Myrtle Beach Regional Economic Development Corp. at funding impasse

May 17, 2010 — The Sun News

Claudia Lauer

May 17, 2010 (McClatchy-Tribune Regional News delivered by Newstex) -- The Myrtle Beach Regional Economic Development Corp. is at a crossroads, with its contract for public funding from Horry County ending in less than two months and a track record of failing to meet annual goals.

The agency parted ways with former president Hugh Owens in December, and board members said the group has been refocusing and redoubling its efforts to make contacts with industry representatives and potential new companies looking to relocate or expand.

The Horry County Council must now decide whether those efforts -- along with some internal restructuring and a closer relationship with the S.C. Department of Commerce and the North Eastern Strategic Alliance -- will be enough to merit a three-year funding contract worth more than $1 million.

The past

The County Council is finding itself in a familiar place. Before there was a MBREDC, there was Partners Economic Development Corp.

Partners was the public-private partnership that spent a decade as the economic development agency promoting Horry County to potential businesses. In 2004, a County Council-ordered study from an outside agency turned up 42 recommended changes in the structure and functions of the group.

The study came at the request of a council member who questioned the group's effectiveness because of a lack of tangible results during budget time, a situation that mirrors the current issues facing the MBREDC. Partners had received about $4 million in funding between 1994 and 2004, but when council members looked into the companies and jobs that the group listed as its contributions and accomplishments, discrepancies began to arise over whether the group had played a role in some of the companies' decisions to relocate or whether some of those claims, including a high school, were valid.

With a new name, new location, new leadership, staff and a streamlined board of directors, the MBREDC that emerged had a high set of expectations to meet in its first year, including bringing in 125 jobs paying more than $12.63 an hour, generating $25 million in capital investments through business expansions or new business relocations, bringing in at least three new businesses from targeted industries, establishing monthly contact with a certain number of existing companies, and arranging visits from a certain amount of other businesses.

The requirements also included networking with regional economic organizations, such as the North Eastern Strategic Alliance, an economic and lobbying group representing 10 counties including Horry and Georgetown.

Every year during the MBREDC's new five-year contract, the County Council revised the agency's goals at budget time, lowering the bar and continuing to fund the group.

The requirement for new jobs brought to the county dipped from 125 to 100 to 85 for the last two years. The county has given about $2 million to the agency over the last five years.

In the 2008 fiscal year, the MBREDC sold no county property, brought in 85 new jobs and relocated three companies to the area. Final numbers for fiscal year 2009 were not available, but for the 10-month period between July 2008 and April 2009, the MBREDC reported selling no county property, relocating three new businesses and bringing in 78 new jobs, but did not name the actual companies in its report.

So far in the current fiscal year, the group has sold no county property and has brought in one new company, signing an agreement in October with Coca-Cola bottling to build a plant in Horry County that will eventually bring an estimated 50 manufacturing jobs.

"I think the biggest question is: If we're going to give them $1 million over three years, how are we going to have assurance that progress will be made?" said County Councilman Gary Loftus. "We kept lowering the MBREDC's target so that the arrow would hit the bull's-eye. We set the goals and there should have been an incentive or a disincentive for their performance, but it didn't seem to make a difference if they met the goals or not."

The present

None of the MBREDC board members or County Council members interviewed would say that Owens' performance was not acceptable, but all said that a new leader for the group would be the best weapon toward results in the future.

When Owens left the MBREDC in December, the board of directors had a restructuring meeting of their own.

"We need the right leadership for the future. The leader we seek is one with a proven record of landing prospects," said Jimmy Yahnis, chairman of the MBREDC board. "We've still got a ways to go as far as establishing products, but what's different is we have some products to sell like the [International Aeronautics and Technology Park] and the Bucksport Marine Park and others. We've gotten better at generating our own prospects, better at networking. We're on the verge of something pretty good if we can pull it off."

Board members sometimes put in 20 hours a week making contacts and clawing at leads since the beginning of this year in an attempt to save the agency's efforts. The number of contacts made with existing and potential businesses increased over the last few months, and the number of company visits to the area jumped as well, from four visits during the first half of the year under Owens' leadership to nine in the past four months -- six in April alone.

"Honestly, I'm not sure we've ever really gotten the right person in the leadership position there," said County Council Chairwoman Liz Gilland. "We've had good people working in the organization, but we haven't had a young and hungry person at the top who would sell the county."

MBREDC board members approached the County Council at its April budget retreat to ask for a commitment to continue and increase its portion of the agency's funding for the next three years to help attract a new leader.

Dodd Smith, owner of Metglas, told the council that without more than a one-year commitment, the chances of finding someone with the right credentials who would be willing to uproot their family and their career would be slim.

The County Council is mulling over the funding request and will discuss the restructuring of the group at its council meeting Tuesday and funding the agency at a budget workshop Thursday. An ad-hoc committee of five council members held a meeting closed to the public to discuss the restructuring on May 7, citing a statute in the S.C. Freedom of Information laws that exempts certain discussions of sensitive economic development issues from public discussion.

The Sun News objected in writing and in person to closing the meeting, arguing the reason the committee gave to go behind closed doors does not adhere to the state's Freedom of Information law because no specific company deal was being discussed.

The committee voted to move a restructuring proposal to the full County Council for discussion. The proposal is not tied to specific funding numbers, but includes a change in the way a new president would be paid, chosen and trained, and a requirement for a closer relationship with the North Eastern Strategic Alliance and the S.C. Department of Commerce. That last stipulation is something the ad-hoc committee members said was missing, and some said could make a big difference in the number of leads the MBREDC has to pursue.

The new proposal would also include incentive-based pay for the MBREDC's new president, with a lower base salary and bonuses every six months if the agency meets incremental goals for job and company creation.

The future

The Department of Commerce recommended putting portions of the agency, including the director, under the county's control, but the private partners in the group, which includes most of the board of directors, protested the idea, Gilland said.

Yahnis said it may be more difficult to convince private industry to invest in economic development if all they see themselves as is a funding mechanism instead of a partner.

"If you move all of the decision making for economic development all back in the county, a fear would be losing the private sector's support," he said. "They don't want to be donors."

The proposal before the council would include continuing a three-pronged approach to economic development with county property manager Jim Papadea continuing to develop and manage the county's properties; the MBREDC continuing to be a public-private partnership responsible for marketing those properties; and North Eastern Strategic Alliance marketing and lobbying for the county on a regional level.

Part of Papadea's job has been to find alternative ways of funding some of the infrastructure like roads, spec buildings and utilities for available properties. He has been able to do this while spending very little taxpayer dollars to date through rural development grants and funding partnerships with agencies like the Grand Strand Water and Sewer Authority, Santee Cooper and the Horry Telephone Cooperative.

Council members said they hope to see a better partnership with the North Eastern Strategic Alliance, which has received about $1 million in dues from the county over the last five years. The agency is not required to submit an annual report on results from its efforts, County Administrator John Weaver said, but the council has argued on several occasions about the lack of results for Horry County during NESA'smembership.

Gilland said she doesn't fault the agency, pointing out that the group was only given two properties to market in the last year of Owens' tenure on the MBREDC, and those properties did not include the many open business parks inside the county, including the Atlantic Center, Cool Springs and Loris parks.

Part of the proposal, if accepted Tuesday, would include using help from the commerce department to advertise, narrow and vet candidates for the president's position, including using a battery of psychological testing for business aptitude that has become standard for new hires at the Department of Commerce. After the MBREDC board voted on a finalist for the job, that person would then train for about three weeks, learning about the various divisions in the department.

The relationship is not unusual, said department spokeswoman Kara Borie. She said the department had a similar arrangement with Marion County a few years ago and the relationship has led to several big announcements, including the relocation of three companies to that county this year. The department is also working on a similar partnership with Dillon County.

Gilland said the efforts of counties like those are a prime reason why Horry County must push forward its relationship with and the restructuring of the MBREDC to make it a better agency.

"It used to be that we competed with areas like Charleston and Greenville for companies coming into the state," Gilland said. "The alternative is, you give no money so you have no group going after those industries, and every other county, Dillon, Marion, even the smaller counties, is going out to beat the bushes. That is stupid. That would be stupid of us. We would just sit here then and just look at each other while the other counties work at those companies.

"You can't give up on economic development, not when people are crying for jobs. We only had two properties that we gave to NESA to even consider. We've wasted money in the past [through some MBREDC spending], but that won't happen again. We've reached a point where we can't let it happen again."

Contact CLAUDIA LAUER at 626-0301.

Newstex ID: KRTB-0119-45081672