S.C., York County benefit when companies cross state line

dworthington@heraldonline.comJuly 27, 2013 

An overhead view of part of the Britax plant in Fort Mill. The company manufactures childrens car seats. It moved less than two miles from North Carolina, bringing tax revenues to South Carolina. .

JEFF SOCKHO — JEFF SOCHKO - SPECIAL TO THE HERALD

  • By the numbers

    Economic projects for recent companies who have located from Charlotte to York County.

    Company Investment Number of Jobs Facility

    Britax $26 million 243 500,000 square-feet, new construction

    Shutterfly $60.1 million 416 300,000 square-feet renovated space

    Physicians Choice $24.1 million 364 104,000 square-feet, new construction

When Britax Child Safety, maker of car seats and strollers for infants, moved its operations to South Carolina in March, workers adjusted their commute – by all of four minutes.

The company moved two miles south on Carowinds Boulevard to a new, 500,000-square-foot facility, allowing 200 employees to work under one roof in York County.

“No concerns, no worries, everything is just fine,” Britax president Jon Chamberlain said last week about the move. “The only thing I have to remember is to say Britax is in Fort Mill rather than in Charlotte.”

Britax is one of three Charlotte-based companies to move across the border in the last year.

Shutterfly, the company that helps turn photos into lasting memories with a variety of products, moved south in June. It renovated 300,000 square feet of vacant space off S.C. 160 near Baxter Village into a customer service, production and distribution facility.

Earlier this month, Physicians Choice Laboratory Services held a grand opening for its new 104,000-square-foot facility. It’s the first business to open in Rock Hill’s new Riverwalk Business Park off Cel-River Drive.

Altogether, the companies invested more than $110 million into York County facilities, promised to employ up to 1,000 people, and put almost 1-million square feet of space filled with high-tech equipment on the tax rolls.

But while the companies have moved across the border, many of their employees continue to live in North Carolina. A drive through any of the three company parking lots reveals a preponderance of North Carolina license plates.

To encourage the companies to come here, South Carolina and York County offered incentives that included lower property taxes and tax credits for jobs created. But because the companies planned to retain most of their previous work forces, the incentives were offered even though relatively few additional York County workers were initially hired.

Britax moved with 200 workers and promised South Carolina to eventually employ 243. Chamberlain said they have already met that goal.

Shutterfly moved with about 500 workers, company officials said. An agreement approved by the York County Council called for 416 jobs.

Physicians Choice’s agreement with the state called for 364 jobs total over the next several years. Almost 200 employees followed the company to Rock Hill.

Do the impressive numbers result in an economic gain for South Carolina and York County, even if much of the work force continues to live in Charlotte?

Absolutely, say those who recruit and relocate companies to both sides of the state line.

The benefits to South Carolina include personal income taxes paid to the state regardless of where the workers live. Employees of all three companies will file S.C. returns and then get a credit on their North Carolina income tax filing. While the job tax credits offered to businesses lowers corporate income taxes, an employee’s S.C. personal income tax remains the same.

The companies also will pay property taxes, although each one negotiated lower rates - often called fee-in-lieu-of-tax agreements. The agreements cut the companies’ tax bills by 43 percent over the next 30 years.

Even with the fee-in-lieu agreements, the county benefits because the cost of providing county services to new commercial and industrial businesses is lower than the revenue generated, said Mark Farris, the county’s economic development director. For every 31 cents spent on services to commercial and industrial businesses, the county gets $1 in revenue.

Residential development, in comparison, costs the county $1.45 in services for every dollar of revenue raised.

The biggest benefactors are York County schools. If a company moves to the county but its employees continue living in North Carolina, the local schools get tax revenue without having to spend money on new students, said school and economic development officials.

Plus, unlike most homeowners, businesses pay property taxes for school operations.

“It’s the best of both worlds,” said Chuck Epps, Fort Mill schools superintendent. He said the fee agreements negotiated by the York County Council are fair because “they don’t hit rock bottom” like other counties have. Some S.C. counties have offered fee agreements that eliminate property taxes.

“Managed growth is good for everyone,” he said.

The state also gets the benefit of commuters buying gas here – South Carolina’s gas tax is 21.2 cents less per gallon than North Carolina’s – and the tax on retail sales, where York County’s is slightly higher than Mecklenburg County’s by .75 of a percent.

The recent border crossings by Charlotte companies is reminiscent of six to seven years ago when several companies made the move, including to Lancaster County. Incentives were an issue at the time, with some fearing they were out of control.

At the time, members of the Charlotte Regional Partnership debated whether they needed to limit incentives to keep companies from jumping from one county to another.

The partnership promotes economic development for 16 partner counties, including York, Lancaster, Chester and Chesterfield in South Carolina.

Ronnie Bryant, president and CEO of the partnership, said at the time there might be “flaws in our relationships.”

Now, there is a balanced approach to incentives rather than a free for all, Bryant said last week.

“It’s a positive,” Bryant said of the decisions by Britax, Shutterfly and Physicians Choice. “They could have moved outside the region. I don’t look at this as crossing a county line, but relocating within a region.”

All three companies moved because they needed more space. All three also said they wanted to stay locally to retain their employees.

While these were the top two considerations in their site selection, incentives from South Carolina and York County also played a role in their decisions.

“In situations like this, the ‘receiving’ state has more incentives it can offer than the state trying to retain a business,” said Ken Wittenauer, the lawyer for Britax who negotiated the company’s move to South Carolina.

South Carolina incentives generally fall into several categories: grants for infrastructure such as constructing a building or adding utilities, tax credits for creating jobs, and tax credits for investments.

Wittenauer said South Carolina’s job credits were more than what North Carolina could offer. That was a factor in the company’s decision.

Companies can receive up to a $3,750 credit for each job created. The credit reduces the company’s S.C. corporate income tax liability.

However, jobs that are simply moved from an adjacent state to a border county in S.C. get lower tax credits than other jobs new to South Carolina, said Bobby Hitt, secretary of the S.C. Department of Commerce.

Any newly created job gets the higher tax break regardless of the county.

The new jobs, Hitt said, get the bigger incentive, “because they are taking a community to a higher level.” Hitt did not specify the difference in the incentive rates.

Stephen Turner, Rock Hill’s economic development director, said the policy results in South Carolina “fighting with one hand tied behind its back.” North Carolina usually gives incentives for all jobs a company brings.

But, Turner said, if the intent of the policy is to discourage companies from exploiting the system for incentives, then “it makes sense.”

Farris, York County’s economic developer, said a cost-benefit analysis is done on each prospect presented to the County Council. The analysis includes information on variables such as the cost of land, the cost to build, wages paid during construction and operation of the facility, and revenues generated for the state, local schools and local governments. The analysis even estimates how many people will visit a new business and the number of nights they could stay in local hotels.

Farris said he is looking for a cost-benefit ratio of about $10 for every $1 invested to make sure a project will make an economic difference in York County. His cost-benefit analysis of Shutterfly’s proposal – assuming 383 employees make an average of about $31,000 annually – showed a cost-benefit ratio of $9.15 for every $1 invested over time.

By comparison, the Exel distribution center to be built next to Physicians Choice is expected to employ mostly local workers. Farris’ analysis, based on 139 workers making $23,000 annually, shows a cost-benefit ratio of $9.92 for every $1 invested over time.

The analysis is just one factor presented to the council to help it make a decision, Farris said.

Stephanie Yarbrough, an attorney with Womble Carlyle Sandridge & Rice, said South Carolina’s economic development policies are better than other states she has encountered. Yarbrough, based in Charleston, often represents companies considering relocating in South Carolina.

South Carolina has created a system that rewards companies for investment and job creation rather than “putting cash on the table up front,” she said. The result is the state puts an emphasis on building relationships with prospective clients with the intent the relationship will last for years, she said.

The result is “people take us seriously. We want them to be successful and we want them to know that this is a partnership,” Yarbrough said.

The decision by Britax, Shutterfly and Physicians Choice will not change York County’s reputation as a bedroom community for Charlotte. Each work day, about 39,000 York residents commute to Charlotte and Mecklenburg for work. Conversely, 9,197 make the trip from Mecklenburg to York County for work.

Their decisions, and the commuting patterns, show the region continues to mature, said Bryant of the Charlotte Regional Partnership. “At the end of the day, it’s good for the companies and it’s good for the employees,” he said.

For Britax – and others – it means the ability to recruit a work force from the entire Charlotte region, tapping into a large talent base.

Britax, Wittenauer said, could have gone anywhere. There was nothing keeping the company in the region but its “valuable work force,” he said.

Instead of leaving, the company drew a five-mile circle around its old plant and started looking. It ended up in South Carolina, ironically where it was incorporated 16 years ago.

“This was not a flight to South Carolina,” Wittenauer. “We did not abandon the Charlotte region. . . Our job growth benefits both sides of the border.”

Don Worthington •  803-329-4066

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