Saturday, January 07, 2012

Horry County, South Carolina: County leaders want more details about companies receiving incentives

AvCraft mechanic Kevin Dorsey works on an airplane propeller in the AvCraft hangar in Myrtle Beach 
(Charles D. Perry | The Herald).

By Charles D. Perry
The Herald

When some Horry County Council members found out AvCraft Technical Services would be getting $200,000 in incentives to expand, they were frustrated.

Now, those council members say they will handle incentives negotiations differently.

“There were quite a few council members that were shocked when the announcement came down, given our history with AvCraft,” said councilman Marion Foxworth. “When we first started talking about incentives, the example that a few of us gave of things to look out for was AvCraft.”

Licensed by the Federal Aviation Administration, AvCraft specializes repairing and maintaining planes that carry 32-75 passengers. The Myrtle Beach company has 50 employees now, but last week AvCraft officials announced that they plan to expand their operation and add 150 workers during the next five years.

As part of the arrangement, AvCraft is getting $100,000 from the county and $100,00 from the state.

For some county council members, the problem is that the company’s predecessor, which was also called AvCraft, failed to deliver on some of its job creation promises. The new ownership has been in place since 2010.

Foxworth said he didn’t know who was getting the $100,000 when he voted to award it. However, he said, he won’t be voting blindly again and plans ask more questions about companies looking for incentives to expand or relocate here.

He also wants the county to structure incentives in a way that rewards benefits for job growth.

“I’m concerned about providing the incentives up front and hoping that they produce,” Foxworth said.

Councilman Harold Worley asked about setting up those kind of benchmarks at last month’s council meeting. Although Worley couldn’t be reached for comment this week, councilman Carl Schwartzkopf said he, too, wants to provide incentives to companies that reach specific goals.

“I’m a firm believer in paying on performance,” Schwartzkopf said, adding that offering incentives should be like rewarding a child for raking a lawn. “If you look at Hershey bar without nuts in it, it’s got all these little squares. OK, well, you rake the front lawn, you get two squares. You rake the side lawn, you get two more squares. You rake the other side, you get two squares. You rake the back lawn … and then you’ve got the whole candy bar.

“But I’m not going to give the kid the candy bar and then go ahead and [ask him to] rake the lawn because I’ll tell you exactly what’s going to happen. The kid’s going to take the candy bar, go down the street, eat it and then the next time you see him [he’ll say] ‘I haven’t gotten around to it yet.’”

Along with Foxworth, Schwartzkopf plans to take a more active role in researching companies that request incentives. He wants the council to meet with economic development officials in closed sessions to talk about prospective companies before any votes are cast. There, he said, he plans to ask about everything from the company’s history to its management philosophy.

“You can rest assured that Carl’s going to ask a whole lot more questions in the future,” he said. “When people stand in front of us again and ask for money, they probably better feel that they’re in court and they’re under cross examination.”

EDC leader stresses caution

AvCraft’s jobs are the first announced since local leaders restructured the Myrtle Beach Regional Economic Development Corporation (EDC) and hired CEO Brad Lofton. After years of dismal job growth, officials decided it was time to overhaul the EDC and bring in new leadership.

When asked about council members’ AvCraft concerns, Lofton defended the project, saying the state spent a year vetting it.

“It’s a new company, new ownership,” he said, adding that the state chipped in $100,000. “They don’t just do that for anybody.”

He noted that said some clawback provisions will protect the county’s investment. For example, AvCraft will be required to hire a third of the 150 workers within 18 months.

“We’re not going to give them a five-year blank check,” he said.

AvCraft needed the incentives money up front to improve infrastructure and buy equipment so it could begin hiring, Lofton said.

Going forward, the county has the flexibility to structure its incentives any way it chooses to, he said. However, he stressed that leaders not be rigid. Other counties are competing for the same industry.

“Every one of those counties is just as hungry as we are,” Lofton said. “You’ve got a delicate line that you’ve got to balance. You’ve got to make sure you’re protecting the taxpayer, but at the end of the day you’ve got to do what it takes to win the project. And that’s a challenge.”

The only major change Lofton expects in the incentives discussions will be that he’ll talk about the companies with the council in a closed session before leaders vote on what to offer.

He hopes those conversations will take place near the end of the negotiating process to decrease the chance that critical details are leaked.

As for the AvCraft deal, he said it was a learning experience and communication between his office and county leaders will improve.

“I felt like everybody was briefed on it,” he said. “But if not, then we’ll just figure out a way to make sure that doesn’t happen again. I think it’s more of a procedural issue than anything. We’re a young economic development group, just beginning. And we’re working through those things.”

One benefit of helping a company like AvCraft, Lofton said, is that the business can be an ambassador for the county.

“I sure as heck hope that AvCraft can say, ‘Yes, these guys helped us expand and it’s a good community to locate in,’” he said. “I think $100,000 is not a lot to ask for somebody that can be a good testimony for you.”

Lofton’s contract stipulates that me must bring 500 jobs to the county within 18 months of his first day at work. He was hired in March.

Last month — at the same meeting where council members approved the AvCraft incentives — Lofton said he’s working with five local companies on expansions that would generate 285 jobs.


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