Tax incentives for mall hot issue

COLUMBIA -- James and Knola Miles' store The Outpost has been the place to go in Ridgeland for 16 years to buy anniversary gifts, hunting boots, a new handbag -- or to sit down and chew the fat.

But some fear The Outpost could become a disposable relic of Jasper County, and rural South Carolina, if the Legislature decides to hand out $100 million in tax breaks over 15 years to bring a high-end outdoor mall and outlet to the community.

To state Sen. Clementa Pinckney, a Ridgeland Democrat, the incentives would mean a jump start out of the deep economic downturn for a county that was economically down before the recession began. The mall could mean more than 800 construction workers and up to 2,500 new permanent jobs when the mall opens.

The incentives would not be a giveaway, Pinckney said. Any tax breaks will be earned based on the money the mall pumps into the economy and the number of jobs created, he said.

"South Carolina is broken and

South Carolina is out of work, and I believe the No. 1 job of the General Assembly is put South Carolina back to work," Pinckney said. "A job is a job is a job."

Opponents, including Gov. Mark Sanford, argue that incentives should not go to companies that compete with existing ones, especially retail. Instead, they want incentives to be reserved for new industries that create well-paying jobs and that lure in more industry.

Coastal Carolina University economist Donald Schunk said an influx of any jobs at a time like this seems hard to argue against, but legislators must consider the long-term consequences.

Schunk said the developer's request for incentives signals that the market might not be strong enough to support existing stores and the retail center -- which is expected to land boutiques with big-name designers including Gucci and Giorgio Armani and more affordable fashion staples, department stores, home improvement stores and grocery stores.

In other words, the luxury outlet's success could come at the cost of the existing retailers, Schunk said.

The decision rests before the state Senate, which could resume its debate on the tax breaks today.

The Boeing factor

State and local politicians have been applauded in recent months for using incentives to lure aeronautics giant Boeing Co. to North Charleston. Schunk said that's because manufacturers, such as Boeing, create two and three rounds of spin-off jobs as suppliers open up businesses. That ripple effect just isn't there with retailers, he said. And that makes it hard for the state to recoup its investment in a retailer.

Cash generated at retail stores ends up where the products are manufactured, Schunk said. Only a small portion stays locally in the form of employee wages and utility costs, for example.

Pinckney said the mall is only the beginning. The area is in transition, with the planned development of a Southern port to complement Charleston's, and the expansions that have come alongside the development of Hilton Head Island and Sun City in Bluffton. The mall will attract visitors and, in turn, restaurants and hotels, even residential developments, Pinckney said.

State's biggest mall

Okatie Crossings, as the retail center is to be called, would be built by Florida-based Sembler in Hardeeville on about 300 acres off U.S. Highway 278 at S.C. Highway 170. The proposed mall is four times larger than any retail complex in the state's history.

Standing behind Pinckney, among others, is the Jasper County Chamber of Commerce and the city of Hardeeville.

Ted Felder, Hardeeville's interim city manager, said that a few years ago he might have been open to the "ivory tower philosophical reasons" that people have for opposing the development, but times have changed.

"These folks are hurting," he said.

Jasper county's unemployment rate of 10.8 percent is lower than the state's 12.6, but that's because so many workers travel out of the county to the Beaufort, Hilton Head and Savannah areas for jobs. Two counties near Jasper -- Allendale and Hampton -- have unemployment of 24.3 and 16.9 percent, respectively.

Felder said that based on projections, he is not worried that the retail complex would cannibalize jobs. He notes that the region has three thriving WalMarts, one in Beaufort, another on Hilton Head and a third in Jasper County, near Bluffton.

Philosophical reasons

Supporters of the incentives deal think that the investment will spur a strong tax base that will line state coffers with new money.

But Calvin Blackwell, associate professor of economics and finance at the College of Charleston, said passing tax breaks means one of two things: either the Legislature cuts spending to offset the incentives or raises taxes elsewhere. With less revenue, the state can't afford to invest as much in education that might train and provide skills to workers in the region so South Carolina can attract jobs that pay more than retail, Blackwell said.

"Problems in rural South Carolina are long standing," he said. "They're not going to be fixed by shopping malls."

Even if the deal passes the Senate, it needs buy-in from the House and the governor's signature, and the two-term Republican has fought retail incentives throughout his tenure.

Okatie Crossings is no different.

"Few would support the claim that adding jobs in one retail center while you take them from another shopping center five miles down the road is a surefire road to prosperity. Yet there are no prohibitions in this incentives package from this indeed becoming the case," Sanford wrote in a recent opinion piece.

Covering the politics of the Lowcountry, South Carolina and the nation.

"We believe it's important that, when thinking about economic development, we look more broadly than to what happens in one shopping center -- and instead to the larger question of what happens to retail in the area."

Reach Yvonne Wenger at 803-926-7855 or ywenger@postandcourier.com.