidized Avcraft over a nearly four-year period in hopes of eventually selling off the company to recoup a portion of its losses.

During this period, virtually all of the Dornier 328 fleet then in existence was parked on the tarmac near AvCraft at Myrtle Beach International Airport because almost nobody was flying them. AvCraft was providing “routine maintenance” while attempts were being made to find new buyers for the planes.

AvCraft was being paid by the banks who owned those planes for this “routine maintenance.”

Due to legal technicalities, Horry County Auditor Lois Eargle was prevented from assessing taxes on the Dornier 328 planes sitting in Myrtle Beach as would normally been permitted by S.C. law.

In 2009, Maple Financial ultimately sold AvCraft at auction to a group of investors put together to purchase the Horry County location with a goal of making it a maintenance, repair and overhaul facility for small and medium sized aircraft.

A new rent reduction package complete with the promise of creating 50 jobs was approved by Horry County Council, in 2009, for the “new” AvCraft.

In early 2012, the Myrtle Beach Regional Economic Development Corporation and Horry County Council approved a new economic development incentive package for AvCraft complete with further rent reductions and a promise to create 150 new jobs.

The rent reduction alone was worth approximately $1.25 million to AvCraft since 2010. Now, the rent is scheduled to return to market rates and AvCraft can’t afford to pay the rent.

I’m willing to speculate that AvCraft wouldn’t have created 150 jobs (the latest agreement) let alone the original 400-600 promised if they had been allowed to occupy and use the three hangars at Myrtle Beach International Airport for free since 2004. The company doesn’t generate enough business.

This job creation propaganda is what is fed to the public to mask the millions of public dollars given away to these chosen businesses whether they can be successful or not.

However, in 2012, S.C. Gov. Nikki Haley and Horry County Council chairman Tom Rice, then a candidate for the newly created S.C. 7th Congressional District, weighed in on how wonderful it was that AvCraft agreed to the latest economic development incentive package.

“I am thankful for the company’s commitment to Horry County and proud of our economic development team for this terrific announcement.” – Rice.

“It’s another great day in South Carolina, and we are going to celebrate AvCraft’s decision to expand and create 150 new jobs in Horry County.” – Haley.

Of course, those statements were misleading at best and unbelievable falsehoods at worst, but Haley is in her second term as a “job creation” governor and Rice is the “job creating” U.S. Representative for the 7th Congressional District.

Foxworth was correct in understanding from the beginning that the AvCraft business plan was not viable and would not create jobs. But, his comments on the subject were derided as “playing politics” throughout this saga of failure.

If “playing politics” means being correct about the failures of economic development, I wish the two S.C. governors, the U.S. representative, the majority of Horry County Council members (who approved the various economic development agreements) and the three iterations of the economic development agency in Horry County involved with those agreements would “play politics” better.

Maybe, then, they wouldn’t throw away millions of public dollars all in the false claims of creating jobs.

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