Millions in ‘minority’ contracts flow to powerful senator’s coffers

A federal program designed to put African-American and female businesses on a competitive footing with their white male counterparts in one of the largest “Good ‘Ole Boy” networks around (highway construction contracts) is profiting the most powerful white male legislator in South Carolina – the goodest, oldest boy around, one might say.

Last month, The Nerve reported that the business founded by Sen. Hugh Leatherman (R-Florence) – Florence Concrete Products – was operating as a “disadvantaged business enterprise,” a designation designed to assist minority businesses “at a social and economic disadvantage” by requiring that 10 percent of all federal contracts through the Federal Aviation Administration (FAA), Federal Highway Administration (FHWA) and Federal Transit Administration (FTA) go to contractors and businesses certified as DBEs.

What wasn’t known at the time was just how much business Florence Concrete was doing – if any – by virtue of that designation.

Thanks to a Freedom of Information Act request filed by The Nerve, that picture is clear.

Since March 1, 2012, when Leatherman’s company first obtained DBE status by virtue of it having hired a female president, Florence Concrete has received $1.9 million in funds that otherwise would have gone to minority businesses more fully meeting the spirit, not just the letter, of the DBE program.

As it stands, Leatherman maintains “minority” stockholder status in Florence Concrete, according to his 2015 Statement of Economic Interest form filed with the S.C. Ethics Commission. How much stock he holds isn’t known, as the form only requires disclosure of stock holdings if they are “5% or more of the total (stock) issued AND which constitute a value of $100,000 or more.” Thus, he could own 5 percent or 49.9 percent.

Leatherman also lists himself as the “President and Owner” of Leacon of Florence, Inc., a business which a scouring of the internet found only one job ever performed. That was a $6,000 home-remodeling project in Charleston in 2006 on a home across the street from a house he once owned but sold to his daughter, a review of property records in Charleston County by The Nerve found. What amount of stock, if any, in Florence Concrete is held by Leacon also is unknown.

In 2012, the first year of DBE certification, Florence Concrete received $802,746.21 from a single federal contract in the Sixth Congressional District, which includes most of I-26 from Columbia to Charleston and all of I-95 from Florence to Georgia border near Savannah.

While Florence Concrete received no new DBE contracts in 2013, in 2014 it won three new bids, for $140.332.50 in Fairfield County, $225.092.70 in Kershaw County and $$71,916.25 in the Seventh Congressional District which takes in Florence and surrounding counties.

This past year, Florence Concrete was awarded four more DBE contracts – a $161.833.36 project in Cherokee County, a $104,891.03 contract in Lancaster County and two other projects totaling $377,014.38.

Nationally, the Department of Transportation alone awards $20 billion in contracts nationwide, with 85 percent of that total going toward construction, according to Federal Transit Administration figures. The DBE program was launched in 1983 to ensure that minority businesses received a percentage of that business. In 1987, Congress amended the statutory language to include female-owned businesses to those “presumed to be disadvantaged” to “ensure non-discrimination.”

From FY Oct. 2014-Sept. 2015. a total of $65.1 million in DBE contracts was awarded in South Carolina. Of that total, $39.6 million (61 percent) went to non-minority female businesses, while $12.2 million (18.7 percent) went to African-American owned businesses

J.T. McLawhorn, president and CEO of the Columbia Urban League, says such skewed percentages are the rule rather than the exception in a system in South Carolina and nationally where DBE contracts go predominantly to non-minority female businesses rather than the racial minority businesses they were set up to aid.

“There’s nothing unique about what Florence Concrete is doing,” McLawhorn said. “It’s totally legitimate and just exposes one of the flaws in the focus of the program that is evident in the data across the country.

“If you want to level the playing field for minorities, that takes looking beyond the designation to the businesses themselves. I can’t criticize a company for working a system. In this case, the system itself doesn’t recognize that non-minority female businesses or those led by a non-minority female have advantages and a support system than many minorities do not have.”

In other words, most DBE’s don’t have the backing of the oldest, most powerful legislator in South Carolina.

“What’s within the legal limits of the law isn’t the same thing as truly enhancing opportunities for disadvantaged businesses and minority owners. We need to go back and fine-tune the system.”

http://thenerve.org/news/2015/12/21/leatherman-dbe/?utm_source=The+Nerve&utm_campaign=be9e687f5e-Today_on_The_Nerve&utm_medium=email&utm_term=0_b306b3032c-be9e687f5e-219790377&mc_cid=be9e687f5e&mc_eid=805deb8b99

As “Cyber Monday” quickly approaches, South Carolinians should be mindful that buying from online national retailers that do not collect South Carolina sales taxes not only puts our local retailers at a competitive disadvantage but robs our state from necessary resources to fund government.

This includes paying for necessary road, highway and bridge repairs and providing adequate funding for our public schools.

Last January, I filed Senate Bill 170, which passed the S.C. Senate in the spring by a vote of 37-4. The bill now resides in the House Ways and Means Committee, and I’m optimistic of a hearing on this legislation from Chairman Brian White.

The bill is simple at its core, and is, at the end of the day, about “fairness” for our state’s local brick-and-mortar” retailers and the “mom and pops” across “Main Street” South Carolina. Similar in nature to legislation passed in at least 14 other states (including North Carolina and Georgia) it simply requires that “remote sellers” — aka “Internet” or “e-commerce” retailers — located outside of South Carolina collect and remit sales tax from their South Carolina customers in the same manner that South Carolina-based mom and pops already are required to do.

This is first and foremost about fairness. Under current law, an out-of-state retailer that does not collect S.C. sales tax has a built-in 6-8 percent price advantage over our state’s very own, often home-grown, local businesses.

Why? Because an archaic 23-year-old U.S. Supreme Court ruling known as the Quill decision held that the only way a state can compel collection of sales tax from out-of-state retailers is if that retailer has a substantial “physical presence” (or “nexus”) in the state that is trying to collect the tax. And while the court has made it clear that Congress can, at any time, pass legislation re-defining what “nexus” means to correctly take into account how drastically and quickly our economy has shifted away from traditional “storefronts” and to online sales, Congress, of course, has consistently failed to take any action. Its failure, motivated by fear of no-tax pledges and deep-pocketed special interests with ties to the rise in e-commerce, continues to cost home-grown retailers and local economies jobs and income.

State and local government revenue continues to suffer along with our home-grown businesses as well. According to our state’s official economic forecasting agency, the S.C. Office of Revenue and Fiscal Affairs, South Carolina’s lack of a strong nexus law, coupled with a do-nothing Congress, costs South Carolina state and local governments an estimated $100 million in lost sales tax revenue annually. This is not fair, and is costing our local economies and government revenues. Unless S.170 bill becomes law or until Congress finally acts, the damaging effects to our businesses and ability to provide basic state services are only going to grow.

Consider that (according to the Office of Revenue and Fiscal Affairs) growth in e-commerce retail trade has been rising at an astonishing rate over the last 10 years, averaging almost 20 percent per year over the last decade. This rate of growth far surpasses the rate of growth of general brick-and-mortar sales and is reflective of our rapidly changing economy — and not just what we buy but how we buy. Although our economy is changing, the state’s blue ribbon Taxation Realignment Commission (TRAC) found several years ago that our state’s tax code simply hasn’t kept pace with the changing economy. My proposal helps rectify this growing reality.

It is extremely important to point out that this legislation is not a tax increase. That’s because technically South Carolina law (as in every other state with a sales tax) requires South Carolina residents who purchase a product from an out-of-state retailer to pay what’s known as a “use tax,” which is basically the same as a sales tax. But the problem with this is that it puts the burden entirely on the customer to pay the tax, and not the retailer, which is what most customers are familiar with. On top of that, customers can’t pay the tax at the time of the purchase while it’s fresh on their minds. They must wait and pay this sales tax as part of their income tax at the end of the year.

This is simply confusing and very inefficient, both for the customer and the state. Of the almost $3 billion in state sales tax collected each year, less than $10 million comes in the form of self-reported “use tax.” It is time to recognize that we live in a different world than the times of the 23-year-old Quill decision.

The state’s tax laws must be amended to level the competitive playing field for local brick-and-mortar stores that contribute to our state’s economy and collect the sales taxes already legally due, revenue that the state is being cheated out of.

Marlon Kimpson represents District 42 (parts of Charleston and Dorchester counties) in the S.C. Senate