Tag: Economic Development

Economic Incentives and the Kingman Airline Services Deal

The recent announcement by Horry County officials that Kingman Airline Services will be expanding its business to Myrtle Beach International Airport is one in which enthusiasm must be tempered.

The announcement was accompanied by sparkling pronouncements from such dignitaries as Gov. Nikki Haley, Horry County Council Chairman Mark Lazarus, Myrtle Beach Mayor John Rhodes and the like.

Local media was quick to pick up on this announcement to shout ‘180 jobs coming to Horry County’ without the qualifying ‘we hope’ that this type of deal requires.

We’ve heard this type of fanfare before – do you hear AvCraft and PTR Industries among others? I do.

It’s only four short years since we heard the last “It’s a great day in Horry County” when the last AvCraft deal was announced by many of these same players.

The initial reaction I heard from several callers who contacted me was, “Is this AvCraft 2.0?”

On the surface it sounds a lot like it. A small Arizona company plans to open an aviation maintenance and repair facility (MRO) at Myrtle Beach International.

It promises to provide 180 new jobs to the area over a five year period. For that promise, Horry County and the Myrtle Beach Air Force Base Redevelopment Authority is providing a total of $250,000 in incentives (read cash payments).

According to sources familiar with the deal, the payment of the $250,000 will be phased over the five year period of the agreement and will depend on Kingman meeting targeted employment levels along the way.

Kingman will be leasing one of the former AvCraft hangars from Horry County Department of Airports. I do not know the rental amount. However, I have been assured by several county officials familiar with the discussions that the rent will be in line with market value and more than AvCraft paid.

In addition, Horry County will be spending an estimated $100,000 to repair the fire suppression system in the hangar and to repair the hangar doors.

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Final AvCraft Chapter?

The Horry County Transportation Committee voted earlier this week to write off $113,687 in unpaid rent from AvCraft Technical Services that the county will never collect anyway.

AvCraft filed for bankruptcy in March 2015 after an 11 year history of failing to make good on its promises to Horry County.

This should be the final chapter in the saga of local and state politicians, especially Horry County Council, looking at AvCraft through rose colored glasses in the name of economic development.

Since arriving to much hoopla in 2004, AvCraft was consistent in only two areas – it consistently failed to meet job goal promises and it consistently requested and received rent reductions on the three hangars at Myrtle Beach International it rented from the Horry County Department of Airports.

After eight years of failing to meet goals, Horry County Council tried one last time in January 2012 to help AvCraft save itself with the recommendation of the Myrtle Beach Regional Economic Development Corporation.

One of the main items in that agreement was a $1.25 million reduction in rent on the county hangars over a five year period. This came after three earlier rent reductions, agreed to by the county, failed to make AvCraft profitable.

The following four comments made after the 2012 incentive package was approved demonstrate how far from reality politicians and their economic development arms exist from reality:

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

“AvCraft is a tremendous asset to our community, and this project is just the beginning for aviation-related businesses locating and expanding in the Myrtle Beach region.” – Doug Wendel, MBREDC board chairman at the time.

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Potential Buyer Looking at PTR Industries

(Above Gov. Nikki Haley with a special edition assault rifle presented to her by PTR Industries}

A firm from New York state is reportedly looking at the possibility of buying PTR Industries, a deal that could save the company’s operations at Horry County’s Cool Springs Business Park.

PTR Industries was recruited to relocate from Connecticut to Horry County in 2013 by the Myrtle Beach Regional Development Corporation. This was touted as a major coup by MBREDC as Horry County was a successful bidder over several other states in landing PTR Industries.

A package that included an approximately $1 million upgrade of a county spec building at Cool Springs Business Park and incentive based job creation credits was put together by MBREDC and the SC Department of Commerce for PTR Industries.

The company brought approximately 21 workers with it from Connecticut and promised to create an additional 145 jobs in Horry County within three years.

PTR Industries commenced operations in Horry County in January 2014 and hired approximately 28 additional employees in the first months of its operations.

However, it quickly fell behind in its rent payments to Horry County for the Cool Springs Business Park building that is its headquarters and manufacturing location. One week after a Grand Opening celebration, in July 2014, that included appearances by Gov. Nikki Haley and local Congressman Tom Rice, PTR Industries laid off some workers and instituted a 10% across the board pay cut to those remaining.

Since then, PTR Industries has struggled. According to several sources, Horry County Council restructured its rent deal with PTR Industries last fall in order to help the company become current.

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Déjà vu for SC General Assembly

In November 2014, when everyone was talking about the upcoming SC General Assembly legislative session, three big topics were at the fore, ethics reform, transportation maintenance and repair funding and education funding.

One year later, as preparations are made for the second session of the 121st General Assembly, those three topics are still waiting to be addressed.

Real ethics reform falls into three areas – disclosure of all sources of income for members and their immediate families, disclosure of donor sources in these currently anonymous PACs and an independent process for ethics violation investigations.

Under our current ethics system, the House and Senate have ethics committees that essentially do nothing, and the SC Ethics Commission, which covers all other public officials throughout the state, specializes in collecting fines for late filing of disclosure documents.

All three areas have strong resistance, especially in the Senate, so expect another year where ethics is talked about much and accomplished not at all.

In the area of transportation maintenance and repair or general infrastructure funding, one lesson should have been learned with the floods of October – you can only ignore maintenance and repair of necessary infrastructure for so long.

When old, neglected infrastructure is hit with unusual conditions, it will fail. Some of the flood damage we saw would have happened anyway, but dams failing, bridges collapsing and roads washing out were as much a consequence of neglect as it was from the storm.

School funding, or rather equitable funding for poor, rural school districts is a subject that has been effectively dodged in one way or another since the Brown v. Board of Education Supreme Court decision of 1954.

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County Council Mistake on MBREDC

Horry County Council is about to make another mistake with regard to the MBREDC.

Council will vote Tuesday night on extending its funding contract to the Myrtle Beach Regional Economic Development Corporation for another year. This would commit the county to three more years of funding from the current two.

County council should not have agreed to a new two-year contract when considering its budget for the current fiscal year. It is making a terrible mistake extending the contract.

The excuse is a new executive director for the MBREDC, for which there is a search currently ongoing, will want a three-year contract to agree to a deal.

But, with the history of the MBREDC, not only in its current iteration, but also in all the ones that came before, county council would do better if it burned $1.1 million in the parking lot of the government center as give this agency another dime!

What it is doing here is giving away tax dollars to an agency whose only goal is to give away more tax dollars to bribe companies to relocate to Horry County.

And, it doesn’t do that well!

All we have to do is remember AvCraft, Project Blue, Ithaca Gun Company and PTR Industries to see how woeful has been the performance of MBREDC.

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More Economic Development Exposure

Economic development incentives will be more transparent thanks to a new Governmental Accounting Standards Board disclosure requirement.

The GASB is a private nonprofit agency that provides standards and oversees governmental accounting throughout the nation.

Thanks to this new requirement, government agencies must now tell taxpayers how much tax breaks given under the guise of economic development incentives actually cost.

The new requirements take effect December 15, 2015.

Those incentives often take the form of state income tax credits, property tax reductions through fee-in-lieu agreements, free or reduced rental payments for government structures and cash incentives.

It is past time that taxpayers were told just how much governments are giving away to corporations who promise to create new jobs and sometimes actually do.

In a report that accompanied the new requirements, the GASB said giving up revenue (in the form of incentives) is sometimes a gamble.

I would say it is primarily a gamble.

Corporations play this game well. It’s not about economic development or creating new jobs to them. It is only about where they can get the most for the least cost to them.

Who cares if the taxpayers fill in the rest?

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MBREDC Smart Economic Planning or Insanity

On July 7, 2015, the Horry County Council approved another 2-year $2.6 million contract with the MBREDC (Myrtle Beach Regional Economic Development Corporation.)

This action is probably very confusing for anyone who has followed the progress of the MBREDC over the years.

Have Horry County taxpayers received a proper return on the $1.3 million given annually to the MBRDC during the past 5 years? Certainly any prudent investor would ask about an expected return on investment before committing funds to a corporation, whether a quasi-public/private or solely private one. There is only one measure of success when it comes to investing your (the taxpayers) money and that is the return on investment. In this case the return would be measured in number of residents who got jobs per tax dollars spent.

Unfortunately (for my peace of mind and confidence in our County Council) I did some basic math. The MBREDC receives $1.3 million annually from Horry County taxpayers. The former MBREDC President Brad Lofton had announced 1,500 jobs were created by the MBREDC in Horry County during his 3 years running the agency. Oops – but it appears that half of those jobs have not been filled. Let’s do some easy math; 750 jobs at $1.3M X 3 years of taxpayer money = $5,200 per job. Oops, forgot to subtract the money owed to the county by the current occupant of the Cool Springs Business Park (paid for by taxpayer $). PTR owes $73,000 in back rent as of June. Is it now logical to add $73,000 / 3 = $24,333 to the cost per job? Well probably not, but you get the drift.

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A Lesson from the AvCraft Experience

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.

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A Christmas Gift for AvCraft?

It’s two weeks til Christmas and Horry County Council is in the gift giving mood to AvCraft again.

This is an act that plays in December almost as regularly as “A Christmas Story.”

And every time it plays it provides another lesson about everything that is wrong with the concept of giving incentives to companies in the name of economic development.

What it really boils down to is corporate welfare.

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Curbing Economic Development Incentive Excesses

A bill prefiled with the S.C. Senate last week could go a long way toward limiting the excesses of economic development incentive agreements between government and private business.

S. 134, with senators Tom Davis and George Campsen as sponsors, would tighten down on not only what, but how governments can give away public money as an economic development incentive.

Most importantly, it would make the process transparent so the taxpayer could see in advance just how much public money is being thrown at a company to relocate, or expand its business.

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