Volvo Plant is Credit Positive for South Carolina and Berkeley County
Friday, May 15, 2015
BRADENTON, Fla. - Volvo Car Corp.'s selection of Berkeley County, S.C., for its first U.S. factory is a credit positive for the county and the state, according to Moody's Investors Service.
Volvo will invest $500 million to produce up to 100,000 cars a year in a facility along Interstates 26 and 95 with easy access to the Port of Charleston and Georgia's Port of Savannah.
"The announcement is credit positive for South Carolina, Berkeley County, and other local governments in the region where the factory will add 2,000 new jobs," Moody's analyst Edna Marinelarena said May 14. "The factory will contribute $4.8 billion in economic output per year, according to the state's analysis."
To attract the automaker, a subsidiary of Zhejiang Geely Holding of China, South Carolina agreed to provide more than $200 million in state and local incentives.
The state is expected to issue $120 million in general obligation economic development bonds to fund transportation infrastructure, environmental mitigation and site work. The bonds must still be approved by the legislature and the State Budget and Control Board.
Berkeley County offered Volvo a fee-in-lieu-of-taxes agreement that excludes the plant from property taxes through 2018. Additional local tax breaks will be granted if the plant meets its investment target.
A College of Charleston study estimates that the plant will generate $11.3 million annually in state and local taxes beginning in fiscal 2017, rising to $72.3 million upon completion of the project's first phase by 2024, then doubling to $144.7 million by 2028, Moody's said.
Construction is scheduled to begin in this fall with the factory opening in 2018. Volvo estimated that future expansion plans could lead to employing 4,000 people by 2030.
"This further strengthens South Carolina's already healthy auto manufacturing sector, which accounts for 3.1% of state gross domestic product, and continues a recent trend of automaker initiatives in the state," Marinelarena said.
BMW AG operates a plant in Spartanburg County that employs 8,000 people, and recently announced a $1 billion expansion - the fifth expansion since it opened in 1994.
In March, Daimler AG announced a $500 million expansion near Charleston that will employ 1,300 workers to manufacture work vans.
"Volvo's announcement comes as many global carmakers are building new factories in Mexico rather than the U.S. to take advantage of lower labor costs and low export costs through free trade agreements," Marinelarena said. "However, South Carolina is bucking this trend with auto manufacturing growth that has outpaced the national rate since 2008, in part owing to its low unionization rate, willingness to provide economic incentives, and attractive transportation infrastructure."