GO bonds are South Carolina's vehicle to subsidize Chinese auto manufacturer
BRADENTON, Fla. – South Carolina plans to help Volvo finance an expansion at its new manufacturing facility in Berkeley County, as part of the state’s second incentive package for the Chinese-owned automaker.
The Joint Bond Review Committee and the State Fiscal Accountability Authority approved issuing $46 million of state general obligation bonds for the latest Volvo Car USA project, adding to the $120 million of GOs pledged in 2015 to pay for public infrastructure at the facility.
The first South Carolina-built Volvo S60 sedans are expected to roll off the assembly line in late 2018. The additional state GOs will finance improvements related to the company's plan to add a new production line and construct offices.
“Volvo's most recent announcement, which doubles down on a prior commitment to the state, is credit positive for local governments in South Carolina's Lowcounty region, which includes Berkeley, Charleston and Dorchester counties,” said analyst Evan Hess, with Moody's Investors Service.
The plant and its economic effects will benefit the regional economy in the form of population growth, tax base expansion and increased high-wage employment opportunities, Hess said.
The car company announced in 2015 that South Carolina would be the site of its first North American manufacturing operations, promising an initial $500 million investment. At the time the state approved its first incentive package, which included GO bonds.
In September, Volvo, which is part of the Hangzhou, China-based Zhejiang Geely Holding Group Ltd., said that it would invest an additional $520 million to expand the unopened plant, for a total investment of $1 billion. The entire project is expected to create at least 3,900 jobs.
The addition will include a new production facility for the XC90 SUV and construction of an 88,000-square-foot office building.
The $46 million of GOs will help finance the construction of a building on state land as well as construction of a railroad spur and road and water improvements.
“Two years ago, we were excited when Volvo Cars selected South Carolina for its first American manufacturing facility,” South Carolina Secretary of Commerce Bobby Hitt said in a statement. “We're proud that, before a single car has rolled off the assembly line in Berkeley County, the company has decided to increase its commitment to our state, adding a new product line to what I know will be a dynamic, state-of-the-art facility.”
Volvo’s announcement comes while many carmakers are building factories outside of the U.S. to capitalize on lower labor costs and low export costs through free trade agreements, according to Moody’s.
“South Carolina is defying this trend by growing its auto manufacturing sector, in part owing to its low unionization rate as well as the state's willingness to provide economic incentives and attractive transportation infrastructure,” Hess said.
The state’s continued investments in the auto industry will fuel ongoing manufacturing growth, and further expansion of the economy.
Hess said more than one in five factory workers in the state are employed in autos or industries that supply it, which is nearly twice the national share. The new jobs will have above-average salaries that drive growth in consumer industries and housing.
Public Resources Advisory Group is the state’s financial advisor for the upcoming GO sale.
Haynsworth Sinkler Boyd PA is bond counsel. Howell Linkous & Nettles LLC is disclosure counsel.