Lawmakers offered lure worth $450M

Oct 29, 2009 (The Post and Courier - McClatchy-Tribune Information Services via COMTEX) -- BA | Quote | Chart | News | PowerRating -- Fifteen minutes before South Carolina announced to the world that it is the new home of Boeing Co.'s second Dreamliner assembly line, the power brokers sat together in Senate leader Glenn McConnell's office and huddled around the phone.

On the other end of the line, a Boeing executive gave the verdict: The incentives package worth $450 million that the Legislature had just agreed to was the last bit of news the aeronautics giant needed to make their decision.

Sen. Hugh Leatherman's announcement from the Senate podium on Wednesday afternoon -- "Boeing has chosen North Charleston!" -- cracked applause in a chamber known for its decorum.

The figure ranks as the largest single investment in South Carolina's history with a record incentives package to match.

"Without the incentives package, there is no discussion," said House Speaker Bobby Harrell, a Charleston Republican. "But once you have an incentives package on the table ... that's where those other things come into play for South Carolina."

From there, Harrell said that Boeing executives were enticed further by state- sponsored workforce training programs, the responsiveness of Commerce officials and state lawmakers and the state's business-friendly climate -- made friendlier in recent years by workers' compensation and tort reform.

Harrell, along with Leatherman and McConnell, were credited with having the biggest influence in drawing the company to North Charleston.

Gov. Mark Sanford acknowledged that in a very public way. Leatherman by many accounts has been Sanford's No. 1 political adversary, but Wednesday, Sanford asked the press to gather around and he credited state lawmakers for their efforts. The governor didn't leave any question about whether he would sign off on the incentives package when it reaches his desk: "Absolutely."

Over the years, Sanford has called for restraint of state incentives, a tool that state governments commonly use to lure industry but one that has drawn criticism from free- market thinkers.

Calvin Blackwell, an associate economics professor at the College of Charleston, said he is skeptical about market intervention, especially when government competes for industry in a confidential setting.

"Generally, this is not a very good strategy for states to employ," he said. "It's a race to the bottom: who can provide the most goodies?"

Companies play localities off one another, Blackwell said. Another downside is that jobs created don't necessarily go to current state residents, yet they are the ones who shoulder the impact to the tax base, he said.

South Carolina would be much better off pursuing a long-term strategy by investing in the workforce through education and improving the infrastructure, Blackwell said.

But when it comes to Boeing, this incentives package seemed to work.

South Carolina lawmakers tweaked state rules Wednesday to give breaks to companies that make major investments within the state. Boeing will have to create at least 3,800 jobs and invest more than $750 million within seven years to take advantage of them.

The package includes a tax exemption for fuel that is burned during aviation test flights and while transporting airplane parts to other manufacturing locations. It also would exempt computer equipment purchases and allow a qualifying company to immediately pay no sales tax on construction materials, rather than wait for a 2011 phase-in.

It would ensure that the company could negotiate with state officials to pay little in corporate income taxes for 10 years by deleting a minimum pay requirement. Current law allows the income tax break for companies investing at least $10 million and creating 200 jobs, but mandates salaries be three times the state's per capita income.

Charleston County officials put together their own incentives package, which is still confidential but typically includes property tax relief. Council members could consider the package as early as their Nov. 12 meeting.

Council member Elliott Summey, who chairs the economic development committee, said he'll vote to approve the package, calling it "responsible and proper."

"The bottom line is it's going to do wonders for the health of our economy for a long, long time," he said. "We're getting a great corporate citizen."

The Associated Press contributed to this report.

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