Greenville and Spartanburg counties topped the list for targeted grants and job development credits in a recent audit (.pdf) critical of the S.C. Commerce Department for inadequate oversight measures for verifying job creation and investment requirements.
According to a June report from the S.C. General Assembly Legislative Audit Council, the S.C. Coordinating Council for Economic Development — headed up by Commerce Secretary Bobby Hitt —approved and executed 415 revitalization agreements. Overall, these agreements led to $223 million in claimed company reimbursements, expected to create 66,684 jobs, through job development credits. The Coordinating Council approved roughly $6.2 billion in potentially reimbursable costs through job development credits during this time.
Spartanburg, Greenville and Lancaster counties had the highest number of projects at 40 or more per county, while York County had the highest job creation expectation at 9,300 new posts, according to the report. Spartanburg County accounted for the highest project costs during a 10-year period covered in the audit, at more than $1 billion, according to the report.
Greenville and Spartanburg counties were also the top recipients for the 557 projects funded by the Coordinating Council’s $526 million grant pool between 2009 and 2019, followed by York County. Spartanburg businesses were expected to invest $3.5 billion in the state through the projects — the highest investment out of any county, followed by Anderson County businesses which committed to roughly $2.5 billion in investment.
Grant recipients exceeded their collective investment goal of $10 billion while job development credit recipients created 34,562 new jobs and $8.4 billion in investment — meeting the collective goal by 100% — but auditors argue that Commerce Department verification of credit and grant requirements remain suspect.
“We found that DOC and the Coordinating Council do not include actual figures related to the projects’ performances or the number of projects that were not successful in job creation efforts in annual reports. Additionally, DOC does not conduct any fiscal impact analyses after the initial cost-benefit analysis performed prior to an award to determine if the projects were successful,” auditors said in the report summary.
The report contends that the Coordinating Council failed to clawback $17 million in repayment requests for recipients who did not meet requirements for the grants or tax credits, based on information from recipients’ records, and attributed $5 million in grant funding to companies that bankrupted or committed fraud.
A letter from Hitt refutes auditors’ claims that Commerce Department oversight overlooked fraudulent self-reporting from grant or tax credit recipients and failed to enact adequate performance measures.
“Despite the LAC’s acknowledgement of the overall effectiveness of our discretionary incentive programs, many of the LAC’s recommendations translate into exactly that — more bureaucracy, with more cost, but minimal benefit,” Hitt said in the letter. “The LAC may not fully appreciate how Commerce’s relationship and interaction with prospective companies plays a key role in attracting economic development projects that could locate anywhere.”
He noted that tax filings to the Internal Revenue Service and to the S.C. Department of Revenue are also self-reported, and additional audit requirements demanded by the audit council could hamper the growth of small businesses and new corporations.
“If Commerce cannot sell South Carolina as business-friendly, our incentive programs never come into play,” Hitt said in the letter. “Commerce is the face of our state to the global business world, so compelling your chief recruiter to be more bureaucratic may undermine Commerce’s effectiveness.”s