SC agreed to spend $1.3B to land Scout Motors EV project in Blythewood

In order to attract a $2 billion electric vehicle plant to Blythewood, South Carolina agreed spend $1.3 billion to help the start-up Scout Motors provide 4,000 jobs in the Midlands.

The $1.291 billion state incentive package includes building a railway bridge over Interstate 77 to the Blythewood industrial park site, building a new I-77 interchange to serve the eventual factory, additional road improvements, electrical work, water and sewer infrastructure, and stabilizing the soil on the site, state officials said Monday, three days after the landmark project was announced.

“Having the new interchange and having these road improvements will actually help and benefit the residents of the community that’s already there,” Department of Commerce Secretary Harry Lightsey said in a Monday morning press briefing. “It will improve their traffic flow and keep traffic from the site out of the downtown of Blythewood.”

The company also will be given $400 million for site construction as a part of the $1.3 billion package.

South Carolina has the cash available to pay for the incentives and also has the ability to borrow the money if necessary, but either action to pay for the package will need legislative approval.

Department of Commerce officials said in an email the agreement with Scout Motors includes a claw back provision for money spent on site work that directly benefits the company.

“The company’s performance obligations do not include state investments in public infrastructure which is typical of larger economic development projects,” the department said in an email. “Additionally, Scout’s obligations under the performance agreement are guaranteed by Volkswagen.”

The state incentives come on top of a property tax break and other incentives offered by Richland County.

According to county paperwork, the period for the incentives for the company would be for 40 years. The company’s property would be assessed at a tax rate of 4%. Per the state Department of Revenue, manufacturing property in South Carolina is typically assessed at rates up to 10.5%. The company also will be able get a further 50% tax break through making investments in infrastructure, a setup known as an infrastructure tax credit.

The county incentives also include stipends for employees’ child care, according to the company.

In exchange for the Richland County incentives, Scout Motors agrees to invest $400 million within eight years of the deal with the county, and $2 billion within 13 years. County Council still must take a third and final vote to approve the incentive deal.

Commerce also said Scout, separate from the $1.3 billion package, is slated to receive job development credits, which are awarded for the amount of investment the company will carry out and number of jobs it creates.

The value of job credits is based on how much employees are paid and the unemployment rate and per capita income in the county.

Incentives are nothing new for South Carolina to attract car manufacturers.

The Scout incentive package is about 10 times the size of the package given in 2015 to Volvo, which opened a $500 million plant in Berkeley County with 2,000 jobs.

Three decades ago, the state also gave incentives worth more than $130 million at the time to attract BMW to the Upstate. The plant has since become the German company’s largest producer in the world. The company is now spending $1.7 billion to shift to building six electric vehicle models by 2030. South Carolina committed at least $65 million toward that project.

Not all incentives have worked out for South Carolina.

When the Carolina Panthers agreed to move their practice facility and headquarters to Rock Hill, the state agreed to help pay for a $40 million I-77 interchange and provide $115 million in tax incentives for relocating the team’s day-to-day operations.

Construction of the interchange took place as the Panthers constructed their facility.

However, now that the team has abandoned the project, the tax incentives won’t be awarded because the 150 promised jobs did not come to fruition. But the interchange work continues.

“That is a real risk when you’re taking that on,” said Greg LeRoy, founder and director of Good Jobs First, a policy group that researches economic development subsidies. “Yes, obviously, better infrastructure can benefit other employers, other commuters. But if it’s put in there for one specific project that doesn’t materialize, then you the government have extended a lot of money in a way that’s not going to get a very good payoff. That’s a real risk.”

As billion-dollar incentive deals for electric vehicles continue to pile up, LeRoy said states won’t be able to recoup the money they put in up front.

Federal legislation already supports the expanding world of electric vehicles, LeRoy said.

Even during the Obama administration, federal subsidies were being launched to promote electric vehicle expansion. Today, grant and loan programs are in place to aid manufacturing and state and federal programs to expand the availability of charging stations.

Individuals can also get a $7,500 tax credit for purchasing a new electric vehicle or a $4,000 credit for a used one.

“Uncle Sam has already got his thumb on the scale very heavily for EVs right now,” LeRoy said.

Competing with other states

Before picking Blythewood for its first-ever manufacturing plant, Scout looked at 74 sites around the country. South Carolina had to compete with other states for the project and considered other packages made for carmakers.

In comparison, Georgia is putting up $1.8 billion in incentives to attract Hyundai, North Carolina is spending $1.25 billion for car manufacturer VinFast, and Tennessee provided $1 billion for a new Ford plant.

“These are the types of numbers in this very competitive world that the states are investing because they know these facilities are going to be here for the long term, and they’re going to provide tremendous positive economic impact,” Lightsey said.

Given the existing federal subsidies, LeRoy said it doesn’t make sense for state governments to be “gold-plating” individual facilities, which he said don’t need the additional public help.

He called the deals in Georgia and North Carolina “terrible precedents” for future EV manufacturing subsidies.

In South Carolina’s case, LeRoy said spending $1.2 billion in exchange for 4,000 jobs, roughly $300,000 per job, isn’t a good value.

“At that price, South Carolina taxpayers can never break even,” LeRoy said.

During Monday’s press briefing, Lightsey said the project itself is expected to be generate $15 billion worth of economic impact by 2029, pointing to a study done by the University of South Carolina economist Joey Von Nessen.

“So we’ll already have a return on that investment as the governor said, and that’s within three years of when they start their production,” Lightsey said.

Lawmakers already have had their eye toward helping attract economic development as part of their upcoming budget debate.

In the House Ways and Means 2023-24 spending proposal, budget writers included $200 million for “strategic economic development infrastructure,” which would be money to help pay for road, water and sewer work to prepare land for a business to come in.

When the Department of Commerce submitted its budget request last year, it only requested $100 million for that type of work.

“Site readiness is a top priority for use of the funds the agency requested to ensure South Carolina remains competitive and able to meet the needs of prospective industry,” the department said in an email.

Commerce added it is up to the lawmakers how on to pay for the promised Scout incentives.

Gov. Henry McMaster defended the large commitment made by the Department of Commerce.

“We always have to spend money to make money, and there have been other investments,” McMaster said. “Years ago, if you count inflation is part of it, (other incentive deals) were mighty big. They were thought to be mighty big at the time, and actually there was some opposition to them. But the time has proven that those were wise decisions.”

Incentive breakdown

▪ $650 million for a new I-77 interchange, area road improvements, railroad bridge construction, water and sewer infrastructure and site preparation.

▪ $400 million for Scout Motors to use for “hard assets.”

▪ $200 million loan for soil stabilization. Scout Motors will repay the loan with 5% interest.

▪ $25 million to build a publicly owned Midlands Technical College training center for employment with Scout Motors.

▪ $16 million for property acquisition to connect to a Class I railroad.