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Friday, June 14, 2024 - 11:12 PM

INDEPENDENT CONSERVATIVE VOICE OF UPSTATE SOUTH CAROLINA

First Published in 1994

INDEPENDENT CONSERVATIVE VOICE OF
UPSTATE SOUTH CAROLINA

Electric bus maker required to do less for taxpayer backed incentives

When Proterra announced in February 2010 that it was locating a hybrid- and electric-bus assembly plant in Greenville, the then-CEO said the company selected South Carolina over some 30 states because of the “numerous benefits in terms of workforce capabilities and research and development support.”

Former CEO Jeff Granato didn’t mention any taxpayer-backed incentives offered to the company, based then in Colorado. The S.C. Department of Commerce in a press release at the time said two state grants totaling $3 million were awarded to the company – dubbed “Project Magic Carpet” – but didn’t provide specifics on any other offered incentives.

Two months later, The Nerve revealed that Proterra could receive up to $40 million in grants, corporate income tax and job development credits, low-interest bonds and forgivable loans within 10 years.

Proterra at the time publicly committed to investing $68 million and creating at least 1,300 jobs over seven years. But under a state incentives agreement obtained then by The Nerve, the company would have to create 800 jobs – not 1,300 as announced – and invest $30 million– less than half of the announced $68 million – over five years to receive the collective $3 million in state grants publicized by Commerce.

And a new investigation by The Nerve, which was based on records obtained under the S.C. Freedom of Information Act, found that state and local officials continued to ratchet down Proterra’s job creation and investment requirements at its Greenville County facility, currently located on Whitlee Court near Clemson University’s International Center for Automotive Research.

As of 2020 – the last time state officials said they tracked employment numbers at the plant – the company had about 300 workers, a Commerce spokeswoman recently told The Nerve, though the last-known amended incentives agreement required a minimum of 400 employees.

Proterra, currently headquartered in Burlingame, Calif., filed for bankruptcy in August and since last Friday agreed to collective auction purchases of more than $200 million for various company assets, including its electric-vehicle battery plant in neighboring Spartanburg County, bankruptcy records reviewed by The Nerve show.

The total actual cost of taxpayer-backed incentives awarded to the company is unknown – partly because of a general lack of transparency by state and local government agencies awarding incentives, and state privacy laws that prohibit the release of the taxpayer cost of certain types of benefits.

A Proterra spokesman didn’t respond to The Nerve’s recent written requests for comment about whether the company’s bankruptcy would result in any repayment of state or local incentives. A nearly $200,000 incentives repayment to the state involving the Greenville County plant was waived in 2020, according to Commerce.

Proterra wasn’t the only company in South Carolina in recent years to have reduced investment and job creation requirements after initially being awarded incentives. The Nerve in 2018 revealed, for example, that Element TV in Fairfield County had to create far fewer jobs than originally promised under a $1.3 million state grant for its assembly plant.

The Nerve in 2018 also revealed that since 2015, 14 other companies that had committed to locating or expanding in South Carolina had repaid a total of nearly $7 million in state grants after failing to meet  job creation or investment requirements.

The South Carolina Policy Council – the parent organization of The Nerve – has called for greater transparency in the incentives process.

Lowered expectations

Under the last-known amended state “performance agreement,” which was dated March 7, 2012, Proterra was required to invest a minimum of $16 million for its land, building, machinery and equipment – down from the previous $30 million threshold - and create at least 400 full-time jobs – compared to the previous 800-employee target, according to records obtained under the state open-records law.

Proterra was given an extra two years under the 2012 agreement to meet the reduced requirements.

No explanation was given in the revised agreement with Greenville County and the S.C. Coordinating Council for Economic Development (CCED) for the lowered thresholds, which were required to be met by June 29, 2017. The awarded $3 million total in state grants was cut in half, records show.

The CCED is made up of the directors or board chairpersons of 11 state agencies, including Commerce, involved with economic development and by law is headed by the Commerce secretary, who is appointed by the governor.

CCED meeting minutes from Dec. 3, 2009, show that the council initially approved job development credits (JDCs), which are rebates of a portion of employee wage withholdings, for Proterra, provided that only jobs paying at least $14 an hour would be eligible for the credit.

Proterra was identified in the minutes only as project “EZ09232475-Greenville” and was among five unidentified companies approved for JDCs under the heading, “Regarding confidential projects, the following actions were taken.”

In a recent written response to The Nerve, Commerce spokeswoman Kelly Coakley said Proterra in 2012 requested a “reduction of its minimum investment and job requirements,” and that no grant funds had been dispersed then, adding, “Because the investment and job numbers were reduced by 50%, the grant award was reduced by 50%.”

No answer was given to The Nerve’s question about why the state agreed at the time to the lowered job and investment targets.

Proterra never hit its reduced 400-job threshold by the required deadline, according to Coakley, who noted that when the state grant closed in 2020, the company had 302 employees. Still, the CCED in March 2020 waived a $195,000 incentives repayment because although Proterra had fallen short of a 300-job target by Dec. 31, 2018, it had invested “nearly double its requirement” at its Greenville facility, she said.

The Nerve previously has pointed out that the CCED, which is administered by Commerce, routinely has met in secret in Commerce’s headquarters on the 16th floor of an office high-rise across the street from the State House to discuss what incentives – often totaling in the millions – to dole out to companies seeking to locate or expand in South Carolina.

The CCED was a party in the recent state incentives agreement involving Scout Motors, an electric vehicle company created last year by German-based Volkswagen and which earlier this year received a nearly $1.3 billion appropriation – which works out to be about $240 for every man, woman and child in South Carolina – from the S.C. Legislature to locate an assembly plant in Richland County.

The Nerve in June revealed details of that agreement and followed up with another investigation last month showing how state and local government officials – including Republican Gov. Henry McMaster, who last year issued an executive order committing the state to promote the electric vehicle industry – kept the deal secret from the public for months.

Unknown job numbers

In a press release issued last Saturday, the U.S. Volvo Group, which manufactures commercial vehicles, announced that it had submitted a winning $210 million bid at a bankruptcy auction for Proterra’s electric-vehicle battery plant in Greer in Spartanburg County and a related battery development facility in California. A separate Volvo company operates a car assembly plant in Berkeley County.

Bankruptcy records reviewed by The Nerve show that the agreement involving Proterra Inc., Proterra Operating Company Inc.,  Volvo Battery Solutions LLC and Mack Trucks Inc. included a reference to “transferred incentives” – specifically a 2021 “fee-in-lieu-of-tax” (FILOT) agreement with Spartanburg County and two 2021 “revitalization” agreements with the CCED.

Mack Trucks, which is part of the Volvo Group, operated a truck assembly plant in Winnsboro in Fairfield County from 1987 to 2002 and received taxpayer-backed incentives before Volvo closed the plant and relocated operations to Virginia, as The Nerve revealed in a 2010 story about failed companies in South Carolina that were awarded incentives.

In announcing the Spartanburg County project in December 2021, Commerce described the project as a $76 million investment that would create more than 200 new jobs. The CCED approved job development credits for Proterra and awarded Spartanburg County a $750,000 grant to “assist with costs related to this project,” according to a Commerce release.

“Today’s announcement by Proterra is further proof that South Carolina is leading the charge in the electric vehicle revolution,” Gov. McMaster said in the release.

The announcement came about eight months after President Joe Biden took a virtual tour of Proterra’s Greenville County facility.

Asked for current job and investment numbers at Proterra’s Greenville and Spartanburg County locations, Commerce spokeswoman Coakley in her recent email response said because the state grant for the Greenville County plant is “now closed,” and the company did not claim job development credits for that facility, it no longer has to report updated job and investment figures there.

As for the Spartanburg County plant, Coakley said no current employment or investment figures are available because required job and investment thresholds don’t have to be met until Dec. 2, 2026. A Spartanburg County spokeswoman didn’t respond to The Nerve’s recent written requests for any related county incentives agreements.

County concessions

The Nerve’s review found that the state incentives package for Proterra wasn’t the only amended agreement with reduced requirements for the company.

Under “inducement” and millage rate agreements with Greenville County, which were signed in December 2009 and January 2010, Proterra committed to making a $42 million investment over five years – $68 million over seven years  - and creating “approximately” 1,300 jobs over five years, according to records provided recently to The Nerve by the county under the state open-records law.

In exchange, Proterra would be allowed to make FILOT payments over 20 years based on the 2009 county millage rate and a reduced property assessment percentage of 6% – potentially saving the company millions in property taxes over the life of the agreement.

In addition, given that the plant would be located in a “multi-county” industrial park as defined by state law, Proterra would be eligible for county “infrastructure” credits equal to 100% of its FILOT payments on its land and building investment for the first four years, and 50% of FILOT payments on other property, such as machinery and equipment, for the first 10 years, under the agreements.

Besides FILOT incentives, the county also authorized the issuance of up to nearly $7.5 million in federal “recovery zone facility” bonds for the project. The January 2010 agreement and a related county resolution authorized another maximum $7.5 million in federal “qualified energy conservation” bonds (QECB), which, as with the other bonds, were supposed to be repaid by the company. The total maximum authorized QECB amount was later reduced to $4.5 million under another resolution.

But despite the initial investment requirements approved by the county, under an ordinance approved in November 2010 and a FILOT agreement in December 2010, Proterra would have to invest a minimum $33 million – not $42 million as required in the initial agreements – over a period of seven years – as opposed to five years under the first contracts – to receive the same FILOT benefits.

No job-creation figures were listed in the revised agreements.

A county resolution in August 2017 extended the seven-year project completion period by another three years to the end of December 2020, given that Proterra was “considering making additional investment in the Project,” though no specifics were provided.

The Nerve recently sent a list of written questions to Joseph Kernell, the county’s longtime administrator, about the lowered incentives requirements in the amended agreements. He told The Nerve in 2010 that offering incentives was necessary to persuade Proterra to locate in South Carolina, describing the county deal then as a “strong package.”

“If you don’t do the investment, you wouldn’t get the return,” he said at the time. “The  competition is from other states; we’ve got to be competitive.”

Responding on behalf of Kernell, county spokesman Bob Mihalic in a recent email to The Nerve said the county’s 20-year FILOT agreement with Proterra is still in effect, and that the company has made required annual FILOT payments.

Asked why Proterra was allowed to receive the same FILOT benefits while being required to do less under the amended agreements, Mihalic replied, “Automotive/Mobility was/is a sector that the GADC targeted and tries to grow.”

“GADC” refers to the Greenville Area Development Corporation, the governing board of which is appointed by the Greenville County Council. In its most-recent federal income tax return filed in April this year, the nonprofit organization, which aims at “promoting and enhancing the economic growth and development” of the county, reported a $2.1 million deficit for the 2021-22 tax year, with total revenues and expenditures at nearly $2 million and more than $4.1 million, respectively.

Mihalic said Proterra was not required to repay any awarded county incentives because it had met the reduced $33-million minimum investment requirement. “Clawback” provisions in incentives agreements typically require companies to repay part or all of certain awarded benefits, based on a formula, if job creation or investment thresholds aren’t met.

As for the federal bond repayments, Mihalic said that “would be all between” Proterra and the federal government.

Mihalic instructed The Nerve to contact the S.C. Department of Commerce about Proterra’s current number of workers at its county plant and referred questions to county Auditor Scott Case about Proterra’s total FILOT payments and awarded “infrastructure" credits. Case didn’t respond to The Nerve's written requests for that information.

Elsewhere in the state, Proterra announced in March that the S.C. Department of Education would “deploy” 160 electric school buses statewide in a partnership with the company and Thomas Built Buses. Proterra in its press release described the purchase as the single-largest order then of electric school buses under the federal Environmental Protection Agency’s "Clean School Bus Program."

In a recent written response to The Nerve, Department of Education spokesman Derek Phillips said Proterra’s bankruptcy announcement in August would not affect "the production or delivery of the buses.”

Phillips said the 160 buses cost a total of $59.5 million, which was covered by a federal grant through the Clean School Bus Program. He provided The Nerve with a list of 17 school districts statewide in which he said Proterra buses are operating, ranging from small districts such as Barnwell 45 to the larger Richland 1 district.

Big creditors, big losses

Proterra on Aug.7 filed for Chapter 11 bankruptcy in U.S. Bankruptcy Court in the District of Delaware. The company listed the location of “principal assets” at its Greer electric battery plant.

Proterra in its bankruptcy petition estimated the number of creditors at 5,001-10,000. Total assets and debts as of June 30 were $818.7 million and $609.4 million, respectively, according to the petition.

In its latest quarterly filing with the U.S. Securities and Exchange Commission, Proterra, which became a publicly traded company in 2021, reported a total operating loss of $183.6 million for the nine months ending Sept. 30.

Proterra’s shareholders that had at least 5% voting power within the company as of August, according to the bankruptcy petition, included New York-based BlackRock Inc., which has been ranked as the world’s largest asset manager, and whose co-founder and CEO, Larry Fink, has publicly encouraged businesses to adopt liberal “environmental, social and governance” (ESG) policies.

The Nerve in April revealed that BlackRock, which as of fiscal 2022 managed more than $10 billion in the state pension system in South Carolina, was among the top-five collective shareholders as of the end of 2022 among the 19 biggest companies by publicly traded stock in one or more of the four largest, public-stock MSCI indexes in the state pension plan.

As for why Proterra filed for bankruptcy, industry analysts in technology publications cited various factors, including inflation, tightening capital markets, supply chain issues and pressures fulfilling contracts with public transit systems that required customized buses.

Bankruptcy records show that California-based Phoenix Motor Inc., another electric vehicle company, on Monday purchased Proterra’s transit business line.

Proterra’s top-25 unsecured creditors as of August listed claims ranging from $661,463 to $27.5 million and included 10 municipal or regional transit systems in the U.S. and Canada, with Miami-Dade County claiming the largest amount of “deferred revenue” – nearly $10 million – among that group, according to the bankruptcy petition.

Deferred revenue refers to advance payments that a company receives for products or services that are to be delivered or performed in the future, according to the online Investopedia.

In court papers, Miami-Dade County said it awarded Proterra in 2019 two contracts totaling more than $72 million to purchase 69 electric transit buses and charging systems, along with new replacement parts and services for those buses. In a June 2021 press release, the county said it had agreed in 2019 to buy 33 electric buses and depot chargers, following up in 2021 with a “commitment” to purchase 42 additional buses, though no cost figures were provided.

A “pilot” Proterra bus model was scheduled to be delivered in mid-July 2021 for testing, with the other electric buses slated for delivery last year, the release said.

“With these new electric buses, Miami-Dade will lead the way with the largest sustainable transportation fleet in Florida and one of the largest in the nation,” county Mayor Daniella Levine Cava said in the release.

The Nerve recently sent written questions to Miami-Dade County about the number of Proterra buses currently operating in the county, and its bankruptcy claim against the company. No response was provided by publication of this story.

A Proterra spokesman didn’t respond to The Nerve’s questions about how the company’s bankruptcy would affect contracts with transit systems nationwide.

Besides the transit systems’ claims, the U.S. Customs and Border Protection – another unsecured creditor as of the August bankruptcy filing – claimed nearly $713,000 in owed taxes from Proterra.

Nerve intern Jasmine Creech contributed to this story. Brundrett is the news editor of The Nerve (www.thenerve.org). Contact him at 803-394-8273 or This email address is being protected from spambots. You need JavaScript enabled to view it.. Follow The Nerve on Facebook and X (formerlyTwitter) @thenervesc.