New Incentives for AvCraft?

October 20, 2014 7:00 AMViews: 902

By Paul Gable

A recent local media report said Horry County officials are working with officials of AvCraft Technical Services to attempt to structure a new incentives deal for the company.

AvCraft admits it can’t meet the goal of 150 new jobs it agreed to approximately three years ago when it received its current economic development incentive package from Horry County.

And this is not the first time. AvCraft has failed to meet promises. It never produced the 400 jobs it promised when it received its first incentive package from the county in 2004. After new ownership bought the company out of bankruptcy in 2009, it did not produce 50 jobs promised.

AvCraft received its third rent reduction on the three hangars it occupies at Myrtle Beach International Airport as part of a new economic incentive package finalized in early 2012. The actual rent reduction began in 2010 under a new space use agreement between Horry County and the company.

Now, nearly three years after its latest promises, AvCraft is three months behind on its rent, it admits it cannot meet the 150 new jobs it agreed to in the current incentive package and company officials are again asking for even more concessions from Horry County.

Before the county gets too involved in negotiating a new or modified incentive package with AvCraft, it seems prudent for the county to get answers to some questions.

While the cash incentives offered to AvCraft in the current economic incentive contract are a relatively modest $200,000 ($100,000 each from the county and the state) the reduced rent, which began in 2010, amounts to approximately $250,000 per year for five years or $1.25 million total.

The money saved in rent was supposed to have been spent on upgrading fire suppression equipment in the hangars occupied by AvCraft, especially Hangar 358 which was used for painting.

According to county officials, by AvCraft’s admission this fire suppression upgrade was never started. The company does not have the resources to pay for it.

Isn’t it prudent to ask where the rental savings were spent and just how much overall debt KNH Aviation, the actual company that does business as AvCraft, has on its books before a new package of economic incentives is voted on?

Do the hangars used by AvCraft meet current local, state and federal fire and safety regulations? Who pays for the insurance on these structures? Are insurance payments current? Does the county have any residual liability if something, such as a fire, occurs at these hangars?

How many people in AvCraft’s workforce are actually full-time, permanent residents of Horry County?

According to a source familiar with AvCraft, contract employees provided by a major temporary aviation labor staffing company routinely make up a significant portion of the workforce at AvCraft.

This is a normal practice in business, especially one whose labor requirements rise and fall as contracts are entered into and completed. But, this temporary labor hardly falls into the category of full-time, year around employees, which economic development incentives are meant to attract.

Is AvCraft current in its payments to this contract labor company?

The concept behind economic development incentives is that jobs are created that will be filled by people permanently living locally thereby providing economic stimulus to the local economy as a whole as employee earnings are spent within that local economy.

With AvCraft apparently using contract labor, other states, where that labor maintains a permanent address, receive at least partial benefit from economic incentives given to AvCraft by the South Carolina and Horry County governments.

You can’t blame AvCraft officials for asking for new incentives from Horry County. The company has never been told NO by county officials. Promises of those ‘hundreds of high paying jobs’ are always just over the horizon. They just never seem to get here.

This is no time for Horry County to go rushing into a new incentive deal with a company that consistently fails to meet its promises. It is way past time for Horry County to do its expected due diligence on the company before more public dollars are committed in cash incentives, reduced rent or some other type of incentive.

 

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