What's up with South Carolina?

Is South Carolina shaping up to be the new-age-hipster Mecca of the South?

Last week, Google announced plans to build a gigantic server farm in Goose Creek near Charleston SC, and has applied for permits for another facility near Columbia.

This week, Starbucks announced plans for a new roasting and distribution facility in Calhoun County near Columbia SC.

Dedicated Google employees are known for their hard work and long hours. Speculation is that Starbucks saw a potentially huge demand for its products and is positioning itself to fill it.

All South Carolina needs now is a Ben & Jerry's factory and an IKEA distribution center and half of Seattle will want to move down there.

But seriously, these announcements again highlight the "corporate welfare" aspects of the incentives used to lure new employers to the South, but may also be good news for South Carolina in the long run.

Google's $600 million Goose Creek facility will employ about 200 workers at an average annual salary of $48,000 and an impressive array of benefits according to state officials.

A couple of weeks ago we talked about the "new economy of the Old South" and a recent report that looks at "new economy" jobs and cautions against old-school incentives designed to attract manufacturing jobs of the "old economy."

The report defines the "new economy" as having the following attributes:

- Today's economy is knowledge dependent.
- Today's economy is global.
- Today's economy is entrepreneurial.
- Today's economy is rooted in information technology.
- Today's economy is driven by innovation.

By any measure, Google fits all these criteria to a "T". So that's a good thing for South Carolina. Google was said to be attracted to SC because of the availability of cheap electricity, abundant water (which they need for cooling towers for their server farms) and access to fiber optic networking connections.

Incentives were an attraction, too. Details are sketchy, but some that have been mentioned include $4.8 million in tax credits for job creation, tax-free electricity, and elimination of taxes on capital investments -- "exemptions that have traditionally been offered to large old-line manufacturers." Google could also qualify for other incentives if they double their payroll, and they have purchased enough land to accommodate future expansion to 400 employees.

Google's standard-issue incentive package, however, does not follow the recommendations of the "new economy" report referenced earlier. Instead of job creation credits, the report recommends that states "align incentives behind innovation economy fundamentals", which means tying incentives to specific state goals that support the "building blocks of knowledge, innovation, and entrepreneurship." The report also recommends rethinking incentives to accomplish such things as making them contingent on higher wages, targeting distressed areas of the state and enhancing "key industrial centers."

However, because of the nature of Google's business the incentives may, in a roundabout way, promote "innovation economy fundamentals", and it could be the start of a South Carolina IT "industrial center." So that's a good thing for South Carolina, too.

Another interesting aspect of Google's deal with South Carolina involves their simultaneous negotiations with North Carolina for a similar facility and how they pitted the two states against each other to bid up their respective incentive packages while planning to build all the facilities all along. Or, as this editorial puts it, "For a company whose motto is 'Don't be evil,' Google indulged in some nigh-unto-devilish behavior in seeking economic development incentives for its planned computer data center near Lenoir, N.C."

The total value of the South Carolina incentive package is not yet known, but the North Carolina package may be worth up to $260 million over thirty years for 210 jobs, which is more than $1 million per job.

That's a lot of Starbucks!