Small Business Bulletin – 12/26/2003

MAP Commission Adopts Small Business Chamber’s Concerns and Recommendations

On July 7 of this year, The SC Small Business Chamber of Commerce went public with data it had obtained from the SC Comptroller General’s Office. Over 1.3 billion of the state’s procurement dollars (approximately 42%) were leaving the state to purchase goods and services every year. The Small Business Chamber called for change to the state’s procurement system so that more of our tax dollars would go to in-state businesses to both improve our economy and promote the growth and development of our small businesses.

In response to this alarming data, Lt. Governor Andre Bauer invited the Small Business Chamber to participate in the state Procurement Subcommittee he chaired on behalf of Governor Mark Sanford’s MAP Commission (Management,
Accountability and Performance). The final MAP Commission report was released on September 30, 2003, and the concerns and recommendations of the Small Business Chamber are included.

The lengthy report calls on the state to buy more from in-state companies, especially small businesses ( pages 135-139). The key to transforming the state procurement system into a much needed incentive program for our small businesses is the use of a “best value” analysis that would take into consideration the flow of the money. The more money a contract leaves in South Carolina, the better value that
proposal offers for the state.

The Small Business Chamber will work with Governor Sanford, Lt. Governor Bauer and the General Assembly to insure that these valuable small business recommendations are implemented in the state procurement system.

USC Hotel Clears Zoning Hurdle Over Small Business Chamber’s Objections

The Columbia City Council approved a zoning change that possibly paves the way for the University of South Carolina and its foundation to have an on-campus hotel. The Small Business Chamber had joined with the Greater Columbia Hotel/Motel Association and the Hospitality Association of South Carolina to oppose the hotel. The Small Business Chamber does not believe that public agencies should be competing with the private sector.

With only one City Councilman (Jim Papadea) willing to defend the area hotels from unfair competition, the local hotels took a last-minute offer from USC to limit the occupancy of their hotel to 65%-85% in the first four years and to not build any more hotels for seven years. In exchange, the hotels had to agree to stop all on-going and planned lawsuits as well as
halt all negative publicity.

Fortunately, the Small Business Chamber was not a party to either the negotiations or agreement with USC and its foundation and is presently weighing its options for continuing the fight on this particular issue. One possible course of action is an appeal of the zoning change. The change was requested by the USC Development Foundation. However, records show that the actual property owner is a private company set up by the Foundation to own the land and the hotel. The Small Business Chamber has always championed a regulatory process that does not favor big business (or in this case a big state agency). A small business would certainly not be given such an extraordinary regulatory consideration by local government.

The Small Business Chamber could also legally challenge the fact that USC and its foundation have failed to follow state procurement policies in the selection of a developer for the hotel and the selling of public property to a private business. The Constitutionality of the public/private business partnership proposed for this hotel is also questionable.

How To Avoid “Buyer Beware List”

On October 15, the SC Department of Consumer Affairs launched a website to identify businesses that have not responded to consumer complaints or have not taken promised steps to address complaints. Last week the Small Business Chamber, the SC Automobile Dealers Association and the SC Merchants Association met with Brandolyn Pinkston, Acting Administrator of the Consumer Affairs, to address concerns about this “Buyer Beware List”.

Obviously it is good business practice to respond to legitimate customer complaints and to carry out promised action to resolve the complaints. However, it is important to assure that procedures are in place to avoid the “listing” of businesses due to illegitimate complaints or even simple failure of businesses to be aware that they are being targeted.

Ms. Pinkston shared the safeguards the Department is using to avoid the potential problems. At least four attempts will be made to contact the business–three letters, a telephone call and fax if possible. To avoid being placed automatically on the “Buyer Beware List” the business only has to respond to the Department’s inquiry. However, if the business promises
the Department to take a specific action to address the complaint and fails to do so, then the business will be listed.

As a result of the meeting with Ms. Pinkston, the Department agreed to more prominently display in the letter the importance of calling the agency and to list a toll free telephone number for the Department.

Should your business receive a letter from the Department of Consumer Affairs regarding a consumer complaint, the matter is serious regardless of the legitimacy of the complaint. Please respond quickly to the agency to discuss the matter and you will avoid any potential problems.

2004 Priority Issues

The President and CEO of the Small Business Chamber, Frank Knapp, Jr., has set a goal of sitting down with each state Senator to discuss the organization’s top issues for 2004 before the legislative session starts in January. The process is well underway and the response has been excellent.

The Small Business Chamber will continue to work on issues such as supporting funding for technical colleges and tech tuition assistance, property rights, regulatory reform, workforce development and others. However, it is very important to focus much needed attention on the following critical issues facing all small businesses:

Promote Small Business Development Through State Procurement. The State of South Carolina spends at least 42% ($1.3 billion) of its state procurement dollars out of state every year. State agencies should be encouraged to buy locally and contract decisions should be heavily based on “best value” to the state. “Best Value” would be calculated by following the flow of money.more money staying in the state would receive a higher “best value” score. A central repository of all state agency contracts should be established.

Stop State Agencies from Competing with Small Businesses. As their budgets are decreased, state agencies begin looking at ways to take revenue from the private sector. USC’s new on-campus hotel will take millions of dollars a
year from local hotels and more hotels are planned. The SC Employment Security OneStops are openly competing with private personnel agencies resulting in 200 closing their doors in the last 4 years. A legislative solution must be found to protect private businesses from unfair competition from public agencies. S.403/H.3866 would prohibit institutions of higher learning or political subdivision of the state from owning or operating a hotel or resort.

Develop a Solution to the Small Group Health Insurance Crisis. Sixty-five percent of South Carolina businesses with 50 or less employees do not have group health insurance. These numbers will increase because small businesses with coverage can no longer sustain annual double-digit increases in health insurance premiums. The number of insurance companies willing to write small group health continues to drop leaving only a few to compete. S.349/H.3593 would require the State of South Carolina to create the vehicle needed for all small businesses to aggregate together for the purpose of
acquiring group health insurance.

Obtain Income Tax Fairness for Small Business. Small businesses (mostly sole proprietors, partnerships, S-corporations and limited liability companies) pay a state income tax of 7% compared to the income tax rate of 5% for C-corporations. S.173/H.3314 would reduce the income tax for small businesses to 5%. The BEA estimates the cost to be $76 million a year.

Fight Frivolous Lawsuits. Frivolous lawsuits and defenses cost small businesses in terms of money, time and distraction. However, no data is currently available to document the frequency of the problem. Small businesses are unaware of their legal rights as to how to fight frivolous claims and defenses to recover expenses. A reporting system and database
should be established to document the extent of the problem. Plaintiffs and defendants should be automatically advised of the consequences of frivolous lawsuits and defenses and how to fight them using Rule 11 and the Civil Proceedings Sanctions Act (15-36-10). Efforts already being taken by the judicial system to address this problem should be increased. 

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