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SC governor urges passage of law to lure wine giant Gallo to Chester County

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Fort Lawn sign

Fort Lawn is a town of about 1,000 people on the edge of Chester County, just south of Rock Hill and Charlotte. A proposed Gallo winery could bring prosperity back to the former textile town. Warren L. Wise/Staff

COLUMBIA — As Chester County eyes a "once-in-a-generation" $400 million economic development deal expected to bring nearly 500 jobs, S.C. Gov. Henry McMaster urges lawmakers to pass legislation to make it happen.

The county, an hour north of Columbia, has given initial approvals for tax incentives to California-based E&J Gallo Winery, a deal known by code-name "Project Magma," but South Carolina's liquor laws could hold the company back from making all of the investments it has planned.

That's why lawmakers, led by Senate Judiciary Committee Chairman Luke Rankin, R-Myrtle Beach, have filed a bill that would attract and benefit wineries in South Carolina. The bill is co-sponsored by powerful Senate Finance Committee Chairman Hugh Leatherman, R-Florence, and now receives a further boost from the governor.

"South Carolina has a reputation as a state where world-class brands establish operations and thrive," McMaster said in his letter to lawmakers March 9. "That reputation was earned, in large part, because of a pro-business climate resulting from thoughtful legislative deliberation which balances the interests of our diverse constituencies with the opportunities stemming from robust economic development."

In the letter, McMaster praised Gallo "as a well-respected, family owned company with products that are distributed across the globe." 

"This investment by Gallo will transform the community and contribute greatly to South Carolina’s economic prosperity," he wrote.

A Gallo spokeswoman did not respond to questions sent by The Post and Courier.

The major change contained in the legislation would allow wineries, breweries and distilleries to open up to four satellite tasting and sales locations. Under current law, samples and retail sales for those businesses are limited to where the beverages are produced.

Gallo representatives told lawmakers during a legislative hearing that the tasting rooms it wants to open would be small, about 800 square feet, with a capacity for 30 to 50 people. They said the deal with Chester County hinged on being allowed to open these locations, and they're up against a deadline for the purchase of the proposed 630-acre tract in Fort Lawn, which is west of Lancaster.

The law change would come with an investment requirement tailored directly to the wine giant.

The provision requires a $400 million minimum investment and at least 300 new jobs to be eligible for what it calls a "manufacturer’s satellite certificate." The company also must pay an annual $5,000 fee per location.

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"I look forward to signing this bill into law and welcoming Gallo to South Carolina," McMaster said.

But wholesalers and retailers of alcoholic beverages are pushing back against the change, and other lawmakers have some concerns about making major revisions to existing liquor laws to suit one company.

"We certainly want Chester County to get a winery," said Sen. Sandy Senn, R-Charleston, who was confident that a compromise between manufacturers, wholesalers and retailers can be reached.

But she also worries about Gallo being able to undercut smaller retailers on price if it is allowed to operate retail establishments beyond the winery itself.

Gallo is a major player, controlling more than 30 percent of the U.S. wine market, Karl StorchmannNew York University economist and American Association of Wine Economists executive director, told Wine Enthusiast magazine. Its major brands include Barefoot, Apothic, Dark Horse, Arbor Mist and Mark West. Gallo is also in the low-cost hard-liquor business, with brands like Amsterdam Vodka and E&J Brandy.

Senn said it's likely, once an exception is made, other major alcohol producers in the state, such as Firefly Distillery in the Lowcountry or White Claw-maker Mark Anthony Brewing in the Midlands, will want to follow suit.

Democratic Sen. Dick Harpootlian said he shares Senn's concerns for retailers.

The Columbia lawmaker also has a reputation for targeting establishments in the Capital City's FivePoints entertainment district that do not comply with the state's legal requirement of primarily being in the business of serving food. He questions whether satellite tasting rooms would meet constitutional muster.

The full details of Gallo's proposed deal with Chester County are still unknown. 

The Post and Courier requested the text version of a resolution about the tax breaks, which was discussed during the open session of a public meeting in February. The county required the newspaper to file a Freedom of Information Act request, which it said was forwarded to legal counsel Feb. 26.

The company would also likely be eligible for state tax credits for jobs created at a rate of $25,000 per position annually, up to five years.

Reach Jessica Holdman at jholdman@postandcourier.com. Follow her @jmholdman on Twitter.

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