Scout Motors celebrated its groundbreaking Thursday, Feb. 15, 2024, in Blythewood, South Carolina. Vehicle assembly is supposed to start in 2027. (Provided by Scout Motors)
COLUMBIA — South Carolina has racked up $150 million in cost overruns as it works to fulfill pledges it made to lure electric vehicle maker Scout Motors to the state. The state’s economic development agency wants taxpayers to make up the difference.
South Carolina lawmakers, in March 2023, already agreed to spend $1.3 billion to bring Scout to the Palmetto State. If the General Assembly does not agree to pony up the additional cash in the next state budget, the state Commerce Department would have to tell contractors working on the site that it doesn’t have the money to pay them.
“And we would not have the money to pay them for several years under our regular funding,” Harry Lightsey, South Carolina’s economic development chief, told legislators Tuesday.
Funneling future money from its standing annual budget allocations also means Commerce would have to pass on other companies that may come seeking to build in the state, he said.
More than half of the over-budget expenses are related to an environmental package meant to offset the wetlands lost when the Volkswagen subsidiary started to build, Lightsey told a House budget-writing panel.
In the agreement with Scout, the state Department of Commerce and Richland County agreed to contract and pay for all of the mass grading work at no cost to the company. And the costs of all associated environmental requirements were to be borne solely by the state and county, the 192-page contract reads.
At the heart of the issue are tight deadlines Scout Motors set for getting this work done so it could begin assembling vehicles in 2027. Those due dates were redacted in the copy of the agreement Commerce provided to the SC Daily Gazette.
“Scout wanted to build this plant and have it in production on an extremely aggressive schedule,” Lightsey said. “So, there was certainly a lot of time pressure involved in all of this.”
That meant Commerce needed a waiver from the U.S. Army Corps of Engineers to avoid a more lengthy, two-year environmental permitting study.
“If we had had to go through a two-year process, that would have killed the project,” Lightsey said.
The company, through a permit filed by Commerce and the county on its behalf, first offered to protect 4,902 acres of wetlands near Congaree National Park and another 155 acres on the Broad River, known as Shelton Island.
To win the Corp’ approval, the group added 18 miles of stream restoration in Sumter National Forest to its environmental proposal, along with more improvements to land along the Congaree River.
While the group waited for a nod from the Corps, crews had to pause work for five months, tallying up an even greater bill. Equipment the state had rented sat idle.
“We wanted to be ready to go to work as soon as we received the wetlands permit. And we were concerned that if we let go of that equipment, that would take additional time and effort to get that equipment back on the site,” Lightsey said.
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Once the Corps allowed the state to resume work, Commerce spent an additional $18 million to bring more crews on site and get its construction schedule back on track after the months-long environmental delay and an unusually rainy 2024, Lightsey said.
Also related to the rain, the state Department of Environmental Services required Commerce to build dams on site to hold back rainwater and keep clay and silt from washing onto downstream neighbors’ property. The cost: $17 million.
Beyond the environmental issues, a third of the overruns were related to road improvements the state and county agreed to make on Scout’s behalf.
In his own budget proposal, Gov. Henry McMaster only recommended giving Commerce a third of the money it’s requesting. Commerce officials did not say how the agency would make up the remainder if the Legislature adopts the governor’s suggestion.
Scout Motors did not approach Commerce or the governor about making the budget ask, according to company spokesman Jamie Lovegrove.
In a statement, the company said it “appreciates the State of South Carolina’s continued commitment to completing the earthwork and site preparation in support of our project.”
Scout also pointed out that its own expenses have ballooned. And it is building out a business park to house potential suppliers without requesting any additional incentives from the state.
That brings the company’s total investment to $3 billion — a $1 billion increase over the initial announcement.
Meanwhile, more than 130,000 people have signed up to buy the first Scout vehicles when they roll off the line next year.
Of those pre-orders, 80% of buyers are asking for the hybrid-like models the carmaker announced in October 2024 that it would offer.
These models, which Scout is calling Harvesters, have both a battery and a gas engine that can recharge the battery while the car is still in motion, extending the range of travel to 500 miles between refueling.
Commerce officials said they were unable to respond by deadline to questions from the SC Daily Gazette about whether it had approached Scout Motors about amending the agreement to have the company cover the shortfall.
The agency also did not say whether it would change how it writes these types of agreements in the future by committing to a set dollar amount rather than being left on the hook when something goes over budget.
“Sure, you’re not happy about the overrun. We’re not happy about it,” said Rep. Leon Stavrinakis, D-Charleston.
“But if you knew 2 ½ years ago that it would cost an extra $150 million, would you still have recommended this project to the governor and to the General Assembly?” asked the chairman of the Ways and Means subcommittee.
“Absolutely,” Lightsey replied.
