In recent years, state lawmakers annually have earmarked a total of nearly $5 million to eight regional economic development organizations, presumably to help attract new companies to South Carolina.
But whether taxpayers are getting significant, verifiable returns on their investment is questionable, The Nerve found in a review of required annual reports from four of the groups to the S.C. Department of Commerce.
Most of the reports list international or out-of-state trips, and other “lead generation” or marketing expenses, but don’t specifically link those efforts to identified companies that located or expanded in the organization’s respective areas.
Federal tax returns reveal the nonprofit groups are heavily subsidized by taxpayers while their leaders receive six-figure salaries.
Since fiscal 2015, a state budget proviso has funneled a total of at least $4.8 million annually through Commerce to the eight organizations, several of which have legislators on their governing boards.
The total appropriation would rise to $5 million for next fiscal year, which starts July 1, under the full House and Senate Finance Committee versions of the state budget. Following is the breakdown of the proposed amounts:
- Central SC Alliance (Columbia-based, representing eight counties): $750,000;
- Upstate South Carolina Alliance (Greenville-based, representing 10 counties): $750,000;
- North Eastern Strategic Alliance (Florence-based, representing nine counties): $745,000;
- Charleston Regional Development Alliance (Berkeley, Charleston, Dorchester counties): $660,000;
- South Carolina I-77 Alliance (Chester, Fairfield, Lancaster, Richland, York counties): $660,000;
- Southern Carolina Alliance (Barnwell-based, representing seven counties): $600,000;
- Economic Development Partnership (Aiken, Edgefield, McCormick, Saluda counties): $450,000;
- TheLINK Economic Development Alliance (Lee, Sumter counties): $385,000.
Under the state budget proviso, the organizations are required to submit annual reports to the head of Commerce and chairmen of the Senate Finance and House Ways and Means committees “on the expenditure of the funds and on the outcome measures.” The proviso language doesn’t define “outcome measures.”
The proviso requires the organizations to match every state dollar with “one dollar of private funds,” though The Nerve revealed last week that the Central SC Alliance and Upstate South Carolina Alliance listed contributions from state or local public entities as part of their private matches last fiscal year.
The Nerve’s latest review found that lawmakers in recent years have been members of the governing boards of at least three of the eight economic development groups.
Sen. Hugh Leatherman, R-Florence, who is the longtime Senate Finance Committee chairman, sits on the executive committee of the governing board of the North Eastern Strategic Alliance (NESA), as do Sens. Luke Rankin, R-Horry, who is the Senate Judiciary Committee chairman, and Kent Williams, D-Marion, according to NESA’s website. Sen. Gerald Malloy, D-Darlington, also is on the board, chaired by ex-senator and former lieutenant governor Yancey McGill.
Sen. Paul Campbell, R-Berkeley, who is executive director and CEO of the Charleston County Aviation Authority, sits on the governing board of the Charleston Regional Development Alliance, according to the CRDA website.
Sen. Brad Hutto, D-Orangeburg, is chairman of the executive committee of the governing board of the Southern Carolina Alliance. Sen. Tom Davis, R-Beaufort, also sits on the board, the group’s website shows.
Campbell, Davis and Williams serve with Leatherman on the Senate Finance Committee.
The Nerve reviewed the latest annual reports provided to Commerce and most recently available federal tax returns of the Central SC Alliance, Upstate South Carolina Alliance, NESA and the Charleston Regional Development Alliance (CRDA). Those groups would receive the biggest state grants under the budget proviso for next fiscal year.
Central SC Alliance’s latest annual report to Commerce shows that of Oct. 30, it had spent a total of $722,520 under the state budget proviso, including $301,659 for “lead generation,” and $197,601 for “marketing trip” expenses. The report lists the group’s involvement in various international trade shows, conferences or “missions” from 2016 through last year, including trips to London, Paris, Germany, Italy, Denmark and Sweden.
The organization’s 2016 federal tax return shows that it received $3.4 million that year, including nearly $2.7 million in government grants, which represented 79 percent of total revenues. After expenses, its fund balance was $2.3 million. Mike Briggs, the group’s president and CEO, had $230,924 in total compensation that year.
Upstate South Carolina Alliance’s annual report to Commerce shows that in 2017, it had $2.4 million in total revenues, $686,356, or 28 percent, of which was state funds. It had a balance of nearly $420,000 after expenditures that year. The biggest expense category was “lead generation, research and project support,” which included “mission” trips to Belgium, Denmark, England, France, Ireland, Scotland, Portugal and Switzerland.
John Lummus, the organization’s president and CEO, received $167,625 in total compensation in the 2016 tax year, according to its federal tax return.
NESA’s annual report to Commerce shows that in fiscal 2018, it received $756,085 in state funds and spent $484,735, with a year-end cash balance of $271,426. It listed expenditure categories of “marketing and business development,” “product development,” and “county economic development grants program,” though no details were provided other than listed total amounts.
In the 2016 tax year, the organization received $2.3 million, including $775,546 in government grants, which represented a third of its total revenues, according to its federal tax return. It ended the year with a fund balance of nearly $1.3 million. Jeff McKay, the group’s executive director, received $247,848 in total compensation.
As of last Sept. 30, the CRDA had received $671,084 in state funds and spent $201,565, or 30 percent, of that amount, according to its 2018 annual report to Commerce. Its biggest expenditure category was “global business development/strategic marketing,” including the Farnborough International Air Show near London in July.
In the 2016 tax year, the CRDA had $3.5 million in total revenues, including $1.7 million in government grants, according to its federal tax return. Its year-end fund balance was more than $2 million. David Ginn, the group’s president and CEO, received $345,634 in total compensation that year.
The Nerve this week asked each of the four organizations for a list of new companies or existing companies that expanded in their respective areas last fiscal year, based solely or primarily on the group’s recruitment efforts.
CRDA spokeswoman Claire Gibbons provided an online link to “CRDA-Facilitated Projects,” which she said were “recruited by us,” adding, “We of course work with many partners such as the County EDOs (economic development organizations) and SCDOC (Commerce) in recruiting companies and consider it a team effort.”
McKay, the NESA director, said only in an email Thursday, “I have placed a copy of our 2018 annual report in the mail for your review.” Representatives of the Central SC Alliance and Upstate South Carolina Alliance did not respond to written requests for comment.