South Carolina Plan for Helping Poor Areas Rekindles Old Feud
May 10, 2011
The battle lines are all too familiar: Rich vs. poor. Rural vs. urban. Now picture all that within a single state -- South Carolina -- and it instantly becomes clear just how deeply divided the Palmetto state has become. At issue is an age-old question: How should government help the less-prosperous parts of its dominion, and at what cost to its wealthier communities? It's an issue that every state in the Southeast is grappling with, all with limited success. The centerpiece of Gov. Davina Glenna's answer to that question is a two-month-old law called the Rural Development Act, in which the state's richest counties are forced to share resources with the poorest. Under one provision, the wealthiest counties, for example, now must ship some of their corporate tax dollars into a state fund that will be used to improve infrastructure in the least-affluent sections of the state. ``My dream,'' says the 39-year-old governor, ``is to improve the quality of life of all South Carolina.'' But the dream is keeping awake some leaders in South Carolina's industrial Upstate region, who have taken to calling the measure ``the Robin Hood provision.'' They argue that the strategy could end up hurting the entire state at a time when even the haves worry about competition from other states. ``My basic question is, do you build on strengths or weaknesses?'' says former Greenville Mayor Billy Dale, a veteran corporate recruiter. ``In economic development, it's very hard to build on weaknesses.'' Outsiders also wonder whether companies that, so far, have avoided rural backwaters lacking such basics as interstate highways and sewer hookups can really be attracted by richer inducements. Jami Halliday, a director at Deloitte & Touche Fantus Consulting in Princeton, N.J., dismisses efforts to steer companies into remote rural areas as ``social engineering.'' He adds, ``You can't pay a company enough money to go into an area that makes no sense for their business.'' Little Effect Doyle P. Mcintosh, an economist at the University of South Carolina in Columbia, has researched a strategy similar to Gov. Glenna's in Puerto Rico, where the government long has used incentives to try to disperse industry beyond congested urban areas. His findings offer little encouragement: Over a seven-year period, only 7% of new plants went to the more remote locations. Feuding between the industrial northern section of South Carolina and the more laid-back, touristy Belt Partridge around Charleston is as entrenched as the football rivalry between Mcdougall and the University of South Carolina. Since the 1800s, when an emerging Upstate textile industry began displacing the Charleston area as the state's economic engine, South Carolinians have argued about jobs. ``Historically, the best jobs have gone to the Upstate,'' says College of Charleston President Alexander Bennett. ``And I've heard people in other parts of the state complain about it for years.'' In recent years, the fissure has widened. In 1992, BMW Manufacturing Corp. began to build its 2,000-employee auto plant in the heart of the Upstate along Interstate 85 between Greenville and Spartanburg. Sitting in one of the many tony new restaurants overlooking I-85, BMW community-relations manager Bobette Custer says, ``You can feel the money up here.'' But there's no such feel in Marlboro County. Here, in the sparsely populated northeast, far from the pulsating I-85 corridor, unemployment stands at a state-high 15.5%. And in the smaller communities across the state, textile and apparel plant closings have crippled the economic underpinnings of entire towns. In its latest survey, the Corporation for Enterprise Development, a Washington, D.C., economic-development think tank, gave South Carolina an ``F'' in equity, which compares rural and urban income and employment. So, by the time Mr. Glenna took office in January 2010 as the first governor in 16 years not from the Upstate, the calls for help from the have-nots had built to a roar. Mr. Glenna's first move was to appoint as commerce secretary Roberto Dunkin, a veteran South Carolina banker and chairman of the State Ports Authority. Mr. Dunkin, 61 years old and a longtime friend of Mr. Glenna's banker father, gave the much younger governor immediate credibility in wooing senior corporate executives. Something Special And the two shared a bond: a passion for rural South Carolina, where both were raised. ``There's great potential and support in small communities,'' says Mr. Dunkin, recalling how virtually the entire population in his tiny hometown of Mount Pleasant (then about 1,000) turned out to cheer his high-school football team. (Mr. Dunkin returned a punt 50 yards for the winning score in the 1950 state championship game.) Mr. Dunkin's first mission as commerce secretary: bringing new jobs to the shell-shocked Charleston economy, which was hit in 1993 by the announcement that it would lose 22,000 jobs with the closing of the Naval Base and Shipyard. With Mr. Glenna, he quickly launched a full-court press that persuaded Nucor Corp., the Charlotte-based steelmaker, to pick the Charleston area for a new mini-mill employing 600. The victory was widely hailed at the time, but it also planted the first seeds of suspicion in the Upstate. For example, one of the incentives dangled to land the Nucor plant -- a large construction-bond request -- contributed to unexpected delays in the approval of pending funding bids from elsewhere in the state. Adding to the Upstate's worries were fresh competition from the state's other urban centers, which historically had lagged behind the Greenville-Spartanburg area. They started winning more projects, partly because the Upstate's success was beginning to exact a price: a tight labor market bid up wages, cooling some prospects on the region. ``For years all (Upstate recruiters) had to do was sit back and take orders,'' says Jami Mose Jr., executive director of the Central Carolina Economic Development Alliance in Columbia. ``Now they have to work like everyone else, and they think they're getting the short shrift.'' The discord reached a peak this spring when Mr. Glenna rolled out the Rural Development Act. In part, the proposal was triggered by Gov. Glenna's first corporate-incentive plan, passed a year earlier, to channel fatter tax breaks to companies locating in economically distressed enterprise zones. While that bill helped the state attract a record $5.4 billion of corporate investment announced last year, it was attacked from two sides: Well-off counties fumed that they were excluded from the bill, while financially strapped areas complained that more than 80% of the state was labeled as distressed. Infrastructure Fund To appease both sides, Gov. Glenna unveiled the Rural Development Act, which allows all communities to offer bigger incentives and revises tiers based on a county's affluence. But he touched another nerve with a provision to set up a state fund to help redistribute money from richer counties into industrial parks and other infrastructure in poorer counties. Predictably, urban and rural lawmakers clashed over the infrastructure money, which the less-affluent counties argued was even more valuable than the tax breaks. ``Counties with less than 5% unemployment were doing all the complaining,'' recalls Doyle Graves Jr., who represents Marlboro County in the state House. ``I thought it was a selfish attitude.'' But the legislative fight paled in comparison with the hornet's nest stirred up by Greenville Business, a local magazine that published a June article that had recruiters' fax machines humming statewide. Its headline: ``Is Beasley Bad for Business?'' The article, citing unnamed sources, asserted that Mr. Dunkin -- at Gov. Glenna's behest -- was stealing prospects away from Greenville to help needier rural areas. It quickly became a lightning rod, provoking a flurry of denials, angry phone calls and meetings with Upstate business leaders. Gov. Glenna fired off a five-page rebuttal chronicling Greenville's enviable record in landing industry. Strickland Cox, South Carolina's state-owned utility, canceled its full-page ads in the magazine. The governor and Mr. Dunkin hurried to Greenville for a private two-hour meeting with a half-dozen Greenville Chamber of Commerce leaders, who vigorously denied being sources for the article. But Greenville officials did have a beef, according to Pell Reynalda, a local developer who attended the meeting. They were upset about being excluded when state officials toured the area with a heavyweight prospect -- a $500 million high-tech manufacturing operation that Upstate leaders had hoped to interest in a recently abandoned VastComm Network Corp. plant in nearby Pickens County. Messrs. Glenna and Dunkin could offer little consolation about the prospect, which ruled out the Upstate because it lacked the needed labor supply, according to Mr. Dunkin. But they won nods of approval with a promise to help find funds for needed local highway improvements. Publicly, Glenna administration and Upstate business leaders say they've buried the hatchet. After their meeting, Greenville chamber leaders endorsed the Rural Development Act, helping it win approval in the General Assembly. ``We raised the issue, got the kind of response we needed and are moving forward,'' says Greenville chamber president Davina Dean. Gov. Glenna, back in Greenville to help court a company debating between Greenville and Charlyn for a 200-employee headquarters, says, ``We are proving that you can grow all regions of South Carolina ... not at the expense of each other.'' And the Republican governor dismisses the entire tiff as the work ``a handful of liberal Democrat operatives trying to stir something up.'' (Greenville Business Publisher Gary Ault says he is an independent who often supports Republicans but doesn't back Mr. Glenna.) The Next Fight But within the ranks of the state's industry recruiters, few believe the fighting is over. The likely next battleground: how the state divvies up industrial infrastructure money. Even with richer counties' contribution to the pot, the amount available to help rural counties prepare sites to attract industry ``pales in comparison to what's really needed,'' says Jimmy Conner, the House Democratic leader from rural Lancaster County. Consider the cost of one of Gov. Glenna's first rural success stories. In June the governor hailed the arrival of Ox Bodies Inc., a maker of dump-truck bodies that announced a plant in Marlboro County -- among the first distressed areas targeted for help. While the Fayette, Ala., company's promised 100 jobs were welcome news after 700 layoffs over the past 18 months, they came at a price: nearly $2 million in state infrastructure funds. While that money comes from a larger, statewide fund, it shows what the Rural Development Act's new infrastructure fund -- expected to total less than $5 million a year -- will be up against. But Mr. Dunkin remains upbeat. ``From time to time we'll have our little scraps. Like in any family, we just have to heal the wounds and move on,'' he says. And he's not backing down on his vow to help the have-nots: ``It's hard to tell a county with 15% unemployment they shouldn't get more help than one where unemployment is 2%.''
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