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Socastee Elementary School on Dec. 19, 2020. Photo by Janet Morgan/janet.morgan@myhorrynews.com

For more than two years, Horry County Schools fought against giving school builder Firstfloor Energy Positive and its contractors tax breaks worth nearly $1.5 million.

But the dispute quietly came to an end this year when Horry County Board of Education Chairman Ken Richardson signed off on the tax deal — shortly before the district gutted the part of its facilities department funded by capital dollars.

Emails obtained through a public records request show how Firstfloor officials pursued the tax breaks, even refusing to sign off on a road project for a Carolina Forest school as an objection to being denied a benefit the firm insisted it was due. Those emails also show how school district officials steadfastly opposed approving the builder’s request until suddenly changing course this year.

The tax breaks come from the 179D section of the federal tax code, which allows the owner or designer of energy-efficient buildings to receive a tax deduction of up to $1.80 per square foot for energy-efficient buildings. If the owner of such a building is not a tax-paying entity, such as a school district, then the owner can assign the tax deductions to the building’s designer instead. 

Since 2017, the district had resisted giving the deductions to Firstfloor without something substantial in return. District staff estimated that the $1.80 per square foot tax deduction applied to the five new schools constructed by Firstfloor could be worth about $1.5 million. Firstfloor’s contract didn’t guarantee the firm would be granted the deductions, and until February, then-Executive Director of Facilities Mark Wolfe, Chief Financial Officer John Gardner and Superintendent Rick Maxey had taken a firm stance against giving up their leverage and signing off on the deductions for nothing. 

That changed on Feb. 12 when Wolfe got an email from Chief of Support Services Daryl Brown directing his department to provide operational expense information for the district’s five new energy-positive schools to Firstfloor. 

“I’m confused,” Wolfe wrote back to Brown that afternoon. “We have never granted this to FFEP in years past. Has there been a change in that decision?” 

A minute later, Brown wrote back one word with no explanation. 

“Yes.” 

In an interview, Richardson said he signed over the tax deductions in February because of the school district’s desire to continue its relationship with Firstfloor.  

Months later, Horry County Schools would point to COVID-19 budget concerns as the reason for a reduction in force that sliced in half the size of the facilities department funded by capital monies, cutting 11 of those 22 budgeted positions, including Wolfe's job, in its fiscal year 2020-21 budget. Superintendent Rick Maxey said during a meeting that the move would save the district an estimated $1.25 million annually. 

The reduction in force did not affect any other department, and the district has justified eliminating the positions because it doesn’t plan to build any more schools for several years. The district issued close to $200 million in bonds to build the five new schools, and it still has to pay back around $148 million.  

“We know we don’t have any money to do any building right now. Why keep all these people on the next four years until we get money?” Richardson said. “So the only thing we did is we downsized a department.”

Wolfe filed a lawsuit in mid-July alleging that Firstfloor, its contractors and the district conspired to get him fired, allegedly because they saw him as a roadblock to their control of the building project, including the 2018 procurement of bullet-proof security film installed over the glass in the new schools. Wolfe was placed on administrative leave that year before being reinstated. Horry County Schools, Firstfloor and the other defendants have denied the allegations in their responses to Wolfe’s lawsuit, which is pending.

That suit has become an annoyance to Richardson, who blames Wolfe and others in the facilities department for underestimating the budget for the new $17.9 million Horry County Education Center, also known as the SOAR Academy, which should be finished in September. The district was able to lower the price from an even higher estimate after several revisions to the plans. (H.G. Reynolds serves as the general contractor on the project while Quackenbush Architects + Planners is responsible for the architecture.)

“I wouldn’t care if you put this on the front page of the paper: I would have fired his (Wolfe’s) [butt] immediately,” said Richardson, who was sworn into office in January of 2019. “When they can’t figure a $13 million building, and it comes to $20 million, they’re incompetent. And I’m not going to put up with people that are incompetent. But now they’re trying to take it off of that, and trying to put it on something that happened two years before I got on the board. I’m a little frustrated about it.”

During a facilities committee meeting on Jan. 27 where board members and staff were hashing out the revised cost for the SOAR Academy, Mark Koll, the coordinator for design, engineering and sustainability, credited Firstfloor with giving the district a good product for a good price in context of the discussion about the cost of the new academy. 

“We got a great value for our money in terms of the amount of square footage that was built for the money,” Koll told board members. “The simplest way for me to explain that is you take one of those buildings and try to reproduce it today, you cannot build it for the same money that we built if for two years ago, because it was priced four years ago.”  

After personally rebuffing Ferris’ request for the 179D tax deductions several times throughout 2019, Richardson said he could no longer justify refusing to sign them over. 

“So then when Robbie Ferris calls me and asks me again, I call Rick [Maxey], and I said ‘Rick, now you tell me how am I supposed to tell this guy that he can’t get these tax credits now, when our own people stood up in public and said he built us a good product for a good price?’” Richardson explained. “I said, ‘So as far as I’m concerned, nobody else can use them, the only person that can use them is them; our own people just told me that. Draw the letters up and I’m going to sign it and I’m going to give ‘em to them.’ And I gave it to them. Because we’re still continuing to have a relationship with them; they’re still helping us manage the buildings.” 

Wolfe’s attorney Shannon Polvi said in an email that Wolfe is continuing to be targeted for “performing his job with integrity.” 

“Mr. Wolfe was committed to good stewardship of public funds for all projects, including but not limited to his opposition to Firstfloor Energy Positive receiving unnecessary 179D tax credits,” Polvi said. “Those tax credits can potentially amount to more than a million dollars of the public’s tax money. Firstfloor was the highest bidder and the most expensive option for the school district on the five new school builds, and it had already received extensive payment of public funds for their building services. The school district administration had previously agreed with the position to disapprove the tax credits to Firstfloor, but this suddenly changed shortly before the elimination of Mr. Wolfe’s job. Close in time to Mr. Wolfe’s opposition activities, and on two occasions in two years, Mr. Wolfe has experienced the elimination of his job with the district.”  

Koll was also released as part of the reduction in force. He has since found a new job.

Facilities Committee chairman Neil James, Gardner and Maxey declined to comment for this story, and James and Maxey referred questions to Richardson.

Choosing Firstfloor

Six years ago, neither the 179D tax deductions nor energy-positive schools were in the district’s plans. Horry County Schools was preparing to move in a different direction before Ferris began pitching his energy-positive schools to district staff and school board trustees, convincing them to abandon their original building project.

After paying consulting firm Cardno Tec $875,000 for a district-wide needs assessment, Horry County Schools issued an RFQ (request for qualifications) in September of 2014 for design services for a new Horry County Education Center and four new schools, as well as some other facility improvement work. Ferris’ company had previously submitted a proposal in the fall of 2013 for conceptual design work on those projects, emails show, but he was not a final contender.

That didn’t stop Ferris from courting then-Executive Director of Facilities Matt Dean and then-school board attorney Keith Powell in the summer of 2014, when emails show that he was pitching his idea for energy-positive schools that generate more energy than they use. At the time, the district had already begun the process of soliciting qualified bidders for the original four schools it was planning to build back then.

The correspondence between Powell and Ferris goes back to June of 2014. Communicating by email, Ferris and Powell discussed the energy-positive schools, including whether they could use sole-sourcing to justify the project without a bidding process. That communication occurred long before the district put out its RFP for the new schools that it would eventually hire Ferris to build.

In one email, school board attorney Powell told Ferris that he could give him a “thumbnail sketch of procurement options” for the schools, even though the district office wasn’t aware of their communication at the time.

“What I have discovered is that the administration doesn’t know anything about this proposal having been requested,” Powell wrote. “To whom is this proposal being made? I like the dbom (design-build-operate-maintain) model and it could work here but since HCS is an existing client, now that we see there is a disconnect somewhere in how this is playing out, we need to know what is going on.” 

In response, Ferris wrote back, “I think you sketching out a direction is exactly what we need right now. As far as your question goes; The facilities director (Matt Dean) doesn't want to run this up the chain of command unless he sees it as viable, He does not want folks to get excited over an opportunity that does not work out. That is why we were hoping that that you could help us get the direction set so we could submit a ‘credible proposal’ and then work the details out after the superintendent tells Matt to go with the proposal.”

In another email, Ferris wrote to Powell, “The second question is what do you think about using an AIA (American Institute of Architects) design build contract between my company and the school district, or would you prefer some other form of contract.” Ferris eventually won the AIA design-build contract for five energy-positive schools. 

On Oct. 3, 2014, Ferris met with then-school board chairman Joe DeFeo, former Burroughs and Chapin CEO Doug Wendel, school board trustee Neil James and former school board trustee Holly Heniford at James’ office at Santee Cooper. At the time of the meeting, Heniford hadn’t been sworn into office yet. James and Heniford later said Ferris used the meeting to pitch his idea for energy-positive schools. 

The next Monday, Ferris emailed DeFeo and James to thank them for their time and told them that his legal and financial team was ready to talk to the district’s procurement attorneys about the schools. He told them his team was “ready to move quickly with your projects.”

On Oct. 20, 2014, Ferris took his proposal to the full board. He told them his schools could generate 40% more energy than they consumed, and DeFeo told the board the district could generate revenue from the new buildings. Neither of those ideas materialized.

A few weeks later, the board voted to scrap their original plans for four traditional schools and begin the process of bidding out five energy-positive schools.

With the help of district staff, school board attorneys wrote out the technical specifications for the new buildings. But the new request only specified that the schools produced more energy than they consumed, not the 40% requirement initially proposed by Ferris.

In December of 2014, during the development of solicitation documents, school board attorney Keith Powell talked four times with Firstfloor registered agent Brent Jeffcoat, according to attorney billing records obtained by MyHorryNews.com. Powell also reviewed “edits” made to the document by DeFeo, who was talking to the board attorneys developing the solicitation requirements. Jeffcoat said in emails that he was doing Ferris a favor to help him understand South Carolina’s procurement code. 

Firstfloor was the highest bidder but won the job to build five new schools after a 10-member selection panel that included five school board members ranked Firstfloor as the best of the three top-ranked bidding companies. Ferris has since pointed out that he wasn’t the highest bidder when calculating the price per square foot. 

The school board awarded Firstfloor a $220 million contract in 2015 and budgeted an additional $20 million in contingency funds. Board members said he had the best proposal and the best product. The selection of Firstfloor sparked a State Law Enforcement Division (SLED) investigation in 2015, which is still open.

Years later, Ferris began lobbying the district to assign his company the 179D tax benefits for energy-efficient buildings. But his contract didn’t guarantee him the right to the tax deductions. For more than two years, he made no headway. 

Dispute over deductions 

On Oct. 26, 2017, Ferris emailed Wolfe asking the district to assign his company the tax deductions for the five new energy-positive schools.

“The benefit to you is that we will pay a totally independent third party, as required by law, to make sure the lighting, envelope and HVAC system is installed per the drawings,” Ferris wrote, adding that the third party would adhere to federal standards and share the work with the district.

“If you signing a release letter is acceptable, I will prepare one for each HCS project,” he wrote. “Let me know if SfL+a taking the 179-d deduction is acceptable.” 

District staff in email conversation estimated that the tax deductions, if applied to all five schools, could be worth around $1.5 million. Consulting firm KLG Jones was already tasked with making sure the schools perform the way they’re intended, and Ferris’s offer wasn’t enough to convince district officials to approve the tax breaks. 

Gardner, the CFO, proposed that the district negotiate a part of that amount to be rebated back to the district in the form of deductive change orders.

In an email to Wolfe, Ferris said Gardner mentioned the proposal to him at a school board meeting. “I don’t recall how I responded to him but quite frankly I was shocked,” Ferris wrote on Feb. 9, 2018.

“It is customary for us to receive 179D deductions on our buildings and we have never been asked to pay for them,” Ferris told Wolfe in the email. “I do not think it was [the] intent of Congress that a public entity would charge architects for this deduction. I would ask that you discuss this with John and let me know what [your] decision is with regard to us receiving the 179d deduction.” 

Ferris’s request spurred district staff to look at Firstfloor’s contract to see if the company had a legal claim to the tax deductions.

“With all of the later changes between ‘our’ attorneys and FFEP there could have been something added,” Gardner wrote to Maxey and Wolfe a few days later. “I am inclined to think that there is not since Robbie has not quoted the specific reference…… but we need to make sure.” 

District procurement officer Ara Heinz took a look at the contract and confirmed that Horry County Schools was not obligated to assign Ferris the deductions. “I’ve reviewed the documents that make-up the contract with FFEP, and I have not found any specific references to the 179D deductions,” she wrote back to Gardner and Wolfe. 

Clint Wallace, a former tax attorney and professor at the University of South Carolina, said Firstfloor would be eligible to take the deductions on all five schools as long as they’re operative by the end of this year. Because the buildings went into to operation in previous tax years, Wallace said Firstfloor may have to file amended tax returns from previous years to take the deductions. 

“As long as the buildings are placed in service, which means they’re ready to be used before Dec. 31 of this year, there is an immediate deduction of a $1.80 per square foot,” Wallace said. “If the buildings exist now and are ready to go, they certainly meet the timing requirement.”

Ferris did not respond to specific questions about his company’s eligibility for the tax deductions, their value and other queries about his conversations with the district about the tax deductions. Instead, he released a brief statement through his public relations firm generally describing the 179D section of the tax code and referring specific questions to the school district. 

“All questions regarding internal decision making and the specifics of the Horry County School District Section 179D program and related results are best directed to the district,” the statement said. 

But in the letters Ferris sent to Richardson asking that the tax deductions for the five schools be assigned half to Firstfloor and half to the construction company Metcon, the CEO made clear that “Firstfloor and Metcon assume sole responsibility for determining whether they qualify for this tax deduction.” 

District spokeswoman Lisa Bourcier also said in an email that determining the value of the deductions was a job for Firstfloor. 

“That would be their responsibility,” she said. “The estimation we received are in the emails.” In the emails, district staff estimated the tax deduction would be worth about $1.5 million. 

Richardson was not on the school board when Gardner first proposed getting a cut of the deductions rebate back to the district, but he said he wouldn’t have supported such a move. 

“Either you deserve something or you don’t; either you get it or you don’t,” he said. “I’m not going to play where ‘you give me this, I give you that.’ That’s a borderline thing for me. I don’t think that’s kosher and I wouldn’t go for something like that.” 

Legally speaking, asking for a rebate in return for assigning the deductions would be permissible, said Wallace, the tax professor.

“I don’t see any problem with that,” Wallace said. “From a tax perspective, that is fine. With this tax deduction, it’s meant to be transferred and there is a price for that transfer.” 

Ferris declined the district’s proposal. Instead, he refused to sign close-out documents for Revolutionary War Way, a road built by Firstfloor subcontractor Southern Asphalt that connects Carolina Forest Boulevard to the new Ten Oaks Middle School.

In March 2018, Wolfe emailed Ferris that Horry County was requiring the district to “provide a letter of credit for a 3 year road warranty, and a certificate of non-litigation. In order for HCS to supply the non-litigation certificate, we will require the same from FirstFloor. I have taken the form provided by the County and modified the signatures to provide the same assurances to HCS from FirstFloor that we give to the County. Please sign, witness, notarize and return the form to me for our files and we’ll be able to process the paperwork for the County.”

Responding to Wolfe, Ferris wrote that he had asked other contractors on the project to sign the documents “and then I can sign one.” But following that exchange, Ferris for years maintained a stalemate with the district, holding back the warranty and other closeout documents in return for the tax deductions that the district refused to sign over. In April 2018, he told Wolfe in an email, "We would ask that we receive a signed 179d release letter exchange for signing the letter?" The district declined.

“While you do not owe me an explanation, if possible, can you tell me why HCS is not willing to sign the 179d release letter over to us?” Ferris asked Wolfe in an April 2018 email. “It costs you nothing to release the 179d and is standard in the industry.”  

After consulting with Gardner, Wolfe replied, “It is our opinion that releasing these tax credits has no benefit to HCS, but potentially has very significant financial benefits to you. We would be willing to entertain a proposal for a deductive change order to HCS in exchange for granting the use of these tax credits.” 

For years, neither side budged.

In January 2019, when Wolfe once again asked Firstfloor and its contractors to sign paperwork closing out Revolutionary War Way, Ferris emailed Wolfe and district staffers, repeating his request for the tax deductions. 

“When we price projects, we actually assume that we will be given the 179D deduction,” Ferris wrote. “My recollection of my previous email was we would provide you with these documents that you were asking for [i]n exchange for the 179D deduction.” 

Wolfe wrote back, in part, “HCS has been very clear from your initial request for the tax credit that we had no intent of assigning them to FFEP. We later offered that HCS would be willing to entertain a negotiated price in return for the tax credits, but you declined. I find it surprising in your response below to assume that HCS would be willing to provide FFEP with such a sizeable tax credit opportunity without having confirmed or negotiated it ahead of time.” 

Ferris, who years earlier had helped the school board attorneys develop the district’s solicitation for the energy-positive schools he built, countered that his company had provided items that it was not contractually required to offer. 

“We have given HCS millions of dollars in additional items that you requested and were not called for in the RFP like flooring, doors, etc.. the list goes on and on,” he wrote to Wolfe and other district staff. “We accomplished a near impossible task in doing the projects when others in the industry said it could not be done.” 

The Firstfloor CEO said his company had gone “above and beyond” on the projects. “You have a 179d deduction and the ONLY use of it is to give it to the designer of record yet you choose to let it go to waste,” he wrote. “I am speechless!” 

“I am more speechless than he is!” Wolfe emailed the district staffers about an hour later. “His recollection of events differs greatly from mine and my team has the documentation to back it up. I am of the opinion that HCS sign the documents, provide the required letter of credit to the County, and move ahead with the process of dedication of the road without the document from the FFEP team. It is obvious that he is not willing to do what is right here, and I stand firm in my belief that HCS does not assign the credits to FFEP.”

Wolfe emailed district staff that he would tell Ferris it was in the district’s best interest to move ahead on the road without the support of Firstfloor. 

“If anything happens to the road during the warranty period (which I feel is a very low risk to HCS) we at least have this paper trail of our efforts to assure they stand behind their work,” he wrote. “In my personal opinion, his actions are nothing short of an intimidation tactic, if not something greater.” 

On Jan. 24, 2019, Maxey sent an email to Richardson, Brown, Gardner and Wolfe, declaring an “impasse with Robbie Ferris regarding his agreeing to provide a written commitment to stand behind the work provided by his subcontractor Southern Asphalt for the construction of Revolutionary War Way (road leading to Ten Oaks Middle School) for the three years Horry County requires in order for the district to dedicate the road to the county.

“Mr. Ferris requests that the district provide him with a transfer of a 179 D federal tax deduction in exchange for this written commitment,” Maxey added. “Facilities and Finance staff and I agree that we should not provide Mr. Ferris with this tax deduction which staff estimates could be worth up to $1.5 million. We think he should stand behind the work that he and his subcontractor were paid to complete.”  

That month, Richardson was sworn in as the new school board chairman, and Ferris wasted little time in refocusing his lobbying efforts.

Signing off

Richardson said Firstfloor first asked him about the tax break when he visited a booth the company had set up during a February 2019 school board convention in Hilton Head. The chairman said he called Maxey after the encounter to ask if the district would sign off on the deductions. 

“I asked Rick; he didn’t want to give them to him,” Richardson said. “He said, ‘No,’ they didn’t fulfill some obligation. It was like some punchlist [items] or something at some schools that didn’t get done. So I called Robbie Ferris. I said ‘Mr. Ferris, I’m not going to be able to get those tax credits for you because Dr. Maxey said you can’t have them.’ That was it, end of story.” 

Richardson said he couldn’t recall the exact items that were left unfinished.

About six months later, Richardson said, Ferris called again and said his company had addressed some of the problems. Again, Richardson called Maxey, and again, he got the same answer: Firstfloor wouldn’t get the deductions.

“He said ‘Ken, listen, we’re not giving them,’” Richardson said. “He said ‘We’re going on a visit tomorrow to a school. Let me show you.’ So we went to, I believe it was Socastee Elementary we went to, and Rick walked through and he showed me a few things. Rick said ‘We’re not giving them to him.’” 

Richardson passed on the message to Ferris. “I told him this time, ‘Mr. Ferris, let me tell you, I’m not the kind of guy who keeps on and on with stuff,” he said. “You’ve asked me twice, I’ve asked the school district twice and they’ve said ‘No’ both times. So as far as I’m concerned, we’re done. You’re not getting them; they’re not going to give them to you. Even though I know we can’t assign them to somebody else; they could only go to him; but ‘We’re not going to give them to you because… they said you were deficient in some of your work.’” 

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Then in January of 2020, as the school board was preparing to build the new SOAR Academy, they ran into a budgetary snag. In March 2019, the district had budgeted $13 million for the 40,000 square foot facility, but after some revisions and an increase in the proposed size, the new cost estimate was substantially higher. 

Before the Jan. 27 Facilities Committee meeting, Richardson got a call from Maxey telling him the bad news: the new cost estimate for the school was $20 million. 

“Rick knew I was mad,” Richardson said. “He said ‘I’m gonna set up a meeting with you at facilities.’ So I go over to facilities. And Mark Wolfe’s there, Daryl Brown’s there, Mark Koll’s there, I can’t remember who else was there. And they told me. And I ain’t going to lie to you, I lost it with them. If it would have been left up to me, I’d have fired every damn one of them that day. But it wasn’t left up to me.” 

After the facilities meeting where Koll spoke favorably about Firstfloor’s cost per square foot for the new schools, Richardson got a call from Ferris.

“And Robbie says ‘Listen, I know you said you wouldn’t ever ask again’ he said, ‘but your own people got up there and said that we gave you a good product for a good price,'” Richardson explained, adding that he couldn’t justify withholding the deductions from Firstfloor any longer, despite opposition from other district officials.

“If it’d been left up to Rick Maxey, he’d have never got ‘em,” Richardson said. “And the only reason I gave them to ‘em was simply because we were going to continue a relationship with them. They were of no use to us, the only person who could use them is them. I had no problem with them getting them.”

In return, Ferris promised in a letter to “hire a third party to confirm that [each] building is constructed in accordance with the design.” It was the same kind of offer that the district had rejected more than two years prior. 

In June, with COVID-19 looming over budget discussions of every government in the county, the district made the decision to cut down the facilities department staff. 

“They needed to go,” Richardson said. “The only thing that made me mad is that Rick Maxey didn’t do it quicker. Rick let them go through this process. But when you’re cutting down staff because you don’t need them, you’re cutting down staff. You shouldn’t have to explain to everybody what you’re doing.”

While the scope of Wolfe’s lawsuit so far has been limited to accusations related to his role in the district’s procurement of security film for the new schools, his attorney, Polvi, said that could change. 

“We are presently in the process of amending the pleadings in Mr. Wolfe’s case,” she said. “We cannot comment on what those will be, as it is not yet part of the public record. The amended pleadings will provide additional information about Mr. Wolfe’s legal position on this matter.” 

After more budgetary haggling, the new $17.9 million SOAR Academy will be 49,500 square feet with 32 classroom spaces. Richardson said it’s scheduled to be finished in September.

Clarification: this story has been updated to show that the 22 positions cited were facilities department jobs funded by capital dollars. 

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