Sanford says wind tunnel lacks needed finances

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The governor said he examined the financial underpinnings of the park being developed with money from Clemson University, the state and BMW because of questions about a private developer's stake in the arrangement.

"We need to specifically lock down what his contribution is and consequently what share of the residuals would go to him versus the state," Sanford told The Greenville News. "I would have grave problems with a sweetheart deal where the developer makes a huge profit and the taxpayer in South Carolina has to take all the risk up front."

The governor's entry into the negotiations rattled some Upstate political officials who have been working to nail the park they said holds the promise of 20,000 high-paying jobs. Sanford has since tried to smooth the turbulence, saying he's committed to keeping the park in Greenville, but "we're not committed to this developer or this site."

Miami developer Clifford Rosen has been working with Clemson to build a $2.6 billion park on 407 acres along Interstate 85 near the intersection with Laurens Road. A key component is a wind tunnel that would be operated by Clemson as part of a graduate school of automotive engineering. Rosen couldn't be reached for comment.

However, Bill Thompson, president of Rosen Associates Development Inc., said, "No one has required us to provide the financing yet. We're just getting started. It's not to that stage yet."

Rosen, in a Jan. 21 letter to Clemson, expressed frustration at the pace of developments to secure the wind tunnel.

The state has pledged $12 million for roads and may contribute another $25 million in bond money to build the graduate school. BMW has pledged $10 million.

Sanford told The News he wants Rosen to contribute more "real equity" before the state releases road and bond funds.

Rosen said in his letter to Clemson that his company has committed more than $12 million in land acquisition obligations and costs for design, marketing, legal and engineering services, including $500,000 for development of the wind tunnel.

Clemson negotiations

Clemson President James Barker said all aspects of the auto park development are still under negotiation, including the financing of the wind tunnel. "We've all been on the same page as far as the vision for the project, but if we were all completely on the same page, the deal would have been finalized," he said.

Barker said he couldn't talk about the specifics of the financial discussions, saying, "In the middle of negotiations, I don't think it's wise to discuss those negotiations."

The effort, said Barker, is "getting closer" to a final deal and Clemson wants to make sure the project has the financial backing to "sustain the level of quality we're looking for."

In his letter, Rosen said he was "greatly disillusioned and frustrated" over efforts to secure the wind tunnel. The original plan, said Rosen, was for Clemson to design and manage the facility and that he would attempt to finance and develop it.

He said there have been changes to the wind tunnel plan since its inception, including:

Clemson taking control of the design, cost and allocation of commitments for testing time.

An increase in cost of about $13 million because the university included "tandem testing."

Clemson told him an anticipated $20 million state grant was not currently available.

NASCAR, a prime hoped-for client for the wind tunnel, has indicated it may standardize the body shape of its race cars, which would significantly reduce the need for aerodynamic testing.

Another major racing series has banned aerodynamic testing.

Reports that General Motors has bought significant time at a North Carolina wind tunnel.

"Although nine months (have) passed since execution of our documents, Clemson has not begun the final effort to deliver executed presale agreements from the race teams and manufacturers," Rosen wrote. He added, "Thus, the current status of the wind tunnel is not the result of any action or lack thereof by my organization."

Thompson said the Jan. 21 letter was written "when we were at a frustration point. We're two partners dealing with a lot of individuals, and we just wanted to get going on the wind tunnel."

He said Rosen Associates sent another letter to Clemson officials last week "indicating our continued commitment to the wind tunnel."

Original plans

State Commerce Secretary Bob Faith said the original plans called for Rosen to line up financing for the wind tunnel and donate it to Clemson after the debt was paid off. Faith said that scenario lately has been "in question."

The gift of the wind tunnel was a "major inducement" for $12 million allocated by the State Infrastructure Bank to build roads in the park, a public benefit that enhances the value of Rosen's land, Faith said.

Clemson and the Greater Greenville Chamber of Commerce have been working to bring a research presence to the city for 2½ years.

"The state and related entities are bringing an enormous financial commitment to the table," Faith said. "A $50 million wind tunnel helps balance that out pretty well. If the wind tunnel comes off the table, clearly the deal needs to change to continue to be fair."

State Sen. David Thomas, R-Greenville, said the governor was "making noises" earlier as if the project could be moved away from the county, until he and House Speaker David Wilkins of Greenville held a breakfast meeting to stress the political importance of keeping the project local.

Sanford told The News there was "never" any discussion about the project being "anywhere but Greenville," although he understands how comments that the state wasn't wedded to the current site could have been interpreted that way.

Later that same day, Sanford met with all the major players in the deal to reaffirm that the park would be in Greenville. He then privately asked each of them to explain the overall plan.

No one could tell him, the governor said.

"The first order of business in light of that letter would be to make sure Clemson, BMW and the state were on the same page," he said. He said that wasn't the case as recently as 10 days ago, but the group is now negotiating together for more assurances from Rosen.

Rosen wrote that he has done his part but Clemson has not presold time in the tunnel to secure its development.

Barker declined to talk about Clemson's role.

Taken by surprise

Thomas said Sanford should have met with project principals earlier to voice his concerns. "If he has a problem with the financials, you've got to have a meeting with the honchos, and he hadn't done that," Thomas said.

Greenville Mayor Knox White said the project's loose ends and the governor's objections came as a surprise to some.

"We all were moving along merrily," White said. "Everybody thought somebody else was being talked to. It turned out that they were kind of down in Columbia doing this on their own. And that's scary."

Thomas said, "The expenditures for infrastructure roads was about to take off in March without everybody having signed and confirmed their part of the agreement. That's crazy."

Local environmental engineer George Fletcher, who has been involved with the project, said Rosen doesn't necessarily need up-front cash to make the wind tunnel viable, only a business partner such as a NASCAR racing owner or letters of intent from companies who plan to buy time in the tunnel.

Or the developer could simply donate more land to Clemson, Fletcher said. Rosen said in his letter that Clemson is responsible for preselling time in the wind tunnel and he "cannot afford either the investment of time or financial resources to continue to address multiple, diverse and conflicting objectives."

Sanford said there are many ways for Rosen to satisfy the state.

"One can be endlessly creative on different ways that you can put equity in a deal — but it can't be smoke-and-beer equity," he said. "There's a difference between ... cold, hard cash and developer's equity, which at times can be a creation of one's imagination. We would like the first kind."

Thompson said his company and other parties involved in the planning are working on the design of the wind tunnel.

"The fact we don't have financing now is not surprising because the project is not ready," Thompson said.

"You can't go get the financing until you've worked out all the details," he said. "There's a process here. It's a very complicated facility, and we've got to get it right."

Backup plan

Fletcher said the $25 million in state bond money for the graduate school hasn't been released yet and there's likely a backup site for the development in case plans fall through on the land formerly owned by the late textile millionaire John D. Hollingsworth.

Barker has said a new site could mean a new developer while Rosen would have to develop the park if it remains at the current location.

Sanford said, "We haven't gotten that far because we'd love for this site to work out." But he said if a deal can't be reached with Rosen, the parties could look elsewhere in Greenville.

"We would agree with that," Barker said. "As long as it is in Greenville ... we would go to another site and try to put the same arrangement together with a different piece of property."

Fletcher said Rosen has made a wise move by questioning the wind tunnel's viability now instead of waiting until the project was well under way.

"If you're spending $50 million of your own money, you've got to have some assurance NASCAR is not going to decide next week the cars can't use wind tunnels," he said.

Initially, Fletcher said, there were five sites in contention: the Hollingsworth land at I-85 and Laurens Road; the Matrix commercial park near U.S. 25 and the Southern Connector; the Adulas LP site at I-85 and the Connector; 40 acres at the end of Greenville-Spartanburg International Airport; and land off interstates 85 and 185 near the Greenville hospital.

"The alternate site is an exit strategy," Fletcher said. In any case, the governor "has made it clear it's in Greenville County."

"I haven't looked," Sanford said. "We have simply been dealing with the place that was put before us."

The mayor said while there's "theoretically" a second option, it's not a working plan.

"The way we put it in our meeting with the governor ... the project before us is the project at the Hollingsworth site," White said.

BMW spokesman Bobby Hitt said the company remains committed to the project.

"Our goal is to build a graduate engineering center in conjunction with Clemson," Hitt said. "We remain convinced that will occur and that there will be a variety of research facilities there."