Sonoco CEO Sanders calls for gas tax increase to fix poor SC roads
Source: The State
April 22, 2015
The chief executive of Sonoco, the state’s largest home-based company, on Tuesday said the state’s poor roads will stall industrial recruitment and cause existing companies to expand elsewhere.
M. Jack Sanders also told the The State newspaper that he would support raising the gas taxes to pay for repairs.
Sonoco estimates that poor roads cost the global packaging giant up to $5 million annually in increased maintenance to its trucks as well as driving farther to avoid bad South Carolina roads.
About $10 million of the $40 million the company spends in-state on freight is gasoline, the company said.
“The timing is right,” Sanders said of a tax increase, noting that wholesale gas prices are low and should remain so for the next few years.
“I also think it’s fair because people that are using the roads are paying to ensure that they are maintained,” he said, without specifying how much of an increase he supports. “Like anybody else, I don’t want to pay any more taxes, but ... we have to do something.”
Bad roads also are a risk to the company’s drivers, Sanders said. “There is a potential safety issue. There are insurance and liability issues as well.”
Sonoco is South Carolina’s largest home-based company with more than $5 billion in sales. It has more than 335 operations in 33 countries, producing packaging for some of the world’s most recognized brands, according to its website. Sonoco said it serves customers in 85 nations.
But its headquarters and largest manufacturing complex is in the Pee Dee town of Hartsville. Based on a USC economics analysis, Sonoco has an annual impact of about $1 billion to the state’s economy.
Presently, South Carolinians pay 16.75 cents a gallon in gas taxes. Georgia’s is 26 cents. North Carolina’s state gas tax is 37.5 percent – more than South Carolinians pay in combined federal, state and local gas taxes.
With Tuesday’s comments, Sanders joins Michelin North America Chairman and President Pete Selleck in going public about the poor condition of the state’s roads. In November, Selleck described the state’s roads as a “disgrace” and said that without improvement the tire maker might have to look outside the Palmetto State for future expansions.
Like Selleck, the Sonoco chief executive said his company would have to consider expanding elsewhere if the roads are not fixed.
“Certainly it impacts our decisions,” Sanders said. “It’s about the bottom line and the cost to expand. It would be really unfortunate (lawmakers) don’t get there.”
The state Department of Transportation has estimated it needs up to $1.5 billion a year in additional money to repair, maintain and expand the state’s roads by 2040.
The S.C. House approved a bill last week that would generate $427 million a year by raising the state’s gas tax by 10 cents per gallon to 26.75 cents. The measure is pegged to a cut in the state’s income tax that Gov. Nikki Haley proposed in her State of the State address.
An $800 million plan in the Senate would increase the gas tax and increase fees for driver’s licenses and vehicle tags. It doesn’t cut income taxes.
Haley has proposed raising the tax by 10 cents per gallon, at the same time reducing the state income tax over 10 years, from 7 percent to 5 percent.
Sanders said he isn’t backing one plan over another.
“I don’t have a preference and I don’t want to get involved in the politics of this,” he said. “I hope they reach a middle ground that benefits the state.”
Sonoco spends about $160 million annually on truck transportation in the United States and Canada, the company calculates. It spends about $40 million annually for inbound and outbound freight into South Carolina.
An average of about 210 trucks a day come into and out of its Hartsville manufacturing facility in Darlington County, representing about 5.6 million miles traveled each year.
Sonoco has approximately 170 tractors and leases 800 trailers. Its annual maintenance on tractors alone is about $1.5 million, about $500,000 of which is associated with damage from bad roads, according to company figures. The cost to trailers because of bad roads adds another $500,000.
The company estimates the increased costs of having to drive more miles by avoiding or minimizing travel on poor road also adds time. Overall, adjusting to road conditions is increasing miles traveled by 7.5 percent to 10 percent, Sonoco said. That results in $3 million to $4 million in additional costs.
Among seven routes the company cites as problematic is U.S. 1 between Patrick, S.C., and Cheraw, S.C., which Sonoco said is especially in poor condition and forces drivers to take alternate routes or to proceed more slowly.
Sanders said that raising the Ravenel Bridge in Charleston and dredging the harbor to make way for bigger freighters is important, but no more than maintaining roads.
“Just having a port doesn’t get you there,” Sanders said.
Reach Wilkinson at (803) 771-8495.