Horry County Council puts AvCraft on agenda amidst debate over incentives oversight

In their push to bring more jobs to this area, members of the Horry County Council are divided over how much oversight they should be giving to the Myrtle Beach Regional Economic Development Corp.’s use of taxpayer dollars to lure businesses.

Council members agreed during a Committee of the Whole meeting on Tuesday to put a $100,000 incentive package to aircraft maintenance firm AvCraft Technical Services back on the agenda for likely approval next week.

The cash incentive came under fire last week from some council members who said they were concerned about AvCraft’s history, under previous ownership, of failing to live up to job promises and recent layoffs at the company. Mike Hill, the company’s president, appeared to ease most of those fears during Tuesday’s discussion of AvCraft’s business plan and financial future.

However, council members remain far apart on how economic development should be approached going forward.

“We need to understand that we can’t expect these guys to come in here and tell us about every aspect of their business,” Council Chairman Tom Rice said, referring to potential industry recruits. “It’s not going to be like that when we’re competing for new companies.”

Rice said the economic development group “will have to have the ability to offer incentives confidently and not come back for us to put everything under a microscope.”

Other council members said they prefer a more cautious approach, saying they need to know specifics about the companies that might be getting money from an incentives pool the council approved last year.

“I don’t want to vote in the blind because I’ve got to be able to defend the votes I make to the people I represent,” said Councilman Paul Price. “We need to have some comfort level instead of voting in the blind.”

Differing perspectives

Councilman Harold Worley said the controversy that erupted after AvCraft was announced as the potential recipient of incentives will no doubt happen again if council is kept in the dark about economic development prospects.

“I understand you [Rice] want to grease the skids so this thing will move faster,” Worley said. “But unless we figure out a way to allow this council to be involved prior to that decision making, I think it’s going to be a problem again.”

Rice said any concerns could be discussed during executive sessions at council meetings, but taxpayer incentives for most businesses would not even come before the council under current economic development rules.

The council voted on Dec. 13 to approve $100,000 in incentives for AvCraft only because the deal didn’t meet minimum requirements for the incentives. However, most council members said they did not realize AvCraft – which had been referred to only by a code name – was the company getting the money until after they had voted to approve the project. The council voted last week to reconsider the incentives approval – citing AvCraft’s layoffs, past financial problems and failure to meet previous incentives goals.

Hill – part of an investment group that bought AvCraft out of insolvency in late 2010 – told council members on Tuesday that his business essentially is a new company that kept its old name for marketing purposes.

Hill, who was a manager with the old AvCraft, said the old company struggled because it focused solely on the maintenance of Dornier 328 turboprop airplanes, which are no longer produced. AvCraft still counts on the Dorniers for about one-third of its work, but Hill said the company is diversifying its maintenance capabilities to include the more popular ATR-42 and ATR-72 turboprops, which are used by companies such as FedEx, United Express and American Airlines.

The $100,000 incentive from Horry County would match a $100,000 grant that has already been approved by the state’s Commerce Department. The money would be used to upgrade a county-owned aircraft hangar rented by AvCraft – eventually doubling the number of aircraft the company could repair at any one time. Hill said AvCraft plans to spend another $800,000 – a combination of private loans and future company revenue – on hangar upgrades, tools and equipment.

AvCraft also plans to add a back shop where the overhaul and maintenance of aircraft components would take place. Hill said the company eventually plans to add another fulltime shift that would operate seven days a week.

Hill said AvCraft – which currently employs 57 people – had a $4.5 million payroll last year, pays the county $230,000 to rent three buildings at the airport and, with its customers, spends about $200,000 on fuel at the Myrtle Beach International Airport – second only to the U.S. Department of Defense. If the county approves its incentives, Hill said he expects to hire between 15 and 20 employees immediately and a total of 150 new workers over a five-year period.

AvCraft was forced to lay off 20 employees late last year, Hill said, because the company grew too fast and was “unable to get the proper middle management and keep ourselves working in an effective and profitable way.”

“We saw a slip in our efficiencies that caused us to step back and say, ‘Wait a second, we need the proper foundation’,” he said.

A safety net

The council is requiring AvCraft to sign an agreement that it will pay back the incentives if it does not produce 150 new jobs within a five-year period. Council members Jody Prince and Carl Schwartzkopf said they would prefer not voting on the incentives package until that agreement is finalized, but County Attorney Arrigo Carroti said no money will be disbursed until after the document is signed.

Councilman Gary Loftus said the county can’t lose on the AvCraft deal because, even if the company doesn’t meet its job goals, the county will wind up with $1 million in improvements to a hangar it owns.

“I think we’ve illustrated very clearly that we’ve done our due diligence,” Doug Wendel, chairman of the economic development corporation, told council members. Wendel said that without the incentives package, “you don’t have a maintenance operation, you’ve got a vacant hangar. I think it’s worthwhile for us to give a vote of confidence to this industry and move ahead.”

The money for AvCraft would come from a program council approved last year that gives the private economic development group an initial $600,000 in tax money to close deals with companies that promise, among other things, to invest at least $2.5 million in facilities and create at least 35 jobs paying the average wage or higher in Horry County.

The economic development group can use its discretion in awarding funds to companies that meet the minimum requirements, thereby skipping county council’s need for approval, but AvCraft had to come before the council because it fell short of the requirements.

Brad Lofton, president of the economic development group, told council members Tuesday that the incentives plan “has allowed us to operate without undue political interference, which we think is healthy in economic development.”

Some council members, however, said some political oversight is necessary when tax dollars are on the line.

“When you’re spending public dollars, the public has a right to know where their money is going,” Councilman Marion Foxworth said, adding that the council might have done a disservice by setting a goal of 500 new jobs within two years for the economic development group.

“We might have things coming from you guys in an attempt to meet that quota that aren’t exactly what we were aiming for,” he said. “I would like council to possibly cut the [group] loose to bring us the good-paying jobs with benefits even if we don’t quite make the 500-job quota.”

Wendel countered that his group is “not going to push the envelope because we’ve got some goal, but we think it is achievable.”

Councilman James Frazier said the fight should not be between council members over how incentives are doled out but with other counties that are competing for the same businesses and jobs.

“We’ve got all these other counties trying to do the same thing – trying to get jobs,” Frazier said. “Florence County is eating us alive. We’ve got to find a way to move forward faster. I haven’t had one person say anything to me about what we’ve done, but I’ve had a bunch of them ask when are we going to get the jobs? We need jobs.”