Public, Private Money Lure Industry

WINNSBORO – Documents made available to The Voice last week through a Freedom of Information Act (FOIA) request reveal the scope of financial incentives employed by Fairfield County and the State Department of Commerce (DOC) to lure a television manufacturing company to Winnsboro.

Element Electronics, headquartered in Minnesota, announced plans on Aug. 22 to relocate manufacturing operations from China back to the United States, tapping the former Perry Ellis Menswear building in Winnsboro as their new home. Vlad Kazhdan, vice president of product for Element, said during the announcement that the new venture would create 500 new full-time jobs over the next five years.

Purchase and Lease

As part of the agreement, Fairfield County purchased the Perry Ellis building, at 392 Highway 321 Bypass N., from a Perry Ellis subsidiary for $2 million in a deal that closed on Oct. 14. But the County only ponied up $600,000 for the property, while the Department of Commerce, through an economic development grant, put up $1.25 million. Element, meanwhile, kicked in the remaining $150,000 for the purchase. An additional $50,000 in DOC grant money will go toward the cost of upfitting the building, transforming it from a clothing manufacturing center into a high-tech electronics plant. Fairfield Electric Cooperative and SCANA have also offered to reimburse Element $100,000 each for upfit costs.

Element will lease the property from the County for $1 a year for 30 years. Element will have the option to purchase the property for $1 if, by Dec. 31, 2018, it has created at least 500 new, full-time jobs and has invested at least $7.5 million in taxable property; or, if by the same date, Element has created at least 350 jobs, invested at least $5.25 million, repaid a pro rata amount of the grant money and paid to Fairfield County an additional amount based on the following formula:

400-499 jobs by Dec. 31, 2018 = $120,000;

350-399 jobs by Dec. 31, 2018 = $200,000.

Payments would be due to the County by June 1, 2019. Element may also continue to lease the property for $1 a year for an additional five years, but must have created at least 250 new, full-time jobs, invested at least $2.5 million by Dec. 31, 2018, and paid to the County $600,000, plus the pro rata grant amount. Failing to have met those conditions, Element may then lease the property at market value, but still must repay the County’s $600,000 investment.

Fee in Lieu of Taxes

Manufacturing property in South Carolina is taxed at 10.5 percent, while commercial and other property is taxed at 6 percent. To level the playing field and help attract industry, Tiffany Harrison, Director of Fairfield Economic Development said, local governments often offer as an incentive fees equivalent to the 6 percent rate that companies may pay instead of taxes. Such an agreement is known as a Fee in Lieu of Taxes, or FILOT. Perry Ellis, however, had no such agreement and their property at 392 Highway 321 Bypass N. was listed on the tax rolls. And once a property is on the books, Harrison said, it cannot be removed. Element, therefore, did not qualify for a FILOT on the property itself, but instead was offered by the County an annual tax credit of 42.8 percent for 30 years to bring their contributions to Fairfield County coffers down to the 6 percent level. Like the lease agreement, that tax credit is contingent upon Element creating at least 500 new, full-time jobs and investing at least $7.5 million over the next five years. Otherwise, the credit decreases by the following formula:

If, by Dec. 31, 2018, Element has created less than 500 jobs, but at least 400 and invested less than $7.5 million, but at least $6 million, tax credit = 33 percent;

Less than 400 jobs, but at least 350 and an investment of less than $6 million but more than $5.25 million, credit = 23 percent;

If, by Dec. 31, 2018, Element has failed to create at least 350 new, full-time jobs and has invested less than $5.25 million, the credit agreement terminates and all property taxes shall be paid retroactively.

Although the building does not qualify for a FILOT, equipment does, Harrison said, and for their equipment Element will pay a FILOT equivalent to the 6 percent property tax rate for 30 years, provided Element has met the 500 job and $7.5 million investment threshold. Otherwise:

Less than 500 jobs, but more than 400 and less than $7.5 million, but at least $6 million = 7 percent;

Less than 400 jobs, but at least 350 and less than $6 million but more than $5.25 million = 8 percent.

If, by Dec. 31, 2018, Element has failed to create at least 350 new, full-time jobs and has invested less than $5.25 million, the FILOT terminates.

Typical jobs at Element will pay about $12.50 an hour, on average, Harrison said. Element plans to create 250 jobs in the initial phase of start-up. An additional 250 jobs will be added over the course of five years. Element is a main supplier of electronics to Wal-Mart, as well as Target and QVC.