The Palmetto Insider

The blog of the South Carolina Policy Council

How Much Will the Sembler Deal End Up Costing Taxpayers?

with one comment

Questions continue to surface regarding a multimillion tax incentives deal for what is being described as a “high-fashion” luxury destination in Jasper County.

The Nerve today has a dynamite piece on Sembler’s lobbying practices in Florida and elsewhere – practices that have attracted attention from federal investigators.

Likewise, costs regarding the new development continue to be debated. Senator Greg Ryberg’s office estimates the incentives package will be $131.5 million – and this is the estimate we originally used. While Senator Clementa Pinckney has released data suggesting the sales tax break will be $174.5 million over 15 years. These estimates should be compared to a fiscal impact statement (section 38 of the May 14 version of H 3722) from the state Board of Economic Advisors (BEA) suggesting the incentive is only worth $22.5 million. We are awaiting clarification of these numbers from the BEA.

The true costs of the sales tax break are difficult to estimate because they depend upon revenue projections from Sembler, which has yet to respond to an SCPC request for such data. Not that any company, especially in today’s environment, can provide sales projections over 15 years.

If the Sembler deal is anything like the Boeing package legislators approved in October, we can expect the cost to taxpayers is being underestimated. Just yesterday, the S.C. Joint Bond Review Committee authorized the sale of an additional $100 million in general obligation bonds – which taxpayers will have to repay with interest – on behalf of Boeing. Interest payments for economic development bonds stemming from the Boeing incentive plan are already expected to cost between $80 million to $160 million, with the new bonds increasing these payments by millions more.

According to defenders of the Okatie Crossing mall development, the retail center will be an absolutely unique “destination mall” that will not be in direct competition with other local retailers. This does not seem to be true, though.

While the development may include high-end retailers, it will also bring in “more commonplace retailers such as Target and Lowe’s.” Likewise, restaurants such as Chick-fil-A and Cracker Barrel are tentatively committed to the site.

What this means is that the new mall in Jasper will be drawing customers away from other local establishments. In fact, Chick-fil-A and Cracker Barrel are planning to build next to an existing Wendy’s.

This is not to say, of course, that Jasper County residents should not have as many restaurants as possible to choose from. Or that existing restaurants may not benefit from visiting tourists.

But would these restaurants be locating to Jasper County if Sembler were not building Okatie Crossing? And would Sembler be building Okatie Crossing if they weren’t getting a multimillion dollar tax break?

If so, then why give Sembler the tax break to begin with? But, if not, that indicates the market and tax environment in Jasper County can’t really sustain this new mall development. Thus local retailers and taxpayers will be stuck paying the bill

Advertisements

Written by Jameson Taylor

January 13, 2010 at 2:04 pm

One Response

Subscribe to comments with RSS.

  1. […] Costs of the incentive package for the new development continue to be unclear: ranging from a low of $22.5 million to as much as $174.5 million in tax breaks over 15 years. If Sembler is anything like the Boeing package legislators approved in October, the cost to taxpayers is probably being underestimated. (Read here for why future incentives deals should be capped so the costs are known upfront.) […]


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: