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State incentives structure should consider high-impact jobs

May 9, 2017

Legislation would strengthen SC’s ability to recruit array of businesses

by John Lummus, President & CEO of the Upstate SC Alliance

“What are you doing about headquarters?” 

That question comes up time and again during business events and presentations geared around economic development, and it’s asked in the recognition that corporate headquarters operations are a highly sought business operation for most metropolitan communities. 
The 10-county Upstate of South Carolina is home to thriving businesses of every size, and each plays a role in the economy of our region. We are known especially for manufacturing and automotive production, and are proud to attract and support companies in those fields. South Carolina’s current tax incentives, however, do not offer as much to the businesses and corporate headquarters outside of those industries. 
Last year, UST Logistics brought its national headquarters to downtown Greenville, a move projected to generate $1.6 million in new capital investment and bring 50 jobs to the Upstate. 
Medical technology start-up Chartspan established a headquarters in downtown Greenville last year after relocating from Texas to a NEXT incubator space. According to the company, tax and job incentives from the S.C. Department of Commerce and the Greenville Area Development Corporation made staying in Greenville, and expanding their operations to nearly 400 new positions, an easy decision to make.
These companies are often forward-thinking, with high-impact career opportunities and favorable wages — the very types we should be working to attract. 
However, the traditional thought – demonstrated by state legislation on statutory and discretionary incentives – has been that the state’s savviest investments are made in the businesses that invest heavily in new construction, machinery and equipment systems to tie them deeply to the region. In the past, office-type operations that could succeed on leases and with light, portable equipment have been seen as a greater risk for public investment, lest they hop across state lines when their lease ends in pursuit of a new incentive package. 
Today, however, the types of jobs available in the marketplace are changing in nature, with more efficient technology enabling greater output at lower costs. UST Logistics and Chartspan are just two examples of such business models, companies that perform in a nimble way without the investment machinery-heavy operations require; as it stands, such businesses are not extended the same tax incentives as their manufacturing counterparts.
South Carolina will miss the opportunity to secure companies like these and the countless jobs they would bring if we’re not competitive about what we can offer. Establishing a tax environment where these businesses are enticed to expand and allowed to grow should be a top priority for legislators and their constituents alike.
All things being equal, tax incentives can sweeten the deal for businesses considering a move to or expansion within the Upstate. These efforts are instrumental in helping pare down costs associated with moving headquarters or adding new positions. Selecting a site for business expansion looks at the full picture: skilled workers, a thriving community, accessibility and transportation, cost of operations and tax incentives. South Carolina has so much to provide expanding businesses in each of those arenas, but our legislators need to help us expand that last crucial factor. 
With that in mind, the SC Senate recently passed S.404, which focuses on our agriculture industry and the recruitment of professional services and “back office” administration and support service jobs by modifying the state’s primary discretionary incentive, Job Development Credits (JDCs) for professional service jobs. 
The legislation, which was championed by the South Carolina Economic Developers’ Association, allows companies creating new, high-paying, professional office jobs in South Carolina to qualify for JDCs. 
The legislation also provides an income tax credit or credit against employee withholding for agribusiness or agricultural packaging operations who increase purchases of South Carolina certified locally grown products. The bill was sent to the House Ways & Means Committee for consideration, but its chances of success in the current legislative session lessen each day. 

It is my hope that this legislation, or something similar, be enacted  if not in the current 122nd General Assembly, then perhaps when they reconvene for the 123rd. 

This legislation would improve the tax environment for businesses outside of the manufacturing and distribution industries benefited by our current incentives. Offering future tax relief in exchange for providing jobs to the skilled workers of our state is more than a fair exchange. As it stands, South Carolina is not incentivizing non-manufacturing businesses to expand or headquarter in our region, something we need to rectify quickly for the future growth potential of economy, providing the greatest field of opportunity for our workforce. 
The Upstate of South Carolina is proud to be home to so many businesses of every size, but there is power in having C-level executives in a South Carolina-based headquarters. Our state is home to one Fortune 500 headquarters, but this legislation would strengthen the Palmetto State’s ability to retain its homegrown companies and more competitive for recruiting new businesses. 
If passed, the S. 404 incentive legislation will expand job development tax credits to businesses that are bringing in new jobs but don’t qualify for traditional infrastructure-heavy industry. Technology has made it so that business operations are more deft and lightweight; just because a company doesn’t take up as much physical room in our area doesn’t mean they don’t have a sizable impact on our economy. We urge the South Carolina General Assembly to re-assess and expand its tax credits for headquarters locations and for high-impact companies that do not qualify for traditional incentive packages, which oftentimes focus on investment in costly infrastructure. S. 404 is a strong first step. 

TOPICS: Advocacy, Business Recruitment